Best Business Loans in the Philippines

Last Updated – May 18, 2021 @ 11:19 am

What is a Business Loan?

As you might have surmised, a business loan is acquiring funding from the government, bank, or private lender to start or expand a business endeavor.

The loan is payable with different financing options depending on where you get it. 


Types of Business Loans

There are four basic types of business loans, each suiting different business requirements. Before you begin looking for the right loan provider with the most ideal terms, it helps to understand the types of business loans available.

This gives you better insight into what your options are and what best fits your needs.

Term Loans

This type of loan allows entrepreneurs to get additional funding while essentially keeping their own financial resources intact. These loans can support either short or long-term business needs and are ideal for SMEs.

Term loans are designed to make loan payments more manageable by spreading them out across regular installment, which include both the principal and interest. 

Generally, term loan amounts range from P100,000 to P20 million, which are received in lump sum via the borrower’s deposit account.

Short-term loans are payable within a year, while long-term loans are payable from five to 15 years.  

What can I use Term Loans for?

  • Equipment for increasing production or expanding a business
  • Construction, renovation, or purchase of properties like office space, store, or warehouse
  • Adding fixed working capital to a business
  • Financing a franchise business

Credit Line

This is a short-term loan that provides borrowers with quick access to money on demand.

In this arrangement, interests only start accumulating when you make purchases against the credit line, paying it only on the amount used. 

Also ideal for SMEs, credit lines can range from P500,000 to P20 million.

Here, lenders fund the borrower’s business checking account, with the loan amount being accessed by either issuing or encashing checks.

Other lenders provide additional means to access funds such as through ATM withdrawals, POS transactions, and fund transfers. 

This type of loan’s flexibility is what makes it most ideal for SMEs. Essentially, while interest is paid in monthly installments, borrowers can also repay the principal anytime or as often as they can within the loan term. 

What can I use Credit Lines for?

  • Purchase of supplies and inventory (often done to meet seasonal demands)
  • Increasing working capital for daily business operations
  • Accounts receivable financing

Related: Best Online Credit Line & Installment Loans in the Philippines

Secured Business Loans

This type of loan requires collateral such as real estate properties and bank deposits, which the lender will claim in case a borrower defaults on a loan.

Because the collateral reduces the risk for lenders, secured loans usually have lower interest rates, higher loan amounts, and longer loan terms than unsecured loans.

This makes it ideal for startups that need initial funding during periods when they’re just starting to make profits. 

Apart from interests, lenders charge fees such as appraisal and collateral registration fees.It’s important to note that term loans and credit lines are usually secured business loans. 

Unsecured Business Loans

While this type of loan doesn’t require collaterals, it is more difficult to qualify for. As well, due to the lack of security for lenders, this type of loan comes with higher interest rates, lower loan amounts, and shorter loan terms.  

You can mainly secure this type of loan from private lenders as there are only a few major banks that offer unsecured business loans. 

Also Check: Online Loans in the Philippines


Why Get a Business Loan?

As you might imagine, there are a myriad of reasons entrepreneurs may want to get a business loan. Below, we list down a few of the more common ones.

To expand your business

This has been alluded to earlier, but it’s worth mentioning the different ways this can manifest.

Perhaps you’ve hired too many employees to fit in your current office space; maybe your restaurant requires more seats; demand could have gone up over the years, and you need to both purchase equipment and increase your workforce to keep up. 

The need to expand is always a good business problem. And loans are an easy way to solve it. 

Related: 10 Ways to Fund and Finance your Dream Business

To improve cash flow

Sometimes, unforeseen circumstances creep up on businesses that compromise more urgent aspects of cash flow. It could be that some accounts receivables were delayed, which were meant to pay suppliers.

Maybe an equipment abruptly broke down, necessitating replacement. Whatever the case may be, sometimes a timely injection of cash flow could be the difference between a business floundering and overcoming an obstacle. 

To invest in better marketing strategies

As digital marketing ultimately became marketing, a number of businesses had to invest in modern approaches to market their brands.

It’s not just a way to keep up with the times and the increasing competitive demands, it’s also a way to scale up your business by expanding your reach and increasing potential leads.

