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A Veteran’s Guide to Starting a Small Business

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Did you know that, out of the 27.9 million businesses in the United States, 2.52 million of them are owned by veterans?

That’s right—employing over 5.793 million different employees and bringing in over $1.220 trillion in sales—veteran-owned businesses have a big impact on the U.S. economy.

If you’re a veteran, how can you get in on a piece of the entrepreneurship pie?

Clearly, a small business in the United States would be nowhere close to where it is today without veteran entrepreneurs. But still, starting a business as a veteran business owner is much harder than it should be.

That being said, there are a handful of steps you can take and resources to take advantage of if you’re a veteran trying to start a business, including traditional forms of financing and various VA SBA loan programs.

Here’s your ultimate guide to starting and financing a business as a veteran entrepreneur.

3 steps to starting your veteran-owned business

The decision to even start your veteran-owned business is already a big, exciting, and possibly scary step. If you’ve never done this before, you have a few learning curves to get over.

Knowing that you want to start a business is just the first step—you don’t necessarily know how to start a business.

That’s where we come in. Let’s run through a crash course on how to start a business, then cover the many resources available to veteran entrepreneurs to help start your business along the way.

Step 1: Coming up with your perfect business idea

You might be going into starting your business knowing exactly the business you want to start. You have that stellar business idea, and you just can’t sit on it—business ownership came to you.

But on the other hand, there are many people who naturally have that entrepreneurial spirit. They’re born to be their own boss, but don’t necessarily have the business idea to get rolling with. If that’s the situation you find yourself in, then step #1 of starting your business is coming up with the right business idea to pursue.

(If you already have a stellar business idea and you’re trying to take it off the back-burner, then skip ahead to step #2.)

If you’re looking for a business idea that works for you, here are four questions to ask yourself:

What are my skills?

As a veteran, you have a very unique set of skills that could be utilized and translated into a viable business idea. Or, you might have skills from before you joined the Armed Forces, that you can tap into to spark some inspiration for your business idea.

Figuring out how to run and manage your business is already hard enough, so don’t make starting the actual business harder for yourself. There’s no need to reinvent the wheel here—play to your strengths.

What am I interested in?

Many small businesses were built from ideas that just made plain sense—not necessarily related to the business owner’s passions, dreams, or interests. So, that whole “loving what you do” sentiment doesn’t have to hold true as you develop your business idea.

However, it’s worthwhile to consider your interests while you’re brainstorming your business idea. You might find that there actually is a great business idea in a realm that you thought might have just been a hobby for you.

What resources do I have?

You might already have the contacts, tools, resources, or equipment you need to start a business without even really knowing it. If you’ve got a stellar tool shed, and you’ve always been handy, then starting a repairs business might be a good idea.

Or, if you’ve inherited a storefront or retail space, you already have the foot in the door when it comes to starting a brick-and-mortar shop. Starting a business likely requires significant investment upfront, so it’s a good idea to start something where you already have a few of the things you need.

What need could I fill?

As you look around your local (or larger) community, is there a big, gaping need that should be filled by a great business? Then you could be the one to fill that missing puzzle piece.

Many of the most successful small and large businesses started because they were out to solve a problem. So put your thinking cap on, walk in the shoes of your potential customers, and try to solve the problems they face every day.

Step 2: Writing your business plan

Once you have a business idea to pursue, now it’s time to get it into writing.

Drafting a business plan is a crucial step for starting a business. Your business plan will lay out where your business is right now, and how you’ll get from point A to point B in the next two to five years.

Your business plan will help prove your case to investors, lenders, and potential partners for your business—showing why people should work with and invest in your business.

All in, it’s an important document to think carefully about. So, here’s what you’ll need to incorporate into your business plan.

1. Executive summary

Your executive summary is a general overview of your business—giving the readers a glimpse into what they’ll get if they flip through the pages of your plan.

This section shouldn’t be more than one or two pages—brevity and clarity are key here. While your executive summary is short, it’s probably one of the most important pieces of the whole documents. If an investor or lender doesn’t get what they need from the executive summary, there’s a chance they could just put your business plan aside all together.

Your executive summary should give a general explanation of what your business does, and where you want your business to be in three to five years.

