You are a veteran or current service member and are bitten by the entrepreneur bug. Truth be known, you have always been an idea person, and mull over in your mind constantly business models and new strategies. You can’t wait to start your own business. Or, you are currently in business and exploding with concepts for expansion. In both instances, you have always dreamed taking on the world by succeeding in your own business. Your biggest problem is: How do you start? Where do I go from here to put into effect those ideas? More significantly, who is going give you the working capital (that’s right, the money) to put those fervent hopes to the test?
Well, there is something out there for you. Congress has rightfully acknowledged the service our veterans have conferred upon the nation by providing various benefit programs. We are all aware of benefits under the categories of home loans, education, rehabilitation, and the like, but what if you are the owner of a business? Fortunately, there is a program that is devised specifically for our veteran and service-disabled business owners. It comes in the form of reasonable interest business loans administered through the U.S. Small Business Administration (“SBA”) and is called the Veteran Advantage --
The SBA since 1953 has been in the business of promoting the interests of small businesses. Traditionally, they were largely neglected by large banks and had to secure their financing by reaching into their own pockets, as well as gingerly extending a hand toward families and friends. So in order to encourage the banks to open up their coffers, they came up with the idea of guaranteeing any default a bank would have after loaning the money. Bear in mind this is not my money coming directly from the Veterans Administration or the U.S. government, but from private banks and lenders. The SBA loans direct taxpayer dollars only in cases of the disasters (“FEMA” loans). So then the idea is to give banks the incentive to make a loan because 85% of it is now guaranteed against default with the loss reimbursed from the government. The result: hopefully banks will be more encouraged to make the loan in the first place. This all makes sense from an economic standpoint because as we all know, small businesses grow into large and more productive business models.
If you are currently a business owner or planning to take the plunge shortly, paramount in your mind is access to capital. Even the best ideas need the backing of moneys earmarked for development, advertising, inventory, office supplies and equipment, rental of office space, production costs, payroll, and the whole panoply of cash flow needs. This applies across the board to start-up businesses as well as existing ones who wish to expand. But where do you go to receive such funding? It is a dilemma that has been analyzed by Congress and they have come up with a solution.
So for years the SBA was licensing the private lenders and monitoring their activities along this line. But what about us veterans? It worked under the same business model so the capital would land in the laps of such deserving business owners. Making it even easier, all existing licensed SBA lenders could get involved in the program with little paperwork. In fact, they used the same basic forms.
The loan amounts are between $5,000 and $500,000. The larger loans typically require 100% real estate collateral, more comprehensive financial paperwork, and a cash down payment if you are startup., it allows the lenders to make decisions within one or two days with funding in 25 days by the wiring of the funds directly into a business account.
Because they are unsecured loans, the personal credit of the owners is analyzed. The good news is that many lenders allow a favorable review of such credit reports so as to give the maximum benefit to our veterans.
Realizing business owners need flexibility in repayment, it was formulated so the loans can be paid off early, stopping all interest, and without a prepayment penalty. Thus, if the owner receives a large draw or payment on a contract, all or part of it can be paid down. And to reduce the monthly payment, it was spread out as a ten year fully amortized, principal and interest loan. Notes that unsecured loans are primarily adjustable rate vehicles, so the interest rate goes up and down based on the Wall Street Journal Prime. But because the payments are spread out over such a long period of time, an increase in the interest rate does not equates to that large of a jump in the monthly payment. This is all good news in our current economy since interest rates have only increased once since the downturn in the economy.
Further simplify matters, there is no longer a need to send in a check with your payment coupon, since debits are done electronically on the first of the month through a business account.
Sounds simple? Well it is, exactly what our veteran-owned businesses deserve, it is alive and well as a direct benefit to our veteran businesses, and to jumpstart our economy. Let us not forget that there are 29 million small businesses in this country, and they provide approximately 2/3 of the available jobs.