BANK DEBT AND TRADE CREDIT OF MSMEs IN THE

CENTRAL BUSINESS DISTRICT OF BAGUIO CITY

DARYL VINCENT A. ESCALER, JOEMAR E. SUAREZ, FAITH ANNE Z. PALOLAN,

CRISJAN IRA KASHMIR J. RAMBOYONG, TAGUPA, ENGELICA COLIN M.
EVELYN ROSEMARIE J. DIZON

ACCOUNTING RESEARCH

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 SCHOOL OF ACCOUNTANCY AND BUSINESS MANAGEMENT

SAINT LOUIS UNIVERSITY

PHILIPPINES

DECEMBER 2015

BANK DEBT AND TRADE CREDIT OF MSMEs IN THE

CENTRAL BUSINESS DISTRICT OF BAGUIO CITY

DARYL VINCENT A. ESCALER

darylescaler@gmail.com

JOEMAR E. SUAREZ
joemarsuarez15@yahoo.com

FAITH ANNE Z. PALOLAN

pfaithanne_14@yahoo.com

CRISJAN IRA KASHMIR J. RAMBOYONG

crisjanirakashmirramboyong@yahoo.com

TAGUPA, ENGELICA COLIN M.

engetag@yahoo.com

Keywords: Bank Debt, Trade Credit, Interest, Payment Period, Transaction Cost
Abstract
The MSMEs in Central Business District in Baguio city contribute to a large part of the local
economy. The study of how MSMEs are financed is important given the contribution they make
to the economy. The two major sources of debt financing accessible to business are bank debt
and trade credit. The purpose of this paper is to provide helpful information on the decisions of
MSMEs in using bank debt and trade credit considering the interest or discounts, payment
period, accessibility to sources of finance, and transaction cost as influenced by the
determinants of using the two and its profile. The profile of MSMEs in this paper included the
amount of capital, types of industry and the age of the firm. The descriptive method of research
was used. The representative sample of the population was MSMEs from trading, service, foods
and other industries for a total sample of forty-four (44). Data was gathered through the
dissemination of questionnaires to the owners or managers who decides on financing decisions
of the firm. The statistical test suggests that there is no significant difference in the use of bank
debt and trade credit when grouped according to amount of capital and the years of operation.
But there is a significant difference in the use of bank debt and trade credit when grouped
according to the types of industry. The researchers recommend to existing MSMEs to plan and
analyze the cost implications of the use bank debt and trade credits in terms of interest or
discount, payment period, accessibility of sources of finance and transaction cost.

Acknowledgements

This research would not have been possible without the guidance and help of several
individuals who in one way or another contributed and extended their valuable assistance in the
preparation and completion of this study.

First and foremost, the researchers would like to take this opportunity to thank God for
being the strength and guide in the writing of this thesis. Without Him, the researchers would not
have had the wisdom or the physical ability to do so.

The researchers would like to express greatest gratitude to their beloved family and
friends for their encouragement and support throughout the making of this study.

The researchers would also like to express gratitude to their thesis advisor Mrs. Evelyn
Rosemarie J. Dizon, CPA for devoting much time to this study. Her special interest and
knowledge in to this study enabled her to give the researchers the right guidance and much
needed motivation.

Lastly, the researchers would also like to thank Ms. Kathlyn Bangao for taking the time
to help the researchers with technical advice and guidance during the derivation and
interpretation of statistical data.