How to Get Non-Collateral Business Loans in the Philippines
Starting a business is an exciting journey, but it comes with a lot of challenges. One of these challenges is financing the business. As they say, to make money, you need money. There are several ways of securing funding for a business—personal savings, borrowing money from friends or relatives, and applying for a bank loan. While borrowing money from relatives would require a good relationship to ensure that you would be able to pay them back, most banks would also ensure that you would be able to pay them back. And in case you default on your loan payments, they must have something to hold on to you to make up for the potential loss, and that is collateral. Collateral can be a motor vehicle, real estate, or any asset considered of financial value, such as jewelry or stock portfolios.
Some small businesses may not have collateral that they can present to banks, but that does not mean that they cannot secure a loan. Fortunately, some financial institutions offer non-collateral loans for small businesses in the Philippines.
What is a non-collateral business loan and how does it work?
A non-collateral loan is a type of loan that does not require the borrower to pledge any assets as collateral. Instead, the loan is granted based on the borrower's creditworthiness and ability to repay the loan.
In a non-collateral business loan, the lender evaluates the borrower's financial statements and other factors to determine the borrower's ability to repay the loan. If the borrower is approved, they receive the loan amount and are responsible for making regular payments, usually with interest, over a set period.
Non-collateral business loans are typically offered by banks, non-bank financial institutions, and online lenders. They are often used by small businesses that do not have valuable assets to pledge as collateral but need access to capital to grow their business.
Advantages of Non-Collateral Business Loans
There are several advantages of availing a non-collateral loan in the Philippines, aside from not requiring the borrower to pledge any assets. Below are some of them:
- Faster approval process
Non-collateral business loans typically have a faster approval process than traditional collateralized loans. This is because the lender does not need to evaluate the value of the collateral and can focus on the borrower's creditworthiness and ability to repay the loan.
Non-collateral business loans offer more flexibility in terms of how the loan proceeds can be used. The borrower is not restricted to using the loan for a specific purpose, as is often the case with collateralized loans.
- Access to capital
Non-collateral business loans provide small businesses with access to capital that they may not have obtained. This can be particularly advantageous for startups and businesses with limited credit history or assets.
- Opportunity to build credit
By repaying a non-collateral business loan on time and in full, a small business can improve its credit score and credit history. This can make it easier to obtain future loans and financing at more favorable terms.
Factors to Consider Before Applying for Non-Collateral Business Loans
Before applying for a non-collateral business loan, it's important to consider the following factors:
- Financial statements
Lenders will often require financial statements, such as income statements and balance sheets, to assess the financial health of the business and determine the borrower's ability to repay the loan.
- Business plan
Having a solid business plan can demonstrate to lenders that the borrower has a clear understanding of their business and a plan for how the loan proceeds will be used to grow the business.
- Cash flow
Lenders may also evaluate the borrower's cash flow to determine if the business can generate enough revenue to make regular loan payments.
- Interest rates and fees
Non-collateral business loans may have different interest rates and fees compared to collateralized loans. It's important to carefully evaluate the loan terms and compare them to other loan options before accepting the loan.
- Repayment terms
Understanding the repayment terms, such as the loan term and repayment schedule, is important to ensure that the borrower can afford to make regular loan payments.
- Application requirements
Non-collateral business loan applications require paperwork and documentation. It's important to understand the application requirements and have all the necessary documentation
ready before applying.
Non-Collateral Business Loans in the Philippines
If you are looking for a small and medium-sized enterprise or SME business loan that is non-collateral, Esquire Financing Inc. or EFI is here for you.
EFI offers a fast loan without collateral, and the requirements are just minimal. Below is the list of requirements, most of which you may already have if you have a registered business:
- TIN ID and one (1) valid government-issued ID of the principal borrower
- Latest three (3) months bank statements and bank certification
- Photocopy of valid Mayor’s Permit
- Photocopy of valid Barangay Business Clearance
- 2x2 ID picture of the principal borrower
- Proof of billing for business and residence
- Pictures of the business (internal and external)
- Hand-drawn sketch map of the business and residence
Additional requirements shall be submitted for specific types of business. For more information about Business Loans without Collateral, read Esquire Financing Inc. Business Loans Without Collateral.
Applying for a Business Loan from Esquire Financing
- Visit the EFI website and fill out the application form found on the homepage. You should receive confirmation via e-mail or SMS after the form is completed.
- Submit the complete documentary requirements.
- Claim your business loan in 3 days or less.