Business Loans for Veterans
When transitioning from active service to civilian life, veterans take on different paths to meet their general financial obligations. Most follow different career paths while some invest in their hobbies.
However, a larger percentage ventures into business. This has greatly impacted the US’s economy positively and employed an even larger percentage of the total population of the country.
For this, they need and deserve all the support from the federal government and private organizations. In this article, we’ll narrow it down to the business loans available for veterans, and the top lenders in the market.
- Rep APR
- Min Credit Score
OnDeck
- 9.00 - 99.00%
- 600
BlueVine
- 15.00 - 78.00%
- 650
SBA Lenders
- Starting at 6%
- 620
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
How Business Loans for Veterans work?
Entrepreneur veterans, like many entrepreneurs out there, need financial support, at least at one point in the business. Business loans for veterans are meant to bridge this financial gap and help veteran business people meet the costs of starting and running businesses.
Such costs include employee salaries, acquiring and maintaining equipment, even expansion. The loans come with favorable terms, specially engineered to help veterans.
The loans can be accessed by veterans and their dependents. That covers reservists, service-disabled veterans, transitioning service members, even extending to active duty soldiers under special circumstances.
These loans are available in select banks and financial institutions. Like any other loan, business loans for veterans also require regular repayments plus interests.
The only significant difference is that veterans’ business loans are a result of the direct involvement of government agencies and select lenders. This makes them affordable, but most importantly, less risky to lenders.
Please note that not all veteran business loans are similar. And, because of this, plus the difference in borrowers’ financial situations, the rates and loan terms are subject to constant changes.
The application process is not as rigorous as it would be with other loans. And, lenders reserve the right to choose the candidate they deem fit.
Requirements to qualify
These vary from one lender to another. Each of them has laid out policies borrowers must meet to be considered.
First off, business loans for veterans are reserved for honorably discharged veterans, service-disabled veterans, transitioning service members, and their dependents. Anyone out of this group, including dishonorably discharged veterans don’t qualify.
You must also be engaged in, or be planning to start a business in any of the US territories. Those with existing businesses will show such things as registration certificates, operation permits, and tax returns forms.
Those looking to start businesses will show business plans and proposals. This should contain everything about the business the borrower wishes to start, including the capital and operation costs.
Low lender risks mean lower interest rates and more flexible repayment and general loan terms.
Types of Business Loans for Veterans
With your veteran status, you can access different loan products. Remember, the same status can earn your special discounts and grants. Be sure to engage your lenders to know what incentives you’re entitled to if you apply for a loan with them.
The loans you can apply as a veteran include;
-
Standard 7(a) loans
Standard 7(a) is the primary and most-known SBA program. It is specially tailored to help with multiple small businesses’ needs. The loans are known to be mostly used for real estate and as working capital. Borrowers can access up to $5 million.
The loans come with low interest rates and long and flexible repayment terms. You’ll have up to 25 years to repay real estate loans and up to 10 years for working capital and equipment loans.
And that’s partly because they are SBA-backed. For $150,000 and less, you’ll enjoy up to an 85% SBA guarantee. Anything above the said amount will grant you a 75% SBA guarantee.
Unlike many loans, most SBA loans don’t require an upfront fee to act as a guarantee. And, the few that do have special discounts and multiple incentives for veterans.
-
Military Reservist Economic Injury Disaster Loans (MREIDL)
The primary goal of these loans is to keep the business afloat when the owner is deployed in the National Guard or Reserves. The funds will aid in the daily operations of the business till the owner returns.
Qualifying for military reservist economic injury disaster loans is subject to showing proof of inability to qualify for affordable loans with other lenders. Therefore, the loan should be the last resort, after unsuccessful application of other loans.
Eligibility will also depend on you proving how the business will suffer in your absence or that of the core employee.
The loan can neither be used to expand your business or service your debts. It’s purely meant to keep your business afloat in the absence of the business owner or key employee on active service.
You can access the loan at a rate of 4% – lower than most bank loans. You can pay the loan for up to 30 years depending on the borrower’s qualification, and the amount in question, $2,000,000 being the highest.
Please note that you’ll need collateral for loans larger than $50,000. However, you won’t be disqualified based on the absence of such. Instead, the lender will take any available security.
In case it doesn’t match the value of the loan, the lender will recommend a different loan product you can qualify for.
-
SBA Express Veterans Advantage Loans
These loans are meant to bridge the gap of longer waiting time by the 7(a) loans. Express Advantage Loans typically take 36 hours to be approved. And, the subsequent funding takes 30 days.
For this loan type, you can borrow no more than $350,000. You’ll also enjoy a full waiver of the guarantee fees under the Veterans Advantage Program.
