Are There Benefits for Veterans Who Start Their Own Business?
At Incfile, we care about the questions our clients ask and want to give you the highest-quality answers possible. Recently, someone posed this question to us on Twitter: “What kind of benefits do veterans get if they want to start a business?”
Before we begin, if you are serving or have served in the U.S. military, we want to thank you for your sacrifice and dedication to our country. We’re able to live free in the greatest country in the world because of the brave men and women who put their lives on the line every day to protect our freedom. We would be remiss if we didn’t start by expressing our gratitude and acknowledging our respect for you.
Veteran Business Resources
Fortunately, there are a lot of resources available to veterans who are looking to begin a new career outside of the military or start their own businesses. The U.S. Small Business Administration (SBA) has many resources listed on their website in their Veterans Business Outreach Center (VBOC). Here are some of the opportunities they offer that you may want to look into:
- Pre-business plan workshops: Help entrepreneurs gain the internet skills they need to promote their businesses in an online world.
- Business plan preparation assistance: Include creating a five-year strategy to assess how much it costs to start a business. This helps to create a market analysis for potential growth, and you’ll be able to determine what equipment and supplies you’ll need to get started.
- Mentorship programs: Mentors are available to partner with you to review whether your business plan is working and how you may want to adjust it.
- Training opportunities: Include training in accounting, internet marketing and franchising.
VBOCs are located around the country; see if there is one near you. Boots to Business is another entrepreneurial education and training program that’s offered by the SBA as part of the Department of Defense’s Transition Assistance Program (TAP). This program provides valuable classes to guide you through the process of establishing a business plan and getting funding.
Veteran Business Loans
One of the biggest hurdles for any entrepreneur is obtaining the funding needed to get the equipment, inventory or employees needed to actually open for business. In August 2017, the SBA published a Special Notice that grants veterans a clear advantage pertaining to loans. It states the following:
“Loans of $125,000 or less: For all 7(a) loans, including those to veteran-owned small businesses, the upfront guaranty fee will be zero. The upfront guaranty fee for loans to veteran-owned small businesses of $125,001 up to and including $350,000 will be 50% less than the upfront guaranty fee for non-veteran owned small businesses… For all 7(a) loans to veteran-owned small businesses, the annual service fee will be 0.55%… of the guaranteed portion of the outstanding balance of the loan. a. For loans with a maturity in excess of 12 months in the amount of $125,001 up to $150,000, the fee will be 1% of the guaranteed portion. b. For loans with a maturity in excess of 12 months in the amount of $150,001 up to $350,000, the fee will be 1.5% of the guaranteed portion. c. For loans with a maturity of 12 months or less, the fee will be 0.125% of the guaranteed portion.”
So what does all this mean? If you get a small business loan through one of the SBA partners, you don’t have to pay any upfront “guarantee fees” if you are borrowing $125,000 or less. For loans above that amount, the SBA guarantees 75 percent of the loan for the benefit of the funding bank; if you borrow $200,000 and take away 75 percent, that leaves $50,000. If a non-vet-owned company is required to pay 1.5 percent of the “guaranteed portion,” that means a fee of $750. However, this fee is 50 percent less for veterans, which means you’ll only pay $375. For loans over $350,001, your fee will depend on the loan. This is effective for loans approved October 1, 2017, through September 30, 2018.
It can be terrifying to apply for a loan because so much is at stake, and it can be confusing to know whether you’re making the right choice based on interest rates and other considerations. The SBA has joined with approved partners to help you get competitive terms, and they offer financial counseling so you can be confident in your decision. You can check out SBA lender information here.
Veteran Owned Business Certification
Another way the VA attempts to help vets is by hiring veterans who own small businesses through the Office of Small & Disadvantaged Business Utilization (OSDBU). Let’s say you own a construction company, and the VA office in your city needs repairs made. As a Veteran-Owned Small Business (VOSB), you may qualify for advantages when bidding for government contracts compared to non-vet-owned companies. When you first start your business, you should consider whether this certification is a good option for you, because you will need to go through a verification process.
What Type of Entity Is Best for My Veteran Business?
Once you’ve reviewed the veteran resources mentioned above, decided on the type of business you want to start, written out a business plan and calculated the financial costs, the next important step is to determine which type of business entity you should choose.
Most small businesses start their company as an LLC since this structure allows pass-through taxation and offers protection for your personal assets in case of a lawsuit or business debt. If you’re not sure which entity is right for you, or you’re not confident filling out your government paperwork, contact Incfile today. We’ve helped more than 250,000 companies, and our incomparable business formation packages include a lifetime of customer support, online access to your incorporation documents and your first year of registered agent service for free. Check out our online business formation packages — starting at just $0 + state fees with a free year of Registered Agent service — to form your business today. You’ve served our country, now let us serve you!