Types of Business Loans for SMEs in the Philippines

Business Growth
August 1, 2022

A business loan is essential for small and medium enterprises (SMEs) for many reasons, from covering cash flow gaps to accelerating business growth.

Sometimes, other financing sources are the only way to cover your operational costs, especially when business is slow or customers can’t pay on time. A business loan is also the fastest way to diversify your business or expand your market reach.

There are plenty of business loans in the Philippines, and just as many financing sources. Since no two businesses are alike, only you – as the business owner – can decide which financing and provider suits you best. Choosing a business loan depends on several factors, such as your purpose, your financial capacity, and the urgency of your needs.

What are the basic requirements for a business loan?

Most providers require the following documents:

  • A valid ID
  • Loan application form
  • A DTI, SEC, and/or BIR certificate of registration 
  • Business permit, or another official document showing your business address
  • Audited financial statements and/or Income tax returns
  • Other business documents such as Articles of Partnership or General Info Sheet

What are the types of business loans?

To get started, you can narrow down your business loan options into four general types:

1. Term Loan

A term loan is a business loan that disburses a lump sum of cash upfront. It is best used for funding a large one-time purchase, investment, or cash flow gap.
Purpose

Terms loans are your best option for instances such as: building a new store; purchasing large equipment, another business or real estate; or paying off existing debt.

Loan amount, terms, and repayment

Depending on the amount borrowed, a term loan can be paid within a year or up to fifteen years. In the Philippines, you can get up to ₱20 million of funding. Repayments of the principal loan plus interest is often done monthly or quarterly.

How to apply

If applying for a corporate loan or commercial loan, you can apply from the bank or provider’s office, branch, or website.

Term loan options in the Philippines

Business loan

Interest rate

Loan amount

Loan term

BDO SME Term Loan

6.25% to 7.25%

₱1 million to ₱20 million

Up to 10 years

BPI SME Term Loan

Prevailing market interest rates

Minimum of ₱300,000

Up to 5 years

Metrobank SME Term Loan

Prevailing market interest rates

Minimum of ₱500,000

Up to 25 years

Government financial institutions also offer the following: 

Business loan

Interest rate

Loan amount

Loan term

SSS Asenso

Prevailing SSS interest rates

Maximum of ₱5 million

Up to 5 years

SSS Business Development Facility

Prevailing SSS interest rates

Minimum of ₱500,000 

Up to 15 years

2. Credit Line

A credit line is a form of business loan that provides access to a set amount or ‘credit limit’. You can dip into it whenever the business need arises, and you only pay for the portion you used plus interest.
Purpose

Credit lines are best for short-term goals, project funding, cash flow gaps, or growth opportunities. Due to their always-available nature, they also serve as a good emergency fund for unexpected business spending, such as equipment repair or increasing inventory for seasons with an influx of customers.

Loan amount, terms, and repayment

Credit lines are available for up to ₱20 million; First Circle’s Revolving Credit Line goes up to ₱5 million for new clients. Repayments can be monthly, quarterly, or as a one-time payment, depending on your loan term; however, the interest rate payment is often done monthly.

When your dues are paid, your credit limit is replenished and you can borrow again without the need to re-apply. Our Revolving Credit Line, for instance, is always valid as long as you keep your business documents up-to-date.

How to apply

With First Circle, you can apply here in just one minute, and hear from us regarding your application within 3 business days. Application for other credit lines can be done at a bank branch or online.

Credit line options in the Philippines

Business loan

Interest rate

Loan amount

Loan term

First Circle Revolving Credit Line

As low as 1.39% per month

Up to ₱10 million

Up to 6 months for new clients

PSBank SME Business Credit Line

Prevailing PSBank interest rates

Minimum of ₱2 million with real estate collateral; minimum of ₱500,000 with bank deposits as collateral

1 year renewable

BPI SME Credit Line

Prevailing market interest rates

Minimum of ₱300,000

1 year renewable

Maybank Retail SME Loan

Prevailing market interest rates

₱500,000 to ₱35 million

Up to 90 days 

3. Secured Business Loan

A secured business loan is a type of term loan that requires collateral. Collateral can be the borrower’s real estate, bank deposits, or other forms of valuable assets; they are seized by the lender if the borrower fails to repay the loan.

Secured business loans usually offer higher amounts and lower interest rates to borrowers, because the collateral required reduces risk for the lender.

Purpose

Like term loans, secured business loans are best for large one-time purchases or spending.

