Everyone needs seed money to start a business. But veteran entrepreneurs usually have a harder time getting financing than their nonveteran counterparts, a new study finds.

Veterans had to submit more applications to get approved for loans and other types of financing, and when they eventually were approved, it was often for less money than they were seeking, according to data from the latest annual Federal Reserve Banks’ Small Business Credit Survey.

Why are vet entrepreneurs falling behind? The authors of a new report, “Veteran Entrepreneurs and Capital Access,” which was released by the Small Business Administration and the Federal Reserve Bank of New York this month, have a few theories.

Veterans often apply for smaller loans of $100,000 or less, which can be harder to get from big banks. In addition, the military lifestyle can make it difficult to build a good credit history.

Financing was one of the top challenges for Kathleen Ford, a retired Army senior nurse executive, when she was starting her business, scDataCom, a business security solutions company, with her daughter in Savannah, Georgia.

A well-educated former colonel with a retirement pension, personal savings and assets to use as collateral, Ford thought she represented the “best case scenario of military veterans seeking to start a business.”

“Despite what I expected would make me an excellent candidate to invest in, I was disappointed to find that this was not the case at all. The banks were uninterested or unresponsive,” she said in an email.

Ford and her daughter wanted a business credit card and line of credit, but were turned down for the line of credit by their bank and were approved for a credit card with a low balance.

“It took three years to get a new bank who offered us more satisfactory credit card terms, which gave us some wiggle room to resolve short term cash-flow concerns,” she said.

Between the fourth quarters of 2016 and 2017, forty-two percent of majority veteran-owned businesses applied for financing, on par with the 40 percent of nonveteran-owned businesses, according to the study. Yet 47 percent of businesses led by former service members applied three or more times in that timeframe, compared to 34 percent of those with majority nonveteran owners.

Then, 60 percent of veteran-owned businesses obtained less financing than they applied for, while the same was true for only 52 percent of nonveteran-owned businesses.

Researchers at the Syracuse University Institute for Veterans and Military Families said the results of the study jibe with what they’ve heard from veteran entrepreneurs as well. They say that a lack of education about available resources could be part of the problem.

“Veterans often — or any entrepreneur — might think, ‘OK, I go to a bank because that’s traditional funding.’ And in reality there are a lot of other options,” such as business competitions and veteran-specific initiatives to help vets start businesses, said Misty Stutsman, IVMF director of entrepreneurship and small business.

Other entrepreneurs may not realize the need to start small and build up some capital before they apply for a loan. Stutsman gave the example of a prospective gym owner hosting boot camp workouts to build some funds and a following before buying a building.

“I think that’s why connecting to educational resource partners to say, ‘Let’s create a plan and a path forward’” is important, Stutsman said, “so that you’re continuously building a stronger business, so that you’re … loan ready, and it can stand the test of time.”

Ford believes veterans are uniquely positioned to be successful entrepreneurs because of the skills, stamina and mental tenacity that were required of them in the military. She recommends that vet entrepreneurs check out resources such as the training and support offered by IVMF.

“I have personally found these resources to be absolute game-changers for my business, and I don’t think there is anything close to this available to our civilian counterparts,” she said.

And while access to capital is a challenge worth addressing, IVMF Researcher Rosalinda Maury said it’s not the only thing worth focusing on.

“It’s also the education, the training, the navigation, the network, the resources. All of the above can only make for successful business ownership,” she said.

Military Times contributor and former reporter Natalie Gross hosts the Spouse Angle podcast. She grew up in a military family and has a master's degree in journalism from Georgetown University.

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