Loans for dealing purposes are a popular decision for young entrepreneurs without starting capital. However, there are stacks of pitfalls that should be thoroughly investigated.
There are several types of business loans in the Philippines. Startups are likely to seek help from banks, loan companies, private creditors or government. Below you’ll find everything you need to know before submit an application for a loan in Filipino financial companies.
Bank business loan requirements
Business loans in the Philippines are available equally for singular manufacturers and corporations, though requirements are varied.
- Appropriate credit history
It depicts the lender’s repayment ability and consists of information about previous loans. The most important aspect reports about promptly paid bills. Also, businessmen should pay attention to the amount and types of previous credits. Lenders without a credit history are not likely to gain approval for a big sum for the first time.
According to the rules newbie businessmen aren’t considered to be appropriate lenders. That’s why it is required to have at least 2 years of cost-effective operation.
- Citizenship and age limits
Most lending companies work only with Filipino citizens who are older than 21 years old. The extreme age when you can apply for a business loan is not the same for different companies, but in most cases, lendees are people not older than 65 years.
- Credit reputation
Good credit history is as significant for partnerships as for individual undertakes. So, to claim lenders fund your company should obtain a good credit report at the outset.
- Business registration
In the Philippines, there are two certificates needed for business: SEC and DTI.
DTI (Department of Trade and Industry) secures your singular valid trade name (suitable for individual businessmen).
SEC (Securities and Exchange Commission) regulates the business activities within corporations. The initial capital is obligatory.
And the most essential is that corporate clients should have a proper annual income. The amount of it depends on the bank.
How to Apply for a business loan online?
- Establish the loan purpose
As a rule lending goal determines the amount and term of lenders fund Business loans are mainly taken for production renovation or some essential equipment. For example, credit lines are especially useful for startups that are longing for some renewal. These short-term credit lines are available for a recipient on demand and charge is paid only for the used amount of money which is available for one year. Long-term credits taken in a bank would be advantageous for big enterprises that don’t expect “quick profit”. Small businesses that don’t have a deal with advanced manufactures and a big number of staff can use online loans option as their purchases will pay off right away.
- Decide on the loan company and figure out the amount
In the Philippines, there are many opportunities for business loans and sometimes it is hard to figure out which company is reliable. That’s why you need to choose only among the credible loan companies such as Robocash, Cashwagon, Atome or OnlineLoans Pilipinas. Conditions for applying are pretty the same, though, there are different loan limits. The first credit in that companies generally varies from 2 000 to 10 000 PHP. For the second time, you can loan up to 40 000 PHP. Online loan companies work without collateral and they are 100% online. So, today business isn’t about long queues in a bank and hours of negotiation.
- Collect necessary documents
Comparing to the list of necessary documents in a bank, documents required in the financial companies are simple “pro forma”:
- Minimum 2 valid IDs (Passport, TIN ID, PRC ID, Driver’s License, UMID or Postal ID);
- Employment confirmation;
- Age range between 20 to 70 (depending on the lending company);
- Valid mobile number;
- Steady income from the business (this is also optional);
- DTI check and permit for business are mainly asked in traditional banks.
Business loans vs. personal loans
This battle could end before even start as the decision seem to be simple: if you need money for your business needs – take a business loan, if there is any other financial problem – take a personal loan.
Nevertheless, it’s not that simple. And there are some additional notions that you need to follow.
- Personal loans online provide money without asking the exact purpose. So, as a rule, people are tending to borrow for some everyday needs or emergencies. Note, that you are not supposed to borrow money in a bank for travel or repairing.
- Most personal loan companies work fast in all senses. Need money for an emergency? The loan term wouldn’t belong as well.
- Business loans serve as an advantage to modernize the manufacture to double income.
Well, requesting a personal loan could be the best decision in a particular situation. There are some obvious advantages:
- Bigger loans than a credit card;
- Permanent interest rates;
- Optional terms.
However, people don’t like high-interest rates and various fees that are common for personal loans.
Bank Loan vs. Online Loan
- Banks allow borrowing larger sums (up to 2 million PHP). However, the process of lending is hard and requires a lot of papers.
- In loan companies, there is no need for various certificates and income information, more than that application process takes about 10 minutes. But the amount of money you could borrow is lower (up to 40 000 PHP).
- Online loans allow small sums lending for a short time, when banks do not even moderate the list of requirements for both short- and long-term credits.
- One of the crucial “pros” in favor of traditional banks is that they are under the authority’s control. Thus, many people don’t believe in online lending companies. However, in the Philippines both banks and financial companies are regulated by authorities. They are equally legitimate.
So, today there are many opportunities for developing businesses to lend money in the Philippines. There are different kinds of loans that fluctuate by the amount of money, conditions, and terms. That’s why every entrepreneur needs to have a detailed returning loan strategy, before applying for any kind of credit. More than that it is vital to figure out the goal of lending and find the simplest and the most cost-effective decision.