Financing business in Philippines can be confusing and overwhelming because there a lot of options and choice that is designed to kick start business depending qualification requirements and type of credit facility ranging from loan from the government, bank, or a private lender.
Business financing Philippines comes in a variety of types that suit different business needs. Before you start searching for the right startup credit facility, it will ideal you understand the types of business loans for starters and how to apply and requirements by the lenders.
You need to answer this questions, Are you looking for long-term financing? Do you need cash within days? Do you need the money to refinance debt or buy real estate? if you can provide answers then you are the right steps
For the purpose of this content we have outline source of business financing in the Philippines .
1. Government Loans
There are a variety of Philippines government-backed loans and grants available for businesses needing financial assistance. It should be noted that these loans are not operated by BOI, however they are available to BOI registered businesses they are:
i. Interim Rehabilitation Support To Cushion Unfavourably-affected Enterprises by Covid-19 (I-RESCUE) : designed for SMEs affected by the economic impact of Covid-19
ii. Pagbabago at Pag-asenso (P3): This scheme is run by the SB Corporation and the Department for Trade and Industry (DTI) established for micro-corporations with assets
iii. Micro, Small, Medium Enterprise (MSME) Credit Guarantee Program: This is working capital loan package designed to support small and micro-businesses affected by COVID-19 pandemic
iv. COVID-19 Assistance to Restart Enterprises (CARES):This scheme is run by Small Business Corporation (SBC) and the Department of Trade and Industry (DTI) designed to loan assist p small and medium-sized enterprises (SMEs)
v. Rice Farmer Financial Assistance (RFFA): This credit facility package is designed to assist rice farmers with farm sizes of 1 hectare and below
vi.Survival and Recovery Loan (SURE) for small farmers and fishers : this This scheme is run by the ACPC with zero percent interest rate loan amounting to twenty five thousand pesos for small farmers and fishers.
vi. Rehabilitation Support Program on Severe Events (RESPONSE: the package is to support both public and private institutions affected by the COVID-19 pandemic with minimum cash requirement to help them recover
2. Bank Business Loans
Banks and financial institutions have different eligibility criteria with flexible payment methods and loan terms. Most Banks in Philippines require a good credit line, a personal guarantee, collateral, and a good credit standing. This include secured and unsecured business loan
Most of the requirements by Philippines banks are stated below.
1. Borrower Must be a Filipino citizen between the aged 21 but not older than 65 when the business loan matures
2. Should have an SEC-registered or DTI-registered business with at least 3 years of profitable business operations
3. Must meet a minimum annual gross sales
4. Repayment terms of 6 to 60 months for business loans, depending on the amount of the loan and your credit history
5. Proof of healthy cash flow.
6. Valid Government ID (Passport, Driver’s License, TIN ID, PRC ID, Postal ID, or UMID)
7. Proof of Business Billing Address (Mayor’s Permit, Lease Contract, Utility Bills)
8.DTI or SEC Certificate
9.BIR Certificate of Registration
10.Photocopy of audited financial statements
11.Business background/company profile
12. Accomplished loan application form
13. Good credit standing
3. Private Company Loans
There are a lot private lenders in Philippines that provides personal and business loans to entrepreneurs which include Fintech. Though they have simpler application process and requirements compare to traditional banks
Types of Business financing in the Philippines
1. Term Loans
This could be short term or long term as a contract between a borrower and the Bank with a specific amount that has a specified repayment schedule and either a fixed or floating interest rate. a term loan may require a substantial down payment to reduce the payment amounts and the total cost of the loan.
A term loan is a loan issued by a bank for a fixed amount and fixed repayment schedule with either a fixed or floating interest rate. most banks in Philippines offers term loans which include the following
i. Metrobank SME Term Loan
ii. BPI Family Ka-Negosyo Loan
iii. PSBank SME Term Loan with Prime Rebate
iv. SSS Business Development Loan Facility
v.Security Bank SME Business Mortgage Loan
vi.OWWA Loan (for OFWs)
Types of Term Loans
i. Short-term loan
This is short-term loan, usually offered to firms that don’t qualify for a line of credit it’s run within 18 months
ii. Intermediate-term loan
This is generally runs more than one and paid in monthly installments from a company’s cash flow.
iii. long-term loan
The loan term ha a longer repayment duration often from 3- 25 years depend on the lenders
Philippines bank term loan amount ranges from PHP 500,000 up to 5 million with or without collateral to serve as security. They have Monthly or quarterly amortizations and loan tenor from 1 -15 years
Before you can apply for term loan in Philippines, kindly check with your bank to understand repayment term, Qualification requirements, tenor and interest rate so as to save you from financial danger
4. Bank Lines of Credit
The bank credit line is a short-term loan that provides quick credit to business owners. Business owners who opt for this type of loan can choose between a fixed or a revolving line of credit. If you need ongoing access to funds, or if you don’t know the full cost of a project, a personal line of credit may be better. With a bank line, you can use the credit as needed, and only pay interest on the funds you borrow.
