The Best Loan Option For Small And Medium Enterprises
Starting a small business is no easy feat. Profits aside, funding is one of the biggest hurdles that can make or break a business – you got to have enough funds to start your business or scale it further.
One of the challenges that many small business owners face is access to financing. According to data compiled by SME Finance Forum, 41% of small and medium enterprises in developing countries have unmet financing needs. There is a gap of US$5 trillion between the funding needs of small and medium enterprises (SMEs) and available institution-based finance providers.
Fortunately, there are financial services providers in the country that are not banks. These non-banking financial companies specialize in more specific financial products that may meet the needs of SMEs in the Philippines better. Today, more Filipinos are likely to get their first loan from non-bank lending companies compared to traditional banks.
If you’re looking to grow your small business and need some funding, read on to find out why you should seriously consider applying to a non-bank financial institution to get your next business loan.
Your business may not meet the bank’s loan requirements
It’s no secret that when it comes to loans, banks usually have a tighter screening and qualifications process. Realistically speaking, it’s not for everyone especially in a country where only 29% of the population have a bank account.
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- Sole Proprietorship, Partnership, Corporation
- Business is in profitable operation for at least 2 consecutive years
- Minimum annual gross sales of ₱1 MILLION.
While many established businesses could easily hit ₱1 million pesos in annual sales, this sales target may not be within reach yet for small thriving businesses that are still trying to make a name for themselves.
The same goes for the requirement on the length of business operation – you need to be in business for at least 2 years to tick one of the qualifications for a bank business loan. While it’s understandable, it doesn’t make small business loans easier for SMEs who are just starting and need an extra boost to make it.
On top of that, the process is time-consuming and the approval period can stretch up to a month or more before you can access your funds.
Banks do offer very attractive loan agreement terms, but if your business is not ready, it may be better to consider alternative loan options that can better support your current financing needs.
What advantages can non-bank financial institutions offer your business?
Unlike banks, most of these providers specialize in providing a specific type of loan to meet the needs of certain segments of customers. Thus, applying for a loan is straightforward and a lot faster as the process is streamlined to the target customer’s needs.
More inclusive requirements
Unlike banks, their requirements and qualifications are within reach of most business owners. While there are certain procedures for providing documentation that you need to follow when you apply, for the most part, they just need standard documents that you’d normally have if you’re running a registered business.
These qualifications as listed below aren’t that difficult to meet, especially for budding business owners.
- Fully accomplished application forms
- ID pictures
- Income documents
- Business registration and tax documents
- Valid IDs
- Proof of address
- Post-dated check (PDC)
Quick application and approval
Non-bank lenders can offer better accessibility to their products and services. Most providers today offer loan services that can be accessed and processed online, and they have a fast turnaround time.
Since they are specialized in certain loan products, they have a dedicated team to go through your documents and conduct the necessary checks to quickly process and complete your application. This allows non-bank providers to process loan applications faster, even though there may be more paperwork required.
On average, they can approve your loan in as fast as 3 to 7 business days from the time you’ve completed and submitted your documents. On the other hand, banks typically take a week to a month to approve a loan application.
Less commitment
Non-bank lenders can grant a good sum of money even without collateral. You don’t have to be tied up for the long term too because you can opt to have a shorter-term loan that saves you more on interest fees.
| Minimum loan | ₱100,000 |
| Maximum loan | ₱1,000,000 (with collateral) ₱150,000 (without collateral) |
| Term | 3 months to 1 year |
Also, short-term loans may be more suitable for business owners because they won’t tie you up with long-term financial responsibilities which can be detrimental to your finances.
A lot of non-bank financial institutions have products specifically made for micro-businesses such as sari-sari stores, food stalls, karenderia, and etc. those that don’t need exorbitant amounts to run their business. This lessens the burden to this type of entrepreneur.
Overall, non-bank lenders are a good alternative for business owners and even entrepreneurs who need hassle-free financing in the Philippines.
Know your loan application process
While the requirements and qualifications may be less of a headache if you are planning to apply for a non-bank loan, you still need to make sure you fulfill the application requirements and process.
To increase your chances of a successful loan application, each piece of document you submit and each item you tick on the criteria for your assessment must be done properly.
Here’s a basic guideline:
- Consistent revenue documentation
Your revenue documents are your income documents. This will gauge how much you’ll be eligible to apply for and whether or not you meet the income criteria of the lender. The income requirement may be less for non-bank lenders, but you still need to be able to produce some documentation as proof of income.
- Eligibility
This requirement is necessary to determine whether or not your business is officially registered and is acknowledged by the government as a legal entity. Without this, you automatically disqualify yourself from any business loan applications.
- Extra requirement
For big-ticket loans, lenders might require collateral that’s at least 70% of the value of your loan. This isn’t necessarily a requirement for most loans or for smaller loans. However, if you’re aiming to get a higher-tier loan, do expect and prepare to put any of your properties at stake for the collateral.
Apply for a business loan easily
One of the business loans available in the market that is designed to accommodate the needs of small business owners is RFC Business Loan. The minimum income requirement for this loan is lower than banks’ and the overall requirement isn’t that intimidating even to budding entrepreneurs who are just starting out on their own.
Most small businesses need working capital. This is where an RFC SME Working Capital Loan can help. All you need are the following:
Self Employed
- Completed Application Form
- Two (2) ID pictures (1×1 or 2×2)
- Passbook (open for six months)
- ITR/W2/W2316
- Anyone (1) valid primary ID (SSS, GSIS, Postal ID, Voter’s ID, Driver’s License)
- Or two (2) secondary IDs (Pag-ibig ID, PhilHealth)
- Latest utility bill (telephone, electricity, water, or cable)
Corporation
- Completed application form
- Corporate/Partnership Registration Certificate
- Secretary’s Certificate
- Minutes of the Board Resolution stating the authorization of loan application
- List of authorized signatory/ies
- Mayor’s / Business Permit
- Copy of SEC Registration
Post-dated checks with a deposit slip not more than 1 week
You can apply online and have your loan approved in 3 to 5 business days. It’s easy and hassle-free.
Radiowealth Finance Company (RFC) is one of the longest-running finance companies in the Philippines. Established in 1964, they were known for their car and appliance loans.
Today, they have expanded to provide business loans to small and medium businesses with 100 branches around the country offering a variety of loan options to Filipinos.
If you are looking to start or grow your business, getting a business loan from RFC can be a solution.
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