National Veterans Small Business Week 2016 (NVSBW) just kicked off and runs through November 4. You can find local NVSBW events here. You can find tips for veterans to fund your small businesses right here.
Thanks for all you do abroad and here at home!
There are a number of private and public resources exclusively available to veteran small business owners (more about some of these in later tips). Many, including the public programs, requires you be verified as a vet-owned business. For other private organizations, it just makes things easier. The VA recently changed the process to ge verified due to feedback from the vet-owned business community, including implementing a pre-qualification process to speed things up and assigning each application a single point of contact to improve the customer service handling of your application.
2. GET YOUR FINANCIAL HOUSE IN ORDER – PERSONAL AND BUSINESS
Military life makes it too easy for issues to come up in your personal finances, which impacts your business’s financial health. If you’re already carrying a lot of debt or have fallen behind in payments, this will make it more challenging to get a small business loan. The Servicemembers Civil Relief Act (SCRA) makes it possible for some veterans to get an interest rate deduction on any debt incurred prior to military service. If you qualify for SCRA relief, you can get your interest rates lowered for things like your mortgage, car payments, and credit card debt. With lower monthly payments, this should provide an opportunity to get current and to re-establish a reliable payment history – both attractive traits to business loan lenders.
Another part of getting your financial house in order is organizing your financial and business documentation. Make sure bank and financial statements, credit card statements, any relevant rental contracts or business licenses are all available and updated. Alternative lenders, who work primarily online, will want your documentation electronically. Operating digitally helps them keep costs down and speed processes up. So make sure your documents can be delivered and accessed electronically. This is especially true if you need a business loan quickly. UCS has helped small business owners apply and get their funding with in 24 hours, but it requires fast moving by the business owners in providing their documentation.
3. KNOW YOUR CREDIT SCORE – BOTH PERSONAL AND BUSINESS
Knowing what your credit score will set your expectations on the kind of small business financing deal you can get and on what sort of terms. Having fair or poor credit makes the cost of borrowing money more expensive. There’s no getting around that in the short term. Knowing what your credit scores will help you avoid wasting time chasing down business loan lenders, like traditional banks, that require high credit minimums. It also sets a benchmark and starting point for your plan to improve your credit scores. Depending on the kind of small business loan package you get, meeting its payment schedule can be a part of that credit score improvement plan.
4. BE CLEAR ABOUT YOUR NEEDS
Specifically, know exactly how much money you need, what you need it for, how it’s going to provide a return for your business and what that expected return will be. When you’re clear about all these elements of your small business financing plan, you’re making sure you’re not taking on more debt than you need, have a plan to keep you on focus for using the money well, and have definitive success metrics to work towards. Without them, it’s too easy to get caught up in the available cash and fall off track. You don’t want to become a business loan junkie.
Going through this clarification step and writing it down will also reveal where some of your financial weaknesses are so you can take steps to shore those up. If you’re looking for working capital to carry you through a cash flow crunch, investigate how and why the cash flow crunch occurred. Then you can think about what sorts of financial management changes you can make to avoid it in the future.
5. UNDERSTAND HOW LENDERS MEASURE RISK
When you understand this, you’ll have realistic expectations on what sort APR or costs you can expect to access small business financing. For example, a sketchy repayment history or any loan default will likely make the cost of financing higher. Lenders also look to length of operating history and cash flow history. Think about whether you have collateral to secure the business loan or want an unsecured business loan. If you don’t need a business loan immediately, take the time to shore up any of weak spots you might have that ring a high risk bell for lenders.
6. HAVE A STRONG BUSINESS PLAN THAT INCLUDES YOUR MILITARY STORY
Lenders don’t just lend to businesses. They lend to people. That’s one reason why your personal credit score matters as much (if not more) as your business credit score. Your military background matters, but you need to frame it right. Tie your backstory to your business. Be specific about what military skills, experience, and contacts you have and how you use them to benefit your business.
7. DO THOROUGH RESEARCH
Once you’ve completed step #4 and have clarity about your financial mission, you’re ready to research now that you know what you need.
8. TAKE ADVANTAGE OF VET-FOCUSED RESOURCES AND MENTOR PROGRAMS
As I mentioned above, there are numerous public and private resources dedicated to helping veterans become successful entrepreneurs. Some, like the SBA’s Patriot Express program help veteran’s find lower cost business loans. Other programs and organizations might offer business mentoring, including preparing your business plan, or help you apply for vet-owned business set aside contracts (government contracts set aside specifically to be fulfilled by vet-owned businesses). Keep in mind that there are also organizations dedicated specifically to entrepreneur-veterans with disabilities.
9. DON’T WAIT UNTIL LAST MINUTE
Alternative finance lenders can provide cash quickly if you need it. That’s a great relief when the unexpected happens. But why put yourself in that position? Prepare. Prepare. Prepare. Even if you don’t need financing right now, start working through these steps so you can put yourself in the best possible position when the time arrives for your business to take advantage of outside financing.
10. STAY ON MISSION
Whatever the current financial state of your business, as a veteran you have the internal and external resources to get your business on track and thriving. Set your business financing objective and get to it.