Business Constraints

• What are the main constraints on growth?

  • Size of the market
  • Access to finance
  • Owner objectives
  • Regulation
• How is the size of the market a constraint on growth?

  If firms do not make enough profit or have to give out too much to shareholders, they will not be able to use retained profits to grow. Banks may be unwilling to lend firms money, particularly smaller businesses that they see as high risk. As a result, firms will be unable to grow as they can’t finance it.
• How is access to finance a constraint on growth?

  A small company often does not have the assets on which to secure a loan.

  Banks can have a risk adverse attitude to new profits/businesses. If a business/project is considered risky, the bank may charge a higher interest rate, which a small business can not afford, or the bank may decide not to lend at all.
• How is owner objectives a constraint on growth?

  A lack of resources such as funding, staff or technology can also hinder achieving business goals. Therefore, business owners should assess their resources regularly and seek out opportunities for growth, such as partnerships or funding opportunities, to help achieve their goals.
• How is regulation a constraint on growth?

  If regulations are too stringent, they can prevent businesses from adopting new technologies or innovative practices, which can slow down economic growth. Moreover, compliance with regulations can be costly for businesses, which can reduce their profitability and their ability to invest and expand.