GOOD AFTERNOON

GRADE 11-COMMITMENT!
November 18, 2021
2:20 P.M – 4:00 P.M
PRAYER
Objectives:
At the end of the lesson, the students are expected
to:

1. Illustrates business and consumer loans.

M11GM-IIf-1

2. Distinguishes between business and consumer

loans. M11GM-IIf-2

3. Solves problems involving business and

consumer loans (amortization, mortgage).
M11GM-IIf-3
REVIEW:
1. What is BONDS?

2. What is STOCKS?

3. In general, what is the difference

between BONDS and STOCKS?
What first comes to
your mind when you
encounter the financial
term “credit” ?
Activity
Directions: Describe the following:

1. What is COLLATERAL?

2. What is LOAN?

3. What is DOWNPAYMENT?

4. What is a CREDIT SCORE?

Based on the activity,
what is the importance
of knowing the key
terms in building a
business?
 BUSINESS AND
CONSUMER LOANS
CONSUMER CREDIT
➢ It is the term used for a type of loan that is offered to businesses
(which could either be a sole proprietorship, partnership, or
corporation) and individuals or other retail customers.

➢ These loans are usually paid through a series of regular payments

or installments with imputed interest.

➢ The repayment of a loan in equal installments that are applied to

the principal and interest over a period of time is called the
amortization of a loan.
TWO TYPES OF INSTALLMENT LOANS
1. Closed-end credit
- a type of installment loan in
which the principal amount and the
interest borrowed are repaid in a
specific number of equal payments.

2. Open-end credit
- a type of installment loan in
which there is no fixed amount
borrowed or number of payments.
Regular payments are made until the
loan is paid off. A line of credit is a pre-
approved amount of open-end credit
based on the borrower’s ability to pay.
TWO TYPES OF INSTALLMENT LOANS
4 FACTORS THAT NEED TO BE CONSIDERED IN A LOAN TRANSACTION
1. Cash price
- the price paid all at once at the time of
the purchase.

2. Down payment
- fractional payment to the loan.

3. Amount financed
- total amount granted by the lending
institution to pay off the balance.

4. Installment price
- includes all installment payment,
finance charges, and down payment.
5 C’s OF CREDIT
You also need to be familiar with the 5 Cs of
credit to understand the criteria that lending institutions
follow to assess the credit worthiness of a borrower.
1. Character
- In this area, the lender is looking for such things
as credit history, training and knowledge, experience,
financial competency, and plans for the future. In short,
the character is the reputation of the borrower.
2. Capacity
- It is the ability of the borrower to repay a loan by
assessing the income against the debts of the
borrower. Capacity is also the borrower’s liquidity
status.
3. Capital
- This is what is left with a borrower when the
liabilities are deducted from the assets.
5 C’s OF CREDIT
3. Collateral
- This is the lender’s security in a loan transaction.

4. Conditions
- These are the commercial terms of a loan
transaction such as the principal amount, interest rate,
and the term of the loan.
 Are the 5 C's of credit
enough to help a lender
decide on whether to
grant a loan to an
individual or business?
Business
Loans
BUSINESS LOANS
Types of Business Loans in the Philippines

1. Corporate loan
- a loan being availed by top
corporations whose purpose is to finance their
projects or expand their business. (In the
Philippines, these are usually the top 1,000
corporations.)

- Corporations are usually provided by

banks with credit line depending on their size,
liquidity, profitability, and other factors deemed
by banks as necessary.

- Example lender: Bangko Sentral ng

Pilipinas (BSP)
BUSINESS LOANS
Types of Business Loans in the Philippines
2. Commercial loan
- a loan being availed by commercial businesses that are not as big as the
top 1,000 corporations.
- An example of a consumer loan might be a credit card loan, a loan to buy
a car, or a loan to buy a home.
BUSINESS LOANS
Types of Business Loans in the Philippines
3. SME (Small and Medium Enterprises) loan
- a loan being availed by SMEs which are usually entrepreneurs or start-up
businesses.
BUSINESS LOANS
Banks are considered the primary lenders to
the types of businesses mentioned above.
Philippine banks have segmented their loan
organizations according to the type of business
customer they serve.
Thus, banks have a Corporate Banking Unit,
Commercial Banking Unit, or SME Loans Unit.

