GROUP 8

BSE 3-1
What is Business Financing?

Business financing is the activity of

funding the many aspects of a
business, whether the funding be for
starting a business, running it, or
expanding it. Regardless of the size or
type of business.
Overview

Sources Of Capital
Types of Loans
Bank Transactions
Franchising

DTI

Government financing loan sector

Credit Card Application
 Capital

capitalrefers to the money that is required to start

a new business, whether for office space, permits,
licenses, inventory, product development and
manufacturing, marketing or any other expense.
Startup capital is also referred to as "seed money."
 Source of Capital

Crowd funding
Venture Capital
Business Angels
Loans

Savings
 Source of Capital

Crowd Funding
Crowd funding is the use of small amounts of
capital from a large number of individuals to
finance a new business venture. Crowd funding
makes use of the easy accessibility of vast networks
of people through social media and crowd funding
websites to bring investors and entrepreneurs
together. Crowd funding has the potential to
increase entrepreneurship by expanding the pool
of investors from whom funds can be raised beyond
the traditional circle of owners, relatives and
venture capitalists.
 Source of Capital

Venture Capital
Venture capital is financing that investors provide to
startup companies and small businesses that are
believed to have long-term growth potential.
Venture capital generally comes from well-off
investors, investment banks and any other financial
institutions. However, it does not always take just a
monetary form; it can be provided in the form of
technical or managerial expertise.
 Source of Capital

Business Angels/ Angel investor

Angel investors invest in small startups or
entrepreneurs. Often, angel investors are among an
entrepreneur's family and friends. The capital angel
investors provide may be a one-time investment to
help the business propel or an ongoing injection of
money to support and carry the company through
its difficult early stages.
 Source of Capital

Loans
A loan is the act of giving money, property or other
material goods to another party in exchange for
future repayment of the principal amount along
with interest or other finance charges. A loan may
be for a specific, one-time amount or can be
available as an open-ended line of credit up to a
specified limit or ceiling amount.
 Source of Capital

Savings
Personal savings are commonly used by business
owners to help pay for startup costs. You won't incur
any interest expense when you use your own
money to finance your business. You also won't
have any creditors to pay back, and no one will
come after you for money if your business fails or
isn't successful right away.
 LOANS

The ability to obtain things of value in exchange

for a promise to pay at a determinable future
time. (Debtor's viewpoint)

Willingness
to accept the debtor's promise based
on trust and confidence. (Creditor's viewpoint)
 LOANS

A loan is a debt provided by an entity

(organization or individual) to another entity at
an interest rate, and evidenced by a promissory
note which specifies, among other things, the
principal amount of money borrowed, the interest
rate the lender is charging, and date of
repayment.
Loan types include fixed rate, variable rate,
installment, secured, unsecured and convertible.
Each type of loan has unique repayment terms,
and understanding those terms can make choosing
the right loan easier.
 Types of Loans

Bank Loan
Most common form of loan capital for a business.
Provides medium or long-term finance.
The bank sets the fixed period over which the loan
is provided (e.g. 3, 5 or 10 years), the rate of
interest and the timing and amount of
repayments.
 Types of Loans

Personal Loan
A personal loan has higher interest rates than
secured loans like a home-equity loan, but you
are not required to put up any collateral to ensure
repayment.
The main characteristic of a personal loan is that it
is not secured by collateral.
Also known as "signature loans" or "unsecured
loans"
 Types of Loans

BPI Personal Loan

Clients may get up to 3 times of
gross monthly income, ranging from
PHP 20,000 to PHP 1,000,000. Approved loans may get
the cash quickly and safely from their preferred BPI
branch;
And anyone can experience flexibility by choosing
whether to pay monthly installments in 12, 18, 24, 30 or
36 months. And very low interest rates and easy
payment schemes can be expected. Payments can
also be automatically debited from any BPI deposit
account.
 Types of Loans
Required documents:

Employee/Professional
1. Government-issued photo-bearing ID (Passport,
Driver's License, SSS, PRC, etc.)
2. 3 months original pay slip and/or Latest Income
Tax Return with BIR or Bank stamp (BIR Form 2316)
 Types of Loans

Business Loan
A Business Loan is thus an unsecured loan at an
interest rate, giving you access to credit that can
be paid back over an agreed time along with the
interest, without any security against it.
 Types of Loans

Required documents:
GENERAL DOCUMENTS
Duly Accomplished Application Form
Photocopy of Income Tax Return (ITR) for the last 3
years
Bank Statements for the past 6 months
Copy of Marriage Contract, if applicable
 Types of Loans
Additional Requirements :
FOR EXISTING ENTREPRENEURS
Company Profile
Photocopy of BIR-stamped financial statements for
the last 3 years
Photocopy of Business Registration Certificate /
Business Permit / Latest General Information Sheet
Photocopy of SEC-validated Articles of
Incorporation / By-Laws, if corporation
Resume of Major Stockholders, if corporation
 Types of Loans

