Banks require land as collateral, invoices are weeks away from clearing, and your supplier has shortened payment terms. Many SMEs in the Philippines face this working capital trap. To fill the gap, informal lenders have stepped in to provide financial support.
The informal lending industry is now a ₱30 billion market, offering interest rates as high as 20%, which is significantly higher than the 2.5% monthly cap for formal lenders.
They move fast, but the trade-offs, tight repayment cycles, and compounding costs can quietly erode profit margins.
In this article, we explain the SME loan eligibility and application process in the Philippines, including what qualifies your business, the required documents, and how to strengthen your application before submitting it.
TL;DR
- Business Registration: Must be registered with DTI or SEC and have valid local permits.
- Operational History: At least 1–3 years of consistent operations.
- Financial Stability: Lenders require stable cash flow, clean credit, audited financials, ITRs, and recent bank statements.
- Sales Requirement: Often a minimum of ₱1M in annual sales.
- Purchase Orders: Some lenders require proof of at least 3 completed purchase orders.
What is an SME Loan?
An SME loan is a type of financing extended to small and medium enterprises to support operational costs, business expansion, working capital, equipment purchase, or inventory management. It is structured based on the borrower's business size, creditworthiness, and revenue.
Types of Use:
- Working capital for cash flow gaps
- Equipment purchase or upgrades
- Business expansion (new branches or production lines)
- Inventory procurement
- Debt restructuring
Also Read: What is a Small Business Loan and How Does It Work?
Different Types of SME Loans in the Philippines
SME loans vary by structure, collateral requirements, and purpose. Lenders may offer one or more options depending on the applicant's profile.
Common Loan Types:
- Term Loans: Fixed amount, fixed repayment period (e.g., 12-60 months)
- Credit Lines: Revolving credit for working capital with flexibility in withdrawals
- Purchase Order (PO) Financing: Short-term loan based on confirmed purchase orders
- Invoice Financing: Loan issued against unpaid client invoices
- Secured Loans: Require collateral such as real estate or equipment
- Unsecured Loans: Higher interest but no collateral required
Example: A startup with active contracts but limited cash flow may qualify for invoice financing via SBCorp or a private fintech lender.
Now, let's explore the key steps in the SME loan eligibility and application process.
Key Steps in SME Loan Eligibility and Application Process
Though MSMEs account for over 99% of registered businesses in the Philippines, fewer than 1 in 10 have access to formal credit. The issue isn’t revenue, it’s structure.
Lending criteria were designed for corporations with fixed assets, not for SMEs operating on lean capital and inconsistent cash flow.
To improve your chances of approval, it’s critical to understand what lenders require. Below are the key steps in the SME loan eligibility and application process:
1. Business Registration Requirements
Philippine lenders require that SMEs be formally registered with both national and local authorities, depending on the type of ownership. Required documentation varies by business structure.
Key Requirements:
- Sole proprietors must register with the Department of Trade and Industry (DTI).
- Partnerships and corporations must register with the Securities and Exchange Commission (SEC).
- Local permits, such as a Barangay Clearance and Mayor's Permit, are mandatory.
- Corporations must often show proof of minimum paid-up capital (commonly PHP 1 million) verified by the SEC.
2. Minimum Operating History
Banks assess operational longevity to determine business stability. The requirement ranges from 1 to 3 years depending on the institution.
Bank-specific Criteria:
- BDO: At least 2 years of profitable operations.
- BPI Ka-Negosyo and Robinsons Bank Go Small Biz : 3 years minimum.
- SBCorp: Some products are available for businesses with 3-12 months of sales history.
Action Point: Prepare financial statements and receipts that cover your entire business operating history. Ensure continuity in reported sales to support claims.
3. Profitability and Financial Health
Profit margins, cash flow, and financial ratios are evaluated to gauge repayment capacity and long-term viability.
Benchmarks:
- Industry-average profit margin: ~24% of sales.
- Ideal debt-to-income ratio: <40%.
Required Documents:
- Audited Financial Statements for the last 2-3 years.
- Latest 3-6 months of bank statements.
- Cash flow statements, Profit & Loss statements, and Balance Sheets.
Example: A food distribution company with PHP 5 million annual sales and PHP 1.2 million net income meets typical profitability standards and is more likely to qualify for loans over PHP 500,000.
4. Owner Eligibility Criteria
Lenders evaluate the business owner’s citizenship, legal capacity, equity stake, and financial profile.
Requirements:
- Must be a Filipino citizen residing in the Philippines.
- Age range: 21 to 65 years.
- Must own 20-51% of the business and be authorized to transact.
- Must provide a government-issued ID (e.g., Passport, UMID).
Supporting Documents:
- Tax returns (BIR Form 1701 or corporate equivalent).
- Credit report from the Credit Information Corporation (CIC).
- Business Plan for larger loans or younger businesses.
5. Credit Standing and History
Lenders evaluate both business and personal credit histories to estimate default risk.
Scoring System:
- Credit scores in the Philippines range from 300 to 850.
- Scores above 650 are considered fair to excellent.
- Credit reports are accessed via CIC and private credit bureaus.
Evaluation Includes:
- Timely payment of previous debts.
- Existing liabilities and their ratio to income.
- Defaults, unpaid obligations, and total credit exposure.
Example: An applicant with no late payments in the past 12 months and total liabilities under 30% of monthly income is typically rated as low-risk.
6. Required Financial Documentation
Financial documents validate the SME’s income, stability, and compliance. They are mandatory for loan assessment.
