Ask most graduates what the next step is after earning their degree and they’ll likely say that it’s heading into the workforce and starting their careers. Starting a business after college and becoming your own boss is an alternative to the traditional career mold.
There’s just one important wrinkle to iron out: how you’ll pay for it. According to a 2018 LendingTree survey, 42 percent of would-be business owners say that finding capital is the biggest obstacle to funding a startup.
“For a new business, capital is everything, even more so if you’re a first-time entrepreneur,” says Steve Kurniawan, a marketing strategist at digital marketing agency Nine Peaks Media. Financing capital needs is about taking managed risk, he says, and if you’re not willing to take a certain amount of risk, starting a business may not be right for you.
Starting a Business After College
Kurniawan, a serial entrepreneur who launched his first business in 2008, says trial and error are common in the beginning.
The good news is you have multiple choices for financing a startup fresh out of collegeparing them can help you find the capital you need to make your business launch successful.
Option 1: Get a Startup Loan
For recent college graduates, the main advantage of these loans is that they’re easier to qualify for compared to traditional business loans. For example, you can get a startup loan with less revenue and as little as six months in business where a regular business loan will require more revenue and at least one to two years in business.
One potential drawback of startup loans is that you may need to have exceptional credit to qualify for a loan. If payday loans Norwalk bad credit you’re just out of college and have no credit history yet or a thin credit file – meaning you don’t have enough credit history to generate a credit score – a startup loan may be harder to get.
You also have to consider whether repaying a startup loan works with your budget if you’re also repaying student loan debt.
“Remember that with new businesses, there can be cases where you won’t make any revenue at first or even lose money,” Kurniawan says. He advises that if you’re choosing a startup loan, to get one with the lowest interest rate possible, which can translate to lower payments.
And, if you’re also balancing student loan debt, you could consider consolidating or refinancing your loans to get a lower rate – and potentially a lower payment. Keep in mind that if you extend your loan term, you will pay more in interest over the life of the loan, even if your monthly payments are lower.
Your friends and family may be able to help you with starting a business after college by loaning you the money to get up and running.
If you have this option, it can be appealing because you won’t have to worry about having a certain credit score or meeting revenue or other requirements like with a loan from a financial institution. Friends and family may also charge you a more favorable interest rate if they charge anything at all. In some cases, they may want to invest in your business in exchange for a percentage of the profits.
In Kurniawan’s case, he borrowed $30,000 from his parents to launch his first business, a fish farm in Indonesia. A potential downside is that your friends and family may not have as much to lend. But that can be a good thing, says Jason Patel, who founded college prep company Transizion after graduating from The George Washington University in 2014.