FOUR TYPES OF BUSINESS LOANS IN THE PHILIPPINES

Are you a business owner looking for a business loan? With so many options available, it can be hard to figure out how business financing works and what will best suit your requirements.

You help you decide, we narrowed it down to 4 types of business financing and its' respective pros and cons.

1. Business Loan thru banks

Bank term loans work best if your business has established a good credit standing. It also helps if you have a fixed asset that can serve as collateral. Because banks offer bigger loan amounts, this type of loan is mostly used to acquire a new property (a truck, car, or heavy equipment), expand the business (open a new branch, add inventory) or make minor to major renovations to the current office. On the flip side, this loan can’t manage your short-term capital gaps or requirements.

Pros: Depending on your requirements or qualifications, banks offer bigger sums of money on a short-term loan or long-term loan, and lastly, usually they provide low-interest rates compared to non-banks.

Cons - Qualifying for a bank term loan is very challenging because of the strict requirements prerequisites. The loan application process is tedious and often takes a month to complete.

2. Loan against your Credit Card Limit

A credit card offers you convenience as a business owner if used for business purposes. Compared to small business loans and other loan programs, credit cards allow you to make purchases on the spot without cash in hand. Also, it can be used to power your online marketing efforts by advertising on your favorite platforms like Facebook or Google.

Pros. Usually, credit card offers 0% interest for the first year. It is also easy to apply because of the minimal documentation. You can earn points or you can take advantage of the perks that your credit card has

Cons. Once the initial 0% interest rates expire, the average rates increase. Failure to repay the loan or settle the amount due on time may lead to additional charges.

3. Invoice Financing

Invoice financing is a type of loan that serves as a very useful option for SMEs. It requires a business to submit their invoice to a possible lender so that they may advance cash against future invoice payments. However, it’s only available to businesses that issue invoices to their clients.

Pros. You can get cash quickly and not damage your ability to borrow in the future. They’re useful in addressing short-term cash flow requirements because they’re advancing cash from future invoice payments.

Cons. It can only be used by a business that invoices clients

4. Secured Loan or Collateral Loan

Collateral loans, also known as secured loans. This is only available to potential borrowers who own a house, vehicle, or another piece of property routinely used as collateral.  Usually quick to approve loans, even if the borrower does not have a pristine credit history. More often than not, people that are turned down for unsecured loans can get a secured loan because there is so much less risk to the lender.

Pros. Collateral loans are often easy and quickly approved, and the borrower can usually request more money than could with an unsecured loan. 

Cons. The property used as collateral is at risk if the borrower cannot fully pay back the loan in the amount of time given. Another con of collateral loans is that they are not available to just anyone

Start your online loan application today and enjoy our simple 3-step application process with flexible and comfortable payment terms to fuel your dreams and reach your business goals. It’s time to grow your business, get started with your online business loan application by answering our Online Loan Assessment Form or consulting our Loan Consultant thru our FB Page.