Category: Business Loans

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Business Loans

Leveraged Loans: How to Leverage a Loan to Boost Finances

Leveraged Loans How to Leverage a Loan to Boost Finances - JK Capital

Financing is a force of success when it comes to business.

Whether you’re launching a startup, expanding an existing enterprise, or navigating through challenging times, securing the right kind of financial support is often the key to unlocking your business’s true potential. However, not all debt financing is equal. That’s where the strategic use of loans, such as those offered by JK Capital Financing, comes into play.

Leveraging loans enables your business to achieve its goals, and this article aims to guide you on how to do this. Having outstanding debt doesn’t mean obtaining new loans is out of reach. Leveraged loans, a unique financial instrument from trusted financial institutions such as JK Capital, can fuel your growth and help you achieve your big, hairy, audacious goals.  

What are Leveraged Loans?

A leveraged loan in business financing is a financial option available to individuals or companies with high debt levels or poor credit histories. The caveat is that these loans typically come with higher interest rates and involve multiple lenders or investors due to the greater risk. 

Understanding leveraged loans equips you with the knowledge to optimize your capital structure, enhance financial flexibility, and seize growth opportunities. 

A good example of using a leverage loan is if you were to strategically fund an expansion to acquire your competitors. Leveraged loans from JK Capital make this possible, even if your credit history falls short of other lenders’ standards. This development can increase market share and revenue, justifying the loan’s cost. 

Similarly, a technology startup might use a leveraged loan from JK Capital to invest in research and development. This investment can lead to product innovation and provide a strong competitive edge in the market. 

While getting a loan with pre-existing debt can be difficult, these examples illustrate the potential rewards of leveraging loans wisely to achieve specific business objectives.

Pros and Cons of Leveraged Loans

When considering leveraged loans to fund your business, you must carefully weigh the advantages against the potential drawbacks. This section sheds light on the merits and pitfalls of this financial tool, helping you make informed decisions on your path to business expansion and growth.

Pros

  • Access to larger capital: A leveraged loan can provide substantial capital, enabling you to fund major expansion projects, acquisitions, or other high-impact initiatives.
  • Preservation of equity: A core benefit of what is leveraged loan is that it allows you to secure funding without diluting ownership through equity investments. This is particularly valuable for small and medium-sized enterprises (SMEs) looking to maintain control over their businesses. In this regard, JK Capital can assist you in preserving your business’s equity.
  • Interest tax deductibility: In many cases, the interest paid on leveraged loans is tax-deductible, resulting in potential tax savings for your business.

Cons

  • Increased risk: Assuming significant debt can elevate the financial risk for your business, potentially leading to financial strain and the risk of default if you cannot meet repayment obligations.
  • Costly interest fees: Leveraged loans typically have higher interest rates to compensate lenders or investors for taking on more risk. These higher interest rates may impact your profitability.
  • Complexity in finances: If you’re already struggling with debt payments, adding another financial obligation may add complexity and potentially overwhelm your financial resources if not managed diligently. 

How Your Business Can Use Leveraged Loans

How Your Business Can Use Leveraged Loans - JK Capital

To get the most out of leveraged loans, you can explore various strategic applications, including:

  • Funding mergers and acquisitions (M&A) deals

Deals completed with leveraged loans are typically called leveraged buyouts (LBOs). This approach enables you to leverage the acquired business’ resources to generate more revenue to help pay for your existing debts. 

Aside from that, leveraged loans can fund other business objectives. For example, a pharmaceutical company might use a leveraged loan to acquire a smaller biotech firm, expanding its product portfolio and market presence. 

  • Debt refinancing

Leveraged loans offer an advantageous avenue for refinancing existing debt, particularly when interest rates meet your needs. For instance, a manufacturing company might refinance high-interest loans with leveraged loans to lower overall interest expenses and free up capital for other investments.

  • Supporting daily operations

Leveraged loans can help startups and small businesses meet their daily operational expenses or complete ongoing projects. Alternative financing options from institutions like JK Capital can also fulfill these monetary needs.

  • Recapitalizing  

Recapitalization with leveraged loans involves changing your company’s capital structure to improve its financial position. For example, a company may use a leveraged loan to buy back its shares or to pay a special dividend to its shareholders.

  • Fueling asset financing

Leveraged loans can provide asset financing, such as purchasing new property and equipment. Whether you need financial assistance for your company’s renovation or new machinery, JK Capital provides secure loans, venture capital, or other financial solutions. 

5 FAQs about Leveraging Loans Answered

FAQs about Leveraging Loans Answered - JK Capital

If leveraged loans still confuse you, here are answers to some common questions when encountering this concept for the first time: 

1. What types of loans can be leveraged?

There are three types of leveraged loans: 

  • Underwritten deals: In these deals, the arranger takes on the risk of selling the loan. The arranger bears the losses if there aren’t enough investors to subscribe to the loan.
  • Best efforts: This leveraged loan involves the arranger underwriting less than half the loan amount. The remaining amount can be left as credit or adjusted based on prevailing market prices. 
  • Club deal leveraged loans: These are popular among private equity investors. Several investors contribute to the loan to fund M&A deals, which spreads costs and risks.

2. Do banks sell leveraged loans?

Yes, banks do sell leveraged loans. Banks or other financial institutions typically originate these loans and are then sold to investors, including insurance companies, pension funds, and mutual funds.

3. Are leveraged loans floating or fixed?

Leveraged loans are floating-rate loans, meaning their interest rates adjust upward along with rises in key consumer interest rates. This characteristic provides leveraged loans with potential inflation protection and hedges against increasing interest rates.

4. Why are leverage loans considered risky?

Leveraged loans can be risky for both borrowers and lenders. Borrowers face higher interest rates and the possibility of default. Although these loans can fund your business, economic downturns can still cause a slowdown in revenues, capital market disruptions, debt repayment challenges, and hindrances in debt rollover. 

Meanwhile, lenders may not receive their payments since borrowers usually have high debt levels or a poor credit history.

5. What’s the difference between debt and leverage?

Debt refers to the total amount of money a company owes, while leverage involves using that debt to amplify returns or outcomes. Leverage can potentially increase a company’s profitability but also introduce greater financial risk. In essence, leverage is a strategic use of debt to enhance a company’s financial performance.

The Leverage Advantage: Transforming Loans into Assets

Indeed, not all financing is created equal, and leveraged loans are far from a simple financial transaction. They represent a powerful tool that can propel your business toward growth and success. Wielding leveraged loans strategically provides the capital necessary to expand your business and seize great opportunities.

If you’re seeking expert guidance and financial solutions, consider working with a reputable financial lending company like JK Capital. We offer small business loans and other services that can help boost your finances. Feel free to visit our Facebook page or reach out to us for more information.

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Business Loans

The Benefits of Business Loans for Economic Growth

Benefits of Business Loans for Economic Growth - JK Capital

In economics, the relationship between government support and businesses is comparable to a mutualistic symbiosis. Government decisions influence market conditions, and the success of businesses contributes to economic growth, which, when effectively nurtured, results in prosperity for all sectors.

However, businesses cannot thrive solely on their own volition. More often than not, these ventures need assistance from business loan companies such as JK Capital, which hold a unique role as bridges between aspiration and achievement. JK Capital provides small business loans that empower businesses to grow, innovate, and create new opportunities.

Whether funding a small startup or helping a thriving enterprise expand, business funding catalyzes progress through the collaborative synergy between government initiatives and business loan companies. If you’re interested in knowing more about the myriad benefits of business loans for economic growth, the blog below discusses everything you need to know.

Business Loan Statistics in the Philippines

How do loans help the economy? Well, numbers paint a vivid picture of the economic landscape. They provide valuable insights into the impact of business loans on entrepreneurship and economic growth in Southeast Asia. Here are essential statistics to consider before starting your venture:

1. In 2022, bank loans to micro, small, and medium enterprises (MSMEs) saw a 3.2% increase, reaching P454.31 billion from January to September. (PhilStar)

This growth plays a significant role in the economy, as MSMEs provide employment for most of the labor force and contribute significantly to the country’s economic value. 

