A business loan can be a great way to fill various funding gaps—provided you understand how to manage it. But while loan defaults are a major cause of premature failure for Philippine-based startups and (small- and medium-sized enterprises (SMEs), that doesn’t mean you should avoid them altogether. When approached with the right mindset, loans for businesses can be the best way to navigate unexpected liquidity issues and take your business to new heights. Here are a few important business loan do’s and don’ts that will help you avoid the potential pitfalls of borrowing:
Do Understand the Assets at Stake
A typical business banking loan for large amounts of cash will typically require some form of collateral. Ideally, the required collateral shouldn’t be something that your business needs to keep functioning. However, offering critical assets is sometimes unavoidable if you’re in a pinch.
If you want to mitigate your small business’s risks, no-collateral business banking loans like the Maya Flexi Loan are a great option. With flexible payment schedules and up to PHP 2 million in available funding, the Flexi Loan product is the business loan Philippines’ startups and SMEs can depend on.
Do Choose a Reputable SME Bank
If you have an SME, then it makes sense to get loans from an institution that offers banking solutions to businesses of your size. The overall risk profiles of SMEs, large businesses, and microenterprises are very different from each other and many lenders will often focus on just a few industries or business types to reduce their potential exposure.
With its years of success, Maya Business has developed a stellar reputation among Philippine-based businesses of all sizes. With products like the aforementioned MayaFlexi Loan and the high-interest Maya Business Deposit, Maya Business is your best partner for sustainably growing your small business.
Do Consider the Loan Types
Small business loans are an extremely wide category of instruments, covering everything from traditional bank loans and lines of credit to business credit cards and merchant advances. With so many options on the table, it’s all too easy to choose a loan product that isn’t optimal for your business needs. When in doubt, consult with a qualified financial expert to help you narrow down your options.
Do Prioritize Loans for Growing Your Business
While loans are useful for covering short-term cash issues, ultimately, you want to be using most of your loans to meaningfully expand your business. As much as possible, try to develop your business’s positive cash flow and cash reserves to minimize the need for loans for day-to-day operations.
Don’t Consider Loan Payments to be a Variable Cost
If you want to pay your loans off on time, designate them as a fixed cost in your budget. Considering loans as fixed expenses may keep you committed to paying off your loans while also helping you avoid penalties for late payments.
Don’t Take Out Too Many Loans at Once
Taking out multiple small loans can lead to a negative debt-to-equity ratio, severely limiting your business’s ability to access capital or take advantage of opportunities. Because agility is a key advantage of small businesses, having a negative debt-to-equity ratio can also harm your overall competitive edge. If you have to take on multiple loans, make sure to pay any existing loans as soon as possible to limit your risk exposure.
Don’t Borrow without a Specific Reason
While most mainstream lenders will require you to send a presentation or offer a pitch before they approve your loan request, many others don’t. This is a good thing for borrowers who have a good grip on their finances, but it can be potentially risky for everyone else. No matter how favorable the terms, never take out a loan unless you need the extra funding for a specific reason.
Don’t Stress Out over Your Loan Payments
As an SME owner, your main concern should be growing your business. So long as they’re being used properly and are paid on time, loans should not cause you any more stress than other important business inputs like your electricity or water bills. It takes time to grow a successful SME and taking a long-term perspective should help you keep your focus on other things that matter to your business.
Broaden Your SME’s Horizons with Maya Flexi Loan
With up to PHP 2 million in instant funding and no collateral needed, Maya Flexi Loan has become a popular choice among growth-driven startups and SMEs in the Philippines. Create a Maya Business Manager account today to receive quick and secure funding right in your Maya Business Deposit account.
Creating a Maya Business Manager account lets you enjoy exclusive offers like Maya 1-2-3 Grow. The Maya 1-2-3 Grow bundle qualifies you for a 1% MDR discount for all QR Ph transactions for 3 months after signing, saving you PHP 14,600 in transaction fees for every PHP 1 million in sales. As part of this bundle, you can also assign a Maya Business Deposit account as your settlement account. You’ll earn a 2.5% per annum interest on your deposit account, which translates to PHP 25,000 in interest per year on a PHP 1 million deposit. Finally, signing up also entitles you to a Maya Flexi Loan offer in just 3 months. Create your Maya Business Manager account to take advantage of SME-friendly loans and amazing growth bundles like Maya 1-2-3 Grow.