Here’s what an executive summary could include:

  • Mission statement: Your mission statement is a paragraph (no more than four to five sentences) explaining what your business is and your higher-level goals for your business.

  • General company information: Give some insight into when the company was formed, who the founders are and what their roles entail, the number of employees, and the location of your business.

  • Business highlights: Are there any key numbers and growth you’ve hit already? Include some examples of what you’ve already accomplished. This could be financial highlights or key milestones of the business. This gives the reader a snapshot of how successful your business has been and how successful it could be in the future.

  • Products and services: Give a brief description of what you actually sell and who you sell it to. (If you don’t have a fully formed product just yet, give a plan for what it will look like in the future.)

  • Financial information: If you’re looking for business funding—whether through a business loan or through equity—state your goals in the executive summary. Be sure to mention any banks or lenders you’ve worked with thus far.

  • Future plans: At the end of your executive summary, give the reader a look into where you want your business to be in three to five years.

2. Company overview

The next section of your business plan should be your company overview. A company overview is a look into the structure of your business and how it generally functions.

A good way to structure your company overview is to think about these three general pieces of information:

  • Give a brief pitch: Start by describing what your business does in a few sentences. This is not unlike an elevator pitch. This gives the readers an idea of what they’re working with.

  • Provide your value prop: Explain the nature of your industry and the marketplace that you serve. Position your business in the larger picture of the industry, explaining where you fit in.

  • Describe your structure: Once you’ve explained the business and your value proposition, explain how your business is structured. How many owners are there? What’s your legal entity? Be sure to explain this when you put together a company overview.

3. Market analysis

Next up could be a market analysis. You could spend days and weeks conducting and presenting the perfect market analysis of your industry, market, and competitors, but here’s a quick glimpse into what it should include:

  • Industry description and outlook: Give a description of your industry by presenting the industry’s size, trends, growth rate, and outlook.

  • Target market information: What market is your business specifically targeting, who’s in it, and how big is it? This describes your ideal niche, customer, or client. This data will also have demographical information to give a look into your business’s customers (think gender, age, household income, etc.). It’s good practice to also include the lead time in your target market (the time it takes for your product to get to your customer once they’ve ordered it).

  • Market research results: This section is probably the most important of your market analysis, giving the results and findings from any in-depth research you’ve done on your target market.

  • Competitive analysis: A crucial step in outlining your market is looking into your competition. Who’s out there serving similar customers in your target market? What makes them similar to you, and what makes them different? How are they doing financially, and how much market share do they hold? The people reading your business plan will want to know what you’re up against.

4. Business organization

The next step in writing your business plan is to outline your business’s organization and management structure. This explains who’s who in your business, what everyone’s background is, and their past experiences bring to the team.

This part of your business plan will break down the following:

  • Organizational structure: Before you go into detail on who each stakeholder is, lay out the structure in which they’re situated. This is like an organizational chart of laying out what everyone does and what team they manage.

  • Ownership structure: You’ve mentioned key owners before in your business plan, but go into detail on how your company’s ownership works.

  • Background of owners and board of directors: Next, explain your background as a veteran and relevant work experience you’ve had, and do the same for the rest of your owners, managers, and key team members. This information will prove to potential investors and partners that you’ve surrounded yourself with a good team. The SBA has a good list of what exact information you should include here.

  • Hiring need: What talent will you need to hire in the near future to make your team complete? Outline what key managers you’re currently looking for in order to grow your business.

5. Product development plan

Once you’ve gone through the nitty-gritty of how your business works and who’s involved, it’s time to walk through the actual product you sell or service you provide.

This section is meant to dive into your product and who it’s intended for. It can be structured as the following:

  • General product description: Give the details of your product, highlight the aspects of the product and service that make it stand out, and describe who it serves. Be sure to speak towards how exactly it fulfills your customers’ needs, and how it’s different than your competitors.

  • Current product status: Have you already rolled out the first stage of your product? Or is the design and fulfillment still in the works? This section will explain how fleshed out your product really is.

  • Product development research and goals: This section should explain how you plan to iterate on the product in the future. What research do you need to do before the product goes to market, and what do you want it to look like when it does? Also, if you have any plans for additional products in the future, give a brief description of what those might look like.

