7 Tips for Funding Your Veteran-Owned Small Business

Veterans business owners face challenges when it comes to securing funding, but this advice could help.

Military veterans often face challenges when it comes to funding their business with a veteran small business loan, but finding capital that works for you is not impossible, especially when you have help. (Full Disclosure: I am the CEO and co-founder of StreetShares, a financing community for veteran business owners.)

If you find yourself in this situation, here are seven tips to help get you started on getting your business finances in order.

1. Assess Your Strengths & Weaknesses as a Borrower

Before you begin your search, make sure you know where your small business stands. How much funding do you need? How much can you afford to pay back each month? Are your margins higher than the interest rates?

It is also helpful to be realistic about your chances of accessing different funding options. Do you know your credit score? (If not, you can check it free on Credit.com.) How are the rest of your financials?

Finally, make sure your documents are in order. Have you filed your taxes? Do you have an updated balance sheet and income statement? Being prepared can save you time and grief later on. Follow these two easy steps to determine your financial needs.

2. Understand the Terrain Lenders Navigate

There’s a heap of regulations and internal policies that lenders must comply with in regards to small business funding that can make the lending experience hard and expensive for the borrower and the lender. It’s important to understand some of these factors that could affect your chances of getting funding.

For example, the lender must have access to capital on their end to be able to fund your loan. They also need the proper finances and marketing it takes to convince you to do business with them.

From the borrower’s perspective, here are a few things that should help you qualify for funding.

  • Earn the lender’s trust by displaying evidence of a good track record; you may have to find a way to convince lenders that you are trustworthy if your small business hasn’t yet established a good credit history (e.g., consistent, timely payback in the past).
  • Come to the table with assets to offer as collateral for the loan.
  • Have a compelling back-story in which you describe experiences and skills gained during your service that set you up for success.

Proper knowledge of both perspectives will help you have a better chance of smoothly navigating the early stages of funding.

3. Conduct Reconnaissance on the Options Available

While there may be a lending gap for veterans today compared with the veteran business loan options for veterans following World War II, technology is helping fill that gap with alternative online options. Make sure you research what’s available — from traditional banks to online lenders — and go with what makes sense for you given the stage of your business, your revenue and margins. Finally, make sure you understand what is offered: Some lenders charge 50% or more for loans, which few new businesses can afford.

4. Think Outside the Box

Funding can sometimes come from an unconventional source. Do you have a family member, friend, fellow veteran or schoolmate that made it big and would love to be part of your adventure? If you’re a young business, try a crowdfunding campaign or look for veteran small business grants, SBA loans or contests and awards for veteran entrepreneurs.

5. Connect with Veteran-Focused Mentoring Programs

Mentors provide insight and connections that can help accelerate the growth of your business, as well as teach you invaluable skills – such as how to present your business to potential investors. There are lots of great veteran-focused entrepreneurship mentoring programs out there, such as:

  • Bunker Labs is a program built by veterans to help veteran-owned tech startups launch and accelerate their businesses.
  • American Corporate Partners (ACP) is focused on helping military members as they transition into business. ACP will match veteran entrepreneurs with a mentor who shares the same personal and business interests for a 12-month mentoring program.
  • Entrepreneurship Bootcamp for Veterans with Disabilities is designed to help veterans launch and grow their businesses by leveraging skills veterans learned in the military and applying them to business ownership.
  • Some states have programs for veteran entrepreneurs. For example, Veterans Florida has developed an entrepreneurship program that offers a tuition-free, online and on-campus program. It’s designed to work around busy schedules, giving participants the option to access local resources such as business mentors at partner campuses.

6. Follow Through

You would never show up on a mission in the military without training for it and having a well-thought-through plan. You should take funding applications just as seriously — be responsive to questions from the lender you’re working with and prompt in delivering asked-for information.

Lenders work with a long list of businesses seeking funding. Small business owners should aim to make lenders happy to call them first thing in the morning.

7. Believe in Your Mission

Veterans bring skills, knowledge and grit to the table. Smart lenders know this makes you a high-value asset as a business owner, partner or borrower. As you grow your business, leverage your experiences in uniform and prove that you and your company are a worthwhile investment. You’ve got this.

