The first problem that is visible from Ricky’s cash flow forecast is that Ricky is dependent on his bank loan which is his capital which is £17,500. Bank loans are an effective way to start up a business, however a bank loan is not reliable due to the fact that the bank loan could get prolonged and delayed.
This would be very problematic for Ricky as he would not be able to pay back his expensive truck which cost him £20,000 another problem caused by his reliance on bank loan is that the sales cost would not be covered. A way to tackle this limitation is for Ricky to use his own savings with money he has acquired himself throughout a time period, an alternative way for Ricky to acquire the funding to start his business if he lacks sufficient funds is to ask ‘Friends and Family’ for a loan if this is not possible then Ricky should opt for an overdraft to keep his business maintained in terms of expenses however it may be difficult for Ricky to pay the overdraft due to the interest incurred by the overdraft.
