25 years old and deep in debt

[CountDeMoney]

IT Certs, people.  It's the only solution.

[Savonarola]

To my mind, from the article, the main problem appears to be that both of them are attempting to run a small-manufacturing business while at the same time pursue university degrees.

The article states that they are currently using a university owned laser-cutter for their current business.  Presumably that wouldn't be available to them if they weren't students.  We don't know that they would continue to pursue their degrees if they had a bigger laser cutter.

While I doubt that the two presented in the article are some mute inglorious Bill Hewletts; they're only meant to draw you into the article.  The writer is giving you a human example that you can relate to in order to explain how student loans stymie entrepreneurship.  Obviously she failed to factor in the Languish element.

[merithyn]

there is another unexplained assumption here:

How exactly is the personal uni debt stopping them from getting a business loan?
It is true that the personal debt lowers the value of a personal guarantee.
But if the sales of the business are sufficiently strong and business plan robust, a community bank may still lend, or alternatively, the business owner can get an SBA guarantee.
The SBA microloan program (up to 50K/6yrs)  seems tailor-made for this particular business need.

The need is $140k, not $50k. That's a factor. And when it comes to small business loans, banks generally look at personal credit, too. At least, they did when the toffee company I worked for was looking for a loan.

Though this does sort of look like a good candidate for Kickstarter.

EDIT: Just saw that the need isn't known, despite Jacob's statement otherwise. Anyway, the point still stands. Banks will look at personal credit history for business loans.

[Admiral Yi]

So many assumptions flying around in this thread

I found it funny because as far as I'm concerned you need to do your due diligence and understand the particulars of your field to develop a good business plan. I thought it ironic that someone would dismiss a business plan without knowing any of the particulars of either the plan nor the field.

It's not that funny anymore, though 

This doesn't really explain why Beeb's comment about a crowded market is funny--excuse me, used to be funny.

[crazy canuck]

Obviously she failed to factor in the Languish element.

What sane person would?

[Malthus]

To my mind, from the article, the main problem appears to be that both of them are attempting to run a small-manufacturing business while at the same time pursue university degrees.

The article states that they are currently using a university owned laser-cutter for their current business.  Presumably that wouldn't be available to them if they weren't students.  We don't know that they would continue to pursue their degrees if they had a bigger laser cutter.

Exactly so. They are manufacturing a product using the University's equipment (we don't know at what cost to them, but it's a reasonable assumption that it isn't at full, commercial rates).

There is exactly zero evidence that they could make a profit in this business if they had to do it on their own, paying commercial rates for the equipment they use.

Add to that the fact that they are doing this business as a side-line while simultaneously pursuing academic degrees, which raises its own red flags, and it looks to me like they are not the best poster-people for the problem alleged in the article.

While I doubt that the two presented in the article are some mute inglorious Bill Hewletts; they're only meant to draw you into the article.  The writer is giving you a human example that you can relate to in order to explain how student loans stymie entrepreneurship.  Obviously she failed to factor in the Languish element.

Exactly so. What I'm saying is that the writer made the wrong choice of example. My heart does not go out to their plight, because in two brief paragraphs the picture the author presents is not one of buding entrepreneurs stimied by student loan debt.

[crazy canuck]

Exactly so. What I'm saying is that the writer made the wrong choice of example. My heart does not go out to their plight, because in two brief paragraphs the picture the author presents is not one of buding entrepreneurs stimied by student loan debt.

Only because you require "evidence" that they have a good business plan.  Something which would deflect the story from the point it is trying to make.  Which is why writers should never have Languish in mind as a target audience.

[Malthus]

Exactly so. What I'm saying is that the writer made the wrong choice of example. My heart does not go out to their plight, because in two brief paragraphs the picture the author presents is not one of buding entrepreneurs stimied by student loan debt.

Only because you require "evidence" that they have a good business plan.  Something which would deflect the story from the point it is trying to make.  Which is why writers should never have Languish in mind as a target audience.

No, not at all. I've said I know nothing about the market.

What I require is that the article not include actual evidence that the alleged problem is unlikely to be the real issue.

'I'm pursuing my masters while doing a start-up using university equipment, and for some strange reason the bank won't gimme a loan - must be my student debt! Damn you, university, for screwing me!' 

[crazy canuck]

'I'm pursuing my masters while doing a start-up using university equipment, and for some strange reason the bank won't gimme a loan - must be my student debt! Damn you, university, for screwing me!' 

Actually, running a business using university equipment while pursing a degree is a time honoured way of starting a business.  They are just doing it more creatively.

