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10 Ways to Fund Your Startup in the Philippines

Jul 21, 2020 8:58:00 PM

Before the 2000s, founding one’s own business was often a difficult and expensive endeavor. The traditional business origination model required one to save tremendous amounts of capital independently for costs like office rental, salaries, and production equipment. But that model has since evolved with the rise of the digital economy, which has made it much easier and much less costly to put up a business.

Enter the startup, which is typically founded and run by a small and agile team of individuals with specialized knowledge and skills. Many such operations begin from a simple home office before expanding in size and revenue, oftentimes thanks to outsourcing and the flexibility they afford employees, who are often given the privilege of engaging in remote work.

A 2020 survey from PricewaterhouseCoopers revealed that there are now more than 400 startups, at least 50 angel investors, and 40 venture capitalists in the Philippines. This is currently the environment prospective entrepreneurs can enter to try their luck, fill a need in the market, and create new jobs for fellow Filipinos. This intersection of digital mobility through the internet and the availability of various debt and equity financing instruments indeed make the present day an opportune time for startups to set up and thrive in the country.

But even if startups don’t have the same financial requirements as running a big conglomerate, funding remains a challenge for such businesses. In fact, 78% of Filipino startup owners who participated in  the PricewaterhouseCoopers survey considered funding requirements as their biggest challenge. The startup landscape is a highly competitive one, after all, and costs can rack up as quickly as those of a traditional business. Given these challenges, what exactly can a startup owner do in order to stay viable and keep their business afloat? If you’re a startup entrepreneur yourself, you can start by doing two things:

  • determine how much money you need for a given time period, and
  • find funding options that can help you secure that amount in ways that are best for your business right now.

This feature discusses 10 different financing options that you can consider for your startup, as well as tips on maximizing your funds with PayMaya Enterprise. Search below for the ideal financing option for your situation, and learn how to make the best of new funds for your startup!

The Top 10 Ways to Fund Your Own Filipino Startup

If you’re a very green startup owner, your access to regular debt financing options—for example, those offered by banks—may be limited in scope. All the same, you can choose some simpler financing options to get your startup business off the ground. Among the primary financing options you can explore are the following.

    1. Loans from Family and Friends

What does it mean to take loans from family and friends?

Borrowing money from family and friends may be the simplest route to financing your startup operations. They are among the easiest to persuade about your entrepreneurial vision, and there’s less red tape required in order to secure funds from them. In exchange for the monetary support of family and friends, it’s typical for Filipino startup owners to pledge partial ownership of the business to them.

If this is the route you plan to take, don’t forget to put the agreement on paper. This is important, even if it’s between you and the people you’re closest to. You should still have a legal document binding you all to the details of the loan, its payment terms, and agreed business shares. That way, everyone can be on the same page about money matters—something you need for both the professional and personal aspects of your relationship. 

What are the pros and cons of taking loans from family and friends?

 There are several pros when it comes to this type of loan arrangement. For one, your friends and family will likely allow very liberal interest rates and payment terms unlike the ones offered by banks or credit companies. They’re also not as likely to ask you for collateral as part of the agreement. And since they already know you, they won’t subject you to a lengthy background or credit check before lending you money.

But there may be downsides to this financing option as well. Money can put a strain on personal relationships, and you may not be 100% exempt from that. Your relationships could sour if you don’t pay back what you owe or if you find out that someone’s lending you money in bad faith. That makes it all the more important to have your loan terms put in writing.

What kind of entrepreneur is this financing option ideal for?

This type of financing option is ideal for beginner entrepreneurs who need fast capital and flexible borrowing arrangements. For support in the earliest stages of your startup, you can turn to friends and family.

2. Liquidation of Assets

What does it mean to liquidate your assets? 

Liquidating your own assets is another simple way to free up finances for your startup. If you have properties that you no longer need and are willing to sell off for extra cash, you can do so for your startup.

Examples of assets that you can liquidate are a car, a motorcycle, a piece of jewelry, or real estate property. You can even sell off collector’s items, like limited edition toys or musical instruments. Find someone on the market willing to buy these, and you’ll likely have several thousand pesos on hand to pay for office rent, salaries, or equipment. 

What are the pros and cons of liquidating your assets?