Documents List:
- Latest ITRs filed with BIR.
- Audited Financial Statements (last 1 to 3 years).
- Bank Statements (last 6 to 12 months).
- Official Receipts and Sales Invoices.
- Purchase Order History (for PO-Based Financing).
- General Information Sheet (GIS), Articles of Incorporation, By-Laws (for corporations).
Discover the requirements and steps for SME loan eligibility and application in the Philippines. At n90, we offer tailored financing solutions to help your business grow. Get in touch with us today to explore your options!
7. Sales and Income Thresholds
Banks set minimum income thresholds to qualify for SME loans.
Requirements:
- BDO Unibank: Minimum PHP 1 million in annual gross sales.
- Security Bank: Requires profitability, three years in business, and <40% debt-to-income ratio.
- SBCorp PO Financing: Requires at least 3 completed POs in the past 2 years.
Example: A retail business generating PHP 120,000 in monthly sales, with consistent tax filings and receipts, will typically meet the gross sales requirement of most major banks.
Action Point: Prepare a simple sales report with summaries from BIR 2551Q and 1701/1702 filings to back your income claims.
8. Existing Bank Account or Credit Card
Many lenders require a history of banking activity or existing credit lines to assess reliability.
Common Conditions:
- Active business account for at least 6 months.
- Minimum average daily balance (varies by bank).
- Alternatively, a personal or corporate credit card may be used for credit evaluation.
Purpose:
- Facilitates Know Your Customer (KYC) verification.
- Provides insight into cash flow and financial behaviour.
- Builds credibility with existing financial institutions.
Action Point: Maintain steady deposits in your primary business account and avoid overdrafts. Preferably consolidate business income in a single account for clarity.
Also Read: Venture Capital in The Philippines: How to Secure Funding For Your Business
9. Application and Approval Process
The SME loan application process requires complete documentation, financial screening, and identity verification. Processing timelines depend on the lender's systems and the completeness of documentation.
Steps:
- Complete loan application form.
- Submit financial documents (AFS, bank statements, ITR).
- Provide business legitimacy documents and valid IDs.
- Attend interviews or submit clarifications if requested.
- Await credit and risk assessment.
Timelines:
- Small simple loans: 3 to 5 business days.
- Standard SME loans: 7 to 15 business days.
- Fintech-enabled banks: Approval within 1 business day for qualified applicants.
Tip: Ensure all data aligns across documents to reduce delays. Discrepancies between bank statements, ITRs, and financial statements often lead to additional review or rejection.
Why Philippine SMEs Work with n90
For many SMEs, the challenge is not just approval but finding funding that fits how they operate. Banks demand collateral, fintechs lack clarity, and informal lenders are costly.
n90 offers a better option with fast and flexible financing based on your revenue, not rigid terms.
What Sets n90 Apart:
- Loan sizes that grow with you: ₱1.5M to ₱25M, based on your actual annual revenue
- Straightforward pricing: Rates from 1.09% monthly, no hidden fees or balloon terms
- Quick, simple process: Fast approvals, minimal paperwork, funds when you need them
- Revenue-based approval: Strong sales matter more than perfect paperwork
- Built-in guidance: Get expert financial support with every approved loan
Financing Options That Fit
Whether you’re closing a temporary cash flow gap or funding your next phase of growth, n90 offers financing designed for momentum:
- Bridge Loans – Short-term funding for urgent needs like supplier payments, seasonal spikes, or time-sensitive opportunities.
- Small Business Loans – Flexible capital for expansion, equipment, inventory, or smoothing out day-to-day cash flow.
- Invoice Factoring – Turn unpaid invoices into working capital. Access funds while waiting on 30, 60, or 90-day client payments.
With n90, the process is simple and the terms are built to keep you moving, not stuck waiting for paperwork or tied to inflexible repayments.
Final Thoughts
Getting approved for an SME loan isn’t just about submitting documents. It’s about proving your business is stable, compliant, and financially prepared. This guide covered the essentials, including business registration, operating history, financial records, and credit profile.
n90 is built for businesses like yours. We offer fast, flexible financing based on revenue, not rigid requirements. No hidden terms, just support that fits how you operate.
Apply now or call +63 962 663 1393 to speak with an n90 lending expert and explore the right funding option for your business.
FAQs
Q: Can I apply for an SME loan if my business is less than a year old?
A: Most banks require at least 1 to 3 years of operating history. However, some government-backed programs or alternative lenders like SBCorp may consider startups with 3 to 12 months of sales, provided there's proof of consistent revenue.
Q: What if I don’t have audited financial statements?
A: Some lenders may accept internally prepared statements, especially for smaller loans, but this limits your options. To access higher amounts or better terms, having audited financials is strongly recommended.
Q: Do freelancers or online sellers qualify for SME loans?
A: If you’re registered as a sole proprietor with the DTI and can present financial records and tax filings, you may qualify. However, many banks still prefer businesses with physical operations or clear trade history.
Q: How does a poor personal credit score affect my loan chances?
A: Even if your business is performing well, a weak personal credit score can hurt your chances—especially in sole proprietorships where personal and business liabilities are linked. Paying down personal debts helps improve eligibility.
Q: Can I use loan proceeds to pay off existing informal loans?
A: Yes, but some lenders may ask how the funds will be used and may view debt consolidation as higher risk. It helps if you show a clear repayment plan and stable income to support your restructuring goal.