2. During the final quarter of 2022, 22% of respondents sought loans to initiate or expand their businesses. (Statista)

This statistic underscores that business initiation and expansion rank among the leading reasons households took out bank loans, alongside essential home goods. It highlights the pivotal role of loans in fostering entrepreneurship, from household-level ventures to larger-scale businesses. Access to financing remains a driving force for those pursuing their entrepreneurial aspirations.

3. The loan portfolio of the Philippine Banking System displayed robust growth, marking a 5.8% year-on-year increase, reaching P11.3 trillion by the end of March 2022. (BSP)

Notably, 2022 was the eighth consecutive month of positive year-on-year growth in total loan portfolio (TLP). This impressive loan expansion was primarily driven by key sectors, including real estate, information and communication, wholesale and retail trade, and manufacturing.

5 Benefits of Business Loans for Economic Growth 

From stimulating entrepreneurship to fostering job creation, business loans are pivotal in shaping vibrant economies. Let’s explore the multifaceted advantages of business loans in fueling economic growth.

1. Job creation and entrepreneurship

Job creation and entrepreneurship - JK Capital

Statistics reveal that one of the leading reasons individuals seek loans is to kickstart businesses, a step that carries numerous benefits.

Loans provide essential funding to aspiring entrepreneurs, enabling new startups to emerge and generate employment opportunities. This not only eases the burden on government resources allocated for unemployment benefits but also contributes to the overall development and sustainability of the economy. 

With the assistance of JK Capital, businesses can expand and hire more talent, further propelling economic growth. 

2. Innovation and industry expansion

Economic challenges often demand adaptability and innovation for business survival. One of the benefits of business loans, including those provided by JK Capital, is that it offers the financial backing needed to invest in research and development (R&D). This investment in R&D facilitates the adoption of new technologies and the diversification of business models.

This continuous effort to progress fuels economic recovery by creating new industries and job opportunities and fostering innovation. These factors collectively reduce the need for government funding, promoting self-sustaining economic growth.

3. Encouraging cashflow

Encouraging cashflow - JK Capital

Maintaining a healthy cash flow is vital for business continuity but can pose challenges, especially during economic downturns. These periods can bring reduced customer demand, delayed payments, and unexpected expenses, putting significant pressure on your business’ finances. Here’s where business loans, like those offered by JK Capital, provide a vital lifeline.

JK Capital’s business loans are a financial cushion during difficult times. They provide the necessary funds to cover day-to-day operational costs, including payroll, rent, utility bills, and inventory purchases. These loans effectively bridge cash flow gaps that could otherwise threaten financial instability or even lead to business closure.

4. Government-backed loans for financial accessibility

Many startups struggle to raise funds quickly to seize business opportunities; this is where government-backed funding shines. Availing of a business loan through these programs is a simple and expeditious process, allowing aspiring business owners to access much-needed funds promptly. 

These loans often come with lower interest rates and reduced risk for lenders, making it easier for business owners to start.

5. Flexible repayment for financial ease

Business loans, especially those offered by JK Capital, offer flexible repayment options that you can customize to align with your cash flow. This feature ensures aspiring business owners that they can manage their payments without worrying about incurring excessive interest.

Such flexibility alleviates the financial pressure, especially in the initial stages of your venture when income might not be fixed. It allows you to focus on business growth rather than being burdened by rigid repayment schedules.

Gear Towards Prosperity Through Business Loans

Gear Towards Prosperity Through Business Loans - JK Capital

Business loan companies provide a unique position in supporting government initiatives, acting as bridges of economic growth. The synergy between these entities creates a symbiotic relationship, resulting in mutual benefits and fostering sustainable progress.

If you’re eager to take the next step in your business journey, JK Capital, a leading financial lending company in the Philippines, is here to help. Discover our wide range of business loans and experience a hassle-free loan application process.

For more information, don’t hesitate to reach out to us. Contact us today to learn how we can assist your business. Also, visit our Facebook page for additional insights and service updates. Your path to economic success starts right here.

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Business Advice Business Loans

Growing a Business as a Loan Consultant: What to Expect

consultant with laptop talking to a woman about a deal

If you’re a loan consultant and want to build your own consultancy business, you have numerous opportunities. You just have to know how to navigate the industry.

The first step is to find a niche to specialize in. Next, start networking with other professionals in this area. This strategy will help you find clients who need your services. Advertise your services online by creating an online presence and promoting yourself on social media platforms.

Finally, getting a business loan will benefit you in the long term because it allows you to focus on other aspects of the company rather than worrying about finances all the time.

In this article, you’ll learn what to expect when growing a business as a loan consultant and the types of business financing.

Group,Of,Business,Partner,Professional,Team,Working,Together,Meeting,Are

Financing Your Consultancy Business: 4 Things to Expect

  • Consider your financial situation first

Small business loan consultants always need to consider their financial situation before they start growing their business because the lack of funds leads to multiple roadblocks. Financing is crucial to growing any business; if you don’t assess the situation, it can prevent growth.

Understanding your finances will also assist you in making business decisions. Knowing what you can and should afford narrows your options to what your company needs to further its growth.

  • Double-check your expenditures and cash flow

With your financial situation, expenditures and cash flow are things you should understand to fully grasp where you stand as a consulting business. You have your payroll, marketing, supplies, and even travel expenses to consider. 

Leaving these unattended expenditures results in issues with your capital since some aspects of the business require more financing.

  • Know your credit score

Credit scores play an essential role in business loans. They determine your probability of getting a loan. 

The higher the credit score, the better your chances of landing a loan. Not knowing this wastes your time if you have a low credit score because the odds of receiving a loan are slim.

  • Get the right timing

Having the funds at the right time brings in more opportunities. If there’s a chance to expand the business, but you have no funds, you’ll have to wait. On the other hand, if there’s an opportunity to grow when you have the finances, you can immediately focus on that.

4 Types of Business Financing for Consulting Businesses

  • SBA loans

Small Business Administration (SBA) loans guarantee loans with member banks and other credit unions. They offer low-interest rates and some of the best loans available. To qualify, you’ll need a high credit score and collateral.

  • Cash advance

A cash advance is a kind of financing that revolves around your business’s cash flow. The requirements are less strict than other long-term financing options and are a great way to gain additional ROI on specific projects because you can get answers on your loan application within hours. Periodic payments will also be either weekly or daily.

  • Term loans

Term loans have a fixed interest rate during the specified period and will require you to pay monthly. Traditional banks will offer this loan, which comes with or without collateral.

  • Short-term loans

Short-term loans are for businesses that require financial support during a short gap. These loans are offered online and are payable within a year, but that depends on the lender. The process for this loan is fast, but the interest rate is high. 

Choosing the Best Type of Financing for Your Consulting Business

Choosing,The,Best,Interest,Rate,Of,A,Financial,And,Mortgage

Lending companies always look for the best candidates when reviewing each loan application. If you want to increase your chances of approval, here are four questions to consider.

  • What is your loan purpose? 

When you apply for a loan, you’ll be asked to provide information about your income and expenses. You must give details about the property or business you plan to use as collateral for the loan.

You’ll need proof of income, such as pay stubs, annual revenues, monthly cash flow, or tax returns showing recent earnings. By identifying your loan purpose before applying, you can get the best terms on your loan and avoid costly mistakes.

  • How is your credit history? 

If you know your consulting business’ credit history, you’ll be able to see what information is being reported about you and what kinds of loans might be available to you. Find out if there’s anything on your record that would disqualify you from getting approved. 

For example, if you’ve been late on payments in the past or have defaulted on other loans, it may be difficult or impossible for lenders to approve your application until those issues are resolved.

  • Can you repay your loan?

Your budget should be based on your income and expenses and include all the money coming in and going out. If your income is insufficient to cover your costs, you may need to consider other ways to pay off the loan. 

For example, if you have credit cards with high-interest rates that are close to being maxed out, you could transfer those balances onto a lower-interest card. Your revenue and cash flow numbers are essential to getting your needed financing. Your potential lenders need to see your consulting business’ financial ability to pay periodically. 

