Hal wants to be a successful entrepreneur．He plans to leave his job to start up a bakery．The bakery will operate in the private sector．The business will have many stakeholder groups．Hal has been told it is important for a new business to select an appropriate source of start－up capital．He also knows new businesses are at a greater risk of failure． Do you think a bank loan is the best source of start-up capital for a new business? Justify your answer. .......................................................................................................................................

Award up to 2 marks for identification of relevant points.
Award up to 2 marks for relevant development of points.
Award up to 2 marks for a justified decision as to whether a bank loan is the best source of start-up capital for a new business.

Points might include:
Bank loan
- Quick to arrange [k] so does not delay plans/so can pay bills on time [an]
- Must pay interest [k] increasing costs/expenses/cash outflows [an]
- Must repay [k]
- Able to obtain large/full amount [k]
- May need security/collateral [k] which may not be available for a start-up / so personal assets may be at risk [an]

Other methods could include:
- Own savings [k] as no need to repay [an]
- Borrow from friends/family [k] as may give long time to repay [an]
- Overdraft [k] can arrange quickly/only pay interest when used [an]
- Government grant [k] which has no interest [an]
- Crowdfunding [k] but no guarantee can raise full amount [an]

Other appropriate responses should be credited.
Justification might include:
One advantage of a bank loan is it is quick to arrange \([\mathrm{k}]\) so does not delay plans/ability to pay bills straightaway [an]. Another source is own savings \([\mathrm{k}]\) because there is no need to repay [an]. A bank loan is the best source because speed means they do not miss out on the opportunity whereas it can take time to build up enough savings [eval], and by the time they do, there may be insufficient demand [eval].