CHAPTER I

INTRODUCTION

RATIONALE/BACKGROUND OF THE STUDY

Starting a business is both exhausting and thrilling. It’s a starting point towards a

bigger future. A bigger dream, a bigger opportunity. Many successful companies started at

the bottom and later become the leader of the entire business world, helping their country’s

economy escalate such as Disney, Google, Apple etc. Numerous companies started small,

but little information were known about how they struggle to start a business financially

speaking. A lot of aspects are considered when you want to start a business and that

includes money. According to Kariuki (2015) “The foundation of a successful firm is money,

and the glue that holds these elements together is a well-thought concept” .Money is a factor

when starting a business and paying off the capital while running a business might be

difficult for some. That’s why this study aims to find out solutions on how to handle and

improve their business while paying their loans at the same time. Financial capability of a

person is necessary to venture and succeed in the competitive world of business.

Money is necessary to build your business. It enables business owners to buy resources

that are essential to keep the business going in the area of Quezon, Bukidnon. However

money and debt being the factors of business don’t come easy. “A company's ability to

survive can be negatively impacted by debt, which can also result in problems with

profitability, lower investment, and higher finance costs. The result is predictable in the

absence of corrective intervention.”

(Marin,2021). Aside from this “ Debts can seriously harm your company’s finances

by interfering with cash flow, making it more difficult for you to pay suppliers and staff, meet

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operating cost, and make investment in expansion project” as published by Siinghhal

(2023). Furthermore loans also affects mental health of the busiess owners as published by

Kissel (2022).”Unmanageable debtors frequently have high stress levels, clinical

depression, anxiety, hypertension and a variety of other chronic illnesses.

This study will address its problem through researching and finding out the secrets

and reasons the businesses are be able to survive in the competitive world of business

through depending on loans. Based on the research, the research gap would be the

struggles of entrepreneurs who depend on loan for funding in Quezon, Bukidnon. And

through the research gap, the goal of this research it to fill the gap by knowing experiences

of the business owners who depend on loan for funding. The study provide some insights

on how these business owners respond to these difficulties and find factors that made these

businesses prosper.

STATEMENT OF THE PROBLEM

This study focuses on the difficulties faced by entrepreneur who depend on loans for

funding. These findings are relevant especially, when answers are based on these following

question:

Problem 1: Why do the participants decided to venture into the kind of business they have?

Why did they opt to borrow money for business?

Problem 2: What are the difficulties and challenges encountered by the participant in terms

of their loan and business?

Problem 3: How do these challenges affect the participant’s business? What are the

specific aspect at their business that are affected by it?

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Problem 4: Has do the participants manage these difficulties? What strategies they imply

to solve it?

OBJECTIVES OF THE STUDY

These objectives aims to accomplish the following:

Objective 1: To know why the participants decided to venture into the kind of business they

have. And why did they opt to borrow money for business.

Objective 2: To know what are the difficulties and challenges encountered by the participant

in terms of their loan and business.

Objective 3: To know how these challenges affect the participant’s business. And what are

the specific aspect at their business that are affected by it.

Objective 4: To know how the participants manage these difficulties. And what strategies

they imply to solve it.

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CONCEPTUAL FREAMEWORK OF THE STUDY

Input Output Outcome

Debt Small Bankruptcy cost

Nazir, A., Azam, M., and Khalid, M. U. (2021, March 8). Debt financing and firm
performance: empirical evidence from the Pakistan Stock Exchange. AJAR (Asian Journal
of Accounting Research). [Link]

Figure 1: A Diagram that Shows Conceptual Framework of the Study

This Conceptual Framework is adapted from the research of Nazir et,al (2021) Debt

financing and firm performance: empirical evidence from the Pakistan Stock Exchange

which shows how loans and debt financing can be a drawback to your business. The

variables as shown in the figure brings sever impact the business owners. The independent

variable, of this study is the debt financing which affects the dependent variable stated in

the research namely the firm performance. The outcomes from the study in businesses

which is bankruptcy cost, insolvency, financial stress and profitability.