Related: 150+ Profitable Business Ideas in the Philippines


9 Best Business Loans for SMEs & Startups in the Philippines

Below are the top lending institutions in the Philippines that provide business loans with low-interest rates.

1. First Circle

The fintech company was founded to empower SMEs in growth markets by financing their business-to-business trade transactions. They specialize in funding payments for different purchase orders and invoices. 

How to apply:

  • Enter your info
    Visit firstcircle.ph and enter your personal and business information. 
  • Submit requirements
    You’ll be required to submit both personal and business requirements. These include basic personal and business IDs, proof of billing address, DTI or SEC certificates, and BIR certificate of registration, among others. 
  • Submit an invoice or purchase order
    First Circle can finance multiple orders and receivables. When you submit a clear photo of these documents, the verification process begins and First Circle creates a loan offer within 48 hours. No minimum transaction amount is required to avail of business financing.

How you’ll get funds:

If you accept their loan offer and you’re in a serviceable area, First Circle will schedule a courier to collect your post-dated cheques.

Serviceable areas include Metro Manila, and some areas of Rizal, Cavite, and Laguna. The PDCs will be used to collect loan payments.

Meanwhile, approved funds will be transferred directly to your bank account. Fund transfers usually occur within 48 hours of collecting your cheques. 

First Circle Terms and Rates:

Loan duration is up to six months, while monthly interest rates start at 1.99%.

Interest rates will depend on the business profiles of both the applicant and the business associated with the purchase order or invoice. There’s also a 1.99% fixed processing fee of the principal loan amount. 


2. RFC

RFC is another non-bank organization aiming to help SMEs and even business owners by providing alternative sources of funding.

So whether it’s business expansion, paying for tuition, or going on a well-deserved vacation, RFC stands as a viable option to realize those needs. 

How to apply:

  • Fill out their online form
    You can fill out their online form here.
  • Submit requirements
    Depending on your purpose for the loan (working capital, business expansion, franchise financing, putting up a sole proprietorship or partnership/corporation), there will be different requirements. You can find them all here

Should your application be approved, a representative will call you. You will then be requested to complete the required documentation and will instruct you on how to collect your loan. 

Additional info:

  • Online applications are free, but should you wish to process your application in the branch closest to you, there will be upfront charges like processing/notarial fees. 
  • Payments can be settled through RFC’s payment partners. Post-dated checks are required for loans amounting to P100,000 and above. 
  • For more info, contact easyrfc@rfc.com.ph, (0961) 136-1160 / (0995) 307-9062. 

3. SeekCap

Backed by Union Bank, this lender provides business loans for a bevy of purposes – inventory, payroll, operations, capital investment, equipment, and infrastructure.

You will need to sign up to get started with your application and see potential interest and processing rates. 

Here’s a sampling of their loan offers:


4. BPI Family Ka-Negosyo

This BPI-powered loan caters to entrepreneurs looking to either start or expand their businesses. They offer term and franchising loans, as well as credit lines. 

How to apply:

You can find the form here where you’ll be asked for the purpose of your loan and borrower information.

You will be asked to submit a number of supporting documents depending on the type of loan you’re applying for. You can find the list of documents here.  

Additional info:

  • For term loans, there is a minimum loan amount of P500,000 (maximum of 70% of appraised value of house and lot or a maximum of 60% of appraised value of vacant lot or residential condo). The term is a minimum of one year and a maximum of 10. 
  • For franchising loans, there is a minimum of P100,000 (or 60% of total investment) depending on franchise packages available for Best List brand partners. For non-Best List brands, the minimum is P500,000. The terms come at a minimum of one year and a maximum of three. Meanwhile, credit lines have a one-year term. 
  • For more info, contact kanegosyo@bpi.com.ph, call 754-NEGO(6346), text 0917-8KANEGO / 0922-869NEGO.

5. Security Bank SME Business Express Loan

Security Bank says this loan is perfect for businesses looking to finance short-term needs.

And with minimal documentary requirements, fast approval, and auto-crediting of funds, they claim their SME Business Express Loan is tailor fit to the growing needs of your business – whatever they may be.

Additionally, there is no collateral required for loans up to P5 million and processing and approval can be as fast as five days. 

