Loans unapproved are common in the Philippines
Securing a loan especially business or personal loans is one of the most tedious tasks you may encounter in your life, and after all you won’t be getting loans if you don’t need it, right? So you shop around for the best deals, asked friends for recommendations and even went as far as browsing the internet for bank info and feedback just to make your decision in all 50+ pages on that forum and yet your loan application was unapproved. Let me tell you my friend, you are not alone! Loans unapproved are common.
Here’s why. Banks operate by the money of their depositors, and if you were a depositor, you want your money in full and in peace whenever you withdraw it. Banks work in a philosophy that the probability of loss is less than the interest rate they can collect from the loans they lend. So if there are only a few deposits in the bank, the chances are steep in having your loan approved. (Do you know that only 2 out of 10 Filipinos have a savings account?)
Basically for every type of business, bank officers know the profitability if it were to become successful or not. Let’s assume you are starting your business and going to loan an amount of P200, 000.00 at 10% interest. For this example, bankers would have a target loss of 8% and the success rate is at 50%. So if worst comes to worst that this business would loss half of the money loaned, it reduces the success rate to 25%, which in fact is much higher than the target loss of 8%. That gives a red alert to loan officers to not approve the loan.
So what can you do to have your loan approved? Raise capital without borrowing! Banks need an assurance that you can repay them. Here are the two steps.
1 Attract Investors
Create a solid business plan and invite people to invest in your business. Word of caution: You have to have a real team behind this so that you can have the investors’ confidence in what you are doing.
2 Raise Equity Capital
It can be in the form of office equipment, machines or a car which later on if you ask for a loan can be a form of collateral. This is necessary because even if your business fell short on expectations. Banks can just get these equipment so they can recover the loss from the loan you borrowed.
If you’re interested, you can use our free, online comparison tool so you can compare personal loan rates and apply for the right one that matches your requirements.