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BusFin12 Q1 Mod3 Short and Long Term Funds v2
BusFin12 Q1 Mod3 Short and Long Term Funds v2
BUSINESS FINANCE
Module 3 - Quarter 1
Short Term and Long Term Funds
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BUSINESS FINANCE
Module 3 - Quarter 1
Short Term and Long Term
Funds
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TABLE OF CONTENTS
Page No.
Table of Contents V
Overview VI
General Instructions VI
What I Know 1
What’s In? 2
What’s New? 2
What is it? 3
What’s More? 4
Assessment 6
Answer Key 7
References 8
V
OVERVIEW
Financing is an important part of every business because it provides funds
for business activities, acquire purchases or investing. Financial institutions, such
as banks, cooperatives and other financial companies are the one that will provide
loans for their capital to help them achieve their business goals.
This module focuses on the two-common source of financing, the debt and
Equity financing. Financing can be either Long-term or short-term funds. Short-
term is debt scheduled to be paid within a year while long-term is debt to be paid in
more than a year. The goal of this module is have the knowledge on how to avail
and process the sources of funds when there is cash needed within the business
and also helps the students to identify directly what types of sources of funds
available in their respective community.
GENERAL INSTRUCTIONS
What I Know
Let us determine how much you already know about the sources and uses of short-
term & Long-term funds
Direction: TRUE OR FALSE. Write T if the statement is correct and F if it is
wrong. Write your answers in your notebook.
_____1. Cooperative banks and credit cooperative are just the same.
_____2. All cooperative in the Philippines regulated and supervised by the
Cooperative Development Authority.
_____3. By resorting to debt financing, business ownership has kept and
maintained.
_____4.One of the aims of cooperatives is to provide goods and services to its
members to enable them to attain increase, savings, investments,
productivity, and purchasing powered income, and promote among
themselves equitable distribution of net surplus through maximum
utilization of economies of scale, cost sharing and risk sharing.
_____5. Capacity refers to the applicant’s net worth, which can be arrived at by
deducting total liabilities from total assets.
1
What’s In
What’s New
Question: What comes to your mind when you hear the words debt financing and
equity financing based on your knowledge and understanding in the previous
lesson? Copy the rectangular box and write your answers in your notebook.
2
What is it?
https://www.credibly.com/incredibly/trending/debt-vs-equity-financing/
Equity Financing, on the other hand, refers to the sale of ownership interest,
most often represented by shares, to raise fund for business purposes. To
compensate for the use of funds from equity financing, dividends or profits shares
has declared, set aside, and paid by the business. Common Equity financing
arrangements include funds raise by the entrepreneur or business owner from
friends and family, capital infusion through direct sale of shares or through initial
public offerings, and financing by private companies. In here, there exists an
investee-investor relationship.
3
What’s more?
Direction: List the sources of funds that are found in your community and
describe. Copy the table below and write your answer in your notebook.
Sources of fund Describe
Example: Bank of the Philippine Island A bank is a financial institution
(BPI) involved in borrowing and lending
money. Banks take customer
deposits in return for paying
customers an annual interest
payment.
1.
2.
3.
4.
5.
What are the usual loan requirements and application? See table below.
4
Loan Applications Requirements Loan Application process
Demographics –includes the name or Receipt of application form and
business name, birthdate, address, required documents;
SSS no. TIN no. phone no. and other
identifying information such as valid
government-issued identification cards
Income or revenue refers to current Verification of information in the
personal income and employer, application form and required
employment and salary history, and documents may include
business revenue, if there is already an interview;
existing business.
Assets and Liabilities-applicants may Checking credit history
ask to disclose their checking savings
and investment accounts and their Writing credit report with
outstanding loans and credit cards, if appropriate recommendations
there are any.
Contact or references-require Documenting final decision
identification and contact information
of existing employers, previous If approved, final documents
employers, or even nearest relative not sign-off (interest rate and other
living with the identified contact terms) and loan release
Attest and authorization require If rejected, rejection letter sent to
affixing applicant’s signature on the applicant
credit application stating that
everything on the application is true
and correct and authorizing the lender
to verify the information provided with
the identified contacts and references.
The credit department evaluates on the
basis of Character, Capacity, collateral,
capital and conditions or 5C’s of credit
Note: Loan application requirements and process vary among banks, credit
cooperatives and commercial finance companies.
Direction: Copy the process questions below in your notebook and answer directly.
1. In loan application, when is a co-maker required?
2. What is the importance of affixing applicant’s signature on the loan
application?
3. Enumerate the five C’s of credit and describe each.
5
Direction: Complete the sentence stem below. Write your answers on a separate
sheet of paper.
1. Sources of funds is important because:
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
What I Can Do
Direction: Choose one bank, one credit cooperative and one commercial finance
company. Research on the following: compare the loan application requirements
and loan application process.
Assessment
Activity/Need Answer
1.Acquisition of equipment
2.Franchise of a fast-food outlet
3.Purchase of inventory for a clothing shop
4.Loan for agricultural needs
(ex. Palay production)
5.Loan for purchase of a commercial space
6.Auto-loan
7.Housing loan
8.Emergency loans
9.Development of a subdivision
10.Loan for sari-sari store supplies
Congratulations!
You have completed your 6
journey in this subject. Great job!
Answer Key
1. F 1. Long-term
2. T 2. Long-term
3. T 3. Short-term
4. T 4. Short-term
5. F 5. Long-term
6. Long-term
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References
Book:
Vibal group Inc. and Florenz C. Tugas, Aeson Luiz C. Dela Cruz, Alloysius Joshua
S. Paril, and Alger C. Tang. Business Finance, Araneta Avenue, Quezon City
Internet link:
Image:https://gbr.pepperdine.edu/2017/12/religious-beliefs-influence-financial-decision-making/
Image:https://smallbiztrends.com/2016/01/small-business-finance-basics.html
Image:https://www.dmu.ac.uk/study/courses/postgraduate-courses/international-business-and-
ifinance-msc-degree/international-business-and-finance-msc.aspx
Image:https://www.credibly.com/incredibly/trending/debt-vs-equity-financing/
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Don A.Velez St., Cagayan de Oro City
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Email address: misamis.oriental@deped.gov.ph