How to Start a Money Lending Business in the Philippines
These days having only one source of income is no longer enough, what with the rising cost of our basic needs. Thus in order to make ends meet, one must have other sources of income such as a part time job or a small business. One such business that can be considered is the money lending business. Here in the Philippines, there are already a number of individuals or small companies that engage in the business of loaning money to others. The reason behind this thriving business is that most people would rather approach the lending companies than banks because the process of getting a loan is not that complicated and that the document requirements of money lenders are not that strict and numerous.
In case you want to put up your own lending business, here are the steps on How to Start a Money Lending Business in the Philippines:
1) First, you must register your business with the Securities and Exchange Commission or the SEC. The Republic Act No. 9474 requires that a lending business should already be registered only as a corporation and not as a single proprietor or partnership. The act also sets the minimum paid in capital requirement to be One Million Pesos (Php 1,000,000.00).
2) Second, you must also register your business with the Social Security Services (SSS), Philippine Health Insurance Corporation (PHIC), Home Development and Mutual Fund (HDMF) and the Bureau of Internal Revenue (BIR)
3) Third, once your business is already properly registered, you must then consider office space. Here you must choose the place where your target market is located so that your potential borrowers can easily do business with you.
4) Fourth, prepare the documentations that you will need. These documents may be Promissory Notes, Chattel Mortgage, and Deed of Sale etc. Samples of these documents can be downloaded from the internet. All you have to do is to edit them to fit your requirements. Note that the Truth in Lending Act requires that before a loan is given to a borrower, there should be a written statement setting the amount to be loaned, the agreed interest rate and agreed payment terms among others.
5) Fifth, you must have a written set of lending policies to be able to guide you in your business. These policies should contain the interest rate that you are going to apply on loans, your collection process, what to require from potentials borrowers etc.
6) Sixth, the rule of the game is to start small. Once your business and office has been set, you may now start lending money. For personal loans, you may need to lend from Php 5,000.00 to Php 15,000.00 in order to accommodate more borrowers. The requirement for these amounts may only be the promissory note or a certificate of employment or payslip if you so desire. For business loans, you may start from Php 50,000.00 up. For this type of loan, you may want to require aside from the usual PN, a collateral commensurate to the amount of loan or post dated checks.
The first 3 steps in starting a lending business is a government requirement while the rest of the steps are just prudent requirements that will be able to protect your business from bad debts and to ensure that your business will thrive.