Seeking funding for your veteran small business can be one of the biggest hurdles you overcome as a business owner. There are many ways to go about it. Depending on the stage of your business, you may be looking for equity financing, debt financing or you may be bootstrapping and doing it all on your own with your savings and/or with money from friends and family.
When you have money, you can make more money. It’s a vicious cycle, but it’s one of the most important factors in running a small business. In fact, 82 percent of businesses fail because of cash flow problems, according to a U.S. Bank study. Cash flow is the movement of money in and out of your business. Not having enough cash or inaccurately analyzing your cash flow can affect everyday operations.
Once you have enough cash flowing in and out of your business, you’re probably at the stage of growing your business. If your cash flow is steady, how do you get more money to boost your business even more? Let’s look at a few veteran small business owners who took the debt financing route to grow their businesses with small business loans and lines of credit.
1. Purchasing Inventory
Product-type businesses that actually manufacture and sell physical products need enough inventory to sell to their customers. If you’re a small business, it’s a delicate balance between having enough inventory to sell and not producing too much so that you’re in the hole. However, if you’re getting purchase orders that means you’ve got future cash available.
Zachary Green, Marine Corps veteran, volunteer firefighter and CEO of MN8 Foxfire/LumAware, went through that exact scenario.
“We received $1 million contract with Kroger to replace their exit signs with our photoluminescent exit sign,” Zachary said. “But the problem was – how do we make sure we’ve got enough inventory to fill an order like that?”
Zachary took out the Patriot Express® Line of Credit* to cover the costs of inventory. He converted the cash from StreetShares to raw materials. Smart business owners like Zachary Green, open lines of credit even if they’re already in a great financial position with good cash flows.
“We don’t need the money, but sometimes we grab it when we don’t need it,” Zachary said, “because when you need it, sometimes it’s difficult to get.”
2. Paying Personnel
Small businesses typically have a few employees on hand. To keep your business running smoothly, it takes help from other people. They may be part-time or full-time employees. But they’re crucial to the success of your business.
Zachary tells us about another example when he was just starting out and received a large order that paid MN8 Foxfire at a slow pace. They suddenly had two or three more orders and were faced with a very difficult situation. He wasn’t going to be able to make payroll.
His growing business encountered a classic example of not having enough cash on hand. Cash management was his biggest problem. Zachary did his research. Banks wanted to see three to five years of consecutive years of profitability and they could only lend so much. He discovered that a term loan from StreetShares was the right fit.
“I was able to get funding within a few hours,” he said. “We were able to pay that business loan back and actually get a couple of other ones.”
3. Opening a Multi-Unit Franchise
For many military veterans, opening a franchise business is a good option for entrepreneurship. One in seven franchises in the U.S. are owned and operated by veterans, according to the International Franchise Association Educational Foundation. It allows the for veterans’ leadership skills to shine, structure in starting up and support in marketing and operations.
As with any business, franchises come with costs. Typical franchising fees include one-time initial fees to become a franchisee, royalties or ongoing franchise fees, marketing fees or required purchases of products or services. As a single-unit franchise owner, one must assess these costs and determine if it’s worth the return on their investment.
After some years in business, a first-time franchisee may see that the business is going well and decide to open another location. Single-unit franchise owners have a ton of advantages into becoming a multi-unit franchise owners. They have they experience of running a franchise and potentially already have the cash flow from the original franchise business.
Retired Marine veteran and multi-unit franchise operator of Juice It Up, Willie Smith, is a great example of a successful and growing franchisee. Willie opened a franchise because he wanted to continue to serve the country with a healthy-living business that gives back to the community and Juice It Up was the perfect fit.
After 17 years in business, Willie was ready to open his second location. As a multi-unit operator, it’s a bit easier to get a small business loan or line of credit than it would be for a single-unit operator. To open a second location, different fees and costs will most likely come up. Willie turned to StreetShares for a term loan to assist in opening his second location in the historical distrcit in Temecula, Calif. He used the funds to pay for the franchise agreement, the lease on the building and architect fees.
4. Building Your Own Franchise
One of the greatest business growth strategies is to franchise your current small business. That’s exactly what Angela Cody-Rouget, Air Force veteran and CEO of Major Mom, did last year. As a professional organizer, her mission is to restore order to the world, one home at a time. Angela started her business, Major Mom, just after the recession. A few years later, the newly rebranded company, Major Organizers, is now in 11 locations including three states, Colorado, Arizona and a franchisee in Ohio.
Creating your own franchise business comes with tons of work. Financing a franchise is only one of the pieces. But it’s a huge hurdle to overcome. You’ve not only got to define a scalability model, but also figure out how you’re going to pay for up to $50,000 in lawyer fees.
After winning $5,000 in the Veteran Small Business Award, she then turned to StreetShares for financing. She took out a term loan to pay for lawyer and website fees and has recently added her first franchisee to the business.
5. Fulfilling a Government Contract
The U.S. government is the single largest buyer of goods and services in the world. If you’ve secured a government contract you’ve got a stamp of approval from the U.S. government. This also means that the government is very likely to pay your business for your goods or services. Therefore, getting a business loan or line of credit is a lot easier.
Many government contractors turn to StreetShares to fund their contracts. “StreetShares has become our go to financing partner for all of our government contracts,” said Dennis Roark, President of Terra Ferma.
Terra Ferma, a Service Disabled Veteran Owned Small Business (SDVOSB), is just one example of a company that bids for and accepts government contracts. They provide innovative power systems and engineering services to the government.
With contract financing, “we can focus on the project and the client,” Dennis said.
Funding Your Small Business
Small businesses need funding for a variety of reasons. They could use it to build more inventory, to pay employees, to become a franchisee, to open your own franchise or to fulfil a government contract. Determining when you need financing would be ideal. But as many of the veteran business owners we work with say, it’s hard to know when you’ll need financing. You’ll need money most when you don’t have it. That’s why a lot of small business owners open the Patriot Express® Line of Credit.* StreetShares has many options that suit your business needs, from lines of credit to term loans and contract financing. Contact us today to learn more or get started and apply now.
Not ready to get started yet? "The Ultimate Guide for Veteran-owned Small Businesses" is a good place to start to learn more about different financing options as well as tons of resources to help your business grow. Download it now.
* The Patriot Express® Line of Credit is not associated with the SBA or the SBA Patriot Express Loan Program, which was discontinued.