  • Sourcing and fulfillment: If you need to rely on other vendors or manufacturers to provide your product, you should outline what that looks like and the key players involved. Include information about what inventory or materials you need, how you get them, and how often you need them.

  • Intellectual property: While it’s more relevant for technology-based businesses, make sure you outline any intellectual property that is proprietary to your business in the product description. Note if you have patents or are in the application process for one.

6. Financial plan and projections

The current financial status of your business—and your plans for the future—can be one of the most important parts of your business plan. This section of your business plan outlines the current state of your business’s financials, and any small business financing you’ll need in the future.

As you’re just starting your veteran-owned business, you might not have a lot to show here. But eventually, you’ll want to include the following financial documents:

  • Income statements

  • Cash flow statements

  • Balance sheets

  • Accounts receivable statements (if applicable)

  • Accounts payable statements (if applicable)

  • Documentation of debt obligations (if applicable)

And if you don’t have any of these documents because you’re just starting up, then the financial section of your business plan should include financial projections.

While there’s more that goes into your financial projects, in general, they’re your best guess at your financials based on the market analysis you did and the performance of your top (and most comparable) competitors.

When you’re projecting your future financial performance, here are some documents and information to include:

  • Statements of projected income

  • Cash flow forecasts

  • Balance statements

  • Capital expenditure budgets

And finally, if you have any plans to take on financing in the future, you should explain your needs and goals in that regard.

This may be to bring on more investors into your business (therefore giving away equity in your business) or to approach small business lenders to find debt financing for your business.

In this last part of your financial information, describe what type of funding you need right now, how much you might need in the future, and the potential impact of having that funding for your business.

7. Appendix

Most complete business plans will also have an appendix included at the end of the document.

The appendix holds any supporting information and data points that you didn’t want to clutter the heart of your business plan with.

Specifically, this could be tables, graphs, and charts that help explain any section included in your business plan.

Step 3: Registering your business

Now that you’ve outlined your business in a business plan, the next key step is to make it all official—registering your business and securing the legal documents you need to operate.

This is a hard transition to make after big-picture planning, but it’s a necessary one if you want to get up and running any time soon.

Taking the time to properly establish your new business from the get-go will save you a lot of headaches in the long-run.

Here are the steps you need to take to make your business official and legally established with the local and state government.

Register your business name

Your DBA name is a business name that’s different from your personal name, the names of your partners, or the officially registered name of your LLC or corporation. This is important to note because when you form your business, the legal name of the business becomes the name of the person or entity that owns the business (you), unless you choose to rename it and register it as a DBA name.

If you decide to register your business as a sole proprietorship, partnership, corporation, or LLC, you’ll need to register your DBA name.

You can do so at your county clerk’s office or with your state government.

Choosing a legal structure

The next official task to undertake is to choose a legal structure for your business. The structure you choose will impact how you file state and federal taxes, the roles and ownership of different team members, and how you’ll be held liable if someone files a legal claim against your business.

It’s a complicated decision—one that we could devote a whole separate guide to. But as a quick run-through, here are your main options:

Sole proprietorship

A sole proprietorship is a simple, common way to structure a business.

It is an unincorporated business in which there’s one owner, and no distinction between the business and the owner. That means that you, the business owner, are entitled to all of your business’s profits, assets, liabilities, and debts.

You don’t need to take any formal action to form a sole proprietorship—you’ll automatically be a sole proprietorship if you form a business as the only owner.

As for taxes, because you and your business are legally the same, the business itself isn’t taxed separately. You’ll file the business’s income as your income on your taxes.

Partnership

A partnership is a legal structure in which at least two business partners share the profits and liabilities of a business. In order to formalize a partnership, you should draft up a legal partnership agreement if you choose to structure your business this way.

With a partnership, the business itself doesn’t pay taxes—they “pass-through” to the partners. The partners then include their share of the profits and losses on their personal tax returns.

A benefit of forming a partnership is that there’s some shared financial commitment in the deal.

Corporation

A corporation is an independent legal entity that’s owned by shareholders. The corporation, not the owners or shareholders themselves, is legally liable for any assets and liabilities.

A corporation is a more complex business structure, and tends to come with more costly administrative fees and more complicated tax obligations.

S Corporation

An S corporation is a special type of corporation, designated through a separate IRS tax election.

