Veteran Entrepreneurship: Access to Capital Challenges and Opportunities

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The search for capital to support small businesses is a challenge for all potential entrepreneurs, regardless of veteran status. For anyone, the initial startup phase is one of the most difficult and risky in the life cycle of a business. Though many small businesses are created each year, a significant number of small businesses close as well. Though veterans acquire substantial skills and knowledge during their tenure in military service that are transferable to the business world, this experience also may create additional issues that create unique barriers to starting a new business. 

In recent years, there have been attempts to address this issue through various programs and funding initiatives, and although helpful to some veteran entrepreneurs, this solution may not be the right fit for every business owner. There are still some nuances to the issue of access to capital and the concept of capital readiness needs to be further explored through research, so that solutions can be designed and implemented that will better prepare veteran entrepreneurs. 

Highlights and Findings

Results from the 2016 Survey of Consumer Finance reveal:

  • Both veteran (84%) and nonveteran (82%) business owner respondents predominantly use personal savings or assets to (start/acquire) their businesses
  • A large percentage of these accounts were from commercial banks (68%), finance or loan company (27%), credit unions (19%), and savings and loan or savings banks (10%).
  • In general, veteran and nonveteran business owner respondents have not been turned down for a credit request. It should be noted that veteran respondents do exhibit a higher percentage of being turned down, 24 percent, compared to nonveteran respondents at 18 percent. These percentages imply that veterans are 30% more likely to be turned down for a request made for credit than nonveterans.
  • Veteran business owner respondents identified only two reasons for not being able to get as much credit for which the business applied: personal credit history and firm not in business long enough (included young management).
  • Of those that were denied credit, a substantial percentage of veteran business owner respondents successfully secured the full amount requested by applying elsewhere (41%), especially compared to nonveteran respondents (26%). However, the majority of veteran business owner that were denied credit did not reapply (59%)