Common Business-Funding Sources for Students

A great entrepreneurial idea can come at any age, even a young one. For some, it happens right out of college. For others, they may still be in school, yet their business idea just can't wait. But, while having a great idea is one thing, you also have to figure out where you're going to get the money to set up your business, get it up and running and keep it going until it can stand on it's own two feet. That's often a lot of cash to have to come up with, even for a moderately simple business plan. If you're not sure just where you're going to find the funding for your brainstorm, here are some of the most common places to look for the initial capital that will get your business started:

  • Start saving. While you're formulating your business plan and figuring out how to embark on this endeavor, you should also to be doing all you can to put some cash away towards your business idea. If you don't have at least a part time job, strongly consider getting one. If you do, save every penny you can (that means less lattes and Friday night movies) so you'll have more money to use for your business needs.
  • Bank accounts. Do you have some money put away? Whether it's a savings or checking account, Certificate of Deposit, stocks, bonds or other instrument, now may be a good time to cash out those funds you've been putting away to see your business dream come to life.
  • Family members. One of the first sources that many young entrepreneurs turn to is their family. If your folks have some extra money put away, or you have a family member that believes in your business idea and wants to be a part of it, this is a very good way to obtain the funding you need. But be careful when going this route – keep in mind that while this business venture may be your dream, it is not necessarily everyone else's. You can't get angry if they don't want to give you the cash to get it going. Also, think carefully about what you'll do if the business fails. You don't want to be in the situation of having taken money from those you care about and then not be able to pay them back. This could lead to a major strain in family relations.
  • Friends. Similarly, your friends are also an option worth considering. These folks may be able to loan you some money to get your business going. They may even be able to offer you advice and expertise as you put together your new business plan. While they are your friends, you should nevertheless draw up a loan contract letting them know how and when you plan on paying them back (this should be done for the benefit of family members that loan you money, as well). If they're willing to make the funds they give you an investment, hoping that you'll succeed, that stipulation should also be placed in writing. Then, if things don't turn out the way you hoped they would, you'll have paperwork stating that the money you received was an investment and not a loan.
  • Bank loans. Of course, when you're ready to start your business, you could always take the path that much of the rest of the word uses – getting a business loan from a bank. There is a catch here, however. As a student, you may have a tougher time getting a bank to trust you with a large amount of money than most other businesspeople would normally have. Generally, students don't have a strong or lengthy credit history and when banks look at your credit report, they'll often think that you're not experienced enough or too great a credit risk to trust with their money. One way to get around this is to have someone with a stronger credit history co-sign the loan with you.
  • Student loans. You may have thought that student loans were only for classes, books and dorm rooms, but some student loans can be used for anything you want to spend them on. That means they can be used to kick off your business endeavor. And, when it comes to paying back loans, student loans are the best way to go since their interest accumulation doesn't kick in until you're no longer in college – and even then they're typically lower than most other types of loans. This translates to free money – at least for a while – to help get your business underway.
  • Credit cards. While this is not the most highly recommended way to go for financing a business, if you're running out of options, a credit card may help you to get some of money you need to get things moving. As a matter of fact, it's really not uncommon to see entrepreneurs that are starting a new operation use a number of credit cards to finance their initial purchasing. While you won't have too much of a hard time getting a credit card, this financing option should be taken on carefully and prudently as credit cards will almost always carry higher interest rates than other financing options. One thing to look for if you choose this option is a credit card that offers 0-percent financing for six- to twelve months. This will give you some time to pay the charges off before interest begins to accumulate on the amount borrowed.
  • Competitions. Keep your eyes open for business competitions offered at your college or university. Many schools offer contests for business plans or business ideas and offer cash as a prize for the winning entry. That could be free money to put into your company.

Starting a business can be an exciting time, but it can also be a frustrating time if you don't know where to get the money to make a go of it. But keep your head up and don't let go of that entrepreneurial spirit. For those with perseverance, there are plenty of sources out there.

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