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A FEASIBILITY STUDY ON
ESTABLISHING A LENDING
       BUSINESS




    REYMAR M. DE LUZON
        PROPONENT
ACKNOWLEDGEMENT


I would like to acknowledge and extend my heartfelt gratitude to the following
persons who have made the completion of this Project Study possible:


To our instructor, LTC. COL. ALFREDO L. LUPIG, (CE) PA (GSC) RES for his
vital encouragement, stimulating suggestions, knowledge and experiences
helped me in understanding and analyzing my project study.


To my respondents, the employees of LGUs of Naujan, Other Offices, school
teachers & staff as well as the pensioners for their cooperation in answering my
queries and sharing their opinions.


To Ms. Douris Cruzat, an employee of an existing lending company for sharing
some ideas and picturing to me how lending business operates.


To my colleagues and officemates, for assisting me in preparation of Projected
Financial Statements.


And most especially to my family and friends for their untiring support


And above all, To God who made things possible.




Reymar M. De Luzon
Proponent
03/23/2013
CHAPTER I: INTRODUCTION


INTRODUCTION
Lending money to those who need it can be a profitable business. With the
proper management of your funds and control of risks involves in extending
credit to borrowers, running such venture can give you favorable return of capital
or investment. You can expect more people wanting to borrow money, amidst the
economic crisis our nation is now facing. The credit industry has many players,
such as banks, financing companies and other financial institutions. However,
there are still specific markets which you can successfully target to extend your
fund for lending. You just need to be strategic and prudent enough to ensure that
your loans and receivables are reasonably collectible.


You may or may not have heard of micro-lending, the hottest new trend in global
finance, but it is changing the way people borrow, lend and donate. Boiled down,
micro-loans are small loans, made to the working poor or other needy individuals
who are unable to borrow money through traditional routes. Micro-lending first
became an avenue for investors by helping impoverished individuals in third
world countries—particularly women in rural areas—to borrow money for
business, agricultural and educational ventures. The idea has spread so that you
can now help individuals both far away and next door see their dreams become a
reality. While some micro-lending will earn you a return on your investment,
others are simply loans that will be repaid at dollar value, and some are actual
gifts. No matter what, you can feel good about where your money goes.


As mostly people who are willingly to quit an employee life, have a sincere desire
to build a better life for themselves. They know that the loans offer an important
opportunity and they are committed to making the most of them. Most of our
kababayans were already involved in some kind of small enterprise, like vending
on the street. Therefore, they have a good business sense. The loans allow them
to diversify, be creative, and buy products in bulk.


They will work for everything that they receive through the project, with the micro-
lending program, the individuals must give back what they have borrowed. This
helps ensure a high repayment rate.


Running a successful business and making good on a loan creates a more
powerful and independent person.


A. STATEMENT OF THE PROBLEM
As the need for money increases to sustain the financial needs of different
individuals in the area such as the need to support studies, basic needs & etc.
Many of them are choose to avail loans from underground lending (e.i. bombay
5-6, short time & the like) which offer as high as 20% interest rate which makes
borrowers sunk from their financial obligations. In other words it can not really
helps the individuals for their financial shortcomings in the long run.


In this regard the main gist of this study is to establish lending company that offer
a reasonable interest rate to cater the financial shortcomings of the market. To
determine the worthwhile of the study it sought to answer the following aspects:


Marketing Aspect
Who will benefit on the proposed lending business?


What method should the business ratify in order to introduce and compete with
the existing lending businesses?
Management Aspect
How would the business be managed successfully and maintain it?


Technical Aspect
How the business can be practically put into effect?


What are the general guidelines or implementing rules under RA 9474 also
known as Lending Company Regulation Act of 2007 to be followed in
establishing the business?


Financial Aspect
How can the business earn profit and underrate its cost?


B. OBJECTIVE OF THE FEASIBILITY STUDY
To be able to identify the effectiveness of the proposed business in the market by
catering their financial needs.


To be able to formulate the most effective management techniques in operating
the business.


To find out how the business be practically put into effect.


To be able to find effective strategies of increasing the profit of the business
while underrating the cost.


C. SIGNIFICANCE OF THE FEASIBILITY STUDY
It is a challenge for everyone to put up a business. Many factors will be
considered therefore, this study will be a great help to the society most especially
to those whose interest are in venturing their money in lending business. This will
serve as a guiding tool in making the business in reality and minimize/eliminate
the underground lending such as bombay lending also known as 5-6 and short
time lending that offer an unreasonable interest rate.


Furthermore, this paper can broaden the thinking of the researchers with regards
to the challenge in the business world and urge them to be informative on how
lending business accompany and fight those challenges.


D. METHODOLOGY
The research methodology to be used in conducting this project study is the
descriptive method of research which helps the researcher since this type of
research method concerned with the description of data and characteristics
about the population that provides an accurate potrayal of the characeristics of a
particular individual, situation or a group in a current trend of the operation.


Sources of Data
The primary sources of data for this study is through distributing and conducting
of questionnaires and interviews from the future target market, the employees of
LGUs, offices, schools and pensioners within the area and to those who engaged
in the same line of business. These kind of descriptive research methods will
photograph an accurate data and information which may not found in books and
other research materials.


The other sources of data to be used in this study are books, periodicals, other
related research papers and studies, and through internet.


E. SCOPE AND DELIMITATION OF THE FEASIBILITY STUDY
This study tends to establish a lending business in Poblacion, Naujan, Oriental
Mindoro.
The study will cover the future market, the employees of LGUs, offices, schools
and pensioners within the area. As well as the competitor/s to be able to identify
the current trend of the business.


The study will also consider the guidelines and implementing rules in establishing
lending business.


F. REVIEW OF RELATED LITERATURE
Lending handles a big role in supporting the financial incapacity of many
individuals. Even the employed people who handled a permanent positions in the
company once in a while still availing the offer of lending companies. In the
Philippines many lending companies offer different kinds of loan it depends on
the needs of the people and their capacity to return the lent amount.


According to the article in Innovation for Poverty Action entitled ―The Impact of
microcredit in the Philippines‖ Microcredit, or the practice of providing very small
loans to the poor, often with group liability, is an increasingly common tool
intended to fight poverty and promote economic growth. But microlending has
expanded and evolved into what might be called its ―second generation,‖ often
looking more like traditional retail or small business lending where for-profit
lenders extend individual liability credit in increasingly urban and competitive
settings. The motivation for the continued expansion of microcredit is the
presumption that expanding credit access is an efficient way to fight poverty and
promote growth. Yet, despite optimistic claims about the effects of microcredit on
borrowers and their businesses, there is relatively little empirical evidence on its
impact.
G. DEFINITION OF TERMS
1. Borrowers – an individuals, organization or company that is using funds on
   credit.
2. Interest Income – an income gained from lending of money.
3. Interest Rate – an amount charged, expressed as a percentage of principal,
   by a lender to a borrower.
4. Lending – an activity to give or allow the use of temporarily on the condition
   that the same or its equivalent will be returned with interest.
5. Lending Company – a company which makes loan to individuals and/or
   business to gain interest.
6. Loans – the act of giving money to another party in exchnage for future
   repayment of the principal amount along with interest.
7. Penalty Fees – fees being collected for late repayments of loan.
8. Republic Act 9474 - also known as Lending Company Regulation Act of
   2007. An Act Governing the Establishment, Operation and Regulation of
   Lending Companies in the Philippines.
9. Term – period over which a loan agreement is in force, and before or at the
   end of which the loan should either be repaid or renegotiated for another
   term.
10. Underground Lending – informal engaging in lending activities, usually
   offers higher interest rate.
CHAPTER II: MARKETING ASPECTS


A. INDUSTRY PROFILE
The proposed project will be introduced with business name Quick Cash
Lending Company, Inc. The business name is based on the purpose of the
business to lend a money to borrowers with lower interest rate and minimal
documentary requirements. The project will cater the employees of LGUs, other
offices as well as the teachers and staff of schools within the area and the
pensioners.