Whereas a corporation is subject to “double taxation”—where the corporation is taxed once and then again to the shareholders—an S corporation helps you avoid paying taxes twice on your business’s profit. The main difference between an S corporation and a general corporation (C corporation) is that taxes for S corporations pass through to the shareholders.

Limited liability company (LLC)

A limited liability company (LLC) is like a hybrid between a corporation and a partnership or sole proprietorship.

With an LLC, shareholders of the business are not legally liable for the business’s debts and liabilities (like a corporation), and they get the benefit of having taxes pass through to the shareholders (like a partnership or sole proprietorship).

Register for state and local taxes

Before you register for state and local taxes, you’ll first need to get a tax identification number.

Again, the IRS will use your EIN to track your business for federal tax purposes, but most U.S. states and territories will have you pay income and employment taxes for your business as well. (Certain states have additional requirements, like state-mandated workers’ compensation and unemployment insurance, but you can bet on having to pay income and employment taxes).

What you’ll need to do for registering for state and local taxes will vary widely from state to state.

Get all the documents, permits, and licenses you need

The last, nitty-gritty step you should take to make your business official is to get the small business licenses and permits you need to operate.

Virtually every small business needs a business license and/or permit to operate legally. So before you open your doors, make sure you’ve done your research to see what you need to hold before doing business.

We have a resource for how to get state-specific licenses and permits, so make sure to check that out.

Resources for veterans starting and managing a business

There are resources out there specific to veterans starting and managing their businesses.

If you don’t already, these are the resources that every veteran entrepreneur should take advantage of to start off their business on the right foot or be the best business owner they can be.

1. Office of Veterans Business Development

The Office of Veterans Business Development is an SBA initiative that offers programs and services to empower new and existing veteran entrepreneurs (and their spouses). Use this resource for training, mentorship, direction to get access to capital, and networking.

2. Boots to Business

Boots to Business is an entrepreneurial two-step program that helps train veterans hoping to become entrepreneurs. This program is a part of the Department of Defense’s training track for their Transition Assistance Program.

3. Veterans Women Igniting the Spirit of Entrepreneurship (V-WISE)

Specifically geared towards female veterans and their families, V-WISE is an SBA-funded program that includes online training, conferences, and mentoring.

4. The National Center for Veterans Institute for Procurement

5. Veteran Business Outreach Center (VBOC)

Perhaps the most comprehensive resource for veteran entrepreneurs, Veteran Business Outreach Centers offers any kind of entrepreneurial development assistance—business training, counseling, and mentoring for veterans starting or managing a business.

6. SCORE

SCORE is a great resource for any small business owner, but shouldn’t be forgotten by veteran entrepreneurs. SCORE is a non-profit organization dedicated to giving free small business advice. Use them for contacting volunteer business counselors or go to one of their free business workshops and in-person appointments.

7. Institute for Veterans and Military Families (IVMF)

The IMVF is a program at Syracuse University, meant to provide education and training for veteran-business owners. The IMVF can help educate you on how to access capital, manage your business financing, or bootstrap your business.

8. Veteran Entrepreneur Portal

The Veteran Entrepreneur Portal is a VA-run portal that connects veteran entrepreneurs to different federal, state, and local resources, opportunities, or financing programs.

9. Service-Disabled Veteran-Owned Small-Business Program

The Service-Disabled Veteran-Owned Small-Business Program is an SBA program that helps entrepreneurs land sole-source government contracts of up to $5 million. Not all business owners will be eligible, but if you own at least 51% of your business and have a service-connected disability, you should consider applying.

10. VetBiz

VetBiz is a Department of Veterans Affairs organization dedicated to all things small business.

The first way to use this veteran entrepreneurial resource is to become a certified veteran-owned small business with them, which makes you eligible to win federal contracts.

11. USA.gov Resources for Veterans

The small business section of USA.gov has a large number of tools, training sessions, and more resources for veterans looking to start a business (or improve one).

12. VetFran

VetFran is a more tailored program with resources meant to help veterans get access to franchising opportunities. The website helps you determine if franchising is right for you, and what kind of franchises you could access.

13. Entrepreneurship Bootcamp for Veterans With Disabilities (EBV)

The IMVF started the EBV program—a three-phase training program with the goal of helping disabled veterans become entrepreneurs.

