A Student’s Guide To Getting Business Loans

If you’re one of millions of Americans trying to manage student loan debt, and also are passionate about starting your own business, you aren’t alone.

Almost seven in 10 college graduates in 2015 had student loan debt, with an average of $30,100 per borrower, the Institute for College Access and Success’ Project on Student Debt found. Meanwhile, the number of new businesses in the U.S. has grown every year since 2010, the Bureau of Labor Statistics reports. So what should you do to avoid letting loan debt derail your dreams?

As a new graduate or even a current student, you have to understand there isn’t going to be a magic bullet. If you don’t have a developed credit history, proven business income or a cosigner, it is harder to get a business loan with generous interest rates and payment structures. However, piecing together several of the tactics below can help you meet your business and personal financial needs.

If one of the biggest hurdles to starting your business is your large pile of student loans, consider consolidating, refinancing, deferring or changing the repayment plan of those loans. What action you take depends on your lender. The federal government offers several varied types of loan repayment programs. Options include basing your payment amount on your discretionary income, meaning your payment is lower in the early, leaner months of your new business venture.

If your loans came from a private lender, such as a bank or a credit union, check with that individual lender to see what options it has available. You may be able to consolidate multiple loans into one monthly payment or negotiate a new or deferred payment structure.

Applying for a business loan without any business history or guaranteed income can be a tricky and fruitless proposition. However, a personal loan can be a way to get the seed money for your business. There are companies such as Avant and OppLoans that accept customers with poor credit scores (below 640). Be aware personal loans usually carry higher interest rates than business loans. Look for companies that don’t charge penalties for paying off the loan early. That can really benefit a recent grad who already has significant student loan debt. The longer you take to pay off your loan, the more interest can accrue and the longer it takea you to get your head above water and out of debt.

If you need just a little capital to jumpstart your business, a credit card with a low introductory annual percentage rate (APR) may get you the funds you need. A card such as the Discover it card offers a 0% APR for the first 15 months of the card, along with no annual fee. As long as you make the minimum payment, your original purchase won’t accrue interest for more than a year. That said, make sure you have a plan to pay off the balance before the introductory period is up, because you don’t want to be stuck paying interest and getting yourself back into debt.

If you can’t qualify for or don’t want to pursue a personal loan or 0% introductory APR credit card, you may consider a crowdfunding campaign. Sites such as Kickstarter, Indiegogo and GoFundMe have helped many businesses get off the ground. Crowdfunding gives businesses the opportunity to receive payment up front from interested customers, use that money to fund the business idea and then deliver the goods after production. One of the main benefits of crowdfunding sites is the ability for founders to keep 100% of their business by not having to reach out to venture capitalists. However, you should know how much money you need to get off the ground and be able to convince people your product is worth paying for up front. In many cases, if a company doesn’t meet their desired funding goal, all of the money gets returned to the investors.

When your startup costs are more than you can get with a credit card, but not quite big enough for a crowdfunding campaign or personal loan, you may want to consider a microloan. Microloans usually top out at about $10,000, and like many other loan products are based on your ability to repay the loan. However, some microloan companies take less conventional metrics into consideration, such as the borrower’s character. In addition, they might consider your business plan’s pros and cons when judging your ability to pay back the loan. This can help a new business that doesn’t have business history. Being a great person with a solid business plan aren’t guarantees, however. You still may need to provide a cosigner to get a microloan.

Getting a business loan when you are a student already battling debt may not be a viable option. However, that doesn’t mean there aren’t ways to get the money you need to start your business. Check out our personal loans reviews for companies that can work with your credit history and needs. Also consider a credit card that offers a low introductory APR.