What is a veteran small business loan?
Veteran small business loans are special financing programs that are designed to help veterans start or grow their businesses. These loans typically offer lower interest rates and more favorable terms than traditional small business loans, making them an attractive option for veterans who are looking to start or expand their businesses.
In addition to offering competitive rates and terms, veteran small business loans also typically require less collateral than traditional loans, making them easier for veterans to qualify for.
Whether you're a veteran entrepreneur who is just starting out or an experienced business owner looking to take your business to the next level, a veteran small business loan could be the perfect solution for you.
How do small veteran business loans work?
Small veteran business loans are an important resource for entrepreneurs who are looking to start, expand, or improve their existing business.
Typically, these loans are used to purchase equipment, hire new employees, or cover startup costs.
Unlike a traditional bank loan, most small veteran business loans don't require any collateral and have low interest rates.
Additionally, they can be used to fund both long-term investments and unexpected expenses, making them a very flexible tool for entrepreneurs.
When it comes to applying for small veteran business loans, there are a number of factors that lenders will consider. These include things like the applicant's credit history and current debt burden, as well as their overall financial stability and business plan.
For many aspiring small business owners, these loans provide the necessary support and financing needed to turn their visions into reality.
And with careful planning and execution, they can also help businesses make meaningful progress towards achieving their goals. So if you're thinking about starting your own venture or expanding your existing one, small veteran business loans may just be the perfect option for you!
How hard is it for veterans to obtain a business loan?
Many veterans struggle to obtain business loans, as they often face serious barriers when seeking this type of funding.
Many lenders are hesitant to approve loans for veterans, especially those who have a less-than-perfect credit score or lack business experience.
Additionally, the application process can be tedious and time-consuming, requiring veterans to provide extensive documentation and financial records.
Furthermore, there is often a stigma against veteran-owned businesses, with many people assuming that these ventures will be unreliable or unsuccessful.
Despite these obstacles, however, it is still possible for veterans to get the funding that they need to start and grow their businesses. By working with reputable lenders and providing detailed information about their business plans and financial situation, veterans can successfully navigate the loan approval process and make their goals a reality.
Does the VA have a business loan program?
Simply put, the VA does not offer business loans for veterans. However, certain lending institutions and credit unions may have special programs for veteran business owners. Locally, you can search for a credit union dedicated to serving military members and veterans such as Navy Federal or USAA. Some may have special loan programs for veteran business owners. The Small Business Administration (SBA) previously offered an exclusive program for veterans called the “Patriot Express.” The SBA is an independent agency of the federal government that exists to protect and aid small businesses. SBA loans are partially backed by the government which gives small business owners an advantage. Unfortunately the SBA Patriot Express program is no longer offered as a result of a high default rate. The SBA claims that there are upwards of 2.52 million small businesses owned by veterans that employ nearly 5.8 million people. With so many veteran business owners there are VA loan programs out there even though they are not directly offered by the VA.
Who qualifies for a VA small-business loan?
The SBA claims that 59.4% of veteran business owners use personal or family savings to start a business, but not every veteran has access to capital. Therefore, the other percent of veterans will seek financing. Financing can be used to start or grow a business. Established veteran owned businesses will have an easier time qualifying for financing, just as non-veteran owned businesses. Since the 2008-2009 financial downturn, lending standards have tightened, and with the recent Pandemic we’re seeing some pretty tight standards once again. However,most financial institutions do recognize that veterans deserve to achieve their dreams after risking their lives to ensure we all could achieve ours. From countless hours, days, and months away from their families to some never returning home, veterans are a selfless group of individuals with a special appreciation for life. There are several pro-veteran financial institutions willing to relax standards or lend low-rate loans for veterans. In order to qualify for a VA loan a businesses must be at least 51% owned and controlled by one of the following:
- Honorably discharged veteran
- Service-disabled veteran
- Active-duty service member participating in the military Transition Assistance Program
- Spouse of any of the above
- Reservist member
- Widowed spouse of an active-duty member who died serving
Aside from these requirements, veteran business owners will also need to meet minimum requirements set forth by the lender. Veterans will also need to provide a copy of their DD 214 form. Transitioning active duty members need to provide DD Form 2. While lenders want to pay their respect to veterans by helping them make their dream a reality, they must protect their institution as well. Not all veterans are financially savvy business owners afterall. Most lenders will consider credit score, financial stability, assets, business plan, and other components related to approving a VA loan.
What Type Of Small Businesses Can a Veteran Borrow?
Having two years in business and above-average credit will increase your chances of being approved for a loan with a low rate and flexible repayment terms. Most businesses are eligible to apply for loans. However, non-profit organizations and companies operating in the gambling or lending industries are typically excluded.