B. DEMAND ANALYSIS

                                      Table 1
                                   Demand Analysis

   TARGET           POPULATION SIZE         PERCENTAGE OVER THE TOTAL
   MARKET                                        POPULATION SIZE
LGUs Employees               171                      57%
Teachers, Staff               61                      20%
Other Offices                 20                       7%
Pensioners                    50                      16%
TOTAL                        302                      100%

The table 1 shows a total target market of 302. And 57% of them are coming
from employees of LGUs, 20% are from the teachers & staff of different schools,
7% will be coming from the employees of other offices and the remaining 16%
are the pensioners within the area.
C. ESTIMATION OF PRESENT DEMAND

                                      Table 2
                                 Present Demand
                                   PERCENTAGE                         PERCENTAGE
    TARGET           WILLING        OVER THE          UNWILLING        OVER THE
    MARKET           TO AVAIL         TOTAL            TO AVAIL          TOTAL
                      LOAN         POPULATION           LOAN          POPULATION
                                       SIZE                               SIZE
LGUs Employees          150            49%                 21              7%
Teachers, Staff          53            18%                 8               3%
Other Offices            20             7%                 0               0%
Pensioners               50            16%                 0               0%
TOTAL                   273            90%                 29             10%

Based on the interviews and questions conducted by the proponent, the
summary of the present demand arrived as shown on the Table 2. A total of 150
out 171 employees of LGUs or 49% of the total population size are willing to avail
loans from the proposed project 21 of them or 7% of the total population size are
unwilling and said that they have other sources of income which they can use in
the event they needed it. While 53 out of 61 school employees or 18% of the total
population size are said that they are also willing to avail loans for their financial
shortcomings such as for tuition fees of their children. Only 8 of them or 3% of
the total population size said that they don’t want to avail loan, since their
husbands/wives are also employed. On the other hand, all the employees of
other offices and pensioners in the area are very much willing to avail loan from
the legitimate lending firm with a reasonable interest rate unlike with the
underground lending (e.i. 5-6 lending, short time lending) that offers as high as
20% interest rate.
D. PROJECTION OF FUTURE DEMAND

                                        Table 3
                                    Future Demand

                 PRESENT      ESTIMATED       PERCENTAGE          PROJECTED
  MARKET         DEMAND       INCREASE        OF ESTIMATED         DEMAND
                    (a)           (b)           INCREASE             (a+b)
LGUs
Employees           150            98               65%                248
Teachers,           53             34               65%                87
Staff
Other Offices       20              13              65%                33
Pensioners          50              32              65%                82
TOTAL               273            177              65%                450

Based on the figures on the present demand and to know that the project will
prosper in the future the proponent will set of atleast 65% increase per year for
the demand. As shown on the table above.
E. SUPPLY ANALYSIS
Since the nature of operation of the project is by lending money the supply for
this kind of business is of course the funds that the business will lend to the
borrowers. The project will ensure and will establish a good collection strategies
to make repayments faster and enable to loan out money to more borrowers.
CHAPTER III: TECHNICAL STUDY


A. DESCRIPTION OF OPERATION AND PROCESS
To be able the project be implemented the project will ensure first the papers and
basic documentary requirements as provided in RA 9474 also known as Lending
Company Regulation Act of 2007 an Act Governing the Establishment, Operation
and Regulation of Lending Companies. To name those documents and
requirements, the project will establish as corporation, with a minimum paid-in
capital of One Million Pesos (P1,000,000.00) and secure a license to operate
from Securities and Exchange Commission (SEC), other documentary
requirements shall secure from the Municipality where the business will be
located.


The business will grant loan to the borrowers with a reasonable interest rate of
3% per month. The company will also deduct an advance one (1) month interest
from the proceeds of loan as well as the other fees. The loan must be payable
within one (1) month up to six (6) months term base on the amount borrowed and
the agreemement between the borrower and the company.


Since the target market of the project will be the employees of LGUs, other
offices and Schools and also the pensioners, the proponent will propose to have
a Memorandum of Agreement (MOA) between the lending company and their
respective employers to deduct a corresponding amount from their monthly
salary and remit the same to the lending company. This will ensure the smooth
collection of loans. On the other hand, on the part of the pensioners they will
surrender their Passbooks, or ATMs to the company as collateral since this is the
only way to protect and as assurance to pay their lent amount. And for some
instances, for the convenient collection of matured loans, the company will
propose to the bank where the monthly pensions of pensioners are remitted in
the area to debit the account of the pensioners with matured loan once their
pensions credited to their respective accounts and credit the same to the account
of the company. Since, the company will open a bank account preferably
checking account for easy releasing of loans.


As one of the requirements to avail a loan from the company, borrower must
have a co-maker and it must be his/her officemate. To ensure that whenever the
borrower fails to settle his/her obligation, the co-maker will be liable for that
obligation.


The company will provide a promissory note stating the amount of loan, the
interest rate, the term of loan, other fees and other terms and conditions and this
will be signed by both the representatives of the company and the borrower
same as with his/her co-maker. This is also in compliance to the requirements of
Truth in Lending Act.




B. PROJECT LOCATION
The proposed location of the project would be the vacant office space owned by
the Riveras along Garong St., Poblacion 2, Naujan, Oriental Mindoro. The Office
is fully furnished.




C. PROJECT EQUIPMENTS
Every business can not operate without equipments in the workplace. The
proposed equipments to be acquired before the project be implemented are the
following:
Two (2) sets of computer
Two (2) units of printer
One (1) unit of telephone/fax machine
One (1) unit of typewriter
Three (3) calculators


The owners will canvass those equipments to qualified suppliers. Setting a
parameters to get a lowest price with good standard will observe by the owners.
The project will prioritize the supplier who have a better offer.


These equipments will be used by the employees of the business to ensure the
smooth operation of the business. The proponent suggested to have 2 sets of
computer, one (1) for the manager and the other one(1) is to be used by his/her
staff or co-employees same as the printer for preparing and printing the reports.
The company must have of atleast one (1) unit of telephone/fax machine for the
queries of the prospective clients and for follow-uping other business related
concerns. One (1) unit of typewriter for preparing cash vouchers, promissory
notes, checks and other documents. And of course calculators to be used for
computation of interest and other related mathematical matters.


