Call it high-powered small business financing with dog tags.
Obtaining business financing has become increasingly challenging due to shakiness in the housing market, the resistance of the Federal Reserve to reduce interest rates and other factors. These national trends threaten the availability of credit that entrepreneurs need to establish and grow businesses. In response, the U.S. Small Business Administration (SBA) has launched a timely new business loan program for veterans, active duty military personnel, reservists and their survivors and spouses.
The SBA’s Patriot Express Pilot Loan Initiative is a powerful new weapon for entrepreneurs with military backgrounds. Offered in cooperation with a network of specially qualified banks, it is a launching pad for small businesses and an antidote to the negative economic trends that are reducing the availability of credit.
Many veterans returning from current conflicts are simply too young and too recently settled in any one place to have accumulated favorable credit histories that conventional lenders use to qualify borrowers.
As with any business financing initiative, this promising new program cannot compensate for significant factors that may render an applicant a problematical credit risk and unqualified for a business loan. It cannot compensate for a low credit score or a faulty business plan. However, the Patriot Express program can provide business financing that supports the entrepreneurial aspirations of those who have military backgrounds and who also have relatively intact credit.
A sub-set of the SBA 7(a) loan program, the Patriot Express program is offered through a national network of specially qualified commercial banks for rapid response on loan approvals. The program features the fastest turnaround time of any SBA program, as well as the SBA’s lowest interest rates for business loans usually 2.25 to 4.75 percent over prime, depending on the size and term of the loan.
Loans are available up to $500,000 with the SBA guaranteeing 85 percent of loans up to $150,000 and 75 percent of loans up to $500,000. For loans of more than $350,000, the SBA requires lenders to place liens on all of borrowers’ available collateral. Naturally, the security that this program offers to lenders provides a powerful incentive, encouraging them to make loans to entrepreneurs who qualify under the program because it reduces risk to the lenders.
Entrepreneurs can use their Patriot Express loans for many business purposes involved in starting or growing a company. They can buy equipment or inventory, and they can also use their loans for working capital or to purchase business-occupied real estate.
The program is open to a broad range of entrepreneurs with military backgrounds and their immediate relatives:
Veterans (other than those with dishonorable discharges), including veterans with service-related disabilities;
Current members of the military who are on active duty and who are eligible for the military’s Transition Assistance Program (potential retirees within 24 months of separation from the service and other active duty members within 12 months);
Members of military reserve or National Guard units; and
Current spouses of members of any of these groups and widowed spouses of military personnel who died on active duty or of veterans who died as a result of service-related disabilities.
The potential impact of the program is significant because approximately 1.2 million men and women are now on active duty with another 1.8 million in the reserves and National Guard. Of the 3 million total in America’s armed forces, half have been deployed to Afghanistan or Iraq. More than 14 percent of all U.S. businesses are owned by veterans.
In addition to the Patriot Express program, the SBA also offers other services to small businesses that can significantly benefit entrepreneurs.
For example, the SBA’s comprehensive Checklist for Starting a Business, available online at http://app1.sba.gov/survey/checklist/index.cgi, can help any aspiring business owner to analyze his or her entrepreneurial potential and direct them to resources.
The SCORE program provides technical business assistance to entrepreneurs such as guidance in writing a business plan; information on financing, managing and expanding a business; and how to sell goods and services to the U.S. government.
For vets who already own businesses, the SBA offers help in preparing their businesses for the owners’ deployment, guidance in managing the business, free or low-cost training, and counseling.
Military Reserve Economic Injury Disaster Loans (MREIDL) of up to $1.5 million are available to businesses that will suffer economic impact from the deployment of an owner or essential employee who is a military reservist deployed to active duty.
Those who meet the eligibility criteria for the Patriot Express program can determine if their credit and business plans are adequate to ensure a credible launch for the new businesses they hope to establish by consulting with experts from SCORE, local Small Business Development Centers and commercial bankers.
The SBA Patriot Express program is a small business support program whose time has come, an important and richly deserved form of assistance to entrepreneurs whose sacrifices in uniform deserve this resourceful program and much more.
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