Changes In How Companies Pay Veteran Owned Businesses

Running a small business is hard enough, but unique challenges facing veteran-owned businesses have prompted change in how companies pay them. The need for fair and prompt payment is even more pronounced for veteran-owned small businesses that often experience unique financial challenges due to their owners transitioning from the military to civilian life.

The federal government already has provisions in place such as the Prompt Payment Act, but veteran businesses that limit themselves to just the federal space take on risks like budget stalemates and continuing resolutions. Additionally, the private sector represents a more than $80 billion business opportunity for veteran-owned businesses compared to $33 billion in available federal contracts.

The private sector is a great opportunity for veteran businesses, but “floating” these large companies can lead to the end for small businesses who are considered to be the backbone of the U.S. economy. The practice is called “trade credit” and it cripples small businesses’ ability to pay their suppliers, contractors and employees.

Military families encounter financial difficulties for many reasons including long deployments, being stationed in high cost of living areas combined with low salaries of the armed services, and difficulty finding employment for military spouses. Any one of these situations can impact the ability to build or access capital for veteran business owners.

Creating a policy that cuts payment terms can be a business-saver. Fortunately, a small number of companies are reversing their payment term policies for veteran-owned small business suppliers. They are bucking the trend towards extended payments and acting without the fanfare of federal programs like the SupplierPay or QuickPay programs.

“Just like companies creating unique policies for employees who serve in the National Guard and Reserve, companies are creating unique policies to better leverage what veteran-owned businesses have to offer.” According to Misty Stutsman, Director, Center of Excellence for Veteran Entrepreneurship at the Institute for Veterans and Military Families’ (IVMF).

For example, at the end of 2016, La Quinta Inns & Suites made a significant adjustment to their payment terms for their veteran-owned business suppliers, reducing their payment window from 45 to 15 days for veteran and military spouse suppliers. Companies like First Data have followed suit.

Roger Sellers says his experience in the Air Force taught him financial resourcefulness. He’s the owner of Atlanta-based JMZ Construction, which manages commercial construction projects for companies including La Quinta Inns & Suites. When business capital gets tight, he often turns to credit cards to keep projects on track and ensure his workers get paid.

“Cash often runs thin on projects. When companies like La Quinta pay us in two-weeks it’s incredible,” he said. “It means I’m not carrying excessive debt. I’m able get more business and hire more people.”

Increasingly, diversity supplier leaders at companies need to evaluate payment terms for vendors who are veteran-owned. Additionally, veteran business owners should consider requested these type of payment terms in the contract-stage of new business relationships.

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