Mar 19, 2012

How to Get Collateral-Free Financing for Your Startup Business

(Photo by iprole)
For a few articles now, we've been talking about businesses you can start right from home. But the big question for a lot of us is, Where do I get the money to start this business?

Often, a compounding problem for a lot of us is that we have no assets we could use for collateral.

Well, this is another reason why I strongly advise everyone to start their businesses while they are still employed. When you are an employee, you have one valuable resource at hand: the salary loan.

SME banks

How much, you may ask, can one get from a salary loan? Well, if we look at the loan offerings of my favorite bank for small and medium enterprises (SMEs), Plantersbank, you can see that you can get as much as P500,000 salary loan (of course, depending on your salary), payable for up to 36 months. And yes, no collateral is needed.

What are the requirements for applying for a salary loan?

  • Fixed-salaried individual working in the Philippines’ Top 12,000 Corporation OR  must be a credit card holder with a P50,000 credit limit if not employed in the Top 12,000 Corporations.
  • At least 23 years old but not more than 65 years old
  • A permanent employee with a length of service in current employer of at least 1 year (if less than 1 year, then total continuous work experience should be at least 2 years)
  • Has a gross monthly income of P30,000 for Metro Manila and P20,000 for Provincial Areas
  • Not due for retirement within the term of the loan.
Now let me take this opportunity to highlight the usefulness of a credit card. It's true, this little piece of plastic can be detrimental to our financial health when we don't know how to use it properly. But often, our credit card is also our best (sometimes, our only) proof that we are willing and able to pay our debts. When we apply for a loan, our credit card history can be our strongest ally.

Note, also, bulletpoint number 3: permanent employee of at least 1 year with current employer. If you can't keep a job, so much less will you be able to keep a business. Because no matter how difficult it is to work with your boss, trying to be your own boss is even harder.

The SSS loan

But what if your gross monthly income does not reach P30,000 per month? (Mine never did, when I was employed.)

Well, there's SSS too. But to get a one-month SSS salary loan, you need to have paid at least 36 monthly contributions prior to the month of filing the application. For a two-month salary loan, the requirement is 72 posted monthly contributions.

Microfinance institutions

There are also microfinance institutions. Granted that the interest rates of these institutions may be even higher than some banks and are definitely higher than SSS rates, they are still much lower than if you borrow from "five/six," those notorious lenders that charge an astounding 20% monthly interest rate.

If you want to contact a microfinance company near you, here's a list of them. Just click on the links below and find which company is best for you:

All these companies listed above are partners of the PinoyMe foundation, which was instituted by President Corazon C. Aquino. See the full list of PinoyMe's partner companies here. Or learn more about the PinoyMe foundation by clicking on the link.

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