This short guide outlines student debt solutions when you plan to start a business, and how to prevent the debt from holding you back.
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 if you find proper student debt solutions.
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 unless you establish student debt solutions.
Business start-ups with existing debts every day: Experience from practice shows that this happens more often than some might think. So if you ask whether it is possible to start a business despite debts. The simple answer is: yes, in principle it is possible. However, that does not mean that it is easy or possible in every case. As is so often the case, circumstances also play a decisive role here.
Student debt solutions when you want to start a business
To help you combat your biggest obstacle in starting your business, here are some student debt solutions 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 as the first of the student debt solutions. 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
The biggest problems with starting up with debt naturally arise with financing. Getting a loan will be difficult, but it doesn’t have to be impossible. Before granting a loan, the bank first checks your creditworthiness and then evaluates your business project in a second step. As a result, the first thing you need to do is convince the bank that you are able to responsibly use the money they want to borrow or explain how it went into debt.
There are several other 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.
Conclusion
Starting up with student debt is complicated, but doable when you find student debt solutions. The step into self-employment is always associated with a risk, so you should, especially if you are already carrying a financial burden, carefully consider whether you want to take on additional obligations.
The risk that you will fail with your business idea is always there and then you may have more debts than before. Even in the event that you are unsuccessful, you should have a plan in place before you start.
A start-up with debts must be planned down to the last detail, as there is no financial cushion. You cannot react to unforeseen costs or take out a loan quickly. Even the smallest amounts can lead to the closure of your company.
