Posted on Feb 19, 2014
Yes, you can get a commercial loan if you are still in college! However, you will need to put some work into it since there are a few obstacles that young borrowers—like college students—specifically face.
“College students face the triple hurdle of insufficient credit history, low collateral, and if they have student loans, high current debt load. This makes them a bad credit risk in general. So there is a bit of automatic age-ism in the mix, endemic in the system,” said Professor Trexler Proffitt, from Muhlenberg College, in an interview with loans.org.
Fortunately there are ways to jump over these hurdles. First, young borrowers should get their paperwork in order. Neither a bank nor a credit union will lend money to anyone who lacks a well-written business plan. For virtually all lenders, this is a mandatory requirement. Second, young borrowers should consider putting up collateral for their commercial loan. Understandably, this can be very difficult since most college students don’t have a lot of collateral available to them.
This brings up the possibility of actually forgoing borrowing money from a bank or credit union and instead approaching family and friends, who may be more accommodating. Once an idea is up and running, you can re-approach banks and credit unions with more leverage. As you can imagine, lenders are far more willing to give money to a business that already has orders, customers, employees, and all the other working parts necessary to make a buck.
All is not lost to young borrowers who do not have family and friends with deep pockets though. There is always the path of venture capital and angel investors. This type of financing will give money to young entrepreneurs but at the cost of equity in the novice business. Since this is a big decision to make, it is really up to each young entrepreneur to decide whether taking money in exchange for partial ownership of their business is wise or not.
Finally, a campus may be a resource for capital. While universities don’t typically toss money to entrepreneurial students, they do host a variety of programs, competitions, and conferences that might offer financing opportunities.
When all is said and done, success doesn’t necessarily rely on money, as Professor Proffitt explains. “Veteran entrepreneurs say vision, persistence, and teamwork matter a lot more than startup cash, and that these things build to produce credit-worthy cash flows,” he said.