Finance your business p1 - Military - Start Your Own Business - Military Times Edge

With banks imploding and bankruptcies exploding you might be fighting the urge to toss that great new business plan like a hot grenade. Indeed, it may feel like the worst time ever to launch your startup, especially if you need hard cash and open credit to get things going.

Sure, it’s harder these days to put together financing, experts say — but it’s not impossible.

From traditional loans to, shall we say, more creative arrangements, there is still plenty of money out there.

Cast a wide net

“We really do encourage veterans, family members, reservists to look at everything — look at family, friends, state, federal, local and private lenders,” the Small Business Administration’s veterans expert William Elmore said. “There’s such a range of opportunity. If you’re willing to put in your time and effort, and if you present your ideas strongly enough, you’ll find somebody to provide you the resources.”

There’s no denying, though, that things have gotten tight. From just a year ago, the number of SBA-approved loans is down 57 percent nationwide. Meanwhile, loan values have plummeted from more than $5 billion lent out from October 2007 to February last year to $2.9 billion over the same period this year, according to SBA records.

“While we certainly recognize that our lending is down significantly over last few months, the veterans’ part of that lending seems to be down a little bit less,” Elmore said. A small silver lining perhaps, but one that can translate into thousands in credit with the right business plan.

Fast cash

Patriot Express is dubbed a “streamlined loan product” that promises fast turnaround from application to approval — usually within 24 hours — but with better guarantees for lenders and better interest rates for those borrowing.

In almost two years, the pilot program has helped dole out $250 million to about 3,000 veterans and spouses, averaging about $88,000 per loan. And that’s just part of roughly $1.2 billion the SBA helps provide to veterans annually. Through their local offices, the SBA also offers everything from microloans — up to $35,000 — to multi-million-dollar infusions.

Exploit opportunity

Perry Lamy knew he was taking a different road when decided to trade in his Air Force test pilot wings and go into the junk business two years ago. His pension as a retired major general gave him a great cushion, but not nearly the capital needed to open a 1-800-GOT-JUNK? franchise.

“One of the things I realized early on is that you have to exploit every opportunity available,” Lamy said.

For Lamy and his wife, also a retired Air Force officer, the knock of opportunity came literally at their front door. As young captains, they bought a home in the Washington, D.C., area and held on to it over the years, renting it out when new assignments took them elsewhere.

When he needed $180,000 to open his junk business, he was able to convert the equity they’d built up in the house into a second mortgage.

“The bank cut us a check, and we were off to the races,” he said.

Angel Lenders

Lamy’s business has been so good — even with the struggling economy — he decided to expand and buy more territories last summer.

A relative had just inherited some money and agreed to front the $130,000 needed to grow the business.

“Most of us have friends and family who know our abilities and our strength and trust us to do the right thing. It’s really the best kind of loan you can secure, but it can be touchy, because of course if you defaulted, it would just be devastating.”

In their case, the loan was arranged as interest-only with the option that their relative could join the business as a partner down the road.

Credit card cash out

Others opt to take a more risky route, drawing cash on low-interest-rate credit cards to cobble together the money needed to start a new business.

If you need gear, furniture or high-end equipment to get your business going, many stores will offer “same as cash” deals on big purchases often with no interest for a year or more.

But watch out. If the items aren’t paid off before the due date, high-rate interest is suddenly tacked on, typically for the full purchase price and often backdated to when the stuff was first bought.

The watchdogs at MSNBC and the Consumerist.com have even noted companies such as Best Buy tacking on monthly “debt cancellation” fees to same-as-cash purchases that can cost hundreds over the course of the loan.

“We generally don’t encourage a lot of use of credit cards, because interest rates can get so high,” the SBA’s Elmore said.

Pay as you go

Instead, Elmore suggests considering the take-it-slow approach. That’s what he did back when he started his own small business before going to work for the SBA.

“I never borrowed any money,” Elmore said. “Instead, I invested my own time.”

While still working for another company, Elmore started working nights and weekends and over few years turned his hobby of military records research into a viable full-time business.