Photo AI
Discuss three challenges facing business start-ups. - Leaving Cert Business - Question C - 2014
Question C
Discuss three challenges facing business start-ups.
Worked Solution & Example Answer:Discuss three challenges facing business start-ups. - Leaving Cert Business - Question C - 2014
Step 1
Raising finance and making loan repayments.
Answer
One of the significant challenges faced by business start-ups is securing sufficient finance to launch and sustain operations. Many start-ups fail due to the difficulty in obtaining loans. Lenders are often reluctant to provide funds without substantial collateral or a proven track record, leading to high-interest rates or stringent loan conditions. This situation heightens financial risk and can lead to difficulties in meeting repayment obligations, exacerbating the challenges of being in a high-geared financial position.
Step 2
Credit squeeze and securing credit.
Answer
In the current economic climate, many businesses face a credit squeeze, making it increasingly challenging for start-ups to secure necessary credit. Reduced access to funds can hinder a start-up’s ability to launch operations fully or expand. This lack of available credit is frequently cited as a primary reason why new businesses struggle and often fail within the first year of operation, as they cannot adequately manage cash flow or invest in essential resources.
Step 3
Lack of adequate cash.
Answer
Finally, insufficient cash flow is a common issue for start-ups. Many entrepreneurs underestimate the amount of capital needed to sustain the business during its early stages. The lack of adequate cash can lead to difficulties in managing daily operational expenses, hiring staff, and scaling the business as necessary. This financial strain can disrupt business operations and ultimately lead to failure if not properly managed.