Each phase is a different program that focuses on the different challenges for becoming (and being) an entrepreneur. The last phase is a 12-month mentorship program with EBV mentors.

14. The Bunker

The Bunker (from Bunker Labs) is an incubator for veteran-owned technology startups. The Bunker is like any other incubator, providing you with office space, networks, mentorship, and professional development, just specifically focused on veteran-owned startups.

15. SCORE Veteran Fast Launch Initiative

Another SCORE opportunity meant just for veterans is the Veterans Fast Launch Initiative. This initiative includes free business workshops, personal mentoring, business calculators, templates, and more. Plus, the program also offers five free hours of consultation from a certified public accountant.

16. Coalition for Veteran-Owned Business

The Coalition for Veteran-Owned Business is more of an advocacy group for veterans. But because it’s a free service that promotes veteran-owned businesses through B2B product and services awareness, it’s worthwhile to get involved for networking and promotion purposes.

17. National Veteran-Owned Business Association (NAVOBA)

NAVOBA is another advocacy group for veteran entrepreneurs that you can become of a member of for free. You’ll get your business listed in their marketplace—so businesses looking to work with yours can find you there.

18. Patriot Boot Camp

Patriot Boot Camp provides free in-depth business education, mentorships, and live events. This boot camp is more geared towards technology-based companies, so if you operate a veteran-owned business in this space, don’t miss out on this program.

19. GovCon Ops Consulting

GovCon Ops is a private organization (owned by veterans!) aimed to help other veteran-owned businesses receive government contracts. This consulting business also helps veteran entrepreneurs navigate the process of simply finding the right government contracts for their companies.

The bottom line

The above resource has everything you need to do and every resource you can use to make your entrepreneurial dream a reality. Each one of these resources and initiatives is designed to help veterans like yourself launch and grow their own small business.

We know that as a veteran, your training and skills leave you well equipped to start a successful business. Thank you for your service, and good luck!

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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4 Tips for Starting an Industrial Business

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The industrial sector is a broad category that covers businesses involved in the manufacturing, production, and distribution of goods. Small industrial companies are growing across the country and there are many opportunities for entrepreneurs to get involved in this sector.

As with any type of business, there are certain things you need to do to set yourself up for success. Here are four tips for starting an industrial business:

photo credit: Pixabay

1. Do Your Research

Market research means figuring out who your target customers are and what they want or need. There are a number of different ways to do this, but some of the most common include surveys, interviews, focus groups, and observation.

Surveys can give you a good overview of customer opinions while interviews or focus groups can help you to delve deeper into specific issues. Observing potential customers in their natural environment can also be helpful in understanding their behavior and needs.

2. Choose the Right Niche

When it comes to starting an industrial business, one of the most important decisions you’ll make is choosing the right niche. There are a number of factors to consider when making this choice, and it’s important to do your research before settling on a particular industry.

First, you’ll need to identify the needs of your potential customer base, such as the products or services they need. Once you have a good understanding of the market, you can then start to narrow down your options. Consider the competition in each niche and decide which one offers the best opportunity for success. When making your final decision, it’s essential to choose a niche that you’re passionate about.

3. Create a Business Plan

In today’s competitive marketplace, it’s more important than ever to choose the right niche for your industrial business. When you specialize in a specific industry or type of product, you can better meet the needs of your target market and stand out from the competition. How do you know what niche is right for your business? Here are a few things to consider:

First, think about your strengths. What does your company do better than anyone else? What unique skills or experience do you bring to the table? Use these strengths to narrow down your focus and choose a niche that you’re passionate about.

Next, consider your target market. Who are you trying to reach with your products or services? What needs do they have that you can address? When you choose a target market and understand their needs, you’ll be better able to choose a niche that meets their demands.

Finally, don’t be afraid to experiment. Trying new things is essential for any business, so don’t be afraid to test out different niches to see what works best for you. By keeping these tips in mind, you can be sure to choose the right niche for your industrial business.

Engineers work with industrial printer

4. Optimize Your Processes

Through industrial control engineering, you will be able to identify opportunities for improvement and design solutions that achieve the desired results. In many cases, these solutions involve the use of automation and other advanced technologies.

