Grow Your Business

Entrepreneurs need start-up capital to register their business, set up shop and begin operations. Oftentimes, this capital is sourced from personal savings, credit cards, and loans from family and friends. But if additional money is needed and your sources have already run dry, what can you do next?

Look for other available sources of funds. Banks, lending companies, and even cooperatives offer several types of loans catering to different customers and needs. But since your business is new—and lenders consider newbies as a risky investment—consider doing the following to improve your chances of securing much-needed funds:

Assess the strengths and weaknesses of your application. Before even trying to shop for loan products, take stock of your status. Don’t have as yet strong operations and stable financials? Off a piece of property or deposit account as collateral to secure the loan, or other sources of income such as your regular salary, lease agreements, or stock and bond certificates. Remember, lenders are most interested in how you can repay the loan.

List down what you want from your loan. How much money do you need? What is the nature and purpose of your loan? Do you want to pay with equal monthly amortizations, or do you want a revolving credit line that allows interest payments for a certain period?

Knowing the answers to these questions will help you find the most suitable loan package, says Donaldson Jao, group head of Small and Medium Enterprise Banking for Philippine Savings Bank (PSBank).

Be familiar with different loan providers and products. Don’t just go to large commercial banks; you may have a better chance of securing a business loan with lending companies, says Eillen Barredo-Mangubat, general manager of Asialink Finance Corp.

When going to loan providers, don’t forget to ask about the products they offer. In addition, ask about the following:

In addition, lenders usually require principal borrowers to be at least 65 years of age upon loan maturity (or when a loan is due to be paid). For businesses registered as corporations, it must be at least 60-percent Filipino-owned.

If you plan to loan from a multi-purpose cooperative (MPC), you must be a registered member of the co-op and must have contributed a certain amount before application, says Kamay Krafts MPC general manager Venus Pizaña. The bottom line is know if you are eligible for a loan.

2. Required documents. List down all documents you need to submit, which depend on the type of loan you want to get. For applications offering a time deposit account as collateral, for example, PSBank’s Jao says government-issued IDs, a certificate of deposit, a copy of your business permit and registration documents from the Securities and Exchange Commission (SEC) or Department of Trade and Industry (DTI) might be required, among others.

“But if you offer real estate as collateral, a copy of its title would be required as well,” he adds.

3. Application and loan release process. Lenders vary in their processes and turn-around time. Some can evaluate applications and release funds in just few days; others take longer.

“Loan application nowadays is made simpler and much more convenient to clients. They can choose to visit a branch or the head office or submit applications via fax or the Internet,” says Jao.

According to Barredo-Mangubat, a client usually submits the application form with the required documents. After a day or two, a representative from a bank’s credit review department performs a credit and background investigation and conducts phone interviews with the applicant.

“If everything is in order, the loan will be booked and the money released,” she says. Do not, under any circumstance, falsify information. Write your complete personal, contact and business details in the loan application form.

4. Interest rates. Ask for the best rate and payment term to benefit from low monthly payments. Interest rates will also depend on the lender’s objectives; unlike most banks and lending companies out for profit, cooperatives have other aims, according to Pizaña.

“We at Kamay Krafts aim to help the women living in the poor areas of Metro Manila make a decent living through livelihood loans. That is why we try to give our borrowers good loan financing deals,” she says.

5. Payment term. Decide how many months you want to pay for your loan. There are short-term loans like a revolving credit line that has a maturity of up to one year. Long-term business loans usually mature in seven years. “Customers now can benefit from a wide range of loan products either through short- or long-term basis,” says Jao.