Since the office space is completely furnished. The proponent will also propose
to have the following furnitures and fixtures. Proper canvassing as what had
observe in purchasing office equipments will also follow.
Three (3) sets of office tables
Three (3) roving chairs
Six (6) chairs for clients
Two (2) electric fans.
CHAPTER IV: ORGANIZATIONS AND MANAGEMENT ASPECTS


A. TYPE OF ORGANIZATION
The proposed business will be established as corporation as per the requirement
of RA 9474 an Act Governing the Establishment, Operation and Regulation of
Lending Companies.


B. ORGANIZATIONAL STRUCTURE




C. PERSONNEL COMPONENT
The business will employee three (3) employees in the office, the cashier,
bookkeeper and operations head or manager. Duties and responsibilities of each
employees are stated below:
Loans Clerk – responsible in releasing and accepting payments of loans.
      -   Prepares cheques, vouchers, promissory notes to be issued to
          borrowers.
-   Prepares Official Receipts (ORs) when the borrowers pay their due
          amount.
      -   Update the ledger of each borrowers.
      -   Make a bank reconciliation.
      -   Handles petty cash in the company for petty expenses.


Loans Supervisor – act as supervisor/bookkeeper.
      -   Checks the works of cashier (cheques, vouchers, ORs, promissory
          notes & etc.)
      -   Handles and prepares the General Ledger/Subsidiary Ledger of the
          business
      -   In charge of closely monitoring collections of delinquent loans.


Manager/Operations Head – over-all in-charge in the lending operations
      -   Approve the loan application and vouchers.
      -   Analyze borrower’s financial & credit status to determine wether the
          loans will be granted or denied.
      -   Responsible in overseeing the performance in processing loans
          documents.
      -   Prepares and analyzes variance on budget vs actual.
      -   Understands, manages and supervises all aspects of cash flow, such
          as but not limited to:
             o Ensures all collections are deposited and accounted for.
             o Ensures all disbursements are approved by authorized
                 personnel before processing.
             o Prepares cash flow projections.
D. PROFILES AND QUALIFICATIONS
For Loans Clerk
     Graduate of any business related course
     Proficient in MS Office
     With good communication skills
     Entry-Level


For Loans Supervisor
     Graduate of Accounting or equivalent
     Knowledgeable in bookkeeping
     With 1-2 years experience in related field.
     Proficient in MS Office
     With Good communication skills
For Manager/Operations Head
     Graduate of any business related course
     Not more than 45 years of age
     With 2-3 years experience in microlending
     Must be Computer Literate
CHAPTER V: FINANCIAL ASPECTS


A. CAPITAL CONTRIBUTION
The study shows that in order to establish a lending company in Poblacion,
Naujan, Oriental Mindoro. The project must have of atleast P1,000,000.00 paid-in
capital.


The proponent will propose to have P2,000,000.00 paid-in capital twice of the
minimum paid-in capital, due to greater demand of the project. The capital will be
from the eleven (11) private individuals whether they are retired employees or
employed but does not affect/influence the interest of both the business and the
company where they employed. They will contribute as to how much investment
they want to raise the projected paid-in capital.


B. BASIC ASSUMPTION
The proponent will assume that the 273 present demand will all avail loans
within the year from the business amounting to P 25,000.00 each with an interest
rate of 3% for 3 months term. On the other hand, the proponent will project 3
uncollectible accounts, this will be the basis to be used in projecting loans
receivables & the one-percent (1%) provision for bad debts. As well as the 2.5%
penalties will be imposed for late payments and the proponent will assume that 5
borrowers may fail their outstanding obligation on the specified term. The
company will also open a bank account and assumed to earn a 1% interest on
deposit.


For the purpose of preparing Financial Statements the proponent will assume
that the project will start its first year of operation on the first day of January
2014. Other related matters will be based on the current trend such as utilities
(electricity & water expenses).
FINANCIAL ANALYSIS


A. OPERATING EXPENSES
The projected monthly operating expenses of the project will be as follows:
Rent Expense                                    P      2,500.00
Water Expense                                            467.50
Electricity                                              500.00
Telephone Expense                                        400.00
TOTAL                                           P      3,867.50


B. SCHEDULE OF SALARIES
To attract qualified employees to fit the position. The company will offer an above
minimum wage. The salaries of each employees are as follows depending on the
postion they will handle.
POSITIONS                                  MONTHLY SALARIES (PHP)
Loans Clerk                                 7,600.00
Loans Supervisor                            9,000.00
Manager/Operations Head                    12,400.00




C. SCHEDULE OF FRINGE BENEFITS
All employees will receive a mid-year bonus equivalent to their one (1) month
salaries. A christmas bonus base on the company’s performance. Thirteenth
month pay will be given also as provided by our labor code.


Aside from fringe benefits mentioned above the company will also give a yearly
medicine allowance of P1,200.00 for each employees. Other benefits as provided
by our Labor Code will be given also.
D. PROJECTED INCOME STATEMENT

         Quick Cash Lending Company, Inc.
              PROJECTED INCOME STATEMENT
             For the Year Ended December 31, 2014




INCOME
Interest Income                            P        569,250.00
Late Fees                                             3,125.00
Other Income (Interest on Deposit)                   16,000.00
Total Income                               P        588,375.00


Less: EXPENSES
Salaries                                   P        348,000.00
Fringe Benefits                                      61,600.00
Supplies Expense                                     12,000.00
Power, Light & Water                                 15,210.00
Rent Expense                                         30,000.00
Telephone Expense                                     3,000.00
PHIC, SSS & Pag-ibig Dues                            36,351.60
Permits & Licenses                                   24,436.00
Provision for Bad Debts (1%)                         12,250.00
Total Expense                              P        542,847.60

Net Income Before Income Tax                         45,527.40
Provison for income Tax                              28,462.50
Net Income After Income Tax                P         17,064.90
E. PROJECTED BALANCE SHEET

               Quick Cash Lending Company, Inc.
                      PROJECTED BALANCE SHEET
                        As of December 31, 2014

ASSETS
Cash in Bank                                           P    705,012.40

Loans Receivables                   P   1,225,000.00
Less: Allowance for Bad Debts              12,250.00       1,212,750.00
Interest Receivables                                           2,250.00
Unused Supplies                                                6,000.00
Office Equipments                                             78,000.00
Furniture and Fixture                                         34,320.00
Total Assets                                           P   2,038,332.40



LIABILITIES
Accounts Payable                                       P      2,500.00
Accrued Other Expenses Payable                                1,517.50
Unearned Interest Income                                     17,250.00
Total Liabilities                                      P     21,267.50

STOCK HOLDER'S EQUITY
Retained Earnings                                      P      17,064.90
Commonstock                                                2,000,000.00
Total Stockholder's Equity                             P   2,017,064.90
Total Liabilities & Stockholder's
Equity                                                 P   2,038,332.40
F. PROJECTED STATEMENT OF CASH FLOWS

                  Quick Cash Lending Company, Inc.
                         PROJECTED STATEMENT OF CASH FLOWS
                             For the Year Ended December 31, 2014

Cash Flow from Operating Activities
     Cash Inflows
          Cash Received from Loan
         Interest                        P     567,000.00
          Cash Received from Advance
         Interest                               17,250.00
          Cash Received from Other
         Income                                 19,125.00           P     603,375.00
     Cash Outflows
         Payments for Permits,
         Licenses &Taxes                 P      52,898.50
          Payments for Suppliers                18,000.00
          Payments for Employees               445,951.60
          Payments for Rent                     27,500.00
          Payments for Utilities                13,942.50

