By Steve Nicastro
Opening your own business is always tough, but American veterans who become small-business owners have added challenges.
Take Mark L. Rockefeller, who devoted nine years to serving his country. During this time, he moved every 18 months or so. Veterans often miss "the credit stability and FICO benefit you get from having a lengthy mortgage that you've been paying off," says Rockefeller, the chief executive of Street Shares, a Virginia-based online lender that focuses on small-business loans for former service members.
And veterans may not be able to lean on their spouses for financial support as they explore entrepreneurship.
"Oftentimes a spouse has to start his or her career over again each time they move. So they may not have established the same sort of spousal income that a [civilian] married couple might have," says James Schmeling, co-founder and managing director of Syracuse University's Institute for Veterans and Military Families.
Despite the obstacles, about one in seven veterans is either self-employed or a small-business owner, according to a report by the IVMF. And vets do have something special to offer, notes Jim Salmon, vice president of business services at Navy Federal Credit Union and a Navy veteran. As entrepreneurs, they tend to come equipped with the ability to lead, think quickly and manage their time.
If you're one of the many veterans who decide to start a business, you're in good company -- and there are ways to make the process easier.
4 tips to give veterans a leg up
In honor of Veterans Day, here are four pointers veterans can use to get small-business funding and advice.
Start with the Veterans Business Outreach Center Program, which provides business training and mentoring at 15 locations throughout the country. You can also reach out to Score, a nonprofit association of volunteer business counselors who offer free business workshops and in-person appointments.
In addition, the Institute for Veterans and Military Families at Syracuse University has education and training programs, including the Small Business Administration's Operation Boots to Business program, the Entrepreneurship Bootcamp for Veterans With Disabilities (EBV) and the Veteran Women Igniting the Spirit of Entrepreneurship program.
Street Shares rewards a $5,000 grant to a new veteran-owned small business each month. At the Department of Veterans Affairs' VetBiz site, you can apply to become a certified veteran-owned small business, which makes you eligible to win federal contracts. Similarly, the Service-Disabled Veteran-Owned Small-Business Program can help you obtain sole-source government contracts of up to $5 million. Participants must own at least 51% of the business and have a service-connected disability. And the Veterans Entrepreneur Portal connects vets to federal, state and local financing programs, resources and opportunities.
-- Check for credit report errors: Request a free credit report from each of the three major credit bureaus -- TransUnion, Equifax and Experian -- once a year at AnnualCreditReport.com. If you find any errors, dispute them with the credit bureau.
-- Set up automatic bill pay: Set up automatic bill payments from your checks so that you pay off your most important bills -- such as your mortgage, car loans and credit cards -- first and on time, Rockefeller says.
-- Don't overuse credit: Try to keep your credit utilization ratio below 30%. In other words, the amount you owe on your credit cards should be 30% or less of your total available credit limit.
Many lenders require collateral, a physical asset -- such as real estate -- that your lender can seize if you fail to repay your loan. Veterans often lack home equity to use as collateral for small-business loans, Rockefeller says. This makes it more difficult to obtain a loan at a low interest rate. Online lenders typically have looser restrictions than traditional banks, but their loans are often more expensive.
Because of this, veterans looking for online financing should always research the lender's annual percentage rate, or the true cost of borrowing with fees and interest included. If a lender doesn't advertise it, ask for it. Also, be wary of merchant cash advances, which have APRs that typically range from 70% to 350%. Do your loan research. You'll be glad you did.
Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.
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