These followings are the components of the conceptual framework:

Bankruptcy Cost- Is possible when debt financing is present. It is introduced as the

expenses need to fill bankruptcy.

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Insolvency-According to the study is cause when the income is too little to pay for the debt

thus making the owner unable to pay for their debts.

Financial stress-Is given when debt is present. Anxiety and depression are common mental

health disorders which often results from debt.

Profitability- Is also affected when you have regular obligations with the regards of your

debts. Lesser profit is accounted when you have debt to pay. And this factors affect the firm

performance as it limit their resources and profit which limits their opportunities to continue

their businesses and possible plan for expansion.

SIGNIFICANCE OF THE STUDY

The study aims to benefit the following:

This study aims to benefit small business owners, aspiring business owners,

society and communities and the future researchers.

 Small Business Owners may benefit from this study by gaining insights on

how they could properly expand their businesses through depending on loans

for support and how they could handle their business properly while being on

debt.

 Aspiring Business Owners may gain something from this study by having

better understanding of the struggles they might face when choosing loans as

the main form of support for their business.

 Society and Communities may acquire something from this as this research

helps the society and the people living in communities to be aware of the

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 struggles faced by entrepreneur who depend on loans for funding and to have

basic knowledge with business.

 Future Researchers who are willing to follow the previous researchers’

footsteps and provide deeper information that will be beneficial to future

business owners.

SCOPE AND LIMITATIONS

This research assess entrepreneurs who have started business using loans as funds

in Quzon, Bukidnon focusing on the areas as stated in the following: finance, emotional

health, expansion opportunities and financial risks.

This study also examines the impact of external factors to the businesses in particular

the government policies, economical circumstances and technological incorporations to

their businesses. Due to time and resource limitations, the sample size is small. This impact

the relevance of the study and as well as the results. This study was conducted using

narrative approach including interviews with small business owner in the year 2015-2024.

DEFINITION OF TERMS

For better understanding, the following words are conceptually and/or operationally

defined in the study:

Entrepreneurs: Conceptually defined by Hayes (2024) as someone who starts their

own business, taking up most of the risk and reaping most of the benefits.

Loan: Is conceptually defined by Kagan (2023) as a kind of credit value wherein a

certain amount of money is granted to a third party with the exception that the value or

principle amount will be repaid in the future.

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 Funding: Is conceptually defined by Kagan (2023) as a sum of money set aside for

a particular objective.

Struggles: Is operationally define as the challenges faced by an individual or group

of people towards a certain event.

Depend: Is operationally define as the act of relying on something.

BIBLIOGRAPHY

Hayes, A. (2023, February 14). Entrepreneur:

What It Means to Be One and How to Get Started.

[Link]://[Link]/terms/e/[Link]

Kagan, J. (2023, July 31).

What is a Loan, How Does It Work, Types and Tips on getting One. Investopedia.

[Link]

Kagan, J. (2023, April 17).

Fund: Definition, How It Word, Types and Ways to Invest. Investopedia.

[Link]

Karuiki, G. (2018, March 9).

Money means business. [Link]

george-

kariuki?utm_source=share&utm_medium=guest_mobile_web&utm&campaign=cop

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Kissel, C (2022, January 29)

Effects Of Debt On Mental [Link] Debt Relied.

[Link]

mind-how-debt-affects-your-mental-health/

Marin, M. (2021 February 25).

How to Manage Short and Long Term Business [Link] Commercial Finance.

[Link]

Nazir, A., Azam, M., and Khalid, M. U. (2021, March 8).

Debt financing and firm performance: empirical evidence from the Pakistan Stock

Exchange. AJAR (Asian Journal of Accounting Research).

[Link]

Siinghal, P. (2023, July 15).

The Silent Menace: How Bad Debts Can Severely Impact Your Business.

[Link]

your-

siinghal?utm_source=share&utm_medium=guests_mobile_web_campaign_copy

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