Of an estimated 5.9 million US employers, 273,542, or 4.7%, are owned by veterans. For many veterans and transition service members, entrepreneurship provides a pathway to apply skills and continue to serve the community in new ways.
However, securing funding is one of the biggest challenges. Business-oriented VA loans can provide critical support with lower fees, flexible terms and dedicated resources, especially through US SME management. Understanding how these loans work and comparing them with loans from banks, credit unions, and online lenders can help veterans decide which types of small business loans suit their funding needs.
Small business loans for veterans
The Veterans Advantage Program is no longer an option, but veterans looking for small business loans can consider the options through SBAs and other lenders, including banks and credit unions.
SBA 7(a) Loan
The Veterans Advantage Program, which reduces or eliminates fees for SBA 7(a) Veterans’ Loans, has been removed, but Veterans are still eligible to apply for an SBA 7(a) loan. The maximum amount for VA Small Business Loan is $5 million, so this option could appeal to veterans who need large amounts of money.
To qualify, a company must be for commercial purposes and must not be in arrears on debts to the US government. And the employer must have exhausted other sources of funding, including his own pocket.
SBA business loans are attractive because they have an interest rate cap. This makes it cheaper than the alternative. Additionally, if you have received approval for an SBA 7(a) loan, you can use your funds to purchase equipment, real estate, consumables, and more. This is also an opportunity to build business credits. This is important for businesses that just open the door.
SBA Express Loan
If you are a veteran veteran or spouse, you may qualify for one type of fee discount on SBA 7(a) Loan: SBA Express Loan. Veterans currently do not pay advance fees (essentially incurred fees) for these loans.
With an SBA Express loan, the approval process takes up to 36 hours. It will take longer to actually get your money, but it is useful to know if you are approved or not.
The SBA Express loan cap is $500,000, with a maximum of 10 years. Keep in mind that SBA Express loans usually carry higher interest rates than 7(a) loans, as the government guarantees less loan amounts (50% instead of 75%).
To qualify for this fee relief, your business must be owned by at least 51% of those who fall under any of these groups.
- Veterans who were not discharged from hospital for dishonor or bad behavior
- Veteran with a service failure
- Active military service members of the transition support program
- Reserve or National Guard
- One of the current spouses above, or the spouse of a disabled person on duty or connected to service.
Military Preventioner Economic Injury Disaster Loan (MREIDL)
The SBA’s Military Reserve Economic Injury and Disaster Loan Program (MREIDL) offers low-interest business loans if “essential employees” are called for active duty in a reserve or National Guard. The loan provides up to $2 million in working capital to help cover operating expenses that an employee could have paid if they were not called.
The interest rate is fixed at 4% and has a maximum repayment requirement of 30 years. Loans over $50,000 require collateral and funds can only be used for normal operating costs for losses, debt refinancing or expansion. Companies can apply once an employee receives an active duty order up to one year after their release from the service.
Bank and Credit Union Loans
Many banks and credit unions offer small business loans to veterans and other types of business owners. Banks usually have more stringent eligibility requirements, but we can see that the APR scope is more competitive than what online lenders offer. Additionally, if you already have a relationship with the lender, you may be offered an APR discount.
Certain banks, including Huntington Bank, offer discounted fees and interest for veterans. As the SBA’s preferred lender, Huntington can assess the creditworthiness and financing of your business, and you need to determine whether a traditional or VA loan is the best for you.
You can also apply for small business loans through credit unions that cater to veterans, such as the Navy Federal Credit Union. Credit unions are member-owned non-profit institutions, and tend to have fewer strict borrowing requirements than traditional banks.
Online loan
Also, some online lenders offer small business loans to veteran business owners. Loans from alternative lenders typically have fewer eligibility requirements than traditional lenders such as banks and credit unions. However, a potential trade-off to keep in mind is that it typically has a higher average APR than traditional options. Especially in cases of poor trust.
Additional Resources for Veteran Business Owners
The SBA and other organizations offer a variety of resources aimed at veterans and excel as entrepreneurs, including military base classes, mentorship, online programs for women veterans, and training on how to bid on government contracts.
- American Corporate Partners (ACP): The ACP provides support by providing veterans with long-term career goals through one year of mentorship when veterans return to civilian life.
- Boots for business: Training and resources available to veterans through national and international military facilities.
- Veterans Business Development Office (OVBD): Entrepreneurial resources such as workshops, mentorship, training, locations all over the country.
- Veteran Entrepreneur Training and Resource Network (Vetrn): Vetrn offers a free online MBA program designed to support veteran small business owners, veterans with service disabilities, National Guard members and their families in developing strategic business plans, improving financial management and access capital, and supporting sustainable growth in support of mentorship and networking opportunities.
- Veterans Business Outreach Center: Provides entrepreneurial development resources such as business plan preparation, training, counseling, and mentorship.
- Veteran Entrepreneur Portal (VEP):VEP provides important resources to support veterans in launching, raising and growing small businesses, including access to federal contract opportunities and specialized programs such as veterinary first certification and direct access programs.
- Veteran woman (vise) ignites entrepreneurship: Women-specific resources for training veteran entrepreneurs.
- Warrior Rising: The nonprofit will help veterans and their near-kinds create sustainable small businesses by providing coaching, education and guidance with the aim of supporting 16,000 veterans in 2025.
Veterans grants
Business loans are dangerous. You should be aware of this type of funds as if you default on a loan could cause your business and personal credit scores to plummet.
Grants are a great alternative to business loans as they do not have to be repaid and do not affect your credit score. Organizations such as the Second Service Foundation and Warriors Rising provide small business grants to various amounts of veterans. Veterans can find small business grants through grants.gov.
Be prepared: grants are often competitive and funding timelines may be long. Make a backup plan in case you are unable to land funds through the grant.
Conclusion
VA loans ended in 2019 in the traditional sense. However, veterans still have plenty of small business loan options to choose from. For some, SBA Express or Mreidl may be the best option. Other veteran business owners may prefer to acquire small business loans through local credit unions, either online or through peer-to-peer lenders or state programs.
