When you as a business owner need working capital for business sustainability and growth, the first step is to determine which source of financing is best for your company.
It can be a choice between applying for a business loan philippines at a bank or through an online lending company. Choosing which option to pursue will have a significant impact on your company’s financial stability, so it is important to make an informed decision.
The following comparisons between banks and online lending companies will assist you in determining the best option for your business.
Most banks have a minimum loan amount of Php 1 million and a maximum loan amount of Php 15 – 20 million. Online lending companies, typically lend up to Php 10 million. However, they mostly differ in terms of the minimum amount required.
Loan Duration and Payment Scheme
Banks generally offer short to medium-term loans ranging from one year to three years. This requires monthly interest payments with final principal payments but some banks offer monthly payments that cover both the interest and the principal.
On the other hand, online lending companies provide short-term loans ranging from two weeks to one year, providing payment plans of the principal and interest at the end of your loan term, others provide bi-weekly or monthly interest and principal payment terms.
If you apply for short-term loans, go for online lending as banks usually charge a fee for early repayment or loan termination.
To apply for a loan at a bank, go to your nearest branch or call the Relationship Manager or Account Manager who will handle the processing of your loan. They are in charge of giving you the application form and do inquiries about the nature of your needs.
It usually takes two to three months to approve your loan and establish your credit line. The Relationship Manager collects your documents, assists you in meeting the necessary requirements, and assesses your credit standing and the risk of lending to you.
As for applying from an online company, just google the company or search “online lending Philippines”. The entire application process is available online.
This includes completing the application form, uploading required documents, having your loan approved, and receiving notification of loan disbursement.
Online lenders can process and approve your loan in three to seven business days and after this period, you can access the funds that have been transferred to your bank account.
Business and Documentary Requirements
Banks require your company to be in operation for at least two to three years with at least one year of profitable operations.
You have to give originals or hard copies of all documents required for your loan application. Meanwhile, online lending companies at the very least will require at least one year of operation, and a scanned copy of your documents and your uploaded photo.
Interest Rates and Fees
Banks offer lower monthly interest rates ranging from 0.50 percent to 1.5 percent as they have access to cheaper sources of funds and would be able to keep their risk at a lower level. Banks charge around 0.75 of the loan amount in processing fees.
Online lending companies charge higher interest rates and charge around 1.99 percent of the loan amount for processing fees.
Other charges or fees that may be included in your loan may apply to both types of lenders. Most online lending companies publish their fees and charges on their website to ensure transparency with their customers.
Most businesses seek financing from a bank but the bank can only lend up to a certain amount, so if it is insufficient to cover your company’s working capital needs, this is where online lending companies come in to fill the financial gap.
Legitimacy and Regulation
Banks are regulated by the Bangko Sentral ng Pilipinas (BSP). Online lending companies are registered with the Securities and Exchange Commission (SEC) and must be granted the authority to operate as a financing company in order to make business loans.
Online lending companies also make significant investments in securing their technology and the information they collect online.
All relevant business documents and authorizations issued to them by the SEC are published on their website and since everything is done online, they adhere to the Data Privacy Act imposed on institutions by the National Privacy Commission (NPC).
As technology and innovation advance at a rapid pace, it is critical to stay informed about the various products and services available for your business. It is important in your business to know the differences and benefits of banks and online lending companies that will help you decide what is best for you as a business owner.