Types of financing options for veterans
Financing your business can be daunting, but there are a variety of options available for veterans.
Online business loans
There are now a number of online lenders that offer business loans specifically for veterans.
These loans typically have lower interest rates and longer repayment terms than traditional loans, making them easier to qualify for. However, they also tend to have higher fees and stricter eligibility requirements.
SBA Veterans Advantage Program
The Small Business Administration (SBA) offers a Veterans Advantage Program that provides preferential treatment to veteran-owned small businesses when awarding government contracts.
Military Reservist Economic Injury Disaster Loan
The Military Reservist Economic Injury Disaster Loan (MREIDL) is a loan program administered by the Small Business Administration (SBA) that provides financial assistance to small businesses that have been impacted by the deployment of a reservist.
The MREIDL can be used to cover a wide range of expenses, including payroll, inventory, rent, and utilities. Undersized businesses may borrow up to $2 million at a low interest rate with terms up to 30 years.
SBA Express Loan
The SBA Express Loan program is a loan guarantee program offered by the Small Business Administration (SBA). The program is designed to help small businesses obtain financing when they might not otherwise be able to do so.
The SBA guarantees a portion of the loan, which reduces the risk for the lender and makes it more likely that the loan will be approved. In return for this guarantee, the SBA charges a fee. The main benefits of the SBA Express Loan program are that it can help small businesses obtain financing when they might not otherwise be able to do so and that it can help to reduce the risk for lenders.
Do small business grants exist for veterans?
According to the Small Business Administration, there are over 2.5 million veteran-owned businesses in the United States. These businesses employ over 5 million people and have an annual revenue of over $1 trillion. Given the significant contribution of veteran-owned businesses to the economy, it's not surprising that there are a number of programs and initiatives designed to support these businesses.
StreetShares Foundation
The StreetShares Foundation is a 501(c)(3) public charity that was founded in 2014. The foundation's mission is to help veterans start and grow their businesses. To date, the foundation has awarded over $1 million in grants and scholarships to veteran-owned businesses. The foundation also offers free business education resources, such as webinars and an e-book library.
In addition, the foundation hosts an annual Veteran Entrepreneur of the Year Awards ceremony to recognize the achievements of veteran entrepreneurs. The StreetShares Foundation is a great resource for veterans who are looking to start or grow their businesses.
Hivers & Strivers Angel Fund
Hivers & Strivers is a unique and innovative fund that helps to provide much-needed support for our country's veterans. Created by a group of visionary philanthropists who recognize the value of our veterans, this fund aims to empower struggling servicemen and women with the resources they need to thrive in civilian life. Thanks to its generous contributors, Hivers & Strivers Angel Fund has been able to provide housing assistance, job training, mental health support, and many other crucial services to countless veterans across the country.
Small business financing options for veteran start-ups
There are many different ways that veteran entrepreneurs can secure financing for their small businesses. Some options include traditional bank loans, venture capital funding, crowdfunding, and investor partnerships.
One option is to seek out a traditional loan from a bank or credit union. These types of loans offer predictable terms and competitive interest rates, making them a popular choice for many small business owners. However, this type of financing tends to be fairly expensive in the long run and may require more paperwork than other options.
Another option is to take advantage of venture capital funding. This type of investment offers faster access to large sums of money at the cost of ceding some degree of control over major business decisions. Venture capitalists are typically looking for high-growth companies with a strong potential to succeed in their market niche, making it an attractive choice for startups with big ambitions but limited resources.
What credit score do I need to qualify for a veteran business loan?
Different lenders have different requirements when it comes to evaluating applicants. Some may be more willing to work with a borrower who has a lower score, while others may only consider applicants with high scores.
However, in general, most lenders tend to prefer borrowers who have a credit score of at least 640 or higher.
Can I get a veteran business loan with bad credit?
You may be able to get a veteran business loan with bad credit but it’s not advisable. Veteran or not, bad credit can cost you, especially when it comes to loans. When operating a business, your personal credit score is often considered when taking out a loan. It’s advisable to rebuild your credit before taking out a loan. If you have a business partner, you should consult with them about their credit score. If they have a better score they should take out the loan or act as a cosigner.
How can a veteran get money to start a business?
While there are grants available for veterans, these are about the only “handouts” available. There are certainly more grants for veterans than regular business owners but they’re still in limited supply. Qualifying for a grant is possible but you’ll likely need to get money other ways as well. Veterans can get money the following ways to start a business.
- Personal loan: Veterans can access personal loans to fund a business venture. Businesses just starting out may need to use a personal loan to get started. To qualify for a business loan, veteran-owned businesses will need to meet the requirements. At PrimeRates, veteran-owned businesses can explore personal and business loan offers with no credit impact.