By optimizing industrial business processes, industrial control engineers can help to improve efficiency and increase productivity. In addition, they can also help to improve safety conditions by reducing the potential for accidents. As industries continue to grow and become more complex, the demand for qualified industrial control engineers is likely to increase.

Endnote

With an increased demand for industrial operations and manufacturing, there has never been a better time to start an industrial business. By following these four tips, you can be sure to set your business up for success.

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How to Find the Right Business Coach — and Avoid the Wrong One

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At its best, business coaching can connect you with a mentor and supporter who helps you generate ideas, make plans and execute on them.

But at its worst, a business coaching offer can cost you time, energy and money — without much to show for it.

Here’s what to expect from a business coach, how to find a coach that suits you and how to spot red flags.

What a business coach can do

Business coaches draw on their professional experience to help you set and achieve your own business goals.

“I’m here to help you, and I’m here to raise your level of knowledge in whatever way I can,” says Gary Robinson, who chairs the Memphis, Tennessee, chapter of SCORE. SCORE offers free business mentoring for entrepreneurs nationwide.

Some ways a business coach or mentor might do this include:

  • Offering feedback on your ideas and suggesting new ones.

  • Giving you templates and other tools that help you make plans.

  • Connecting you with resources in your region or your industry.

  • Giving you deadlines and holding you accountable to them.

Some business coaches may also offer coursework or group training sessions on particular topics, like sales.

Working with a coach should help you identify opportunities you hadn’t seen before or develop new strategies for pursuing those opportunities, says Sophia Sunwoo, who coaches women and nonbinary entrepreneurs through Ascent Strategy, her New York City-based firm.

“[Coaches] don’t necessarily have to have all the answers,” Sunwoo says. “But they are the people that know how to maneuver and create a bunch of different thinking paths for their clients.”

What a business coach can’t do

A business coach isn’t the same as a consultant, whom you would hire to perform a specific task. A coach or mentor could look over your business plan, for example, but they wouldn’t write it for you.

“If you were to hire me as a consultant, you would expect me to roll up my sleeves and pitch in and work with you to get things done, and you would pay me for that,” Robinson says. Coaches, on the other hand, “try to show you how to do things so that you can do them [yourself].”

Business coaches are also not therapists, Sunwoo says. Entrepreneurship can be emotionally and mentally taxing, but it’s important that coaches refer clients to mental health professionals when necessary.

Business coaching red flags

If a business coaching opportunity “promises guaranteed income, large returns, or a ‘proven system,’ it’s likely a scam,” the Federal Trade Commission warned in a December 2020 notice.

In 2018, the FTC took legal action against My Online Business Education and Digital Altitude, which purported to help entrepreneurs start online businesses. The FTC alleged these companies charged participants more and more money to work through their programs, with few customers earning the promised returns.

In both cases, these operations paid settlements, and the FTC issued refunds to tens of thousands of their customers in 2021 and 2022.

To avoid offers like these, the FTC recommends that you:

  • Be wary of anyone who tries to upsell you right away or pressures you to make a quick decision.

  • Search for reviews of the person or organization online.

  • Research your coach’s background to see if they’ve accomplished as much as they say.

Sunwoo says to also be skeptical of one-size-fits-all solutions. A coach should customize their advice to your personality and skill set, not ask you to conform to theirs.

“The moment that a business coach pushes you to do something that is really not compatible with your personality or your beliefs or values,” Sunwoo says, “that’s a huge problem.”

How to find the right coach — maybe for free

Here’s how to find a coach that will be as helpful as possible.

Determine whether you need advice or to hire someone. A coach isn’t the right fit for every business owner. If you need hands-on help organizing your business finances, for instance, you may need a bookkeeping service or accountant. And take legal questions to an attorney.

Seek out the right expertise. A good coach should be aware of what they don’t know. If they’re not a good fit for your needs — whether that’s expertise in a particular industry or a specialized skill set, like marketing — they might be able to refer you to someone who’s a better fit.

Consider free options. There may be some in your city or region:

  • SCORE offers free in-person and virtual mentoring in all 50 states, plus Guam, Puerto Rico and other U.S. territories.

