Every year, countless military vets take the leap toward opening their own businesses. This allows them to have some freedom in providing for their families long-term. At the same time, many vets discover unexpected challenges when it comes to securing startup financing. Why does this happen and what can be done?
Low Credit Score
Many military vets have spent a good portion of their life away from home. Instead of working toward paying off a car, they may have been overseas in battle zones. Sudden life changes can make it hard to consistently pay off a loan, which can hurt credit rating. Sometimes, the only credit rating vets have is from using a credit card as a teen, which is unpredictable at best.
How does this affect their ability to get a startup loan with traditional lenders? Most banks turn down financing from the very beginning in these circumstances. The only credit offered may be in the form of a credit card with a high-interest rate, which is not conducive to successfully operating a new business. This can spur even more credit rating issues.
The solution to this credit issue is something most vets don’t even consider: finding a lender with experience in alternative financing. These options can provide funding that is more adaptable to the needs of a startup business, and they’re not dependent on credit rating.
For example, small businesses focused on sales can use purchase order financing to get started without worrying about purchasing a large volume of inventory. Equipment financing is equally useful for many startups, helping new businesses get high-quality equipment with a comfortable down payment and accessible monthly payments.
If alternative funding is so useful, why don’t more veterans choose it? Often, because they simply don’t know about it. Without training in how to start a business, vets may go with what they’ve always believed: that banks are the only place to get a loan. For new businesses these days, that’s rarely true.
The good news is that military veterans can often benefit immensely from training for new entrepreneurs. They already have many of the skills needed by successful business owners: drive, dedication, focus and problem-solving skills.
If you’re a veteran, how can you maximize your chances of getting startup funding? Highlight your strengths. Stress your entrepreneurial qualities. Choose alternative financing, start small and build up your credit rating.