How to apply: 

  • You can find their online form here. It starts off with a few basic information that checks your eligibility for a loan, followed by your desired loan amount, purpose and tenor.  
  • You can also download the Business Express Application Form and together with the requirements, submit them to a branch near you. 

Additional info:

  • If you’re approved for a loan, you will receive an SMS and an SPOC will reach out to you to set an appointment. 
  • Upon booking the appointment, loan proceeds will be credited directly to your bank account. If you do not have a Security Bank account, you will have to open one. 
  • All loan monthly amortizations will be collected either via auto-debit arrangement from the nominated Security Bank account or via PDCs for neww-to-bank clients. 
  • Loan term ranges from 12 to 36 months, with interests starting at 1.50% and up to 1.95% for longer terms.

You can find more information here.


6. DBP Small Business Puhunan Loan Program (SBPLP)

The DBP SBPLP was designed to support the government’s thrust to provide credit for working capital to small enterprises.

This program will open the doors of small borrowers who may later enter into the regular lending program where they can avail of bigger loans. 

Additional info:

  • You can find their online application form here. Additionally, you can download their brochure.
  • The minimum loan amount is P300,000, while the maximum is P1 million. The maximum percentage loanable is based on audited net income (50% for the initial loan, and 60% for renewal). 
  • Interest rates for a one-year term loan is fixed at 9% per annum, and is 10% for a two-year term loan. 
  • Lump sum is released to the borrower’s deposit account with DBP. 
  • There is a 3% fee based on approved and booked loan amount, while post-dated checks from non-DBP accounts are collected as collateral security.  

You can find more information here.


7. BDO SME Loan

This loan is a one-time fund release designed to help your business finance long-term investments such as purchasing equipment to address production increase or acquire/construct new warehouse or office space. 

Its features include the ability to spread out payments to make monthly amortization more manageable. You can also maximize the value of your collateral up to 70%. 

How to apply:

  • Check your qualifications
    Borrowers need to be at least 21 years old and not more than 70 years old at the end of the loan term. Businesses should be in profitable operation for at least two consecutive years and have minimum annual gross sales of P1 million. 
  • Prepare documents

Loan terms and available options:

You can find more information here.


8. Blend PH Franchise Loan

This franchise loan allows borrowers to pay for franchise license fees, which allows the borrower to provide products and services licensed under the name of the franchisor and its business. 

How to apply:

  • Create an account
    Sign up here and proceed with the loan application once an account is created.
  • Processing
    Their team will process the application by validating and verifying all submitted information and requirements. The process usually takes 24 to 48 hours.
  • Funding and disbursement
    Once your loan is approved, it will be forwarded to Blend PH’s lenders for funding. You will be notified when a lender decides to fund your loan. 

Additional info:

  • Loanable amounts range from P50,000 to P2 million with interest rates of 2% to 3%. Terms are from 12 to 36 months. 
  • Requirements

9. Esquire Financial Business Loan

Designed for SMEs, this loan is part of the company’s thrust to advocate the Filipino entrepreneurial spirit.

Loans start at a minimum of P100,000, with a maximum of P10 million (with collateral) – at 3.5% monthly interest rate. 

Whereas, loan terms are from 3 months to 1 year.

How to apply:

  • Visit their website and register by clicking “Create An EFI Account.” Fill out the online application form and upload the necessary documents. Those who submit their bank statements for the past three months will be qualified for pre-approval. 
  • Wait 48 hours for an SMS and email notification of approval. 

For more information, click here


Things to Consider Before Applying for a Business Loan

1. Your purpose

As with anything in business, you need to be clear about what your goals are.

This would give you a better understanding of what kind of loan you need to look for and what terms and monthly amortization amount you can handle. 

2. Loan amount and repayment

Once you determine your purpose for taking out a loan, perform due diligence to find out just how much you need.

Equally important, you need to consider interests and other fees so you can actually work with the amount you have in mind and not something much less after all the fees have been taken out. 

Then, analyze what kind of repayment method fits your business. Consider your cash flow to check if monthly, quarterly, or bi-annual payments suit you better. 

3. Method of funding

Think about how you prefer to access your funds.

