Veterans and their loved ones sacrifice so much for the safety and well-being of all Americans. Most people are grateful for their commitment and understand the struggle many military members and families experience throughout their careers and even into retirement. Multiple local, state, and federal organizations seek to support veterans through various programs and incentives. These efforts extend into the business community to help veterans succeed as small business owners.
If you're interested in starting your own business or looking to secure additional funding for your current venture, you're in the right place. This guide will help you understand what types of loans and grants are available to veteran entrepreneurs and how to apply.
Top Resources for Veteran Loan Programs
The U.S. Small Business Administration (SBA) is the top resource for veteran small business loans. It's the only federal agency at the cabinet level that supports small business owners through counseling, funding, and contracting. The Office of Veterans Business Development (OVBD) within the SBA exclusively promotes veteran small business owners' interests and helps them to access all SBA programs applicable to their situation. The OVBD supports U.S. military:
- Veterans
- Reservists
- Service-disabled veterans
- Active-duty service members
- Transitioning service members
- Dependents or survivors
The Veterans Business Outreach Center (VBOC) program is a very helpful initiative within the OVBD. They've established centers throughout the U.S. to provide veterans with training, mentorship, business plan workshops, and concept assessments. They aim to help qualified veterans learn more about starting and growing small businesses, which includes financial planning such as budget projections and funding requirements.
VA Small Business Loan Eligibility
In order to qualify for reduced fees through SBA veteran loan programs, a small business be at least 51% owned and controlled by a person who belongs to one of the following groups:
- Honorably discharged veterans
- Service-disabled veterans
- An active-duty military service member who's eligible for the Transition Assistance Program (TAP)
- Reservists and/or active National Guard members
- Current spouse of any veteran, active duty service, Reservist, or National Guard member
- Widowed spouse of a service member who died while in service
- Widowed spouse of a service member who died due to a service-connected disability
Lenders also set eligibility requirements borrowers must meet to qualify for a loan. These specifics are often related to how the business makes money, plus its location and ownership. Some lenders also require business owners to:
- Meet business-size standards
- Be able to repay the loan amount
- Have a sound business purpose
- Be a legally registered for-profit business
- Be located within the U.S. or U.S. territories
- Have invested their own money or time
- Have exhausted all other financing options
Each type of small business loan has unique eligibility requirements, so be sure to thoroughly read all specifications before applying.
SBA Small Business Loans
The SBA works directly with lenders, community development organizations, and micro-lending financial institutions to negotiate on behalf of small business owners. They lower the risk to lenders by guaranteeing portions of the loans, which also enables easier access to capital for borrowers. Benefits of SBA-guaranteed loans may include competitive terms, continuing counseling and education, and lower down payments. While most of these SBA loans are available to non-veterans, the SBA offers a veterans advantage version to eligible applicants.
Standard 7(a) Veterans Advantage Loan
The standard SBA 7(a) loan has a maximum lending amount of $5 million. The SBA guarantees 85% of loans up to $150,000 and 75% of loans greater than $150,000 up to $5 million. The agency decides which military veterans are eligible for this loan, including assessing the applicant's credit score. They permit lenders and borrowers to negotiate the interest rate, though it can't exceed the SBA set maximum.
This loan is a good option for startup veteran business owners who need to secure a large amount of funding within five to 10 business days. With a revolving line of credit up to 10 years, it's also a possibility for established businesses who want to increase their working capital by borrowing money on a long-term basis. Applicants must use SBA Form 1919 and SBA Form 1920, though other SBA forms may be required.
Small 7(a) Veterans Advantage Loan
The small SBA 7(a) loan works much like the larger standard loan with the exception of the lending amount. The maximum loan amount is set at $350,000 but the guarantee rates are the same. Each applicant must fill out SBA Form 1919 and SBA Form 1920 and possible additional SBA forms. A small loan like this can still help with startup costs.
Express Veterans Advantage Loans
The SBA Express program features an even faster turnaround time than the Standard 7(a) loan. The SBA reviews and responds to express loan requests within 36 hours. The maximum loan amount is only $350,000, and the agency guarantees just 50% of the loan amount.
