Congratulations! You are probably reading this because you are in one of the two main categories for people that need information about small business loans for veterans:
- You’re an aspiring entrepreneur. You’re maybe newly separated from the military or are semi-retired. Either way, you have a great idea for a small business and you are interested in startup business loans for veterans.
- You’re an existing business owner. You’re looking for funding to help you get through Covid-19 pandemic-related setbacks or need capital to improve and grow your company. Either way, you need to find the best small business loans for veterans.
Does that sound right? Good. Let’s proceed.
No matter which group you belong to, you are participating in one of the most important parts of the American economy. Did you know there are an estimated 2.5 million veteran majority-owned businesses in the U.S., and that 99.9% of them are small businesses? These VOSB (veteran-owned small business) and SDVOSB (service-disabled veteran-owned small business) owners also provide jobs for more than 5 million workers!
Those figures might have recently changed after the pandemic, but the message should be clear: Our nation depends on veterans like you to start and operate small businesses.
Veterans are excellent candidates for small business ownership. There’s just something special about the values and skills you acquired during your active-duty days that make you a natural for owning a small business. But, as the old saying goes, “It takes money to make money,” and this is almost certainly why you are here to learn about small business loans for veterans.
Does that still sound right? Great! Let’s get started.
- What kinds of loans are available
- Who can get those loans
- How much money you can get
- How to get a loan
- How to pay it back
Getting Started with Small Business Loans for Veterans
We’re going to keep this as simple as possible. Our goal is to help you quickly understand what you need to know about small business loans for veterans so you can determine which ones might be the best for you. We’ll look at:
What Kinds of Small Business Loans for Veterans are Available?
First, let’s be clear there are many ways for a veteran-owned small business to get funding. These include grants, angel investors, venture capital and a bunch of other programs that are designed to help veterans start and grow their businesses. For now, we are just going to focus on small business loans for veterans.
SBA Loans for Veterans
Most of the small business loans for veterans you’ll usually hear about are connected to the U.S. Small Business Administration (SBA). The SBA’s Office of Veterans Development (OVBD) offers support for veterans as they enter the world of business ownership—including loans.
The SBA does not actually lend the money, but instead, partially guarantees the person borrowing it will pay it back to the bank or credit union that actually provides the money.
There are several kinds of SBA loans, some of which are available to anybody (but are potentially excellent options for veteran-owned small businesses), as well as SBA that are purely meant for veterans. These include:
As its name suggests, this loan is best if you need smaller amounts of money, especially for specific needs (unless that need is to pay debt or buy real estate, which you cannot do with this loan).
This loan is one of the best small business loans for veterans with established small businesses that need funding to expand or create more jobs.
This was a popular option from the time it was introduced in 2007 and until it expired in 2013. If an SBA Microloan doesn’t fit your needs in terms of how much money you can get or how quickly you can get it, you probably want to consider its successor, the SBA Veterans Express loan program (see below).
This is the SBA’s most common type of loan for small businesses, and for that reason, it can be used for various purposes, but with some restrictions. For example, you can’t use it to pay taxes.
As you can probably tell, this is the same as the SBA Standard 7(a) loan program, but, with aspects that make it much more advantageous for veterans (like lower fees).
This sometimes gets confused with the long-gone SBA Patriot Express loan program (see above). Also, no “SBA Express Loans for Veterans” is currently available. Instead, think of an SBA Express Loan as something between an SBA Microloan and an SBA Veterans Advantage 7(a) loan. You can get more money than a Microloan, and it’s a lot faster to get than an SBA Veterans Express 7(a) loan.
This sounds more complicated than it is. Basically, it gives you money to cover operating costs if one of your essential employees is called to active duty in the Reserves or National Guard.
Non-SBA Loans for Veterans
As mentioned earlier, the SBA does not lend money, but instead, it works with small business owners to get loans from banks and credit unions. That means you can also work directly with the bank or credit union of your choice.
Of course, not all banks and credit unions are the same, which means they may or may have special loan programs for veterans. However, when they do have special programs, they tend to be geared more for personal loans to buy houses, cars, etc. For these reasons, we will not dive into non-SBA small business loans for veterans, and instead encourage you to first explore the many excellent loan programs the SBA provides.
One more thing: If you do Internet searches for these loans, you’re going to discover many organizations that offer services to help you get those loans. Proceed with caution. Always do your homework and be skeptical of anybody that wants to help you get something you probably can get on your own.
Who Can Get Small Business Loans for Veterans?