The biggest advantage you’ll have when liquidating your assets is maximum control over your personal dealings. You can sell at your own pace, and you’ll make money back without owing anyone else anything.  

No matter what type of item you’re selling, however, you’re at the mercy of the market. Prices for the item you’re selling may fluctuate, and some properties are more difficult to sell than others. Plus, certain assets, like real estate, may require you to pay capital gains taxes upon sale. Know the markets and the costs of selling each asset before you choose which ones to liquidate for your startup expenses.

What kind of entrepreneur should consider liquidating their assets?

This is another financing option that any startup entrepreneur, even a beginner, can try out. You’ll be surprised how much extra money you can free up for your business expenses just by liquidating some of your assets.

   3. Personal Loans

How can a personal loan help finance a startup business?

Some startup entrepreneurs think that business loans are the only financing options they can explore with banks. However, in the absence of a long and successful financial track record, it can be very hard to get approval for a business loan.

The only alternative would be to apply for a personal loan, which would allow an entrepreneur to borrow a much smaller amount in comparison. All the same, a personal loan may be your ticket to getting some extra funding for your startup—and long-term viability as a creditworthy entrepreneur.

What are the benefits versus the detriments of taking out a personal loan?

Personal loans are much easier to apply for than business loans, and most are unsecured (i.e., don’t require you to pledge collateral). Moreover, when you apply for a personal loan, you’re judged for your creditworthiness as an individual instead of the profitability of your business. This helps a lot if you don’t have a business track record to speak of just yet.

Of course, the downside to personal loans are the limit to how much money you can borrow. The funds from a personal loan will likely not be enough to finance the bigger capital requirements of your startup. As such, even as you apply for a personal loan, you have to be ready to find other financing options that can tide you over.

Should an entrepreneur finance a business with a personal loan?

Limits aside, getting a personal loan may be a good decision for your startup overall. It’s one foot in the door to help you get better financing in the future. If you fulfill the terms of your personal loan, your lender will trust you with larger amounts next time.

   4. Angel Investors

What are angel investors?

Angel investors may not be as common in the Philippines as they are in Hollywood films, but they do exist. Moreover, if you get lucky, you may find one who’s willing to help you expand your Filipino startup.

Unlike a traditional business loan, an angel investment doesn’t require you to pay back the capital in case the business fails. But in exchange, the investor will likely require 25% or more of your startup’s returns. This is a higher rate of return than what they would get through a traditional investment.

What are the pros and cons of seeking out angel investors?

You can already expect a willing angel investor to put up a large amount of capital towards your startup in exchange for equity. That’s because angel investors are typically high-income individuals who are aware of the risks they’re taking. If you earn the favor of one, you may find yourself with a large amount of capital and a great ally to your cause.

Bear in mind, however, that an angel investor will have a big say in how your startup will be run. And unlike a bank or lending company, they will also be entitled to your future profits. Plus, you may be competing with many other startups for an angel investor’s attention, so it may not be worth the effort.

Should an entrepreneur should seek out an angel investor for their startup?

If you want to partner with an angel investor in order to get capital for your startup, think very carefully about your decision. It will work best if you and your investor see eye to eye about what financial goals you want to achieve. 

     5. Crowdfunding

What is crowdfunding?

Crowdfunding involves raising small amounts of capital from friends, family, acquaintances, coworkers, or even strangers in order to back a business venture. Would-be startup owners usually take to the Internet to ask for pledges, and they offer either project updates, free gifts, or even equity.

You may have already seen people launch projects on platforms like Kickstarter or GoFundMe. Such avenues may also be good for your business if you have a compelling idea and a big network of potential supporters.

What are the pros and cons of crowdfunding?

Two things drive crowdfunding activity on the Internet: audience and momentum. If you have both on your side, you could amass a handsome amount of money to put into your startup. Crowdfunding can also be a means of expanding your network. If people who pledge money to you really believe in your cause, they are likely to spread the word to others.

Still, there are a few risks to crowdfunding. After a while, it’s possible for momentum to dry up and for your contacts to get donor fatigue. You can set a goal for how much money you want to raise through crowdfunding., but at the same time, you don’t have full control about how quickly that goal will be met.

Is crowdfunding an idea you should pursue for your startup business?

