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

May 11, 2022 | BLOG

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.