The following collaterals are usually being

accepted by Philippine banks for business loans
aside from the company’s financial and industrial
conditions:

1. Investment in government securities and stocks

2. Different forms of real estate
3. Deposit accounts with the loan provider and other
banks
4. Standby letter of credit
5. Updated financial statements
BUSINESS LOANS
Example 1: SME Loan: Installment
Franco Tristan Remittance Business, a start-
up business, purchased 30 laptops in installment
plan to support its remittance operations group with
a P100 000 down payment and 12 monthly
payments of P80 000 for the remaining balance of
P800 000.
1. What is the installment price of the 30 laptops?
2. How much interest rate was imputed if the cash
price of the 30 laptops is P900 000?
3. How much is the interest paid by the business
per month?
4. How much is deducted from the principal loan
per month?
BUSINESS LOANS
Example 1: SME Loan: Installment
Franco Tristan Remittance Business, a start-up business, purchased 30
laptops in installment plan to support its remittance operations group with a
P100 000 down payment and 12 monthly payments of P80 000 for the remaining
balance of P800 000.
1. What is the installment price of the 30 laptops?
Solution:
Apply the following formula in getting the installment price:

Installment price (IP) = Total of installment payments + Down payment

= (12 × P80 000) + P100 000
= P960 000 + P100 000
= P1 060 000
BUSINESS LOANS
Example 1: SME Loan: Installment
Franco Tristan Remittance Business, a start-up business, purchased 30
laptops in installment plan to support its remittance operations group with a
P100 000 down payment and 12 monthly payments of P80 000 for the remaining
balance of P800 000.
2. How much interest rate was imputed if the cash price of the 30 laptops is
P900 000?
Solution:
Apply the following formula to get the interest rate.

I = Installment price — cash price I = Prt

= P1 060 000 – P900 000 P160 000 = P800 000(r)(1)
𝑃160 000
= P160 000 =𝑟
𝑃800 000

r = 0.20 or 20%
BUSINESS LOANS
Example 1: SME Loan: Installment
Franco Tristan Remittance Business, a start-up business, purchased 30
laptops in installment plan to support its remittance operations group with a
P100 000 down payment and 12 monthly payments of P80 000 for the remaining
balance of P800 000.
3. How much is the interest paid by the business per month?

Solution:
Apply the following formula in getting the monthly interest payment

I = Prt
= (P800 000)(0.20)(1/12)
= P13 333.33
BUSINESS LOANS
Example 1: SME Loan: Installment
Franco Tristan Remittance Business, a start-up business, purchased 30
laptops in installment plan to support its remittance operations group with a
P100 000 down payment and 12 monthly payments of P80 000 for the remaining
balance of P800 000.
4. How much is deducted from the principal loan per month?

Solution:
Apply the following formula in getting the amount of principal paid per month:

Monthly payment – Monthly Interest Payment = Principal Paid per Month

P80 000 – P13 333.33
= P66 666.67
BUSINESS LOANS
Example 2: Corporate Loan
AMDDC Corporation, a real estate company, is one of
the top 1 000 corporations in the Philippines. It has a
P500,000,000 credit line with the Global Filipino Bank. The
annual percentage rate (APR) charged on the account is
the current prime rate plus 5%. There is a minimum APR on
the account of 10%. The starting balance on 1 June 2019
was P50,000,000. On 9 June 2019, AMDDC Corporation
borrowed P20,000,000 to finance one of its projects in
Santa Rosa City. On 20 June, AMDDC made a
P60,000,000 payment on the account. On 26 June, AMDDC
borrowed another P50,000,000 to finance its operating and
capital expenditures. The billing cycle for June has 30 days.
If the current prime rate is 8%, what is the finance charge
on the account and what is AMDDC Corporation’s new
balance?
 AMDDC Corporation, a real estate company, is one of the top 1 000 corporations in
the Philippines. It has a P500,000,000 credit line with the Global Filipino Bank. The annual
percentage rate (APR) charged on the account is the current prime rate plus 5%. There is a
minimum APR on the account of 10%. The starting balance on 1 June 2019 was
P50,000,000. On 9 June 2019, AMDDC Corporation borrowed P20,000,000 to finance one
of its projects in Santa Rosa City. On 20 June, AMDDC made a P60,000,000 payment on
the account. On 26 June, AMDDC borrowed another P50,000,000 to finance its operating
and capital expenditures. The billing cycle for June has 30 days. If the current prime rate is
8%, what is the finance charge on the account and what is AMDDC Corporation’s new
balance?
Solution:
To solve this problem, you need to find the following: (a) annual percentage rate, (b)
periodic rate, (c) average daily balance, (d) finance charge, and (e) new balance.

