SOURCES OF FUND Flashcards
refers to the amount of money needed by a
business in order to achieve its goals.
Capital Requirements
capital requirements
also refers to non-monetary requirements such
as
ideas
money needed to purchase fixed
assets or capital goods.
Fixed Capital
fund needed to finance the daily
operations of the business
Working Capital
fund needed in expanding,
diversifying or changing the directions of the
business.
Growth Capital
Forms of Monetary Capital
Fixed Capital
Working Capital
Growth Capital
(Sources of Capital) safest way to raise capital for funding a
business that is by investing the money that comes
from your own pocket.
Informal
(Sources of Capital) Are from the legal entities, institutions or
establishment.
Formal
External Sources of Capital
Pawnshops
Credit Cooperatives
Money Lenders
Lending Investors
Formal Sources of Credit
Types of Credit Extended by Formal Lending Institutions
Short Term
Intermediate Loans
Long-term Loans
- loans that are basically payable in one
year or less. These are normally self-liquidating, may
come in the form of revolving credit line
Short Term
These loans are repayable in
one to three years and requires collateral securities
and is paid back in installments over the lie of the
loan agreement
Intermediate Loans
These loans are extended only to
enterprises assured to exist over the longterm period
of the loans. These types of loans a repayable up to
10 years
Long-term Loans
Forms of Long-term Loans
Mortgage
Bonds
Long-term Commercial Papers (LCP)
pledging a designated property as security
or collateral for the loan
Mortgage
requires approval from SEC or other legal
entities, done by issuing bonds to lenders in the form
of a fixed amount of interest to the bondholders upon
maturity or call by its holders
Bonds
carries a fixed
return promised by the issuer regardless of the
operational outcome of the business of the issuer.
Long-term Commercial Papers (LCP)
Sources of Short Term Loans
- Commercial banks
- Merchandise suppliers
- Credit card companies
- Capital equipment suppliers
- Leasing companies
- Receivable factors
- Deferral of payables in general
Guidelines in Borrowing
- Evaluate yourself whether you are in good position to borrow.
Be prepared to put up capital. - Estimate accurately the amount you need to borrow.
- Choose the bank to borrow, preferably the one nearest to
your place of business - Choose bank depending on the size and status of the
business and the purpose of the loan.
5C’s of Credit
Collateral
Capacity
Character
Contract
Conditions
refers to the fixed assets or real properties that
serve as the borrowers guarantee to the creditors, such that in
case the borrower fails to repay the loan, this may be
seized by the creditor.
Collateral
refers to the ability of the borrower to repay the
loan, This may be determined by the value of the business, the
borrower’s work, real property value and others
Capacity
- refers to the personal standing. Of the borrower
in his community, as well as his own personal credibility.
Character
an agreement which defines the obligations of
parties.
Contract
refers to the terms and conditions set forth in
the contract or agreement in terms of the amount, mode of
payment, interest rates, penalties, and sanctions.
Conditions
