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Top 5 Dos and Don’ts When Taking Out a Business Loan

By Genmar Dadivo
Top 5 Dos and Don’ts When Taking Out a Business Loan


There’s a first for everything, and that includes taking out a small business corporation loan in the Philippines. These loans help entrepreneurs in various ways since they can be used as capital to launch the business and provide extra funds to scale operations.

While loans are extremely helpful, business owners should carefully think and prepare before entering a loan agreement. Enhancing one’s knowledge of loans is crucial to ensuring a smooth and successful application.

For your benefit, Cebuana Lhuillier Kanegosyo Center came up with this article, tackling the dos and don’ts of taking out a business loan. Read on to become more prepared with your loan application!

Dos When Taking Out a Business Loan 

Consider the following things you should do when taking out a business loan:

Identify What You Will Use the Loan For 

The purpose of the loan will help in identifying what type of business loan suits your needs. For instance, you may opt for equipment financing if you require extra funds to obtain new machinery. You can choose term loans for bigger purchases or long-term goals that require a considerable amount, while a credit line may be more suitable for covering immediate expenses.

Evaluate Your Credit Profile 

To assess or increase your chances of loan approval, you should check your credit profile by securing a copy of your credit report, which is a summary of your financial transactions. It includes various pieces of information, like your loan contracts with lending institutions. Your credit report, along with your credit score, can help lenders assess your ability to repay the loan.

Prepare a Repayment Strategy 

While it can cause much excitement to apply for a small business loan in the Philippines, you will need to formulate strategies for how to repay the loan on time. Doing this is important for two reasons. The first is quite obvious – it’s to help you not miss payments and avoid becoming buried in debt. The second is to increase your chances of successfully applying for a loan. Lenders will want to know your ability to repay the loan on time.

Understand the Full Cost of the Loan 

When you borrow money from a lender, you must remember that you’re not only repaying the principal amount. It comes with interest, calculated as a percentage of the principal loan. This is how lenders earn money by lending cash to others. Aside from interest, take note of various fees, such as processing and service fees, which lenders charge borrowers.

Be Fully Aware of the Loan’s Terms 

Be sure to read and understand the loan’s agreement before signing. Check the loan term – the amount of time to repay the loan completely – as this significantly impacts the amount of interest you need to pay. If you’re taking out a secured loan, which requires collateral, check which of your assets are at stake. Understand any possible fees you need to pay, such as late payment and prepayment penalties.

Don’ts When Taking Out a Business Loan 

 What are the things you should not do when taking out a business loan? Here are a few examples:

Take Out More Than One Loan 

Avoid taking out multiple loans over a short period. Pay off your existing loan before applying for a new loan to avoid becoming buried in debt. Multiple or successive loan applications can also negatively impact your credit score. Building a good credit score is important to increase your chances of loan approval, among other benefits.

Apply for a Business Loan When You Don’t Need To 

Determine if you really need to apply for a business loan. Do you need to, or were you just swept away by the idea of getting extra funds you can use for different purposes? Applying for small business loans for startups in the Philippines should be a strategic decision to help you generate more profits in the long run.

Choose a Shady Loan Provider 

If you are tempted to transact with a seemingly suspicious lender because of the promise of low-interest terms, the quick application process, and so on, think again. For your security and peace of mind, financial matters, such as business loans, should only be conducted with legitimate small business lending companies in the Philippines, which are regulated by government agencies.

Rush Into Applying for a Business Loan 

Even if you’re in dire need of extra funds, you should still carefully consider applying for a business loan. Never rush into signing a loan agreement without understanding its terms, determining how much funding you need, or researching other financing options. Assess if you really need to take out a loan and if you can realistically pay for the extra costs of borrowing money from lenders.

Limit Yourself to Banks 

Traditional banks aren’t the only institution that offers business loans. Microfinance institutions, government agencies (e.g., DTI), digital banks, and online platforms like Cebuana Lhuillier Kanegosyo Center also provide business loans to entrepreneurs.

Tips for Using Your Business Loan Wisely 

 Successfully getting your business loan application approved is only a piece of the pie. You also need to learn how to spend the borrowed money wisely so that it benefits your business and does not negatively affect it. Check out the tips below to help you:

Establish Goals 

Establishing goals is one of the best ways to ensure you spend your loan wisely. Examples of reasonable goals include investing in digital marketing services to build your online presence so you can reach more customers. You could also purchase new equipment or software to augment production or fast-track your processes. As much as possible, these goals should support your main goals for the business.

Seek Coaching 

Getting help is always a good idea. Try asking other business owners for advice on how they used their loans. Meanwhile, for business coaching you can access anywhere and at any time, check out Cebuana Lhuillier Kanegosyo Center’s Kanegosyo Coach services. Here, we offer various helpful resources on all things business, including loans.

Don’t Spend the Money All at Once 

Let’s say you applied for a small business capital loan in the Philippines to get your business started. Be strategic with your spending. Don’t put all the money in a single element of the business, and be disciplined and follow a budget. Remember, unexpected events and setbacks are bound to happen, so it’s essential that you have extra funds on hand to handle them.

Take Your Business to the Next Level With Cebuana Lhuillier Kanegosyo Center’s Loans 

Cebuana Lhuillier Kanegosyo Center is an online business platform that aims to make business ownership more accessible for Filipinos. We have various products and services to empower aspiring entrepreneurs and small business owners with the tools and resources to help them succeed.

Understandably, securing funds is a challenge for many of them, which is why we offer the Simula and Paglago Bundles. These packages provide products, including loans, to enable entrepreneurs to start or grow their businesses.

To get started with your loan application, kindly sign up first to become a Cebuana Lhuillier Kanegosyo member. Membership is free with no expiry!

FAQs About Small Business Corporation Loans in the Philippines 

Is SSS Required for Small Businesses? 

Yes, even small businesses must be registered with the Social Security System (SSS) since it is a part of the registration process. Employees must also registered.

What Are the Three Types of Business Loans in the Philippines? 

 There are different types of business loans. Secured loans require collateral, while unsecured loans do not. Another type of loan is the term loan, which can be either short- or long-term. Here, borrowers pay back the money at regular intervals with interest.

Where Can I Loan ₱50,000 To Start a Business? 

 At Cebuana Lhuillier Kanegosyo Center, business owners can loan up to ₱50,000. To apply, you need to sign up first to become a member. Afterward, you can choose between our Simula or Paglago Bundle. Additionally, kindly prepare a valid ID, your latest ITR (income tax return), and business permits. Other business-related documents may also be asked.


You don’t have to feel daunted at the prospect of taking out a business loan for the first time. As long as you did your part in educating yourself about loans, particularly what you should and should not do, you’ll be ready for the application process.

Cebuana Lhuillier Kanegosyo Center’s small business corporation loan in the Philippines is perfect for entrepreneurs looking to start or grow their businesses. For questions and clarifications, don’t hesitate to get in touch with us. Contact us today!