While the number of students who obtain Masters of Business Administration degrees, also known as MBAs, has been climbing since 2000, that increase hasn’t led to more entrepreneurs. Not many of the 1.9 million graduates in the U.S. who received bachelor’s degrees or those getting MBAs are opening their own businesses.
What About Millennials?
With so many computer-savvy millennials born from 1980 to 1996 who were highly exposed to the age of technology, one might think they would be fully prepared to use their innovative ideas and tech knowledge and start their own businesses. But millennials appear to be less likely to take a risk on opening their own business.
Increasingly since the 1980s, people under the age of 30 are staying away from their own businesses – there has been a 65 percent drop in those who have started their own business in that age group since that time, according to an article at Quartz.com.
Most years, somewhere around 20 percent of MBA graduates had begun their own business in their first three years after graduation. The most recent figure, however, in the Financial Times yearly global ranking of business schools showed that number fell to 16 percent. Instead of striking out on their own, an increasing number of those MBA graduates are going to work for someone else.
But, even though they aren’t opening businesses, a large percentage of millennials consider themselves entrepreneurs – 60 percent to be exact, according to the Huffington Post.
If Millennials See Themselves as Entrepreneurs, Why Aren’t They Starting Businesses?
What are the reasons behind millennials shying away from businesses?
Part of the reason is blamed on the staggering debt some of them face upon graduation. About $1.5 trillion in student loan debt is owed by graduates in the U.S. That has skyrocketed in recent years and is now more than is owed on credit card debt.
Not only do students owe more on average, but more students are borrowing for their educations than ever before. Students may feel too worried to take on more debt. And even if they are willing, they may have a hard time securing small business loans because of their often entry-level incomes and their student loan payments that eat up a lot of the debt-to-income ratio that lenders would partially base their loan approval upon.
What Graduates Can Do to Improve Their Chances of Getting a Business Loan
If would-be entrepreneurs are worried about being turned down for a loan, there are some ways they can improve their chances. For starters, they can keep all their other debt besides student loans as low as possible. That includes avoiding credit card debt and expensive car loans.
Also, to show their creditworthiness, graduates should make all their payments on-time so they can build a great credit score that will let lenders know they are responsible with their money.
If they feel extremely motivated, they may want to add a side hustle or part-time job to their regular full-time job. That would allow them to save up a bigger emergency fund or aggressively pay off student loan debt.
Finally, would-be entrepreneurs might want to find a city that’s better for startups. They can search a list of the best cities for small business to pinpoint better business opportunities.
Author: Shannon Serpette
Student Loan Guides
Student Loan Reviews