Small Business Loans for Veterans
Veterans can take advantage of several privileges that the government provides to help them start or expand their small businesses.
This article will look at the loan options available to veterans, how they can be accessed, types of loans, and their requirements. We will also look at other financial alternatives that veterans can use to boost their entrepreneurial ventures.
- Estimated APR
- Min Credit Score
SBA Loan
- 7.75% - 9.75%
- 650
OnDeck
- 9 - 99%
- 600
BlueVine
- 15% - 78%
- 600
- 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 Do Small Business Loans for Veterans Work?
The Small Business Administration (SBA), some commercial lenders, and nonprofits alike offer loans that are specifically tailored to veterans’ business needs.
These loans are aimed at helping veterans start or expand small businesses that can help them make a living past their active years in service.
There are different financial assistance products that veterans can choose from depending on their eligibility. For instance, SBA loans have a minimum age requirement, but some commercial institutions don’t look at that.
So, regardless of your circumstances, you won’t miss finding a suitable loan product for your needs.
Another essential thing to note is that eligibility requirements for veteran loans are usually downgraded to allow more people to qualify. For instance, on average most institutions require a credit score of 600, which can be considered fair. In contrast, if you are looking for a small business loan, your credit score should be in the region of 680, and that’s besides meeting other credibility checks, such as good cash flow.
Veterans can find comprehensive information about their loan options from SBA’s Lender Match service. Lender Match helps veterans find potential lenders based on their needs. On the website, you describe your needs, get matching lenders within two days, compare their offers and apply for a loan.
Eligibility requirements for veteran loans are usually downgraded to allow more people to qualify.
Requirements to Qualify
Depending on the type of loan, requirements for getting funding for a veteran-owned business will vary. For VA loans, you need to meet one of the eligibility requirements below (there might be differences among individual different loan products).
#1 You must have been honorably discharged. Some loans and grants may specify that you need to have been discharged within a particular period.
#2 For VA loans for disabled veterans, you need to have been medically discharged. The disability should also have been incurred during your tenure in service.
#3 You must be in Active Duty Military service and going through the Transition Assistance Program (TAP). TAP is designed to prepare service members to transition into civilian life.
#4 You must be a member of the National Guard or a Reservist.
#5 You must be the spouse of a veteran, an Active Duty Service member, member of the National Guard or Reservist. If widowed, you will be eligible if your spouse died while in service.
Meeting one of these basic eligibility requirements only gives you a chance of being considered for federal grants, small business loans, or other grants as a veteran.
Individual loan products may need you to meet additional requirements. SBA guaranteed loans have the least requirements.
If you consider looking at other lenders for whatever reason, it is worth checking their credit score requirements.
Having at least 6-months’ business records, relevant licenses, tax compliance documents, and a business plan may improve your chances of getting a loan or lower rates.
Types of Small Business Loans for Veterans
There are several types of business loans and other financial assistance products that address a range of veteran business needs. It could be launching a startup; you could be having bad credit; you may be seeking assistance to sort out some short-term financial constraints.
Whatever the case, you will likely find a product that suits your circumstances. Let us look at the top six types of veteran loans.
- Veteran Small Business Loans: This is a general-purpose business loan given to veterans who pursue entrepreneurship after service. You can access this loan as long as you have been in business for at least six months – no credit checks or minimum monthly revenue is required for eligibility.
- Veteran Equipment Financing: Starting a business may involve considerable investments in equipment, which might be a challenge for an entrepreneur who is just starting up. National Funding’s equipment financing provides lower rates, high limits, longer terms, and quick processing for such buying or leasing machinery for virtually any industry. These loans are typically processed within 24 and 48 hours
- Veteran Business Term Loans: These loans are borrowed on fixed terms and rates. If you know exactly how much funding you will need, you can reduce the cost of the loan by choosing a shorter term. This type of loan also typically ignores credit scores.
- Veteran Affairs Business Line of Credit: This loan provides continuous funding within a set limit. A good credit score, guarantee or collateral is not required to get a VA revolving loan. Also, these loans are usually processed pretty fast.
- VA Merchant Cash Advance: Cash advances for veterans help them to offset urgent cash needs for running their day-to-day operations. Payments are then deducted from their future debit and credit card receivables. The good thing about cash advances is that you only pay back in proportion to how much sales you make.
- Accounts Receivables Financing for Veterans: Veterans with businesses that have long payment cycles, such as wholesale distribution, may need finances to keep operations running as they wait for customers to honor their invoices.
