Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated.
But the result, for those with enough heart to see it through, can be massively rewarding. It takes a certain, special type of work ethic to start something from scratch, to build something from the ground up. Many have ideas, but few can execute to fruition.
Perhaps that’s why so many veterans transition from the military to business owners. All of those characteristics mentioned above…those are just standard traits for the men and women who dutifully and proudly serve in the military. So it shouldn’t come as too much of a shock to hear that as many as 25 percent of transitioning service members aspire to become small business owners. In fact, there are more than 2.5 million U.S. businesses today that are majority-owned by veterans.
Yet veterans are at a serious disadvantage when it comes to seeing their business ideas come to light. The issue isn’t a lack of desire, skill, or intent…it’s something else. Where, exactly, is the system broken?
An Overall Decline of Entrepreneurship – Why?
It’s a topic well-discussed by Inc.com in recent years – the fact that entrepreneurship as a whole has been on the decline for decades. Some reports show the trend has been on a downward slide for nearly four decades.
Just why is the ability to fulfill that age-old American dream of starting your own business in a slump? The main answer is simple: lack of access to capital.
For millions of businesses across the nation (both veteran-owned and non), cash flow and capital are a huge struggle. The simple fact is that access to working capital is among the greatest of challenges small businesses face. All too often, business owners just can’t get funding to start or grow their businesses. The term “underbanked” represents the 77 percent of small/medium business owners who are declined by traditional banks after they apply for funding for their business ventures. And for veterans, this is even more the norm.
VOBs – Entrepreneur Assets to Our Economy
U.S. veteran owned businesses (VOBs) are an essential component of our overall economy. The leadership skill sets and values service men and women hone during their time in the military is a big part of what transforms many of them into natural leaders. They develop an uncanny ability to solve problems…many of them are able to overcome the types of challenges most small businesses face during the startup phase. And these leadership skills often carry them throughout their tenure as business owners, even years after they launch. After analyzing four year’s worth of credit data (of both VOBs and non-veteran-owned-businesses), a recent report from Experian notes that VOBs tend to have improved sustainability and longevity when compared to non-veteran-owned businesses.
There are countless other substantial benefits VOBs offer. They’re more likely to provide employees with retirement plans, health insurance, paid leave and profit sharing. They’re also 30 percent more likely than non-veteran-owned businesses to employ fellow veterans. Statistically, research consistently shows that VOBs report impressive numbers in relation to growth, employment opportunities and sales, including:
- VOBs with more than two employees = over 490,000
- Total number of VOB employees = 5.8 million
- Annual payroll = $210 billion
- Number of VOBs that are “small businesses” = 99.9 percent
- 6-digit sales of $100,000 or more = nearly 80 percent
- Generate an annual revenue of $500,000 or more = more than 38 percent
- VOBs have collective sales of = $1.2+ trillion
What does all this tell us? VOBs are a huge benefit to the economy. That’s in part what makes it so hard to ignore the other side of the story. Despite their success and contribution to our economic sustainability, many VOBs – just like most small businesses today – are struggling to make ends meet. The Small Business Association (SBA) Office of Advocacy says that over 69,000 VOBs closed as a result of inadequate cash flow.
Taking that leap of faith and starting your own business has always been a risk, for any entrepreneur, but with entrepreneurship across the board on an overall decline (for both VOBs and non-veteran owned businesses), that risk seems somehow even greater these days.
Challenges Veteran Business Owners Face
Of the many challenges entrepreneurs face when starting a new business, for most, funding is high on the list. For the majority of veterans, sources of capital can include personal savings (30 percent) and personal or business credit (nearly 11 percent).
According to the same Experian report, veterans tend to have significantly fewer mentorship options and a lack of networking opportunities. They’ve also historically had less access to capital than their non-veteran owned counterparts, says a report from the Federal Reserve Bank, who together with the SBA assessed the stats of both VOB and non-VOB small businesses.
The SBA’s Office of Advocacy partnered with the Federal Reserve Bank of New York to publish FINANCING THEIR FUTURE: Veteran Entrepreneurs and Capital Access. Their research shows that despite need being strikingly similar amongst VOB and non-VOBs, there is a glaring disparage in lending opportunities for the two groups. It’s one major reason why veteran entrepreneurship continues to see a generational decline.
The report notes that even though VOBs submitted more applications for funding than non-VBOs (47 percent versus 43 percent, respectively, submitted three or more applications), from a larger variety of lenders (online lenders, small banks and large banks), VOBs received less financing overall. During 2010 – 2017, SBA loans to VOBs increased by 48 percent, whereas they increased by 82 percent to non-VOBs. This is despite dedicated veteran-dedicated relief programs.
And some more results of those applications? It’s reported that 60 percent of VOBs still have a financing shortfall due to receiving less funds than they applied for. In comparison, only 52 percent of non-VOBs received less than requested.
The report also points out what we’ve already seen in multiple other studies, that:
- “military service is highly correlated with self-employment probability,” and
- “veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed”
What should all this data tell us? It’s pretty clear: we should be putting more faith and funding into VOBs.
Real-Life Success Stories
For those veterans who have been able to find funding through alternative resources, the results are both impressive and inspirational.
Just look at veteran and owner of The Texas Silver Rush, Joseph Remini. Remini creates custom jewelry and is considered a “destination” in Fredericksburg. He’s created custom pieces for the likes of stars including Santana, Ringo Starr and countless other country artists. Reliant Funding’s non-traditional funding options allowed him to purchase the silver he needed to make expensive, custom, one-of-a-kind pieces that are allowing him to make a name for himself. Remini knows that Reliant’s dedication to veterans is something unique.
“I will tell you that Reliant has given me peace of mind. I know I am with a company that cares about me, is willing to grow with me.” – Joseph Remini, The Texas Silver Rush
Christopher Adams is VBO of Cedar Creek Builders and a rental management company. When both companies were growing at a rapid speed, Adams used alternative funding to purchase and replace equipment he desperately needed for a job. Borrowed funds also allowed him to cover unexpected costs during the winter months. His success even meant he was able to purchase a personal condo without concern that it would affect his credit, and ultimately, his ability to access capital to grow his businesses. Adams is grateful for the opportunity non-traditional funding has afforded him.
“Reliant is there when you need funding. It is nice to know and have that peace of mind.” – Christopher Adams, Cedar Creek Builders
Reliant Funding is honored to represent so many veterans in small business. By eliminating origination fees for veteran and active duty service members and their families, and releasing a comprehensive resource guide for veteran owned businesses, Reliant has shown its dedication to the veteran community. We believe knowledge is power, so we’re committed to setting VOBs up with the know how to successfully navigate:
- Cash flow management strategies
- Funding options and how to use them
- Franchise initiatives
- Certification as veteran owned business
- Training and education opportunities
- How to take and apply advice from other successful veteran business owners
If you’re a veteran or family member of a veteran looking for funding and working capital for your new or existing venture, our special offering to veterans and the debut of our VOB guide is proof of our commitment to investing VOBs.
Adam Stettner is the CEO and Founder of Reliant Funding