           Payments for Telephone                2,750.00           P     561,042.60
Net Cash flow from Operating
Activities                                                                 42,332.40
Cash Flow From Investing Activities
     Cash Inflows
         Cash Received from
         borrowers                            5,675,000.00              5,675,000.00
     Cash Outflows
           Cash Lent to borrowers             6,900,000.00
           Purchased of Equipments,
           Furniture & Fixture           P     112,320.00           P   7,012,320.00
Net Cash Flow from Investing
Activities                                                          P   (1,337,320.00)

Cash Flow From Financing Activities      P            -
Net Cash Flow from Financing
Activities                                                          P             -
Net Increase (Decrease in cash)                                     P   (1,294,987.60)

Add: Cash,Beginning                                                 P   2,000,000.00

Cash , End                                                          P     705,012.40
FINANCIAL RATIOS


A. CURRENT RATIOS
To determine that the project will settle its short-term obligations. The proponent
will calculate the projected current ratio as shown below:




Current Ratio = 1,926,012.40 / 21,267.50
Current Ratio = 90.56
The computed current ratio of 90.56 proves that the business is capable to settle
its short-term obligations.


B. PROFIT MARGIN
Net profit margin is a key financial indicator used to asses the profitability of a
company. Below is the computation of the Net Profit Margin of the business:




Net Profit Margin = 17,064.90 / 588,375.00 x 100
Net Profit Margin = 2.90%
The percentage shown by net profit margin is does not have any specific
benchmark. It is because the net profit margin of a small business and big steel
plant cannot be same and therefore a standard benchmark cannot be set. The
interpretation is more meaningful when the data of more than one period are
available or the industry or competitor’s net profit margins are available.
EVALUATION OF PROJECT STUDY


A. RETURN ON INVESTMENT
Based on the projected income statement of the business a total gain of
P588,375.00 was earned while a total operating/administrative expenses of
P542,847.60 was also incurred during the year. To get the ROI the illustration is
drawn below:




ROI = (588,375 – 542,847.60) / 542,847.60 x 100%
ROI =    45,527.40 / 542,847.60 x 100%
ROI = 0.08 or 8%
As shown on the above computation, 8% ROI is greater than 3%. Therefore, the
project is said to be feasible.
CHAPTER VI: CONCLUSIONS AND RECOMMENDATIONS


Establising of Lending Business in Naujan, Oriental Mindoro appears to be
feasible as shown on the evaluation of Return on Investment of 8% on its first
year of operation.


As per the interviews and questions conducted by the proponent, having a
lending company in the area will assist the needs of certain individuals for their
financial shortcomings.


Therefore, I conclude as per the data gathered and based on the results, it
shows that the project will help and assist the financial needs of different
individuals and in return it will give an income to the company. I also conclude
that with this, it will minimize and later on eliminate the traditional lending from
underground lenders that offer a short-time lending like bombay( 5-6). On the
other hand, I recommend that this project be implemented. And research
supports that with the 65% increase for the future demand, this industry will
continue to grow for the following years.
CHAPTER VII: DESIRABILITY OF THE PROJECT


The primary objective of this study is to determine the feasibility and viability of a
proposed plan to establish a lending company in Poblacion I, Naujan, Oriental
Mindoro. Part of this study is to be able to shed light to the proponent of this
project as to well-grounded, risks, expenditures, benefits, marketability and
profitability of the services. After interpreting the data gathered and concluding
that the proposed project is feasible, I made some financial projections that show
a favorable outcome. It is been estimated that after a year of operation the
project can enjoy the net increase of P17,064.90


Moreover, this project does not only give a great deal of benefits to the proposing
parties but to the society as well. With the establishment of a new line of
business, which is the lending, Quick Lending Company, Inc. can contribute to
the improvement of the economy locally by some how giving employment in the
society. In the first year of operations, the new line of business would already
generate a quite favorable income to the owner of the project. Usually,
companies would only break even in their first year of operations. But the
proposed lending business has already shown its profitability. It is expected that
with a favorable and profitable lending operations, Quick Lending Company, Inc.
would increase their types of lending services to different types of individuals in
the society. Possible expansion by putitng up additional offices in some areas will
also be considered.


This implies that need for personnel or workers will also increase. Thus, giving a
venue for people to get employed and earn their money. If there are more people
earning, this means that taxes to be returned to government would also increase.
If there is an increase in lending services, reasonable return will be also
generated. This means that the business is contributing the local economy.
APPENDICES


APPENDIX A
DERIVATION OF INCOME
                                                                INTEREST
     PERIOD              NO. OF          AVERAGE LOAN          EARNED IN 3
                      BORROWERS            AMOUNT AT          MONTHS TERM
                        MONTHLY             P25,000.00         AT 3% RATE

     Jan-Mar                23                  575,000.00           51,750.00

     Feb-Apr                23                  575,000.00           51,750.00

    Mar-May                 23                  575,000.00           51,750.00

    Apr-June                23                  575,000.00           51,750.00

    May-July                23                  575,000.00           51,750.00

    June-Aug                23                  575,000.00           51,750.00

    July-Sep                23                  575,000.00           51,750.00

     Aug-Oct                23                  575,000.00           51,750.00

    Sep-Nov                 23                  575,000.00           51,750.00

     Oct-Dec                23                  575,000.00           51,750.00

     Nov-Jan                23                  575,000.00           51,750.00

     Dec-Feb                23                  575,000.00           51,750.00

     TOTAL                 276                6,900,000.00          621,000.00

The table shows that the 276 total number of borrowers is a rounded off number
of present demand. A total Interest of P621,000.00 was earned by the company
P569,250.00 of it was earned during the year and the difference of P51,750.00 is
due on January and February of the following year. Since the company is
deducting an advance interest, the company assumed that on December a one
month advance interest of P47,500.00 from the 23 borrowers is unearned
interest as reflected on the Projected Balance Sheet.
APPENDIX B
                                    TIMETABLE
                        Establishing of Lending Business
                                                                 2
                                                                 0
                                                     2013        1
                                                                 4




                                            JUNE
                                            JULY
                                            MAR


                                            MAY



                                                           AUG



                                                           NOV
                                             APR




                                                           OCT

                                                           DEC
                                                           SEP
                                             JAN




                                                                 JAN
                                             FEB
              ACTIVITIES


Presentation of the project study to the
interested investors.
Discussion of the capital contribution
Securing License to operate & permits
from SEC, locality, & BIR.
Communicating with the Offices for
possible linkages.
Coordinating with the owner of the office
space
Posting of job vacancies
Acquisition of Office Equipments,
Supplies, Furniture & Fixture.
Presentation of the project to the target
market
Start of Business Operation
APPENDIX C
BIO-DATA
Personal Information
Name               :     Reymar Manhic de Luzon
Birthdate          :     June 27, 1988
Birth place        :     Santiago, Naujan, Oriental Mindoro
Age                :     24 years old
Height             :     5’11
Weight             :     145.2 lbs.
Father’s Name      :     Raymundo Moreno de Luzon
Mother’s Name      :     Maricel Manhic de Luzon


Educational Background
Graduate Studies   :     Master in Business Administration
                         Mindoro State College of Agriculture & Technology
                         Masipit, Calapan City
                         June – present