(a) Annual percentage rate (APR): The APR is the current prime rate plus 5%, with a
minimum of 10%. Because the current prime rate is 8%, the APR on this line of credit is
13% (8% + 5%).
APR = 13%
 AMDDC Corporation, a real estate company, is one of the top 1 000 corporations in
the Philippines. It has a P500,000,000 credit line with the Global Filipino Bank. The annual
percentage rate (APR) charged on the account is the current prime rate plus 5%. There is a
minimum APR on the account of 10%. The starting balance on 1 June 2019 was
P50,000,000. On 9 June 2019, AMDDC Corporation borrowed P20,000,000 to finance one
of its projects in Santa Rosa City. On 20 June, AMDDC made a P60,000,000 payment on
the account. On 26 June, AMDDC borrowed another P50,000,000 to finance its operating
and capital expenditures. The billing cycle for June has 30 days. If the current prime rate is
8%, what is the finance charge on the account and what is AMDDC Corporation’s new
balance?
Solution:
(b) Periodic rate
 AMDDC Corporation, a real estate company, is one of the top 1 000 corporations in
the Philippines. It has a P500,000,000 credit line with the Global Filipino Bank. The annual
percentage rate (APR) charged on the account is the current prime rate plus 5%. There is a
minimum APR on the account of 10%. The starting balance on 1 June 2019 was
P50,000,000. On 9 June 2019, AMDDC Corporation borrowed P20,000,000 to finance one
of its projects in Santa Rosa City. On 20 June, AMDDC made a P60,000,000 payment on
the account. On 26 June, AMDDC borrowed another P50,000,000 to finance its operating
and capital expenditures. The billing cycle for June has 30 days. If the current prime rate is
8%, what is the finance charge on the account and what is AMDDC Corporation’s new
balance?
Solution:
(c) Average daily balance
 AMDDC Corporation, a real estate company, is one of the top 1 000 corporations in
the Philippines. It has a P500,000,000 credit line with the Global Filipino Bank. The annual
percentage rate (APR) charged on the account is the current prime rate plus 5%. There is a
minimum APR on the account of 10%. The starting balance on 1 June 2019 was
P50,000,000. On 9 June 2019, AMDDC Corporation borrowed P20,000,000 to finance one
of its projects in Santa Rosa City. On 20 June, AMDDC made a P60,000,000 payment on
the account. On 26 June, AMDDC borrowed another P50,000,000 to finance its operating
and capital expenditures. The billing cycle for June has 30 days. If the current prime rate is
8%, what is the finance charge on the account and what is AMDDC Corporation’s new
balance?
Solution:
(c) Average daily balance
 AMDDC Corporation, a real estate company, is one of the top 1 000 corporations in
the Philippines. It has a P500,000,000 credit line with the Global Filipino Bank. The annual
percentage rate (APR) charged on the account is the current prime rate plus 5%. There is a
minimum APR on the account of 10%. The starting balance on 1 June 2019 was
P50,000,000. On 9 June 2019, AMDDC Corporation borrowed P20,000,000 to finance one
of its projects in Santa Rosa City. On 20 June, AMDDC made a P60,000,000 payment on
the account. On 26 June, AMDDC borrowed another P50,000,000 to finance its operating
and capital expenditures. The billing cycle for June has 30 days. If the current prime rate is
8%, what is the finance charge on the account and what is AMDDC Corporation’s new
balance?
Solution:
(d) Finance charge

Finance charge = Average daily balance × Periodic rate

= P51 000 000 × 0.01083
= P552 330
 AMDDC Corporation, a real estate company, is one of the top 1 000 corporations in
the Philippines. It has a P500,000,000 credit line with the Global Filipino Bank. The annual
percentage rate (APR) charged on the account is the current prime rate plus 5%. There is a
minimum APR on the account of 10%. The starting balance on 1 June 2019 was
P50,000,000. On 9 June 2019, AMDDC Corporation borrowed P20,000,000 to finance one
of its projects in Santa Rosa City. On 20 June, AMDDC made a P60,000,000 payment on
the account. On 26 June, AMDDC borrowed another P50,000,000 to finance its operating
and capital expenditures. The billing cycle for June has 30 days. If the current prime rate is
8%, what is the finance charge on the account and what is AMDDC Corporation’s new
balance?
Solution:
(e) New balance

New balance = Previous balance + Finance charge + Loan amounts – Payments

= P50 000 000 + P552 330 + P70 000 000 – P60 000 000
= P60 552 330
If you are to put up
your own business,
would you consider
applying for a
business loan?