SME Loans: The Full Guide

When there are many small businesses in a community, economies flourish. Many small businesses find their footing in their industries and become more successful. But, most of the time, the need for additional funds stops them from further expanding their business. Many entrepreneurs are hesitant to take out a loan from banks and other lending companies because of their assumption that interests are too high and requirements are too stringent.

Let us take a deeper look into what SME loans in the Philippines are, how it works, the benefits, and whether you need one.

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Written by: Piggyy

SME Loan Offers



Apply for BDO’s low interest-rate loan products now.



Get the financing offer that best matches your financial needs and apply for a loan with CTBC Bank.


Equicom Savings Bank

Equicom Savings bank offer longer repayment terms for their loan. Don’t miss out on this offer, apply now.



Loan Term

12 months - 5 years

Est. APR

% 0,99 - 5

Loan Amount

Php10,000 - Php 3M



Loan Term

3 - 12 months

Est. APR

% 48-54

Loan Amount

10,000 - 3,000,000 PHP

What is a SME Loan?

A SME stands for Small and Mid-size Enterprise. A business is considered a Small Enterprise if it only has between 10 to 99 employees and has assets between Php3,000,000 to Php15,000,000. In contrast, Medium-Sized Enterprises have 100 to 199 workers and an asset of Php15,000,000 to Php100,000,000. 


Small and Mid-size Enterprise Loan(SME) is a Loan provided to businesses that require additional funds to address their short-term financing needs, either for expansion, purchase of additional assets or equipment, or even for funding of the business’s day-to-day operations.



Compared to a typical business loan, a SME loan requires minimal documentation, a longer loan term, and lower interest rates. In addition, because it is only used to finance for the short term, the loan amounts for SME loans are lower than a business loan.


Some Definitions


Enterprise Company

An enterprise company is a for-profit business associated with creating entrepreneurial business ventures. 


Small Business Enterprise

Small Business Enterprises work on small-scale operations and produce goods and services in limited quantities. With the many small businesses present in communities, they can easily outnumber large enterprises collectively. 


SME Loan Features & Terms

SME loans are meant to provide a faster process with less documentation required to process a loan. And because it is intended to address a short-term requirement, the terms are more agreeable than the regular business loan. 


  • Loan Amount: Php 500,000 to up to Php30,000,000
  • Loan Term: 12 months – 60 months
  • Interest: 1.5% to 7.25%
  • Other fees:
    • Processing Fees
    • Notarial Fee for Sole Proprietorships
    • Notarial Fee for Partnerships and Corporations


Who Can Apply for a Loan?

The good thing about a SME Loan is that it is not just open to existing businesses to help them in their business goals – expansion, additional capital requirements, purchases of major assets, etc. A SME Loan is also open to employed individuals ready to open their own businesses. 


A SME Loan can be applied by the following:

  • Employed Individual 
  • Sole Proprietorship
  • Partnership
  • Corporation


Eligibility Criteria


Employed Individual 

A permanent or regular employee with the current employer for at least 1 year and have continuity of employment for at least 3 years. 


Sole Proprietorship / Partnership / Corporation

  • Must be a business that is duly registered to operate in the Philippines. 
  • Business is in profitable operation for at least 2 consecutive years, while others require at least 3 years of profitable operation
  • Other banks will need other eligibility criteria to be met like the following:
    • Minimum annual gross sales of 1 Million
    • Must not have a debt that is more than 40% of the company’s income


SME Loan Purpose

Those looking at applying for a SME loan will need it for a variety of reasons. The good thing about this loan is that it can cover whatever the needs of entrepreneurs are. 


Employed individuals to buy a business franchise / as a working capital

Franchising requires upfront cost and for those who dream of starting their own business, this should not be an obstacle. But for those thinking about another type of business, other than franchising, a working capital will help them focus on their business rather than worrying about the day-to-day cash flow. 


Additional working capital requirements for existing businesses

Some businesses look at adding more to their capital to grow their business or meet existing obligations. 


Purchase of additional inventories

Adding more inventories means generating more sales. However, entrepreneurs should not let this stop them from growing their businesses when facing a financing issue. 


Business expansion

Entrepreneurs looking at expanding their business means they are doing good. However, expansions mean a huge upfront capital. 


Purchase of machinery and equipment

Depending on the type of business, some machineries and equipment can be very expensive. 


Loan take-out from other banks

Some banks charge higher interest rates. Therefore, in order to save on interest, it is a sound decision to take out your loan from the other bank. 


Acquisition of land property

Like in the purchase of machinery and equipment, land acquisition will also need upfront payment. 