  • Do you need collateral?

Determining if you need collateral will lead you to pay extra fees to get the loan or rely on other factors such as your credit score and income level. 

Collaterals are important because they help lenders feel more comfortable making risky investments with money from investors who may not be able to pay back their loans if something goes wrong with their business or personal finances.

Raise Money for Your Business

Financial,Growth,Concept.,Stacks,Of,Gold,Coins,On,Table,And

Finances are a constant factor that many businesses consider. It keeps the company alive enough for it to grow and expand. Knowing the types of financing available for consulting businesses is advantageous, providing insights that will improve decision-making for future ventures.

If you’re looking to get a business loan and fund your small business, JK Capital Finance is an online lending company that can assist you. We offer multiple services, from business loan applications and check rediscounting to quick approval and non-collateral loans. 

For more information, visit our website, and feel free to visit JK Capital’s official Facebook page today!

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Business Advice Business Loans Small Business

Alternative Financing Options for Small Businesses in the Philippines

Businessman talking to couple on the couch with laptop and documents on table

Loans are integral to industry development in the Philippines, helping entrepreneurs and business owners grow and reach success. However, for small to medium enterprises (SMEs), financing is another barrier they must overcome. Most traditional banks tend to have rigid requirements, which makes applications difficult for some SMEs. 

This challenge significantly affects the Philippine market since SMEs make up 99% of businesses in the country and employ 62% of the workforce, based on data from BusinessWorld. Thus, a drop in SME progress could cause an economic slowdown. 

Fortunately, alternative financing options make applications more manageable to support these enterprises. Knowing how to finance a business with alternative funding ensures your company’s survival during financial difficulties. With that, delve deeper into this financing approach for SMEs.

What is Debt Financing?

asian male finance staff is calculating by using a calculator

Debt financing involves borrowing money to fund your enterprise by selling debt instruments in exchange for funding. It’s a versatile tool outside of traditional bank loans that counts as a type of alternative financing.

Unlike equity financing, wherein lenders get an equity share of your company, debt financing gives you complete control over your SME. Investors aren’t shareholders, so they don’t have a say in how you run it. Moreover, interest payments are tax-deductible, so you can subtract them from your tax obligations.

Learning how to get financing for a small business with debt financing is helpful in case you’d need to fund your SME. However, it’s just one of the many alternative financing options for SME owners. There are also other ways to fund your business. You may consider the alternative financing options below to find what suits your needs. 

5 Types of Alternative Financing for SMEs

1. Crowdfunding

A popular approach to funding your small business is calling for financial contributions from multiple individuals, which many refer to as crowdfunding. The process typically entails creating crowdfunding campaigns stating the amount required to finance your budding business.

Forecasts suggest that global crowdfunding could reach $42.93 billion by 2028, with an annual growth rate of 16.40% from 2022, attesting to its effectiveness. So, if you’re having difficulty financing your SME through single entities, consider casting a wider net by crowdfunding.

2. Angel investors

An angel investor is an individual who uses their own money to invest in an SME or entrepreneur, often in exchange for an equity stake.

Angel investments are significant to businesses worldwide. In 2021, the total funds invested through this approach were $29.1 billion, 15.2% more than the previous year. Moreover, remember that angel investors tend to fund already stable SMEs, so they’re an excellent complement as one of your small business’ sources of finance.

3. Venture capitalists

A venture capitalist is another private investor funding small companies for an equity stake. While they may seem similar to angel investors, there are distinct differences between them. For instance, while angel investors’ only goal is financial support, venture capitalists aim to develop the company through direct participation in its operations.

That said, venture capitalists also prefer to invest in SMEs already set for growth, so check if your company fits the bill before approaching a firm.

4. Government-backed loans

You could also get a business loan from the government. The primary benefit of government-backed loans is their extremely low-interest rates. Hence, they significantly help SMEs without the capacity to pay for higher rates.

The two primary issuers of government-backed loans in the Philippines are the Small Business Corporation (SB Corp) and the Department of Trade and Industry (DTI). However, remember that you must be a registered contributor to the government body from which you want a loan.

5. Bootstrapping

Money from your savings, borrowed from friends and relatives, or earned from selling assets can also fund your SME in a process called bootstrapping. 

This approach is typical for micro-businesses, such as sari-sari stores, that require a small amount to progress. However, many corporate giants today started as bootstrapped enterprises, such as GoPro, in which founder Nick Woodman poured $10,000 of money he earned from selling bread and belts into the business. 

When to Consider Alternative Financing

confused, frustrated young man, reading letter in cafe, debt notification

  • You have a poor credit score

Credit scores inform lenders about your reputation as a borrower. However, traditional financing options often have high credit requirements, which may take time for startups to reach, given their risky environment. Alternative financing solves this problem by providing loans to SMEs with little or poor credit scores, helping them expand.

  • You need quick funding

Getting a loan from traditional banks is often time-consuming, which is detrimental, especially if time is critical for your SME’s growth. Fortunately, alternative financing providers generally offer speedy procedures and low-interest rates to receive your business loan as soon as possible.

  • You’re rejected in traditional financing

Traditional banks often have labor-intensive application processes unfavorable to SMEs, making it challenging to secure approval, not to mention the stringent requirements, which may lead to your rejection. Meanwhile, alternative financing options, especially those from online lending companies, generally have minimal paperwork, making approval easier.

  • You have no collateral

Banks often require valuable assets as collateral to ensure your payments. In contrast, alternative financing providers generally don’t involve collaterals or personal guarantees, so you won’t have to worry about putting your assets at risk.

Expand Your Business with Alternative Funding

fund managers, team consultation and discuss about analysis investment stock

SMEs comprise a vast portion of Filipino businesses, hence the importance of financially supporting them to keep the economy and workforce afloat. However, given banks’ strict application requirements, it may be challenging for these enterprises to acquire loans. 

Fortunately, alternative financing options exist. With lenient requirements, swift processes, and low-interest rates, SMEs can finally gain the resources to facilitate expansion.

Are you looking for alternative financing for your enterprise? JK Capital provides quick approvals and non-collateral loans to help it flourish. Contact us to learn more about our business loans, application processes, and other related services, and visit our Facebook page for updates.

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Business Loans Small Business

Small Business Funding: Ultimate Guide for Entrepreneurs

Small Business Funding, Ultimate Guide for Entrepreneurs

Every entrepreneur’s journey starts with finding ways to fund their small business. Sponsors can be individuals, groups, or financial institutions like banks. 

Small business funding is necessary for your business to stay afloat. It also acts as a safety net during global crises or low sales. Small and mid-size enterprises (SMEs) can take advantage of different business funding options and make a more personalized experience. 

If you’re starting a new business or need advice on small business funding, this guide will help you learn all you need to know about it and how to navigate it effectively.

Small Business Funding, Ultimate Guide for Entrepreneurs, Infographic

What is Small Business Funding?

Small business funding refers to financial support an aspiring business owner receives to run a small business. It also extends to purchasing an already established business or investing financial resources into another small business’s future activities. Startup financing and franchise financing are also alternative names to this concept. 

Small business financing is necessary for small businesses since it effectively allows for day-to-day functions and promotes long-term growth. Small companies usually look to request funding if they need working capital or assets for development and other similar ventures.  

  • How Does Loan Amortization Work for SMEs?

When businesses borrow money from banks, they usually take out an installment loan. The process of scheduling a fixed-rate loan into equal payments is called loan amortization, and it’s often done semi-annually or annually. 

Additionally, an amortization schedule shows you the amount of interest and principal value of each payment. A loan payment’s principal is the amount you borrowed from the bank, while the claim is the charge you incur throughout the loan’s lifespan. 

Each periodic payment is the same, except when you begin the process, most of the amount paid goes to interest. Over time, the percentage of each payment going to interest decreases while the share going toward principal increases. 

By this point, the principal is a more significant portion of each periodic payment. Debt to the bank is amortized if paid in equal installments throughout its term. 

How Does Small Business Funding Work?

Business loans give you and your business financial payments, either in lump-sum or through credit, to kickstart your business ventures. In exchange for this investment, you repay the same value through periodic payments over time. The frequency of compensation depends on the type of loan your business availed and ranges from payments made daily to monthly.

