PILAR COLLEGE OF ZAMBOANGA CITY, INC.

R.T. LIM BOULEVARD, ZAMBOANGA CITY

BASIC EDUCATION DEPARTMENT

PAASCU Accredited Level III
A.Y. 2020-2021

SENIOR HIGH SCHOOL

GRADE 12

LEARNING
MODULE in
BUSINESS FINANCE
Unit Topic: SHORT-TERM AND LONG-TERM FUNDS
Lesson 4: SOURCES AND USES OF SHORT-TERM AND
LONG-TERM FUNDS

NAME: ______________________________________________

SECTION: ___________________________________________

MRS. ROWENA L. ESTERO

TEACHER
 Subject Area: Business Finance Quarter: FIRST
Unit Topic: SHORT-TERM AND LONG-TERM FUNDS Time Allotment: 180 minutes

Lesson 4: SOURCES AND USES OF SHORT-TERM AND LONG-TERM FUNDS

INTRODUCTION

The quality of product or service a business can provide is dependent on its financial situation. A business
without appropriate funding sources will be drown in a sea of debt. Funding is the fuel that powers a
business. A business can take different avenues and channels to attain funding, often numerous channels are
used. The type of funding chosen is dependent on the business type, the current situation of the business, and
the direct that the owners are intending to grow. (GAEU Consulting Experts n Horizon 2020 Funding)
In this lesson, the main focus for discussion are the sources and uses of funds, the loan applications,
requirements for funding and the obligation of entrepreneurs to its creditors.

OBJECTIVES

Students will be able to:

a. cite bank and nonbank institutions in the locality that would serve as possible sources of funds for
business operations;
b. compare and contrast the loan requirements of the different bank and nonbank institutions ;
c. draw a flow chart on the steps in loan application;
d. list down obligations of entrepreneurs to creditors; and
e. identify uses of funds

MOTIVATION
Funding Institutions!

Identify the type of financial institution from the logo presented below.

1._______________ 2._____________ 3. __________

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 DISCUSSION
THE PHILIPPINE FINANCIAL SYSTEM

Some bank and nonbank institutions that would serve as possible sources of funds for business
operations

TYPE OF INSTITUTION
Banking Institutions Nonbank Financial Nonbank Thrift
Intermediaries Institutions
COMPONENTS
Universal banks Investment houses Mutual building and loan
Commercial banks Financing companies associations
Thrift banks Securities dealers Nonstock savings and loans
Rural banks Investment companies associations
Specialized government banks Fund managers
Lending investors
Pawnshops
Government NFBIs*
Venture Capital corporations
*Nonbank financial institutions. These include the Social Security System (SSS), the Government Service Insurance
System (GSIS). And the Home Development Mutual Fund (HDMF)

SOURCES OF FUNDS FOR BUSINESS OPERATIONS

SHORT-TERM AND LONG-TERM FUNDS

What are Short-term Funds?
- are used for business operations' working capital. Banks are usually your good source of short-term funds

Short-term Funds Definition / Description

Net working capital - is defined as current assets less current liabilities. It helps carry out the
or working capital normal operations of business.
- Working capital is used to generate sales and profits for a business.
Marketable - are used to generate investment income through capital appreciation in
Securities stock investments or trading through bond investments
- is your product roster. The more interesting your inventory, the greater
Inventory potential sales for your business because your customer will always be
attracted to what you offer.

What are Long-term Funds?

- are usually used for start-up business requirements, or capital expenditures or business expansion for
existing businesses.
This means that when a business owner sees the need or the opportunity for his business to grow some
more, he may invest in a building or equipment that will sustain the growth of his operations

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 DISCUSSION

Long-term Funds Definition / Description

- is a financial intermediary that brings together depositors and borrowers
Bank - It is the major source of funding for our working capital requirements
- clients are mostly retail customers. They are the employed, self-employed, or
who have small businesses to operate.
Commercial Banks - Its main business is lending.
- examples: Banco De Oro (BDO), UnionBank, Metrobank, and Bank of The
Philippines (BPI)
- participates in many kinds of banking activities and is both a commercial bank
Universal Banks and an investment bank as well as providing other financial services such as
insurance.
- act as intermediaries between investors (who have money to invest) and
Investment Banks corporations (who require capital to grow and run their businesses).
- is the division of a bank or financial institution that serves governments,
corporations, and institutions
- are financial intermediaries as well but are supervised and regulated by another
Nonbanks government body, the Securities and Exchange Commissio n (SEC).
- Banks, on the other hand, are regulated by its Central Bank. In the Philippines,
it is the Bangko Sentral ng Pilipinas (BSP).
- pools the money to invest in securities. These companies were regulated by the
SEC and must be registered under the Investment Company Act of 1940.
Investment Company - Company whose main business is holding and managing securities for
investment purposes. Investment companies invest money on behalf of their
clients who, in return, share in the profits and losses
- provides coverage, in the form of compensation resulting from loss, damages,
Insurance Companies injury, treatment or hardship in exchange for premium payments.
- The company calculates the risk of occurrence then determines the cost to
replace (pay for) the loss to determine the premium amount
- are funds of private investors used to finance lucrative projects that are
projected to give good returns.
Private Equity Funds - The private equity investor will generally take a controlling position in the
business in order to foster active ownership. In addition to financing, investors
provide strategic expertise and support for the company's management.

