Most people say that student debt is killing entrepreneurship but without student debt you will not have any learned and qualified entrepreneurs in the first place. Being a successful entrepreneur does not mean you will have to be a millionaire but you can at least prevent your business from early closure with a proper contingency plan to pay off the student debt you may have taken for your higher studies.
This will make you free from debt and you will have enough time and resources top devote to your business for the desired growth and expansion. However, easier said than done, you will need to follow specific plans for but first you must know the truth about the claims people make about debts killing entrepreneurship.
It is only this year alone that there are about 1.9 million fresh graduates in America and out of these roughly 200,000 of them are holders of a Masters’ Degree in Business Administration, or MBA. According to studies, there has been a steep rise increase in the number of MBAs, college grads and others 2000. The primary reason to this is the greater and easy availability of student loans.
Now the obvious question that may arise in your mind is that whether the country has enough scope to absorb all these fresh grads into different companies and services and especially how far feasible it is for these fresh MBA graduates to become an entrepreneur. At this point you may feel that the claims made by experts are true.
Just like the liberal lending policy, the government has also been very liberal in their governance and removed a few specific barriers to the entry of a new business startup today. This liberal policy has resulted in businesses to find it much easier to outsource their business activities whether it is for payroll or to obtain a scalable office space.
However, if you have to deal with an already existing huge amount of student debt on your shoulders, it will be really tough for you to handle your business finance as well as your personal debt commitments and its repayment each month.
Therefore, the need of the hours is to have a strategic contingency policy along with a well formulated repayment plan for an individual. As for the government, it is required to have a more liberal, well-targeted, properly designed and more productive tax policy so as to ease the pressure of student debt repayment for each would-be entrepreneur so that they do not have to spend all their time in reading debt consolidation reviews instead of reading articles and blogs of successful entrepreneurs to follow and become equally successful.
Things to consider
There are a few things that both an entrepreneur as well as the government should consider such as:
- The employment tax credits for the founders so that it eases the cost of new hiring for the company
- Different types of student debt relief programs offered by the government especially for those grads that go on to serve at nonprofits, start their own business or for the government and
- Extending the government’s Public Service Loan Forgiveness program to those who have started their own registered businesses of a specific size.
Ideally, businesses are the only one that injectsmoney into the country’s economy and therefore, the government must be more considerate if not liberal towards them.
Encouraging entrepreneurial mindset
Governments should encourage people having entrepreneurial mindsets as more and more corporations will come up and will be benefitted from it. There must be specific policies followed by companies to give their employees enough time to work on their own projects just like Google has done. You will be surprised to know that it is due to such encouragement that allowed the Google employees to spend nearly 20% of their total time of work on any passion of their own choice and it is this thought that has led to new products like the most used Gmail.
Therefore, the requirements can be enumerated as:
- Allowing every company to choose its own path and action to encourage any entrepreneurial spirit
- Formulating a sensible government policy and
- Individuals too must play their role well in fostering startups.
It is only then that debts will not kill the potential entrepreneurs anymore.
Access to debt
At times easy access to debt can prove to be extremely crucial for entrepreneurs who want to start a business as they will need capital for it. However, availability of capital can be ensured in ways other than providing them debts on easy terms. The most significant and productive way is by embedding economic ties and a social relationship with the loan provider. This will not attenuate opportunism but will accentuate business growth.
However, to establish such a relationship substantial amount of investment is required in terms of time and effort. But by proposing a contingency theory a solution to this entrepreneurial conundrum can be provided that will help the would-be entrepreneurs to alignthe essential transactional properties. These may include asset specificity, frequency and uncertaintywith the entrepreneur-bank embedded or arm’s length relationship and its nature.
Ideally for the small businesses, there is a need of congruence between the actual and optimal governance structure. It is only then a country will have higher business performance and results. The highlights of this principle should be regarding the:
- Characteristics of entrenched relationships that unite synergistically with the archetypal topographies of hierarchical governance
- Transactional properties that may affect optimal debt governance and
- Firm performance that usually depends upon the basic alignment between entrepreneur and bank relationship as well as the debt transaction properties.
This theory will prescribe and predict all the transactional properties that may affect the optimal governance of such entrepreneur and bank relationship. Ideally, social embedding can even transform a market transaction in the form of a debt transaction in this type of entrepreneur and bank relationship and make it into a more hybrid form. This form of governance will be eventually more analogous to a hierarchy.