10 Mar 2022, 15:23 — 7 min read
There are several challenges every entrepreneur has to overcome to become successful. At the top of that list is access to financing. Luckily, several SME loan companies have made it easier for business owners to apply for a business loan online. In addition to this, loan companies are going the extra mile by educating entrepreneurs on how business financing works.
Before you click on the 'Apply Now' button on that online business loan application portal, be sure to consider other types of business financing strategies applicable to your business requirements. Here are some ideas to help you understand it better:
Sadly, only 20%-40% of the total registered businesses in the country have access to bank loans in the Philippines. This is due to collateral prerequisites, documentary requirements and lengthy process. If you have access to bank loans, here are items to keep in mind:
Your credit history - Most banks, if not all, look at your credit history when applying for any types of loans. This way, they are able to manage the risk of lending out to you. A poor credit history might affect your application. If you have unsettled loans such as personal loans or credit card debts, you may want to work on those first before getting a new loan.
Your source of income - One of the key factors that banks are looking into is your ability to pay back a loan. Most of the time, the loanable amount varies depending on your income. Banks may require you to submit other proofs of income with higher amounts if you ask for more money.
The collateral - This is a critical part for most bank loans. The value of the collateral will determine the loanable amount. Failure to keep up with loan payments will allow a bank to seize the collateral as payment for the loan.
Tapping on your personal assets or personal finance for additional capital can help your short-term needs. Along with using their own personal assets, many business owners also turn to friends and family for loans. Compared to other options, this strategy may be more flexible in terms of rates and payment terms. Here are some things to consider before getting this type financing:
When it comes to personal assets:
Separate personal from business - Mixing your personal money with your business’ cash flow may be a convenient approach during the first few months. However, it’s going to get messy down the line during tax filing if not monitored properly. To avoid inconvenience, it’s better to create separate accounts for your personal and business needs.
When borrowing from friends and family members:
Consider all available options first - There’s a saying that “if you want to lose a friend, loan them money”. It may be easy to borrow money from friends and relatives but always keep in mind the pitfalls that this entails. Money may not be able to buy relationships but it can ruin one.
As explained in a separate article, equity financing is a type of financing strategy where venture capitalists offer funding in exchange for ownership stake. Most business owners prefer other forms of financing over equity investment because 1.) equity financing is hard to come by and 2.) They find it difficult to give up control over their business. Nevertheless, if you have access to this type of financing, here are several things to remember:
Get ready to give up part of your business’ ownership - Giving up part of your business’ ownership means limited control over major decisions and other aspects of the business.
Long-term commitment - Equity investment is a long term commitment. Exit strategies for venture capitalists are normally in place but to give you an idea, venture capitalists are in on this for the long haul (around 5-7 years).
Esquire Financing Inc. is a non-bank financing institution that offers collateral-free business loans to business owners nationwide. Since its inception back in 2011, EFI has served more than 18,000 SMEs across all industries. Here are several items that’s worth considering when applying for a business loan with EFI:
7-business day turnaround time - EFI understands that time is money for business owners. That is why they made the application process fast and hassle free.
Minimal documentary requirements - Applying for a business loan can be a tedious process. EFI made it easier for all legitimate businesses to avail of their service by only requiring documents pertinent to the application. You may visit esquirefin.co/2YBpBUO for the complete list.
No collateral prerequisites - Esquire Financing Inc. offers no collateral loan to business owners wherever they are in the Philippines.
Additional working capital plays an essential role in getting your business to the next level. Yes, it’s easier for a business owner to gain access to additional working capital today through online lending or online loan application portals. However, as tempting as it is, don’t bite more than you can chew.
Regardless of where you’re getting the loan from, ask yourself first why you will take out a loan in the first place. If you’re going to use the funds to pay other debts or for non-business related expenses, you have to rethink your spending habits.
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