Explain the difficulties that a small business start-up might have when trying to obtain finance from an external source.

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

1. Possible answers might include:
2. • The business will not have any past financial history to present to potential lenders.
3. • Banks might be unwilling to allow a bank loan/overdraft to an inexperienced business owner. This might depend on the previous experience of the person/people starting the business.
4. • Small businesses might find it difficult to arrange external finance because of their lack of collateral/security. They are unlikely to have many assets for security.
5. • Difficulty of persuading lenders that the business if viable if the product/service is very new to a market.