It would help if you had an arrangement suitable for your business needs. To avoid risking your business’s finance, you need to understand how applying for a business loan works. 

As a pre-requisite, most loaning bodies in the Philippines have businesses submit several documents before being considered for funding. Examples include government identification, company background, financial statements, and registration certificate. Refer to the list below on how to get a business loan. 

  • Identify how much funding you need

Before applying for a loan, you’ll need to know how much money you need to fund your small business. It’s a waste of time if you go to a bank or other financial authorities without knowing what you want. 

You should ensure that the amount you’re borrowing is realistic and not too high. Otherwise, the lending party can doubt your capacity to pay it back. Likewise, requesting an amount that’s too small results in your loan being rejected almost immediately since banks can’t profit from it. 

  • Learn about the requirements

Banks and similar entities are typically the hardest to qualify for when applying for a loan. Usually, lending authorities in banks require borrowers to meet a minimum standard for credit score, business revenue, and years in operation. Understanding the minimum requirements and qualifications increases the chances of your loan getting approved by the bank. 

For other common sources of loans, like online lenders, the requirements aren’t as strict, and you can qualify for a loan even if your credit score isn’t as high. In both cases, however, you’ll need to provide paperwork and documents, such as bank statements, tax returns, and business plans. 

  • Develop a business plan

A business plan is a great way to show lenders how you plan to use their money. Having a dedicated business plan also builds investor confidence in your business. 

When making a business plan, you should strongly consider the nature of your business, the product or service you plan to sell, what your team is like, marketing strategies, roadmaps, and financial plans and projections.

  • Assess the amount and frequency of your payments

Your business’s revenue dramatically affects the chances of getting your loan approved. As such, while applying for a loan, it’s essential to consider how often you’ll be paying and how much you can afford to pay. You should also factor in the frequency of when you pay and if you can afford to pay it daily, monthly, or semi-annually.  

  • Choose the loan type best suited for your business

Every business is unique and has different needs. Small business funding schemes are popular since they offer various options business owners can choose from. Common loans to small businesses include short-term loans, equipment loans, term loans, and invoice financing. 

Small Business Funding Facts and Statistics

Financing is a company’s most necessary tool to operate effectively. Small business funding has seen numerous successes over the years and is offered in most countries.

Small businesses make up 99.9% of all companies in the US, equivalent to 32.5 million businesses as of 2021. A similar majority is also observed in the Philippines, with small businesses also employing 62% of the country’s workforce. 

To better understand funding’s importance, a study by a US bank showed 82% of businesses fail because of poor cash flow management, while another 38% close their businesses simply because they ran out of purchasing capital. 

The Philippines also faces similar problems. In a survey by Mambu, a cloud banking platform, 3 in 4 Filipino small and mid-size businesses have been unable to secure sufficient business funding over the last five years. 

After failing to secure the necessary financing, 48% have cited that they experienced issues regarding cash flow. Meanwhile, 48% of the surveyed businesses were also unable to launch new products or services, and 35% struggled to repay their creditors. 

Moreover, loans can also be rejected by lending entities, another hurdle businesses have to face when applying. A less-than-ideal credit score, insufficient years in operation, poor collateral types, existing debt, and operations within a risky industry were all cited as common reasons for rejecting loan applications. 

Depending on the loan type and arrangement, loan values in the US range between $20,000 to $545,000. In the Philippines, lenders provide applicants with loans ranging from P100,000 to P20 million. 

What are the Common Types of Business Funding?

One of the biggest appeals to small business funding strategies is its flexibility to accommodate many applicants and cater to their personal needs. Below are some common types of funding being offered. 

  • Banks loans

Bank loans are arguably the most conventional lending source relative to other means. It requires businesses to submit various documents, including profit information, business plans, and financial histories. Because it’s a financial institution, bank loans are sought after as they act as safety nets for businesses. 

  • A business line of credit 

Similar to a credit card, this type of funding is based solely on your credit limit. Two types exist: secured and unsecured. For the former, you’re required to provide collateral against the line. The latter may not require collateral but can still ask for personal guarantees. Interest is paid only during the money draw. 

  • Crowdfunding sites

Crowdsourcing sites are also viable methods for getting extra cash to start your business, with websites like GoFundMe and Kickstarter being prime examples. 

Unlike the traditional applications from banks, crowdsourcing relies on having an exciting and engaging storytelling experience worth investing in. The probability of your success hinges on how well you appeal to the online community.

  • Personal savings 

At the beginning of your business venture, you can generate financial resources through savings or with the help of your friends and family. The value you get here might not be as much compared to other lending options, but repayment is usually more flexible than others. 

  • Angel investors

Usually an individual with a high net worth, angel investors lend funds to businesses in exchange for a stake in the company. Since their goal is to have a position within the company, they’re more likely to invest larger capital. 

Many in this category are involved in private equity, so businesses looking for loans should pitch their business plans, financial statements, and other relevant information before being granted a loan.

How to Know What Type of Business Funding is Right for You? 

With so many options being offered, you might find yourself overwhelmed. You’re now faced with picking based on your business, but how can you decide? Not to worry, below are some steps to ensure the first loan you apply for is best suited for you!

  • Be self-aware

Before doing anything, you’ll need a rough estimate of what kind of funding you need and the subsequent amount. It also includes conducting a background check on your own business, its financial track records, credit scores, and debt-to-equity ratio. At this stage, you should be realistic about your loan and apply for what you need. 

  • Consider your future financing needs

Do you see your business operating at a more large-scale level in the future? Are any possible expansions on the horizon? If the answer is yes, add it to your list of considerations when applying for financial loans. By acknowledging what you might achieve in the future, you can plan for better decision-making. 

  • Look at the repayment terms

Identify how much time you have to pay off the loan and look for one with schedules you can confidently abide by. Additionally, ask yourself if your business can finish paying the loan early or does it need to wait until maturity. Proper assessment and decision-making help save you money in the long run. 

  • Consider interest rates

Although it shouldn’t be the deciding factor, you should also calculate interest rates. It would be best to be smart when comparing rates since, depending on what you choose, small percentage changes can make all the difference in the grand scheme. 

  • Take your time

Be patient with navigating through the loan application process and evaluate everything carefully. Always remember to take things slowly and to think things through before deciding. Rushing through the process results in disastrous outcomes and jeopardizes your business’s financial capabilities. 

Top Financial Challenges Small Business Owners Can Expect

Throughout the lifespan of your business, you’re bound to come across challenges along the way. While many can be mitigated or alleviated by small business loans, others can be avoided by the business itself. 

  • No budget plan

A business with no budget plan is a recipe for accumulating debt and irresponsible handling of company finances. Having a plan and abiding by it helps you grow and expand to better things. Additionally, the budget should be regularly updated and adjusted to current market climates. 

  • Financial reporting negligence

As a form of good practice, businesses should always keep a track record of all their expenses or activities that require financial resources. Neglecting to accurately declare your financial records leads to financial losses or interest charges. The snowball effect impacts your company’s cash flow and financial capabilities. 

  • Too much debt

Accumulating too much debt at any point in your venture has different short- and long-term consequences. You might have to tap into a portion of your profits just to pay off the debt, resulting in revenue losses that you could have used for other business projects. 

  • No preparation for unforeseen expenses

Expenses not anticipated by your company can significantly impact your plans. As such, having an emergency account specifically for unforeseen expenses cushions your business in times of distress or crisis. 

  • Late bills payments

Failing to pay your bills on time costs your small business, even if you think it’s harmless. The most notable area this affects is your credit score, which is one of the important metrics needed when applying for a loan. When you have a poor credit score, you might find it harder to find entities willing to grant you loans. 

Benefits of Applying for Business Loans

Applying for business loans opens many doors for small businesses everywhere. Apart from giving you initial capital, it also lets your business have accomplishments and growth opportunities which they otherwise couldn’t have experienced without the startup capital. Find other benefits of applying for loans below.

