For many entrepreneurs, taking out a business loan for the first time can be daunting. Part of it is due to the complicated nature of business loan requirements in the Philippines.
While banks and independent lending companies have their own lists of business loan requirements, the majority of them are meant to measure three things. These are: the legality of your business operations; the present state of your personal and business finances; and the capacity of your business to pay the business loan, should it be approved.
In the Philippines, bank loans – such as Unionbank loan, BPI business loan, and BDO business loan – tend to request more documents than financial technology companies and independent lending companies. Most online lending companies ask for less due to more sophisticated underwriting systems, or to entice business owners to borrow from them instead of banks. Whichever lending company or financing institution you choose, here’s a primer on the most common business loan requirements you’ll encounter.
#1. Documents to prove your identity
The most basic business loan requirements aim to satisfy Philippines’ KYC (Know Your Client) protocol. This protocol screens bad actors from the start of the loan application process – preventing crimes such as identity theft and money laundering, or at the very least, screening out applications that are not authorized by the business owner themselves.
The following documents should provide your name, age, address, contact information, and business type to a lending company:
- Government-issued ID. Passport, Driver's License, UMID, NBI Clearance, Postal IDs and other IDs from various government agencies.
- Business loan application form. This is usually an online form on a digital lender's website, or a paper form you have to secure from more traditional banks or lending companies.
- Marriage certificate, if applicable
These business loan requirements also prove you are old enough to assume the responsibility of taking out a loan, while still being physically able to repay your loan after months or years of maturity. Thus, many business loans have an age requirement of at least 21 years old, but not exceeding 70 years old* at the end of the loan term.
Some lenders and lending marketplaces such as Seekcap, Radiowealth Finance (RFC Loans) and Unionbank loans for MSMEs require a lower minimum age of 18 years.
#2. Documents to prove your business legitimacy
To be allowed to operate in the Philippines, a business should have the proper government registrations that identify them as a Sole Proprietorship, Partnership, or Corporation. From here, business loan requirements will vary depending on your type of business ownership:
Business loan requirements for all types
- Mayor’s Permit. This is obtained from your local government unit's Business Permit and Licensing Office (BPLO) by filling out an application form and submitting various business requirements. Learn how to register for a Mayor's Permit.
- Business Tax Identification Number (TIN). All businesses are required to register with the Bureau of Internal Revenue (BIR) to operate legally. At the end of your registration, you will also get a Certificate of Registration, Books of Account, and Authority to Print from BIR.
- Company Profile. Some lenders ask for this in their application forms. You may simply write one if your company is a sole proprietorship or partnership, or provide the one written in your General Information Sheet (GIS) if you are a corporation.
- Proof of billing. This can be any of your utility bills, or an invoice or official receipt addressed to your business. The name and address on the document must match the business name, business owner name, and address in your business registrations.
- Map of business location. The best (and easiest) way to provide this is by sending your company's coordinates on Google Maps. Learn how to add your business location to Google Maps.
- Photos of business premises or inventory. Non-bank financing sources like Esquire Financing, Seekcap, DTI loans, RFC loan and Unionbank loan via Seekcap typically require these from micro enterprises and small businesses. Just ensure that your photos clearly show the facade of your business or the bulk of your inventory, and include some photos where you or the business owner is standing on the foreground.
Business loan requirements: Sole proprietors only
- Certificate of Registration from Department of Trade and Industry (DTI). See DTI's guide for obtaining a permit for a sole proprietorship business. While you can still register in-person at your nearest DTI office, the Business Name Registration System (BNRS) also has a completely-online registration process.
Business loan requirements: Partnerships only
- Certificate of Registration from the Securities and Exchange Commission (SEC). Learn how to register your business at eSPARC, SEC's online system.
- Articles of Partnership. This is a notarized contract of agreement that you'll have to submit to SEC to obtain your SEC certificate.
Business loan requirements: Corporations only
- Certificate of Registration from the SEC. Learn how to register your business at eSPARC, SEC's online system. To register as a corporation, you'll have to submit the rest of the documents in this section as well.
- Articles of Incorporation and By-Laws. Articles of Incorporation states the name, purpose, address, incorporators, and term of a corporation upon its establishment. By-Laws are rules drafted by the corporation’s board of directors that serves as the management's guide on how the company will be run. These two requirements often appear in one notarized document. See SEC's template for non-stock corporations and stock corporations.
- Latest General Information Sheet (GIS). An SEC document filed by the company's Corporate Secretary annually, stating the latest information about the Company Profile, type of corporation, location, date of annual meeting and more. See SEC's recommended template for GIS.
In addition, any of these business loan requirements may also be requested from a corporation:
- Secretary’s Certificate. A notarized document written by the company's Corporate Secretary, enumerating the actions and resolutions approved by the corporation's Board of Directors. See SEC's template for the non-existence of a corporate dispute.