- Personal savings or family members: Cash is king there’s no doubt. A majority of veterans use their own savings or family savings to fund their business venture. In some cases, businesses may start small-scale and become profitable before needing to borrow money. If you can find a way to achieve profitability before borrowing money, you’ll be in a good position. However, this is rare.
- Credit cards: Veteran-owned businesses can take advantage of credit cards for short-term cash. Credit cards should not be used for long-term financing but can improve cash flow to keep you going.
- Business loan: Eventually, veteran-owned businesses should qualify for business loans. While they’ll still need to meet the requirements of the lender, some lenders offer relaxed requirements or other perks for veterans.
- Grants: Grants can provide veteran-owned businesses with the funds they need. Grants do not need to be repaid so this can be a great way to get ahead. However, applying for grants can be time consuming so we don’t recommend putting all your eggs in one basket.
How can you use the funds from a VA business loan?
VA business loan funds can be used just like any other business loan, unless specified otherwise. Most business loans will specify that they must be used for business purposes only. Some business loans may have one specific use such as inventory loans. Be sure to understand the restrictions of your business loan before spending. Here are some common uses of funds from a VA business loan.
- Office space
- Machinery
- Marketing
- Inventory
- Staff
- Patents
- Legal protection
What are the best small business loans for veterans?
Credit unions such as Navy Federal specialize in helping service members financially. Veterans should check with local credit unions that share a similar mission to see if they offer business financing. They should also take advantage of some of the resources listed above. By getting a mentor and connecting with other veteran business owners you can get first-hand advice on who has the best business loans for veterans. Rates and terms are constantly changing so if you can connect with a veteran business owner that has recently secured a loan they could share valuable information.However, do not assume that just because an organization is committed to veterans that they can offer the best loans. To explore some of the best personal and business loans available, check offers at PrimeRates.
What are some tips when comparing veteran business loans?
Here are some tips that can help you find the best veteran business loan.
- Find credit unions that cater to veterans
- Compare total loan costs, not just monthly payment
- Evaluate lender support options and other perks (i.e. rate discounts)
- Compare multiple offers
- Try to qualify for a grant
How Much Can I Borrow?
Depending on your financial needs, a small business loan can be as small as just $1,000, and reach above $2 million. The size of your company, number of years in business, your personal credit score, financing proposal and annual revenue are all major factors that will go into determining both the size of the loan that you’re approved for and the rate.
How To Qualify For A Veteran Small Business Loan
The main requirement of any veteran business lender is to have a company that is at least 51% veteran owned.
Additionally, although some lenders will offer loans to new businesses or businesses whose owners have low credit scores, having at least two years in business and a credit score above 600 will help you secure a loan with a low rate and flexible terms. Don’t be discouraged, however, if you don’t meet the qualifications that many traditional and low-rate lenders require to borrow from them. There are still many companies who will lend to low-credit or brand new businesses.
What Do You Need To Apply?
Before applying for a small business loan, you should have a few pieces of information handy:
- Your personal financial information
- Personal credit report
- Business’ credit report
- Business plan
- Income tax returns
- Personal bank statements
- Business bank statements
- Documentation of collateral (if required by the lender)
- Personal contact information
Best Veteran Small Business Loan Options
For Start-Ups & Quick Cash
Kabbage
With Kabbage, you can borrow between $2,000 and $250,000, with rates ranging between 24% and 99%. This lender is ideal for borrowers with low credit scores, or who need cash fast, as funds can be made available within as little time as a few minutes.
Accion
Business owners can borrow as little as $300 and as much as $1 million through Accion. Their rates range between 7% and 34%, and the lender only requires six months in business to qualify.
OnDeck
Borrowers can access between $5,000 and $500,000 through OnDeck’s small business loans. Their rates range between 9.1% and 99.8% for term loans, and start at 11% with a maximum of 63.2% for their lines of credit. Due to the potentially high rates that can come with OnDeck’s loans and lines of credit, this lender is more willing to work with borrowers who may be new business owners or have low credit scores.
For Established Businesses & Business Expansion
Credibility Capital
Credibility Capital offers business loans with amounts ranging between $50,000 and $400,000 and a maximum annual percentage rate of 25%. With rates as low as 10%, this lender primarily works with borrowers with above-average credit scores, multiple years in business and high annual revenue.
StreetShares
StreetShares’ loans start at $2,000 with a maximum amount of $250,000, and come with annual percentage rates as low as 9% and as high as 40%. This lender is best for borrowers with good credit scores who are not looking to make major property or equipment purchases.