Under the same program, you’ll also enjoy a 6.5% rate for a loan amounting to $50,000 and less, while anything above $50,000 gets you a 4.5% rate. These are typically lower than the usual bank loans.
-
Microloans
Microloans are meant for small business owners who can’t qualify for other loan products and lending options.
Like you might have guessed, these are small loans, basically not exceeding $50,000. Despite the small loan amounts, microloans attract higher rates of between 8% to 13%.
For these, you’ll mostly require collateral. The application process is also rigorous and requires heavy paperwork. You’ll need such things as financial projections, business plans, and tax returns.
Startup business loans for veterans
Start-up business loans are meant for veterans enthusiastic about contributing to the US economy. The loans are meant to help especially small businesses, with capital for starting, running, or expanding the business.
The federal government is the key player in this program. Through it, Small Business Administration, partners with different lenders to offer affordable loans with flexible terms to lenders.
The program helps thousands of veterans every year to support themselves financially and create employment. Here’s a chance for the veterans to put into practice such skills as discipline and leadership that they are taught in the military.
Start-up veteran business loans generally don’t have high credit requirements. However, when applying with a poor credit score, be prepared to pay higher interests and part with ‘unfavorable’ repayment terms.
To be on the safer side, strive to keep your score above 650. This will not only open doors with veteran business loan lenders but other lenders with exciting loan products, too. So you can leverage on start-up and running costs.
Business loans for disabled veterans
When readjusting to civilian life, disabled veterans face lots of challenges. From endless medical assessments, which are of course expensive, to the inability to give their businesses the care they deserve, it can be tough.
The following are the financing options they can explore;
- VA Business Term Loans – these are meant for veterans with small businesses. They come with fixed interest rates and repayment terms. They are best for business owners looking for a consistent repayment schedule.
- Flexible Veteran Small Business Loans – this is one of the go-to options for disabled veterans, thanks to its flexibility. The loan terms are flexible and can fluctuate to match a business’ funding strategies and rate of sales. If you’re planning on using different loan amounts occasionally, this is your go-to option.
- Veteran SBA Loans – these are loan products characterized by larger loan amounts, prime interest rates, and flexible loan terms. They are also highly popular with veteran business owners.
- Equipment loans for veterans – these loan products are meant to help veterans acquire the equipment they need to run their businesses smoothly. Because the equipment acquired acts as collateral, you won’t need to offer any other asset as security. Approval is fairly fast, taking at least 48 hours after approval. The loan is best for business owners in the construction, restaurant, and hotel industries.
- Veteran invoice factoring – veterans, through this financing option, can exchange their invoices for instant cash. This bridges the gap of slow customer payment. Instead of waiting, the cash facilitates the smoother running of the business.
- Merchant Cash Advances – Here, a lender gives a lump sum of cash to veteran business owners for part of future sales. The agreed portion keeps fluctuating with the change in business sales. Please note that this isn’t a loan, but a cash advance. And, you’re committing part of your future finances. The lender will deduct payments from your credit card sales or automatically from your bank account through Automated Clearing House. Approval is not as strict as other loans since its totally dependent on your sales
The low the veteran earnings, the less they are obligated to pay.
Other alternatives
While commercial and SBA business loans for veterans could be easy to qualify for, not all applicants are eligible. As such, it could be wise to seek alternative sources of funds to start and grow your business. The following options could work;
- Short-term business loans – this is an excellent loan product for veterans with small businesses. The borrower doesn’t have to commit to a long-term product that could affect the business’s future income flow. Veterans can access up to $500,000, or more depending on the lender in question. The funds are not tied to specific use and can serve any business purpose. And, the loan comes with flexible repayment terms and up to 18 months or more to repay your loan.
- A business line of credit – this is an excellent option for veteran business owners looking for the recurrent need for working capital. You’re free to withdraw the amount you need as you’re within your limits. The funds can help finance a new project or help with the daily business cash needs. there are no monthly minimum terms, as long you pay in installments within the required time frame. After successful repayment, you can proceed to withdraw more funds.
Once you’ve decided which financing option to go for, do a check on the available financers and begin the application process. Once you receive the funding, put it into use as soon as possible so you can give your business time before you start repayment.
Frequently Asked Questions (FAQ)
Business loans for veterans are meant for honorably discharged active-duty military service members, service-disabled veterans and National Guard members, and their dependents including spouses and children.
The federal government has the STTR grant awarded to businesses belonging to veterans that can help the Government to carry out research. Qualification requirements for the business include being American-veteran owned and having less than 500 employees.
Veteran business loan lenders are among the most lenient in the market. They hardly disqualify a borrower based on their credit score. However, having a score less than 650 could have you paying higher rates.
It must be a small business with not less than 51% owned by a veteran. There must also be at least one veteran involved in day-to-day business operation and making long-term decisions.
The lenders on the table above are some of the best in the market.