This post was originally published on the StreetShares blog.

Image: Steve Debenport

The post 7 Tips for Funding Your Veteran-Owned Small Business appeared first on Credit.com.

10 States With the Best Business Credit Scores

It’s no secret that personal credit scores are a barometer of financial strength. The better your score, the easier (and cheaper) it is to get things like a mortgage or car loan. But, did you know small business owners have a separate business credit score for their company?

The two scores share commonalities, both impact a business owner’s ability to get financing, but they also have surprising differences.

While personal and business credit scores are both influenced by region, new data from Nav.com reveals other factors, like local policy climate, can impact business credit scores. Nav used data from 15,500 of its small business customers to calculate the average business credit score for each state to find the top 10.

Business Credit Score 2017 Rankings

So, what is a solid business score? Unlike personal credit scores, the business credit score range is much smaller. Most models range from 0 to 100. The higher the score, the better. Each of the 10 states with the best business credit scores have scores of 45 or above — putting them in the low- to medium-risk range. Business owners with scores in this range will find it easier to qualify for loans and trade credit with more favorable terms.

If you own a business in a northern state, your business credit score is more likely to outshine the rest of the country. Eight of the 10 states with highest average business credit scores are located where snow can regularly fly, with one “roll tide” exception.

10. Michigan: 45.0

Michigan snuck into the top 10 with an average business credit score that makes it easier for business owners to get an affordable loan. The state ranks higher for business credit scores than it does for personal credit, where its 675 is almost equal to the national average. Its business score nearly mirrors its 12th place ranking for policy climate according to the Small Business and Entrepreneurship Council (SBE Council).

9. Maine: 45.7

Maine business owners enjoy both stronger than average business and personal credit scores. This is a winning formula for success, as both scores can be used by business lenders to get business financing. Its strong business credit score flies in the face of the SBE Council’s low, number 44 policy climate ranking, which is a surprising, recurring theme in our list .

8. Alaska: 45.7

The “great white north” trend continues, as Alaskan business owners maintain higher business credit scores than most of the country. Unlike others on the list, Alaska’s average personal credit score of 668 falls below the national average and it’s settled in the middle of the pack when it comes to policy climate.

7. Wisconsin: 46.1

It should be easier for Wisconsin entrepreneurs to find the cheese they need to run and grow their business thanks to a solid business credit score. Their residents also rank fifth in personal credit scores, thanks in part to having the lowest credit card delinquency rate according to TransUnion data. The state ranks below average for policy climate, but it doesn’t seem to be holding Wisconsin back.

6. Utah: 46.3

Talk about a state with business tailwinds. Utah’s business credit score is among the nation’s best, its personal credit score of 679 is above average, and its policy climate is comes in at No. 11. It’s no wonder why the beehive state consistently ranks tops in business growth.

5. Oregon: 47.3

Like others on the list, Oregon shows that strong personal credit health can translate to good business credit scores. The state’s top five ranking means its business owners with strong scores can negotiate better payment terms for goods and services from suppliers, like net-60 or net-90 day terms. Like Maine, Oregon ranks very low on the SBE Council’s policy index rating, but its business owners’ credit scores are thriving.

4. Alabama: 47.6

Alabama is the only southern state that cracked the top 10 list—although it has the 5th-worst personal credit score average in the country. Some of this can be explained by Alabama’s strong No. 9 rank for policy measures and costs that impact small business. Strong business credit scores will help most Alabaman companies, but for younger companies (under 2 years in business), business lenders will heavily weigh personal credit scores.

3. Nevada: 48.8

Nevada hit the business credit score jackpot, beating out all but two other states in the nation. It also ranks number one in the SBE Council’s policy index, which should mean that business owners there are less burdened by regulations and taxes. Despite those solid rankings, and reflecting the boom or bust persona of Las Vegas, it also has the third-worst personal credit in the country. For  business owners with strong enough business credit scores and financials, they may be able to overcome personal credit flaws when applying for lending.

