If you’re a current or former military member, you have options when it comes to funding a business. While the VA doesn’t provide loans directly, the Small Business Administration (SBA) Veterans Advantage program offers waived or significantly reduced guaranty fees on some types of SBA (7) for military members and their spouses.
You may also be able to take advantage of small business grants and veteran entrepreneurship programs through the SBA — or get a line of credit, equipment loan or accounts receivable loan from a bank or online lender. Here’s a closer look at seven types of veteran loans or programs and how to choose the right one for your needs.
Loans for veterans, including SBA 7(a) loans, are available through banks, credit unions and online lenders. Here’s a rundown of each type.
This program is a set of benefits available to eligible veterans and military-connected business owners applying for SBA 7(a) and SBA Express loans. Today, the main advantage is reduced or waived SBA guarantee fees on certain loans, most notably a waived upfront fee on eligible SBA Express loans, rather than broad, automatic fee waivers across all loan sizes. To qualify, the business must be at least 51% owned by an eligible veteran, active-duty service member or qualifying spouse, National Guard member or qualifying spouse, and meet standard SBA credit and financial requirements.
The SBA 7(a) loan is the SBA’s most common loan and is partially guaranteed by the SBA with amounts up to $5 million. The SBA’s Veterans Advantage Guaranteed Loans program offers waived or reduced fees on its SBA 7(a) loans, as well as competitive rates and terms up to 30 years.
This how the reduced fee structure works for veterans:
While the SBA 7(a) is one of the best options for veterans looking to fund or buy a business, you’ll need strong credit and solid business financials to qualify.
Like SBA 7(a) loans, SBA Express loans are partially guaranteed by the SBA and enable veterans to borrow up to $500,000 with no upfront guaranty fee. The difference between SBA 7(a) and SBA Express loans is that Express loans have a faster turnaround time — with responses on applications taking as little as 36 hours. Like the SBA 7(a) loan, you’ll need to show strong credit and business revenue with at least two years in business to qualify.
Not everyone qualifies for the SBA 7(a) or Express loan. This is especially true if you’re just starting out or have a credit score below 650. However, online lenders offer a wide range of loan products besides term loans — including lines of credit, equipment loans and invoice factoring — that have more flexible underwriting criteria than SBA loans.
Online lenders also have quicker funding than SBA loan turnaround times — sometimes in as little as 24 hours — depending on the loan type. But because they’re not specifically for veterans and cater to higher-risk borrowers, online loans may come with higher APRs than SBA loans, plus origination fees ranging from 1% to 10%. But they can be a good option if you need quick turnaround funding to keep your business running smoothly.
If you’re looking for a term loan to fund longer-term goals, business loans from banks tend to have the lowest rates — but they can be more difficult to qualify for. Traditional banks may want to see that you’ve been in business for several years and have strong revenue, along with a personal FICO credit score of at least 700. Some banks cater specifically to military members and may offer special discounts to veterans and their families.
While not only for veterans, microloans offer smaller loan amounts of up to $50,000 and are designed to help small business owners get off the ground. The SBA offers microloans, but you generally need some type of collateral and a personal guarantee to qualify. The SBA works with designated lenders across the country. You can visit their website to find one in your state.
The Military Reservist Economic Injury Disaster Loan Program is a needs-based program offering loans up to $2 million to cover regular operating expenses that couldn’t be met because an essential employee was called to active duty as a military reservist.
While every lender is different, here are the general criteria for getting a business loan:
You’ll also need to provide documentation, like a government-issued ID, your military paperwork and bank statements. There are also no-doc lenders that allow electronic document submission, making for a faster application process.
While there’s no such thing as a specific VA business loan for veterans, the SBA Veterans Advantage program waives or reduces guaranty fees on its SBA 7(a) and Express for eligible veterans. You may qualify for these loans if you have a strong personal credit score and business financials.
Sometimes an SBA loan isn’t an option — especially if you’re just starting out. In that case, you can consider other types of loans and financing.
With rates ranging from 7% to 36% APRs, personal loans from banks, credit unions and online lenders aren’t the cheapest option. But they may be easier to qualify for than a business loan and can generally be used for any purpose, including funding a business. While the best personal loans don’t charge origination fees, these fees can range from 1% to 10% of the amount borrowed, depending on your credit score.
Business credit cards can be a convenient way to fund your business and may offer better rates, higher limits and more perks than personal credit cards. Business cards can also help simplify your bookkeeping by tracking tax-deductible expenses and building credit. Compare the best business credit cards.
Here is a list of SBA programs for entrepreneurial veterans who want to start a business, plus organizations that offer grants to veterans.
If you’re a service member with a service-connected disability with the skills and desire to run a business, you may be eligible for this program. To qualify, you must be a veteran who didn’t receive a dishonorable discharge and were rated at 10% or more by the VA.
You’ll also need to provide a business plan and justification for wanting to start a business and demonstrate a reasonable level of experience in the industry you want to start a business in.
This SBA program provides entrepreneurial training to women veterans, women service members and women spouses of service members and veterans to guide them through starting and developing a business.
This SBA program provides entrepreneurial training programs to service-disabled veteran entrepreneurs who want to start a business or currently own a small business. However, funding is limited to a small number of applicants.
This SBA program offers entrepreneurship training to veteran-owned and service-disabled veteran-owned businesses that want to pursue, or are already engaged pursuing, federal procurement.
There are a range of business grants available for veterans looking to start a business. These programs are available through the StreetShares Foundation, The Global Good Fund Veterans Leadership Program and the Hivers & Strivers Angel Fund.
See our personal loans for veterans page for more information on funding options for veteran-owned businesses.
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