  • Full control over the borrowed money

You don’t have to split the borrowed money between investors or other shareholders when you’re given a loan. It’s meant solely for the benefit and future of your business. As such, you don’t have to worry about other people or entities interfering with your decision-making. 

  • Interest rates are usually low and affordable

Banks and similar institutions offer competitive rates to their customers. While interest rates depend on your loan amount and arrangements, they’re generally low, so more customers are encouraged to apply. Interest rates for business loans are also much cheaper because there’s high competition for customer attention. 

  • Flexible and convenient

Small business loans have a large pool of options to choose from, so businesses looking to apply can have a more convenient, hassle-free, and personalized experience. You can even have different durations for repayments or loan shelf-life, like long-term and short-term. 

  • The application process is easier than others

Applying for a business loan is a challenging process, but relative to other types of loans, it’s easier to get approved. After pitching your intention for a loan and meeting the minimum requirements, you can get approved. Ensure you submit documents like business plans and financial records throughout the application process. 

  • Improved business credit

Once you have a track record of business loans, regularly pay on time, and repay accordingly, you can boost your business credit and reputation. Finding financing opportunities with lower interest rates becomes much easier when your business achieves this. 

Achieve Now, Pay Later!

Small business funding is a great way to give your small business the tools and opportunities it needs to thrive in its industry. Additionally, it plays a big role in a company’s survival, especially in today’s market landscape. With many options to choose from and several benefits, the possibilities for your business are virtually endless. 

If you’re planning to start your loan journey today, consider checking out JK Capital, an online lending company specializing in loans and other related services. For services relating to business loans or loan applications, reach JK Capital and our team of experts via the contact page. 

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Business Loans Guides

Online Loans in the Philippines: What SMEs Need to Know

Online Loans in the Philippines: What SMEs Need to Know
Any aspiring entrepreneur today can start a business just by creating a page on social media or using an e-commerce platform. Due to the convenience of digital platforms, the number of registered online companies in the Philippines increased from 1,700 in January to March 2020 to 75,000 by the end of the year.  While starting online helps entrepreneurs save on costs, one thing remains certain: small- and medium-sized enterprises (SMEs) still need adequate funding to scale every aspect of their business—inventory, logistics, marketing, customer service, and many more. Banks are equipped to grant loans to SMEs, but stringent requirements and non-flexible terms make it difficult for budding entrepreneurs to secure funding. In fact, 77% of SMEs in the Philippines have been unable to secure any or sufficient funding on at least one or more occasions over the last five years. This is where online loans come into play. Online lending companies typically help SMEs secure funding through digital channels. Compared to conventional bank loans, online loans are more accessible as they have fewer requirements and faster approval. They’re ideal for SMEs needing emergency funds or having difficulty getting approval for bank loans. If you need more funding to scale your business, this infographic can help you learn about online loans in the Philippines and how to apply for them. Online Loans in the Philippines: What SMEs Need to Know

Online Lender Legitimacy and Regulation

Online lending companies in the Philippines must be registered with and licensed by the Securities and Exchange Commission (SEC) instead of the Bangko Sentral ng Pilipinas (BSP).  They’re required to obtain a Certificate of Authority (CoA) before they can offer loans. To get a CoA, lenders should fulfill the requirements in forming an ordinary stock corporation and have a minimum paid-up capital of ₱1 million. Once registered with the SEC, online lending companies should comply with different regulations, such as the Corporation Code, the Lending Company Regulation Act, and the Data Privacy Act, to keep customer data safe and secure. If an online lending company fails to comply with these laws or commits harassment, cyber libel, and unfair debt collection, the SEC and other government agencies will investigate the claim. It’s required to cooperate during the investigation. The online lending company would have to give up its licenses and pay exorbitant penalties if found guilty.  Even if an online lending company is registered with the SEC, you should still conduct thorough research before transacting with one. You can read the terms and conditions, look for customer reviews, and check its website and repayment schemes. If a company makes an offer that’s too good to be true, that’s usually a sign that it’s not as legitimate as you think.  You can also check this list of SEC-registered online lending companies to see if the lender you’re dealing with is legitimate.

Business and Documentary Requirements

Online loan requirements vary per lender, but below are some that they typically ask for: 
  • Online application form
  • Government IDs of business owner/s
  • Securities and Exchange Commission (SEC) or Department of Trade and Industry (DTI) registration
  • Bureau of Internal Revenue (BIR) registration
  • Proof of billing
  • Latest payslips for employed individuals or bank statements for self-employed individuals
  • Certificate of Employment (CoE) for employed individuals or Income Tax Return (ITR) for self-employed individuals
  • General Information Sheet (GIS) for corporations
For more specific requirements, you can check the website of the online lending company you plan to borrow from or directly contact them via phone or email. Some online lenders require borrowers to prove their age, place of residence, and properties such as cars and tech devices. Since these companies are available online, you can submit soft copies of your documents anytime via their app or website. This helps SME owners save time and costs from visiting in person when applying for loans.

Application Process

Applying for an online loan is usually fast and easy. Online lending companies can process and approve a loan in three to seven business days, which is faster compared to banks that take two to three months. Most online lenders also have relationship managers and customer support teams to assist you throughout the process. While the application process is different per lender, here are the basic steps that you need to accomplish:
  • Fill out the online form available on the lender’s website.
  • Upload the requirements.
  • Wait for the lender to contact you.
  • Wait for your loan disbursement.

Online Loan Terms

Before applying for an online, you need to consider some factors and align them with your business needs. Some of these include:

1. Loan duration

Online loans are ideal for SMEs that need quick or short-term funding. Online lenders allow SMEs to repay their loans within two weeks or a year. Some also offer biweekly or monthly repayment schemes where the borrower pays both interest and principal. SMEs that need short-term funding can also save on costs with online loans. Banks typically charge extra for early repayment or loan terminations to compensate for the interest they would’ve collected from you until your loan matures. These fees are typically 4–8% of your current outstanding balance.

2. Loan amount

Online lenders have different caps for their loans, but most offer somewhere between ₱50,000 and ₱10 million. This is in stark contrast to banks, which offer around ₱1 million to ₱20 million in loan amounts. The loan amount of online lenders may be small, but it’s perfect for SMEs that need quick funding and can repay within a few weeks or months.

3. Interest rates and processing fees

When it comes to interest and processing fees, banks are more modest because they have access to cheaper sources of funds, such as customer deposits. They can also maintain risks at lower levels. Their monthly interest rates are around 0.50% to 1.5%, with processing fees at 0.75% of the loan amount. Meanwhile, online lending companies offer monthly interest rates of around 1.99% to 4% and charge processing fees of 1.99% of the loan amount. Some online lending companies may charge other fees, which may not be published on their website or communicated to borrowers at the onset. When getting an online loan, ask your relationship manager or customer support representative about these fees to manage your financial expectations efficiently.

4. Minimum number of years in operation

Banks often grant loans to businesses that have been in operation for at least two to three years, with one year of profitable operations. Meanwhile, many online lending companies grant loans to those still in their first year of operations. This is ideal for SMEs that have seen growth in a short time and need funding to continue doing so.