2. Iowa: 49.2

Iowa may be first in the nation to pick the Presidential candidates, but it narrowly missed out on pole position for business credit. Business owners here also have the added benefit of strong personal credit, where it ranks in the top 10. Having strong credit scores in both categories can help the state’s entrepreneurs qualify for the money they need to expand — which should come in handy as Iowa’s economy is predicted to expand through 2017.

1. Vermont: 51.7

Like maple syrup on pancakes, Vermont’s business credit is sweet. Its average score takes the top spot in the country and it is the only state that cracks the 50 mark, signifying a lower credit risk. Again, we see that the SBE Council’s policy index ranking doesn’t necessarily correlate with business credit health, as Vermont ranks near the bottom on their list. The state’s stellar business credit score, combined with personal credit that ranks No. 2 in the country, makes for business success. Entrepreneurs in the Green Mountain State with strong business credit are most likely to secure affordable funding, with the best terms.

Considering U.S. small businesses produce 46% of GDP, their success can ripple across the entire economy. That success typically depends on access to affordable capital. One way you can set yourself up to qualify for the best funding is by maintaining a strong business credit profile. Low scores are the number one reason business financing applications get denied. You can get your free business credit scores, along with your personal credit scores, by visiting Nav.com.

A list of business credit score rankings for every state, maps, trends and methodology for Nav’s 2017 State Business Credit Snapshot are available here. Personal credit data was sourced from Experian’s 2016 State of Credit report.

Editor’s note: You can get a snapshot of your personal credit by taking a look at your credit report summary on Credit.com. This provides you with your two free credit scores, updated every 14 days, plus a review of the five key areas that affect your scores.

Image: PIKSEL

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I Want to Start a Business With My Brother-in-Law. Bad Idea?

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Q. I’m thinking of starting a business with my brother-in-law, but we don’t always get along. We would have to borrow some money to get started. What are the pros and cons?

— Almost ready to jump

A. We love to hear about new ventures, but you’re right to be concerned. You’re going to have to juggle having a financial deal with a family member, possibly linking your own credit to your brother-in-law’s, and that can get ugly if things go wrong. (Editor’s Note: You can see where your personal credit currently stands by pulling your credit reports for free each year on AnnualCreditReport.com and viewing your credit scores for free each month on Credit.com.)

Starting a business with someone is a lot like getting married, said Eric Furey, a certified financial planner with RegentAtlantic Capital in Morristown, N.J.

He said regardless of whether your business partner is family, a close friend or maybe a colleague from another job, you need to ask yourself if you’re comfortable being with this person through thick and thin.

Furey said people go into business with the best intentions. They’ll divide up the responsibilities of the business so maybe one person focuses on operations while the other focuses on business development and driving revenue.

“In a perfect world, the two roles complement one another, the business is successful, and the partners get to split the fruit of their efforts,” he said. “The reality with most small business is that they are not successful, and regardless of one’s role in the business, the liabilities of the business are assumed by each of the partners.”

There are a few ways to raise money for the business.

The first, Furey said, is for you and your partner to put your own capital at risk, and the capital you commit represents your ownership in the business.

For example, if you need $100,000 and each of you puts in $50,000, then you each have a 50% interest in the business.

The second way is to have outside investors put in capital in exchange for an equity ownership, Furey said.

“The drawback is that if the business is successful then that investor will always receive a portion of your profits and may have a say in how you operate the business,” he said.

Lastly, you can use traditional lending whereby a lender gives you money, charges an interest rate, and you pay the funds back over time, Furey said. The lender’s only source of compensation is the interest that they charge and paying back that money is the obligation of you and your partner.

It sounds as if that’s the scenario you’re considering, so then you need to be comfortable and confident in the person you’re going into business with.

“Even if you uphold your end of the partnership, the failure of the business is shared between you and your partner,” Furey said. “The eyes of the lender will not see and place blame on the underperforming partner. Lenders will hold the business as an entity, to which you are a joint owner, accountable.”

If you do start this family business, make sure you’re both in it for the long term, and be sure to consider succession planning issues.

Good luck with this one — and consider saving your receipts.

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Image: BartekSzewcyk

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