There are currently 46 million Americans with student loan debts and nearly half of the millennials who own or plan to start a business say that their student loan debt is an issue when starting their business.
The major issue faced by startup owners is finding a way to finance their startup. Having student loan debt makes it difficult because lenders might not lend you the money you need to get started. This means that securing financing for your startup can be tricky.
On that note, here are four ways to launch your startup despite having student loan debts.
Alternative Repayment Methods
It goes without saying that paying off your student loan debt takes a chunk out of your income, money which could have been put down towards launching your startup. To deal with this problem you can find alternative routes to help you ease your student debt and free up some income you can put towards your business.
Startup owners can first explore the option of getting a deferment or forbearance on their loan. This frees them up for a period of time so they can focus their income, time, and energy on the startup. Another option is to refinance private student loans, which simply means that a lender pays off your current student debt and gives you a fresh loan with new terms.
Find an Investor
If you can’t seem to get good credit due to your student loan debt, a good way to finance your startup is by getting an angel investor. An angel investor is an investor that provides you with startup capital in exchange for a stake in your company and its proceeds.
Your first investor doesn’t necessarily have to be a big name or a corporation. In fact the first place you would get a check would probably be from your family or friends.
You can draw a business plan and show it to a few people explaining how viable your startup is and the profit they stand to make. The key to getting a good investor is your ability to convince investors that your startup idea is a good one.
One of the ways you can launch your startup is through government grants. Government grants are financial awards that are offered by the government in order to achieve something that is beneficial to society. What differentiates a grant from a loan is that grants often do not need to be paid back.
Government grants come with a bunch of requirements you have to meet before you can qualify for them, and there are also rules that guide how the money must be spent. Often these grants are set up as a means to bolster an industry or to achieve technological or medical advancement.
Examples of such grants include the USDA Rural Business Development grant and the STTR Small Business Technology Transfer program. However, due to the requirements attached to government grants, you or your business might not meet the qualifications and can miss out on the opportunity.
Another way to launch your startup is through crowdfunding. Crowdfunding has become exceedingly popular over the last few years. It is the process of raising capital for a project by getting funding from a large number of people.
The crowdfunding process is digitalized so startup owners can publish their startups and businesses on online platforms like Kickstarter and Syndicateroom, and then a lot of individuals who like the idea invest in the business.
It’s a breakout from the traditional system that meant only the rich could get involved in investing, and has opened doors to startup owners that do not have access to traditional investors.
Before launching your startup with student debts it is imperative that you consult your financial advisor for a better understanding of the options open to you.