All in all, it may be worth it to explore crowdfunding. It will work especially well if you have a big network and if people have the option to pledge a little at a time. It would also be good to thank your donors and investors, and to give them updates about your startup. That way, they’ll be glad they had a hand in financing your cause.

The next five financing options are best for startups that have already built up a certain measure of business acumen. Established startup businesses can grow their cash reserves in the following ways.

   6. Business Term Loans

What is a business term loan?

As the name implies, a business term loan is a type of loan that enterprises can apply for. If your startup is approved for a business term loan, you’ll be able to borrow a large sum for everyday expenditures or for new equipment. You can also use the money from the loan to expand your startup even further.

There are different types of business term loans you can apply for. There are the type that are secured, which require collateral in case you default on the loan, and the type that are unsecured. There are also loans that ask for repayments at a fixed interest rate, versus those that have variable interest rates based on the market. Lastly, business loans differ in terms of how long it takes for them to mature. You can apply for a short-term loan that matures in as little as half a year, but has high interest rates. Conversely, there are long-term loans whose payments are spread out through several years, and that have relatively lower interest rates compared to short-term loans. Learn about the different loan products offered by Philippine banks and lending companies, and choose carefully based on what’s best for your startup. 

What are the pros and cons of business term loans?

Business term loans proffer several advantages to your startup company. Foremost among these is the ability to borrow money in large sums—and as a consequence, have enough money for big business expenditures. You also have a lot of variety in terms of what loan products to choose from, and at what rate you can repay the borrowed money. And if you can prove to your lender that your business is creditworthy, your startup will have access to a wider range of financial privileges.

But to be eligible to borrow money in such big sums, you will have to undergo a stringent approval process. This is so that your lender will know for sure that you are able to repay what you’ve borrowed. And if you want lower interest rates on your loan, you’ll likely have to pledge collateral.  

When is a good time to apply for a business term loan for your startup company?

The best time to apply for a business term loan is when you can say, for sure, that your company is in good financial health. That’s when you have the most favorable chances of being approved by your lender. 

   7. Lines of Credit

What are lines of credit?

Lines of credit are an alternative to business term loans that your startup can explore. Instead of a lump sum of borrowed money, you’ll receive approval for a predetermined borrowing limit. It works just like the borrowing limit on a credit card. For example, if your lender approves you for a monthly line of credit worth PHP50,000, you’ll be able to borrow a maximum of that amount.

Like business term loans, lines of credit can be either secured or unsecured. There are revolving lines of credit, wherein the maximum is reset after the borrower has paid in full. There also fixed lines of credit, which do not reset and close after the payment has been settled. Such a financing option may be extremely useful to your startup and not as taxing to apply for as a business term loan.

What are the pros and cons of applying for lines of credit?

A definite pro for this kind of setup is having credit available whenever you need it, as long as you don’t go past the maximum. That means you can borrow on an as-needed basis. A line of credit will work especially well for your fixed expenses, as you already know how much money to set aside for these.

On the flipside, with this kind of arrangement, you won’t be able to borrow any more than your predetermined limit. You might also have to pay high interest rates on unsecured lines of credit, as these are what lenders use to compensate for their risk.

When should you apply for lines of credit for your startup company?

Only apply for a line of credit when you are sure your startup is capable of paying back the borrowed money, plus interest. It’s good to make a plan for how you will use the credit in order to curb the temptation to overspend.

8. Business Credit Cards

What are business credit cards?

Business credit cards work just like personal credit cards, but you may find it useful to have one dedicated exclusively to your startup’s expenses. You can enjoy the convenience of using a credit card for business-related expenses, like supplies or telecommunications. But at the same time, you’ll also be able to draw the line between your personal finances and that of your business.

In addition, there are many business credit card programs in the Philippines that offer additional perks, such as rebates and rewards points. These said perks could accumulate, and you may be able to use them for company meals, business travel, and other startup-related expenses. 

What are the pros and cons of getting business credit cards for your startup company?

If you already have your own credit card and are used to accounting for your monthly credit, then having one for business won’t be hard. It’s good to have one on hand for business-related emergencies, and you could make good use of the rebates. 

However, you need to be just as conscientious about paying your business credit card bills on time as you are with your personal card. You can also expect high interest rates on business credit cards as opposed to other credit facilities. And take note that a 0% rate, which is often cited in business credit card advertisements, usually lasts for only one year.