  • See if your city has a Small Business Development Center, Veterans Business Outreach Center or a Women’s Business Center. All are funded by the U.S. Small Business Administration and offer free training and advising for entrepreneurs.

  • Do an online search for city- or state-specific programs. Philadelphia, for example, offers a business coaching program designed for entrepreneurs who want to qualify for particular business loan programs. Business incubators often offer courses or coaching.

Make sure your coach is invested in you. They should take the time to learn about you, your business and its unique needs, then leverage their own experiences and creativity to help you.

“I’m on your team now,” Robinson says of his clients. “Let’s do this together and make this a success.”

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Are There SBA Loans for the Self-Employed?

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Many of the same SBA loans are available to both self-employed people and more formally structured businesses, such as limited liability companies and corporations. However, self-employed individuals, like sole proprietors and independent contractors, might face a higher barrier to entry for having limited credit history, inconsistent revenue or no collateral. If they can’t qualify for an SBA loan, other business financing options are available.

Who qualifies as self-employed?

Sole proprietors, independent contractors and partnerships all fall under the self-employed category. In these cases, there is no legal distinction between the business owner and the business itself. Sole proprietors, for example, are solely responsible for their business’s gains and losses, while LLCs and corporations are legally distinct from their owners. This distinction helps protect the owners’ personal assets if their business runs into legal or financial issues.

Are self-employed SBA loans hard to get?

While a sole proprietorship is much easier to set up than an LLC or corporation, lenders may be more hesitant to finance them for a few reasons:

  • Self-employed business owners are legally responsible, as individuals, for any debt and liabilities that their businesses take on. If someone sues their business, for instance, their personal assets — not just their business — could be at stake. This makes it riskier for lenders to finance them.

  • Sole proprietorships and independent contracting businesses may have lower revenue or less collateral to offer since they’re often a business of one. This could make it more difficult for them to prove that they can pay back the loan, plus interest. And it may require more paperwork.

  • Some banks set lending minimums that surpass what a self-employed business owner is looking for, either because the business owner doesn’t need that much funding or doesn’t qualify for it.

  • Since there is no legal distinction between the self-employed business owner and their business, they may lack business credit history. To establish business credit, you’ll want to register the business, obtain an employer identification number and open a separate business bank account and credit card to keep your business and personal finances separate.

SBA loans for the self-employed

SBA microloan: Best for small loans and more lenient requirements

Applying for an SBA microloan is a great option for self-employed business owners, especially if they’ve been turned down by traditional banks and don’t need more than $50,000 in funding. In fact, the average SBA microloan is around $13,000, according to the SBA. SBA microloans are administered by nonprofit, community-based organizations that can also help train applicants in business practices and management. And because the loans are small, the application process may be easier — applicants may have limited credit history and typically don’t need as high of a credit score as they do for an SBA 7(a) loan.

SBA 7(a) small loan: May not require collateral

Funds from the SBA’s most popular 7(a) lending program can be used for a variety of business-related purposes, such as working capital or purchasing equipment. While the maximum SBA 7(a) loan amount is $5 million, SBA 7(a) small loan amounts don’t exceed $350,000. And if the 7(a) small loan is for $25,000 or less, the SBA doesn’t require lenders to take collateral.

SBA Express loan: Best for quicker application process

SBA Express loans are a type of 7(a) loan for businesses that need quick financing and no more than $500,000. The SBA responds to these loan applications within 36 hours as opposed to the standard five to 10 days, which may speed up the process for borrowers working with non-SBA-delegated lenders. Additionally, borrowers might not have to fill out as much paperwork — the SBA only requires Form 1919. Beyond that, lenders use their own forms and procedures.

SBA loan alternatives

Online lenders

Self-employed business owners turned down for SBA or traditional bank loans may be able to qualify for financing with an online lender. These lenders offer options such as term loans and lines of credit, and they often process applications faster and have more lenient requirements. However, applicants should expect to pay significantly more in interest than they would with an SBA loan.

Business credit cards

Not only can business credit cards help build your business credit history and pay for everyday business purchases, but they can also help finance larger purchases (within your approved credit limit). And if you qualify for a credit card with a 0% introductory APR offer, you’ll have multiple months to pay off the balance interest-free. Just make sure you’re able to pay off your purchase before the intro offer ends and a variable APR sets in.

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