The lender decides whether an applicant is eligible and the credit decision is also made by the financial institution. They can also negotiate the interest rate with the borrower but can't exceed the SBA limitations. To apply, the borrower must complete SBA Form 1919 and the lender will also have their own forms and procedures with which to comply.
Export Express Loans
The Express Export loan has a turnaround time of 24 hours by the SBA. It's specifically for businesses that are either beginning or growing their exporting company. With a maximum loan amount of $500,000, the SBA guarantees 90% for loans up to $350,000 and 75% for loans more than $350,000. The loan is to be used only for:
- Day-to-day export operations
- Supplier orders
- Refinancing of export business debt
Applications for this loan will be provided by the lender and applicants will also need to complete SBA Form 1919.
Export Working Capital Loans
This loan type is for businesses that are able to generate export sales who find themselves in need of additional working capital. It has an approval of 5 to 10 business days, a maximum borrowing amount of $5 million, and a guaranteed rate of 90% by the SBA. Credit and eligibility decisions are made by the SBA. Applicants use SBA Form 1920 to apply.
International Trade Loans
The international trade loans facilitated by the SBA are for expanding business with growing export sales. They're also for companies that have been adversely affected by imports. These entrepreneurships find themselves in need of funds to modernize their business operations to stay competitive with foreign companies. International trade loans are used for:
- Building
- Construction
- Real estate equipment
- Working capital for export transactions
The maximum one can borrow for an international trade loan is $5 million, with 90% of it backed by the SBA. Rates are negotiated between borrower and lender though eligibility and credit decisions are made by the SBA.
Military Reservist Economic Injury Disaster Loan Program (MREIDL)
The Military Reservist low-interest rate loan is available as part of the SBA disaster assistance loan program. If an essential employee is a reservist that's called to active military duty, the small business owner is eligible to apply to the MREIDL program.
The actual economic injury to the business will be calculated by the SBA. The maximum loan amount they can approve is $2 million. The cap can be waived if the business is a major source of employment. The money can only be used for ordinary and necessary business operating expenses to recover from the loss of the employee. Business owners can apply for the loan online at SBA.gov.
How Do I Apply for VA Loans?
VA loans make business ownership possible for many veterans and military spouses; with the SBA veterans advantage program, you can qualify for funding you couldn't otherwise get on your own. The SBA backs a variety of small business loans for American entrepreneurs through their Lender Match program. SBA Form 1919 and 1920 are commonly needed when applying for a small business loan. The SBA and lenders may also require the filing of additional forms, especially documents proving your veteran classification.
How Do I Apply for Small Business Grants?
Unlike a loan, a grant is money that doesn't have to be repaid. Earning a federal government grant is a competitive and selective process. Grants for exporting and research and development are commonly available through the SBA. Some nonprofit organizations, like Warrior Rising, and state governments also offer grants for veteran-owned businesses or startups. Search the web and check with the business department of your secretary of state's office for more information on grants available in your area.
Does the U.S. Department of Veterans Affairs Offer Veteran Business Loans or Grants?
Though a great resource for many veteran-related issues, the U.S. Department of Veterans Affairs doesn't have a business loan or grant program. The Office of Small and Disadvantaged Business Utilization within the department lends support to small business owners through the Veteran Entrepreneur Portal. The portal provides direct access to federal resources designed to help veteran entrepreneurs.
Where Can I Find Veteran Business Mentoring and Training Programs?
Business programs for veterans were established to help our military heroes to find success after service. Boots to Business is the SBA's entrepreneurial education and training program under the Department of Defense's Transition Assistance Program (TAP). It's open to transitioning service members, including National Guard, Reservists, and their spouses. The U.S. Department of Veterans Affairs and nonprofit organizations around the country also offer training programs.
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Notice to the Reader
The content within this article is meant to be used as general guidelines and may not apply to your specific situation. Always consult with a financing professional or SBA-approved lender to ensure that you're applying for the right loan for your business needs.