Business loans are not hard to find in the Philippines — any business owner can do a cursory Google search and discover competing loans from multiple banks and financial institutions.
The real battle, however, starts with the interest rate that each loan company has to offer. If you haven’t checked out our guide to interest rates, a loan interest rate is the fee you have to pay as a borrower to use someone else’s money right away. Most lending companies in the Philippines quote their price in interest rate percentages; a lower percentage means that you’ll pay less fees on top of returning the money you have borrowed.
How are loan interest rates decided?
Your loan interest rate varies depending on the following factors:
Your financing partner. Most interest rates boil down to which lending company you choose to approach. Lenders that offer lower interest rates tend to lend out smaller amounts, or are more selective with their clientele. Other lenders make it very easy to borrow, yet charge a higher interest rate due to a higher chance of borrowers defaulting.
Your chosen loan product. Lenders apply different interest rates to different loan products, depending on their features, limits, duration and pricing. Loans without collateral (also called unsecured business loans) and loans with longer payment terms will often have higher interest rates. This is due to a higher chance of government-mandated interest rates changing dramatically, and higher chances of the borrower defaulting over time.
Your risk profile. Lenders have their methods in determining a borrower’s capacity of paying — and paying on time. New borrowers, businesses with a history of late payments, and businesses viewed as high-risk are often assigned higher interest rates. This is not a cause for alarm; rather, it gives you a chance to re-calculate the profits you may gain by taking the loan, versus not borrowing at all. Paying loans on time also improve your risk profile and establish a good working relationship with your lender — which can lead to a lower interest rate the next time you borrow.
Government mandates. Under extraordinary economic and social conditions, government agency policies can also affect loan interest rate. The Bangko Sentral ng Pilipinas (BSP), in particular, mandates the maximum interest rate that banks and financial institutions are allowed to charge. For instance, in March 2022, BSP mandated a 2.5% lending interest rate ceiling to ease the financial burden on businesses that are affected by the COVID-19 pandemic.
How does First Circle offer low interest rates?
With First Circle, first-time borrowers can access up to P5 million in credit for as low as 1.39% interest rate per month.* We make this possible through the following:
By choosing good customers
First Circle employs creative methods, such as quick financial assessments and an innovative risk underwriting system, to find good customers.
In particular, we seek businesses on the blade years of the Hockey Stick growth curve (see below) — small and medium enterprises with a strong potential to turn into larger enterprises, promising runways, and sustainable growth opportunities. By solving the working capital needs of these clients, we help our clients move through their growth inflection point.
One of the most important things we do is a consultation call to our potential clients to assess if additional funding will actually be beneficial to their bottom line. Through this and other quality checks, we acquire high-quality clients and become a dedicated growth partner to their business.
Because we genuinely believe in our clients’ potential for growth, we are also more willing to make reasonable adjustments with their loan structure. We have dedicated account managers for this purpose. Our mutual trust with our most loyal customers have also resulted in lower interest rates for their loans over time.
By providing specialized products
Every lender has different loan products meant for different purposes: SME business loans, bridge loans, commercial bank loans, or capital loans, for instance. But First Circle’s financing options go beyond term durations and purposes to actually meet the inner workings of your business. This gives us more leeway to offer lower interest rates and better payment terms.
At the moment, First Circle has three financing products:
- I. Revolving Credit Line. A credit line that gives you flexible, ongoing access to funds. One of its biggest advantages is you only need to apply once. Most business owners do not have the time to re-apply for funding any time they need to cover unexpected cash flow gaps or dwindling inventory. As soon as your credit line is granted, you can withdraw from it any time — and only pay interest on the amount that you used. You can get a Revolving Credit Line for just 1 month, or as long as 6 months. You can always renew your credit line with your account manager any time.
- II. PhilGEPS Project Finance. A lot of SMEs who approach us are government suppliers, and one of their biggest struggles is finding financing that accommodates their need for longer payment terms. PhilGEPS Project Financing has all the features of our Revolving Credit Line, but with two added advantages. First, you will receive a funding certification to help strengthen your PhilGEPS bids. Second, you can pay on your terms — and only upon the completion of your government contract.
- III. Growth Partners Program. Our newest funding option is designed for high-potential SMEs that are ready to take their businesses to ten times their current revenue. Chosen Growth Partners get an always-available, always-free (as in zero-interest) funding line that is equal to 10% of your annual sales. In return, First Circle becomes a shareholder with a 25% passive stake in your business. Growth Partners also get exclusive early access to our new products, including B2B payments, Corporate Cards, FX and cross-border remittances, B2B marketplace, and much more.
At the moment, Growth Partners are chosen from our existing clients. We will release an announcement when this product is open to new applications.
First Circle’s non-collateral loan offer
First Circle, an SEC and DTI-accredited financial institution, is here to help your business grow through financing options and other tools that bring you more business opportunities. Contact us through our details below from Mondays to Fridays. Should you be qualified for any of our funding options, we’ll ensure you receive your financing in 5-7 business days.
*While we strive to offer this rate and credit amount to qualified customers, the final amount and interest rate will still depend on the results of our consultation call and financial assessment.