This blog is reposted with permission from VETERAN LAUNCH, an affiliate of Main Street Launch Small Business Finance. This blog was written by Tom Aiello, a veteran entrepreneur. Click here to learn more about Tom.
Every person who served in the US military remembers their Transition Assistance program (TAP) class when they separated from the military. It was a governmental approach to prepare transitioning service members to enter the civilian workforce. Soldiers jokingly called it “resume writing and charm school.”
In recent years it’s become clear that this approach is not enough to effectively prepare veterans to enter the workforce. Similarly the same rethinking of services and programs is happening in the world of veteran business support. Here, the approach has traditionally been a “Business Bootcamp” with a focus on building a business plan and pursuing government contracts. Just like with TAP, the instructors are often not veterans or business owners themselves.
THE REAL NEED.
To prepare to launch a successful business, it’s helpful to look at why a veteran-owned business may fail. More than half of all business failures are attributed to not knowing how to accessing capital and a lack of timely and needed financing, according to a 2015 Gallup study. Veterans sometimes fall into a trap when they choose the first form of financing they encounter. They also do not always analyze their business idea with enough financial rigor. Both of these can contribute to business challenges.
ATTENTION VETERANS: THERE IS MORE THAN ONE FINANCING OPTION FOR YOUR BUSINESS
Most government-run entrepreneurship classes talk about business loans from banks, and most business incubators talk about rounds of financing from venture capitalists or angel investors.
There are other viable options for veterans to finance their businesses, such as SBA loans, online lenders, business grants, crowdfunding, and others.
Most veterans remember the car dealerships right off-base that would charge soldiers 20% for a car loan. Well, some business financing options are not much better than that.
If you qualify for a bank loan, you may be able to earn a 5% interest rate from a traditional bank. However, if you are a startup without any capital or revenue, veterans may believe they must give a large piece of equity or ownership of the business to an investor. Even worse, some online lenders charge credit card levels of interest, making the loan very expensive. Few veterans understand they may qualify for an SBA loan that they can pay off over 10 years. These loans go up to $250,000 with interest rates around 7%.
Moreover there are veteran specific nuances to almost all of forms of business financing. For example, loans from VETERAN LAUNCH waive all fees for military veterans. Crowdfunding sites like Indiegogo offer veteran discounts, and there are some crowdfunding platforms like GoFundVeterans that are specific to veteran-owned businesses. There are also groups of military angel investors such as Hivers and Strivers.
A LITTLE FINANCIAL RIGOR GOES A LONG WAY
In the process of qualifying for virtually any type of financing, veterans need to evaluate their financial projections. Some lending organizations will offer support with projections free of charge.
VETERAN LAUNCH provides one-to-one business advising and connection to a network of business resources. This type of one-on-one advising can directly reduce the number of veteran business failures by better preparing the owners with knowledge they need to manage their business’ financials. Investing time in veteran business owners helps the enterprise launch successfully.
When veterans connect with the right network and understand their different financing options, they have a better support system that will help them launch their business and make the financing decisions that are right for them.
For more information about VETERAN LAUNCH, please visit www.VeteranLaunch.org.