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Question 2
Assess two suitable external methods of finance that could have been used by Andy and Holly for The Wonky Table start-up capital in 2010.
Step 1
Answer
Holly and Andy could have sought investment from family and friends, which is often a cost-effective option. This method usually does not involve extra interest rates and allows for flexible repayment terms. Furthermore, it provides an opportunity for them to maintain control over the business without having to surrender equity or profits. This support may also come from a place of trust, encouraging Holly and Andy to take the necessary risks associated with starting a restaurant.
Step 2
Answer
Applying for a bank loan can provide the required start-up capital. This would typically entail covering essential costs such as rent, equipment, and supplies. However, Holly and Andy would need to consider interest rates, the terms and conditions of the loan, and the potential burden of debt repayment. If the bank sees the new venture as a high-risk investment, it may result in higher interest rates or even loan denial, which could adversely affect their business's financial viability.
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