(FOR EMPLOYED / FIRST TIME ENTREPRENEURS

Updated Certificate of Employment indicating
salary, position, and tenure
Resume of Loan Applicant
Certificate of Employment authenticated by
Consul Office, if Overseas Filipino
 Bank Transactions

Banking account transaction types:

ATM: Deposit or withdraw funds using an ATM.
Charge: Record a purchase on a credit card or
withdraw funds using a debit card.
Check: Withdraw funds by writing a paper check.
Deposit: Add funds to an account by any
method.
 Bank Transactions

Online:Withdraw funds through a web-based

store or online banking service.
POS:Withdraw funds through a point-of-sale
transaction (typically a cash or debit card
purchase).
Transfer: Move funds from one account to
another
Withdrawal:
Deduct funds from an account by
any method.
 Bank Transactions

Check Deposit receipt

 Bank Transactions

Online Transfer

ATM ATM
transaction transaction
 Franchising

Franchising is simply a method for expanding a

business and distributing goods and services
through a licensing relationship. In franchising,
franchisors (a person or company that grants the
license to a third party for the conducting of a
business under their marks) not only specify the
products and services that will be offered by the
franchisees (a person or company who is granted
the license to do business under the trademark
and trade name by the franchisor), but also
provide them with an operating system, brand
and support.
 Franchising

Two different types of franchising relationships

Business Format Franchising
Business Format Franchising is the type most identifiable to the
average person. In a business format franchise relationship the
franchisor provides to the franchisee not just its trade name,
products and services, but an entire system for operating the
business. The franchisee generally receives site selection and
development support, operating manuals, training, brand
standards, quality control, a marketing strategy and business
advisory support from the franchisor. More than 120 diverse
industries use franchising as their route to market including:
 Franchising

Automotive (fast food)

Business Services Real Estate
Commercial and Residential Retail Food
Services
Retail Products and Services
Education
Senior Care and Medical
Lodging Services
Personal Services Table/Full Service
Restaurants
Quick Service Restaurants
 Franchising

Traditional or Product Distribution

While less identified with franchising, traditional or
product distribution franchising is actually larger in total
sales than business format franchising. In a traditional
franchise, the focus is not on the system of doing
business, but mainly on the products manufactured or
supplied by the franchisor to the franchisee. In most, but
not in all situations, the manufactured products
generally need pre- and post-sale service as found in
the automobile industry. Examples of traditional or
product distribution franchising can be found in the
bottling, gasoline, automotive and other manufacturers.
 Franchising
Franchising is About
Relationships
Franchising is about the franchisors brand value, how the
franchisor supports its franchisees, how the franchisee
meets its obligations to deliver the products and services to
the systems brand standards and most importantly
franchising is about the relationship that the franchisor has
with its franchisees.
Brands
A franchisors brand is its most valuable asset and
consumers decide which business to shop at and how often
to frequent that business based on what they know, or think
they know, about the brand.
 Franchising
Systems and Support
Great franchisors provide systems, tools and support so
that their franchisees have the ability to live up to the
systems brand standards and ensure customer
satisfaction.
Contractual Relationship
Franchising is a contractual relationship between a
licensor (franchisor) and a licensee (franchisee) that
allows the business owner to use the licensors brand and
method of doing business to distribute products or
services to consumers.
 Franchising
3 types of popular franchise system
Product Distribution Franchise
A product distribution franchise model is similar to supplier-dealer
relationship, however, the franchisee is required to observe a few guidelines
e.g. agreeing to sell only the franchisors brand exclusively.
For example, an outlet may agree to sell only certain products in its store at
the exclusion of some other products. Typically, the franchisee merely sells
the franchisors products. However, this type of franchise will also include
some form of integration of the business activities. The franchisee is allowed
to be much more independent than if he or she was running a business
format franchise.
Some well known product distribution franchises are Coca-Cola, the Ford
Motor Company, Exxon and Osim.
Product distribution franchises deal mainly with large products such as
automobiles and auto repair parts, vending machines, computers and
some inventory for convenience stores.
 Franchising
Business Format Franchise

In a business format franchise, the business integration is more

complete. The franchisee distributes the franchisors products
and services under the franchisors trade mark, as well as
implements the franchisors format and procedure of conducting
the business.
The arrangement is formalized through a legally binding
contract. This comprises the franchisors name, goodwill, product
and services, procedures, manuals and standards, marketing
operating systems and support facilities.
Business format franchising is the most popular type of franchise
system and the one generally referred to when talking
franchising. Famous examples of Business Format Franchise
are McDonalds, KFC, Famous Amos, Starbucks Coffee
and Dunkin Donuts.
 Franchising

