Yes, Young Entrepreneurs Can Get Business Financing Too!
by Carrie Hinkel on February 22nd, 2008
For young entrepreneurs, now may be one of the best times to start a business and convince investors that your idea is the next “big thing”. More and more young entrepreneurs are turning ideas into million and even billion-dollar businesses. Most have heard that Bill Gates was only 20 when he started Microsoft and that Michael Dell was only 19 when he started Dell. More recently, Sergey Brin and Larry Page were both 25 when they started Google, David Filo and Jerry Yang were 27 and 25 when they started Yahoo!, and Facebook was founded by Mark Zuckerberg when he was only 19. The list goes on and on.
No longer are teenagers and twenty somethings brushed off for their business ideas because they’re simply “too young”. If a young entrepreneur has a solid business plan and a thoroughly-researched business idea, there’s a good chance inside investors will be interested – knowing that when it comes to starting a successful business, age doesn’t always matter. However, not every young entrepreneur is the next Bill Gates, nor is every business idea the next Microsoft. So, getting funding isn’t as easy as stating “I’m in my twenties and I have a hot new business idea, want to invest?” But, unlike in decades past, being a young entrepreneur looking for financing isn’t necessarily a roadblock either.
There’s no doubt that young entrepreneurs will encounter more hurdles when trying to raise capital. Often times what’s lacking is a long credit history or enough work experience to obtain formal financing from a bank or credit union. However, there are plenty of other alternatives, such as:
Family and friends – It’s no secret that many young entrepreneurs got a loan from mom and dad to start their first business. They may have had the idea of “doing it on their own”, but the reality is that it’s very tough for someone in their teens or twenties to get a traditional loan without being a homeowner. So, put together a solid business plan, wow your friends and family with your ideas and you might just find them jumping at the chance to back your new business.
Angel investors – An angel investor is an individual who invests their money in a start-up company. This could be a friend of a friend, the owner of your local grocery store, the family lawyer, etc. If you’re interested in finding an angel investor, then create a list of wealthy individuals that either know you personally or know a close friend or family member of yours personally. Make sure your business plan is detailed and concise, and work on your one minute “elevator pitch” to convince them each to give you a twenty-minute meeting.
Venture capitalist – Working with a venture capitalist company can be great in that they not only provide financing, but they use their experience to help you get your idea off the ground and take it to the next level. Venture capitalists are interested in big, million-dollar ideas though, so if you’re looking to open a local pizza shop, a venture capitalist firm is probably not the best place to look for financing.
Credit cards – The good thing about credit cards is that virtually anyone can get one (or two or three). The bad thing is that they can spiral you down into a pitfall of debt very quickly, possibly compromising your future ability to obtain traditional financing. For young entrepreneurs, using credit cards to finance a new business is very dangerous. With no money coming in for months, your debt will continue to rise at a rate that’s hard to keep up with. While plenty of successful businesses got their start on credit cards, many more businesses failed, leaving the founders in serious debt; so make sure to use credit cards carefully.
So, don’t think that being young is a disadvantage when trying to raise capital. Use your youth to your advantage and get potential investors excited about your business idea. Show them that you have done the research and that you have the energy, motivation and enthusiasm to get your idea off the ground and their money back in their pockets with some nice profits!