A crucial first step in launching a business is identifying reliable capital sources. Obtaining a small business loan in the Philippines from the government, a bank, or a private lender is one useful way for ambitious entrepreneurs to raise capital.
But first, let’s figure out what a business loan is.
What is a business loan?
As you might have guessed, obtaining capital for a company venture from the government, a bank, or a private lender is a business loan. To launch their businesses and begin turning a profit, startups require money or capital. These businesses receive an advance loan from banks and other financial institutions in the form of a business loan.
Lenders then collect payments with interest based on the agreed-upon payment schedule and lending arrangement. Depending on where you obtain it, there are many financing alternatives for paying back the loan.
How Can I Apply in the Philippines for a Business Loan?
Banks and financial organizations have various requirements for eligibility. However, the majority of them need the things listed below:
- Must be a citizen of the Philippines and be under 65 years old when the loan for the business matures.
- Should operate a profitable firm registered with the SEC or the DTI and has been in operation for at least three years.
- must achieve a minimum annual gross sales threshold
- and a good credit history
Basic Requirements for Business Loan Applications
Prepare the required documents before applying for a small business loan in the Philippines.
- Valid government-issued identification (TIN ID, PRC ID, Postal ID, Passport, Driver’s License, or UMID)
- evidence of a company’s billing address (Business Permit, Lease Contract, Utility Bills)
- Certificate from DTI or SEC
- Certificate of Registration under BIR
- photocopy of the financial statements after an audit
- Business history/company information
- Completed loan application form
Why do you need a business loan?
- Business Expansion
An entrepreneur’s desire to grow is reflected in business expansion. As a result, most loan requests for the purchase of land, a workspace, or any other type of real estate to accommodate an expanding enterprise are more likely to be approved by banks.
You can apply for any available business loans if you believe your company is headed in the right direction. However, remember that most lenders require your assets to serve as loan collateral.
- Purchase of Equipment
Some business owners take out loans to buy new or additional equipment. A lower loan may be required for equipment purchases compared to business expansion. To decide if it’s more practical to buy a new tool or lease it for an extended period, you must still conduct a cost-benefit analysis.
- Enhance Cash Flow
Unexpected events can occasionally sneak up on firms and threaten more crucial areas of cash flow. For example, it’s possible that certain accounts receivable that were supposed to pay suppliers were delayed.
Perhaps a piece of equipment suddenly malfunctioned and needed to be replaced. Whatever the circumstances, there are occasions when a timely infusion of cash flow can mean the difference between a business struggling and succeeding.
What happens if a business loan is not repaid?
In most cases, the terms of a business loan will spell out the consequences of defaulting on payments. For example, the loan may be terminated, the total amount due will be due and payable sooner, additional fees will be assessed on top of the principal and interest already owed, and the collateral may be repossessed as a result of nonpayment.
Conclusion
Small business loans are sums of money that must be returned with interest to a lender, such as a bank. And it’s one of the popular methods for financing a firm.
