Small Biz View: Self-employed reservists face financial squeeze
Unpredictability is familiar turf for any small-business owner. But those entrepreneurs who double as reservists or employ them can face many unforeseen financial difficulties when reservists are called for duty, suggests a recent study by the Congressional Budget Office.
The CBO estimates that small businesses employ approximately 18 percent of reservists. Of the 860,000 reservists in the Selected Reserves, between 8,000 and 30,000 hold key positions in small businesses. An additional 55,000 are self-employed.
While employed reservists are guaranteed certain rights under federal law—such as continued employment after a tour of duty—there is little protection for their employers. In fact, the effects of the law on small businesses may be particularly difficult to cope with, according to the study. The strains business owners encounter when a reservist is called up include a slowdown in production or productivity, lost sales, and the unexpected expense of hiring and training temporary staff.
Self-employed reservists may find deployment even more cumbersome, something Tom Gotsis knows all too well. A dentist in the St. Louis area, Gotsis has been activated for duty three times in the past four years. Though he has kept his eight-year-old practice open by having his dentist friends see patients (he eventually hired a full-time replacement), Gotsis estimates he has lost $700,000 in income. But Gotsis isn't complaining. "I have it fixed in my mind that this is the right thing to do," he says.
To make ends meet, Gotsis refinanced his business after his second tour of duty. He also tapped the Small Business Administration for a loan shortly before he began his third stint. Reservists who own small businesses are eligible for loans through SBA's Military Reservist Economic Injury Disaster Loan Program, which may be used to cover operating expenses and debt payments for a short period. Gotsis, who concluded his third tour in April, plans to use his MREIDL money to pay his bills while business ramps up again.
"Prebusiness planning is a critical step: What do you when you are gone?" says William Elmore, associate administrator for the SBA's Office of Veterans Business Development. That includes exploring options like MREIDL or taking advantage of reduced loan-interest rates for reservists before deployment. For more tips, visit the SBA's reservists website: www.sba.gov/reservists
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