Definition of Terms:

Lending happens when the owner of a property or money allows another party the use of the property or
money. It is the commercial bank's bread and butter. This is where banking earns and pays its employees,
whose salaries, in turn, are reserved for several purposes
Debt is the obligation to pay back property or cash borrowed in accordance to an agreement, and this may
be in the form of notes, bonds, or mortgages.
Credit is a loan or money extended to a person or business in exchange for a return. Once issued, it becomes
a debt of the borrower.
Insolvency / Illiquidity - is the inability to pay debts on time when they are due. It is insufficiency of cash
flow and is temporary.

Bankruptcy - is a legal process wherein assets of a debtor are distributed to credtitors to be able to pay his
debts.
Net worth - is the value of your assets, cash, savings, real estate, cars, stock, bonds, jewelry collection,
insurance, and art collection

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Short–term and Long-term funds Page 3 of 10
 DISCUSSION

CREDIT

Credit Analyst evaluates the borrower's financial standing by reviewing his financial statements.
Credit Committee - This group of officers represents the financial institutions, creditors and/ or investors
that have claims on a company that is in financial difficulty or bankruptcy

Credit Rating - are way to formally evaluate the credit history of a person or company and includes a forecast
of the capability to repay obligations

The Cost of Credit

The Finance Charge

Character
- the total amount you pay to use credit.

The Annual Percentage Rate (APR)

- the cost of credit on a yearly basis
Conditions Capacity expressed in percentage points.
5 Cs of
Credit

Collateral
Capital

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 DISCUSSION

Requirements of Applying for a Personal Loan

LOAN DOCUMENTATION Business Permit

- must be current and updated. If the business is
Identification undergoing renewal, a clear copy of the business
Passport ID
permit application for renewal must also be
Any government- issued ID
submitted as part of the requirements for a business
School ID
loan.
Voter's ID
Picture in the ID must be clear Settlement Bank Account
The ID must have a recent signature
- this facilitates the more efficient payment of
interest on the loan . If this will involve electronic
Another requirement for business loan
or mobile or internet funds transfer to the bank
documentation is the BIR registration
account, this procedure must be indicated.
certificate and the DTI certificate.

What is bad Bad credit happens when companies are unlikely to pay
credit? their debts.

They are either illiquid, meaning that their debts are not paid
How on time, or could go bankrupt, which means that their assets
even if sold, would not be enough to pay for their debts.
does bad
credit It also happens when company sales do not grow over time
and when company expenses increased faster than sales.
happen?

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 DISCUSSION

Obligations of Entrepreneurs to Creditors

A key partner of the entrepreneur is his creditor bank. His bank extends him a line for his daily businesses
requirements as well as his requirements for longer term capital expansion, for example.

In return, the entrepreneur keeps his promise to pay back his creditor banks by ensuring that he is financially
capable and that his business is sustainable.

The Bus ine s s Entre pre ne ur Complie s with Re gulation

As business expands aided by funding via the financial institutions, the entrepreneur gives his skills and
know-how to grow the business, employ and train people and monitor his business operations

For Working Capital

Your business working capital is used for the business' day-to-day activities, and this refers to the current
assets and the current liabilities of the company.

Uses of funds

For Capital Expenditures, To Reinvest in the Business, For Business Expansion

Long-term funds can be used for capital expenditures or long-term investment opportunities such as
investing in real estate, a condominium, or investing in a new product launch.

Usually, good long-term investments are found in markets that are less competitive where barriers to entry
are high to keep out would-be competitors.

For Debt Servicing

Funds are also used to pay debts. As a general rule, debts should be self-liquidating. This means that the
maturity of the debt should match the length of time the debt is needed.

Steps on Loan Application Process.

Know the Reason for and Amount of the Business Loan

Review Your Credit History and Credit Score
Start Reviewing Your Borrowing Option
Visit Your Local SCORE and SBDC Office for Business Advices
Prepare Your Business Plan
Plan a Presentation and Make the Appointment
Paycheck Protection Program - for COVID-19 applicants
Economic Injury Disaster Loans - for COVID-19 applicants
Disaster Unemployment Assistance Program - for COVID-19 applicants

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 PILAR COLLEGE OF ZAMBOANGA CITY, INC.
R.T. LIM BOULEVARD, ZAMBOANGA CITY

BASIC EDUCATION DEPARTMENT

PAASCU Accredited Level III
A.Y. 2020-2021

SENIOR HIGH SCHOOL

GRADE 12

RETURN THIS
MODULE in
BUSINESS FINANCE
Unit Topic: SHORT-TERM AND LONG-TERM FUNDS

Lesson 4: SOURCES AND USES OF SHORT-TERM AND

LONG-TERM FUNDS

Lesson’s knowledge Check (Activity 1)

Activities 2 to 5
Assessment Page

Name: Date Returned:

Section:

MRS. ROWENA L. ESTERO

TEACHER
 Kindly answer the lesson’s knowledge check (Activity 1), activities 2 to 5 and the assessment part with
all honesty and sincerity. You may write your answers in the indicated spaces of the activity.
.

