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Business Loan Trends and Statistics You Need to Know

In today’s competitive and dynamic market, paying attention to small business loan trends is vital in helping companies of all sizes and industries survive and thrive. 

According to the Philippine Daily Inquirer, the demand for business loans remains strong, reflecting the ongoing need for capital in various sectors, growing to 8.7% in February 2023. 

During the pandemic, with people compelled to stay home and adhere to social distancing measures, the lending landscape underwent a notable transformation. 

“Small business lending trends in the Philippines have experienced significant changes over the past two years, largely due to the COVID-19 pandemic and its economic impact,” Renz Estrella, President of Zenith Capital, shared. 

He further emphasized, “Many lenders have shifted towards online lending platforms that allow borrowers to apply for loans digitally. This has made the lending process more efficient and has allowed lenders to reach a wider pool of borrowers.”

But while loans present opportunities for growth and success, accessing finance can be a challenge. Most financial institutions impose stringent requirements, making qualifying for business loans in the Philippines difficult.

Factors such as limited credit history, insufficient collateral, and cash flow constraints can hinder borrowers’ chances of securing the necessary funding.

To overcome these challenges, staying informed about the latest trends and statistics in the business loan market is imperative. Learn more about these figures in the infographic below.

Zenith Capital Business Loan Trends and Statistics Infographic

Business Loan Trends and Statistics You Need to Know

The State of Business Loans: Global and Philippine Statistics

Business loans play a vital part in supporting the growth and development of companies worldwide. Here are some statistics to help you stay informed when deciding when to finance your ventures.

  • The global corporate lending market is projected to reach $47.2 trillion by 2031, reflecting the substantial demand for financing across various sectors. This growth may be due to the increasing need for capital to fuel expansion, drive technological advancements, and navigate competitive markets. 
  • In the United States, 49% of small business owners report favorable access to capital or loans, indicating a relatively conducive environment for accessing financing. This mild lending climate enables small businesses to secure the necessary funds to contribute to economic growth.
  • Shifting focus to the Philippines, universal and commercial banks disbursed a substantial ₱764.3 billion in new loans, with private corporations receiving the largest share at 73.4%. In contrast, micro, small, and medium enterprise (MSME) loans constituted 4.6% (approximately ₱48.4 billion) of total loan distributions in 2021.

While private corporations dominate the loan market, the government also supports the growth of smaller businesses in the country. They recognize the significant role of MSMEs in driving economic development. Providing them with access to finance fosters job creation and poverty reduction.

  • Significantly, 56% of small businesses seek loans to expand operations, pursue new opportunities, or invest in assets. Regarding financing, the average interest rate ranges between 2.54% and 7.01%. It emphasizes the importance of shopping around for competitive rates when seeking funding.

When contemplating a small business loan, you should carefully evaluate different lenders and products to secure the most favorable terms that align with your financial capabilities and objectives. 

As noted by Estrella, “Businesses in the Philippines can increase their chances of being approved for loans by building a strong credit history, providing collateral, considering alternative sources of financing, and working with loan brokers. By taking these steps, businesses can access the financing they need to grow and succeed, despite the challenges associated with the lending process in the Philippines.”

6 Emerging Business Loan Trends Set to Shape the Industry

As the lending landscape evolves, several key small business lending trends are beginning to shape the industry. Some of them include:

1. Improved business models

Several companies are adopting improved lending models by leveraging technology and data analytics. These types of software enable them to enhance efficiency, streamline processes, and deliver a better customer experience. 

By incorporating automation and digitization, financiers can expedite loan origination and automated underwriting and offer personalized products tailored to your needs.

2. Integration of blockchain-based solutions

Blockchain technology is integrated into lending processes to enhance transparency, security, and efficiency. Through distributed ledger technology, lenders can streamline the verification and authentication of borrower information, reducing the risk of fraud while improving data accuracy. 

Blockchain-powered smart contracts allow automated and secure loan disbursements, reducing manual intervention and enhancing trust among all parties involved. Certain platforms even facilitate fast, cost-effective lending and payment transfers, accelerating cross-border settlement.

3. Emphasis on collaboration and partnerships

Lenders strategically partner with fintech companies, credit bureaus, and other financial institutions to leverage their expertise and data insights. These collaborations enable lenders to access alternative data sources, refine risk assessment models, and reach a broader range of borrowers.

