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Starting a business is not easy especially for those who still have a huge student loan debt, it might seem nearly impossible. Over the last few years, student debt has risen and is the largest single debt source among those that are 40 or under.
If you have student loans and are in debt but want to get your business going, there is no reason to put those on hold. With some careful planning and financial management, you can overcome your debt burdens and make your dreams into reality.
Learn Essential Business Basics
The first step toward creating a viable business is ensuring that you understand the financial basics. You need to be able to handle the basis of day-to-day business operations. From creating a detailed business plan to constructing and managing a budget and leveraging advantageous tax laws, you will face many tricky financial decisions from the very beginning. If you feel like your skills and knowledge can improve, consider taking advantage of the many free business training resources that are available both in person and online. The Small Business Administration offers courses that cover every important aspect of creating and operating a business.
Seek Business Financing
If you are carrying student loan or any other type of debt, you probably do not have cash to invest into your business.
To remedy that, familiarize yourself with the types of business financing options available. Some popular options include traditional bank loans, SBA loans, microloans, and alternative lenders are all popular options, but each come with their own set of pros and cons. Consider exploring angel investors and venture capitalists as well, they may have benefits such as guidance or mentoring or even access to industry connections. Small business grants are also made available to businesses in certain fields related to science and research, though they be difficult to obtain and have strict requirements.
Take the time to do thorough research of the financing available to you to help you secure the money you need while taking on little interest and debt as much as possible.
Explore Payment Options
When it comes to handling your student debt, there are several choices you have. If you have federal loans, you might be able to extend your loan term and consolidate it. By consolidating your student loans, you can get lower payments each month and simplify the payment process.
If you have a private loan, there are fewer options, but you should try to reach out and to your lender and explore your options.
Get Creative
Banks, angel investors, and other financing sources are popular options but there are other creative ways to get the funding for your business. From crowdfunding to grants, getting good funding can be easy by just doing some online research.
You can also get creative by asking your friends and family to help and invest in your idea. A business credit card is also worthwhile consideration. In fact, every four in every five business owners use credit cards to cover some of their early expenses.
It is important to be mindful of high-interest rates and other penalties. Be responsible with a business credit card if you use one because it can provide access to funds while helping you establish and build business credit. Many business cards offer strong rewards programs and other incentives, and you can deduct interest payments and late fees.
Create a Debt Plan
Whether you have deferred your loan payments or not, it is critical that you have a plan for managing and paying off your debts from your student loans. Review your debts and financial situation and make a plan to how you are going to pay them down. It might make sense to put off starting your new business if you need some time to build on your savings. By having savings, it can act as a valuable safety net if your struggles to generate income right away.
Leverage the Expertise of Others
No matter what your level of education or your expertise, you can benefit from the knowledge and experience of others. It is up to you to have a relationship with a coach or mentor that can help you with the ins and outs of being an entrepreneur.
You should never be afraid to ask for your help. Leverage the network that you have start from there. You can use social media such as LinkedIn to help you connect with people.
Take on a Partner
Depending on your situation, finding, and taking on a partner who can provide a steady, interest-free cash flow may be your best way to move forward. Many investors will expect you to become an equal partner in return for bankrolling your venture however, you might find a friend or family member willing to invest without expecting any stake in your company. If both partners are not on the same page from the beginning, it can ruin your relationship.
Manage Your Personal Expenses
From the very beginning you need to get into the habit of reviewing your personal budget routinely with an eye toward reducing your non-business expenses. This can also help you pay off your student loans and other debts more quickly.
The Bottom Line
It can be rewarding to have a successful business, but it is not for the weak. It will be even challenging if you carry on any debt, but it is not impossible. Following the steps above will get you on the right direction to success.
