October 31-November 4 is Veterans Small Business Week and a great time to honor veteran small business owners and the many contributions they make to the economy and our local communities.
According to the US Census Bureau (2021), veteran-owned businesses account for nearly 6% of all businesses nationwide, with about 3.9 million employees and about $177.7 billion in annual payrolls. Despite their many contributions and accomplishments, veterans often face obstacles in establishing and operating their business ventures. According to the 2021 National Survey of Military Affiliated Entrepreneurs, released in April 2022, access to capital is the number one hurdle for new and existing veteran-owned businesses.
Here are a few tips to make it easier for experienced small business owners to access capital:
• Develop a business plan. A business plan is an essential first step – it explains what product or service the company offers, the company’s financial goals, and how the company can address environmental or market risks. Business plans determine what the desired goal is and how it is to be achieved. It also serves as a resource for potential investors and lenders – articulating current financial status, revenue streams, and how revenue projections can be met.
• Get financially organized. It’s important to set up a checking and savings account dedicated to business and separate from personal accounts. A solid financial foundation creates a solid business platform and allows business owners to build creditworthiness and financial stability. Also, personal and business finances are important and can affect funding. On the business side, a bank will determine if the company is generating positive cash flow. On the personal side, a bank wants to know if there is enough income to pay not only for the current debt, but also for the debt that has been applied for. Accurate financial data is critical to determining the company’s financial needs.
• Build relationships with critical partners. It takes a village! Make sure the partners are aligned to support the business, including a lawyer, an accountant, as well as a small business banker. Good relationships with these partners are important to manage the changes in the business life cycle as the company grows and to determine if finances are in order before seeking funding. Using resources to build other relationships can also help with potential funding options, e.g. For example, liaison with a community development financial institution that can also help a small business access capital.
• Demonstrate a consistent and positive flow of funds over time. A positive cash flow is crucial for short- and long-term financial success. Small business owners need to make the most of their money by monitoring expenses, collecting payments quickly, and utilizing resources that can make cash flow management more convenient. Owners should create a cash flow forecast to gain additional control over cash flow and get a clearer picture of the company’s financial health.
• Planning is key for experienced small business owners looking to access capital. In fact, planning and preparing business finances ahead of time might be the most important part of getting a “yes” and accessing the funding you need! Seasoned business owners shouldn’t wait until capital is needed to look for it. Instead, they should organize themselves financially, create a plan, reach out to partners, and take advantage of the many online small business resources.
Ben Bruce is Wells Fargo’s small business leader for the Atlantic region.