SmartBiz
SmartBiz offers loans starting at $30,000, with a maximum of $350,000. This lender has some of the lowest APRs in the online business lending industry, with rates starting at 9.7%, and a maximum of 11.04%.
BlueVine
BlueVine’s offers lines of credit ranging between $5,000 and $250,000, with APRs starting at 15% and a maximum rate of 78%. Their invoice financing starts at $20,000 with a maximum of $5 million. This lender is best for borrowers with excellent credit scores, because those without strong financial qualifications may only be offered products with high interest rates.
For Good Credit
Prosper
Prosper offers small loans ranging between $2,000 and $40,000, and rates starting at just 6.95%. This company has relatively stringent requirements, with a minimum credit score of 640 and least two years of credit history necessary to be considered. Despite these requirements, their average borrowers typically have much stronger financial qualifications, with an average credit score of 710 and an average credit history length of 11 years.
LendingClub
LendingClub offers business loans and lines of credit between $5,000 and $300,000, with annual percentage rates ranging between 7.77% and 35.11%. To qualify, you should have a personal credit score above 620 and a minimum annual revenue of $75,000.
For Bad Credit
QuarterSpot
QuarterSpot’s business loans range between $5,000 and $250,000, with rates starting at 20% and reaching a maximum of 48%. Their loans are easy to qualify for if you have below-average credit, with a minimum score requirement of just 550.
Veteran Business Loan Alternatives
SBA Express Loans
A VA Small Business Administration (SBA) loan is a type of business loan that’s only available to reserve, retired or honorably discharged veterans. If you don’t want to take out a loan specifically geared towards veterans, however, you can consider an SBA Express Loan. If you have a high credit score, multiple years in business and a large annual revenue, you may be able to qualify for an SBA loan, which comes with some of the lowest interest rates in the industry.
» MORE: Learn More About SBA Loans
How to apply for a veteran small business loan
Applying for this type of loan is relatively simple, and there are several steps that you can take to increase your chances of being approved. One key step is to draft a comprehensive business plan outlining your objectives, goals, and strategies for the future. This will help the lender determine whether or not your business is viable and has the potential for success.
You should also be prepared to provide financial records showing that you have sufficient personal income or other assets to make loan payments on time. Finally, it is important to have a good credit history so that the lender has confidence in your ability to make good on your debts.
What are some other resources for veteran-owned businesses?
There are valuable resources that veteran-owned businesses should take advantage of. Here are just a few:
- Office of Veterans Business Development (OVBD): The OBVD facilitates the use of SBA loan programs for veterans, reservists, active-duty transitioning members, dependents, survivors, and so forth. The SBA can connect veteran-owned businesses with federal procurement and commercial supply chains that can help. The SBA offers support for veterans in the form of funding programs, training, and federal contracting opportunities.
- Hivers and Strivers Grant: Hivers and Strivers is a proud angel investment group dedicated to helping veteran-owned businesses. Funding opportunities range between $250,000 to $1 million. To apply for a grant submit your business idea through the Gust platform.
- Street Shares Foundation Veterans Small Business Award Grant: The nonprofit Street Shares Foundation extends grants to veteran business owners that need funding. Via the Military Entrepreneur Challenge, there are three different grants available (1st place $15,000, 2nd place $6,000, and 3rd place $4,000). There are other perks too. First place winners get $25,000 of pro-bono legal services. Scholarships are also awarded to first, second, and third place winners.
- Warrior Rising Small Business Grants: New and existing veteran-owned businesses can access grants through Warrior Rising. This nonprofit offers grants and mentorship for veteran-owned businesses.
- GallantFew: GallantFew offers mentor services for veterans. Mentors are a great way to establish a relationship with an individual that can help you be a better business owner. The mentor is likely someone who was once in your shoes, therefore they may be able to help you find funding.
- Veteran Business Fund Loan: The Veteran Business Fund is a non-profit that offers interest-free loans to small businesses that are veteran-owned. While limited in supply, you may want to reach out. Keep in mind that grants do not need to be repaid, but loans do.
- Veterans Entrepreneurship Program (VEP): Sponsored by the U.S. Department of Affairs Office of Small & Disadvantaged Business Utilization, the VEP program helps eligible veterans bring business ventures to life. They can also help grow profits for an eligible existing business.
Conclusion
Whether you are starting your new business right out of the military, or have already been in business for multiple years, it’s important to shop around and find the loan with the best rate and repayment terms for your budget. There are several different options for financing a business, from borrowing a low-interest SBA loan, to getting fast access to cash through an online lender or line of credit. Even if you have low credit, make sure to apply to multiple lenders before committing to a product.