Startup Business Loans for Veterans
Running a startup can be financially challenging. For instance, a business may be slow, or you may be having accounts receivables outstanding for months.
Meanwhile, the business will still need money to pay creditors, staff and meet other obligations. Startup loans come in handy in these situations.
Startup loans for veterans are designed to help them establish or acquire small businesses. They are usually provided as lump sum funds in exchange for equity. Grants are also common among startups especially for companies with significant social impact.
So let us look at some of the loans that would work best for startups.
Hivers and Strivers
Hivers and Strivers is an angel investment group that provides early rounds funding to veteran startups.
The organization also works with a syndicate of investors who can pump capital to businesses in later rounds of funding that may require heavy investments (their limits range between $250K and $1 million).
Like other angel investors, Hivers and Strivers will require you to surrender some equity in exchange for financial support. Veterans from branches of the military are eligible to participate in their funding programs.
The StreetShares Foundation and Loans
The StreetShares Foundation mission is to inspire, educate and support the military entrepreneurial community. Veteran startups can benefit from inspiration and education, which may include working under mentorship from industry leaders.
But more importantly, the foundation provides grants of up to $15,000 to veteran startups. In accordance with their mission, startups that are likely to improve the welfare of the military have a better chance of getting funded.
Warrior Rising Small Business Grants
Warrior Rising brings together mentors, investors, and entrepreneurs to grow and promote sustainable businesses. Sustainability is at the core of the organization’s funding philosophy. They can fund a business at any stage including a concept.
Passive investments, such as stock trading, cannot be funded though. Also, the organization only provides grants, so you will neither be required to pay back nor surrender some equity.
Small Business Loans for Disabled Veterans
Veterans might find it challenging when entering the traditional workforce after leaving the service. For disabled veterans this challenge can even be bigger.
The SBA provides the Veterans Advantage Loans program to cater for the special needs of service-disabled veterans. Veteran-owned businesses can benefit from the program by applying for contracts set aside for them to limit competition. To qualify for the program,
- You must be a small business (what qualifies as a small business depends on the industry and the annual revenue)
- At least 51% of the business must be owned by a service-disabled veteran
- At least one of the business’ co-owners who run its day-to-day operations must have a service-connected disability
- You must be honorably and medically discharged
Spouses of disabled veterans and those in active duty are also eligible for the program. For active duty members, loans are offered through the Transition Assistance Program.
SBA Express Loans range between $150,000 and $350,000 depending on your credit history, size of business, and funding needs.
Applications are expedited and you can get your funds within two days. Application and upfront guarantee fees are not charged for these loans. Also, the SBA provides a 50% guarantee for the loans.
The SBA provides a 50% guarantee for the loans.
Other Financial Alternatives
Other than small business loans, veterans can benefit from grants offered by different federal agencies, nonprofit organizations. Let us look at some of the top sources of small business grants for veterans.
- Hivers and Strivers: This is an angel investment that funds startups. You can get between $250K and $1 million in grants if you qualify. In return, the investor would seek equity ownership.
- The StreetShares Foundation and Loans: This nonprofit seeks to support military entrepreneurs by providing grants to businesses with a significant social impact on the military community. You can get up to $15,000 in grants if you meet their eligibility requirements.
- Warrior Rising Small Business Grants: This nonprofit focuses on supporting veteran-owned startups. To get a grant from them, you will first need to go through their training and mentorship program.
- Veteran Readiness and Employment: This Veteran Affairs program seeks to assist service-disabled veterans to start small businesses or train for traditional workforce jobs.
Besides grants, veterans can access franchise opportunities where franchising fees are discounted or even entirely waived.
There are also numerous training and mentorship programs worth looking at. For instance, the Boots to Business program offers veterans helpful training, including applying for loans and grants.
Frequently Asked Questions (FAQ)
Yes. While the credit score for getting a veteran low may be relatively lower, both the SBA and commercial lenders require you to have at least a fair score (600).
If you are having problems getting a guarantor for your loan, your best option would be to apply for an SBA loan since they guarantee 50%. However, you will need to find a guarantor for the other half.
SBA and most lenders do not have restrictions on how you can use your loan, but you have to specify that it will be used for business-related activities.
Yes, if you make monthly gross sales of $10K and have been operating for six or more months, you can get a veteran business loan regardless of your credit score.
SBA offers a maximum of $350,000.