One of these examples is the German bank N26 partnering with the application Wise. The alliance enables users to send foreign currency without the hassle and hidden fees.

By collaborating with innovative firms, traditional lenders can seize advanced technologies like machine learning and artificial intelligence to optimize credit scoring and decision-making processes.

4. Increased focus on data analytics

Data analytics plays a crucial function in the lending industry. Lenders utilize advanced analytics tools and algorithms to analyze extensive data sets, gain valuable insights into borrower behavior, and create customer risk profiles. 

These financing companies can use this information to make more accurate lending decisions, reduce default rates, and offer personalized products that cater to your organization’s needs.

5. Rise of alternative lending platforms

Online lending platforms and peer-to-peer networks are taking over traditional channels. These platforms leverage technology to directly connect borrowers with lenders, bypassing the need for conventional banks. By providing faster access to funds, simplified applications, and flexible lending criteria, they cater to underserved or niche markets.

6. Integration of automation and digitization

Automation and digitization are transforming the loan origination and approval process. Creditors are adopting digital solutions, such as online loan applications, automated document processing, and digital signatures, to streamline operations and elevate the borrower experience. 

These technologies reduce paperwork, accelerate loan approvals, and provide borrowers with a seamless and convenient application process.

Factors Affecting Business Loan Trends and Statistics

Several factors influence and shape emerging business loan statistics. Understanding these is crucial for you to navigate the borrowing environment effectively. These factors include:

Economic conditions

Economic conditions such as fluctuations in interest rates, inflation, and gross domestic product (GDP) growth can impact borrowing costs and credit availability. 

During low-interest rates and robust economic growth periods, you’re more likely to seek loans for expansion, investment, and working capital. Conversely, during economic downturns or uncertain times, lenders may tighten their lending criteria, posing challenges for you to access financing.

Government policies and regulations

Another factor to consider is the role of the government and its regulations. Estrella clarified, “The government has implemented reforms to streamline the process of starting and operating a business in the Philippines.” As a result, “This has made it easier for businesses to access financing and other resources.”

“They have prioritized financial inclusion, which has led to the creation of programs and initiatives that aim to improve access to financial services, including lending, for underserved populations.”

For one, “The Bangko Sentral ng Pilipinas (BSP) has announced new regulations and guidelines to improve the safety and reliability of the banking system and protect consumers from unfair lending practices.” 

These fiscal stimulus programs, tax incentives, and lending regulations can create a favorable environment for enterprises of all sizes and industries to access funding or introduce barriers restricting borrowing. 

For instance, government-backed loan guarantee programs like the Pondo sa Pagbabago at Pag-asenso (P3) can stimulate loan activity and improve access to business capital. Conversely, regulatory changes that increase compliance requirements or restrict lending practices can influence the availability and terms of getting a business loan.

Technological advancements

The rise of online lending platforms, fintech innovations, and automation is transforming the loan application and approval processes, enhancing efficiency and accessibility. You can accomplish many of these procedures online, saving time and almost guaranteeing instant funds transfer upon approval by the institution.

Technology-driven solutions streamline risk assessment capabilities and facilitate faster loan disbursements. Businesses that embrace technology can benefit from improved customer experience and increased transparency in the lending process.

Industry-specific factors

Each industry has its unique dynamics, market trends, and regulatory requirements that influence the demand for financing.

Industries experiencing rapid growth or disruptive changes may require significant capital investments, leading to increased borrowing. The healthcare and eCommerce industries are a couple of examples.

Conversely, industries facing regulatory challenges or market saturation may see a decline in borrowing activity. Some of today’s crowded markets include cosmetics and apparel.

Understanding the specific factors impacting an industry helps lenders assess risks and tailor loan offerings accordingly.

Navigate the Path to Financing Success

When seeking financing options for your company, whether for expansion, investment, or working capital, you should understand the factors influencing business loan trends and statistics.

Economic conditions, government policies, and technological innovations all shape the lending landscape and impact borrowing opportunities. You can make informed decisions and adapt by staying updated about these aspects.

At Zenith Capital, we understand the importance of staying informed. Our team of specialists is ready to support you in exploring the best financing options for your business, whether it be a business and consumer loan. Contact us today or apply now to discover how we can help fuel your business’s growth and success.

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