Personal Loans for Financing a Startup Business in the Philippines

by Venus Zoleta, on category "Personal Loan"

August 25, 2017

moneymaxph_personalloanCurrently unemployed and thinking of starting your own business? Once in a while, a business opportunity that’s too attractive to pass up comes along, like a profitable food cart franchise or a ride sharing business. The problem is, you don’t have readily available cash for it. Fortunately, immediate funding for setting up a business is possible through personal loans in the Philippines.
Getting a loan is a smart strategy if the profits you’ll earn from a business opportunity outweighs the possible debt. You don’t have to wipe out your entire savings account or turn to unscrupulous loan sharks for quick cash.
Financing a new business is a serious business for a simple reason: it involves money—lots of it. Learn as much as you can about your personal loan options so that you won’t find yourself racking up more debts than you can handle.
You can get capital for your startup business through a business loan from formal lending institutions such as commercial banks and government agencies.

Business loans from commercial banks

Ideal for: Small businesses (with assets of Php3 million to Php15 million) and medium businesses (with assets of Php15 to Php100 million)
Pros and Cons:

  • Most business loans require a collateral, typically real estate properties.
  • You can loan as much as Php20 million, which can cover a wide range of business expenses.
  • Loan processing usually takes 7 to 10 banking days.

Business loan requirements:
First-time entrepreneurs are eligible for a business loan if they meet these eligibility requirements:

  • Filipino citizens aged 21 to 65
  • Non-entrepreneurs with at least 2 years of steady income
  • Good credit standing

Most banks require these documents from prospective borrowers:

  • Signed and completed application form
  • Valid IDs
  • Latest income tax returns
  • Latest bank statements
  • Certificate of employment
  • Resume of loan applicant
  • Latest pay slips
  • Business permit or DTI/SEC registration certificate

How to apply for a business loan in a bank:
Visit the nearest branch of your bank of choice, fill out an application form, and submit all the required documents. Alternatively, banks such as BPI allow online application for personal loans—just enter the required details on the bank’s website and submit the images of the documentary requirements via email.
BPI Family Ka-Negosyo
BPI personal loans include term loans and franchise business loans, requiring a minimum household income of Php50,000. As of this writing, BPI is the only bank in the Philippines that offers personal loans targeted specifically for franchise businesses.

BPI Family Ka-Negosyo Term Loan Franchising Loan
Loan Amount Minimum of Php500,000 –   Minimum of Php100,000 (for Best List Brand Partners)
–   Minimum of Php500,000 (for Non-Best List Brand Partners)
Loan Terms 1 to 10 years 1 to 3 years
Interest Rates –   5.50% (1 year)
–   6.50% (2 to 3 years)
–   7.00% (4 to 5 years)
–   9.00% (6-10 years)
–   6.50% (1 year)
–   7.50% (2 to 3 years)No collateral:
–   10.00% (1 year)
–   12.00% (2 years)
–   14.00% (3 years)
Acceptable collaterals –   Residential and commercial property
–   Bank deposits
*Note: Franchising loans have a no-collateral option.

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BDO Small Business Loan

BDO Small Business Loan
Loan Amount Php1 million to Php20 million
Loan Terms 1 to 10 years
Interest Rates –   8.00% (1 year)
–   8.50% (2 to 3 years)
–   9.00% (4 to 5 years)
–   11.00% (6 to 10 years)
Acceptable collaterals Residential and commercial properties

Landbank OFW Reintegration Program (OFW-RP)

Landbank offers numerous business loans for specific industries such as agriculture, manufacturing, tourism, and cooperatives. Of all the banks in the Philippines, Landbank is the only one with a lending program (in partnership with the Overseas Workers Welfare Administration or OWWA) exclusively for overseas Filipino workers (OFWs) who want to build a business as an alternative to working abroad. Interested OFWs are required to attend an OWWA orientation or training and submit an OWWA certification before they can file a loan application at any Landbank branch.

