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business owner wondering how he can apply for a small business loan online

How to Get a Small Business Loan Online in the Philippines

Fri, 06/09/2023

Are you ready to take on the challenge of starting your own small business in the Philippines? We’re pretty sure you’ve got the determination, hustle, and big dreams to make it happen. But there is one thing you can’t do without… and that’s funding!

 

Thankfully, the financing landscape in the Philippines has evolved so much so that many lenders now offer small business loans online. Small business loans can provide the capital you need to bring your entrepreneurial dreams to life!

 

In this article, we will explore everything you need to know about obtaining a small business loan in the Philippines. Let’s begin.

 

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Preparing for a Small Business Loan Application

Before diving into the loan application process, it is essential to assess your business's financial situation and funding needs first. To get started, just answer these three questions:

1. How much funding do I need?

It’s necessary that you know exactly how much funding you need for your business, luv. Consider factors like startup costs, working capital, inventory, equipment, or even expansion plans. This will help you communicate your funding needs effectively to potential lenders.

2. Can my business afford to take on debt?

It’s not just about how much funding your business needs. You also need to consider how much debt your business can take. The key thing to think about here is your business’s financial health and cash flow. Can you comfortably handle loan repayment terms without putting undue strain on your operations? If yes, then you can proceed. If not, then it might be time to reconsider how much loan you should take.

3. What is the purpose of the loan?

What do you really need the funds for? Do you need to purchase new equipment? Are you looking to expand your business? Or do you want to boost your marketing efforts? Having a clear purpose will help lenders understand the potential return on investment and assess the viability of your loan application. It will also help determine how much you need to borrow and how you’re going to spend it after approval.

 

Pro tip: Always keep the big picture in mind! Your loan should ultimately help sustain and/or scale your business.

 

Infographic that explains how Filipino entrepreneurs can get a small business loan online TOC

Finding Online Lenders in the Philippines

The rise of online lenders has opened new possibilities for entrepreneurs seeking small business loans in the Philippines. But let’s be honest, luv. Not all online loans are the same. So, before you sign any loan document, be sure to keep these three tips in mind:

Tip #1: Research the lender's reputation and track record

Before choosing an online lender, take the time to research their reputation and track record. Check if the lender you’re going to work with is registered with relevant government agencies like the Bangko Sentral ng Pilipinas (BSP) or the Securities and Exchange Commission (SEC).

Tip #2: Compare loan offerings, interest rates, and fees

Different lenders may offer varying loan terms, interest rates, and fees. Now that you have an idea of how much you can afford to borrow, it’s important to compare these factors to find the best option for your business. Carefully check how much the interest rate will be and if it is within your budget. Look for a lender with flexible payment terms that makes it easier for you to repay your debt.

 

For example, here at Tonik, we offer two small business loans for Filipino entrepreneurs. We have a Quick Loan for small businesses who need up to PHP250,000 and a Big Loan for business owners who require bigger funding of up to PHP5 million.

 

Related: Personal to Business: A Complete Guide to Online Loan Types & Alternatives

 

Tip #3: Check for transparent and secure processes

A reputable online lender should have a transparent and secure loan application, and approval process. There must be clear instructions on how to apply, what documents are required, and how long the approval process typically takes.

 

Also, ensure that the lender's website is secure and protects your personal and financial information. After all, we wouldn’t want your info getting into the wrong hands, right?

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Applying for a Small Business Loan Online

Once you have identified a suitable online lender, it's time to apply for the loan. Most online lenders process their loan applications completely online, which saves you precious time and effort. Here’s a step-by-step guide you can follow when applying for a small business loan online:

1. Gather Required Documents

Before starting the application, gather the necessary documents, like the following:

  • Valid government ID
  • Business permits
  • Bank statements
  • Financial statements
  • Collateral documents if applicable

Make sure to have both digital copies and physical copies ready for submission.

2. Fill Out the Online Application

Once you've selected a lender, it’s time to visit their website or their app and find the online loan application. Take your sweet time in filling out each section to avoid mistakes. Be prepared to provide details about your business, its financials, your personal background, and the purpose of the loan. Be sure to double check your entries, as you wouldn’t want to be declined for a loan because of errors in your form, luv

3. Upload Required Documents

Most online lenders will require you to upload digital copies of the necessary documents during the application process. Ensure that all the documents are clear and legible before uploading them to avoid any hiccups.

4. Review and Submit

Before submitting your application, review all the information you've provided at least one more time. Check for any errors or inconsistencies. Once you're confident that everything is accurate, click the submit button to send your application for review.

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Common mistakes to avoid when applying for a small business loan online

While applying for a small business loan online, it's important to avoid common mistakes that could hinder your chances of approval. Here are a few mistakes to steer clear of:

 

  • Incomplete or Inaccurate Information: Ensure that all the details you provide are accurate, up-to-date, and consistent with the supporting documents you submit. Otherwise, your loan application could be delayed—or worse, rejected!
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  • Poor Credit Management: Lenders often consider your credit history when evaluating your loan application. If you want your loan (and subsequent reloans) to get approved, avoid late payments, defaults, or other negative credit events like the plague. Maintain a good credit history by paying your bills on time and managing your finances responsibly.
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  • Overlooking the loan terms and conditions: Before accepting a loan offer, thoroughly review the terms and conditions. Pay close attention to interest rates, repayment schedules, fees, and any hidden charges. Failing to understand the terms and conditions may lead to unexpected financial burdens down the line. This can wreck your credit history and your relationship with your lender. If something is unclear, don't hesitate to seek clarification ASAP!
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Alternative Financing Options

Aside from small business loans online, there are other funding options you can explore to start or expand your business. Here is an overview of three popular alternative financing options:

Crowdfunding

Crowdfunding is all about looking for people willing to contribute small amounts of money to support your business. This can be as simple as asking for money from friends and family. But it can also be done using crowdfunding platforms Kickstarter, GoFundMe, and Kumu Fund.

Government-Backed Loans

Another funding option would be seeking loans from the government. The Small Business Corporation (SB Corp), for example, offers government-backed loans with favorable terms and lower interest rates. These loans are specifically designed to assist micro, small, and medium-sized enterprises (MSMEs) in their growth and development. You can also opt for getting a multipurpose loan from other government agencies such as PAG-IBIG or SSS.

Microfinance Institutions

Microfinance institutions (MFIs) offer small loans to individuals who may not qualify for loans from traditional banks. While interest rates may be higher compared to traditional loans, microfinance provides an accessible financing option for those who lack collateral or formal credit histories.

 

When it comes to exploring alternative financing options for your small business, you need to keep a few things in mind, hun. Let’s break it down for you:

 

  • Repayment Terms and Interest Rates: Imagine this. You're shopping for a loan, and just like shopping for a cool gadget, you want the best deal. Compare the repayment terms and interest rates offered by different financing options. Look for lower interest rates and flexible repayment terms that won't make your wallet cry.
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  • Eligibility Criteria: Different financing options have different requirements. They may be picky about the size of your business, the industry you're in, or even your credit history. Make sure you're eligible for the financing option you choose and gather all the necessary documents or qualifications.
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  • Risks and Benefits: Every financing option has its pros and cons. It's like a rollercoaster ride—you want to enjoy the thrills but also be aware of the risks. Assess the potential debt obligations, impact on your ownership, and any additional costs involved.

 

Securing a small business loan online in the Philippines is now more accessible than ever. By thoroughly preparing for the application, finding reputable online lenders, carefully completing the application, and exploring alternative financing options, you can increase your chances of getting enough funding for your small business’s needs. Good luck, luv!

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