Management Franchise

It is a form of service agreement whereby the franchisee

provides the management expertise, format and/or
procedure for conducting the business. Some examples
of Management Franchise are Hilton, American
Idol and UPS Store.
 Franchising

Common Considerations
of Franchisors Criteria for choosing
Developing franchise franchisees
concept Control over franchisees
Market research Supply of products/materials
Familiarity with local laws to franchisees
and regulations Intellectual property rights
Providing training and issues, e.g. trade mark
support to franchisees registration
 Franchising
Common Considerations of
Franchisees
Experience and profitability of
Demand other franchisees
Profitability
of franchise, and Existence of competition
length of time required to Capital required
recoup investment
Demands of franchisor, e.g.
Track record of franchisor
income projections, deadline
Support rendered to other to open more franchise outlets
franchisees
 Franchising
COMMON FRANCHISE TERMS
Business format franchise: This type of franchise includes not only a product,
service and trademark, but also the complete method to conduct the business
itself, such as the marketing plan and operations manuals.
Disclosure statement: Also known as the FDD, or Franchise Disclosure Document,
the disclosure document provides information about the franchisor and franchise
system.
FDD: The Franchise Disclosure Document, FDD, is the format for the disclosure
document which provides information about the franchisor and franchise system
to the franchisee.
Franchise: A license that describes the relationship between the franchisor and
franchisee including use of trademarks, fees, support and control.
Franchise agreement: The legal, written contract between the franchisor and
franchisee which tells each party what each is supposed to do.
 Franchising
Franchisee: The person or company that gets the right from the franchisor
to do business under the franchisors trademark or trade name.
Franchising: A method of business expansion characterized by a
trademark license, payment of fees, and significant assistance and/or
control.
Franchisor: The person or company that grants the franchisee the right to
do business under their trademark or trade name.
Product distribution franchisee: A franchise where the franchisee simply
sells the franchisors products without using the franchisors method of
conducting business.
Royalty: The regular payment made by the franchisee to the franchisor,
usually based on a percentage of the franchisees gross sales.
Trademark: The marks, brand name and logo that identify a franchisor
which is licensed to the franchisee.
 Department of Trade and Industry

The DTI is responsible for realizing the country's

goal of globally competitive and innovative
industry and services sector that contribute to
inclusive growth and employment generation.
 Department of Trade and Industry
Financing
There are other ways of getting capital funding:
Own savings
Borrowing against your insurance policy--provided it is a
cash-value life insurance. It cuts the value of your
insurance benefit, but if you're relatively young, you'd still
have a long time to pay it back. Interest rates typically
run in single digits.
State pension funds -- If you're an employee, you can
also access other sources of low-cost cash through your
state pension funds ; SSS or GSIS salary loans or a PAG-
IBIG Fund multi-purpose loan. They usually let you borrow
at the prime rate, but PAG-IBIG's interest is relatively the
lowest.
 Department of trade and industry

Family loans -- Lastly, you could always try to borrow

from your family or relatives, but use this only as your
last resort, since there is risk of
starting a family feud. Doing business with family is still
doing business, so remember to put everything on
paper to avoid unnecessary complications.
 Department of trade and industry

High-interest loans
Pawnshops are also viable sources of funding, and are
very accessible. But starting a business is a serious
venture and it's hard to start one using a high-interest
loan as capital. Another popular non-formal way to get
funding, but which is discouraged, is through five-six
loans. This means for every five pesos you borrow, you
pay back six pesos after just a few days. Effectively, it is
said to be more than 1000% interest rate on an annual
basis. So ask yourself if you want to borrow at that rate
when you start a business.
 Department of trade and industry
GO NEGOSYO
Go Negosyo is the advocacy of the Philippine
Center for Entrepreneurship (PCE), a non-stock,
non-profit organization that advocates for a
change in MINDSET and ATTITUDE.
believe that Filipinos can address poverty in the
country by engaging in entrepreneurship and
developing an optimistic, passionate, creative
and innovative, resourceful, diligent and
persevering character.
encourage everyone to take charge and make
the most of their resources and abilities by utilizing
and transforming these into viable enterprises.
 Department of trade and industry

