Running out of funds or working capital is one of the many challenges business owners or startup founders are now facing.
Aside from rethinking their business strategies, they are now finding ways on how to stay afloat and save their business from the threat of closure.
While the situations may be a lot harder now due to COVID-19 pandemic, there are still financing options that your business can avail of to keep your business running amidst the crisis. Here are some different types of business loans for startups in the Philippines.
1. Short-term loans
If you want additional working capital to jumpstart your business operations after the lockdown, it’s recommended to get a short-term loan that you can typically pay within a year.
Unlike long-term loans from banks, it’s easier to apply for short-term loans as it doesn’t require stringent requirements and your loan can get approved within 3-5 days.
This type of loan is recommended for your business when:
- Adding fixed capital to a working business
- Spending to renovate office spaces
- Purchasing equipment or supplies to increase production.
- Expand your business.
Tip: It is best to project the estimated time you can pay your loan completely before deciding the length of the loan term. This is to lessen the pressure of paying short-term loans in full while your business is still in its recovering phase.
2. Credit line
Availing a credit line is best for business owners who want to finance their working capital. It allows them to access money whenever they need it. The startup owner can encash the amount of loan approved by the lender or bank through checks.
This type of loan can help you with the following:
- Purchase additional supplies
- Manage accounts receivable as well as contract financing.
Usually, interest in this type of loan only starts when you begin to exceed the credit line. You can borrow from Php500, 000.00 to Php2 million and the term can be renewed yearly depending on the lender’s approval. Owners can also pay the principal term anytime while paying for the interest monthly.
Remember: Though purchasing against the credit line may be tempting, you have to be responsible not to go beyond what you can pay.
3. Secured business loan
In case you want to have lower interest rates while attaining higher loan amounts and longer loan terms, the secured business loan can be the best for you. When applying for this loan, you have to present collateral which the lender or the bank can seize when you fail to pay your loan based on what is agreed upon.
Collateral can be:
- bank deposits
- real estates
- Or inventory financing.
Although this type of loan reduces the risks for lenders, it could mean otherwise for the borrower. You have to secure repayment of loan or else, you will lose your hard-earned possessions which may also include your business. The lender may also collect collateral registration fees and appraisal fees on top of your loan.
4. Unsecured business loan
Compared to secured business loans, this type of loan will not require you to present collateral; however, being qualified can be difficult if you have a bad credit history or you have zero credit history.
This type of loan is usually offered by lenders such as RFC and seldom by banks. The processing is also a lot quicker compared to others who only prioritize their brand partners.
Your business can also avail of lower interest rates depending on the performance of your business. RFC, unlike other lenders and banks, only requires a minimum of one-year business operation for you to secure a loan. RFC understands your needs in securing your cash flow and your hardships in managing a business from the ground up.
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 the Filipino entrepreneur by offering flexible business loans.
We help your business dreams take flight.