The lending industry thrives better in times of financial crunch. To cope with the crisis, people try to stretch their budget and augment their income. Many households put up sari-sari stores; family members look for sidelines, try working abroad, or simply try to borrow money. To raise the money to finance these activities, many of them go to lending firms instead of the commercial banks. This is because lending firms are more lenient in their requirements, offer lower interest rates, and process loan applications faster. Entrepreneurs can set up a lending business to take advantage of this demand for easier credit.
A lending business can be set up as a single proprietorship, partnership, or corporation. Per Republic Act no. 9474 or the Lending Act of 2007 lending business should be set-up or organize under a corporation. However, you can’t use the word “lending” or “finance” in your business name if you choose to set up your lending business as a single proprietorship or partnership. You can only use those words if your company is a corporation. In fact, a corporation has advantages that a single proprietorship or a partnership doesn’t have.
In setting up a microlending business, you need to raise the required minimum capital of P1 million and then register your business with the Securities and Exchange Commission or SEC (www.sec.gov.ph). The usual permits and documents required in setting up a business will be required, like the Mayor’s permit, certification from the Bureau of Internal Revenue (BIR), and Social Security System, Philhealth, and Pag-IBIG coverage for the people you will be employing in the business.
In microlending without quasi-banking activities, you may cater to employees, pensioners, sari-sari store owners, market stallholders, and OFWs. OFWs usually require bigger loan amounts that start at P50,000, but it is advisable for startups to lend smaller amounts with short payment terms. This will make repayments faster and enable you to loan out money to more borrowers. Loans could start from P5,000 to P15,000, with 3 to 5 percent interest per month. Payment terms can be from two months to six months. The advisable payment schemes are daily or weekly; for employees and pensioners, though, payments can be scheduled every payday or once a month.
To build a client base, you could partner with the human resources and accounting departments of your target companies. As an incentive to endorse you to their employees, you could also offer to the client-company a commission of a certain percentage of the loan interest you will be charging. If you will be charging 5 percent, for example, you might want to give 1 percent to the company as a commission.
Microlending usually doesn’t require co lateral from the borrower. It only requires the borrower and the comaker to sign a promissory note and submit other documents. However, for loans of P50,000 and higher, you should ask for collateral from the borrower. Any item that is of value can be used as collateral, such as jewelry, real estate, or vehicle, for as long as the borrower owns it. If the borrower doesn’t own the item put up as collateral, you have to ask him or her to submit an authorization letter or special power of attorney from the owner consenting to the use of the item as collateral.
You can start this business with three employees: one to take care of releasing loans, a second to collect payments, and a third either a bookkeeper or accountant on retainer. It is advisable for the owner of the lending business to talk to potential borrowers directly to make a good assessment of their character and integrity. It is also advisable to build an internal security system and a clear accounting system that can track each borrower’s account and the flow of money in the business.
Aside from the interest, you should also charge another 5 percent as a service fee to borrowers to cover your overhead costs. You may automatically deduct this from the loan amount upon release of the loan, or you may just add this to the interest rate. A penalty charge should also be imposed on delinquent borrowers.
The longer it takes the borrower to pay his outstanding balance, the smaller is your chance of getting him to pay it back. You therefore need to allot a 1 percent provision for bad debts.
This article is the advice of Mr. Edgardo Tipa, a financial trainer with BusinessCoach Inc. (www.businesscoachphil.com) who has been conducting seminars for four years now. He has 20 years of extensive experience in banking and corporate finance, as interviewed by Mishell M. Malabaguio, entrepreneur.com.ph. photo from pro.corbis.com. In case of further information in setting up your lending business, you may contact him at edttipa2001@yahoo.com or cell no. 0927-9077-879.
i hpoe m2longan nio pow aq..
i have a business, i only need 10k.. ok lng khit araw araw ang hulog or khit weekly puede rin po..ga2mitin ko lng ang pera this christmas pandag2 ko ng paninda.. reply po
this is my # 09296656947 need ko lang po talaga..ang business ko po ay hardware,mga gadgets and toys so hindi po kaumaze2ro sa singilan..kung ok lng po sana 15k kung ok lng sa inyo..thanks
hi,
we’re looking for angel investor in the philippines.
meron bang nagpapautang ng 3% to 5% apr dito? kailangan namin ng kapital na 100k pesos pang simula sa internet cafe sa dasma. wala kaming trabaho kaya magnenegosyo na lang kami, kaso nga lang walang puhunan.
1st Payment Due Date: 02/15/2010
Principal: PHP 100,000.00
Monthly Payment: PHP 4,391.95
Number of Payments: 24 moths
APR: 5.000%
Total Repayment Amount PHP 105,406.80
Sa pagkakaalam ko kapag sa banko, ang time deposit ay nasa 3.50% lang, kapag pinautang nyo kami para kayong nag invest ng pera na ang tubo ay mas malaki pa sa IRA sa bank. 5% ang tutubuin nyo sa amin, kapag sa banko 3.5% lang.
kaya po 02/15/2011 ang start date ng payment, yun po ay dahil sa start-up business po kami.
maliit nga po ang kikitain nyo kumpara sa mga 5-6, pero malinis naman ang kunsensya nyo. saka trustworthy po kami. gusto lang po namin magnegosyo, fair naman po yun diba?