Obviously, the short answer is that small business loans for veterans are for, well, veterans. And for the most part, nearly all veterans, VOSBs and SDVOSBs are eligible to apply for SBA loans. Additionally, spouses are occasionally eligible. However, there are always some exceptions!
Let’s look at the basics of who can—and who can’t—get a small business loan for veterans.
Eligible for Small Business Loans for Veterans
- Active reservists
- Service-disabled veterans
- Honorably-discharged veterans
- Active National Guard members
- Active-duty military service members that are eligible for the Transition Assistance Program (TAP)
Current spouses of the above are eligible, as are widowed spouses of service members that died while serving or from a service-related disability.
Along with being a veteran, the second most important factor for eligibility is the type of business for which you need a loan, which begins with being a for-profit business. However, not all for-profit businesses are eligible; see the next section about which types are not eligible. For that matter, nonprofit organizations are also not eligible.
One more note: In some cases, it’s not enough to be a veteran that’s a partner in a for-profit business. For example, to get an SBA Veterans Advantage 7(a) loan, the business must be at least 51% veteran-owned.
Not Eligible for Small Business Loans for Veterans
The list for which veterans are not eligible is much shorter, and it means dishonorably-discharged veterans.
Certain types of for-profit businesses are not eligible either. These include businesses involved in:
- Life insurance
- MLM (multi-level marketing)
- “Passive income” (including rent payments from apartments or shopping centers)
How Much Money Can You Get from Small Business Loans for Veterans?
This is probably the question you came here for, right? It’s an important question, because not all small business loans for veterans provide the same funding (either with the minimum or maximum amounts).
Before you try to find out how much money you can get from a loan, first ask yourself: How much do you actually need? For that matter, are you going to be able to pay back what you owe? This includes understanding the loan’s terms and conditions, which you can learn more about below in the section about paying back loans.
It’s important to have genuine and honest answers to these questions so you don’t create any unwanted problems or get in over your head.
- SBA Microloan Program: Up to $50,000
- SBA 504 Loan Program: Up to $5 Million
- SBA Standard 7(a) Loan Program: Up to $5 million
- SBA Veterans Advantage 7(a) Loan Program: Up to $5 million
- SBA Express Loans Program: Up to $350,000
- Military Reservist Economic Injury Disaster Loan Program (MREIDL): Up to $2 Million
These amounts you can actually get are impacted by many factors, including creditworthiness, available collateral, etc. So again, be sure you know how much you actually need, because the less you borrow, the better.
How Do You Actually Get Small Business Loans for Veterans?
If you are still reading, we salute you, because you’re now getting into the least exciting parts of learning about small business loans for veterans: how to get one, and how to pay it back (next section). But don’t worry, we’ll try to keep this simple!
Each small business loan program for veterans will have different processes and requirements. However, all loan applications will usually require you to submit important documents and information, which includes:
We must first mention your credit history and rating—because, although it isn’t the only part of your loan application that lenders will look at when deciding if they will approve your loan, it will be a part of how much they’ll lend you and what type of payback terms they’ll require.
Small business loans for Veterans with bad credit are not impossible to get. However, you will want to at least have a FICO credit score 600–650, so, the more you can improve your score before you apply, the better outcomes you’ll have.
You’ll need to show at least three years of tax returns. Of course, loans for Veterans to start a business for the first time will only need to provide personal tax returns. But, if you are an existing VOSB or SDVOSB, you’ll need to provide at least three years of business tax returns, too.
Even if you don’t or will never need a loan, it’s crucial to have a business plan.
Put in terms any Veteran would understand, it’s like going into war without a battle plan. We all know how many battles have been won and lost on the quality of the battle plan, and your chances of success in business with or without a business plan are the same.
However, if you do need to get a loan, the lender will have more confidence in your ability to pay back the loan if you can demonstrate a path to victory with your business.
How Does Paying Back a Small Business Loan for Veterans Work?
Finally, the last things you need to understand about small business loans for veterans: paying it back!
Other than how much you can get from a loan, the loan’s terms and costs are the most important parts of the loan, because they determine how much you’ll be paying back each month (and for how long)!
These tell you how often—and for how long—you have to pay back the loan. It also tells you what happens if you are late on payments, miss too many payments (called a “default”), etc. Usually, payments are due each month, and it can take months to years to pay back the loan.
These are how the lenders make money from providing loans (and can provide more loans). Usually, loan costs mostly are the interest rates that are added to the loan, but there are various other fees that can get tacked on.
Do you have or work at a VOSB or SDVOSB? Have you ever gotten a small business loan for veterans? Tell us about your experiences in the comments section so other veterans can learn from your successes or mistakes!