Why Do SMEs Need Business Loans Philippines
Small and medium enterprises (SMEs) continue to be one of the biggest players in the Philippines’ economy. As SMEs increase in number, one of the major challenges they face is their lack of capital. As business owners expand their businesses, they soon figure out that funding is needed – only to realize that existing capital is not enough to support the growth and scalability of the business.
One key characteristic of successful entrepreneurs in the Philippines is that they never lose sight of their goals. They know that goals can be achieved when they stay dedicated and when they get additional funding. Thus, business loans become a powerful tool for SMEs. And in this article, we’ll answer the question “Why Do SMEs Need Business Loans in the Philippines?”
Types of Business Loans in the Philippines
1. Short-term loans
If you need additional working capital to kickstart your business, we recommend getting a short-term loan that you can easily pay within a year. Unlike long-term loans in banks with around 15 years of repayment, it’s easier to apply for short-term loans as it doesn’t require too many requirements plus, your loan can get approved within 3 to 5 days.
This type of loan is recommended for your business when you need additional fixed capital for an existing business, home or office renovation, purchasing equipment or supplies to increase production, business expansion, and the like.
2. Credit line
Availing of a credit line is great for short-term needs and those who want greater financial control because the interest will only start accumulating when you purchase against it. Thus, you will only pay for the interest of the amount used which you can spread out in monthly installments.
While paying for the monthly interest, you can pay the principal amount anytime within the agreed term (usually one year and can be extended annually). You can borrow an amount from ₱500,000 to ₱20 million and use it to purchase additional equipment or supplies, increase capital, or even finance contracts and accounts receivable.
3. Secured business loan
In case you opt for lower interest rates with higher loan amounts and longer payment terms, a secured business loan is the way to go. You will need to present collateral which the lender can seize anytime when you fail to pay your loan.
This type of loan is usually offered by lenders such as RFC. RFC, the leading lending institution in the Philippines, accepts collaterals such as Vehicles, Properties, Trucks, Heavy Equipments, Appliances, and Livestock (selected branches).
4. Unsecured business loan
Compared to secured business loans mentioned
above, this type of loan will not require you to present any collateral.
However, you will need to prove your ability to pay back and that you have a
solid credit history in good standing.
This type of loan is also offered by RFC. The
processing is also a lot quicker compared to banks and other lenders who only
prioritize their brand partners. Since RFC understands your needs in securing
your cash flow, they only require a minimum of one-year business operation for
you to secure a loan.
Why are Loans Necessary for Small Businesses in the Philippines?
One of the most undeniable reasons why loans
are necessary for businesses in the Philippines is because it paves the way for
a business’s growth potential. Moreover, it’s also a great opportunity to
respond to market demand and ultimately become successful. As your small
business scales, it will become more stable.
Tips on Handling a Business Loan Properly
● Know your options. It’s crucial for small
business owners to know all the credit options available so they can make the
best decision for their company. Some rates of small business loans may vary
greatly as well as the terms and fees associated with the loan.
● Make sure you are borrowing money for legitimate use. A business owner should not borrow money just for the sake of
borrowing money. Even though a lender or broker may try to sell you on why you
need instant money, remember that such capital comes with a price.
● Show your business’s growth. While lenders in
the Philippines will look at your business track record and performance, they
are still funding based on future projected income. Showing an upward trend in
both growth and net income is a huge green flag in both getting approved, and
getting the best rates and terms for your small business.
Ready to take your business further? RFC is
here to help you. RFC offers SME Business Loans, Business Expansion loans,
Franchising loans, and so much more. Check out their list of financial loans HERE.