BUSINESS FINANCING IN PHILIPPINES

Business financing is the process of acquiring funds for the business and getting a loan or investment to cover business needs, allowing to start, operate, or grow company. Business financing is further divided into two main categories, and these are debt financing and equity financing. Debt financing involves borrowing money and paying interest to the lender and equity financing involves selling ownership shares to an investor. Businesses seek financing to start new businesses, expand existing business and cover ongoing expenses. Business needs finance for its growth therefore, it must be financed. Places from where the business generates funds are the sources of finance.

Following are the sources of business financing in Philippines:

• Every business structure requires financing options for its growth.

ECONOMIC ENVIRONMENT FOR BUSINESS FINANCING

Philippines presents a promising economic environment for the financial sector, Philippines is one of the fastest-growing economies in Southeast Asia, with the International Monetary Fund (IMF) projecting growth rates of 6.0-6.4% until 2028. This translates to a growing demand for financial services like loans, investments, and insurance. In recent years, Philippines attained investment-grade credit ratings, demonstrating enhanced fiscal management and a robust external position. By organizing the account opening procedure and providing funding initiatives to support micro, small, and medium-sized businesses (“MSMEs”), the Philippine government actively encourages financial inclusion. This increases the pool of possible clients that financial institutions can serve. Philippines gives growth opportunity to business by offering various financing options to the business.

 SOURCES OF BUSINESS FINANCING

Business needs finance for its growth therefore, it must be financed. Places from where the business generates funds are the sources of finance. Following are the sources of business financing in Philippines:

TRADITIONAL BUSINESS FINANCING:  This source is a reliable source of funding and has longer repayment terms. Also, it requires good credit history, collateral, and can involve lengthy application processes.

GOVERNMENT LOANS:  This source typically has lower interest rates and caters to MSMEs.  It can be highly competitive and the application processing may take time.

PROCESS OF BUSINESS FINANCING FOR FOREIGN COMPANY

Securing financing for a foreign company in Philippines can involve some additional steps compared to local businesses. Process involved in the financing is as follows:

1. Understanding Foreign Ownership Restrictions:

• The Philippines restricts foreign ownership in certain industries like defense, public utilities, and media. Research about industry limitations can be fruitful.

2. Business Registration and Permits:

• Next step is to register company with the Securities and Exchange Commission (SEC) to obtain a Foreign Investment Negative List (FINL) clearance, which confirms industry allowing foreign participation.
• It has to secure other necessary business permits and licenses depending on industry and location.

3. Explore Financing Options:

• Bank Loans: Banks are a major source of financing, but they might require a strong credit history, collateral, and a local guarantor. It requires preparing a compelling business plan to showcase the venture’s potential.
• Debt Financing: Entrepreneur must consider alternative lenders like private lenders or investment firms specializing in foreign-owned businesses.
• Equity Financing: Business may select an attractive foreign or local investor if it is given an open ownership stake.

4. Prepare Additional Documents:

• Foreign companies might need to submit additional documentation like audited financial statements from their home country and proof of foreign investment.

KEY TAKEAWAYS

Financing is crucial to business. Every business needs to be financed either from private or government source. It comes on the part of business to analyze the source of finance which will best suites to the business and result more beneficial in future. Also, it is complicated process and it needs to be followed. After following the series of steps business get funds to function and it is the core responsibility of the business to utilize such funds efficiently and result in growth to the business.

 HOW WE CAN HELP?

Financing the business requires assistance of professionals and our team can help business in following ways:

• As selecting the source of finance can be confusing and complicated, experts from our team can guide in such selection while financing the business.
• Professional advice is necessary for any business in following the financing process. Our panel of expert can assist in complying with the process.
• Our knowledgeable and experienced team can provide help in documentation process involved in financing.