ALT/loan is a college loan alternative for young people who have a clear idea and need a little help to get started.
Size: $15-30k, dispensed in $5-10k increments.
Return: ALT/loan is priced similar to a private market college loan (10-15%)
Use: Funds will be spent according to a predetermined plan that is approved when the funds are released, with an allowance for some changes in response to business learning. Unlike traditional small business loans, funds can be used towards business-applicable education and non-capital start-up costs like website design or space leasing.
Accountability: Spending of funds will be closely monitored through a Mint-/Xero-like interface (most banks and credit cards have the core functions already in place, e.g. enabling users to tag expenses with specific categories).
Risk: These loans have a similar accountability as student loans (i.e. do not go away with standard bankruptcy), reducing the likelihood of default. For students, the risk of being saddled with unreasonable debt is reduced by the cap on the size of the loan and the education involved with acquiring the loan.
A four-part campaign to introduce ALT/loans to the market
- INSPIRE: partner with local workforce investment boards, community colleges and high school career centers to increase visibility of the option of entrepreneurship as a career path. Digital and physical resources like Business Model Generators and the Board of Innovation templates make space to test assumptions and start building a business plan. Before ever stepping into a bank, prospective entrepreneurs can play with different inputs to think through the fixed and variable costs of the business they want to create and imagine what they could do to make it grow healthier. (Similar to SmartAsset/YourSQFT)
- LEARN: partnering with local business school business simulators and/or partner with start-up incubators (e.g. teensintech, Ycombinator, startup pirates), give youth a trial-by-fire experience of starting a company and lay the groundwork for a successful start. At the same time, completion of one of these projects shows the lending bank the dedication of the applicant. Applicants can also prove their commitment by demonstrating a track record of serious involvement with an activity related to their business and recommendations from the people they worked with in those contexts (e.g. sports coaches, past customers)
- FUND: Qualified applicants receive ALT/loan for $15-30k, based upon a business plan with clear milestones to release funds. Unlike traditional small business loans, ALT can be used for targeted training and start-up costs.
- EXECUTE: Progress is monitored through mentorship and digital monitoring of funds through online bookkeeping system. A Mint-/Xero-like tool gives the business-owner the information they need to stay on-top of maintaining and growing their business. It also gives the bank data on the health of their investments and gives them a chance to help nudge the business back on-track if something has gone haywire. Mentorship comes from continued partnership with local business schools, whose student's have real-world business experience and would benefit from the experience to be a valued advisor. Eventually, "graduate" loan holders also begin to mentor loan holders and visit local high schools to inspire the next generation.