KNOWLEDGE CHECK

ACTIVITY 1: SURVEY SAYS!

Read the following questions and write your answer on the space provided for.
1. What does funding mean? Why is funding important to the operation of a business especially to the
small and medium enterprises?

2. How relevant is the study of the Sources and Uses of Short-Term and Long-Term Funds to me as a
student of this institution? How can the knowledge of such topic be considered advantageous to my
person today and in the future?

3. Integration No. 1: (ICV) What values am I expected to learn and develop in the process of studying
the Sources and Uses of Short-Term and Long-Term Funds? Why?

4. Integration No. 2 (Social Integration) How can I relate my knowledge of the Sources and Uses of
Short-Term and Long-Term Funds to my own daily living and towards helping other members of
my community?

5. Integration No. 3 (Lesson across Discipline - Economics) What is the implication of the numerous
banking institutions found in the community on the economy of the society or country?

Short Essay Rubric:

Standard Excellent Very Good Good Fair
 Explains the topic with correct description and
provides related examples. 5 4 3 2
 Content shows connection of the concept and explains
sensible decision about the topic that can help achieve
the goal.

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 ACTIVITIES

ACTIVITY 2: 3-2-1 ACTIVITY CHART

Directions: Fill up the 3-2-1- chart below. Write three (3) names of banking institutions you know in your
community; two (2) nonbank financial intermediaries and one (1) nonbank thrift institution in
your locality. Indicate also the function of the institution in the last column opposite the name
of the stated institution.

Type of Name of Institution in Purpose/Function of the Institution in

Institution the Locality the locality
1.
Banking
Institutions 2.

3.

Nonbank 1.
Financial
Intermediaries 2.

Nonbank Thrift 1.
Institutions

ACTIVITY 3: CREATING FLOWCHART

Directions: Listed on page 6 of the lecture part of the module are the steps on Loan Application Process
of a business. Inside the box, draw a flowchart indicating the relationship of each step of
the loan application to its process. Make your flowchart neat and creative.

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 ACTIVITIES

ACTIVITY 4: DEFINE THE Cs!

Directions: Describe and define the 5 Cs of Credit.

5 Cs of Credit DEFINITION
1.

2.

3.

4.

5.

ACTIVITY 5: THINK ABOUT IT!

Directions: Answer the questions in two or three complete sentences. Write your answers inside
the box provided below.
1. For a small business to get off the ground, or to keep one operating, it must have financing in any form.
What possible ways can entrepreneurs do to help their businesses recover from the COVID-19 outbreak?

2. Integration No. 4 (Faith/ Biblical Reflection: “Corinthians 9:7). How will you relate this bible verse with the
lesson discussed about finance: “Each one must give as he has decided in his heart, not reluctantly
or under compulsion, for God loves a cheerful giver.”

3. How is credit related to funding? Can a business operates or survives on its own without credit? Why?

Short Essay Rubric:

Standard Excellent Very Good Good Fair
Content shows connection of the concept and explains sensible 5 4 3 2
decision about the topic that can help achieve the goal.

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 ASSESSMENT
SOURCES AND USES OF FUNDS!

Directions: On the spaces below, fill-up the shapes below by listing

the sources and uses of short-term and long-term funds.

3 SOURCES OF SHORT TERM FUNDS 3 SOURCES OF LONG TERM FUNDS

1. ______________________________ 1. __________________________________
2. ______________________________ 2. __________________________________
3. ______________________________ 3. __________________________________
2 Uses of Short Term Funds 2 Uses of Long-Term Funds

1. ______________________________ 1. __________________________________

2 _______________________________ 2. __________________________________

SUMMARY

In this lesson, you learned to identify the sources and uses of short-term and long-term
funds; the loan requirements of a business and the obligations of entrepreneurs to creditors.
You also learned to prepare a flowchart on the steps in loan application.

EXIT INSTRUCTIONS

Answer activities with all honesty and sincerity. Check your answers on the lesson’s knowledge check
(Activity 1), activities 2 to 5 and the assessment part to ensure that all blanks have been answered. Make
sure that you do not leave any blank space unanswered. Please do not forget to write your name and the
date of submission of your answer sheets.
The entire module should be submitted back to the teacher before getting the next module.

SUPPORTING REFERENCES

https://prezi.com/p/nz1avdasjek6/sources-and-uses-of-short-term-and-long-term-funds/
sources and uses of short-term and long-term funds - Prezi

Write your comments and suggestions, if any, inside

FEEDBACK this box.

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