Last Updated On September 2022
Whether you’re just starting a business or you’re already settled, but thinking of expanding your business, you may need additional capital to fuel your business dream. If your current financial standing is not enough to make this dream come true, do not worry because you have options to get additional funding through loans.
For some entrepreneurs, loans are scary because of the interest they have to pay. However, the reality in business is that you need money to create more money. As long as the money will be invested wisely, you do not have to worry about getting a business boost through loans.
If you are planning to get a loan but do not know where to start, we can help you.
Since the financial status of a business is crucial is sustaining the operation, knowing where and how a business loan works is essential. Different loan sources have different loan agreements, so it’s best to research first on what could be best for your growing business.
Learn more at: How Does Business Financing Work
It is normal for us Filipinos to ask for help from friends and families, even in business financing. Some young entrepreneurs ask for financial assistance from their parents to start a business. Others approach friends for additional investment.
Pros:
Your relationship with friends and family is your “collateral,” no need for any credit investigation.
You get better interest rates or payment terms compared to what banks would usually give you.
Cons:
Money can ruin relationships. Unless you are sure that you will be able to pay back, avoid borrowing from friends or family as much as possible. Also, Filipinos might have this “hiya” in setting agreements, especially if it is someone dear to them. Hence, this loan source may have no clear terms. Often, loans from family or friends just go through verbal agreements and do not involve contracts. This may sound convenient, but it may cause problems later on.
A personal or business credit card may be used to acquire additional funding for your business. Banks usually offer credit cards to clients with good credit standing or applicants who meet their financial requirements.
Pros:
If you already have a credit card, you no longer have to go through a lengthy loan application process.
You can take advantage of credit card perks like reward points, pay-later schemes, and zero-interest promos.
Cons:
Depending on your relationship with your bank, the amount you can use may be limited and may not be enough to fund your business. This is true especially for personal credit cards. A credit card’s interest rate is higher than other credit facilities. You also have to be cautious of penalties for late payments, non-payments, and over-limit usage.
A common source of business finance among small and medium enterprises or SMEs in the Philippines is informal financiers or those who offer “5-6.” The term 5-6 is from the 20% interest rate the financiers add to your loan principal.
Pros:
Getting loans from informal financiers is relatively easy. As long as you have an existing business or a physical, your loan will likely get approved immediately. You pay back daily, which makes payment less burdensome.
Cons:
Getting asked to pay daily may be annoying, especially if the collector comes before you make any sale.
An interest rate of 20% is high, but it does not seem such because of the daily payments.
Banks offer big and small corporation loan.
Pros:
Banks are institutions governed by Bangko Sentral ng Pilipinas, so you are guaranteed that they follow stringent rules on offering business loans. Depending on your capacity to pay back, you can get a huge amount of loan for your business from banks.
Cons:
Banks are known for their stiff documentary and financial requirements from businesses planning to avail of their loans. Small businesses often fail to secure loans because of these requirements.
Interest rates are higher than other types of loans, and payment terms are often fixed and not flexible.
You may avail of personal loans offered by banks to boost funding for your business.
Pros:
Personal loans are easier to avail than business loans. To get a personal loan approved, banks will look at your credit score and not at the status of your business. Personal loans do not require collateral.
Cons:
Since it is intended for personal use and not business, the amount you can get from a personal loan is often limited. Mixing your personal finance and business finance is not really recommended, as it may be hard to keep track of your financial health. It may also have tax implications later on.
If you have assets that you are willing to let go temporarily, like jewelry, your car, or the title to your real estate properties, then you can seek collateralized loans.
Pros:
As long as you have something of value, securing a loan is easy. Interest rate is often lower than other types of loans.
Cons:
The amount you can borrow depends on the value of your collateral, often lower than its actual value. If your collateral is of low value, the amount of money you can get will also be low. You risk losing your collateral if you do not meet the payment requirements.
The needs of SMEs are unique. That’s why for small business loans, it is best to seek help from institutions specially made to address these needs. One of them is Esquire Financing Inc. or EFI.
EFI was founded in 2011 specifically to provide small business loans in the Philippines. They have access to financing and sound advisory services to SMEs for them to reach their full potential.
EFI differs from banks and non-bank SME financing companies in the Philippines through the advantages it offers. Aside from not requiring collaterals, EFI offers flexible loan terms with minimal documentary requirements and a 7-days turnaround time. Understanding that each business owner has their own unique requirements, EFI offers loans based on the cash flow of a business. It also provides loans up to P10 million. With EFI, it’s all pros with no cons! It may be the best place for a small business loan.
If you are interested in getting a business loan from Esquire Financing, just visit our loans application page and see for yourself how easy it is to get your loans approved. You may also check this link for a list of the minimal documentation requirements. Start fueling your business dream! Apply for a business loan today!
