Syllabus: Cambridge - IGCSE Business Studies
Module: 5.1 Business Finance: Needs and Sources
Lesson: 5.1.1 The Need for Business Finance

Introduction

This article explores Section 5.1.1 The Need for Business Finance from the Cambridge IGCSE Business Studies specification. Aimed at supporting teachers, SLT, and careers leads, this guide contextualises the concept within both curriculum and careers frameworks. The topic is foundational to understanding how businesses sustain and grow, linking directly to Cambridge’s learning outcomes on why finance is essential across all stages of business activity—from start-up to expansion.

Understanding the need for finance develops students’ financial literacy and commercial awareness, skills applicable in all sectors and vital for preparing students for workplace realities .

Key Concepts

Aligned with the Cambridge IGCSE Business Studies (0450) syllabus, students must be able to:

• Explain why businesses require finance at different stages (e.g. start-up, operational, growth)

• Distinguish between short-term and long-term financial needs

• Identify the main purposes for which finance is required:

  • Starting a business

  • Purchasing assets (machinery, buildings)

  • Working capital for day-to-day operations

  • Expanding the business

  • Dealing with unforeseen circumstances

• Understand how insufficient finance can limit business operations and decision-making

The emphasis is not on the sources yet (covered in 5.1.2), but on why finance is necessary.

Real-World Relevance

Real companies illustrate these needs clearly:

• Start-Up Finance: Small UK businesses like Pip & Nut required seed capital for market entry—covering product development, marketing, and initial staff costs.

• Working Capital: Even large supermarkets like Tesco rely on short-term finance (e.g. overdrafts) to maintain inventory and smooth cash flow during seasonal changes.

• Expansion Finance: Brands such as Gymshark used investment rounds to fund international growth, digital infrastructure, and warehousing.

• Emergency Funding: During the COVID-19 pandemic, thousands of SMEs required emergency loans from schemes like CBILS to avoid collapse—a real-world example of unexpected financial need.

These practical applications give weight to the classroom concept and show students how businesses must plan financially to survive and thrive.

How It’s Assessed

Students are likely to encounter this topic in:

• Short-answer questions: e.g. “State two reasons a business may need finance.”

• Explain questions: requiring development of examples and consequences

• Case study-based questions: e.g. “Using the information provided, explain why the business needs additional finance.”

• Command words: state, explain, analyse, discuss—with increasing marks allocated for greater depth and application.

Strong responses show understanding of purpose, not just repetition of terms, and often integrate case study evidence or logical reasoning.

Enterprise Skills Integration

This topic supports several of Enterprise Skills Ltd’s core thematic frameworks:

• Commercial Awareness: Students begin to understand how businesses function financially and the implications of poor planning.

• Decision-Making & Problem-Solving: Learners assess why finance is needed and consider the risks of underfunding at various business stages.

• Workplace Readiness: Financial understanding is central to any job that involves budgeting, project planning, or strategy.

Enterprise Skills simulations and tools—such as the “Business Finance Scenarios” tool from Skills Hub Business—place students in decision-making roles where financial knowledge affects outcomes, enhancing retention through active learning.

Careers Links

This topic aligns with Gatsby Benchmarks 4, 5, and 6:

• Benchmark 4: It connects curriculum to careers by illustrating how finance underpins all industries—from tech to healthcare.

• Benchmark 5: Use of employer case studies and real financial data gives students encounters with workplace realities.

• Benchmark 6: Business simulations provide virtual workplace scenarios that reflect genuine financial decision-making.

Relevant career roles include:

• Finance Assistant

• Operations Manager

• Small Business Owner

• Investment Analyst

• Commercial Advisor

Highlighting these helps students see the broader purpose of their learning and its career applicability.

Teaching Notes

Tips for delivery:

• Begin with relatable analogies (e.g. why individuals need loans or savings) before scaling to business contexts.

• Use real-world business case studies for engagement.

• Encourage students to apply the concept to a business idea they create.

Common pitfalls:

• Students often confuse need with source—be clear this section is about why finance is needed, not where it comes from.

• There is sometimes a lack of depth—push for “why this matters” thinking.

Extension activities:

• Use the Skills Hub Business scenario builder to model the impact of finance decisions in different business contexts.

• Assign group presentations: “Pitch a business and explain its financial needs over three years.”

By embedding commercial awareness in every aspect of delivery, you not only meet curriculum standards but help students build genuine workplace confidence.