[Malthus]

'I'm pursuing my masters while doing a start-up using university equipment, and for some strange reason the bank won't gimme a loan - must be my student debt! Damn you, university, for screwing me!' 

Actually, running a business using university equipment while pursing a degree is a time honoured way of starting a business.  They are just doing it more creatively.

Pursuing a small manufacturing business making cupcake decorations while getting a masters in Zoology? The two have nothing to do with each other.

[The Minsky Moment]

It sort of fits with the MFA, I guess.

Assuming they want a laser cutter that cuts relatively small pieces of plastic we are not talking about a lot of money here, something in the range of $5000. (assumption 1)
I think that assumption is sound looking at the pictures and descriptions - they are plastic doodads and small enough to fit on a cupcake.

From a banks POV, whether they have 150K in student debt or none at all doesn't matter much; either way they have no collateral.  The bank is going to evaluate this as a loan to the business, secured by the laser cutter, which presumably carries some decent resale value.  (assumption 2)

If they can show a good track record of sales and profits on those sales AND if they can show their order flow supports expansion, they have a decent chance of getting that loan.  And if the bank balks due to risk, they can always go to the SBA.  That involves a lot of PITA paperwork but it can work.

So either:
+ the business isn't strong enough to support the loan, or
+ the local banks in Maine are all very nervous and this couple for some reason can't deal with the SBA application process, or
+ they haven't tried that hard to get the business loan, or
+ there is some other factor at play not mentioned.

[Jacob]

This doesn't really explain why Beeb's comment about a crowded market is funny--excuse me, used to be funny.

It does.

Again, it is because he does not know whether the market is crowded or not for their particular line of products, yet he reacts to a simple anecdote as if it gives him solid factual basis to offer analysis of their business plan.

The device works particularly well because Meri's anecdote causes him to immediately reverse his analysis while maintaining his conclusion unchanged; at first the plan is terrible because there's no market for their product, then when an anecdote indicates that there is indeed a market the plan is terrible because he deems the market overcrowded.

Thus the reader is led to conclude that BB would remain loyal to his initial conclusion and would shape his interpretation of data and anecdotes to support that loyalty; the amusement is derived from watching this process.

Alas, this explanation has done a disservice to both the amusement (killed it through dissection) and BB himself (as there is nothing unique about this on languish, pretty much everyone does it from time to time and with varying degrees of success).

[alfred russel]

Part of the issue may be that finding good subjects for an article like this is tough.

Take JR's (I think valid) points regarding those who start their own businesses not staying in school so long. A budding entrepreneur has a few options to stay in JR's good graces:

a) forgo education: if the business is successful, then the subject makes education seem unnecessary. If the business fails, the subject looks like just a random uneducated dropout.
b) forgo being an entrepreneur. I'm sure that is what many professionals have done. Random office drone #956482 bringing home a decent paycheck probably has made peace with his decision, and in any event the opportunity loss to the person (and the economy) isn't obvious.

[crazy canuck]

'I'm pursuing my masters while doing a start-up using university equipment, and for some strange reason the bank won't gimme a loan - must be my student debt! Damn you, university, for screwing me!' 

Actually, running a business using university equipment while pursing a degree is a time honoured way of starting a business.  They are just doing it more creatively.

Pursuing a small manufacturing business making cupcake decorations while getting a masters in Zoology? The two have nothing to do with each other.

Which is often the case actually.

[Malthus]

It sort of fits with the MFA, I guess.

Assuming they want a laser cutter that cuts relatively small pieces of plastic we are not talking about a lot of money here, something in the range of $5000. (assumption 1)
I think that assumption is sound looking at the pictures and descriptions - they are plastic doodads and small enough to fit on a cupcake.

From a banks POV, whether they have 150K in student debt or none at all doesn't matter much; either way they have no collateral.  The bank is going to evaluate this as a loan to the business, secured by the laser cutter, which presumably carries some decent resale value.  (assumption 2)

If they can show a good track record of sales and profits on those sales AND if they can show their order flow supports expansion, they have a decent chance of getting that loan.  And if the bank balks due to risk, they can always go to the SBA.  That involves a lot of PITA paperwork but it can work.

So either:
+ the business isn't strong enough to support the loan, or
+ the local banks in Maine are all very nervous and this couple for some reason can't deal with the SBA application process, or
+ they haven't tried that hard to get the business loan, or
+ there is some other factor at play not mentioned.

I've never tried to take out a small business loan, but it strikes me that with a start-up business with essentially no assets, the banks might require the principals of that business to make loan guarantees on behalf of the business. Being deep in debt may prevent the bank from accepting loan guarantees from them.