2.1.4 planning*

Question 1

business plan definition

Answer 1

a document setting out a business idea and showing how it is to be financed, marketed and put into practice

Question 2

how it helps to obtain finance

Answer 2

a business plan shows sources of finance (e.g. bank) that the business owner has a good understanding of their market- they will have a greater trust in business owners to repay their investment e.g. a loan or overdraft

Question 3

+ of business planning

Answer 3

+ a good business plan gives a business access to a wider range of sources and methods of finance- more people willing to offer the business finance.
+ it may also help a business to get cheaper long-term finance- e.g. if the business shows that repayments will be made on time, the business could get a load at a lower rate of interest
+ if the business plan shows that the business will be successful, investors may be happy to accept a smaller share of the business in return for their investment.

Question 4

• of business planning

Answer 4

• owners can never be 100% certain of their decisions and fortunes when stating a business BUT the depths and detail of business planning reduces risk associated with unforeseen problems and poor decision making and increasing the likelihood of success