College            :     Bachelor of Science in Commerce
                         Major in Banking & Finance
                         Divine Word College of Calapan
                         Gov. Infantado St., Calapan City Oriental Mindoro
                         2005 – 2009

Secondary          :     Naujan Academy
                         Poblacion I, Naujan, Oriental Mindoro
                         2001 – 2005

Elementary         :     Mariano P. Leuterio Memorial School
                         Andres Ylagan, Naujan, Oriental Mindoro
                         1995 – 2001

Employment Record

Teller/New Accounts Clerk
Allied Savings Bank
January 18, 2010 to present
BIBLIOGRAPHY


http://businesstips.ph/how-to-start-a-lending-company-in-the-philippines/


http://www.pinoybisnes.com/business-ideas/how-to-start-a-microlending-
business/#ixzz2IWxzhk1B


RA9474 An Act Governing the Establishment, Operation and Rehulation of
Lending Companies


http://www.scribd.com/doc/99505226/A-Feasibility-Study

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Project study on establishing lending business

  • 1. A FEASIBILITY STUDY ON ESTABLISHING A LENDING BUSINESS REYMAR M. DE LUZON PROPONENT
  • 2. ACKNOWLEDGEMENT I would like to acknowledge and extend my heartfelt gratitude to the following persons who have made the completion of this Project Study possible: To our instructor, LTC. COL. ALFREDO L. LUPIG, (CE) PA (GSC) RES for his vital encouragement, stimulating suggestions, knowledge and experiences helped me in understanding and analyzing my project study. To my respondents, the employees of LGUs of Naujan, Other Offices, school teachers & staff as well as the pensioners for their cooperation in answering my queries and sharing their opinions. To Ms. Douris Cruzat, an employee of an existing lending company for sharing some ideas and picturing to me how lending business operates. To my colleagues and officemates, for assisting me in preparation of Projected Financial Statements. And most especially to my family and friends for their untiring support And above all, To God who made things possible. Reymar M. De Luzon Proponent 03/23/2013
  • 3. CHAPTER I: INTRODUCTION INTRODUCTION Lending money to those who need it can be a profitable business. With the proper management of your funds and control of risks involves in extending credit to borrowers, running such venture can give you favorable return of capital or investment. You can expect more people wanting to borrow money, amidst the economic crisis our nation is now facing. The credit industry has many players, such as banks, financing companies and other financial institutions. However, there are still specific markets which you can successfully target to extend your fund for lending. You just need to be strategic and prudent enough to ensure that your loans and receivables are reasonably collectible. You may or may not have heard of micro-lending, the hottest new trend in global finance, but it is changing the way people borrow, lend and donate. Boiled down, micro-loans are small loans, made to the working poor or other needy individuals who are unable to borrow money through traditional routes. Micro-lending first became an avenue for investors by helping impoverished individuals in third world countries—particularly women in rural areas—to borrow money for business, agricultural and educational ventures. The idea has spread so that you can now help individuals both far away and next door see their dreams become a reality. While some micro-lending will earn you a return on your investment, others are simply loans that will be repaid at dollar value, and some are actual gifts. No matter what, you can feel good about where your money goes. As mostly people who are willingly to quit an employee life, have a sincere desire to build a better life for themselves. They know that the loans offer an important opportunity and they are committed to making the most of them. Most of our kababayans were already involved in some kind of small enterprise, like vending
  • 4. on the street. Therefore, they have a good business sense. The loans allow them to diversify, be creative, and buy products in bulk. They will work for everything that they receive through the project, with the micro- lending program, the individuals must give back what they have borrowed. This helps ensure a high repayment rate. Running a successful business and making good on a loan creates a more powerful and independent person. A. STATEMENT OF THE PROBLEM As the need for money increases to sustain the financial needs of different individuals in the area such as the need to support studies, basic needs & etc. Many of them are choose to avail loans from underground lending (e.i. bombay 5-6, short time & the like) which offer as high as 20% interest rate which makes borrowers sunk from their financial obligations. In other words it can not really helps the individuals for their financial shortcomings in the long run. In this regard the main gist of this study is to establish lending company that offer a reasonable interest rate to cater the financial shortcomings of the market. To determine the worthwhile of the study it sought to answer the following aspects: Marketing Aspect Who will benefit on the proposed lending business? What method should the business ratify in order to introduce and compete with the existing lending businesses?
  • 5. Management Aspect How would the business be managed successfully and maintain it? Technical Aspect How the business can be practically put into effect? What are the general guidelines or implementing rules under RA 9474 also known as Lending Company Regulation Act of 2007 to be followed in establishing the business? Financial Aspect How can the business earn profit and underrate its cost? B. OBJECTIVE OF THE FEASIBILITY STUDY To be able to identify the effectiveness of the proposed business in the market by catering their financial needs. To be able to formulate the most effective management techniques in operating the business. To find out how the business be practically put into effect. To be able to find effective strategies of increasing the profit of the business while underrating the cost. C. SIGNIFICANCE OF THE FEASIBILITY STUDY It is a challenge for everyone to put up a business. Many factors will be considered therefore, this study will be a great help to the society most especially to those whose interest are in venturing their money in lending business. This will
  • 6. serve as a guiding tool in making the business in reality and minimize/eliminate the underground lending such as bombay lending also known as 5-6 and short time lending that offer an unreasonable interest rate. Furthermore, this paper can broaden the thinking of the researchers with regards to the challenge in the business world and urge them to be informative on how lending business accompany and fight those challenges. D. METHODOLOGY The research methodology to be used in conducting this project study is the descriptive method of research which helps the researcher since this type of research method concerned with the description of data and characteristics about the population that provides an accurate potrayal of the characeristics of a particular individual, situation or a group in a current trend of the operation. Sources of Data The primary sources of data for this study is through distributing and conducting of questionnaires and interviews from the future target market, the employees of LGUs, offices, schools and pensioners within the area and to those who engaged in the same line of business. These kind of descriptive research methods will photograph an accurate data and information which may not found in books and other research materials. The other sources of data to be used in this study are books, periodicals, other related research papers and studies, and through internet. E. SCOPE AND DELIMITATION OF THE FEASIBILITY STUDY This study tends to establish a lending business in Poblacion, Naujan, Oriental Mindoro.
