Members of the military, veterans, and their family members can expect faster help financing small businesses under a new federal program.
The U.S. Small Business Administration unveiled its Patriot Express Pilot Loan program last week to provide more support to businesses owned by current or former members of the military.
The program, based on the agency's popular and successful SBA Express program, is geared for fast approvals on government-guaranteed loans of up to $500,000. It also carries the agency's lowest interest rates on business loans, ranging from 2.25 percentage points to 4.75 points over the prime rate, and its traditional guarantees.
Agency officials hope the new program will go a long way toward encouraging the growth of more small businesses, often called the engine of America's economy. Half of the nation's gross domestic product comes from non-farm small businesses, and such firms account for two-thirds of new jobs.
According to the SBA, one out of five people leaving active military duty consider starting their own business. More than 14 percent of businesses in America already are owned by military veterans, and about 15 percent of veterans are self-employed.
"The drive and persistence of veterans are making a huge contribution to the strength of America's economy," said SBA Administrator Steven C. Preston, in the text of a speech delivered in Washington.
Nationwide, there are about 1.2 million men and women on active duty, plus another 1.8 million in the Reserves and National Guard. There are also 25 million veterans, including almost 200,000 active duty troops and 100,000 members of the Reserves and Guard honorably discharged every year.
There are more than 88,544 active duty, Reserve and Guard members statewide.
According to the 2000 Census, there were 240,000 veterans in the Buffalo Niagara region.
"We're excited about the program, because it's going to enable us to help veterans much more than we have," said Frank Sciortino, SBA Buffalo District director. "We've always been proud of what we do for veterans but this will give us another tool."
Dan Mitchell is one past beneficiary of SBA's efforts. The 37-year-old former Army medic served in the 4th and 7th Mechanized Infantry units in the first Gulf War and in the 10th Mountain Division during the conflict in Somalia. The Utica native later moved to Buffalo after visiting for a Bills football game and falling in love with the area.
Last July, he opened The Soapbox, a downtown gym and personal fitness studio at the foot of Franklin Street. Benefiting from his veteran status, he obtained an SBA loan for less than $50,000 from Greater Buffalo Savings Bank. The business is already profitable, and he expects to seek another loan to expand "at some point within the next couple of years," using the new program.
"It's another benefit of having served," he said. "It's a nice thing to know that the country stays behind their veterans."
Today, the SBA guarantees more than $1 billion annually in about 8,000 business loans to veterans. It also helps more than 100,000 veterans and Reserve members each year with business assistance, outreach and support through the Small Business Development Centers, Veterans' Business Outreach Centers and the Service Corps of Retired Executives, or SCORE.
In its fiscal 2006 year that ended last September, the agency's local office guaranteed 97 loans to veteran-owned businesses under its 7(a) program, but has provided only 27 such guarantees so far this year.
"We're down somewhat in our lending to veterans," Sciortino said. "That's why we're trying to do so much with outreach. We think this Patriot Express program is going to be much more highly utilized."
The regular SBA Express program is capped at $350,000, and carries a maximum guarantee of 50 percent of the loan amount and slightly higher interest rates. But the Patriot Express will go up to $500,000, with an 85 percent guarantee for up to $150,000 and 75 percent for anything higher. And it has the lower interest rates of traditional SBA loans.
Loans can be used for start-up, expansion, equipment purchases, working capital, inventory or business-occupied real estate purchases. Lines of credit are also allowed.
Almost 2,000 "preferred" and SBA Express lenders will participate. Locally, that includes M&T Bank, HSBC Bank USA, KeyBank, Citizens Bank, J.P. Morgan Chase Bank, First Niagara Bank, Five Star Bank, Evans National Bank, Greater Buffalo Savings Bank, Bank of Castile and the New York Business Development Corp.
The program starts June 28, and will operate through the end of 2010. At that time, the agency will decide whether to continue or modify it.
"I think we've created a compelling product for them and that's going to help us all reach a large number of aspiring and current military community entrepreneurs," Preston said.