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Planning to start a business when you have student debt

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You might still be in school or ready for a career change, but launching your own company while already struggling to pay back debt can feel impossible. The massive collective debt in America among college graduates surpasses a trillion dollars, so you’re not alone if your debt has you feeling trapped and your future feeling restricted. But these days you can start a business when you have student debt.

Only two or three decades ago, financing a startup was much more affordable, even for recent graduates. A low credit score and substantial student debt can also make it harder to obtain a loan; this often forces people to put their dreams on hold or try to establish a company on their own. But with such limited resources, even a fantastic idea will likely be unsustainable.

Path to start a business when you have student debt

To help you combat your biggest obstacle in starting your business, here are some tips to tackle student debt, make payments more manageable and lay the groundwork for your future company.

Focus on Debt First

Rather than assuming your balance is just something you’ll have to deal with forever, it’s important to get your personal finances in order. This means knowing exactly how much you owe, how much you are expected to pay and what your options for loan forgiveness are. There are many ways to make student loan payments more manageable; refinancing with a private lender can provide flexible terms that lower your expenses.

When you have a repayment plan that suits your budget, then you can start looking toward saving for then necessary investments a business demand’s. You can also raise your credit by getting your debt in order and paying with a card. Then, you can use your actual income to pay off the card the following month.

Make a commitment to never skip payments; working with your lender to negotiate an income-based repayment plan can help make this easier. Missing payments instantly lowers your credit score, which will only make it harder for you to get approved for a business loan in the future. A poor credit score also influences other major purchases, like getting a car or buying a house.

Explore Funding Options

There are several ways entrepreneurs can get funding. Small business loans and startup loans are the most common, but there are also angel investors. These investors put large sums of money into ideas they support, and if you have a good model to present, you could very well get free funding from someone who believes in your company’s mission. You’ll just have to be prepared to give up some of your equity, which is the value of all your business’s assets minus any debt.

There is also the possibility of reducing startup debt by saving your own money for a few years prior to launching. This may not be desirable if your intention was to become a founder immediately out of college, but there are many benefits to this plan.

First, you’ll have a steady income that helps you work on paying off your student debt while developing financial independence as an adult. You’ll also gain valuable experience that you can apply to your future endeavors. By being a good employee, you also learn what it means to be a good manager.

About Megan Totka

Megan Totka is the Chief Editor for ChamberofCommerce.com. ChamberofCommerce.com helps small businesses grow their business on the web and facilitates connectivity between local businesses and more than 7,000 Chambers of Commerce worldwide. She specializes on the topic of small business tips and resources and business news. Megan has several years of experience on the topics of small business marketing, copywriting, SEO, online conversions and social media. Megan spends much of her time establishing new relationships for ChamberofCommerce.com, publishing weekly newsletters educating small business on the importance of web presence, and contributing to a number of publications on the web.

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