HELO PEEPS.. IM MAKING VINEGAR. PWEDE NYO DIN PO ITO PAGKAKITAAN KAHIT NASA HAUS KAYO. MASARAP PO ANG GAWA KO. D KAYO MAGSISISI :) BINEBENTA KO PO ITO SA MABABANG HALAGA. PWEDE KONG IDELIVER SA INYO. :) PLS CONTACT ME @ MY NUMBER, 09323332232
pHP 750.00 LANG PO ANG CAPITAL DITO. 160 LITERS ( 1 DRUM ) OR 44 – 45 GALONS. :)
@ LEO. BAKIT D MO PO CNAGOT QUESTION KO ABOUT SOY SAUCE :(
hi gud pm!..good day to you nagpapautang po b kau s katulad kong businesswomen i have small business water station at laundry and i need some capital ok lng po skin khit perday collect u may reach me at my number 09205451663 or 4850089…need ko lng po ng cash kht mtaas interest mkasurvive lng ako.pls reply tnxs
anu po ba talaga pwede po ba ang single proprietorship as long as my minimum na 1million capital?at kung sakaling nagppautang lang po sa ngyun anu po ba ang mga dapat ayusin para maging legal ang pagpapautang.marami po kc komo d ka naka lisensya ay ipagwawalang bahala nila ang kanilang inutang.sa ngyun na nagppautang po ako ng 10%na d nkalisensya hindi po ba yun labag sa batas.wala po bang masama kung papapirmahan ko po sila ng promissory note?wala nmn po akong naagrabyadong tao dahil minsan po ako pa yung d nababayaran.tyaga lang po ang paniningil ko sa mga taong deliquent magbayad.umaasa po ako sa inyong kasagutan sa matagal ko na pong katanungan.
Hello, I am planning to put up a money lending business with a small amout of capital. I would like to ask where and when will be the next seminars, I am very interested to attend.
@john, check the sched here,
http://www.mixph.com/2010/02/livelihood-skills-training-seminar-%e2%80%93-mar-2010.html
or call training centers directly for their next sched:
http://www.mixph.com/2006/03/trainings-and-seminars-institutions.html
ahm, ask q lng poh wat business pwd q cmulan? 30k lng poh capital q ee..
hi!im josephine,nabasa ko yng messege mo,your looking business?bka pwde tyo mag tulugan?bka gsto mo maki partner skin?i have a business water station laundry..f u interested pls cal me 4850089 or txt me 09205451663.tnxs
kasi kung corporation medyo sustainability ang resources not like proprietorship pede itigil na lang nya basta kahit kaylan nya gusto.
To Dhang:
Wala kasi iba legal na paraan kung hindi magtayo ng corporation. Other alternative is credit cooperative pero patas nag labanan sa lahat ng members.
Actually malaki nagagawa ng mico financing sa pag alleviate ng buhay ng mahihirap kung maganda talaga ang intention mo. Kaya kasi ginawang corporation yan kasi may pag aaral dati na ginawa ang UN noong 2005 na isa itong mabisang tools para mabigyan ng gap ang mga mahihirap sa financing needs kasi di sila pede sa mga bank lao na at may collateral.
hellow any body y namn po walang nagrtereply s tanong ko
hellow po mr leo..nag post po ako ng msg..ac dhang po i2
ask ko lng uli san po ako pede pumunta kung maliit lng capital ko s pagpapautamng pera .
gus2 ko po kz legal.cno pede kong lapitan para kumuha ng permit tnx
kahit maliit lang capital mo legal pa rin mag pautang… parang kaibigan lang yan na nag utang sayo at naawa ka kaya pinahiram mo ng pera dahil kailangan nya. syempre with interest.
ito yata ang formula nyan sa interest rate: i=prt
kikita ka kahit walang permit, pero risky ang lending business pautangin mo lang yung mga capable magbayad.
Ms. Dhang,
nag papautang po ba kayo ng 5-6. Puede po ba sangla ng atm ant then 2week ko lang po need. Seroue po ako, you can check my background on our office.
Please reply on this email: business_search2008@yahoo.com
elow.. pow! meri xmas pow” ask ko lng pow san pow aq pwd hram ng pera maliit lng interes pra mkapagcmula ng maliit napagkakitaan. asap
sabi nga po nyo hindi inaallowed ang single proprietorship,pano po s 2lad ko
nagpapautang po ako un nga lng talagang may risk dahil ung iba d nagbabayad.ask ko lng kung pede ba akong kumuha ng licensed or permit s pagpapautang.maliit lng nm po capital ko pero gus2 ko may permit.san ako pede kumuha.saa mi nga may nagbibigay 10% maraming kumukuha kz wala ng mga papers n kailngan…tnx [po wait ko po response nyo s email or kht post nyo d2
Dhang,
Nagtabibg ka sa pag ibig fund. May lending program sila na pwede kang mag invest.
@dhang, as far as i know kasi, kelangan mo kumuha ng permit sa BSP (central bank). medyo complicated and process, and you will be required a certain amount as capital, i’m not sure, better to inquire na lang with the BSP office http://www.bsp.gov.ph.
miss dhang ..good day to you nagpapautang po b kau s katulad kong businessman i have small business and i need some capital ok lng po skin khit perday collect u may reach me at my number 09157900241…need ko lng po ng cash kht mtaas interest mkasurvive lng ako
hi po…ask ko lang nagpapahiram po ba kayo..i have 2 burger outlets po which operates 24hrs…inquire lang po sana ako..tnx..here is my #09235736712
dati pwede ang sole or partnership sa lending biz, pero ngaun dapat corp na mali info ng article!
@jc, can you at least provide the link for the info you mentioned?
2nd paragraph, “A lending business CAN be set up as a SINGLE PROPRIETORSHIP…”
@ds, i’m asking for the source link of jc, but if you have one too, please let me know so i can update the article.
Yes, you are correct. Per Republic Act no. 9474 or the Lending Act of 2007 lending business should be set-up or organize under a corporation. Sorry for the misleading write-up on that article. In case of further information in setting up your lending business, you may contact me at edttipa2001@yahoo.com or cell no. 0927-9077-879.
@Edgardo T Tipa, thank you for the updates. I also include your contact details.
@jc, thanks for the correction.
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