One of the breaking points of every business is when finances are negative, and you need to make a quick decision as a business owner to steer the business away from its present station. Without a doubt, you will need a business loan to get out of this unpleasant corner.
Meanwhile, choosing the best financial institution to get a loan from can affect the financial stability of your business. That explains why it is crucial to make the right decision when you get to this spot. To help you make the right decision, we will draw a comparison between a bank and online lending companies to help you make a better decision.
Sean Martin D. Plantado, head of Digido Customer Care notes that there are many types of small business loan Philippines. In this country banks are the most common source of loans. However, this is not the only source of credit. There are many others that we will talk about today.
Loan amount
Before you jump on any loan offer, it is wise that you first consider the loan amount you want to take. For the records, the minimum amount you can take from banks in the Philippines is Php1 million, and the maximum is around Php 15-20 million.
In contrast, online lending companies offer a maximum of about Php10 million. Most online lending companies don’t have a specific minimum loan amount they offer. For instance, First Circle doesn’t have a minimum loan amount. They base it on the amount you need at the time. However, other lending companies offer a minimum amount of Php50,000 to Php100,000.
Loan duration and payment scheme
If you need a loan for an extended period, your best bet is a bank loan. Bank can grant you a loan that would take a year or more to repay. They offer short- to medium-term loans. These loans can take a minimum of 1 year and a maximum of 3 years to return. Some banks have a repayment scheme that allows borrowers to pay both interest and principal monthly.
However, if you need a short-term loan, you can try online lending companies. They offer loans with repayment schemes within a duration of 2 weeks to 1 year. Some lending companies offer loans with biweekly or monthly repayment schemes where you pay both interest and principal.
For the records, online lending companies are better than banks when you need short-term loans. Banks charge a fee for early repayment and loan termination. Hence, if you plan to get a short-term loan, your best bet is an online lending company. Loan companies like First Circle offer more flexibility in loan repayment. They do not charge any fee for quick repayment.
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Application process / How to apply
The bank loan application process is quite tedious and lengthy. First, you might need to visit the nearest branch to you. Better still, you can call the bank representative handling your account, relate your intentions to take a loan. There are Account Managers and Relationship Managers in different branches that will help with your application process.
You will be handed an application form after you have related your financial needs to them. This will help them ascertain the loan amount you need and the duration of the loan. It takes between two to three months before bank loans are approved. Before the approval, the Account Manager will collect all the required documents from you for review. Your credit standing will be assessed to ascertain the risk or safety of borrowing your business.
In contrast to this, online lending companies don’t take time. It is as simple as searching for information online. You can get everything done within a few minutes or hours and wait for a few days for approval. Just search online lending companies in the Philippines to get a list. From the list, you will get their website. Check their requirements. The exciting thing about this is that you can complete the application process online without leaving your house or office.
Like banks, online lending companies also have Relationship Managers and Customer support to guide you through the application process.
One advantage of lending companies is fast approval. They approve loans between 3 to 7 working days. After approval, the money will be sent to your nominated account. If you need a fast loan, an online lending company is better than a bank.
Business and Documentary Requirements
In most cases, before you can qualify for a bank loan, your business must have been in operation for a minimum of two to three years. Also, you must have a track record of 1 year of profitable operations. Online lending companies in the Philippines do not need this. The least they will request is that your company must have been in operation for a minimum of one year.
During documentation, the bank would require hard or original copies of your papers. While lending companies would only request that you upload the copy.
Interest rates and fees
Banks charge lesser interest rates and fees than online lending companies. Banks would charge between 0.50% to 1.5% as interest per month. For processing fees, banks will charge around 0.75%, while lending companies will charge about 1.99%.
It is expected that you turn to an online lender with the lowest interest rates and fees. However, before you decide, ensure you ask the bank Relationship Manager about the interests as most online lending companies publish their interest rates and fees on their website.
Conclusively, before you decide whether to take a loan from a bank or any online lending company in the Philippines, ensure you consider these factors explained within this blog. It will help you make the best loan decision to help your business.
Featured image credit: Pixabay