- List of Elected Officers or Board Resolution. These notarized documents are sometimes accepted in lieu of your latest GIS, should your GIS not be available yet. Both state the corporation's appointed Board of Directors and Officers. SEC does not prescribe a template, but these documents can be drafted by your legal team. Some banks also provide a specific template, so check with your lender before submission.
These documents also show the nature of your business organization structure, board directors, and investors. This is important because lenders look at the credit history of the business owner, business partners, and directors prior to giving out a loan.
If you’re considering a Landbank loan, you must also have a notarized List of Partners (for partnerships), Board of Directors (for corporations), Principal Stockholders and their stockholdings (for corporations), and bio-data of borrowers or proprietors, partners, and key officers. A Landbank loan is best suited for agriculture-based SMEs, as they are designed by the government to improve the state of agriculture in the country.
#3. Documents to prove your financial capacity
To determine if your business is financially capable of paying back the loan principal amount and underlying interest rate, lenders look for these business loan requirements:
- Personal and company bank statements, usually from the last 3-6 months. You may request this from your bank for a certain fee.
- Latest Income Tax Return (ITR). A document stating your annual income and taxes paid to the government, filed annually with BIR. Your accounting team should be able to provide this. However, if you're doing this on your own, you can download BIR's ITR forms for each company type. Some lenders also require ITRs from the past 2 or 3 years.
- Collateral documents for secured business loans. This requirement varies per lender, so check with your lender before proceeding. Some follow an appraisal process that generates its own documents. Others only need copies of your real estate's Transfer of Certificate Title (TCT) or Condominium Certificate Title (CCT) and Tax Declaration on Land and/or Improvement.
Lenders ask for your personal and business bank statements to determine your credit history – looking out for pre-existing loans and penalties for late payments in particular. These can increase your risk profile for their underwriting team, which can lead to a higher interest rate on your business loan or even a disapproval of your application.
Cash flow consistency is another thing lenders look for in your business loan requirements. It’s ideal to maintain high amounts of daily bank balances in your accounts to assure the lending company that you’ll have enough funds for loan payments – and the financial discipline to fulfill them on time. Frequent withdrawals raise a red flag, as well as negative-balance days and extremely high-balance days.
For secured business loans – which usually start at ₱2 million for banks, and ₱5 million for independent lenders – proof of collateral shows lenders that you have assets you can liquidate in case of loan default. These can be bank statements, real estate documents, vehicle registrations, or proof of ownership of business equipment.
#4. Documents to prove your profitability
These are the business loan requirements that give lenders a rough projection of your business profitability in the short term or long term:
- Proof of profitable operations for at least 1-3 consecutive years. Your Income Tax Returns should show this upon submission.
- Annual revenue of at least ₱500,000 for micro-enterprises, and at least ₱1M-5M for SMEs. The revenue requirement varies per lender, but most require profitability in the form of annual revenues.
- Audited Financial Statements (AFS). A BIR document required from businesses earning ₱3 million and above per year. Prior to obtaining this document, your business must first be audited by a Certified Accountant, so it's best to hire one or choose a reputable firm who can also file this for you at BIR.
- List of top customers, suppliers, and/or trading relationships. Some loans for SME require a Latest Summary Alphalist of Withholding Tax at Source (SAWT) or a Latest Summary Lists of Sales and Purchases. Both are proof of trading relationships that can be obtained from the BIR.
- Unpaid invoices or purchase orders as proof of ongoing or upcoming projects
- Official Receipts issued to buyers or clients
DTI loans require that you have profitable business operations for at least 1 year, while banks and independent lenders like Esquire Financing or Global Dominion Financing Inc. can ask for anywhere between 1 year to 3 years. Most lenders also require an annual revenue of anywhere between ₱500,000 to ₱5 million for non-collateral loans, or even higher for collateral loans.
Audited financial statements and the list of your top customers and suppliers, meanwhile, help lending companies determine whether your requested loan amount is commensurate with your future cash flow and working capital.
Summary
Business loan requirements may seem stringent and difficult for most SMEs, but they all serve one purpose: to determine if you are able to repay.
The good news is that with the rise of independent lending companies, not every lender requires tons of documents before providing financing. For instance, First Circle’s Revolving Credit Line is a flexible short-term financing option that only requires 2 documents and an annual revenue of at least ₱5 million before providing you a conditional credit line offer. It also has the following benefits:
- Apply once and access up to ₱5 million of re-usable credit
- Interest rates can go as low as 1.39% per month
- Exclusive account manager to provide hands-on guidance
- Processing of applications in 5 business days
To apply for a Revolving Credit Line and other forms of business funding, you may contact us at support@firstcircle.com.
