What is the difference between a lending and a financing company?

What is the difference between a lending and financing company?


There are clear distinctions between lending and financing companies. Here are the key differences:

Lending companies rely on their own capital funds which are sourced from not more than 19 individuals. This group can grant loans to borrowers at reasonable interest rates agreed upon by both parties. The agreement between lender and borrower are bound by the Truth in Lending Act and Consumer Act of the Philippines and with the approval or prescribed interest rate by the Monetary Board (in consultation with the Securities and Exchange Commission or SEC) in line with the existing economic and social condition. (See: Sec. 7, R.A. No. 9474)

Financing companies have a minimum paid-up capital as required by the SEC. They are primarily organized to extend credit facilities to individual clients as well as industrial, commercial, or agricultural enterprises by direct lending, discounting or factoring commercial papers or accounts receivables. This type of company also supports borrowers by buying and selling contracts, leases, chattel mortgages, or other evidence of debt. Financing companies may also do financial leasing of movable assets (such as vehicles and equipment) as well as immovable property (e.g. houses or commercial spaces). (See: Sec. 3(a), Financing Company Act)

Is First Standard a lending or financing company?

First Standard was initially established as a lending company in 1993 in its first two locations – Bacolod and Ilo-ilo. Since then, the company has become not only a reliable partner for small businesses but also a trustee of families for generations. 

After 12 years in the lending business – and with its desire to expand its services to more members of the Filipino community – First Standard was registered and given a Certificate of Authority by the SEC to operate as a financing company in 2005. Now it extends its services to a vast scope of clientele with over 70 branches all over the Philippines. 

What’s in the horizon?

The financing industry in the Philippines has evolved into a highly competitive and dynamic market where quick responses and customer engagement are two of the top currencies. Providing clients with digital portals such as online application channels has become imperative for even the most traditional institutions. 

To continue its invaluable service to its customers, the company has fiercely dedicated the past two years developing remotely accessible online avenues for a more streamlined loan application process and customer support. Clients can anticipate more updates and improvements on the website and social media channels as part of the revamp. 

These digital portals have begun integration with the company’s ground operations with 2020 as the target year of completion.

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