What to Do if You’re Scammed or Harassed by an Illegal Online Lender

Online lending in the Philippines can be a bit of a minefield, as some illegal lenders are becoming smarter by the day, posing as legitimate companies. If you think you’re being scammed or harassed by an online lender, follow the steps below:
  • If the lender has a CoA to operate, file a complaint with the SEC.
  • Fill out the Complaint Form.
  • Attach all relevant documents or evidence to support your complaint.
  • Submit one Complaint Form per respondent company. 
  • Provide a valid government-issued ID.
  • Show evidence that you’ve exhausted all remedies against the company before filing your complaint.
  • If you have a complaint against a company without a CoA, you can email the Enforcement and Investor Protection Department at epd@sec.gov.ph.
  • If your data privacy rights were violated, contact the following agencies:
    1. National Privacy Commission (NPC) – complaints@privacy.gov.ph
    2. Philippine National Police (PNP) Anti-Cybercrime Group – acg@pnp.gov.ph and pnpacgcfcu@gmail.com) 
    3. National Bureau of Investigation (NBI) Cybercrime Division – https://www.facebook.com/NBI-Cyber-Crime-Division-105613618539830
    4. Department of Justice (DOJ) Office of Cybercrime – cybercrime@doj.gov.ph

Scale Your Business with an Online Loan Today

Online loans are easy solutions for SMEs that need quick, short-term funding. Not only will online loans help SMEs scale their business, but loans will also help build their credit score and improve their financial standing in the long run. Naturally, this will only be possible if you work with a legitimate online lending company. Before getting an online loan, conduct your research so that you won’t fall victim to scammers.  If you’re ready to secure an online loan, you can borrow from a reliable online lending company in the Philippines like JK Capital. We offer instant financial solutions to SMEs planning to go beyond their horizons. Check out our services to learn about our requirements and application process, or fill out our contact form for inquiries. 
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Business Loans

Business Loan vs. Consumer Loan: Differences and Similarities

Business Loan vs. Consumer Loan: Differences and Similarities

Many up-and-coming entrepreneurs apply for consumer loans to generate capital for their businesses since they are relatively easy to qualify for and quickly acquired. Although there is nothing wrong with using a personal loan for business purposes, it does have a few drawbacks. 

If you’re a small business owner and wondering, “when do we consider using personal loans for business?” you’ve come to the right place. In this article, we’ll discuss the differences between a business loan versus a consumer loan and explore the advantages of each.

What is the Difference Between a Consumer Loan and a Business Loan?

The primary purpose of a business loan is to fund business needs. They’re intended for purchasing revenue-generating investments or funding your business’s day-to-day operations. Business loans are also used for acquisitions, renovations, supply orders, payroll, and more.

Meanwhile, consumer loans are more flexible as they fund personal and business needs. They’re generally easier to obtain because lenders will only be looking at your own finances for approval. The most common examples of consumer loans are personal loans, auto loans, and home loans.

Now that you know the difference between a consumer loan and a business loan, let’s find out which one fits your needs best.

Business Loan vs. Consumer Loan

Exploring the topic of differences between business and consumer loans will help you paint a clear picture of the benefits and drawbacks each option may offer. For example, if you prefer a particular timeline for your loan payment, you can explore the terms of each loan.

Nowadays, you can get both short- and long-term consumer and business loans, which provide you with the opportunities below:

Long term loans

  • Lower monthly amortization
  • Larger loan amount
  • Lower Interest rates

Short term loans

  • Shorter time incurring interest
  • Easier to acquire
  • May help increase credit score

Before choosing a loan type, it is best to consider all the factors in your decision. These may include your financial history, business credit score, personal credit score, and long-term business objectives. These factors will help you understand which type of loan you qualify for and what works best for your situation.

Business Loans

1. Eligibility requirements

Most lenders will require a small business to have a stable and predictable cash flow to qualify for SME loans. In addition, they may require more paperwork such as financial statements, business plans, licenses, permits, etc.

2. Loan terms

Depending on your industry, business loans can be repaid over a more extended period, ranging from two to 20 years.

3. Loan amount

A business loan can provide a more significant loan amount compared to a consumer loan. For example, a small business loan may reach up to ₱10,000,000.

4. Interest rate

A business loan’s approval process is more thorough, giving lenders more confidence to provide lower interest rates than consumer loans.

Advantages of Business Loans

  • Separate finances – A business loan will aid personal protection and tax duties by separating your business finances from your personal finances.
  • Limited liability – In case of default or inability to pay, your liability with a business loan may be more limited compared to a personal loan.
  • Business credit – Paying back your business loans on time will help increase your business credit score. This allows you to get higher loan amounts and better terms for future loans.

Risks of Business Loans

  • Personal guarantee – Some business loans may require a personal guarantee to reduce the lender’s risk.
  • Loss of business assets – You may lose business assets such as equipment, real estate, and receivables if you default on a secured business loan.

Consumer Loans

1. Eligibility requirements

A consumer loan typically requires applicants to have good credit, a stable source of income, and a good debt-to-income ratio. Applicants who do not have good credit may take out a secured loan that requires collateral instead.

2. Loan terms

Generally, consumer loans have a short payment term, ranging from a few months to years.

3. Loan amount

Consumer loan amounts tend to be smaller than business loans and rarely exceed ₱3,000,000. You will want to consider business loans if you need a more significant loan amount.

4. Interest rate

A consumer loan usually has higher interest rates compared to a business loan. As a result, it is considered riskier for lenders.

Advantages of Consumer Loans

  • Easy approval – Consumer loans have a short approval process, giving you quick access to funding. These loans require only a few paperwork and documentation from applicants.
  • Collateral workaround – Some small consumer loans may be unsecured, allowing you to withdraw a loan without collateral.

Risks of Consumer Loans

  • Personal risk – Consumer loans will be tied to your personal finances, putting them on the line if you default.
  • Ability to borrow – Lenders will not approve your loan if your debt-to-income ratio is not good. This may cause a problem if you incur outstanding debt and need another loan later on.

Get That Funding

Business loans and consumer loans each have their advantages and drawbacks. In the end, there is no one-size-fits-all solution for your funding requirements. Instead, consider all the factors and research carefully to determine what loan type best fits your business needs. 

If you’re looking for companies offering business loans with fast approval and minimal requirements, look no further than JK Capital. JK Capital provides small business loans that you can use to finance your expansion, working capital, inventory purchases, and other business-related expenses. 

Contact us today to secure business funding in 7 days or less.  

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Business Loans

5 Types of Collateral You Can Use to Secure a Business Loan

5 Types of Collateral You Can Use to Secure a Business Loan

Small businesses often start out with poor credit scores, which affects their ability to take out a business loan. However, you can boost your chances of getting approved for a loan through a collateral loan. But, what is a collateral loan?

A collateral loan is a secured business loan where you pledge assets as repayment to improve your creditworthiness. This will serve as the lender’s safety net if you, as a borrower, default on your loan and cannot pay.

5 Types of Collateral for a Business Loan 

If you need business funding to finance your day-to-day operations, expansion, or a piece of equipment, below are five types of collateral you can use to secure a business loan. 

1. Real Estate

A real estate or home equity collateral is any property you own, including your family home, lots, buildings, or commercial lands. This collateral is common since home equity is easily accessible to most business owners. It’s also ideal for lenders as it has a high value with low depreciation risks.

If you default on payments, lenders reserve the right to take ownership of your real estate and sell them to recover the losses quickly. Therefore, you’ll need to assess your real estate properties and choose one that holds the least value in your life but can back up the amount you’re trying to loan.

2. Business Equipment

If you’re planning to purchase business equipment using a loan, that piece of equipment can serve as your collateral. This is relatively low-risk, especially for construction or manufacturing companies. You can also put up your printers, computers, or copiers to back up payments if you default. 

Although this is less risky than putting up your family home as collateral, you may only lend a small amount as lenders will take more depreciation risk. They’ll likely ask for your equipment’s receipt to assess the value, so check the depreciation of the equipment you’re putting up as collateral.

3. Inventory

This collateral may only work if you’re a product-based company like retail or e-commerce shops. You can use the items in your inventory as backup payments if you fail to hold your end of the bargain. However, you’ll need to ensure that your inventory can back up your lending amount. 

Lenders may ask a third-party auditor to assess the value of your inventory, especially if it is hard to sell. Other considerations also need to be taken, like liquidation value and future depreciation. 

This is risky collateral on your end as it may directly affect your revenue stream and not earn from those inventory losses. The drop in sales may negatively impact your other debts and expenses, so evaluate all your financing options before taking out an inventory loan.

4. Invoices

Unpaid invoices can affect your cash flow, which may cause issues in paying for your expenses and the like. You can put the invoices up as collateral to get cash upfront without waiting for a long period. It’s a good option for borrowers with a low credit score since viability will be based on the worth of outstanding invoices. 

You can sell your unpaid invoices to a factoring company and receive around 80% to 95% of your invoice value. However, you’ll need to pay a fee of 0.50%–5% of your invoice value, so you may earn less than you would have if you collected the invoices yourself. 

