It might be hard to empathise with a twenty-something banker and his struggle to raise the funds for an MBA qualification that will boost his earning power.
But for many prospective business school students the biggest barrier to taking up a place is the ability to get a loan to fund their fees and living costs while studying, according to Brian Norton, chief executive of Future Finance.
The Dublin-based company lends to students in higher education, primarily in the UK. Its first loan in May 2014 was for £2,500 to a trainee nurse at the University of Surrey. However, a significant slice — 10 per cent of the total loan book — is made to postgraduate students returning to full-time study for business and finance qualifications.
Conventional unsecured bank debt is poorly suited to people whose return to the lecture hall prevents them from earning enough to meet monthly repayments, adds Mr Norton. Future Finance tailors its debt to such borrowers, allowing them to make lower monthly payments while studying, often at lower rates than are available on the high street. This is as important for those getting professional qualifications such as nursing, as it is for those seeking career advancement through a masters degree in finance, says Mr Norton.
The average amount borrowed for all postgraduate business and finance courses was £10,816, rising to £14,274 for MBA students. These are not insignificant sums, even for someone earning £50,000 a year, a typical profile of a postgraduate business school student using Future Finance’s services, according to Mr Norton.
Such people carry the least risk for lenders because their qualifications tend to increase their earning power. Education is “very affordable” if you are very rich or very poor, he adds. But for the majority in the middle, who can neither tap family wealth nor qualify for means-tested grants, the cost of postgraduate tuition not covered by government loans is often too expensive.
Chicago-born Mr Norton completed his business education at UCLA Anderson while holding down a job by taking the school’s fully employed MBA, which holds classes in the evenings and at weekends. Classes in practical skills, such as accounting, have proved vital in developing a fast-growing business, such as putting together funding bids. “I use my MBA education every day,” Mr Norton says. But his alumni network has been of less use as many graduates remain in southern California.
Mr Norton was already involved in start-ups before starting at Anderson in 2008, having launched his first business, creating websites, while studying for a degree in history at Harvard University. It was a Harvard friend that introduced Mr Norton to his current business adviser, Vishal Garg, co-founder of US student loans business MyRichUncle. Mr Garg had called Mr Norton to say he should look into the opportunities in Europe, which led to him moving to Dublin to research the market in 2013.
Future Finance recently announced a £119m ($171m) funding round, bringing total capital raised to £185m. Backers include QED Investors, a venture capital firm for US fintech businesses, and Goldman Sachs. The company made its first loan outside the UK, in Germany, last month. Europe is ripe for expansion because of rising fees and declining government funding for higher education, Mr Norton says.
He was pleased with his business education, but admits qualifications count for little in entrepreneurial circles. “You don’t find a lot of investors who will back you because of your MBA,” he says.
“A lot of people think, ‘I will get an MBA and the money will come raining down’. What it provides you with is a great set of tools but you have to put those tools to work.”