Business – 6.1 External influences – Economic | e-Consult
6.1 External influences – Economic (1 questions)
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Two common forms of government intervention are:
- Financial support through grants or low‑interest loans: This provides direct capital to start‑ups and small firms, reducing cash‑flow constraints. It can accelerate business development, enable investment in equipment or marketing, and increase the likelihood of survival during the early stages. However, reliance on subsidies may create dependency and distort market competition if not targeted carefully.
- Regulatory relief, such as simplified licensing or reduced compliance burdens: By streamlining procedures, the government lowers administrative costs and speeds up market entry. This encourages entrepreneurship and can boost the number of new firms. The downside is that overly lax regulation may compromise standards (e.g., health, safety) and could lead to negative externalities.
Overall, financial support tends to have an immediate effect on growth, while regulatory relief fosters a more sustainable, long‑term environment for enterprise.