Many reservists who run their own businesses face a financial crisis when called for duty. Help is out there, but critics say it's hard to find—and insufficient
When National Guard reservist Dave Krasner was called to active duty in early October, 2004, he was given four days' notice before shipping off to Fort Dix, N.J., for training. That meant Krasner, then 32, who had seen combat three times while serving in the Guard, had to devise a contingency plan to keep his IT-service franchise running smoothly. But he was worried about its prospects for survival. He had recently left his job as Northeast area director of IT for Hilton Hotels (HLT) and had bought the Expetec franchise with his wife, Maritza, in Boston, so being deployed forced him to scramble during an already stressful situation.
To start, Krasner couldn't afford to hire a replacement and was facing mounting debt. And four days wasn't enough to organize the books or to make arrangements with customers, so he and his wife temporarily closed the franchise later that month. Maritza took overtime shifts at Gillette, where she had been working as an inspector for the razor division before opening the franchise.
And just six months after Krasner's deployment to Iraq, severe asthma forced him home in September, 2005. Because he could barely breathe or walk, he didn't get started rebuilding the business until three months later, when he reopened it.
"We lost everything," says Krasner. "Now we owe everyone and their brother, and my credit is horrible. It went from 640 to 470—it absolutely killed us." Because of his credit problems, Krasner says he couldn't get a loan from the Small Business Administration (SBA), nor did he qualify for other government programs. The franchise is now slowly getting back on its feet, he says.
With the Bush Administration's proposed increase in troop levels in Iraq, more Guardsmen and reservists like Krasner, who depend on their businesses for their livelihood, could be called to active duty. And advocates say these tours of duty are leaving small-business owners in a precarious position.
"The small businessmen or women, or the lawyer or doctor, more than any other [self-employed] segment, have made the greatest sacrifices," says John Goheen, spokesman for the National Guard Assn., a Washington-based advocacy group. He argues more support is needed. "In a dynamic economy, people come and go, businesses start and fail in 18 months—that's quite a long time," Goheen says.
William Elmore, the associate administrator for Veterans Business Development at the SBA, estimates that about 6% of the 550,000-plus active Reserve and National Guard members are self-employed, and that 9% of all Reserve and National Guard in the labor market are self-employed. Elmore is charged with the difficult task of building awareness of the programs and delivering support to servicemen and women, with a limited budget.
Pre- and post-deployment, reservists who run their own businesses often don't find out about the available government resources. But help does exist in the form of five of the 1,000 Small Business Development Centers across the country that work specifically with members of the military (assistance is available online for those who don't live near one of them) as well as an SBA loan program.
While the SBA offers several loan programs to help entrepreneurs expand or improve their businesses, only one type of loan is aimed at providing funds for operating expenses to small businesses affected by the absence of a military reservist—the Military Reservist Economic Injury Disaster Loan (MREIDL).
Despite being available to applicants who qualify "because an essential employee was 'called-up' to active duty in their role as a military reservist" since 2001, a total of just 268 MREIDLs have been approved by the SBA, for a total of $24.3 million. With a total of 371 applications processed, the approval rate stands at 73% and the average loan size is $90,844, according to SBA numbers.
National Guardsman Stanley Adams is one of the MREIDL recipients, which he says helped save his business. After spending more than 30 years developing a livestock-trailer business in Montgomery, Ala., 50-year-old Adams was called up for duty in April, 2003, and had three days to prepare before he was shipped to Fort Benning, Ga., for training. He had more than $1 million worth of trailers on site and thought his business would fall apart while he was gone. In October, 2003, he borrowed $350,000, which he used to cover bills and keep his head above water, though he says he still fears for his business as rumors circle of his unit's redeployment.
Some advocates say the SBA's MREIDL doesn't have the reach to support the thousands of veteran small-business owners. And other federal funds devoted to helping veteran small-business owners through non-SBA programs are also hard to depend on, says Louis Celli, a 22-year Army veteran who in 2004 started Northeast Veterans Business Resource Center, a Boston-based nonprofit providing courses, coaching, and mentoring to help veterans start and maintain small businesses.
Celli's center depends entirely on federal money, and he says, "Every year we're waiting on pins and needles to see if they will keep funding us." He points out that the already limited funding aimed at helping servicemen rebuild their businesses is spread among several government agencies, so cohesive help is hard to come by.
Other advocates worry that what little funding out there could go away. Jim Boylston, a SCORE counselor in Silicon Valley and coordinator for armed services veterans programs in the San Francisco Bay Area, worries that many soldiers won't reap the benefits of the existing programs before funding is cut. "My concern is that, having lived in Washington, D.C., some pencil pusher is going to cut the programs, and that the money isn't going to be there for [returning soldiers]. When they finally let [the soldiers] come back and stay back, we need the money to be there for them," says Boylston, who served in the Korean War.
Senator John Kerry (D-Mass.), the chair of the Senate Committee for Small Business & Entrepreneurship, has been working for several years to introduce a Military Family Bill of Rights, a bill that includes comprehensive and direct assistance for military members and their families, including loans, grants, and tax credits for Guard and Reserve members who own their own small businesses or work for one.
Veterans advocates say that, by integrating the family into the process, the bill is critical to the overall reintegration of a veteran when they return. "Many times, it's through the family network that we can identify needs and seek out services critically important to getting veterans reintegrated into their previous lifestyle," says Celli.
Click here for a slide show profiling five reservist-entrepreneurs.