SME Loan Requirements

Depending on the bank or lending company where you are applying for a SME loan, the document requirements can vary. But typically, these are the list of requirements that most banks need to process your SME Loan application: 


Employed Individuals

  • Completed Application Form
  • Certificate of Employment (COE) (indicating income details, tenure and employment status)
  • Latest one year ITR with stamped received
  • Latest one month payslip
  • Photocopy of two valid IDs with specimen signature
  • Last six months bank statement or copy of passbook
  • Latest proof of billing (utility bill, credit card bill, etc.)
  • Collateral Documents (Copy of TCT/CCT, Tax declaration and location plan/vicinity map)


Sole Proprietorship

  • Signed and accomplished application form.
  • 1 copy of valid ID
  • Marriage contract, if applicable
  • Photocopy of audited financial statements for the last 1 – 2 years with latest ITR
  • Bank Statements or photocopy of passbook for the last 6 months
  • Certificate of Business Registration with DTI
  • Business Background / Company Profile
  • Valid Business / Mayor’s Permit


Partnership / Corporation

  • Signed and accomplished application form
  • 1 copy of valid ID of the authorized signatory
  • Photocopy of audited financial statements for the last 1 – 2 years with latest ITR
  • Latest Bank Statements (at least 3 months) or photocopy of passbook for the last 6 months
  • Valid Business / Mayor’s Permit
  • List of at least three major supplier and customer
  • Collateral Support Documents
    •  Photocopy of Title
    • Lot plan with vicinity map
    • Tax declaration
    • Special Power of Attorney (SPA), if applicable
  • Articles of Partnership and Certificate of Registration issued by SEC (for Partnerships)
  • For Corporations, any of the following:
    • Certificate of Registration issued by SEC
    • Latest amended Articles of Incorporation and By-Laws
    • List of Elected Officers / General Information Sheet
    • Board Resolution / Secretary’s Certificate

Loans that are under Php5,000,000 may not require collateral but this will still depend with the bank

Pros & Cons of getting SME Loans



  • Shorter processing time
  • Lower interest rate
  • Requires minimum documentation
  • Might not require a collateral for smaller loan amounts
  • Build a good credit rating
  • Separates the business credit from personal credit




  • Will not be able to take higher loan amounts
  • Means additional expense in your business in the form of interest

SME Loan vs. Other Loan types

Deciding which type of loan is good for you and your business is important. Naturally, you would want to avail of the one which will cost you less in the short-run. You would first have to look at certain checklists like the loan amount, loan term, interest, etc. 


Personal Loans vs. SME Loans

  • Approval Basis: Personal loans are guaranteed based on the personal credit history of the borrower while a SME loan is guaranteed by the credit history of the business. 
  • Loan Amount: SME loans have higher approval limits as compared to a personal loan
  • Approval Turnaround Time: personal loans are approved faster than SME loans
  • Interest: SME loans can be lower than personal loans
  • Purpose: SME loan has to be business-specific; a personal loan can be for different purposes
  • Liability: For SME loans it is limited to your business in case of default or your inability to pay. This is not the same for a personal loan. 


SME Loans vs Business Loans

  • Approval Basis: Both loans are guaranteed based on the business’s credit history. However, a conventional loan is issued to entities already established in the market and have an excellent credit standing. 
  • Loan Amount: Business Loans have higher maximum loan amounts than SME loans. 
  • Approval Turnaround Time: Approval is the same for both – 5 to 10 banking days, depending on the completeness of the documents. 
  • Interest: SME loans have lower interest rates compared to a business loan, but a conventional business loan has longer payment terms. 
  • Purpose: Both loans have to be business specific. 
  • Liability: limited to the business for both the SME loan and Business loan.

Frequently asked questions

How can I apply for a SME Loan?

SME loans can be applied through online applications by simply visiting the bank’s or lending company’s website, or personally visiting their branches. 

How will I be notified of my loan approval?

Once approved, the loan applicant will receive an SMS notifying of the loan decision, or a bank representative will contact you. 

How much can I borrow?

Depending on how much you qualify for, the maximum SME Loan amount that can be applied for is Php30,000,000. The interest rate will also depend on the payment terms you wish to avail. Ultimately, the verification process will determine the maximum amount that will qualify for. 

How long will it take to approve my loan?

At a minimum, the loan amount will be approved within 5 to 10 banking days. However, the speed of the approval will depend on the completeness of the documents submitted so always make sure that you have all the documents ready when applying for a loan. 

Can I re-avail a SME loan?

Yes, this is possible. A SME loan can be re-availed when at least 50% of the existing loan is already paid up and the credit history is good, meaning that there are no missed payments. 

Can I take a SME loan for two businesses or more?

For the same entity to apply for two separate SME loans is not possible. In order to take out another loan, they must at least ensure that half of the loan amount has already been paid. 

Should I take insurance alongside the loan?

Yes, this is very important to ensure when taking out a loan to protect the business property during the duration of your loan term. 


Here are the following insurance that you can get: 


  • Credit Life Insurance – this is for the financial protection in case of the untimely death of total disablement of the borrower. This insurance will be able to pay out the outstanding balance of your loan. 
  • Fire Insurance – this insurance will pay off the loan outstanding in case the business property suffers a damage or a loss due to fire, calamity, catastrophe, etc. 
  • Contractors All Risk Insurance – this is only applicable to a construction loan. This loan will cover any damage or risks associated with the construction project. 


Deciding whether or not a SME loan is the best option for your SME business in the Philippines needs to be thought through. The desire to expand or grow your business is a good sign that the business is picking up and thriving in the market. 

Understandably, there are upfront costs associated with expansion but this should not hinder you from exploring the business opportunities that are available for you and your business. After all, when your business grows, the community does too. 


״The secret of happiness, is not found in seeking more, but in developing the capacity to enjoy less״ - Socrates

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