IN TODAY’S credit-happy climate, Dan Smith’s cloud of debt is by no means one of the darkest. Burdened with a relatively modest £19,000 of student borrowings, he is in a better position than many of his fellow graduates, who left university this summer lumbered with twice that amount.

But Dan, 23, is concerned that even a moderate deficit could scupper his plans to set up a small business.

His finances are in better shape than they might have been thanks to his parents, who donated £20,000 towards the cost of his degree in French and politics at Loughborough University.

The money did not last long on the four-year course, which included a year in France. Dan owes £15,000 in student loans, is overdrawn by £1,500 and has credit card debt of £2,757.

Dan’s passion for sport and flair for languages and group management might prove to be worth their weight in gold. Together with a friend, Sam Jennings, he is setting up a business that will operate sports tours for groups of young people in Britain and from the Continent. Between them, Dan and Sam speak French, German, Spanish and Italian. They expect to have their enterprise, Tours4, up and running by the spring.

Sam is employed by a property company in Manchester, while Dan is a part-time support worker for students with special needs at a college in Kent. He earns £60 a week. To keep costs down, Dan will start by running Tours4 from his parents’ house.

Many people dream of being their own boss, but Dan has his feet on the ground. “We have planned everything meticulously,” he says. A “brilliant” course with Business Link dispelled any illusions that self-employment was an easy ride, and getting to grips with VAT, travel regulations and special licences left his entrepreneurial spirit unbowed.

Dan and Sam need to borrow £30,000 to get their business moving, but will any bank lend them money while they both have student debt?

Other goals, such as saving for retirement and breaking into the housing market, are also on Dan’s mind. “I don’t want to be living at home and watching Richard & Judy when I’m 30,” he says.

Dan: what the experts say

FINANCIAL PLANNING
Mark Dampier,head of research, Hargreaves Lansdown

“Banks do not rule out lending money to a debt-laden graduate to start a business, but Dan will not find it easy. His position will be improved if he has an excellent business plan, can show how the loan will be repaid and has a good credit score.

“The latter is becoming increasingly important. Dan can check that his credit file is in good order by contacting a credit reference agency. The three agencies are Experian, Equifax and Callcredit.