Serving Those Who Serve Us: Financial Resources for Vetrepreneurs

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Candice Caruso

On average, 500 or more servicemen and women transition from the military to civilian life every day — that’s around 200,000 Americans each year.

These Americans are returning to places that still may be short on job opportunities for them, forced to learn new skills to accommodate the market.

A growing number of veterans are taking an entrepreneurial leap of faith and opting for business ownership. In fact, nearly 14 percent of businesses in 2016 are owned by veterans; up from 12 percent just four years ago.

The franchise model is one that is particularly appealing for veterans — it presents the opportunity to follow a time-tested business model and allows them to be in business for themselves but not by themselves.

Despite evidence of a business climate that supports vetrepreneurs — with 70 percent of Americans saying they would rather shop at a veteran-owned business than any other — and a growing number of business ownership opportunities, entry into self-employment is still fairly difficult for many military veterans.

Self-Employment Obstacles 

More often than not, access to funding and limited capital is what limits these veterans from achieving their entrepreneurial dreams — even more so for veterans who served in active duty overseas. Military service abroad can impact a person’s credit history and financial health, both of which have a significant impact on qualifying for financing.

Fortunately, for many returning veterans, there are a number of government assistance programs, unique college and university training courses and even opportunities developed by private sector companies designed to help navigate the often complex world of business and franchise investment.

One of the most extensive and widely accessible resources for veteran entrepreneurs is the U.S. Small Business Administration. Through the SBA’s Office of Veterans Business Development, veteran business owners and entrepreneurial hopefuls have access to a number of training programs, outreach centers, government grant programs and financial aid, educational programing and exclusive access to small business loans.

SBA Vetrepreneur Resources

In addition to education and training, the SBA also features a variety of financial assistance programs offering favorable and even discounted services to veteran business owners. While the SBA itself doesn’t provide any financial backing, the organization has partnered with a network of nationwide lenders and works to facilitate loan approval and application. Two of the most successful veteran-related funding programs are the Patriot Express Pilot Loan Initiative and the Military Reservist Economic Injury Disaster Loan.

The Patriot Express Pilot Loan Initiative is offered by that network of lenders and features one of the organizations fastest loan approval times. Patriot Express loans are available up to $500,000 and offer attractive interest rates for business loans, generally between 2.25 percent to 4.75 percent over prime, depending upon the size and maturity of the loan.

These loans can be used for most business and franchise purposes, including start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases.

Similarly, the Military Reservist Economic Injury Disaster Loan (MREIDL) provides funding to help eligible small businesses and franchises meet their necessary operating expenses that are hindered because an essential employee was called to active duty as a military reservist.

While the MREIDL isn’t a financial resource for business startups and cannot be used in lieu of regular commercial debt to refinance long-term debt or to expand the business, it is an essential segment to the longstanding health of a veteran-owned business. Imagine a non-veteran owner vacating his or her business for an extended period of time — the prosperity of that business is most likely to have a significant decline.

With a maximum loan amount of $2 million, each MREIDL loan is determined by the actual economic injury to the veteran-owned business. The purpose of the loan is not to cover lost income or lost profits, it is to protect the business owner and the investment.

Supplemental Funding Options

Even with the wealth of support from the SBA to encourage lenders to extend credit to Ventrepreneurs, sometimes it’s still not enough. That’s where independent and alternative funding options come into play. Entrepreneurs and financial advisors are now looking outside of the box to gain capital for their business investment.

One option that has gained popularity over the years is Rollovers as Business Startups. ROBS is a tax deferred and penalty free investment opportunity in which entrepreneurs rollover and invest- 401K, Thrift Savings or other eligible retirement savings and turn it into business capital. By gaining access to early retirement funds, and leveraging those funds to finance a small business, veterans are able to minimize their debt accumulation and secure necessary capital. ROBS financing can also be used in conjunction with those aforementioned SBA programs and business loans.

While there’s still work to be done on behalf of veterans, improvements are being made. These programs are beginning to focus more and more on supporting the individuals who sacrificed so much to protect the people of the United States, and these advocacy groups, both publicly and privately held, are continuing to build momentum so that veteran support in all aspects of life becomes a nationwide priority.

Candice Caruso is the President of Pango Financial, with close to 20 years of experience in the financial services industry and 10 years as an innovative business funding expert.

pangofinancial.com