With that said, invoice financing is a better option than inventory loans since it gives you a flexible and secure payment scheme while ensuring you have other revenue sources.

5. Cash

Traditional lenders, such as banks favor this collateral as it’s the most liquid asset a person can have. On top of this, they won’t have to go through the trouble of selling a physical asset just to recover their losses.

The collateral for a business loan comes from extra cash from your bank accounts, whether a business or personal account, to back up your payments when you default. With this, you can take advantage of low interest rates and high loan amounts, corresponding to the money you have in your bank.

Collateral Business Loans FAQs

  • How much collateral is needed for a business loan? 

As a rule of thumb, any assets you’ll pledge as collateral should at least have the same or even surpass the worth of the loan you want to borrow. However, auditors will still have to assess their value. They’ll most likely appraise the collateral’s value by 80%–90% of the loan amount to consider other risk factors. So, as long as your collateral does not go below the loaning amount, you can get a business loan.

  • How do I get a business loan without collateral? 

You may need to get an unsecured business loan instead, which you can typically get from online lenders, banks, or credit unions.

Keep in mind that traditional lenders like banks require good business and personal credit scores, so you may have trouble getting an unsecured loan if you have poor credit. In this case, you can seek financial assistance from an online lender like JK Capital which offers non-collateral business loans with fast approval and minimal requirements.  

  • Does collateral improve my approval odds? 

While pledging assets can approve your odds, you’ll need to match the value of your collateral to your loan amount to improve the terms of your loan. You’ll also need to consider the 5 Cs of credit—capacity, capital, collateral, condition, and character—to determine your odds of approval.

Finance Your Business Wisely

It may be difficult to get loan approval with a low credit score, but it’s not entirely impossible—you can pledge collateral to improve your chances. However, you’ll need to carefully deliberate when choosing an asset to pledge as you’ll need to consider your risk factors and the value it will hold to the lenders. 

If you’re not willing to use collateral, you can always look for lending companies that offer unsecured loans like JK Capital. Check out our no-collateral business loans to find out more.

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Business Loans

5 Government Loans for Small Businesses in the Philippines

5 Government Loans for Small Businesses in the Philippines

With the COVID-19 Assistance to Restart Enterprises (CARES) program ending last January 31, 2022, the number of government loans small businesses can apply for shrinks. This can be worrisome, considering how much COVID-19 has affected small businesses in the Philippines. 

All is not lost, however. There are still several government assistance programs for small businesses in the Philippines recovering from the pandemic. The following section will provide a rundown of everything you need to know about government loans you may apply for. 

5 Government Loans for Small Businesses in the Philippines

  1. Pondo sa Pagbabago at Pag-Asenso (P3)
  2. RISE UP Turismo
  3. Helping the Economy Recover through OFW Enterprise Startups (HEROES)
  4. MSME Credit Guarantee Program (MCGP)
  5. Sustaining Trade Access to Primary Food and Link to Enterprises (STAPLES)

These government loans for small businesses in the Philippines are offered for various industries. Below is information about the five programs, their eligibility, terms, and requirements.  

 

Pondo sa Pagbabago at Pag-Asenso (P3)

Informal lending is a common practice among micro-entrepreneurs. One of the most financially harmful is known as “5-6” lending, where borrowers have to pay up to 20% interest on their loan every month. 

To prevent such practices and provide micro-entrepreneurs with convenient financing options, the government introduced the Pondo sa Pagbabago at Pag-asenso (P3) program. 

Who are eligible?

The P3 program was designed for micro-entrepreneurs who had an existing business before the pandemic. These include market vendors, sari-sari store owners, and stall owners, to name a few.

What are the terms?

  • Loanable amount: P5,000 – P200,000 (depending on the size of your business and ability to pay)
  • Interest rate: 2.5% monthly 
  • Loan term: If you intend to loan below P50,000, the term is capped at 18 months; for loans over P50,000, the maximum term is 30 months.  
  • Grace period: 6 months

What are the documentary requirements? 

  • Accomplished P3 loan application 
  • Proof of legitimate business running for at least one year
  • Proof of one year of residence
  • Valid government ID
  • Barangay clearance
  • If you intend to loan more than P50,000, you will need a DTI Business Name Registration Certificate 

To learn more about the P3 program and to apply, visit the DTI P3 website.

 

RISE UP Turismo

It’s no surprise that tourism was one of the most vulnerable sectors due to local and global lockdowns during the pandemic. As a way to stimulate recovery and growth in the sector, the Small Business Corporation (SB Corp) created the RISE UP Turismo Loan, which follows up on the CARES for Tourism Rehabilitation and Vitalization of Enterprises and Livelihood (CARES for TRAVEL) that launched during the height of the pandemic. 

This program is targeted toward businesses in the tourism sector that lost revenues over the pandemic. The loan’s coverage includes all tourism-related enterprises, whether DOT-accredited or not, such as transportation, events organizing, and souvenir shops, among others.

Who are eligible?

Three main business groups are eligible for the program: primary tourism enterprises (including hotels, resorts, and tour agencies); secondary tourism enterprises (including restaurants and tourist shops), and tourism support services. 

What are the terms?

There are two types of loans under the RISE UP Turismo Loan: the SME TURISMO Loan and the Micro TURISMO Loan, each with minor differences.

For the SME TURISMO Loan:

  • Loanable amount: Maximum of P5 million
  • Basis of loan amount: Possibly up to 15% of prior years’ sales; loans over P3 million will be based on your BIR-filed financial statements 
  • Interest rate: A one-time service charge ranging from 4% to 8%, depending on your repayment term.
  • Loan term: Payable monthly for up to 4 years
  • Grace period: Up to half of the loan term, on principal only

For the Micro TURISMO Loan:

  • Loanable amount: Maximum of P300,000 per borrower 
  • Basis of loan amount: Up to 20% of your existing business assets 
  • Interest rate: A one-time service charge ranging from 4% to 8%, depending on your repayment term.
  • Loan term: Payable monthly for up to 4 years 
  • Grace period: Up to half of the loan term on principal only  

What are the documentary requirements?

Both loan types will require the following documents:

  • Government-issued ID
  • Barangay permit for loans not more than P100,000
  • BMBE Certificate or Mayor’s Permit for loans more than P100,000
  • Photos and a 1-minute video of business operations and assets
  • Corporate documents (if applicable)
  • At least one year of business operation, as evidenced by business permits 

To register and view the complete list of eligible enterprises, visit the RISE UP Turismo Loan page of the SB Corp website.

 

Helping the Economy Recover through OFW Enterprise Startups (HEROES)

Businesses worldwide were forced to shut their doors amid the pandemic, meaning many overseas Filipino workers lost their jobs. A Philippine Statistics Authority survey found that the OFW population declined by almost 19% in 2020. 

To help unemployed, repatriated OFWs, the government created the Helping the Economy Recover Thru OFW Enterprise Start-Ups program. This gives OFWs the chance to start their own business and rebuild their lives in their home country.

Who are eligible?

Land-based and non-professional OFWs who returned home due to the layoffs during the COVID-19 pandemic may apply for this loan. 

What are the terms?

  • Loanable amount: Repatriated OFWs may borrow from P30,000 up to P100,000
  • Interest rate: No interest nor collateral required
  • Grace period: Up to 12 months

What are the documentary requirements?

  • Certificate of Completion of Training issued by the Philippine Trade Training Center (PTTC)
  • Scanned copy of passport
  • Video presentation (You will be guided on how to accomplish this during PTTC training)
  • Business Model Canvass (Required for loan amounts exceeding P50,000)

To learn more about the program and the free PTTC one-day online training, visit the HEROES page of the Small Business Corporation website. 

 

MSME Credit Guarantee Program (MCGP)

Micro, small and medium enterprises (MSMEs) struggling with limited working capital after the pandemic may consider getting bank loans. However, not all MSMEs are capable of paying these back, limiting the loans they can apply for. 

This is why the Philippine Guarantee Corporation partnered with various banks to create the MSME Credit Guarantee Program to help MSMEs apply for loans that might have become out of their reach. 

Who are eligible?

