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  • November 24, 2023

The Important Role of Business Loans in SME Growth and Expansion

By Genmar Dadivo


Business owners face various challenges at every stage of their entrepreneurial journey. Initially, the challenge was turning their business idea into reality through careful planning. Once they have achieved this, another mission arises: the business needs to grow and expand to increase revenue and ensure long-term sustainability.

However, a significant part of this task is finding the funds needed to invest in growth strategies. You may have already earned ample profits, but if that’s insufficient, what can you do? Turning to business o negosyo loan financing for SMEs in the Philippines is a viable option.

Assuming your business is ready for the next level, taking out a loan to pursue expansion is a strategic venture that can result in better financial stability and greater competitive advantage. In this article, we’ll explore how business loans can help you achieve this.

Assessing the Growth Needs of Enterprises  

Growth is necessary for a business to continue succeeding. However, the timing is crucial as well. Before you try implementing growth strategies, you need to thoroughly evaluate your business to ensure you and your employees are ready.

Identify Growth Opportunities

There are plenty of ways to expand a business. Increasing your market share o porsyento sa merkado is one example. Here, your aim is to attract new buyers or buyers loyal o suki to your competitors. You can also diversify the business by expanding your products or creating other products for new markets. Another option would be to partner with other and more established companies.

The key is to know which growth opportunity is suitable for you. Remember to be patient. Some growth options look tempting, but your business may not be able to handle the changes yet.

Define Short- and Long-Term Goals  

Before you take action to expand, start with defining your short- and long-term goals. Discuss this with the key people involved in your business to ensure that your goals are detailed and measurable. Doing this will help you create a roadmap for implementing growth.

Examples of reasonable goals to fulfill include improving customer loyalty, venturing to new markets, expanding your services, or enhancing market share. Consider also investing in research and development for your products.

Seek Advice From Experts  

Obtaining counsel before making various changes to your business to achieve growth is highly advisable. Get advice from business coaches. Because they were also once business owners, they are knowledgeable about different aspects of business growth.

Coaches can advise you when is the right time to carry out your plans, what mistakes you should avoid, and what kind of adjustments you should make. They can help refine your ideas and provide objective feedback so you can arrive at a better decision.

How SME Loans Help Enterprises Grow and Expand

Taking out a loan may seem scary for some. After all, nobody wants to end up with a huge debt. However, business loans can be used strategically to achieve various goals. In particular, they are worth taking if it is an ideal time for your business to expand.

Below are some ways financing SMEs with business loans in the Philippines helps business owners:

Get Enough Funds for Expansion

It’s normal to need extra funds to expand your business. This additional capital o puhunan can be used to open a new branch, which will allow you to reach new customers and strengthen your marketing efforts. Loans can also be used to improve your workforce, enabling you to increase your production and serve more people. Additionally, the funds can be used to renovate facilities to ensure safety and product quality consistency.

Introduce New Products to Your Patrons

If you keep offering your customers the same products and services, they may eventually seek other businesses that can offer them something new. For this reason, introducing new products and services is necessary to retain customers. Business o negosyo loan services for SMEs in the Philippines can be used to support research and development efforts to create new offerings. As a result, your business can remain competitive in your market.

Invest in Tech and New Equipment  

New equipment and upgrades in technology are beneficial to businesses in many ways. They help streamline processes, resulting in enhanced efficiency. Consequently, production is improved, which leads to better customer service. New technology and equipment can also reduce mistakes, resulting in higher client satisfaction and improved product quality.

Managing Payments for Your SME Loan

Not being able to repay your loan can have a serious impact on your business and personal life. It can also have an effect on your credit score and relationship with your lender. That’s why it’s important to form a plan on how you’ll repay your loan before you start looking for business loan platforms for MSMEs in the Philippines.

Below are some tips to help you manage your loan repayments: 

Create a Detailed Repayment Plan  

Creating a repayment plan helps break down how you will pay off your loan into achievable steps. First, know the total amount you need to pay your debts each month based on the repayment terms of your loan. Afterward, set a budget. This will help you allocate your funds for various expenses, including your business loan. When creating a budget, make sure to list all your income sources and expenses, such as fixed and variable costs.

Ensure Timeliness When Paying  

Timeliness in paying off loans o pagbabayad sa tamang oras is essential in maintaining a good credit standing. A good credit score has many benefits, such as higher chances of getting approved for future loans and lower interest rates. One of the ways you can ensure you won’t miss a payment is by automating them. If your lender allows it, you can set up automatic payments from the bank account of your business. Doing this can give you peace of mind that you are paying your loan on time to avoid penalties o multa.

Monitor Your Cash Flow Thoroughly

Cash flow o daloy ng pera refers to the total amount of money that moves in and out of the company. Monitoring your cash flow is essential in managing your business finances so you can adequately pay rent, inventory, employee wages, and business loans. If you lack the time to review and record your financial transactions, you can outsource this task or use accounting software.

 FAQs About SME Business Loan Financing in the Philippines

What Kinds of Loans Are Available for SMEs?

There are various loans SMEs can apply for, depending on their qualifications and needs. They can take out long-term loans, which are payable for several years, or short-term loans, which require payment within a year. Equipment financing is another option; it is a loan used specifically to fund new machines, devices, or vehicles.

SMEs can also apply for an SSS loan if they need a considerable amount. Just note that this loan requires collateral. There are also online business loans for SMEs in the Philippines, which offer a convenient means to obtain funds.

Are Collaterals Needed When Applying for SME Loans?

It depends on the type of loan. Unsecured loans require no collateral, making them a viable fund source o pondo for many business owners who do not have assets to offer as collateral.

On the other hand, secured loans are loans that require collateral, such as jewelry or real estate. Despite this requirement, one advantage of secured loans is that they have lower interest rates and longer repayment terms.

How Can I Find a Trusted Lender of SME Loans?

Finding a trusted SME lender is important to avoid falling victim to scams. To do this, check customer reviews to have an idea of other people’s experience with a lender. See if the lender is regulated by public offices, such as the Bangko Sentral ng Pilipinas.

Additionally, if you are applying for an online loan, make sure the lender’s website is secure because you will be submitting financial information. Another tip would be to ask other business owners for their recommendations.

Get Financial Assistance From the Top MSME Business Loan Provider in the Philippines! 

Speaking of trusted lenders, look no further than Cebuana Lhuillier Kanegosyo Center! Our parent company, Cebuana Lhuillier, has been a trusted micro financial services provider for Filipinos for many years now.

We are committed to providing excellent financial services to more of our fellow citizens. Through Cebuana Lhuillier Kanegosyo Center, we have extended our offerings to cater to aspiring Filipino entrepreneurs with the goal of making business ownership easier and more accessible for all.

Driven by this mission, we offer service packages that include loans to help entrepreneurs start and expand their businesses. On top of this, we provide coaching in the form of various resources to help business owners pursue their expansion goals in the right direction.

To access our services, simply sign up to become a member today. We look forward to having you join the Cebuana Lhuillier Kanegosyo Center family!