Guide to Business Loans in the Philippines - Zenith Capital

A Comprehensive Guide to Business Loans in the Philippines

Running a business isn’t easy. Between operations, financing, marketing, and customer support—to name a few—there are numerous duties to create and maintain a successful brand. Companies must innovate to stay ahead of the curve and remain relevant in the face of increased competition.

Business loans can give entrepreneurs the financial push they need to accomplish their objectives and advance their companies. Even small firms can succeed with the appropriate tools and help. The Bangko Sentral ng Pilipinas (BSP) reported that from January to September 2022, bank loans to micro, small, and medium-sized enterprises (MSMEs) rose to ₱454.31 billion.

Business loans are a complex topic if you have no experience with them. As such, this comprehensive article will explain the basics of business loans in the Philippines to help you get started.

Guide to Business Loans in the Philippines - Zenith Capital Infographic

What is a Business Loan?

Businesses can get loans from banks, credit unions, or other financial organizations to help support their operations, buy assets, or grow their firm. However, these loans come with interest rates and additional costs they must repay.

Business loans can come in various types, and the conditions of each might change based on the need of the borrower and the requirements of the lender.

Traditional bank loans

Businesses commonly secure traditional loans through credit unions and banks. Typically, they require security like real estate or machinery as collateral and involve a lengthy application procedure and documentation requirements.

Traditional loans often have lower interest rates and longer repayment than alternative financing choices. However, these bank loans have more stringent eligibility standards and might not be accessible to all industry types and firm sizes.

Government-assisted programs

Government business loans assist small enterprises with trouble obtaining finance through conventional channels. They may demand less collateral than other types of loans and frequently have favorable terms and low-interest rates.

In the Philippines, some of the commonly known national government-funded programs include the Pondo sa Pagbabago at Pag-Asenso (P3) by the Department of Trade and Industry (DTI) and the MSME Credit Guarantee Program (MCGP) by the Philippine Guarantee Corporation.

Alternative lending options

While unconventional, various alternative lending options also help fund businesses to succeed. These usually come from private, online, and community development financial organizations.

  • Peer-to-peer lending – People use an internet platform to lend or borrow money to one another directly instead of going via established financial institutions. While lenders can make more money on their investments, borrowers frequently have access to funds at lower interest rates.
  • Crowdfunding – A way for companies to raise money from many people, usually via the internet. It entails presenting a business concept to a large audience to secure funds from individuals willing to support it.
  • Private lending institutions – Financial organizations that provide more flexible business loan options than traditional banks and government-backed programs. They also champion entrepreneurship and provide aspiring business owners the resources and support they need to succeed.

Factors Lenders Check for a Business Loan Approval

Before approving a business loan, lenders evaluate a borrower’s creditworthiness and loan repayment capacity by looking at several financial and non-financial variables. The following are some factors lenders typically look into:

Business plan

Corporate objectives, approaches, and action plans are the backbone of a business plan. A strong business plan can help you obtain funds, direct decision-making, and establish a structured road map for your company’s future expansion.

Cash flow

Cash flow is the total amount of money coming in and going out of a business. Positive cash flow means the company is bringing in more money than it’s spending, while negative cash flow is the opposite.

For lenders, cash flow is crucial, as it gives them a picture of a business’s ability to repay a loan. 


Any assets a borrower promises to a lender as security for a loan are collateral. The lender may confiscate the collateral if the borrower doesn’t repay the loan.

Common collaterals for a business loan include real estate, stock, machinery, equipment, accounts receivable, and personal property. Their value is the basis for the size of the loan and the interest rate.

Credit score

A credit score is a quantitative indicator of a person’s or an organization’s creditworthiness. It considers elements such as credit use, payment history, credit history duration, and credit kind.

Lenders often use credit scores to assess whether a borrower will return their loan in full and on time. A higher credit score suggests you’re a lower-risk borrower, which may lead to better loan terms and rates.

Repayment schedule

Also called an amortization schedule, a repayment schedule specifies how soon a borrower must pay a debt. It’s a crucial criterion that some financing institutions consider before approving a company loan since it enables them to determine whether the borrower can repay the loan within the allotted time.

