Military veterans face unique challenges when it comes to funding their business with a veteran small business loan, but finding capital that works for you is not impossible; especially when you have a little help. Here are seven tips to get you started:
1) Assess Your Strengths and Weaknesses as a Borrower.
Before you even begin your search, make sure you know where your small business stands. How much funding do you really need? How much can you afford to pay back each month? Are your margins higher than the interest rates? It is also helpful to be realistic about your chances of accessing different funding options. Do you know your credit score? How are your financials? Finally, make sure your documents are in order. Have you filed your taxes? Do you have an updated balance sheet and income statement? Being prepared can save you a lot of time and grief later on. Follow these two steps to determine your financial needs.
Understanding your financials is one piece of the puzzle when seeking funding. In this ebook, “The Ultimate Guide for Veteran-owned Small Businesses," you’ll learn the basics of financing as well as have access to tons of VOSB resources in addition to what you see below.
2) Understand the Terrain Lenders Navigate.
There’s a heap of regulations and internal policies that lenders must comply with in regards to small business funding which can make the lending experience hard and expensive for both the borrower and the lender. It’s important to understand some of these factors that could affect your chances of getting funding.
For example, the lender must have access to capital on their end to be able to fund your loan. They also need the proper finances and marketing it takes to convince you to do business with them.
From the borrower’s perspective, here are a few things that should help you qualify for funding:
- Earn the lender’s trust by displaying evidence of a good track record; you may have to find a way to convince lenders that you are trustworthy if your small business hasn’t yet established a good credit history (e.g., consistent, timely payback in the past).
- Come to the table with assets to offer as collateral for the loan.
- Have a compelling back-story, in which you describe experiences and skills gained during your service that set you up for success.
Proper knowledge of both perspectives will help you navigate the early stages of funding more smoothly.
3) Conduct Reconnaissance on the Options Available.
While there may be a lending gap for veterans today compared with the veteran business loan options for veterans following World War II, technology is helping fill that gap with alternative online options. Make sure you research what’s available—from traditional banks to online lenders—and go with what makes sense for you given the stage of your business, your revenue and margins. Be aware that banks have better rates, but are extremely slow and require a lot of paperwork, while many online lenders are fast, but have higher rates. Finally, make sure you understand what is offered: some lenders charge 50 percent or more for loans, which few businesses can afford.
4) Think Outside the Box.
Funding can sometimes come from an unconventional source. Do you have a family member, friend, fellow Veteran or school mate that made it big and would love to be part of your adventure? If you’re a young business, try a crowdfunding campaign or look for small business grants, SBA loans, or contests and awards for Veteran entrepreneurs, such as the Veteran Small Business Award from the StreetShares Foundation. The Foundation selects five to 10 finalists each month to be featured in a public vote. The public votes for their favorite veteran small business and the three winners get $5,000, $3,000 and $2,000, respectively. Click here to see the winners from January 2017.
One veteran raised almost $250K toward a real estate venture by utilizing his college alumni group on Facebook. One simple post connected him with six willing investors. This creative use of his personal network opened doors for him that he wouldn’t have otherwise been able to access.
5) Connect with Veteran-focused Mentoring Programs.
Mentors provide insight and connections that can help accelerate your business' growth, as well as teach you invaluable skills – such as how to present your business to potential investors. There are lots of great veteran-focused entrepreneurship mentoring programs out there:
- Bunker Labs is a program built by veterans to help veteran-owned tech startups launch and accelerate their businesses.
- American Corporate Partners (ACP) is focused on helping military members as they transition into business. ACP will match veteran entrepreneurs with a mentor who shares the same personal and business interests for a 12 month mentoring program.
- Entrepreneurship Bootcamp for Veterans with Disabilities (EBV) is designed to help veterans launch and grow their businesses by leveraging skills veterans learned in the military and applying them to business ownership.
- Some states have programs for veteran entrepreneurs. Veterans Florida has developed an entrepreneurship program that offers a tuition-free, online and on-campus program. It’s designed to work around busy schedules as you have the option to access local resources such as business mentors at partner campuses.
6) Follow through.
You would never show up on a mission in the military without training for it and having a well thought through plan. You should take funding applications just as seriously—be responsive to questions from the lender you’re working with and prompt in delivering asked-for information. Lenders work with a long list of businesses seeking funding. Small business owners should aim to be the one lenders are happy to call first thing in the morning.
7) Believe in Your Mission.
Veterans bring unique skills, knowledge and grit to the table. Smart lenders know that this makes you a high-value asset as a business owner, partner or borrower. As you grow your business, leverage your experiences in uniform and prove that you and your company are a worthwhile investment. You’ve got this.
The Ultimate Guide for Veteran-owned Small Businesses
Now that you’ve got a few tips to get you started, download “The Ultimate Guide for Veteran-owned Small Businesses” for a more in-depth look at resources, growing your business and the basics of small business financing. This guide will help you through each step. And you’ll have access to valuable resources for Veteran-owned small businesses, all in one place.