Paths to Business Ownership for U.S. Veterans

by Eric Schechterman

On Friday, Nov. 11, the nation pauses to mark Veterans Day, a federal holiday in remembrance for all who have served in the various branches of the U.S. Armed Forces. The origins of this occasion began at the close of World War I when the belligerents signed an armistice. It occurred in the 11th hour of the 11th day of November, ending the global conflagration that was so dreadful, it was referred to at the time as “The War to End All Wars.” Our veterans are a stark reminder of the debt of gratitude we owe all who served in the armed forces. Those who served, and those who still do, have gained valuable skills and experience that can easily translate to success in civilian life – especially for those who desire an entrepreneurial future. And thanks to the highest participation levels in history for veteran-focused entrepreneurial programs, there’s never a better time for U.S. veterans to secure funding for entering the world of business ownership.

Why Veterans Make Good Entrepreneurs

Approximately 10% of all small business owners are veterans, which should come as no surprise when you consider the factors that make them a great match for entrepreneurial pursuits. Veterans understand the value of leadership and success that’s shared by a team. Their level of discipline make them excellent candidates for franchising, as they can intuitively follow a proven business model’s roadmap to success. They’re also no strangers to hard work and sacrifice, qualities that new business owners must possess to launch their pursuits. Lastly, the courage to perform under difficult conditions and critical problem-solving skills are required for entrepreneurial ventures – especially franchise-related opportunities.

According to some of the most recent data from the nonprofit VetFran, veterans make up approximately eight percent of the U.S. population, but they’re twice as likely as individuals in the general population to own a business of their own. Almost 10% of all small businesses in the U.S. are owned and operated by veterans. They currently own 14% of all franchise units and over 70% of all franchisors report having at least one veteran owner in their system.

Paths to Business Ownership for U.S. Veterans to Consider

According to some of the most recent data from the nonprofit VetFran, veterans make up approximately eight percent of the U.S. population, but they’re twice as likely as civilians to own a business of their own. Veterans can be found at the helm of about 14% of all franchise-related businesses and over 70% of all franchisors (brands) report having at least one veteran owner in their system. A few business models that align with franchise ownership among veterans include the following:

Tips for Veterans to Secure Funding for Small Business Ownership

The sheer depth and variety of franchise concepts, particularly those considered recession-resistant business models, are available to veterans – most of whom offer generous discounts to servicemembers. What’s most important for veterans is to understand the full range of their funding options. Here’s some helpful and specific advice for veterans prior to beginning the lending process:

Have Your Affairs in Order

Make sure you have an up-to date copy of your credit score and credit history, as well as a detailed business plan, covering the launch and first year of your franchise operations. This includes your proposed pro-forma, assets and liabilities, market analysis, financial projections, and at least six months of personal bank statements on hand.

Lending Options for Veterans

Veterans looking to fund the purchase of a franchise operation have many funding options to choose from, including banks, the U.S. Small Business Association (SBA), third-party lending from the franchisor, alternative lenders, crowdfunding, and even 401(k) retirement funds. The most important step to take is to compare all of your options. Below is a brief summary of the most common avenues:

Commercial banks

Depending on your banking history, your personal financial institution may be an advisable option – especially if it’s a veteran-based credit union. They should already be familiar with your risk profile. The lower the better when it comes to the loan amount and interest rate you’ll be offered.

SBA loans

The SBA offers two loan programs, 7(a) and 504 Loans, specific to small business ownership and startups. Both offer flexibility, lengthier terms, and potentially lower down payments. Ask about the SBA’s Patriot Express Loans.

Franchisor

Many, but not all, franchisors either offer their own funding, or financing through one of their third-party affiliate lenders. If you go this route, it’s important to understand what percentage of the debt financing they’ll assume. Percentages can range from 15-75%, and some terms are structured quite differently than traditional banks. Make sure to read all of the fine print.

Retirement accounts

Provided candidates have a healthy 401(k) savings program, rollover funding may be an advantageous option. Rollovers for Business Startups (ROBS) is an option that allows you to draw the necessary funds from your retirement account without additional taxes or penalties – provided you meet a stringent set of requirements.

Let’s not forget that November is more than just Veterans Day. It’s also National Veteran and Military Families Month, a time to pause and reflect on the sacrifices our servicemen and women have made in the defense of our country and the freedoms we often take for granted. If you or someone you know is a veteran who is interested in an entrepreneurial future, this would be a great month to lend a hand.