Landbank OFW-RP
Loan Amount Php300,000 to Php 2 million
Loan Terms Based on cash flow but not to exceed 7 years (inclusive of 2 years grace period)
Interest Rate 7.50% per annum fixed for the duration of the loan
Acceptable collaterals –   Real estate mortgage
–   Chattel on machinery and equipment
–   Hold-out on deposit
–   Deed of assignment on inventory and receivable

Plantersbank Small Bizloan
Plantersbank Small Bizloan
Loan Amount Php500,000 to Php5 million
Loan Terms 1 to 5 years
Interest Rate 10.50% per annum (fixed)
Acceptable collaterals Real estate mortgage

PSBank SME Loans

PSBank offers two types of personal loans for small and medium businesses in the Philippines: the SME Business Credit Line and the SME Term Loan with Prime Rebate. Borrowers under the term loan can earn rebates when they pay in advance or in excess of their monthly balance due.

PSBank SME Business Credit Line Business Credit Line Term Loan with Prime Rebate
Loan Amount –   Minimum of Php2 million (with real estate properties as collateral)
–   Php500,000 (with deposits as collateral)
Loan Terms 1 year (renewable annually) 1 to 7 years (can be extended to 10 years in some cases)
Interest Rate At competitive SME Business Credit Line rates Based on the current lending rate of the bank upon loan availment
Acceptable collaterals –   Any prime residential, commercial, and industrial properties
–   Cash deposits

Business loans from the government

Ideal for: Micro businesses (with assets of not higher than Php3 million) such as sari-sari stores  and market stalls in the Philippines
Pros and Cons:

  • Smaller loan amounts compared to personal loans from banks
  • Low-interest rates
  • May or may not require a collateral

Pondo sa Pagbabago at Pag-asenso (P3) Program

Launched in early 2017, the “Pondo sa Pagbabago at Pag-asenso” (P3) Program is the government’s affordable alternative to the 5-6 money lending scheme, in an attempt to stop loan sharks in the country altogether.
The P3 program requires no collateral and only a few documentary requirements (valid ID, business permit, and certificate of good standing) so that micro businesses—which make up around 90% of registered businesses in the Philippines—can have easier access to business funding.
Being implemented by the Department of Trade and Industry (DTI) in the top 30 poorest provinces in the Philippines, the P3 Program enables sari-sari store owners, market vendors, agri-entrepreneurs, and other micro business owners to borrow money at lower interest rates compared to the whopping 20% monthly rate of 5-6 money lenders.

P3 Program
Maximum Loan Amount Php5,000 to Php100,000
Loan Terms 30 to 90 days (payable daily or weekly)
Interest Rate Maximum of 2.50% monthly interest (30.00% per annum)
Acceptable collaterals No collateral required

How to apply:

Visit one of the nearest P3 partner institutions, fill out an application form, and submit the requirements. The Small Business Corporation, an agency under the DTI, will do a credit investigation to evaluate your capacity to pay off the loan. Loan processing will take 1 to 3 days.

SSS Business Loans

The Social Security System (SSS) offers four business loans for its members, two of which are applicable to start-up businesses: the Business Development Loan Facility and Access of Small Enterprises to Sound Lending Opportunities (ASENSO). These can be availed by 60% Filipino-owned new and existing businesses.
Related: A Complete Guide to Getting An SSS Salary Loan

SSS Business Loans Business Development Loan Facility ASENSO
Maximum Loan Amount The lowest of the following:
–   Loan amount being requested
–   Total business project cost
–   Loan value of collateral
–   Php500 million
Maximum of Php5 million
Loan Terms Maximum of 15 years (payable monthly, quarterly, semi-annually, or annually –   Maximum of 1 year payable monthly (short-term loan)
–   Maximum of 5 years (long-term loan)
Interest Rate Based on the prevailing SSS rates
Acceptable collaterals Any collateral acceptable to the SSS-accredited banks and the SSS

How to apply:

File your business loan application with any SSS-accredited banks:

  • BDO
  • Development Bank of the Philippines (DBP)
  • Landbank
  • Philippine National Bank
  • Philippine Veterans Bank
  • Planters Development Bank

Final Thoughts

With so many personal loans in the Philippines to choose from, it can be overwhelming for first-time entrepreneurs to decide on a loan that matches their budget and business financing needs. Make your decision-making easier and faster with a free online comparison tool that can help you pick the right personal loan for financing your new business.
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