Business Studies – 5.1.2 The main sources of finance | e-Consult

I would recommend a bank loan as the most appropriate source of finance for this business. Here's my justification:

• Amount Required: A bank loan can provide the full £10,000 needed, which is crucial for the business's expansion plans.
• Interest Rates: While interest rates on bank loans can vary, they are generally lower than other forms of finance like overdrafts or credit cards. This helps to keep the cost of borrowing manageable for a small business.
• Repayment Schedule: Banks offer structured repayment schedules, allowing the business to budget for regular payments. This predictability is important for financial planning.
• No Equity Dilution: Unlike taking investment from shareholders, a bank loan does not require the owner to give up any ownership of the business. This is beneficial for maintaining control.
• Creditworthiness: The business will need to demonstrate its creditworthiness (e.g., through a business plan, financial forecasts, and a good credit history) to secure a loan. This process can help the business to better understand its financial position.

While other options like a loan from family or friends might be available, a bank loan offers a more professional and structured approach to securing the necessary funds for growth.