Will you benefit from having a dedicated business credit card for your startup?

If you are wise about credit, a dedicated business credit card could be a handy financial tool for your startup. Do research business credit card programs in the Philippines and see which program appeals to you.

   9. Invoice Financing

What is invoice financing?

Invoice financing is a means of borrowing money against invoices or amounts that customers owe businesses. With this kind of arrangement, all you need to do is submit invoices or accounts receivable to your lenders. Then, they will allow you to advance cash that will be repaid from invoice payments.

If your startup already has a robust system for managing invoices and accounts receivable, then you should consider invoice financing. The cash advances that you get from your lender against your customer invoices may prove useful on a rainy day.

What are the benefits versus the detriments of invoice financing?

Invoice financing is often more flexible than other traditional loans. At the same time, approval for invoice financing is often easier to gain than, say for example, a business term loan from a bank. Thanks to the invoices, creditors will know exactly how much money you’re settling with your customers—and that you have the means to repay them. 

But this method of financing will only work if you have the said invoices to support your application. So if your startup doesn’t issue invoices to customers, you won’t be eligible for this kind of financing.

Is it a good idea to explore invoice financing for your startup?

It is definitely a good idea for established startups with organized invoice systems to apply for invoice financing. If you are an entrepreneur who is looking for a simple and efficient way to issue invoices to your clients, an intelligent solution like PayMaya Digital Invoice can help you. You will be able to accept card and e-wallet payments from your customers anytime, anywhere, and you will be able to process transactions even if you don’t have a website. The digital invoices you issued and have on record can then be used for when you apply for invoice financing from a lender.

   10. Purchase Order Financing

What is purchase order financing?

Purchase order financing works similarly to invoice financing. But instead of invoices to customers, you’ll be submitting your purchase orders to your lender. Once the latter receives these from you, they will make a decision on whether to extend credit.

This type of financing can be extremely beneficial to startups who work with a supply chain. In the case that your startup needs more cash to attain materials, you can pay your suppliers using this form of credit. If you get approved for purchase order financing, you’ll have enough money to fulfill all client orders. That, in turn, will help you make enough profit to pay back your lender.

What are the pros and cons of purchase order financing?

Compared to a business term loan, getting approved for purchase order financing won’t be difficult. Some lenders can disburse funds within the week that you submit your purchase orders to them. Thanks to the cash advances allowed by this type of arrangement, you can concentrate on fulfilling customer orders and keeping your startup profitable.

But purchase order financing is typically restricted to startups that deal in physical goods. If your startup sells a service as opposed to physical products, you won’t be eligible for this kind of financing.

How can purchase order financing help your startup company?


Purchase order financing can help your startup gain an edge in producing, distributing, and selling physical goods. For businesses that rely heavily on their supply chain, this is one of the top credit arrangements to explore. 

Conclusion: How to Make the Most Out of Your Startup Funds

If you’ve found a way to finance your startup using one of the ten methods mentioned above, then congratulations! It’s a sign that people are willing to support your business, and that they foresee good things from you in the future.

But don’t forget the equal challenge of sustaining your business even after you receive financing. You’ll make the best out of your credit, loan arrangements, investments, or donations if you use them to keep your startup financially healthy. That involves further action on your part, such as:

  • staying true to the business plan you’ve crafted for your startup,
  • spending wisely on infrastructure, manpower, and daily expenses, and
  • amassing financial tools and systems that can bring new profits to your company.

With regard to the latter, you will definitely want to explore new payment facilities for the tech age. More and more people favor cashless spending, so it’s in your startup’s best interest to give them a lot of choices for cashless transactions. For starters, you can enable online credit, debit, prepaid card, and digital wallet checkouts for your customers with PayMaya Checkout. You can also let them pay for your goods and services via QR code with a service like PayMaya QR Code. And you may want to invest as well in a multi-function cashless payment terminal like PayMaya ONE Enterprise. All of these afford your startup customers a lot of options while at the same time making payments easier.

Lastly, you should commit to fostering transparent, professional relationships with everyone who is responsible for your startup’s success. Put your best foot forward in front of your creditors, your investors, and your donors. That attitude, alongside some healthy ambition, is what will help your startup business grow.

Here’s to securing financing for your startup and seeing your entrepreneurial dreams take flight!

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