Starting a business is incredibly exciting. Contrary to what many people think, you don’t have to be rich to start one. There are actually hundreds, if not thousands of small business ideas that require minimal capital.
But what if you don’t have capital? What’s the best option for you? This is where loans come into play. A loan is an amount of money borrowed from a bank or other financial institution. It is paid back over a set amount of time, plus interest.
Despite the accessibility of loans today, a shocking 79.8% of Filipinos still don’t consider borrowing money from banks and other lending institutions. Instead, they turn to unreliable and sketchy lenders who charge exorbitant interest rates.
In this guide, we’ll let you in on why taking out a loan should be your top choice. We’ll also discuss the easiest ways for budding entrepreneurs to get a loan in the Philippines.
Safest and Easiest Loans to Get in the Philippines
Here are some of the best loans you can apply for to jumpstart your business.
1. Blend PH
Loanable amount: P100,000 to P2 million
Installment terms: 12 months to 36 months
Interest rate: Depends on the borrower’s risk
Developed and managed by Inclusive Financial Technologies, this online platform connects borrowers who need help to fund their goals to people who want to grow their wealth through lending. This platform is a pioneer of peer-to-peer lending in the country, and it promotes responsible borrowing.
Blend PH has a wide array of available loans such as:
- Personal Loan
- Franchise Loan
- Business Loan
- Auto Sangla
- Fast Loan
- Seafarer Loan
- Educational Loan
- Salary Loan
All these loans are highly customizable to fit your needs. You can loan P100,000 to P2 million, which makes it an awesome option if you need more money to start your dream business.
Moreover, you can enjoy 12 months to 36 months installment period. The interest will be determined based on your credit standing.
Applications are made online. Simply sign up for an account.
2. Tonik Bank
Loanable amount: P5,000 to P50,000
Installment period: 6 months to 24 months
Interest rate: 7%, or 5.42% when you link your salary payroll ATM card
Tonik is revolutionizing the way Filipinos do banking. This digital bank empowers Filipinos to take charge of their finances by providing a user-friendly digital-only banking platform that helps them save, monitor finances, and get loans in just a few clicks.
With Tonik Quick Loan, you can get P5,000 up to P50,000. This loan doesn’t require any collateral and Tonik will also not check your credit history.
When you apply for this loan, you can benefit from fast approval and real-time disbursement to your account. You can also choose from flexible payment dates, as well as 6, 9, 12, 18, or 24 months installment.
There is also no pre-termination or early payment fees. When you top-up your account, you’ll be auto-debited on your due date of choosing.
This loan comes with a fixed monthly interest of 7%. However, you can enjoy a 5.42% interest rate when you link your salary payroll ATM card.
All you need to apply for this loan is to download the app and present 1 valid ID and a 1-month payslip.
3. HomeCredit
Loanable amount: as much as P150,000
Installment terms: 15 days to 36 months
Interest rate: depends on loan term
HomeCredit is a non-bank institution that helps consumers get access to easy and fast loans through the HomeCredit app.
Simply download the app and create an account. Then, choose your preferred loan amount and fill up the form. After the details are complete, submit your application and wait for approval.
With HomeCredit cash loan, you can start your business and enjoy low monthly installments, 1-minute approval time, and no hidden charges.
You can get the money you need in as fast as 5 minutes, and you only need to present 2 valid IDs to qualify for a loan.
4. Unacash
Loanable amount: P2,000 to P50,000
Installment terms: 2 months to 6 months
Interest rate: 10% per month
Unacash is a digital loan application platform that boasts a seamless experience and low interest rates. With Unacash, you don’t need to worry about the intricacies that come with traditional loans since you can apply for one in the comfort of your own home.
To get a loan, apply and fill out the loan application form on the app. Then, choose the amount and term of your loan. Approval can take as fast as 24 hours. Once the loan is approved, your funds will be ready to be transferred to your bank account. To pay for your loan, simply go to the nearest Bayad Center, SM Store, Cebuana Lhuillier, or 7-11.
Late payment fees are charged P800. Meanwhile, the prolongation fee or loan extension request is P200.
Applicants must present a valid government ID. Presenting a paycheck will also increase your chance of getting approved.
5. CIMB
Loanable amount: P30,000 to P1 million
Installment terms: 12 months to 60 months (multiples of 12 months)
Interest rate: depends on loan terms
This Malaysian bank is now making waves in the Philippines thanks to its competitive offers. With the CIMB Personal Loan, you can get up to P1 million in just 10 minutes. You’ll also be able to enjoy the all-digital loan application process as well as instant cash disbursement.
