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When Army Staff Sergeant Judy Taylor shed her uniform in 2011 after 10 years of service, she had a vision of opening a bike shop. The Small Business Administration (SBA) helped make that happen. SBA itself doesn't make the loans, but its Patriot Express program links former military with approved lenders. And for those who have served, the keyword here is "express."
"It was a much quicker loan process to go through, as opposed to any of the other bank loans, which would have taken three to four months to process. The Patriot loan took two to three weeks," says Taylor, owner of Midwest Track N' Trail in Roscoe, Illinois. The Patriot program helped her gain speedy access to $24,000 in startup funding from Rockford Bank and Trust.
For veterans, Patriot Express can mean a streamlined path to business ownership. Here’s what you need to know.
1. Prepare to put up.
After two tours in Iraq, USMC Lt. Col. Chuck Brewer left the service in 2010 to buy a Potbelly Sandwich Shop franchise in downtown Indianapolis. All he needed was $300,000 to get it off the ground—money he borrowed from Chase with help from the Patriot program.
His advice: Come with cash in hand. Even though Patriot loans are backed by the SBA, banks still want collateral to the tune of 25 to 33 percent of the loan value. Brewer ponied up $100,000 thanks to family and friends. While he would have preferred to have that cash as working capital, the bank insisted he keep it on the side as collateral. Patriot can get you a speedy loan, but you’ll still need to put skin in the game.
RELATED: 4 Lessons Your Small Business Can Learn From the Military
2. Have your records in order.
As an SBA-approved small-business lender, Tim Jochner, president and CEO of Superior Financial Group, advises veterans to have their financial ducks in a row before starting the Patriot process. “We take a look at their financial statements, their household expenses, how much they spend on entertainment every month. If you can have all that in order before you come in, it will make it twice as quick,” he says.
RELATED: 5 Essential Steps to Preparing a Loan Application
3. Learn the basics.
Before applying for a loan, know exactly what the Patriot program does and does not support. The program tops off at $500,000, and there’s no set interest rate—that’s for lenders and borrowers to negotiate. Loans go to for-profit businesses operating in the United States, and you have to be able to explain what the money will be used for. Plenty more rules–this is the government after all–can be found at the SBA website.
4. Be for real.
As Taylor pursued her Patriot loan, she had to provide more than just financial data. “They asked for my business plan, the demographics, the income in the area. But they also wanted to know my background in the business I was getting into and how I felt this loan would help me get in to what I wanted to do. So basically they wanted a resume on top of a business loan,” she says.
Despite 10 years in uniform, Taylor had acceptable credentials in the world of bikes. “My aunt and uncle owned a bike shop in Cape Cod where I grew up, and in the military, I took a job as a civil affairs soldier, which taught me how to work with people, how to talk to people, how to sell ideas or a product to someone.” All this proved sufficient to convince the SBA and the lender.
RELATED: What Lenders Look for in a Business Plan
5. Know where it goes.
Patriot money can’t be spent on just anything. Before applying, it pays to know the constraints. For example, the funds can be used for operational expenses or to purchase inventory. You can use the money for short-term working capital. But you can’t use it to refinance existing debt or pay delinquent taxes, for example. The fine print is on the SBA website, and any veteran ought to read it before wading into the weeds.
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