I read yesterday that David Cameron is considering offering startup loans at terms comparable to university student loans to young entrepreneurs. The initial reaction from entrepreneurship advocates seems to be overwhelmingly positive, but I’m a bit more hesitant…
Starting a business is very risky and failure rates are high. The article is light on the details of the potential program, but it seems like this could be a huge disaster if not implemented correctly.
If the program has a stringent application process that requires a solid understanding of business concepts and an awesome business plan in order to be eligible for the loan and then couples the financing with in depth training and mentorship, the program could be an amazing success. However, if they simply give loans to students with no background in business or the correct skills to implement their plans, they could be saddling young, aspiring entrepreneurs with a debt that they won’t be able to repay when their business fails. Additionally, the debt isn’t the only negative consequence if these businesses fail: these entrepreneurs may also be turned off from entrepreneurship for good when they have the potential to be huge successes with a bit more experience and/or training and they will have foregone attending university with their peers and will be stuck playing catch up.
What do you think?