Sources and Uses of Short-Term and Long-Term Funds

Question 1

Is the process of providing funds for business activities, making purchases, or investing.

Answer 1

Financing

Question 2

2 types of Financing

Answer 2

1. Debt Financing
2. Equity Financing

Question 3

• is being done through borrowing, whether short or long-term, and it usually comes with an interest.

Answer 3

Debt Financing

Question 4

It involves money borrowed from external lenders, such as a bank or lending company.

Answer 4

Debt Financing

Question 5

• refers to the sale of ownership interest, most often represented by shares, to raise fund for business purposes.

Answer 5

Equity Financing

Question 6

• investing your own money, or funds from other investor, in exchange of partial ownership. Example: Selling of percentage of the properties.

Answer 6

Equity Financing

Question 7

Short-term financing because you can borrow at the financial institution

Answer 7

DEBT FINANCING

Question 8

Only to pay is the interest

Answer 8

DEBT FINANCING

Question 9

It is risky because if you can’t pay the loan on time, you’ll pay penalty.

Answer 9

DEBT FINANCING

Question 10

Long-term financing because in selling percentage or shares is too long to process.

Answer 10

EQUITY FINANCING

Question 11

It is costly because you’ll pay a lot of expenses like taxes and processing fees

Answer 11

EQUITY FINANCING

Question 12

Stocks are changing.

Answer 12

EQUITY FINANCING

Question 13

– supervised by Bangko Sentral ng Pilipinas
- it is an establishment for the deposit, custody, and issue of money, for making loans and deposits, and for making the exchange of funds easier.

Answer 13

BANK

Question 14

– it is an autonomous and duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve their social, economic, and cultural needs and aspirations by making equitable contributions to the capital required.

Answer 14

CREDIT COOPERATIVES

Question 15

an organizations without a bank charter that advances funds to businesses by discounting notes receivable, making loans secured by mortgage, or financing deferred-payment sales of commercial and industrial equipment.

Answer 15

COMMERCIAL FINANCE COMPANIES

Question 16

Includes name (or business name), birth date, current and previous address, social security number, tin, phone number and other identifying information such as valid government issued id’s.

Answer 16

DEMOGRAPHICS

Question 17

Current personal income and employer, employment and salary history, and business revenue. If there is an existing business, filed income tax returns is required.

Answer 17

INCOME OR REVENUE

Question 18

Applicants may be asked to disclose checking, savings, investment accounts and their outstanding loans and credit cards. If with existing business, financial statements and business registration may be required.

Answer 18

ASSETS AND LIABILITIES

Question 19

Require the identification and contact information of existing employers, previous employers, or even nearest relative not living with the applicant.

Answer 19

CONTACTS AND REFERENCES

Question 20

require affixing applicant’s signature on the 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.

Answer 20

Attest and authorization

Question 21

LOAN APPLICATION REQUIREMENTS

Answer 21

1. Demographics
2. Income or Revenue
3. Assets and Liabilities
4. Contacts or References
5. Attest and Authorization

Question 22

Most important C’s

Answer 22

Character and Capacity

Question 23

THE 5 C’s OF CREDIT

Answer 23

1. Capital
2. Capacity
3. Character
4. Collateral
5. Conditions

Question 24

Your financial ability to pay the lender back

Answer 24

Capacity

Question 25

your own money you are investing in your business, often a down payment

Answer 25

Capital

Question 26

an asset you pledge to back the load

Answer 26

Collateral

Question 27

market analysis of the trends of your industry

Answer 27

Conditions

Question 28

credit behavior based on indicators like your credit report and score and payment history

Answer 28

Character

Question 29

Loan Application Process

Answer 29

1. Receipt of application form and required documents 2. Verification of Information 3. Checking of Credit History 4. Writing credit report with appropriate recommendation 5. Documenting final decision

Question 30

Responsibilities of Entrepreneurs to Creditors

Answer 30

Ensure that he or she makes loan payments on time.

Question 31

If in case the borrower failed to make loan payments on time.

Answer 31

1. Contact the creditor immediately 2. Do not wait until the due date has passed 3. Ask for a grace period 4. Renegotiate his or her loan terms

Question 32

may be used for debt repayment, working capital, capital expenditures, acquisitions, expansion, research and development.

Answer 32

DEBT FINANCING

Question 33

business growth, research and development, acquisitions, marketing and advertising, hiring and training employees, capital expenditures, improving infrastructure, produtct development, etc.

Answer 33

EQUITY FINANCING