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Help for self-employed military reservists from SBA

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The U.S. Small Business Administration (SBA) and its partners help millions of existing and prospective small business owners start, grow and succeed. They help with SBA loans, counseling, training and contracts. SBA also helps businesses and families recover from disasters with loans, and is a voice for small business, helping reduce regulatory impact. Each month, this section provides information to start, expand and manage small business.

According to the Department of Defense, nearly 7 percent of National Guard members are self-employed or run small businesses. As reservist call-ups increased after the Sept. 11 attacks, few reservist/business owners knew that they would be away from their businesses for a year or two at a time, much less how their companies would survive while they were gone.

The U.S. Small Business Administration offers help through its Military Reservist Economic Injury Disaster Loan (MREIDL) program. Launched in August 2001 to support business owners and essential employees called up during the Kosovo conflict, the program was expanded several months later to include reservists called to active duty in Afghanistan and Iraq.

An “essential employee” is defined as an individual (whether or not an owner of the small business) whose managerial or technical expertise is critical to the successful daily operation of the small business. These working capital loans provide the funds to help eligible small businesses cover operating costs that cannot be met due to the loss of an essential employee called up to active duty in the reserves or National Guard. The business must also demonstrate substantial economic injury caused by the deployment of the key employee.

“Substantial economic injury” means the company must meet one or more of the following criteria:

• Inability to meet its financial obligations as they mature • Inability to pay its ordinary and necessary operating expenses • Inability to market, produce or provide a service ordinarily marketed, produced or provided

Small businesses may borrow up to $1.5 million to cover their obligations until after the employee is released from active duty. The amount a company can borrow is limited to the actual economic injury the business has suffered, as determined by the SBA. The interest rate on the loans is 4 percent, and the SBA will set the maturity of the loan after considering a company’s financial circumstances, up to a maximum of 30 years.

Like the SBA’s other economic injury disaster loans, companies are required to put up collateral if the loan is more than $5,000. The MREIDL filing period ends 90 days after the business owner or key employee is discharged from active duty.

Documentation needed to apply for the loan includes:

• A copy of the employee’s “orders” for active duty or a copy of their discharge papers; • A statement indicating that the reservist is essential to the day-to-day operations of the company, along with a written concurrence by the employee; • A written explanation and estimate of how the essential employee’s activation to military duty has or will cause economic injury to the company; and • A description of the steps the business is taking to alleviate the economic injury, and a certification from the small business owner that the essential employee will be offered the same job or a similar job when he or she returns from active duty. MREIDL applications and additional information can be downloaded by visiting the SBA Web site at http://www.sba.gov/reservists/ disloan.html.

Small Business Success Dorance Aldridge is not just a business owner; he’s also a cook -- Southern Creole and Cajun style. He developed his Creole sauces while operating his restaurant in the South Bay. In 2004, he approached the Small Business Development & International Trade Center (SBDITC) to help him make his sales as hot as his sauces.

Since then, Aldridge has worked to expand his distribution as well as his product line. He met with SBDITC Consultant Matt Yubas to review Brendory’s position in the marketplace and develop tactics to improve that position.

Aldridge also worked with SBDITC Consultant Larry Kirsch to refine his marketing materials. “Both Matt and Larry went out of their way to get information pertinent to my business, specifically,” said Aldridge. To date, Aldridge and his partner and wife, Brenda, have increased sales greatly and added new products, including Andouille sausage. The U.S. Navy and Coast Guard now serve food made with Brendory’s Creole sauce. Aldridge works with the culinary staff to maximize the versatility of the Brendory products stocked onboard. The products have proved so popular with the troops that Aldridge’s sales to the military are up by 30 percent, and his products are served on 38 vessels.

Explaining his product’s appeal, Aldridge said, “It’s easy to touch all walks of life with the Creole sauce; it’s a flavor that people are familiar with.”

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