How to Start a Lending Business in the Philippines

Money lending is risky but can also be very lucrative.

A high population growth rate of about 1.9%, coupled with unequal distribution of resources, are among the factors that have contributed to increasing poverty levels in the Philippines. This has resulted in many business people relying on money lending institutions for finances. In the Philippines, micro-financing is majorly carried out by rural banks, non-governmental organizations (NGOs) and People Organizations (PO) with support from international donor organizations and the government through the Small Business Guarantee and Finance Corporation (SBGCF). This is aimed at combating poverty.

Instructions

1. Choose a business name. For sole proprietorship and partnership businesses, you can use your name or your partner's name. For money lending corporations, the words "lending" or "finance" are used (see Reference 1).

2. Register your business. To do this you will need the mayor's permit, a certification from the Bureau of Internal Revenue, and a registration from the Securities and Exchange Commission. A maximum of 1 million pesos is the total amount you need as starting capital for your money lending business (see Reference 1).

3. Register your employees. For your money lending business you will need employees to help with releasing the loans and collecting payments. Therefore, you need to register your employees with the Social Security System (SSS), Department of Labor and Employment (DOLE), Home Development Mutual Fund (HDMF) and Philippine Health Insurance Corp. (PhilHealth) (see Reference 2).

4. Control your credit. To avoid bad debts and keep your business running, ensure that you choose your customers wisely. You also need to regulate the amount of money you loan. Between P10, 000 to P15, 000 is advisable for the first months of business. The interest rate ranges between 3 and 5 percent per month for payments made within two to six months. An additional 5 percent is usually included to cater for the operating costs (see Reference 3).

Tips & Warnings

• To help expand your money lending business, have a good marketing plan. Build a good social network so that people can refer their friends and family to you. You could also invest in software that helps you to keep track of payments.

• Limit your money lending to one area to make it easier to collect the money.

• Money lending is a lucrative and potentially dangerous business. Ensure you avoid pitfalls by keeping records. Proper documentation helps you to keep track of your money flow and avoid confrontations due to bad debts.

References

• Pinoy Business:Lending Business Philipines
• Ready to Be Rich: How to Register Your Business in The Philipines
• Tropical Penpals: Opening a Lending Business in The Philippines