Loan Application Process: Qualifications and Requirements

Lending individuals or institutions will have standards and qualifications that those applying for a business loan must meet. Depending on the loan type and source, these conditions can differ, but below are the following factors commonly considered in a business loan application process.


  • Proof of consistent and sufficient revenue – Before a lender can issue a loan, they must know that the borrower can repay it in full. The best way to prove the reliability and substantiality of your income is to show financial statements, tax returns, and bank statements.
  • Solid business plan – A strong business plan demonstrates to financiers that you have a clear vision for your enterprise, financial estimates, and a growth strategy. This document improves your chances of receiving a loan approval and advantageous terms.
  • Collateral or a personal guarantee – Most lenders want collateral or a personal guarantee to secure the loan and lower the risk of default.
  • Good personal and business credit score – When applying for a business loan, it’s crucial to have strong individual and business credit scores. These tell lenders how likely you are to repay the loan. However, it’s vital to remember that not all lenders base their decisions entirely on credit scores.
  • Manageable debt-to-income ratio – Your company’s ability to repay the loan on time is demonstrated by having a sustainable debt-to-income ratio. Dividing your monthly loan payments by your monthly take-home pay will give you this percentage and help you get the best business loans.


  • Government-issued ID – Be sure to prepare any valid ID, such as Driver’s License, Passport, Postal ID, PRC ID, TIN ID, or United Multi-purpose Identification (UMID).
  • DTI or SEC Certificate – Businesses must produce these certifications from DTI and the Securities and Exchange Commission (SEC) to demonstrate the firm’s validity, registration with the government, and compliance with all applicable local rules and regulations.
  • BIR Certificate of Registration – A Bureau of Internal Revenue (BIR) Certificate of Registration signifies that your company is legally compliant and in good financial standing by paying taxes. This requirement is crucial because lenders want to reduce the risk of lending money to companies that aren’t following the law.
  • Bank statements – To help the lender assess the applicant’s financial stability and capacity to repay the loan, financiers require bank statements as a condition of applying for business loans.
  • Payroll records – Payroll records provide evidence of income. These documents allow lenders to assess the company’s financial health and capacity to repay the loan.

Tips on How to Choose the Right Business Loan

Finding the best business loan is crucial to your success. Poor decision-making can have serious repercussions, including increased interest rates, more stringent terms, and a lack of flexibility. Here are some tips to help you choose the right business loan for your enterprise.

Know your business needs

Identifying your company’s financial demands is an essential first step to choosing the best business loans because it clarifies how much money you require and what you will need the funds for.

You can find the right business loan by aligning your financing needs with your business goals. This balance reduces the chance of borrowing too much or too little and guarantees that you receive the optimal business loan for your needs.

Research your options

It’s vital to thoroughly research all available business loan options. You must examine interest rates, periods, fees, and repayment choices to ensure you work with a trustworthy organization. You can also look up client testimonials and the reputation of lenders.

Study the interest rates

Studying interest rates helps you understand the cost of borrowing money to ensure you’re getting a competitive rate. Doing so can help you save money in the long run and avoid excessive debt.

Look at the repayment terms

You must consider the repayment terms of a business loan. These can impact your cash flow and financial security if not set strategically. Choose the loan that best suits your company’s financial situation now and in the future. Additionally, look at the interest rates, the loan period, and the frequency of repayments.

Factor in application fees

Application fees can vary widely among lenders, which can increase the cost of your loan. As a result, it’s important to evaluate these fees while selecting the best loan alternative for your company.

Secure Your Business’s Future

Business loans are crucial for any company needing extra capital to expand or pay for unforeseen operational expenses. However, you must carefully weigh your options when picking the best business loan.

Knowing the set requirements, checking into your possibilities, learning about interest rates, and considering payback periods and application costs will help you make a choice that will benefit your company in the long run.

If you’re searching for a recognized financial services company in the Philippines specializing in loans for SMEs and enterprises, look no further than Zenith Capital! We offer various loan options and personalized solutions to meet your business needs.

Check out our FAQ page or Contact page to learn how we can keep you open for business and ready to grow your business. Ready to get started? Fill out this application form today!

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