02
Nov
2015

How to Start a MicroLending Business

micro lending businessHow to Start a MicroLending Business 1Microlending is a type of business financing that better thrives during recession. It focuses on small loans to help small businesses and new entrepreneurs in establishing or advancing their business. Microlending usually offer a much lower interest rates with no hassle in the requirements, doesn’t require collateral and process loan applications faster. That’s the reason why many household sari-sari store owners, small business owners, and OFW who wants to work abroad go directly to lending firms instead of the commercial banks.

Microlending practice has roots in third world countries as a way to help poor entrepreneurs and working poor create a sustainable living for their families. This is a good business idea for entrepreneurs to set up a microlending firm and take advantage of the demand.

Microlending Startup Guide

1. Business Structure: A microlending business can be set up as a single proprietorship, partnership, or corporation. However, if you wish to set up your microlending business as a single proprietorship or partnership, you can’t attach the word “lending” or “finance” in your business name.

2. Startup Capital: The minimum capital requirement is P1 million.

3. Business Requirements: Register your business with the Securities and Exchange Commission or SEC (www.sec.gov.ph), get a 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.

4. Employees: Start with three employees- one to take care of releasing loans, a second to collect payments, and a third either as bookkeeper or accountant on retainer.

5. Location: You may be able to cut overhead costs by establishing your microlending business right at your own home. You can also rent an office close to major business establishments or to an area where your target market are mostly located.

6. Target Market: without quasi-banking activities, you may cater to business employees, pensioners, sari-sari store-owners, flea market stall-owners, and OFWs.

7. Loanable amount and Interest Rates: Loans could start from P5,000 to P15,000, with 3 to 5 percent interest per month. OFWs usually require bigger loan amounts that start at P50,000. Aside from the interest, you should also charge another 5 percent as a service fee to borrowers to cover your overhead costs.

8. Payment Terms: It 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.

9. Collateral: Microlending usually doesn’t require collateral from the borrower. It only requires the borrower and the co-maker to sign a promissory note and submit other documents.

10. Penalties: A penalty charge should also be imposed on delinquent borrowers. You therefore need to allot a 1 percent provision for bad debts.

Microlending Business Tips
1. Just lend smaller amounts with short payment terms. This will make repayments faster and enable you to loan out money to more borrowers.

2. 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, offer them a certain percentage of the loan interest you will be charging, let say 1 percent.

3. Offer gift certificates for loan funding participants to use as gifts.

4. For loans of P50,000 and higher, you should ask a collateral. If the borrower doesn’t have a collateral, ask the borrower to submit an authorization letter or special power of attorney from the owner consenting to the use of the item as collateral.

5. Talk to potential borrowers directly to make a good assessment of their character and integrity.

6. Important: 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.

7. If permitted, you could ask the accounting dept. or HR of the employees to deduct loans from their salary or you could ask from employees to leave their company ATM and let you withdraw the money and deduct the loaned amount.- Note: this is just an idea, I don’t know if it will work with your business. Better yet ask a business expert.

DOWNLOAD: R.A. 9474 also known as the Lending Company Regulation Act of 2007 (PDF)

Source: entrepreneur.com.ph Photo: amazon.com

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47 Responses

  1. Sam says:

    This is interesting. My aunt is looking for ofw loan manila. Thanks for sharing these tips.

  2. Sandy says:

    For loans, you can check https://www.jctezloan.com/. Hope this can help.

  3. Toby says:

    Hello po ask lang po sana is it to much po ba to ask 4% interest per month if I invest 1m?? Salamat po

  4. Criste ben says:

    Gusto rin po mag umpisa ng ganitong bussness kht single lng po paano po ba ang pag sstart. Thank you po

  5. need help Contact says:

    Do you need loan? if yes, email : dakany.endre @ gmail. com for more Details.

  6. need help Contact says:

    Do you need loan? if yes, email : dakany.endre(a)gmail.com for more Details.

  7. need help says:

    need help Contact: dakany.endre (a) gmail.com

  8. Jayson says:

    I have a microlending busines in bulacan and.manila. gusto ko sana syang eregister para makakuha ng business permit but according to DTI hindi ko daw sya mareregister kasi kelangan corporation pag lending. Any idea please??

