Millennials are often stereotyped as being too scared to take risks, but many of them still have student loans and finding proper funding can be a struggle. Without the proper funding needed for their business, they will not succeed in achieving what they want. Here is how millennial entrepreneurs should go about getting that money without having to start from scratch or sell personal belongings.
If you are a millennial entrepreneur and still have student loans, you may be wondering how to fund your business. There are many ways for entrepreneurs to get funding, but the most common way is through an SBA loan, which does not require any collateral.
Starting a company from the ground up is difficult under any situation. However, for members of the millennial age, many of whom are still saddled with student loan debt, it may seem unattainable.
Student debt has grown significantly in recent years, becoming the most common source of debt among people under the age of 40. In fact, the typical class of 2016 graduate will be burdened with $37,172 in student loan debt, which is enough to destroy any would-be entrepreneur’s entrepreneurial spirit.
Even so, there’s no need to put your ambitions on wait if you have a great business concept. You can overcome your debt problems and turn that killer concept into a reality with some careful preparation and financial management—and a little luck.
Learn the fundamentals of business.
Call it simple sense, but knowing the financial fundamentals is the first step toward building a successful company. You don’t have to be Warren Buffett to thrive in company, but if you can’t manage the fundamentals of day-to-day operations, you’ll be at a significant disadvantage.
From putting together a well-thought-out company plan to establishing and maintaining a budget and taking advantage of favorable tax rules, you’ll be faced with a slew of difficult financial choices straight away. Consider taking advantage of the numerous free business training options accessible both online and in person if your knowledge and abilities might need some improvement. The Small Company Administration of the United States is a particularly useful resource, with courses covering nearly every element of starting and running a business.
Seek for funding for your company.
You probably don’t have a lot of spare cash to spend in your company if you have large student loan or other obligations.
To correct this, you should get acquainted with the many funding alternatives accessible to small companies. Traditional bank loans, Small Business Administration loans, microloans, and alternative lenders are all popular choices, but each has its own set of advantages and disadvantages. Angel investors and venture capitalists are also worth looking into, since they may provide additional advantages like advice and mentorship as well as industry contacts. Small business grants are also available to companies in specific areas linked to science and research, but they may be tough to come by and come with stringent criteria and oversights.
Taking the time to fully study the many financing options accessible to you may assist you in obtaining the funds you need while incurring the least amount of interest and debt feasible.
Look at your loan repayment choices.
You may be surprised by the amount of options available to you when it comes to managing your student loan payments.
You may be able to combine and extend the term of your federal loans. Consolidating your student loans may help you save money by simplifying the payment procedure and lowering the amount you pay each month. The U.S. Department of Education’s website has additional information about the federal loan consolidation procedure, as well as guidance as you evaluate whether loan consolidation is the right choice for you.
While consolidation will result in higher interest payments throughout the life of the loan, it is a simple method to decrease your payments substantially in the near term. Depending on your income level, a “pay as you earn” or income-based repayment plan may reduce your monthly payment burden, while filing for deferral or forbearance may temporarily postpone payment.
Private loans are a little different—they usually have fewer alternatives—but it’s always worth contacting your lender to discuss your options.
Use your imagination.
Banks, angel investors, and other sources of funding are excellent, but they aren’t the only options for funding your business. There are a variety of different tools available to millennials who are rapidly climbing the business ladder. Getting excellent financing may be as easy as going online and sharing your story with others, from crowdfunding platforms like Kickstarter and Indiegogo to grant search databases.
Getting innovative in your hunt for financing may pay off big time, whether it’s convincing friends and relatives to invest in your project or selling any unwanted items you have lying around. A company credit card is also something to think about. In fact, almost four out of every five new company owners use credit cards to pay part of their first costs.
Though it’s essential to be aware of high interest rates and other penalties, using a business credit card responsibly may offer easy access to money while also assisting in the establishment and building of company credit. Many business cards also have excellent rewards programs and other perks, and you may even deduct interest and late penalties when filing your taxes.
Make a debt management strategy.
Whether you’ve deferred or not, it’s essential that you have a strategy in place for managing and eventually repaying your student loan obligations.
Take some time to evaluate your debts and general financial position before diving into business. Determine the best plan of action for paying them off. Depending on your financial position, delaying the formation of your company for a few years while you labor to save money may make sense. Even if your company endeavor fails to produce revenue right immediately, these funds may offer a useful safety net to assist meet your loan obligations.
Make use of other people’s knowledge.
Almost every successful company owner will tell you that they did not achieve their success on their own. You can always learn from the knowledge and experience of others, regardless of your level of education or skill. Family and friends may not always be the greatest sources of business advise, so it’s up to you to develop a connection with a coach or mentor who understands the ins and outs of the entrepreneurial process.
You should never be hesitant to seek for assistance, whether it’s from experienced business executives you respect, working with commercial advisers, or contacting governmental or academic organizations. Make the most of the connections you already have and expand from there. LinkedIn and even Facebook are examples of social networking sites that may be useful. Simply state why you’re contacting them, and don’t be hesitant about discussing your own company aims and ambitions.
You may learn from the triumphs and mistakes of others to manage the numerous hazards of entrepreneurship and design a better route to your objectives by surrounding yourself with experts and leaders.
Take on a partner who is cash-ready.
It’s true that your idea is your child, but it doesn’t imply you have to raise it alone. Finding and taking on a partner who can offer a regular, interest-free income flow may be the best route ahead, depending on your circumstances.
Many investors may want to become equal partners in your business in exchange for funding, but if you’re lucky—and confident in your chances of success—you might be able to locate a friend or family member ready to contribute without any expectation of a share in the firm. However, proceed with care, since a bad business transaction may rapidly destroy important relationships if both parties aren’t on the same page from the start.
Keep track of your own spending.
You may feel like you’re your own company as an aspiring entrepreneur. This is especially true in your personal finances, where you may be forced to make tough decisions and sacrifices for the sake of your company.
You should make it a practice to evaluate your personal budget on a regular basis with the goal of lowering your non-business expenditures right away. This may enable you to pay off your school loans and other obligations more rapidly, in addition to freeing up money that may be re-invested in your company. You may use a variety of budgeting software tools to help you develop and execute a budget plan.
Smartphone applications are the greatest method for many individuals to keep track of their daily budget and bank accounts. To help you remain on track, use an app like Mint or Every Dollar. While adhering to a budget is difficult, making a few more sacrifices today may pay off handsomely later.
Starting a business may be very rewarding, but it is not for the faint of heart. It’s much more difficult if you’re saddled with student loan debt, but that’s no excuse to abandon your goals. Following the basic steps above may set you well on your path to success and financial independence if you have a worthwhile company concept and are prepared to work hard and make sacrifices.
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The “how much student debt is there” is a question that many millennials face. There are many ways to fund a business while still having student loans, but it can be difficult to find the right one for you.
Frequently Asked Questions
Can you start a business if you have student loans?
A: Yes, you can start a business even if you have student loans. However, it is important that your startup has plans or goals to make money in the future with sufficient growth potential before beginning the process of finding investors and starting the company so that they do not lose their investment.
How much does the average Millennial owe in student loans?
A: In the US, Millennials owe a total of $1.2 trillion in student loans as of 2018.
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