SMALL BUSINESS

ENTERPRISE LOAN
A Business Proposal

Liceo de Cagayan University - ETEEAP

In partial fulfillment of the Requirements
for
ETEEAP – Bachelor of Science in Business Administration, Major in Financial Management
S.Y. 2018-2019

September 1,2018

Ermel O. Tagarda
ETEEAP Student
EXECUTIVE SUMMARY

LAST NA NI AYAW SA NI HILABTI

INTRODUCTION

Small Business Enterprise refers to short term loans which are usually payable in 6 months term. This
product aims to help micro entrepreneurs in the outskirts to have access to additional capital with
convenient prepayment terms accompanied with integral business advices.

This proposal aims to help repackage similar existing products in the market with the benefit of increasing
the company portfolio and coverage and at the same time reach out to micro-enterprise entrepreneurs
which may have the potential to become small and medium enterprises if their business will grow. This
had already been initially introduced to the market but there is no concrete plans for the future of this
product. Thus this aims to give guidelines on how the company will benefit from this.

Company Profile

Factors Lending Corporation is a lending institution that was registered on the year 1989 by virtue of
incorporation, and further certification from the Securities and Exchange Commission of the Philippines
(SEC).

Factors Lending Corporation also offered:

Products:

1. Salary loan for ZEALEP Group of Companies’ and employees

2. Multipurpose Salary Loan

3. Multipurpose Business Loan

4. Pension Loan

Statement of the Problem

There are three major key points to be addressed in this proposal

1. Many competitors that give lower interest rates

2. The area to be serviced and the rate to be given
3. Is there a need for additional manpower with collection background or replace existing manpower

MARKET ANALYSIS

This section presents the gathered data from other lending and financing institutions:

RATE
STARTING PREPAYMENT Other
FIRM per TERM COLLATERAL
LOAN TERMS Charges
month
None but
Bless 3 5,000.00 - requires
7.00% Daily None
Microfinance months 10,000.00 referrals from
existing clients

Page 1 of 15
 None but
requires
Weekly,Bi-
Oro Integrated 6 - 12 15,000.00 - business
4.00% monthly, None
Cooperative months 50,000.00 permit and
Monthly
residence
certificate
3 5,000,00 -
4.00% No Collateral Weekly None
months 10,000.00
J&J Finance
2 5,000.00 -
6.00% No Collateral Daily None
months 10,000.00
Original
Notarial,
Business Daily, Weekly,
Benhi 6 20,000.00 - Processing
2.80% Permit and Bi-monthly,
Microfinance months 50,000.00 and
Residence Monthly
Passbook
Certification
Notarial,
Eclaire Lending 2 3,000.00 - Processing
10.00% No Collateral Daily
Firm months 10,000.00 and other
charges
4 10,000.00 -
Mataj 5.00% No Collateral Daily None
months 20,000.00
Motorcycle and Notarial,
6 20,000.00 - Vehicle [Deed Processing
Granduke 3.00% Twice per week
months 100,000,00 of sale or OR- and other
CR] charges
Motorcycle and Notarial,
20,000.00 - Vehicle [Deed Processing
5.00% 158 days Bi-Monthly
C and L 100,000.00 of sale or OR- and other
Lending CR] charges
2 1,000.00 -
10.00% No Collateral Daily No Charges
months 10,000.00

Bless microfinance corporation caters small loans with the rate of 7% per month on a daily basis. The
maximum term they provide is 3 months with maximum loanable amount of 30,000.00. However they
target City proper and selected area of Bukidnon more on rural locations.

Oro Integrated Cooperative offers several type of loan such as Business, Salary, Pension, Vehicular and
Real state loan. There company covered 80% of Mindanao Area they fucos more on the capital used in
opening the business; thier product is base on referrals.

J and J Finance caters all types of business as long as the business is stablish in 6 months onwards with
the rate of 10% per month on a daily basis, payable on 2 months with a maximum loanable amount of
100,000,00. They target Cagayan de Oro, Iligan and Gingoog area.