5 things to know about DTI's Negosyo Centers

The RA 10644 or "AN ACT PROMOTING JOB GENERATION
AND INCLUSIVE GROWTH THROUGH THE DEVELOPMENT OF
MICRO, SMALL AND MEDIUM ENTERPRISES" (also referred to
as the "Go Negosyo Act of 2013") has Senator Paolo
Benigno "Bam" Aquino IV as its sponsor, and it was filed by
various house committees to the First Regular Session of the
16th Philippine Congress in December 2013.
 Department of trade and industry
4 types of negosyo centers with different
features:
Model A: A facility ideal for provinces, cities, and first-class
municipalities with 3 to 5 business counselors plus support
staff. Facility includes a reception area (receiving counter,
PBR kiosk, computers, lounge, and library), consultation
and meeting room, working area, and a training room
Model B: A facility ideal for second-class municipalities with
2 to 3 business counselors plus support staff. Facility
includes a reception area, consultation and meeting
room, and working area.
 Department of trade and industry

Model C: A facility ideal for third- to fourth-class

municipalities with 2 business counselors plus support
staff. Facility includes reception area and 3 desks.
Model D: A facility ideal for fifth to sixth class
municipalities with 1 desk officer LGUs and the
private sector are encouraged to assign personnel
to support the Negosyo Centers. They are also
allowed to host the facility should they have
available space that is accessible to more
entrepreneurs.
 Department of trade and industry

"The Centers will be responsible for promoting

'ease of doing business and facilitating access to
services for MSMEs within its jurisdiction', such as:
Business Registration Assistance,
Business Advisory Services,
Business Information and Advocacy, and
Monitoring and Evaluation (of business-process
improvement for MSMEs)."
 Department of trade and industry

MSMES
Micro, small, and medium enterprises (MSMEs) are
defined as any business activity/enterprise
engaged in industry, agri-business/services, whether
single proprietorship, cooperative, partnership, or
corporation whose total assets, inclusive of those
arising from loans but exclusive of the land on
which the particular business entity's office, plant
and equipment are situated, must have value
falling under the following categories:
 Department of trade and industry
By Asset Size:
Micro: Up to P3,000,000
Small: P3,000,001 - P15,000,000
Medium: P15,000,001 - P100,000,000
Large: above P100,000,000
Alternatively, MSMEs may also be categorized
based on the number of employees:

Micro: 1 - 9 employees
Small: 10 -- 99 employees
Medium: 100 -- 199 employees
Large: More than 200 employees
 Department of trade and industry
P3 PROGRAM
The Philippine government launched the Pondo sa Pagbabago
at Pag-asenso program or commonly called as the P3 program.
P3 program is a counter to the 5-6 money lending scheme.
According to Department of Trade and Industry
Undersecretary Zenaida Maglaya, they are countering the 5-6
money lending scheme.
She said that those people who have small business just like the
sari-sari store owners and the market vendors can borrow money
from the program fromP5,000 P100,000. The interest that the
borrowers would have to pay is just 2.5 percent every month
according to the DTI. It is really far from the 20 percent interest
daily or weekly in the 5-6 money lending scheme.
 Department of trade and industry

How to Apply:
In applying for loan in the P3 program, the people
are required to go to any of the following P3
accredited partners with their IDs and proof that
they have a small business:
Cebuana Lhuillier Finance Corporation
Radiowealth Finance Company, Inc. (RFC)
Center for Agriculture and Rural Development,
Inc. (CARD)
Taytay sa Kauswagan, Inc. (TSKI)
 Department of trade and industry

Tulay sa Pag-unlad, Inc. (TSPI)

Mindanao Alliance of Self-help Societies, Inc. (MASS-SPEC)
National Confederation of Cooperatives, Inc. (NATCCO)
The borrower would have to fill-up an application form
and would have to undergo a short interview for
additional information
P4.72 million has already been released by
the department for the loan application of businessmen
and women in Occidental Mindoro, Sarangani province,
and Tacloban based on a report in UNTV.
 Government Financing Loan Sector

Government Financing (Public Finance)

Collection of taxes from those who benefit from the
provision of public goods by the government, and the
use of those tax funds toward production and
distribution of the public goods.
 Government Financing Loan Sector

GOVERNMENT LOAN SECTOR:

The government offers loan programs through different
departments that support individuals, communities and
businesses according to their varied and unique needs.
These loans provide capital for enterprises deemed
worthy by the government that might not qualify for a
loan on the open market. Government loan programs
aim for the following long-term benefits at the social
and economic levels:
 Government Financing Loan Sector

To improve the overall national economy as well as

quality of life of its citizens
To encourage innovation and entrepreneurship
To provide protection against disaster and calamities
To improve on the countrys human capital
To reward veterans and their dependents for past
contributions and present needs
 Government Financing Loan Sector

Individuals and small businesses with little or no seed

capital or collateral may find the conditions for a
market rate loan unaffordable. Low cost
government loans attempt to bridge this capital
gap for deserving individuals and parties, thus
enabling long term benefits for the recipients and
the nation.
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