To apply for a loan, download the CIMB Bank PH app, open an account, and click “personal loan.” From here, send 1 valid ID, select your preferred loan terms, and supply the necessary details. Then, create an account and get verified through a selfie check. Validate your address, and employment information, and submit your application.
After this, your application will be reviewed by the CIMB team. If approved, accept the offer before it expires. After this, your money will be sent to your chosen disbursement account.
To qualify for this loan, you have to be at least 25 years old, but no older than 65 years old upon loan maturation. Applicants must also have a minimum gross monthly income of P15,000.
If employed, must be tenured for at least 6 months or 1 year of continuous employment. Applicants who are employed in the top 15,000 corporations are exempted from this rule. If self-employed, applicants must be operating for at least 1 year.
Is it a good idea to take out a loan to start a small business in the Philippines?
The subject of whether or not it’s a good idea to take out a loan to start a small business is highly debatable, but here is our take on the matter:
Yes, it is a good idea to take out a loan to start a small business if you can’t afford to do so with your current funds.
Why?
A lot of people underestimate how much money they need to start up a business. But the truth is, starting a business requires cash – even those that require minimal resources. There are bills, permits, taxes, and other miscellaneous expenses that you’ll have to pay to get it running.
Taking out a loan is the best option for small business starters without initial capital, especially those who don’t have an emergency fund yet.
Thankfully, banks and other lending institutions now offer many types of loans geared toward budding entrepreneurs and business owners. These competitive loans are designed to offer a multitude of flexible options for entrepreneurs to easily find the best loan for their business. With these loans, you can easily customize the amount, payment dates, and installment terms.
However, keep in mind to only borrow what you need. If not, you may end up overburdening yourself and sinking deeper into debt.
If you’re set on taking out a loan to start a business, do not forget to compare different lenders before taking out a loan. This way, you can find the best loan terms that are tailored to your needs.
Pros and Cons of Loans
We’ve gathered the advantages and disadvantages of taking out a fast business loan to start a small business.
Pros
Easy application process
Unlike traditional banks, digital banks and the choices mentioned in this article provide an easy loan application process. This means that you can apply for a loan without having to go to a physical bank branch.
These institutions also require a lot less paperwork compared to physical banks so you won’t need days to prepare your loan requirements. Sometimes, all you need is a valid ID.
Instant funding
You will immediately get your funds when your loan application is approved. Most small business loans take less than 24 hours to process your application. Some even take less than an hour, which is perfect if you need money fast.
No collateral needed
When applying for a loan, you don’t need to pledge any collateral, which is good for entrepreneurs on a tight budget.
You can pay for it over time
The best type of business loan is one that lets you pay back your debt over time. This way, you can pay off your loan while your business is generating income.
It can be used for any type of business
The best thing about getting a business loan is it doesn’t have to be used for any specific type of business. The loan can be used for any type of business whether it’s online or in a physical store.
Cons
Higher interest rates
Because these loans are not secured, they tend to have higher interest rates than other traditional loans. This can be a deal-breaker for small business owners who are working with a limited budget.
High fees and penalties
Most business loans require strict monthly payments, which can be a hassle to pay if you’re not earning an income yet. If you miss your payment schedule, lenders may charge you exorbitant late payment fees or increase your interest rates.
Limited borrowing amounts
You can’t possibly fund a Jollibee franchise or any large business with any of the loans mentioned above. Fast business loan providers can only loan a minimum of P2,000 and a maximum of P1 million (depending on lender). This amount is suitable for businesses that are just starting.
You may end up in a cycle of debt
If you end up taking out multiple fast business loans to fund your business, you may end up in a vicious cycle of debt. This can be incredibly dangerous because you may never be able to pay off your debt and could end up losing your business due to fines and penalties.
Other loans may not help you build credit
Unlike other types of loans, fast business loans are not reported to the credit bureau, which means you won’t get any credit rating boost from it. This can be a disadvantage if you plan to take out other loans after your business loan to fund expensive purchases in the future.
Author Bio:
Jason Acidre is a serial entrepreneur and the publisher of Grit PH – one of the fastest-growing online publishing platforms in the financial & business space in the Philippines. Follow him on Twitter @jasonacidre.
