USES OF FUNDS

Sources and Uses of Short Term Funds

Short Term Fund- Is

normally used to finance a day
to day operation of the
company.
 The following can be sources of short
term funds

1. Suppliers Credit
 Suppliers of raw materials and
merchandise are the best sources of
working capital. This is the reason why
a good relationship has to be nurtured
w/ suppliers
2. Advances from the
stockholders
 If you have enough personal assets and you control
the company, advancing funds to the company when
there are financial requirements is an easy way for
the company to raise funds.
3. Credit Cooperatives
 To borrow from credit cooperatives, you
have to be a member. Credit cooperatives
can lend as much as five times of your equity
or contribution.
4. Bank Loans
Banks can provide short-term and long-term loans. Some banks also provide credit facilities , not
just to big corporations, but also to small and medium enterprises

Government Banks Private banks

-Offer short-term credit -Provide working

facilities to small and capital loans to small
medium enterprises. and medium enterprises
 Development Bank of  BDO
the Philippines  BPI
 Land Bank of the
Philippines
5. Lending Companies
 These small lending company which cater normally
to small and medium enterprises. The lending
process is much as faster as compared to banks but
they charge higher interest, higher than the banks
but lower compared to a more informal lending
popularly known as 5-6.
6. Informal Lending Sources
 Also known as 5-6.This is a very expensive source of
financing and should be avoided. This 20% interest
is just for a month. Without interest compounding,
this translates into a annual interest rate of 240%
 Sources and Uses of Long-Term Funds

Long Term- Is used for long term

investments or sometimes called capital
investments. This includes expansion, buying new
equipment or buying piece of land which will be the
site of future expansion. Long-term funds can also
be used to finance permanent working capital
requirements.
 The following can be sources of Long-Term

1. Equity Investors.
 Can be issued common stocks. This is the most patient
source of capital. It is the safest source of financing.
Unfortunately it isn’t always available when the company
needs it. Even big corporations have to identify a correct
timing and opportunity for them to issue more share.
2. Internally Generated
Funds
 Instead of declaring cash dividends, the company can use
internally generated funds for expansion or finance other
types of capital investments. Based on the Corporation
Code of the Philippines, there is a limit regarding the
amount of retained earnings that the company can keep
in it’s statement of financial position
3. Banks
 Are sources of different types of financing from short-term
to long-term. They provide interest rate as compared to
other financial institutions but they have a lot of
requirements and a borrower goes through a process.
4. Bond Market
 This market is gaining more popularity among our big publicity listed
companies for their fundraising activities. Philippine bonds are now
traded through the electronic platform provided by the Philippine
Dealing System Holding corporation (PDS Group)
Among successful bond offering in the last couple of years.
a. Meralco - ₱18.5 billion (2013)
b. Globe Telecom -₱7 billion (2013)
c. PLDT-₱1.5 billion (2013)
d. JG Summit Holding INC- ₱30 billion (2014)
e. Ayala Corporation- US $ 300million (2014)
5. Lending companies
 These are the same lending companies previously
discussed. Some of the provide long-term loans from
two to five tears. These lending companies can
process loans faster but the charge higher interest
rates.