What You Need to Get a Business Loan

Gibson Perez

Business Business Loan

Oct 26, 2020

All lenders check the viability of the loan applicants through three things: financial status, ability to repay the loan, and credit history. To please the lenders and secure that loan, you should meet their criteria and submit the documents needed for faster processing.

It’s best to get prepared before filing a request, and so we have listed what you need to know and what you need to get a business loan.

Types of business forms

Before applying for a loan, you must understand first what category your business falls into:

1. Sole Proprietorship

Sole Proprietorship refers to a business where the owner and the one who manages its operations happen to be the same person. Also known as a sole trader or individual entrepreneurship, the owner of the business is a natural person, meaning it doesn’t include one legal person or entity. As the simplest form of business, there’s no complex set of papers to create an enterprise and its existence completely depends on the owner. 

2. Partnership

Partnership refers to a business where two owners are involved. It has two subtypes, namely general and limited. General partnerships can be achieved through verbal or implied agreement. The two owners are both accountable and liable for business debts 100%, regardless of the amount of investment from each. Limited partnership, on the other hand, needs formal agreement and certification. The liability of each partner is determined according to an agreed size of investment or portion of shares.

3. Corporation

Corporations pertain to separate entities, either of which can be referred to as an artificial or legal person. The profits of a corporation are considered as the company’s personal income which will be taxed accordingly. Then the dividends or profits distributed to and earned by the owners will be subjected again to taxation.

Business Loan Eligibility for Applicants

To determine if you’re eligible for a business loan, refer to the qualifications indicated below:

For Sole proprietors

  • Filipino citizenship
  • Between 21 and 65 years of age
  • For enterprise owners: Business operating for a minimum of 2 years
  • For non-entrepreneurs: Steady income for a minimum of 2 years
  • Remarkable credit performance

Partnerships/Corporations

  • DTI- or SEC-registered business
  • Profitable operations for a minimum of 2 years
  • Required minimum annual gross sales
  • Remarkable credit performance

Basic Requirements of Business Loans

Here are the documents needed in filing for business loans:

For Sole Proprietorship

  • Loan Application Form, duly accomplished
  • 2 government-issued IDs with photo (1 copy for each)
  • Valid Business Registration with Department of Trade (DTI)
  • Valid Business or Mayor’s Permit
  • Most recent Income Tax Returns with BIR stamp
  • Most recent Audited Financial Statements (minimum of 12 months)
  • Most recent bank statements (for the past 3 months) 
  • List of customers or suppliers and transaction details

For Partnership or Corporation

  • Loan Application Form, duly accomplished
  • 2 government-issued IDs with photo (1 copy for each)
  • Valid Business Registration with Department of Trade (DTI)
  • Valid Business or Mayor’s Permit
  • Most recent Income Tax Returns with BIR stamp
  • Most recent Audited Financial Statements (minimum of 12 months)
  • Most recent bank statements (for the past 3 months) 
  • List of customers or suppliers and transaction details
  • For partnerships: Partnership or Board Resolution 
  • For corporations: Continuing Suretyship Agreement

GDFI Business Loan

Collaterals Accepted by Lenders

For more secured loans, you may check below what you can offer as collaterals:

Cash savings or deposits

Cash savings or deposits as collateral serve as low risk for lenders such as banks and business financing companies. It is also guaranteed that it deals with low-interest rates. Other financial accounts such as Certificate of Deposits also apply as collateral.

Residential properties

Residential properties are more sellable than rural or commercial properties and therefore good collateral for business loans. Lenders can offer a high loanable amount according to this type of collateral. However, offer this with great caution as some lenders can take advantage of your housing property.   

Commercial real estate

Commercial real estate can also be used as collateral, especially if you value your residential property with great sentimentality. This may include the facility, high-value equipment, inventory, and accounts receivables. There is complexity with this type of collateral but it still grants you security for the business loans you’re applying for.

Mixed-use properties or developments

Mixed-use properties describe the combination of residential and commercial buildings which can be a single structure, several buildings, or a whole compound. It includes retail shops, restaurants, gas stations, parks, etc.

How Lenders Determine the Loanable Amount

There are different types of lending institutions and each financier uses various methods for determining the loanable amount that borrowers or applicants are eligible for. This is done by comparing the cost projection and appraised value of the approved collateral. These figures are also measured with variables such as the gross monthly income of the business, debt-to-income ratio, credit profile, and credit history. However, some financing companies already have a loan calculator that immediately gives an estimated amount that you can borrow.