BUSINESS FINANCE

LEARNING ACTIVITY SHEET

QUARTER 3: WEEK 6

BANK AND NONBANK INSTITUTIONS

Name of Learner: Kimberly Joy C. Antonio Grade/Section: 12-Partnership

Learning Activity No. 6 Date Answered: May 10-17, 2021

“NOW DO IT!”
A. Compare and contrast loan application in bank and nonbanking institutions by using the Venn
Diagram below. List at least 3 functions that they may be similar or different.

Banks Nonbanking Institutions

Similar Functions
1. Range offered to client 1. Offer flexible
can be as much amount 1. They both require amounts to be
but will depend on the application form and loaned with
collateral he/she valid ID. minimum to no
2. They both ensure the collateral
submitted.
paying capacity of
2. They have low their clients
acceptance.
interest rates 3. They both put interest 2. They have higher
3. Assess lots of loan no matter how small interest rates
requirements the amount being 3. Assess lesser loan
loaned requirements

B. Read and analyze the case below and answer the questions that follow.
The Business Partners
By: Aya
Two brothers are planning to establish a café restaurant. Bien is fond of coffee while Bryan is
fond of pastries. Both have contributed part of their savings but upon the assessment of the
values, they need more capital. The amount needed is P500,000 and they decided to divide it
equally.
Bien plans to get a policy loan of Php. 100,000 from his life insurance and apply from a
microfinance for the remaining. The requirement for both policy laon and microfinance is an
aplplication form and agreement form. The effect on the policy loan is that, it will reduce the
amount of Bien’s life insurance with the principal and interest. On the other hand, the
microfinance has 3.5% interest rate per month payable for 5 years.
Bryan has a 5-year real estate property costing Php. 350,000 at par. He plans to take a loan of
Php. 500,000 from a bank, giving the title of his land as collateral. The bank has an interest rate
of 9% per annum, payable for 10 years.

Questions:
1. Is Bien’s loan application a wise decision? Why or why not?
 On my own perspective, Bien’s loan application is not a wise decision. Rather than
his life insurance will be deducted, he will pay the interest twice to the amount he
loaned. The amount of needed capital that they divided was ₱500,000.00 which
means each of them must have ₱250,000.00. In Bien’s case, he plans to get a policy
loan of Php. 100,000 from his life insurance and apply from a microfinance for the
remaining, equivalent to ₱150,000.00. The interest was 3.5% per month and payable
for 5 years.
Solution:
Terms of loan(in months): 5(years) x 12(months)
= 60 months

Interest per month:150,000 x 3.5%

= ₱5,250.00

Total interest: Interest per month x terms of loan

= ₱5,250 x 60
= ₱315,000

Total Interest = 315,000 = 2.1 = 2.1 x 100% = 210%

Borrowed Amount 150,000

Based on my computation, the total interest was more than twice the amount he loan.
It is equivalent to 210% of the amount he loan. It maybe hard for him to pay it
monthly for it has a high interest. The worst consequences for him is that he can be
indebted under such big interest.

2. Is Bryan’s loan application a wise decision? Why or why not?

 For me, Bryan’s loan application was a wise decision. Although it was risky that the
title of his land was his collateral, on the otherhand, it will not a heavy responsibility
for him to pay his debt since his interest was not that big compared to Bien.
Solutions:
Terms of loan(per annum): 10(years)

Interest per annum:500,000 x 9%

= ₱45,000.00

Total interest: Interest per annum x terms of loan

= ₱45,000 x 10
= ₱450,000.00

Total Interest = 450,000 = 0.9 = 0.9 x 100% = 90%

Borrowed Amount 500,000

Based on my computation, the total interest was more than less than 100% to the
amount he loan. It is equivalent to 90% of the amount he borrow. It will not be hard
for him to pay it monthly for it has a low interest even its terms of loan was long.

3. What can you suggest or advice the brothers about their loan plans? Explain your answer.
 I suggest to both brothers to seek a lender or company that is safe to loan. They must
be aware with the scammeres especially nowadays, scammers were really rampant
around our society. Another things is choose a lender who offers low interest for
them to still gain a profit from their business. It is not a good idea if they will choose
lenders who offers higher interest because there will be a possibility that all their
profit will be used in paying their debts.
 ”ACE IT!”
INSTRUCTION:
A. Make use of a bank’s website and search for loan requirements. Select a bank and list their
requirements.
Land Bank of the Philippines (LBP)
Requirements (Single Proprietorship):
 LANDBANK Loan Application Form
 Bio-data of borrowers with passport-size ID picture
 Photocopy of Certificate of Registration with the
 Department of Trade and Industry
 Mayor's Permit
 Photocopy of Internal Tax Revenue and audited (BIR-received) Financial Statement
for the last three years
 Latest interim Financial Statement
 Projected income statement, balance sheet
 and cash flow statement with basic assumptions
 Brief history of the Business

B. Make use of a nonbank’s website and search for loan requirements. Select one nonbanking entity
and list their requirements or process.
SSS
Requirements:
 Duly filled and signed application form or mortgagor with 1 x 1 picture of the
applicant (and the spouse, if married)
 Loan Eligibility Certification
 Membership Certification from your respective worker’s group
 Certification of Employment
 Two months’ latest income or pay slip with the employer’s certification
 POEA/OWWA/DOLE or any SSS-related foreign officer Certification for OFWs
 Most recent Income Tax Return (ITR)

C. Enumerate 5 advantages and disadvantages in applying loan in bank and nonbank.

Advantages Disadvantages
Loan term is flexible Assess more documentary
requirements.
Interests are lower and fixed
Very difficult to obtain particularly
Good payment habit to bank loans to small business unless they have a
contribute in building a good credit substantial track record or valuable
history and a positive relationship collateral such as real estate. 
with the bank.
Having no strong personal credit
While you must pay interest on report or lacking enough data to
your loan, you do not have to give build up your financial profile
Bank Loan the lender a percentage of your undermines your chance of getting
Application profits or a share in your company. loan approval.

There were so many instances when In some cases, loans are secured
the money got stolen, eaten by the against the assets of the business or
rats or simply rot through the years. your personal possessions, for an
However, the modern banking example, your home. The interest
system completely eliminated the rates for secured loans may be lower
 need to store hard cash. It actually than for unsecured ones, but your
helps save a huge proportion of assets or home could be at risk if you
public wealth that used to get cannot make the repayments.
spoiled in storage which makes
banks safer to loan. Must use the funds for certain
projects or purposes that will help
grow your business, and not usually
to cover any ongoing expenses.
Banks will want to lend to businesses
that will be able to repay the money,
and so they will look for businesses
that will use their money to invest,
grow, and generate returns.

Advantages Disadvantages
There are fewer documentary Private companies may sell your loan
requirements which makes your to a different lender
application easier and hassle-free.
Give loan terms that are short and
Unlike bank loans, there is a higher hardly negotiable.
approval rate with private lending
companies. They have higher interest rates.
Nonbank Loan There is little or no credit history
Application check in the application process. Without caution, borrowers may get
This backs up the high approval involved in unregistered private
rate of your application. lending companies and fall for scams

Loan processing and services can Issue higher penalties if you miss
be optional compared to banks your payments, pay late or even
because these are much simpler and choose to prepay the debt.
faster.
They can be more flexible
regarding what type of finance
product they offer you.