Highlights
- Business owners can apply for an SME Recovery Loan.
- Interest on business loans is considered an expense and is therefore, tax-deductible.
- Because of the pandemic, banks are more understanding when it comes to business owners seeking out loans.
'May PERAan' is SBS Filipino's podcast series which features financial experts seeking to answer the most common questions about money and finances.
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"During the pandemic, businesses had to furlough some of their employees. There were incentives provided by the government at that time as well, but it might not have been enough," Finance broker Maria Papa shares.
Now that businesses are heading towards normalcy, Maria says that owners who have racked up debt could potentially consolidate them into one business loan.
SME Recovery Loan Scheme
Maria shares that the advantage of taking out a business loan now is that the government is currenly offering the SME Recovery Loan until June this year.
"The loan is coursed through different banks and lenders. The rates are quite good. Rates of 3.29% or 4.49% to secure the loan and it's on a 10-year loan term.
"With credit cards, interest is at 20%. Personal loans are at around 10% with only a seven-year loan term max.
"The SME Recovery Loan Scheme might be something you can look at if you want to lower your repayments; because now that businesses are coming back, you'll need money to hire people and operate.
Should you consolidate your debts?
According to Maria, it is possibly a good idea to do so.
"The interest you pay on the loan is tax-deductible because interest is also an expense that can be deducted against revenues.
"You can potentially consolidate business with home loans to get residential rates. Go to your bank and find out if you are qualified."
What will the bank assess me on if I seek a loan?
Before the pandemic, those seeking a business loan had to provide two-years worth of tax returns; however, Maria says that banks have become more understanding of the recent plight of business owners.
"Because of the pandemic, tax returns won't necessarily look great for business owners. Banks know this.
"This financial year, businesses are picking up and this will show in their business activity statements. These statements are filed every month or every quarter. When the bank sees that profits are going back to what they were pre-pandemic, it will be happy to lend.
"People are currently revenge spending because they've been locked up for two years. This is a good opportunity for businesses to operate and seek loans."
Disclaimer: The information in this article serves only as a guide. For additional information regarding your particular issue or situation, consult with legal, financial and/or tax experts.