  • 7. The study will cover the future market, the employees of LGUs, offices, schools and pensioners within the area. As well as the competitor/s to be able to identify the current trend of the business. The study will also consider the guidelines and implementing rules in establishing lending business. F. REVIEW OF RELATED LITERATURE Lending handles a big role in supporting the financial incapacity of many individuals. Even the employed people who handled a permanent positions in the company once in a while still availing the offer of lending companies. In the Philippines many lending companies offer different kinds of loan it depends on the needs of the people and their capacity to return the lent amount. According to the article in Innovation for Poverty Action entitled ―The Impact of microcredit in the Philippines‖ Microcredit, or the practice of providing very small loans to the poor, often with group liability, is an increasingly common tool intended to fight poverty and promote economic growth. But microlending has expanded and evolved into what might be called its ―second generation,‖ often looking more like traditional retail or small business lending where for-profit lenders extend individual liability credit in increasingly urban and competitive settings. The motivation for the continued expansion of microcredit is the presumption that expanding credit access is an efficient way to fight poverty and promote growth. Yet, despite optimistic claims about the effects of microcredit on borrowers and their businesses, there is relatively little empirical evidence on its impact.
  • 8. G. DEFINITION OF TERMS 1. Borrowers – an individuals, organization or company that is using funds on credit. 2. Interest Income – an income gained from lending of money. 3. Interest Rate – an amount charged, expressed as a percentage of principal, by a lender to a borrower. 4. Lending – an activity to give or allow the use of temporarily on the condition that the same or its equivalent will be returned with interest. 5. Lending Company – a company which makes loan to individuals and/or business to gain interest. 6. Loans – the act of giving money to another party in exchnage for future repayment of the principal amount along with interest. 7. Penalty Fees – fees being collected for late repayments of loan. 8. Republic Act 9474 - also known as Lending Company Regulation Act of 2007. An Act Governing the Establishment, Operation and Regulation of Lending Companies in the Philippines. 9. Term – period over which a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term. 10. Underground Lending – informal engaging in lending activities, usually offers higher interest rate.
  • 9. CHAPTER II: MARKETING ASPECTS A. INDUSTRY PROFILE The proposed project will be introduced with business name Quick Cash Lending Company, Inc. The business name is based on the purpose of the business to lend a money to borrowers with lower interest rate and minimal documentary requirements. The project will cater the employees of LGUs, other offices as well as the teachers and staff of schools within the area and the pensioners. B. DEMAND ANALYSIS Table 1 Demand Analysis TARGET POPULATION SIZE PERCENTAGE OVER THE TOTAL MARKET POPULATION SIZE LGUs Employees 171 57% Teachers, Staff 61 20% Other Offices 20 7% Pensioners 50 16% TOTAL 302 100% The table 1 shows a total target market of 302. And 57% of them are coming from employees of LGUs, 20% are from the teachers & staff of different schools, 7% will be coming from the employees of other offices and the remaining 16% are the pensioners within the area.
  • 10. C. ESTIMATION OF PRESENT DEMAND Table 2 Present Demand PERCENTAGE PERCENTAGE TARGET WILLING OVER THE UNWILLING OVER THE MARKET TO AVAIL TOTAL TO AVAIL TOTAL LOAN POPULATION LOAN POPULATION SIZE SIZE LGUs Employees 150 49% 21 7% Teachers, Staff 53 18% 8 3% Other Offices 20 7% 0 0% Pensioners 50 16% 0 0% TOTAL 273 90% 29 10% Based on the interviews and questions conducted by the proponent, the summary of the present demand arrived as shown on the Table 2. A total of 150 out 171 employees of LGUs or 49% of the total population size are willing to avail loans from the proposed project 21 of them or 7% of the total population size are unwilling and said that they have other sources of income which they can use in the event they needed it. While 53 out of 61 school employees or 18% of the total population size are said that they are also willing to avail loans for their financial shortcomings such as for tuition fees of their children. Only 8 of them or 3% of the total population size said that they don’t want to avail loan, since their husbands/wives are also employed. On the other hand, all the employees of other offices and pensioners in the area are very much willing to avail loan from the legitimate lending firm with a reasonable interest rate unlike with the underground lending (e.i. 5-6 lending, short time lending) that offers as high as 20% interest rate.
  • 11. D. PROJECTION OF FUTURE DEMAND Table 3 Future Demand PRESENT ESTIMATED PERCENTAGE PROJECTED MARKET DEMAND INCREASE OF ESTIMATED DEMAND (a) (b) INCREASE (a+b) LGUs Employees 150 98 65% 248 Teachers, 53 34 65% 87 Staff Other Offices 20 13 65% 33 Pensioners 50 32 65% 82 TOTAL 273 177 65% 450 Based on the figures on the present demand and to know that the project will prosper in the future the proponent will set of atleast 65% increase per year for the demand. As shown on the table above. E. SUPPLY ANALYSIS Since the nature of operation of the project is by lending money the supply for this kind of business is of course the funds that the business will lend to the borrowers. The project will ensure and will establish a good collection strategies to make repayments faster and enable to loan out money to more borrowers.
  • 12. CHAPTER III: TECHNICAL STUDY A. DESCRIPTION OF OPERATION AND PROCESS To be able the project be implemented the project will ensure first the papers and basic documentary requirements as provided in RA 9474 also known as Lending Company Regulation Act of 2007 an Act Governing the Establishment, Operation and Regulation of Lending Companies. To name those documents and requirements, the project will establish as corporation, with a minimum paid-in capital of One Million Pesos (P1,000,000.00) and secure a license to operate from Securities and Exchange Commission (SEC), other documentary requirements shall secure from the Municipality where the business will be located. The business will grant loan to the borrowers with a reasonable interest rate of 3% per month. The company will also deduct an advance one (1) month interest from the proceeds of loan as well as the other fees. The loan must be payable within one (1) month up to six (6) months term base on the amount borrowed and the agreemement between the borrower and the company. Since the target market of the project will be the employees of LGUs, other offices and Schools and also the pensioners, the proponent will propose to have a Memorandum of Agreement (MOA) between the lending company and their respective employers to deduct a corresponding amount from their monthly salary and remit the same to the lending company. This will ensure the smooth collection of loans. On the other hand, on the part of the pensioners they will surrender their Passbooks, or ATMs to the company as collateral since this is the only way to protect and as assurance to pay their lent amount. And for some instances, for the convenient collection of matured loans, the company will propose to the bank where the monthly pensions of pensioners are remitted in
  • 13. the area to debit the account of the pensioners with matured loan once their pensions credited to their respective accounts and credit the same to the account of the company. Since, the company will open a bank account preferably checking account for easy releasing of loans. As one of the requirements to avail a loan from the company, borrower must have a co-maker and it must be his/her officemate. To ensure that whenever the borrower fails to settle his/her obligation, the co-maker will be liable for that obligation. The company will provide a promissory note stating the amount of loan, the interest rate, the term of loan, other fees and other terms and conditions and this will be signed by both the representatives of the company and the borrower same as with his/her co-maker. This is also in compliance to the requirements of Truth in Lending Act. B. PROJECT LOCATION The proposed location of the project would be the vacant office space owned by the Riveras along Garong St., Poblacion 2, Naujan, Oriental Mindoro. The Office is fully furnished. C. PROJECT EQUIPMENTS Every business can not operate without equipments in the workplace. The proposed equipments to be acquired before the project be implemented are the following: Two (2) sets of computer Two (2) units of printer