Would a credit line suffice? Do you want to get the loan amount in a lump sum? Or would you rather get access to the amount when you actually need it?

4. Research

As much as possible, take the time to really get into the details of prospective loans.

You and your business will be tied up to the loan for the foreseeable future, so make sure that you truly and fully understand what you’re getting into. 


Loan Repayment Tips

Most businesses enter a loan agreement with the best of intentions. But in reality, there are a number of unforeseen circumstances that could derail your plans.

Here are a few tips to allow you to increase your margin for error. 

1. Create a budget

Depending on your loan provider and the options you choose (PDCs or auto-credit), you need to ensure that you have the funds available when your loan is due.

While this is easier said than done, one way to approach this is to be as realistic as possible with your projections. You can’t base your projections on the numbers that a good month brings. 

You also need to understand that there will be unforeseen business costs, so you need to put that into consideration as well when creating your budget

2. Know your lender’s late payment policy

You need to come to terms that there’s a good possibility that you won’t be able to make your payments.

This is where having a clear understanding of your lender’s late payment policy comes in. This enables you to plan accordingly and make the necessary adjustments to your finances and business operations. 

3. Keep lines of communication open

If something comes up that you know will likely lead you to pay later than scheduled, let your lender know.

You want to build trust and communicating with them regularly keeps them abreast with what the situation actually is.  

When you do this, you’ll find that a number of lenders are more lenient than originally agreed upon, willing to work out alternative payment schedules if you establish a pattern of reliability.

And this can be achieved by communicating proactively. 

Related: Best Home Loans in the Philippines


Business Loan FAQs

What are the usual Business Loan Requirements in the Philippines?

Actual business loans requirements may vary a bit from bank to bank but the usual requirements include: 

SOLE PROPRIETORSHIP

  • Completed and Signed Application Form
  • Copy of 2 valid IDs with photo from primary applicant or owner
  • Valid Department of Trade (DTI) Business Registration documents
  • Latest Income Tax Returns with BIR stamp
  • Latest Audited Financial Statements (at least 12 months)
  • Latest bank statements (last 3 months) 
  • List of customers/suppliers and details about their dealings
  • Valid Business or Mayor’s Permit

PARTNERSHIP/CORPORATION

  • Signed and Completed Application Form
  • Copy of 2 valid IDs with photo from primary applicant or owner
  • Valid Department of Trade (DTI) Business Registration documents
  • Latest Income Tax Returns (ITR) with BIR stamp
  • Latest Audited Financial Statements (at least 12 months)
  • Latest bank statements (last 3 months) 
  • List of customers and suppliers and details about their dealings
  • Valid Business or Mayor’s Permit
  • Partnership or Board Resolution 
  • Continuing Suretyship Agreement (for corporations)

What do lenders consider when looking at potential borrowers?

Each lender has different factors that they look at when considering the viability of a borrower, but the common denominators can be categorized into:

  • Character – Good moral standing, indicator of willingness to pay as promised 
  • Capacity – Ability to pay, adequacy of source of repayment from existing businesses
  • Capital – Borrower’s financial strength, excess of what you own versus what you owe

What collateral is usually accepted?

  • Bank deposits
  • Residential properties
  • Commercial real estate
  • Mixed-use properties 

How does a lender determine the loanable amount a borrower qualifies for?

Again, different lenders have different methods. But almost everyone looks at the realistic projection of the cost requirement of the business. This cost projection is verified and weighed against the appraised value of the collateral offered. 

Alternatively, the loanable amount can also be computed using the gross monthly income of the borrower’s business, with considerations placed on projections and theoretical cash flow after the infusion of the loan. 

How do franchise loans work?

Franchise loans are mainly offered by banks and non-bank financial institutions (NBFI). There are instances when the franchisor offers the funding and terms for the franchisee.

In this instance, both parties are able to directly communicate regarding the arrangement for the franchise. These agreements include how much and how often repayments are. 

There is also an arrangement called peer-to-peer funding, which is what Blend PH offers. Essentially, a company like Blend PH mediates between the franchisee and the lender.

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About TJ Ibay

TJ is the lead editor of Grit PH.

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