This program was created for micro to medium-sized enterprise owners who have been affected by the COVID-19 pandemic. 

What are the terms?

  • Loanable amount: Maximum of P50 million per borrower; Loans exceeding that amount will be subject to the approval of PhilGuarantee based on the guidelines for their Regular Credit Guarantee Program. 
  • Loan term: 1 to 5 years
  • Interest rate: Interest rates, collaterals, and securities will depend on the lending bank or financial institution.
  • Guarantee limit: 50% of the principal loan amount
  • Guarantee term: 1 year 
  • Additional fees: Each amendment will cost P5,000

What are the documentary requirements?

The requirements will vary depending on where you apply for this loan. Contact a PhilGuarantee-partnered bank near you to inquire about the necessary application documents. 

You can find out more about the program on the official PhilGuarantee website.  

 

Sustaining Trade Access to Primary Food and Link to Enterprises (STAPLES)

The food business sector not only suffered from the lack of revenue due to lockdowns but also because of the increased expenses of incorporating social distancing and sanitation measures. 

To assist affected food businesses and food supply chains, the government created Sustaining Trade Access to Primary Food and Link to Enterprises (STAPLES) to help small businesses within the sector replenish their working capital and financially recover.

Who are eligible?

  • MSMEs working in the retail food sector 
  • MSMEs or applicants with no negative payment or unresolved major negative credit history. 
  • Part of the food supply chain of an SBCorp-accredited FMCG food manufacturer
  • Your business must be 100% Filipino owned or, if your business has foreign ownership, at least 60% Filipino owned. 

What are the terms?

The amount you can borrow will depend on your annual sales. The terms, such as repayment and service fees, will also depend on the size of your business.

For small sari-sari store owners:

  • Minimum annual sale: P500,000
  • Loan amount: 2% of annual sales (Minimum of P10,000)
  • Repayment Term: 3 months
  • Service fee: 3%

For big sari-sari stores, mini groceries, and convenience stores:

  • Minimum annual sale: P2 million
  • Loan amount: 2.25% of annual sales (Minimum of P45,000)
  • Repayment term: 4 months
  • Service fee: 3%

For medium-sized grocery, convenience stores, or dealers and small distributors:

  • Minimum annual sale: P20 million
  • Loan amount: 2.5% of annual sales (Minimum of P500,000; maximum of P5 million)
  • Repayment term: 6 or 12 months
  • Service fee: 3% if 6-month repayment, 6% if 12-month repayment

What are the documentary requirements?

Depending on the size of your business, you will need a different set of requirements. 

Requirements for small sari-sari store owners:

  • Valid ID
  • Bank or digital bank account
  • Barangay business permit for 2019 or 2020
  • Two photos of business signage, inventories, or fixed assets (submit in JPEG format)

Requirements for big sari-sari stores, mini groceries, and convenience stores:

  • Valid ID
  • Bank or digital bank account
  • Mayor’s permit for 2019 or 2020
  • Two photos of business signage, inventories, or fixed assets (submit in JPEG format)

Requirements for medium-sized grocery, convenience stores, or dealers and small distributors:

  • Valid ID 
  • Bank or digital bank account
  • Mayor’s permit for either 2018, 2019, or 2020
  • If your intended loan exceeds P1 million, you must submit the latest BIR-filed Balance Sheet to certify that your business is not a large enterprise.

To learn more about the loan program and how to register, visit the STAPLES page on the Small Business Corporation website. 

Choose the Right Loan for You 

If your small business is struggling to get back on its feet after the pandemic or any other crisis, applying for financial aid can be a big help. These five government assistance programs for small businesses in the Philippines can be just what you need to recover what you lost over the pandemic. 

Of course, it’s always important to do your research and consider other financers before applying for a business loan. The government isn’t the only place you can go to for financial help.

Check out JK Capital, which provides loans for small businesses to help you get back on your feet and succeed in the new normal. 

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Business Loans Guides

How to Get a Business Loan in the Philippines: A 5-Step Guide

How to Get a Business Loan in the Philippines: A 5-Step Guide

Funding is one of the most important things to consider for a business owner. Many entrepreneurs are hesitant to take out a loan for many reasons. Some don’t want to go through the hassle of application, while others are afraid of building up a debt they can’t afford to pay.

Instead, they use their own money to fund their operations, which can be personally detrimental if your business fails. 

However, applying for a loan to secure business funding is necessary to avoid risking your finances. The following section provides a list of loan requirements and a five-step guide on how to apply for a business loan in the Philippines.

Common Business Loan Requirements

Like with any business-related venture, there are requirements that you will need to submit before receiving a loan. Below is a list of some of the common business loan application requirements. 

  1. Government-issued ID
  2. Signed and completed loan application form
  3. Company profile or business background
  4. Business permit or DTI/SEC registration certificate
  5. BIR Certificate of Registration
  6. Latest audited financial statements
  7. List of major suppliers and customers with details about dealings
  8. Proof of business billing address (Mayor’s Permit, Lease Contract, or Utility Bills)

How to Apply for A Business Loan

  1. Decide how much money you need to borrow
  2. Assess your eligibility
  3. Determine how much and how regularly you can make payments
  4. Choose the best type of loan for your business
  5. Compare lenders

There are several types of business loans in the Philippines, but what are the steps to apply for one? This section is a quick rundown of the five steps you need to take.

1. Decide how much money you need to borrow

An essential step for any loan application is determining how much money you need to borrow. Applying for too high an amount can make the lender doubt your ability to repay, while an amount too small can immediately get your loan application rejected. 

It sounds counterintuitive for lenders to prioritize people who borrow a bigger sum, but too little of a loan isn’t generally worth it for banks since they won’t profit from it. Instead, they would approve someone who needs to borrow more, but still not to the point where it’s impossible for them to repay. 

You need to do some math to see how much money you need from the lender while finding a middle ground to convince them to approve your loan.

2. Assess your eligibility

When applying for any loan, eligibility plays a crucial role. Your credit score, business history, and cash flow are the three primary factors that will determine your chances of getting approved. 

Credit scores represent your creditworthiness, showing the lender that you are trustworthy enough to repay the loan. 

Business history represents the growth of your enterprise over time. Lending companies will look at this to determine if the business is profitable enough, is relevant to the market, and has potential to grow. Typically, a company needs to have one to two years of operations to qualify for a loan.

Lastly, cash flow is how much money your business is earning. Many lenders will require a minimum annual revenue, so it’s best to check your potential lenders’ requirements.

3. Determine how much and how regularly you can make payments

As previously mentioned, the amount of money your business earns annually affects your chances of loan approval. Some lenders require daily repayments, so it is crucial to factor that in. Determine how much you could afford to pay monthly or daily. Your business should aim to have at least 1.25 times your total expenses, including your repayment. 

4. Choose the best loan type for your business

Small and medium enterprises (SMEs) can apply for various loans, such as the following:

  • Term loans require you to pay monthly, with a fixed interest rate during the specified period. Traditional banks offer this kind of loan and can come with or without collateral. 
  • Short-term loans are for businesses that need financial support for short-term periods. They are payable within a year, and some lenders offer them online. 
  • Equipment loans are financing for machines and other equipment, such as vehicles, printers, etc. The equipment can act as collateral for the loan, meaning the lender can repossess it if you miss your payments. 
  • Invoice financing involves the lender using your account receivables as security for businesses that invoice clients. It is a reliable solution for short-term cash flow issues

5. Compare lenders

It’s always important not to rush any business decision. Take the time to analyze and research which lending company will work best for your business in both the long- and short-term. Inquire with multiple lenders, then compare the loan terms offered by each so that you can select one with the most favorable terms.

Apply for a Business Loan Today

As an entrepreneur, taking out a loan is a strategic and necessary move for the success of your business. This is funding you need to grow, whether it is to finance your day-to-day operations, equipment, or expansion. As such, you shouldn’t hesitate to apply for one because it’ll reap the rewards for you.

If you’re looking to apply for a business loan, look no further than JK Capital. We offer quick business loans with no collateral for SMEs. Apply online today and get the funding you need fast.