  • 14. One (1) unit of telephone/fax machine One (1) unit of typewriter Three (3) calculators The owners will canvass those equipments to qualified suppliers. Setting a parameters to get a lowest price with good standard will observe by the owners. The project will prioritize the supplier who have a better offer. These equipments will be used by the employees of the business to ensure the smooth operation of the business. The proponent suggested to have 2 sets of computer, one (1) for the manager and the other one(1) is to be used by his/her staff or co-employees same as the printer for preparing and printing the reports. The company must have of atleast one (1) unit of telephone/fax machine for the queries of the prospective clients and for follow-uping other business related concerns. One (1) unit of typewriter for preparing cash vouchers, promissory notes, checks and other documents. And of course calculators to be used for computation of interest and other related mathematical matters. Since the office space is completely furnished. The proponent will also propose to have the following furnitures and fixtures. Proper canvassing as what had observe in purchasing office equipments will also follow. Three (3) sets of office tables Three (3) roving chairs Six (6) chairs for clients Two (2) electric fans.
  • 15. CHAPTER IV: ORGANIZATIONS AND MANAGEMENT ASPECTS A. TYPE OF ORGANIZATION The proposed business will be established as corporation as per the requirement of RA 9474 an Act Governing the Establishment, Operation and Regulation of Lending Companies. B. ORGANIZATIONAL STRUCTURE C. PERSONNEL COMPONENT The business will employee three (3) employees in the office, the cashier, bookkeeper and operations head or manager. Duties and responsibilities of each employees are stated below: Loans Clerk – responsible in releasing and accepting payments of loans. - Prepares cheques, vouchers, promissory notes to be issued to borrowers.
  • 16. - Prepares Official Receipts (ORs) when the borrowers pay their due amount. - Update the ledger of each borrowers. - Make a bank reconciliation. - Handles petty cash in the company for petty expenses. Loans Supervisor – act as supervisor/bookkeeper. - Checks the works of cashier (cheques, vouchers, ORs, promissory notes & etc.) - Handles and prepares the General Ledger/Subsidiary Ledger of the business - In charge of closely monitoring collections of delinquent loans. Manager/Operations Head – over-all in-charge in the lending operations - Approve the loan application and vouchers. - Analyze borrower’s financial & credit status to determine wether the loans will be granted or denied. - Responsible in overseeing the performance in processing loans documents. - Prepares and analyzes variance on budget vs actual. - Understands, manages and supervises all aspects of cash flow, such as but not limited to: o Ensures all collections are deposited and accounted for. o Ensures all disbursements are approved by authorized personnel before processing. o Prepares cash flow projections.
  • 17. D. PROFILES AND QUALIFICATIONS For Loans Clerk Graduate of any business related course Proficient in MS Office With good communication skills Entry-Level For Loans Supervisor Graduate of Accounting or equivalent Knowledgeable in bookkeeping With 1-2 years experience in related field. Proficient in MS Office With Good communication skills For Manager/Operations Head Graduate of any business related course Not more than 45 years of age With 2-3 years experience in microlending Must be Computer Literate
  • 18. CHAPTER V: FINANCIAL ASPECTS A. CAPITAL CONTRIBUTION The study shows that in order to establish a lending company in Poblacion, Naujan, Oriental Mindoro. The project must have of atleast P1,000,000.00 paid-in capital. The proponent will propose to have P2,000,000.00 paid-in capital twice of the minimum paid-in capital, due to greater demand of the project. The capital will be from the eleven (11) private individuals whether they are retired employees or employed but does not affect/influence the interest of both the business and the company where they employed. They will contribute as to how much investment they want to raise the projected paid-in capital. B. BASIC ASSUMPTION The proponent will assume that the 273 present demand will all avail loans within the year from the business amounting to P 25,000.00 each with an interest rate of 3% for 3 months term. On the other hand, the proponent will project 3 uncollectible accounts, this will be the basis to be used in projecting loans receivables & the one-percent (1%) provision for bad debts. As well as the 2.5% penalties will be imposed for late payments and the proponent will assume that 5 borrowers may fail their outstanding obligation on the specified term. The company will also open a bank account and assumed to earn a 1% interest on deposit. For the purpose of preparing Financial Statements the proponent will assume that the project will start its first year of operation on the first day of January 2014. Other related matters will be based on the current trend such as utilities (electricity & water expenses).
  • 19. FINANCIAL ANALYSIS A. OPERATING EXPENSES The projected monthly operating expenses of the project will be as follows: Rent Expense P 2,500.00 Water Expense 467.50 Electricity 500.00 Telephone Expense 400.00 TOTAL P 3,867.50 B. SCHEDULE OF SALARIES To attract qualified employees to fit the position. The company will offer an above minimum wage. The salaries of each employees are as follows depending on the postion they will handle. POSITIONS MONTHLY SALARIES (PHP) Loans Clerk 7,600.00 Loans Supervisor 9,000.00 Manager/Operations Head 12,400.00 C. SCHEDULE OF FRINGE BENEFITS All employees will receive a mid-year bonus equivalent to their one (1) month salaries. A christmas bonus base on the company’s performance. Thirteenth month pay will be given also as provided by our labor code. Aside from fringe benefits mentioned above the company will also give a yearly medicine allowance of P1,200.00 for each employees. Other benefits as provided by our Labor Code will be given also.
  • 20. D. PROJECTED INCOME STATEMENT Quick Cash Lending Company, Inc. PROJECTED INCOME STATEMENT For the Year Ended December 31, 2014 INCOME Interest Income P 569,250.00 Late Fees 3,125.00 Other Income (Interest on Deposit) 16,000.00 Total Income P 588,375.00 Less: EXPENSES Salaries P 348,000.00 Fringe Benefits 61,600.00 Supplies Expense 12,000.00 Power, Light & Water 15,210.00 Rent Expense 30,000.00 Telephone Expense 3,000.00 PHIC, SSS & Pag-ibig Dues 36,351.60 Permits & Licenses 24,436.00 Provision for Bad Debts (1%) 12,250.00 Total Expense P 542,847.60 Net Income Before Income Tax 45,527.40 Provison for income Tax 28,462.50 Net Income After Income Tax P 17,064.90
  • 21. E. PROJECTED BALANCE SHEET Quick Cash Lending Company, Inc. PROJECTED BALANCE SHEET As of December 31, 2014 ASSETS Cash in Bank P 705,012.40 Loans Receivables P 1,225,000.00 Less: Allowance for Bad Debts 12,250.00 1,212,750.00 Interest Receivables 2,250.00 Unused Supplies 6,000.00 Office Equipments 78,000.00 Furniture and Fixture 34,320.00 Total Assets P 2,038,332.40 LIABILITIES Accounts Payable P 2,500.00 Accrued Other Expenses Payable 1,517.50 Unearned Interest Income 17,250.00 Total Liabilities P 21,267.50 STOCK HOLDER'S EQUITY Retained Earnings P 17,064.90 Commonstock 2,000,000.00 Total Stockholder's Equity P 2,017,064.90 Total Liabilities & Stockholder's Equity P 2,038,332.40