Benhi Microfinance caters small loans with the rate of 2% to 4% per month on a semi and monthly basis.
The maximum term they provide is 6 months to 2 years depend on the year of business stablish with the
maximum loanable amount of 1,000,000,00. However they fucuses only in getting clients along the high-
way area they donot go on the secondary road even in public markets.

Eclaire lending firm caters business loan with the rate of 10% per month on a daily basis payable in 2
months. They covered Cagayan de Oro, Iligan, Butuan, Bukidnon and Davao area. The maximum
loanable amount they provide is 100,000.00 base on there busineses and recommendation of the
collector assigned on thier respective area.

Page 2 of 15
Granduke caters small and collateral loans with the rate of 2%, 5% and 8% per month on a daily, weekly
and monthly basis.the maximum term they provide are 3 months to 2 years and it depend on the type of
loan they applied with maximum loanable amount of 1,000,000.00. However they target cliens within City
area and they accept on referral basis.

Mataj caters small loans with a rate of 5% payable on a weekly or monthly basis. The maximum term they
provide is 4 months with maximum loanable amount of 20,000.00. However they only target clients who
are located near the highway; they do not target clients who are located near secondary and tertiary
roads.

PRODUCT PROPOSAL AND ANALYSIS

PRODUCT NAME : SMALL BUSINESS ENTERPRISE LOAN

PRODUCT TYPE : Short Term Loan

PRODUCT DESCRIPTION : This facility aims to help small and meduim entreprenuer in
selected areas to have acces to additional working capital with
convenient prepayment terms patterned after thier financial means.

TARGET MARKET : In general, the target market of this facility would be small and meduim
business owner in selected barangays with stable legitimate business of
at least 12 months.

Upon launching of this facility, the company shall fucos first on the
following areas:

1.Carmen

2. Lumbia

3. Lapasan

4. Puntod

The initial maximum loanable amount shall be at Php10,000.00.

RISK AREAS : The identified risk areas for this product are the following:

1.Carmen Market

2. Cogon Market

3. Agora Market

4. Bulua Market

These areas are highly saturated and are more feasible for daily
collection; these areas also provide higher risk given the higher rate past
due in the area due to the presence of other lending firms and debtors
usually max out thier capability to borrow and would not only rely to only
one creditor.

AMOUNT FINANCED : Starting loan will be at Php10,000.00; with a maximum of Php50,000.00

in future re-availment.

Page 3 of 15
MAXIMUM TERM : 6 months

RATE : 4.00% per month or 24% for 6 months

OTHER FEES TO BE APPLIED: Insurance computation - based on insurance

Processing Fee - based on matrix

Notarial Fee - 400.00

MODE OF PREPAYMENT : Weekly (depending on schedule of barangay covered);

Cash collection by assigned colllector

SECURITY : Certificate of Ownership of appliance (model of the appliance must be 2

years old); with same appraisal value of amount being applied.

Appliance are use to be as thier collateral for the loan they applied.

PRODUCT REQUIRMENT : There must be assigned collector per barangay who shall also
monitor the past due accounts.

The credit investigator must not be the collector of the account to prevent
collusion among clients and company personnel.

BORROWER REQUIRMENTS:

a. Photocopy of Valid (unexpired) ID

b. 2x2 ID Pictures - 2 pcs
c. Cedula
d. Barangay Clerance - must indicate for loan purpose
e. Business Permit
f. Proof of billing (light, water and etc.)
g. Co-maker (CEDULA, Valid Ids, Duly-filled out co-makers form
h. Picture of stablishment (if applicable) and Appliance for collateral
i. Inventory/ stocks must be Php15,000.00

CUSTOMER PROFILE

Please butang unsa basis sa pagchoose sa client if new or reloan and ila amount Financed

New customers

For choosing the new and potencial borrower they must have at least 8 months and above business.

Have a good reputation in thier barangay,well known and most important no finding record.

The initial maximum loanable amount shall be at Php10,000.00.

Page 4 of 15
There are some basis of a potencial borrower:

a. Capital – Actual display of the business

b. Condition – Location of the business
c. Character – Attitude of the borrower
d. Capacity – Other source of income
e. Collateral – Business and Appliances
f. Co-maker - Served as the borrower

Repeat Clients

They can re-loan if their previous loan is satisfactory or has not been delayed for 3 or more consecutive
weeks, unless otherwise approved by management due to business turn around.