  9. NIÑO SORIANO says:

    Good day po, paano ko po makapag register about mirco lending? ano po ba mga need na papers?

  10. jb says:

    im looking for investors.. pls email lng po.. salamat..

  11. Efm says:

    Hi.. pwd malaman process how to register as single proprietor kc need ang SEC bago mkakuha ng local permit,,

  12. Ronnie Trinidad says:

    I am starting this business but in small amount only. weekly payment. 10 % hehehe

  13. Arlene Gasoc says:

    can i have it in detailed planwork sir, paano mode of payment nun and ilang percent dapat interest nun pag 10k start

  14. edwin says:

    can u send me business plan thnx

  15. mark says:

    Magandang business ang food trucks. I think Bontella offers Customized food trucks for low cost! Nag inquire ako sa kanila. Try nyo din. 0917 658 1956 or https://www.facebook.com/bontellafoodtruckbuilders/

    🙂

  16. Cindy says:

    Hi! May I know the process how to register a lending business?

    Thank u in advance

  17. Ŷłá Htræh says:

    Hi,
    Anyone here has a single proprietor of micro lending business please email me.

    Best regards,

    Ŷłá

  18. Leovilyn Cruz says:

    such a great post. thanks. Can u please email all the necessary requirements to start this business? Also, any guidelines on the interest, penalty and other charges rates?

  19. My name is Glenn Baker and i live in USA Florida and i am a happy man today, I told my self that any Loan lender that could change my Life and that of my family, i will refer any person that is looking for loan to Them. If you are in need of loan and you are 100% sure to pay back the loan please contact them and please tell them that Glenn Baker referred you to them. scottlarry918@gmail.com

    Glenn Baker

  20. errol duran says:

    I am very interested to put up this business. Can I start of P500k for starting this business? I am OFW and I have own office.

  21. Norbert Del Rosario says:

    thank you for this article… laking tulong po… what concerns me now is the BIR registration, is it vat or non-vat?

  22. Rea yee says:

    but i need more knowledge on how to register it..malaki ba tax or bbyran s permit..pls.educate me more

    • ZERO says:

      GoodMorning Sir…message me in gmail…i explain to you more a lending company and tips

      • Mark says:

        can you also send it to me please? planning to start a small lending business soon. thanks

      • Michael says:

        Zero, hi, I saw reply re: the lending business. What is your email address please? thank you

      • Ŷłá says:

        To Zero….,
        Hi ,
        Please drop your email address. Really want to know your tips about lending.
        Many thanks,
        Ŷłá

  23. Rea yee says:

    I want to start my lending

  24. Liya Ma says:

    Thanx,,,,great ideas indeed…planning to start my own lending business as well…i want to subscribe to be familiar..about the biz….HAVE A LOVELY DAY,,,

  25. christopher diaz says:

    it is good and helpful to my current lending business kindly send me a copy of this article and other helpful tips in relation to lending ideas.

  26. lyn says:

    ang liwanag.. pm me sa my lending company na jan..

  27. bs says:

    5/6 or bombay are engaged in lending money to public. And belong to SINGLE PROPRIETORSHIP. Is it illegal?
    Im engaged in lending also but my interest is ONLY 4% UNLIKE in 5/6 its 20% interest per month.

    • lyn says:

      20 percent 2 months un umaabot pa ng 3 months or more kakabukas nlng hulog balik ka nlang o kya palya muna ako today.. hahaha

  28. francis kariuki says:

    i just loved your teaching and wud like to read more of your articles

  29. Pollet Mashile says:

    Helpful indeed

  30. lending can only be organized as corporation (other business organizations no longer allowed after the passage of RA 9474…those organized as sole/partnerships are given time to incorporate..see the implementing rules of the said law, for sure, as of now, all lending companies existing should have been incorporated already.

  31. Charm Posadas says:

    This helped me with my dissertation. 🙂

  32. Simple and and helpful!

  33. Charlie Mercado says:

    best tips

  34. Michaela says:

    Great post! 🙂

  35. fjovie2009 says:

    great ideas and tips!pls.send me a copy of this articles..thanks a lot..

  36. kate says:

    I can’t believe all of the great tips in this article. It makes it sound like an easy task to start my own micro lending business.

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