  • 22. F. PROJECTED STATEMENT OF CASH FLOWS Quick Cash Lending Company, Inc. PROJECTED STATEMENT OF CASH FLOWS For the Year Ended December 31, 2014 Cash Flow from Operating Activities Cash Inflows Cash Received from Loan Interest P 567,000.00 Cash Received from Advance Interest 17,250.00 Cash Received from Other Income 19,125.00 P 603,375.00 Cash Outflows Payments for Permits, Licenses &Taxes P 52,898.50 Payments for Suppliers 18,000.00 Payments for Employees 445,951.60 Payments for Rent 27,500.00 Payments for Utilities 13,942.50 Payments for Telephone 2,750.00 P 561,042.60 Net Cash flow from Operating Activities 42,332.40 Cash Flow From Investing Activities Cash Inflows Cash Received from borrowers 5,675,000.00 5,675,000.00 Cash Outflows Cash Lent to borrowers 6,900,000.00 Purchased of Equipments, Furniture & Fixture P 112,320.00 P 7,012,320.00 Net Cash Flow from Investing Activities P (1,337,320.00) Cash Flow From Financing Activities P - Net Cash Flow from Financing Activities P - Net Increase (Decrease in cash) P (1,294,987.60) Add: Cash,Beginning P 2,000,000.00 Cash , End P 705,012.40
  • 23. FINANCIAL RATIOS A. CURRENT RATIOS To determine that the project will settle its short-term obligations. The proponent will calculate the projected current ratio as shown below: Current Ratio = 1,926,012.40 / 21,267.50 Current Ratio = 90.56 The computed current ratio of 90.56 proves that the business is capable to settle its short-term obligations. B. PROFIT MARGIN Net profit margin is a key financial indicator used to asses the profitability of a company. Below is the computation of the Net Profit Margin of the business: Net Profit Margin = 17,064.90 / 588,375.00 x 100 Net Profit Margin = 2.90% The percentage shown by net profit margin is does not have any specific benchmark. It is because the net profit margin of a small business and big steel plant cannot be same and therefore a standard benchmark cannot be set. The interpretation is more meaningful when the data of more than one period are available or the industry or competitor’s net profit margins are available.
  • 24. EVALUATION OF PROJECT STUDY A. RETURN ON INVESTMENT Based on the projected income statement of the business a total gain of P588,375.00 was earned while a total operating/administrative expenses of P542,847.60 was also incurred during the year. To get the ROI the illustration is drawn below: ROI = (588,375 – 542,847.60) / 542,847.60 x 100% ROI = 45,527.40 / 542,847.60 x 100% ROI = 0.08 or 8% As shown on the above computation, 8% ROI is greater than 3%. Therefore, the project is said to be feasible.
  • 25. CHAPTER VI: CONCLUSIONS AND RECOMMENDATIONS Establising of Lending Business in Naujan, Oriental Mindoro appears to be feasible as shown on the evaluation of Return on Investment of 8% on its first year of operation. As per the interviews and questions conducted by the proponent, having a lending company in the area will assist the needs of certain individuals for their financial shortcomings. Therefore, I conclude as per the data gathered and based on the results, it shows that the project will help and assist the financial needs of different individuals and in return it will give an income to the company. I also conclude that with this, it will minimize and later on eliminate the traditional lending from underground lenders that offer a short-time lending like bombay( 5-6). On the other hand, I recommend that this project be implemented. And research supports that with the 65% increase for the future demand, this industry will continue to grow for the following years.
  • 26. CHAPTER VII: DESIRABILITY OF THE PROJECT The primary objective of this study is to determine the feasibility and viability of a proposed plan to establish a lending company in Poblacion I, Naujan, Oriental Mindoro. Part of this study is to be able to shed light to the proponent of this project as to well-grounded, risks, expenditures, benefits, marketability and profitability of the services. After interpreting the data gathered and concluding that the proposed project is feasible, I made some financial projections that show a favorable outcome. It is been estimated that after a year of operation the project can enjoy the net increase of P17,064.90 Moreover, this project does not only give a great deal of benefits to the proposing parties but to the society as well. With the establishment of a new line of business, which is the lending, Quick Lending Company, Inc. can contribute to the improvement of the economy locally by some how giving employment in the society. In the first year of operations, the new line of business would already generate a quite favorable income to the owner of the project. Usually, companies would only break even in their first year of operations. But the proposed lending business has already shown its profitability. It is expected that with a favorable and profitable lending operations, Quick Lending Company, Inc. would increase their types of lending services to different types of individuals in the society. Possible expansion by putitng up additional offices in some areas will also be considered. This implies that need for personnel or workers will also increase. Thus, giving a venue for people to get employed and earn their money. If there are more people earning, this means that taxes to be returned to government would also increase. If there is an increase in lending services, reasonable return will be also generated. This means that the business is contributing the local economy.
  • 27. APPENDICES APPENDIX A DERIVATION OF INCOME INTEREST PERIOD NO. OF AVERAGE LOAN EARNED IN 3 BORROWERS AMOUNT AT MONTHS TERM MONTHLY P25,000.00 AT 3% RATE Jan-Mar 23 575,000.00 51,750.00 Feb-Apr 23 575,000.00 51,750.00 Mar-May 23 575,000.00 51,750.00 Apr-June 23 575,000.00 51,750.00 May-July 23 575,000.00 51,750.00 June-Aug 23 575,000.00 51,750.00 July-Sep 23 575,000.00 51,750.00 Aug-Oct 23 575,000.00 51,750.00 Sep-Nov 23 575,000.00 51,750.00 Oct-Dec 23 575,000.00 51,750.00 Nov-Jan 23 575,000.00 51,750.00 Dec-Feb 23 575,000.00 51,750.00 TOTAL 276 6,900,000.00 621,000.00 The table shows that the 276 total number of borrowers is a rounded off number of present demand. A total Interest of P621,000.00 was earned by the company P569,250.00 of it was earned during the year and the difference of P51,750.00 is due on January and February of the following year. Since the company is deducting an advance interest, the company assumed that on December a one month advance interest of P47,500.00 from the 23 borrowers is unearned interest as reflected on the Projected Balance Sheet.
  • 28. APPENDIX B TIMETABLE Establishing of Lending Business 2 0 2013 1 4 JUNE JULY MAR MAY AUG NOV APR OCT DEC SEP JAN JAN FEB ACTIVITIES Presentation of the project study to the interested investors. Discussion of the capital contribution Securing License to operate & permits from SEC, locality, & BIR. Communicating with the Offices for possible linkages. Coordinating with the owner of the office space Posting of job vacancies Acquisition of Office Equipments, Supplies, Furniture & Fixture. Presentation of the project to the target market Start of Business Operation
  • 29. APPENDIX C BIO-DATA Personal Information Name : Reymar Manhic de Luzon Birthdate : June 27, 1988 Birth place : Santiago, Naujan, Oriental Mindoro Age : 24 years old Height : 5’11 Weight : 145.2 lbs. Father’s Name : Raymundo Moreno de Luzon Mother’s Name : Maricel Manhic de Luzon Educational Background Graduate Studies : Master in Business Administration Mindoro State College of Agriculture & Technology Masipit, Calapan City June – present College : Bachelor of Science in Commerce Major in Banking & Finance Divine Word College of Calapan Gov. Infantado St., Calapan City Oriental Mindoro 2005 – 2009 Secondary : Naujan Academy Poblacion I, Naujan, Oriental Mindoro 2001 – 2005 Elementary : Mariano P. Leuterio Memorial School Andres Ylagan, Naujan, Oriental Mindoro 1995 – 2001 Employment Record Teller/New Accounts Clerk Allied Savings Bank January 18, 2010 to present
  • 30. BIBLIOGRAPHY http://businesstips.ph/how-to-start-a-lending-company-in-the-philippines/ http://www.pinoybisnes.com/business-ideas/how-to-start-a-microlending- business/#ixzz2IWxzhk1B RA9474 An Act Governing the Establishment, Operation and Rehulation of Lending Companies http://www.scribd.com/doc/99505226/A-Feasibility-Study