While it may seem strange that a lender would approve business loans to start or grow a business to someone that has not yet graduated from college, it is less odd when you consider the vast number of successful companies that have been started by undergraduates in recent decades. The most notable of these are likely Microsoft and Facebook. Emerging technology has created a way for some very intelligent undergrads to start and run successful businesses all while earning their degree, and some even in lieu of earning their degree.
What Do Lenders Want to See?
For the most part, lenders want to see the same things from undergraduates that they want to see from any other potential borrower. However, there are some special considerations that tend to make lenders look a little more closely at undergraduate borrowers. Factors such as the amount of student debt and major are considered; as are an in-depth look at the business plan and the amount of personal investment available. They may also consider factors that indicate stability, within reason, such as the number of majors a student has declared, where the student lives, or the number of times the student has moved in a set amount of time.
Use Credit Wisely for a Head Start
If you are in college and you have a business idea, there are a few steps you can take to help make it easier to get approved for small business financing. One option is to start the business first, with caution. One way this could happen is with a business credit card. Credit card companies love to cater to college students, and business credit cards for college students could be available. The key is making sure you pay it regularly, and hopefully this could be done with proceeds from the business.
Starting small with the intention of growing is the master plan here. You want to be able to show lenders you can both run the business for a profit and manage the related finances. This could open the door to small business financing in the form of a business line of credit, with a higher maximum and lower interest rate than a business credit card, as well as other types of financing.
Additionally, be certain the business plan is put together professionally, and that you understand it. The Small Business Administration can help with this, as they have a template and specialist available to help answer any questions. There also may be a small business center on campus that can offer help for free, and sites such as Biz2Credit.com can help as well. Be certain to present yourself professionally in every way, and be prepared to present the case for why and how you are going to be able to run this business despite the fact you have yet to graduate. Include any feasibly related experience as well as related courses completed and the corresponding grade if it is favorable. It never hurts to have a partner or mentor, someone who is willing to help you, that has graduated and may be looked upon more favorably by lenders.
It is possible to get a business loan as an undergraduate, though it may take a little more work. Loan approval is not guaranteed, but it can and does happen. These tips could help.
This article was submitted by Faith Stewart. Faith Stewart has a BBA with a major in accounting and spent 10 years working in the various aspects of accounting and finance before pursuing her passion for writing.