TOWS ANALYSIS:

Threat : Rates and requirements by other lending firms

Existing Lending firms having the same facility

Opportunities : The product would be easily introduced towards the target given that the product
already exists with other lending firms.

Target areas are not usually part of the covered areasof other lending firms and
many lending firms only focuses on known larger barangay in the city

Weakness : Possible problems encountered in the assign CI/Collector turnover

Strength : Knowledgeable staff on the product proposed and on the markets being
targeted.

Product Analysis

Page 5 of 15
Target Locations:

MONDAY

Starting point para sa day 1 collection is Taguanao down to balulang,Macanhan to Upper Carmen to have
a lesser gas consumption and not only in current collection also in skip tracing on pastdue din back to
office for cash remittance.

TUESDAY

Page 6 of 15
Day 2 collection is continuation of day 1, starting point is barangay Indahag down to Macasandig daghan
pud possible client na makuha sa area tungod sa iyang kalapad.

WEDNESDAY

Page 7 of 15
Upon making survey day 3 target area was a have many potencial clients and area to open,especially in
kauswagan area ky doul sa ila og ang office located mismo sa kauswagan din good to us ky dali ra pud
nato sila ma monitor og napalibutan siya sa mga subdivicion same pud sa area sa punton and
makabalan.

THURSDAY

Page 8 of 15
Day 4 is sumpay ra sa day 3 although ang time travel ang gas expense is midyo siya taas piro not only in
current collection but also in past due collection.starting point must be in puerto ky atleast if naa na siyay
collction pwede ra niya ma drop by sa ofiice ky pa duol na paduol mn ya collection.besides those area on
the map was not totaly saturated on weekly basis collection.easy for us to offer to them our product.

FRIDAY

Page 9 of 15
Among those area day 5 is sepated its because those area on the map was partly in bukidnon.starting
point is baungon down to manbuaya dn to lumbia area.even if the area was far from city proper, they sell
and buy products in cagayan de oro

In addition our target collection is like a coil from start to end in short our target area for our propose
product must start at city proper upwards,and our collection must start sa layo maduol ky para pud sa
safety sa ato collector if he/she had a collection pwede ra niya ma una sa office.sss

Forecasted Financials

FORECASTED INCOME STATEMENT

(With additional personnel)
2018 2019 2020
Interest Income 84,200.00 300,400.00 600,200.00
Other Income 21,443.38 56,737.01 131,137.09
Total Gross 105,643.38 357,137.01 731,337.09

Salary and Wages (338*30) - 111,540.00 111,540.00

Staff Benefits (338*30)/12 - 9,295.00 9,295.00
Fuel and Lubricants (Monday to Friday
please) 4,400.00 26,400.00 26,400.00
Motor Subsidy (890 per month) - 9,790.00 9,790.00
Collector's Insurance - 5,569.20 5,569.20

Page 10 of 15
 HMO - 10,083.33 10,083.33
Total Additional Cost 4,400.00 172,677.53 172,677.53

Total Operating Income 101,243.38 184,459.47 558,659.56

Income Tax 30,373.01 55,337.84 167,597.87
Net Income 70,870.36 129,121.63 391,061.69

There are two income statements to be presented, first is with the assumption of an additional employee.
This would be followed by without any additional employee.

The revenue is composed of Interest Income and Other Income both of which is determined by the
budgeted slots every six months. Other income is based on the charges during booking which include
service charges, notarial and insurance.

There are 30 budgeted slots for the month of May to October 2018. After six months there will be a re-
evaluation and it is expected that an additional 20 slots would be offered from November2018 to May
2019. The next re-evaluation would open an additional 50 slots from July 2019 to January 2020.the next
set of re-evaluation would yield an additional 16 slots and the last re-evaluation by august 2020 would
result to an additional 14 slots. The review period of six months is based on the standard period set by
management.

Please note that there are 3 levels of amount finance to be granted which are php10,000.00,
php15,000.00. And php20,000.00. Only existing clients may avail of the php15,000.00. And
php20,000.00. Each level will have different charges.

