Adequate funding is the lifeblood of a growing business. However, it’s also one of the biggest hurdles business owners need to overcome.
Small companies, in particular, find it more challenging to get funding. Their loan applications may not get approved because banks or lenders see them as risky borrowers. They may be rejected due to poor credit history, poor business performance, or not being in the business long enough to build credibility.
If you’re seeking alternative options after being rejected for your bank loan, you might want to consider non-traditional funding such as an online lending company. Online lending companies offer more flexible terms and requirements and can be the key to securing the funding your small business needs.
Let this article guide you on why you should borrow from an online lending company in the Philippines.
What are Online Loans?
Online loans are considered non-traditional loans provided by a private lender through digital channels. Those who need funding but fail to secure a conventional bank loan, such as small business owners, typically apply from non-banking financial institutions.
For an online loan lender to legitimately operate in the Philippines, they must first register with the Securities and Exchange Commission (SEC) and the Department of Trade and Industry (DTI). Their registration protects borrowers against scams and fraud.
Besides registration, legitimate lending companies must also comply with the Corporation Code, Lending Company Regulation Act, and other regulations.
Advantages of Online Loans
There is more to online loans than being alternatives to traditional banking loans. Online lending companies can provide a myriad of benefits for your small business, such as the following.
Fewer requirements
Online business loans in the Philippines have become more prominent due to their accessibility. Simply sending a clear photo of your government ID and other requirements are enough to qualify you to borrow.
Additionally, most of them don’t require collateral. This means there’s no risk of you losing an asset when you default on the loan. At the most, online loan lenders may require you to present a certificate of employment if you’re looking to borrow high sums of money.
No credit requirement
Small-time entrepreneurs who haven’t built up a credible credit history yet may find it challenging to get approved by banks for small business loans. In contrast, online lenders are often more lenient regarding credit history.
They typically don’t scrutinize borrowers’ credit scores or history. Instead, they consider other factors like occupation and education to determine approval, making online loans more viable for small business owners with poor credit history.
Fast approval
The online loan process is quicker and less strict than traditional loan systems. Some online lenders respond to your application within 24 hours of submission. Although the realistic timeline for approval is from 2 to 3 business days, it’s still substantially faster than most banks.
Additionally, online loan lenders allow you to apply anytime, so small business owners can apply for funding immediately in case of an emergency.
Offer competitive rates
The lack of physical office space is one of the biggest reasons online lenders can offer competitive rates. Without a brick-and-mortar location to maintain, overhead fees are likely less or non-existent for some of them. This also enables them to provide more favorable loan terms.
Deposit bank account is not required
Online lending companies in the Philippines typically don’t require the borrower to have a deposit bank account, as loan proceeds can be disbursed through partner remittance centers. However, some lenders have the right to ask for a nominated bank account from the borrower for whatever reason.
More convenient
The application process of online lenders is typically more streamlined than banks because it is digital. All you have to do is submit the requirements through the lender’s website or via email, then wait for their response.
FAQs on Online Lending Companies
Are online loans legitimate?
Yes, online loans are legitimate. Before lenders can conduct business with potential borrowers, they’re required by law to register with the proper authorities like the DTI and SEC.
How do you pay for online loans?
Online loans can be paid through the same partner remittance centers in which the lenders disbursed the borrowed sum.
What happens to unpaid loans in the Philippines?
The offender of the unpaid loans may be subjected to late payment fees that can range from P200 to P600 monthly, or 7 to 10% of the loan amount, depending on which is higher. Additionally, a small business owner’s property may be subjected to repossession or foreclosure, depending on the loan’s terms.