The millennial generation has been coined the most entrepreneurial generation to date. However, many are postponing business ownership for one reason: financing. Starting a business from scratch is a challenging feat on its own, but for the one-third of adults under the age of 30 facing student loan debt, it can seem nearly impossible.
To help millennial entrepreneurs navigate the financial side of business ownership, we’re shedding some light on the top five things millennials need to know about business funding.
Learn the basics
The first step to financing your businesses is understanding the financial basics of business and day-to-day operations. If you need to brush up on your knowledge, no problem. Take advantage of the unlimited free training and resources available online and in person.
Turn to your local Chamber of Commerce or The U.S. Small Business Administration for information on virtually all aspects of creating and running a business.
This also means familiarizing yourself with the financial options available to you, including SBA loans, microloans, traditional bank loans, venture capitalists, alternative funding and more.
Begin researching the ins and outs of each of these and the pros and cons that come with them. A comprehensive understanding of each can help you secure the money you need to launch your business while taking on minimal debt.
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Figure out how to qualify for an SBA Loan
SBA loan officers are there to help entrepreneurs fuel small business growth. They want to find ways to provide you with the financial help you need. When applying for a loan, the focus will be on cash flow, credit ratings, capital and overall collateral. If some of those elements are stronger than others, that’s OK. The weaker areas will simply be examined further to identify why that’s the case.
If you don’t qualify for an SBA loan, that is not the end all be all. Especially for millennials who may lack credit history and collateral, there are other options. This might include applying for a microloan. Micro-lenders offer smaller loans, require less documentation, and are more flexible with the criteria. These are great for startup entrepreneurs looking to gain momentum toward operating their business.
Related: 40 Tips for Millennial Entrepreneurs to Improve Their Leadership Skills
Think outside of the box for financing alternatives
You’re a millennial, so creativity is likely where you excel! There are numerous alternative opportunities to help rev up cash flow. One option might be turning to a crowdfunding site as an effective way to start generating funds for your startup. Set your fundraising goal, tell your story, and share the page with friends, family, community members and more.
You may also turn to credit cards to help cover some of your initial expenses. However, be cautious of high-interest rates and penalties. Do your due diligence to find a business card that offers rewards and incentives to best match your needs.
Grants are another creative alternative – and unlike loans, grants usually don’t have to be paid back. Start to explore what grants you could potentially apply for to help fund your business.
Consider franchising for added corporate support
Franchising is one of the safest routes to business ownership, hands down. Choosing to launch a business is a complex financial decision, but buying into a franchise helps minimize guesswork.
If you’re are willing to sacrifice a bit of creative freedom in order to follow a proven business model, franchising is a great option to explore. With so many industries to choose from within the franchising space, you’re sure to find a business and model that works with your skill set, lifestyle and finances.
Of the roughly 30.2 million small businesses in the U.S., one out of every 12 is a franchise, with one new franchise opening every 8 minutes each business day. And the industry continues to expand every year with more aspiring entrepreneurs linking up with franchisors. This is because franchised businesses seem to weather unemployment, recession and stock market fluctuations better compared to independently owned businesses.
Many millennials are turning to franchising for an additional layer of support – investing in a proven business model, following a franchise playbook and receiving resources and support from the franchisor.
The International Franchise Association even launched a program called NextGen in Franchising to educate millennials about the industry, and franchise consultants have begun launching social media campaigns to attract the emerging demographic. It is the perfect opportunity to be in business for yourself, but not by yourself.
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Network: Learn from those who have done this before
Surround yourself with successful entrepreneurs who can shed light and offer best practices on the opportunities and challenges that come with operating a business.
As a first-time entrepreneur, you need to learn these lessons first-hand from those who have walked the path before you. Leverage social networking sites like LinkedIn and Facebook to start growing your base.
Find a mentor you can turn to, to help guide your decision making and offer direct feedback about your business goals and objectives. These relationships can be profoundly beneficial in reaching your goals of running a successful long-term business.
There will always be more to learn about the financials of entrepreneurship, but the above are five great places for aspiring millennial entrepreneurs to start.
