Introduction
Thinking about launching a business can be fun. You become inspired by a lucrative business idea, so you proceed to make a list of the things you need to do to bring it to life. This stage can be very exciting until you realize one thing: the money you have is not enough for your plan to materialize.
Such is the case for many Filipino entrepreneurs. A lot of them have the skill, passion, and talent to become successful business owners but lack the capital to get started.
Fortunately, there are various platforms, like Cebuana Lhuillier Kanegosyo Center, offering micro business loans in the Philippines. What they offer can empower entrepreneurs to immediately start and expand their businesses. Continue reading below to learn more about how they can help you succeed in this blog.
Why Micro Business Owners Need Loans
Generally, business owners in the Philippines take out micro loans for their small business for three main reasons:
Getting the Business Started
No matter how lucrative and novel, a business idea won’t materialize without funds. Money is needed to purchase the things you’ll need to run your business, such as supplies and equipment. You may also need to hire employees and rent or build a physical store to sell your goods. Moreover, you will need to pay fees for business registration so you can operate legally.
Expanding the Business
For any business to maintain its competitive edge, it needs to grow and expand. Part of this is advertising products, upgrading old equipment, expanding into other markets, or hiring more workers. Since these are all strategic investments that can boost your revenue, taking out a loan for these expenses can be a good idea.
Pay for Ongoing Expenses
It’s normal for businesses to go through rough patches, especially if it’s your first time to be an entrepreneur. Sometimes, uncontrolled factors, like emergency situations and natural disasters, can be the cause. Regardless, if you’re in a situation wherein your expenses exceed your sales, you can take out a loan to keep your business afloat. This is especially helpful if you’re waiting to be paid by customers.
Different Kinds of Business Loans for Micro Businesses
Business loans can be divided into several categories. Choosing the best one for you will depend on several factors, such as your needs, the purpose of the loan, and so on.
Term Loans
Term loans, as the name implies, can be either short- or long-term. The former is paid within a year, while the latter is payable for up to more than ten years, depending on the lender. You’re given the full loan amount, and usually, term loans are repaid in monthly installments, which include the principal and interest.
Equipment or Invoice Financing
Equipment financing is a loan used specifically to purchase equipment, vehicles, and other machines needed in a business. On the other hand, invoice financing lets businesses borrow money to pay necessary expenses while waiting for customers to complete their payments.
SSS Loans
The Social Security System (SSS) lets businesses borrow a considerable amount. According to their website, eligible borrowers “shall be new or existing private industries and enterprises including registered Barangay Micro Business Enterprises (BMBEs).” However, note that this loan has multiple requirements, including collateral assets and proof of SSS membership and monthly payments.
Lines of Credit
A line of credit is a convenient loan option for business owners for several reasons. This loan type allows them to access funds up to their approved limit immediately. The interest rate applies only to the money you borrowed. Plus, there’s no need to apply repeatedly, so it becomes an excellent option for taking care of unexpected business expenses.
Other Kinds of Loans
In a merchant cash advance, the borrower repays their loan by deducting a percentage of their daily sales to give to the lender. You can also apply for micro loans online in the Philippines, like the ones offered by Cebuana Lhuillier Kanegosyo Center. Online micro loans for businesses are a type of unsecured loan, which means no collateral is needed. In contrast, secured loans require collateral, which can be real estate, jewelry, and other assets.
Tips for Applying for a Micro Business Loan
Before you apply for a micro loan for startup businesses in the Philippines, it’s important that you come prepared. Follow the tips below to up your chances for success:
Do Your Research
Choosing the right loan begins with ample research. Doing this helps you identify your loan options and compare lenders to find one suited to your needs. This will also help you to know their specific requirements and what fees you need to pay to prevent unexpected costs in the future. As much as possible, you must choose a reputable lender regulated by government agencies.
Prepare the Requirements Early
Different lenders have varying requirements, but it’s highly likely that they will ask for valid government-issued IDs, business permits, and bank statements. They serve as proof that you are a citizen of the country and that your business is legally operating. You may also have to prepare your income tax return and documents that prove the profitability of your business.
Ask a Business Coach for Help
Usually, business coaches are former entrepreneurs, which means they have extensive experience starting and running a business. Thus, their counsel can be beneficial regardless of whether you’re a beginner or not. Being an outsider to your business operations, coaches can provide you with objective and unbiased feedback. They can help you identify potential risks with your loan choices, enabling you to make a more informed decision.
Evaluate Your Credit Profile
Lenders will want to assess your capability to repay the loan. To do this, they may ask you to access your credit report. According to the Credit Information Corporation (CIC), this document is “a summary of your financial transactions,” so it contains information such as the borrower’s TIN, SSS, and GSIS numbers, loan contracts, and residence, among others. You can use the CIC’s website to obtain a copy of your credit report.
Understand the Terms and Conditions
Assuming you have already chosen a lender and loan type, you need to ensure that you fully understand the loan’s terms and conditions. Remember, a loan is a financial commitment that can negatively impact your business and personal life if not taken seriously. Take special note of important information outlined in the contract, such as the repayment terms, fees, penalties for late payments, and so on.
Seek Assistance From Industry Experts Today!
It’s understandable if you are still having difficulty choosing what type of loan despite doing internet research. Reach out to us here at Cebuana Lhuillier Kanegosyo Center! We are an online business platform with services and products designed to make building a business easier and more accessible for all.
As such, you’ll find helpful and easy-to-understand resources on our website, particularly on topics about loans, business growth, coaching, and more. If you prefer talking to our staff in person, you can visit selected Cebuana Lhuillier branches during our business hours.
We also offer loan services perfect for micro businesses in the Philippines. You can borrow up to ₱50,000, which they might need to start or grow their businesses. To apply, kindly sign up to become a Cebuana Lhuillier Kanegosyo Center member first. Membership is free and does not expire.
FAQs About Micro Business Loans in the Philippines
Can You Apply for Micro Business Loans Online?
Yes, there are lenders, like Cebuana Lhuillier Kanegosyo Center, that offer online micro business loans. First, sign up to be a member, and then,choose among our bundles. The Simula Bundle is designed for entrepreneurs who wish to start a business, while the Paglago Bundle is catered to business owners ready to expand their businesses.
How Long Do You Wait for the Loan Approval?
This will depend on various factors, such as the type of loan and the documents you submitted. Usually, online loans enable borrowers to get their money quickly because the process is done electronically. However, regardless of the type of loan that you choose, if you submit incomplete or erroneous documents, expect to wait for some time before your loan gets approved.
What Happens if I Cannot Pay My Business Loan?
Your lender may contact you to remind you of your missed payments. Although you cannot be detained or arrested because of debt (based on Article III, Section 20 of the 1987 Constitution), you can still be penalized through other means, especially if the lender files a civil case against you.
Also keep in mind that interest accrues throughout the time you refuse to repay your loan. Not settling your dues on time only increases the amount you have to pay.
Conclusion
Micro business loans help entrepreneurs finance and grow their businesses, ultimately propelling them toward success. However, business owners should be careful when taking out a loan. They should do so out of necessity and by partnering with a trusted lender.
Cebuana Kanegosyo Lhuillier Kanegosyo Center is one call away from your questions and concerns about our loan offerings. Contact us today!