Should I get a business loan?

‘Debt’ is a can be a horrifying word when it’s not properly used. But risks can come with rewards, especially if you do your homework and make smart decisions.

Here are just a few reasons why you should see business loans in a different (a.k.a. better!) light.

You’re Planting Seeds

Before getting to where you want to be, you need to nurture the seeds of your exciting, new venture. Business loans help you grow those seeds.

Some common factors you need to help your business grow are:

1. Talent

As you grow, more tasks will need completing. Sure, your current team is more than capable of getting stuff done. But can you say the same for heavier workloads?

Getting the “right” people for your business means investing in them. Whether it’s retaining your current team or adding new talents to your roster, you’ll need funds to invest in them.

Also read: Where to start? 5 smart investments to help your business grow

2. Location

Whether it’s renovating your current office or expanding to new locations, you’ll need to have a steady flow of money to start things up. There’s never a shortage of emergency expenses, either. You’ll need to consider construction costs, rental fees, and utility bills.

3. Inventory

Your business may require additional funds to purchase larger amounts of inventory. For instance, expanding your business obviously necessitates more supplies. Seasonal businesses may also need to apply for loans in certain months in order to meet higher demand.

Here’s a really simple example: ice candy. Sure, you’ve got the best flavors in the market. You even have a secret ingredient to help you stand out. But as customers come rolling in (especially during summer), you better be sure you’ve packed. It’ll hurt to lose any opportunity to sell, especially if you didn’t stock up in the first place!

Debunking business loan myths

Let’s dig deeper into some business loan fears, and shed some light on these and other myths, shall we?

1. Business loans have high-interest rates

Your experience of borrowing from loan sharks who can provide quick cash loans, but comes with very high-interest rates may have caused this notion. But business loans aren’t limited to just one type – there are different kinds that you can choose from, depending on your needs. For example, microloans can offer manageable solutions for your funding needs.

2. Only banks offer loans

There are alternatives to banks. Peer-to-Peer (P2P) lending can grant you funds in a relatively faster manner. Non-banking methods can work great locally like loans from RFC.

Considering that credit card penetration is below 10%, people are more likely to go the alternative route!

3. Loan approval will take months

Business loans, once approved, won’t take forever to be funded. As long as you’ve submitted all the necessary paperwork and requirements, you won’t have to wait long. It usually takes 5-7 days for you to get your funds.

4. I need to have an excellent Credit Score

Your credit score doesn’t need to be perfect.

The Philippines doesn’t actually have a standard rating system for credit scores. Instead, banks use their own records to gauge credit scores or depend on firms such as the Bankers Association of the Philippines Credit Bureau.

The information gathered is then submitted to a centralized credit database, the Credit Information Corporation (CIC). The CIC produces credit reports for banks, containing your credit score. “Credit scores” determine whether or not you’re deemed credible by banks and credit groups. (This is different from your “credit history,” which refers to your ability to repay debts).

Depending on the loan you plan to get, there are several factors used to gauge an approval.

Short-term loans have a higher approval rating and don’t necessarily need a spotless credit history record. Also, some banks and non-banks refer to the record of business owners when approving a loan. Some other lending firms consider employment background as an approval factor over credit score.

Here are some factors that may affect your credit score:

• The length of your credit history. When you first used your credit or loan accounts,
  and how often you’ve used them
• The credit payment history. How much you’ve paid – and missed – payments.
• The different kinds of credit you’ve used. To check if you can manage dealing with different credit types.
• The credit limit. If you’ve been within your credit limit.
• Application of new loans. If you’ve been applying for different kinds of loans.

A shift in perspective will help you realize the benefits of applying for a business loan. Apply for a business loan now to start nurturing your dream!

Being your own boss comes with a huge responsibility, and we do understand that sometimes cash flow can be a little tight. We also know that, in order to grow, you need to increase inventory or beef up your capital. RFC supports Filipino entrepreneurs by offering flexible business loans.

We help your business dreams take flight.