There is a growing number of lending and financing companies in the Philippines. This growing sector is a big help in providing start-ups and SMEs or Small and Medium Enterprises better access to corporate loans, salary loans, and invoice financing.
This is perfect because many entrepreneurial Filipinos want to start their journey in managing their own business. And these finance firms can certainly help, provided that they have proper documentary requirements mandated by the law.
If you’re thinking of starting a lending or financing company in the Philippines, you have to take some things into consideration and have requirements to comply with. Experts handling tax services in Manila state that these requirements are necessary for you to operate.
What are Lending Companies and Financing Companies?
Lending and Financing companies are entities regulated and supervised by the SEC or the Securities and Exchange Commission. There are some companies that are subsidiaries of non-bank or bank financial institutions that will be subjected to Bangko Sentral Ng Pilipinas or BSP’s supervision and examination.
Both financing and lending companies provide loans and charge the customers the interest. According to accounting services in the Philippines, the important differences between the two can be seen from the perspective of regulation and compliance in the Philippines. Check out these requirements below:
Financing Company
According to the RA 8556 or the Financing Company Act of 1998, a Financing Company is a corporation that is organized primarily for the purpose of providing credit facilities to consumers, agricultural, or commercial enterprises. This is done through direct lending, discounting, factoring commercial papers, contract to buy and sell, lease, mortgages, financial leasing of properties, and many more.
The following institutions organized under special laws are not included in the definition of the Financing Company. Some of these are:
- Banks
- Investment Houses
- Savings Associations
- Loan Associations
- Cooperatives
- Insurance Companies
If you want to run or establish a Financing Company in the Philippines, the following are some of the key requirements:
- Established as a stock corporation
- Can be owned by 100% foreign nationals
- If the location is in Metro Manila, the paid-up capital should not be less than 10,000 PHP. The capital requirements will vary depending on the location (whether or not it is located in or outside a first-class city).
- The name must have the term “finance company”, “financing company”, “finance and investment company” or other terms that describe the operations and activities of financing companies
Lending Company
According to RA 9474 or the Lending Company Regulation Act of 2007, a Lending Company is a corporation that provides and grants loans using either its own funds or funds from different people (not exceeding 19 persons).
The following institutions organized under special laws are not included in the definition of the Lending Company. Some of these are:
- Banks
- Investment Houses
- Savings Associations
- Loan Associations
- Financing Companies
- Pawnshops
- Cooperatives
- Insurance Companies
If you want to run or establish a Lending Company in the Philippines, the following are some of the key requirements:
- Established as a stock corporation
- Can be owned by foreign nationals (there are restrictions when it comes to where the loans are secured)
- Descriptive words of the company’s goal to grant loans to the public should be included in the trade and corporate name just like the words, “lending company” or “lending investor”
- 51% of the lending company’s funds must be used for direct lending purposes.
- Should have minimum paid-up capital of 1,000,000 PHP unless the SEC prescribes.
- Should start operations within 120 days once granted or given a Certificate of Authority to Operate
How to Secure a Certificate of Authority to Operate
Before officially starting operations, a new Financing or Lending Company should always register with the SEC and get a Certificate of Authority to Operate. If you are looking for the requirements for registration, you can find them on SEC’s website under the “Secondary License” category.
You can also seek the help of expert tax and accounting services in the Philippines as they often provide assistance with business registration. Those who are looking to set up their own financing or lending companies must submit 4 copies of the application requirements. These documents may include the following:
- Application Form signed by the company’s president (signed under oath)
- Company Information including company name, company history, end of the fiscal year, stockholders, credit policies, capital structure, business plant, etc.
- Required documents for registration as a corporation like the By-laws or the articles of incorporation.
- NBI Clearance of each director
- Additional documentation for foreign directors or officers (PH Visa, ACR Card, DOLE Work Permit, etc.)
- Sworn Statement and Undertaking
- Evidence of Paid-up capital
- Affidavit for the treasurer
- BSP Clearance
With so many documents to consider and regulations to comply with, it can be overwhelming. Instead of tackling on the burden solo, call our accounting services in Pasig to help you get started. The right foundation could help your lending firm be more profitable.
