How to Apply for a Business Loan in the Philippines: A Step-by-Step Guide for Small Business Owners
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Do you need money to start or grow your business? One of the practical options for entrepreneurs like you is to apply for a business loan in the Philippines. Essentially a type of personal loan intended for financing a business, a business loan allows you to borrow money that you’re expected to pay back (plus the interest) over an agreed time.
Commercial banks are among the traditional business loan providers in the Philippines. They lend as much as millions of pesos to aspiring and existing Filipino entrepreneurs. If you’re thinking of getting a business loan from a bank, here are the steps you need to take:
Step 1: Determine your reason for needing a loan.
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What do you need the money for? When you’re applying for a business loan, do it for the right reason—such as purchase of equipment or real estate, increase of working capital, financing a franchise, or business expansion.
In contrast, getting a business loan is a bad idea if it will be used to purchase unnecessary business assets or funding ongoing losses.
Step 2: Decide how much money your business needs.
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Before you apply for a business loan, you need to have a reasonable estimate of the amount you need for your business based on your purpose. Ask for too much, and the loan provider will doubt your credibility as a business owner. Ask for too little, and soon you’ll be dealing with problems like lack of working capital or lack of money to purchase a critical piece of equipment for your operations.
Thus, you have to do your research on the costs, evaluate your existing funds, and plan your budget well based on those factors. This way, you’ll come up with an amount that’s enough for the purpose you’ve identified for the loan.
Step 3: Check if you’re eligible for a business loan.
Eligible to apply for a business loan in the Philippines are the following:
- Filipino citizens aged 21 but not older than 65 upon loan maturity
- Business owners with at least 2 years of profitable operation
- Non-entrepreneurs (employees or professionals) with at least 2 years of steady income
- Good credit standing
- Business registered with DTI or SEC with at least 2 years of profitable operation
- Minimum annual gross sales (depending on the bank)
- Good credit standing
Step 4: Find the best loan for your business needs.
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Different banks in the Philippines offer a variety of short-term and long-term loans for small and medium-sized enterprises, as well as franchising businesses. You can’t just randomly pick a business loan or settle with the one offered by a leading bank. Know your options—research which loan provider can match your business loan needs. Review the features of the loans, too.
To save yourself time and effort in deciding on the best loan for your small business, you can enlist the help of a financial comparison website to compare business loans for you.
Step 5: Submit the documentation requirements.
Gather all the documents required by your bank of choice and submit original copies and photocopies. Most banks ask for the following documents from business loan applicants:
- Signed and completed loan application form
- Latest income tax returns (ITRs)
- Latest bank statements
- Valid IDs
For first-time entrepreneurs/employees/professionals
- Certificate of employment
- Resume of business loan applicant
- Latest pay slips
For business owners
- Company profile/business background
- Business permit or DTI/SEC registration certificate
- Latest audited financial statements
- Articles of Partnership or Articles of Incorporation
- Board resolution (for corporations)
- List of major suppliers and customers with details about dealings
For the complete and specific list of documentation requirements, check the official website of the issuing bank.
In a nutshell, applying for a business loan in the Philippines involves identifying the reason for and amount of the loan, checking the bank’s eligibility requirements, choosing the best loan for your business’s needs, and submitting the required documents.
When you’re done with the final step, the bank will process your business loan application for about 3 to 7 business days.
Daniel Zoleta is from MoneyMax.ph, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products. Follow him on twitter @djzoleta