Lines of credit are most often used to cover the gaps in irregular monthly income or finance a project whose cost cannot be predicted up front.A line of credit is a flexible loan from a bank or financial institution. Similar to a credit card that offers you a limited amount of funds
List of Credit Line Options in Philippines
i. PSBank SME Business Credit Line
It have Minimum of PHP 2 million (with real estate property as collateral) and PHP 500,000 (with bank deposit as collateral)
ii. Metrobank SME Term Loan
The credit amount ranges from PHP 1 million – PHP 20 million with 1 year duration
iii. BPI Family Ka-Negosyo Loan
The interest is Monthly amortizations and Principal is Payable anytime during the credit line term
5. . Equipment Loans
This enable Philippines citizen Finance new or used equipment, replace, repair, or upgrade various kinds of equipment to process, manufacture, or produce their product.
Each lender will have different terms, but in general, with a loan, you can finance around 80% of the total purchase price of the item. Your business can’t move forward if you don’t have the right equipment. From heavy equipment like forklifts to large medical equipment, having the equipment you need is a necessary part of your business
You can also read: How to apply for Security bank Philippines salary loan and requirements
6. Invoice financing
This allow business owners sell products or a service to other businesses (B2B), you may allow them to pay at a future date. Invoice financing is a loan secured by your accounts receivables.
As for the traditional banks,they requires businesses to submit their invoice to the lender so that they may advance cash against future invoice payments.Invoice financing makes it possible business owners to pay recurring expenses such as employee salary and overhead.
7. Online loans
Online lender will not require you to visit the lender in person to verify or complete paperwork There are online lenders registered in Philippines by securities and exchange commission
Angel investors are people who have the means to invest in a business opportunity that interests them. They are generally wealthy and will research opportunities in depth before jumping in. They might even spot the potential to join a business before it ever gets off the ground
Angel investors present a huge opportunity for quick growth and shared expertise, but the cost is losing some equity and perhaps autonomy in how you run your company.
9. Family and friends
Family and friends can also be a source business financing, if believe in your project you can easily get funds from them.However, they may need clear picture of your business prospect .
Using online platforms, you raise funds from individuals who want to back your small business, either to earn a reward or by becoming a lender or investor in your business. It is available to startups.
11. P2P Lending
P2P lends money chipped in from a group of investors.It makes easy to access money quickly and requires a small amount to get started. However, investors in the P2P pool still bear the risk of borrowers defaulting on their payment obligations.
12. Secured and Unsecured Business Loans
The Secured business loan requires collateral—such as real estate properties and bank deposits. unsecured business loans don’t require collateral and are more difficult to qualify for, especially for those with bad or no credit history
Secured Business Loan lenders in the Philippines are
i. BPI Family Ka-Negosyo Loan
ii. Metrobank SME Business Loans
iii.OWWA Loan (for OFWs)
iv.PSBank SME Loans
v.Security Bank SME Business Mortgage Loan
vi.SSS Business Development Loan Facility / SSS ASENSO
Unsecured Business Loan lenders in the Philippines are:
i. Security Bank SME Business Express Loan with loan amount from PHP 1 million – PHP 5 million. it loan term goes from 12, 18, 24, or 36 months with Monthly amortization
11. BPI Family Ka-Negosyo Franchising Loan (No Collateral option): The Minimum loan amount ranges from PHP 100,000 or 60% of total franchise investment–The tenor is from 1 – 3 years with Straight amortization
Other business financing in Philippines is adumbrated below.
1. BONUS: Amortizing Loans (ALP)
2. SSS Loans
3.GSIS Enhanced Conso-Loan Plus
4. OWWA (Overseas Workers Welfare Administration) Loans
6.Loans Against Hold-out in Deposits
7.Domestic Bills Purchase Line
8.Business Credit Cards
9. Merchant Cash Advances
10. Personal Loans
11. Purchase Order Financing
13. Cash flow loans
15. Vendor credit
16. Auto loans
17. Commercial real estate loans
18. Business line of credit