Loan amount, terms, and repayment

A secured business loan can go from from ₱500,000 to ₱35 million. It is repaid monthly or quarterly. Generally, a longer repayment period has lower monthly payments but higher interest rates, while a shorter repayment period has a lower interest rate but larger monthly payments. You may also be asked to pay appraisal and collateral registration fees before becoming eligible for this loan.

How to apply

For this type of small business loan, application is often done in person at the bank or government office.

Secured business loan options in the Philippines

Business loan

Interest rate

Loan amount

Loan term

Metrobank SME Business Loans

Prevailing market interest rates

Minimum of ₱500,000

Up to 25 years

PSBank SME Loans

Prevailing PSBank interest rates

Minimum of ₱500,000

Up to 7 years

SSS Business Development Loan Facility

Prevailing SSS interest rates

Minimum of ₱500,000

Up to 15 years

SSS ASENSO

Prevailing SSS interest rates

Maximum of ₱5 million

Up to 5 years

OWWA OFW Reintegration Program

7.5% fixed annual interest rate

₱100,000-₱2 million for single proprietorship; ₱500,000-₱5 million for partnership, corporation, or cooperative

Up to 7 years

4. Unsecured Business Loan

An unsecured business loan is a type of term loan or credit line that does not require collateral. Because the risk is higher for lenders, they often have smaller loan amounts, higher interest rates, and shorter repayment terms.
Purpose

Depending on the amount, this loan can be used for both small recurring expenses or large one-time purchases. Credit lines also count as a form of unsecured loan, as lenders often do not require collateral to qualify.

Loan amount, terms, and repayment

Unsecured business loan terms can be from 3 months to 3 years. Most provide smaller sums from ₱500,000 to ₱5 million. Interest rates start at 2% per month, depending on the SME’s financial capacity and profitability.

How to apply

Depending on the funding sources, you may apply at the lender’s offices, bank branch, or website.

Unsecured business loan options in the Philippines

Business loan

Interest rate

Loan amount

Loan term

First Circle Revolving Credit Line

As low as 1.39% per month

Up to ₱10 million

Up to 6 months for new clients

DTI Pondo sa Pagbabago at Pag-Asenso (P3) Program

2.5% per month

₱5,000 to ₱200,000

Up to 30 months

Security Bank SME Business Express Loan

1.5% to 1.95% 

₱1 million to ₱5 million

Up to 3 years

5. Startup Loans (New business loans)

A startup business loan is a financial grant to startup entrepreneurs and new business owners who have good, profitable business concepts but need capital to execute them.
Purpose

This loan is best for project funding of short-term or long-term business concepts, which require infrastructures, equipment or workers to build.

Loan amount, terms, and repayment

Financial grants often come from the government, with amounts ranging from ₱5,000 to ₱5 million. The loan terms can be several months up to 2 years depending on the business purpose. Loan is repaid at interest rates lower than 10% or even at 0%, depending on the capability, profitability, and purpose of the business project.

How to apply

To acquire this loan, borrowers must have a good reputation from previous lenders and “proof of concept”: often a profitable business model or idea, and good sales projections. These must be submitted at the lender’s office, branch, or website.

Startup loan options in the Philippines

Business loan

Interest rate

Loan amount

Loan term

Start Up QC Program

Visit https://quezoncity.gov.ph/ for more information

Pampuhunang Ayuda sa Taga-Pasig

No interest rate for prompt repayment; 3% interest rate for delayed repayment

Up to ₱10,000

Email tapat@pasigcity.gov.ph for assessment on loan term

Landbank OFW  Reintegration Program (OFW-RP)

7.5% fixed interest rate

₱2 million for single proprietorship; ₱5 million for partnership, corporation, or cooperative

Up to 7 years

Development Bank of the Philippines Small Business Puhunan Loan Program

9% interest rate per annum for loans payable within one year; 10% interest rate per annum for loans payable in two years 

₱300,000 to ₱1 million for account holders of DBP or other banks

Up to 2 years

Summary

A business loan is a big, risky move, but it is necessary to take your business further. To make an informed decision, start by knowing the right type for your needs — whether it is a term loan, credit line, unsecured business loan, secured business loan, or startup loan.

Our credit line offer

First Circle’s Revolving Credit Line is an SME loan that funds your plans and cash flow gaps whenever you need it. Our credit line has the following advantages:

  • Apply once and access up to ₱10 million of re-usable credit
  • Interest rates can go as low as 1.39% per month
  • Processing of applications in 5 business days
  • Exclusive account manager
  • Minimal documents and no collateral requirements

First Circle is a multi-awarded lending company supporting SMEs since 2016. To apply for a Revolving Credit Line, click here.

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