How Much Money Should I Borrow?

Diomampo warns against borrowing too much. The amount that you borrow should be commensurate to your personal assets (cars, house and lot) and fixed assets acquired for the business (commercial lot, equipment, delivery vans). In business terms, this is called the debt-equity ratio. A debt-equity ratio of one to one is best. “If you borrow P5 million, then you should have assets or equity worth P5 million. A ratio of two to one is still safe - meaning if you borrow P10 million, you should have P5 million. Beyond that, you should be careful,” he says.

Also keep in mind your capacity to pay. Keep in mind that if you are delingquent in paying the monthly amortization, you are charged with overdue interest.