How To Get Approved For A Business Loan In The Philippines

How To Get Approved For A Business Loan

How To Get Approved For A Business Loan: There comes a time in business when external funding—whether it’s for growth or to help you through tough times—becomes necessary. Regardless of the reason, if you need extra cash for your company. A business loan is a great option.

If not all business loan applications are approved, your company’s financial standing and your credit score, among other factors, determine how lenders evaluate your loan application.

That’s why it’s important to be fully prepared. In this article, learn business loan tips and essential requirements to help you get your application approved.

Also Read: Jumbo Mortgage Loans: And How To Apply For Loan?

Five Business Loan Tips: How to Get Approved

The following tips for getting a business loan will help you better demonstrate your company’s cash flow capacity to lenders and increase your chances of getting a loan approved.

Tip #1:Describe the objectives of your business loan

Before you start thinking about getting approved for a business loan, ask yourself: What is the desired purpose of the loan, and how much can I borrow?

A business loan helps you expand your sales and marketing efforts or update your existing technology. It’s ideal for capital management or investment or equipment and inventory. You can use it to expand your operations and hire additional staff. Can also be used to get

Financial institutions prefer these borrowers. Those whose loan objectives add value to their business. Positively impact the community by creating more jobs or purchasing property.

Tip #2: Develop a solid financial plan

A solid financial plan that details your goals. It can help you with your business loan application, including how to use and repay your loan.

Submit a detailed timeline of your expected expenses and earnings. Be sure to show that your business has enough cash flow to pay off expenses and debt.

If you think lenders won’t be happy with your finances, recognize that your credit history and finances are already part of your company’s background. Use your financial projections to see what you can do better.

Try to shorten your accounts receivable turnover. Think about extending your credit time to your vendors. Calculate accurately and timely your investment liabilities to avoid penalties. Make the payment.

Make your plan as detailed as possible. This way, lenders will recognize that you have strong initiatives to improve your business.

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Tip #3: Verify If You Qualify for a Business Loan.

Examine the way that banks will assess your company so that you can prepare to improve your chances of being accepted. They will investigate the subsequent aspects of your company:

✅Years Spent in the Business

Your company must have been in operation for at least two years to establish a business financial rating score, which lenders use to assess and process business loans, to be eligible for the majority of business loans in the Philippines.

Even with less stringent conditions, online and starting business loans without collateral still need proof of at least six months of firm activities.

✅ Credit Background

Lenders take into account your ability to make timely loan repayments when you apply for a business loan.

They will use a centralized database to access your credit history. The reasoning for this is that you will probably repay your new loan in full if you have consistently paid off your prior debts.

They can assess the audited financial statements of your business as well. Your credit score, which indicates your propensity to repay the loan, is produced via these channels.

✅ Cash Arrangement

Your bank statements reveal a lot about your income and spending patterns, just like your credit history does. The cash flow history of your company has a significant impact on the approval of your business loan application.

Your financial accounts should accurately and completely depict your business dealings. Numerous software applications assist companies in digitizing invoices, taxes, receipts, and more into a single, integrated solution. You can be sure that your records are made accurately and without errors because a staff of accounting experts handles the majority of these software applications.

Your cash flow estimates should also demonstrate how your new service or product will increase revenue for your company. This forecast indicates to the lender how you plan to use their money. It also indicates the source of loan payments.

✅ Ratio of Debt to Income

The debt-to-income ratio, which compares a company’s income to its debt, is another common metric that lenders look at. A company is better able to repay the business loan if its debt-to-income ratio is lower [1].

✅ Credit Rating

If a company doesn’t have enough history to demonstrate its financial stability, lenders might look at your credit score instead.[2] Owners do, after all, have a big say in how their businesses handle their funds.

Therefore, take care of your finances as soon as you can, regardless of whether you envision yourself starting a business soon. Be careful to pay your bills on schedule. To finance your future, develop sound spending habits and practice forethought rather than going overboard with needless expenditures.

✅ Personality

Consider yourself from a lender’s perspective. A potential borrower seems to be quite unconfident about the marketability of their products as you speak with them. Are you going to grant their loan? Most likely not.

Adding value to your application means making a solid first impression. Lenders take comfort in the knowledge that the company is run by a capable and committed individual. As a result, increasing your chances of loan approval is possible when you interact and transact with your lender favorably.

Tip #4: Examine and contrast business loans

You should be aware of which lenders provide the fastest approval and processing times, as well as the best interest rates and terms for business loans, as a loan application.

Depending on the needs of your company, take into account several funding sources. Banks, for example, provide higher loan amounts, longer payback terms, and more affordable interest rates.

Government loans, however, are the best option for small and medium-sized businesses. Typically, they provide extended payback terms and reduced interest rates for non-collateral loans.

You can also take into consideration small company loans or those with rapid approval for smaller sums and urgent needs. For these kinds of loans, you have alternatives for both non-collateral and collateralized loans.

Compare your options after that. In the Philippines, the top banks for business loans provide term loans, commercial real estate loans, and credit lines. To determine the total cost of your company loan, use the calculator for business loans that banks typically provide on their websites.

Selecting the one that best suits your requirements and skills will increase your chances of approval.

Tip #5:Complete the Requirements for Your Business Loan.

Making sure you present a full set of needs is the final piece of advice for business loans on this list. These are the most typical conditions for a company loan, though they can change based on the lender and the purpose:

• Two legitimate identifications
• contract for marriage (if applicable)
• A photocopy of the previous three years’ audited financial statements
• The last three years’ income tax returns (ITRs)
• For the last six months, bank statements or a photocopy of the passbook
• Overview of the Company
• Regarding sole proprietorships:
• DTI Business Registration Certificate
• Regarding collaborations:
• SEC Certificate of Registration
• The Partnership Agreement
• Regarding companies:
• SEC Certificate of Registration
• Current modified bylaws and articles of incorporation
• Enumeration of elected officials
• Resolution from the Board or Secretary’s Certificate

The majority, if not all, of the prerequisites stated above, should already be met by you. All you need to do is gather these documents.

But keep in mind that having the necessary paperwork does not ensure that your application will be accepted.

Last Words

Now that you know how lenders assess and accept applications, heed the advice provided above regarding business loans.

Make the required preparations to demonstrate your company’s capacity to pay back the loan. Due diligence is necessary to keep an accurate and comprehensive record of your finances since they have a big influence on how other people view your company.

Everywhere you go as a business owner, you represent your firm. Your ability to lead others can make or break the approval of a company loan.

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