In consideration of an additional employee the following expenses is expected: Salary and wages. Staff
Benefits, Fuel and Lubricants, Motor Subsidy, Collector’s Insurance and Health Insurance.

Therefore the total expected income for the year 2018 is php70,870.36, and for the year 2019 when there
is an addition collector already the net income would be at php129,121.63, and by 2020 the total net
income would be at php391,061.69. However 2018 is only for 8 months so in order to compare it with
2019 there would be a need to convert it to a yearly figure from January 2018 to December 2018 which is
a net income of php106,305.54. this shows that the additional employee would only result to an increase
of php22,816.09. the effect of the additional employee would only be felt in 2020.

FORECASTED INCOME STATEMENT

(Without additional personnel)
2018 2019 2020
Interest Income 84,200.00 300,400.00 600,200.00
Other Income 21,443.38 56,737.01 131,137.09
Total Gross 105,643.38 357,137.01 731,337.09

Salary and Wages (338*30) - - -

Staff Benefits (338*30)/12 - - -
Fuel and Lubricants (Monday to Friday
please) 4,400.00 26,400.00 26,400.00
Motor Subsidy (890 per month) - - -
Collector's Insurance - - -

Page 11 of 15
 HMO - - -
Total Additional Cost 4,400.00 26,400.00 26,400.00

Total Operating Income 101,243.38 330,737.01 704,937.09

Income Tax 30,373.01 99,221.10 211,481.13
Net Income 70,870.36 231,515.90 493,455.96

If there is no additional employee the net income for 2018 would still be at php70,870.36. However the
total net income for 2019 would be at php231,515.90 or an increases of 226,68%, by 2020 the total net
income would be php493,455.96.

FORECASTED CASH FLOW

  Dec-18 Dec-19 Dec-20
Cash beginning 300,000.00 149,252.53 315,787.88
Collection (add) 435,033.33 1,552,066.67 4,638,633.33
Bookings (deduct) 585,780.80 1,385,531.32 4,664,396.28
Cash, end 149,252.53 315,787.88 123,489.59

At

Available total funding, aha gikan ang money – operations ni gikan kay naa kwarta bang companya to
dispense

FORECASTED PORTFOLIO
2018 2019 2020
Portfolio, beginning - 339,966.67 635,500.00
Bookings 775,000.00 1,847,600.00 4,364,800.00
Collections 435,033.33 1,552,066.67 3,086,566.67
Portfolio, end 339,966.67 635,500.00 1,913,733.33

This product started at zero portfolio by the end of 2018 it became php339,966.67, and by 2019 it
increase to php635,500.00 and lastly by 2020 the portfolio will be at php1,913,733.33.

Product Process

1. The borrower will fill out the application form together with his/her co-maker in the company
premises.
2. The loan application shall be then subject for Credit Investigator.
3. The Credit Investigator must conduct actual credit investigation for the clients and its co-
makers.
4. If recommended by the Credit investigator, the CI shall accomplish the CI forms for
processing of loan application.

Page 12 of 15
 5. The Loans Processor shall then review the application formand shall the borrower for the
necessary requirements to further process the application.
6. After checking the necessary documentations, the Loan Processor shall then forward the loan
application for endorsement to the manager.
7. If the manager would reccomend for approval, he/she shall fill out the Credit Investigator
Report to be submitted to the president for approval.
8. Once approved, the Loans Processor or the CI Shall inform the client of the approval and
shall prepare the disbursement of check.

Marketing Strategies

a. Selection of Target Barangay (until December 31, 2018):

1. Check with Barangay Hall as to how many lending investors are registered operating in
the barangay and thier coverage.
2. File permit to operate with Barangay – this is additional security for the company in case
of defaults made by the client [they would be able to assist the company for the barangay
level – small claims]
b. Hand out marketing flyers to the barangay in introducing the product.[which shall be duly
approved by the president before distribution]
c. Product launching will be on January 2, 2019
d. A quota of 15 clients per area would be stablished and this product shall be reviewed after 3
months from its launching.

RECOMMENDATION

Page 13 of 15