VA Loan Programs
Most people don’t realize it, but more small businesses in the United States are started by veterans than people who’ve never served. Not only are veterans starting their own businesses, but they are generating jobs as well. In fact, we can thank veteran-owned businesses for employing close to 6 million people across the country.
With veteran-owned small businesses doing so much for our economy, it’s no wonder that the government wants to incentivize more veterans to open businesses and keep their existing businesses running strong.
If you’re a veteran and are looking for funds to start your business, there are several VA loans for small businesses that you can apply for.
What are VA Loans for Small Businesses?
A VA small business loan is for veterans that want to start a small business or who already own a business and want to expand, upgrade, or otherwise invest in its upkeep. VA loans for small businesses typically have lower fees, reduced interest rates, and more favorable terms than traditional loans.
VA small business loans are not actually made by the Veterans Administration (VA). The loans originate from the Office of Veterans Business Development, which is part of the Small Business Administration (SBA). This office matches veterans with lenders who agree to provide loans according to the favorable terms laid out by the SBA.
These loans are partially guaranteed by the SBA, which means that the SBA will reimburse a portion of the loan to the bank or credit union if the borrower defaults on the loan. In addition, the SBA provides training and counseling to help veterans as they get their new businesses off the ground.
What Types of Loans for Veterans are Available?
There are five small business loans available to veterans. See the list below to learn about each loan’s advantages and approval requirements.
1. SBA Standard 7(a) Loan Program
This is the most common loan for veterans, but it’s actually not for new businesses. In order to qualify, you must have operated your business for a minimum of 24 months, have steady cash flow, and a good credit score. Veterans can use the loan to purchase commercial real estate, consolidate debt, or have working capital on hand. The SBA guarantees loan amounts of up to $5 million.
2. The SBA Express Loan
This type of loan expedites the process for the Standard 7(a) loan. The maximum amount that can be borrowed by veterans is $350,000 and is guaranteed is up to 50% of the loan amount.
3. Military Reservist Economic Injury Disaster Loan (MREIDL)
If you are in the Reserves, then this might be the loan for you. This loan offers working capital to veterans who are expecting to meet financial obligations. This gives businesses the cash needed to operate normally during the time the principal operator is away.
4. The SBA Microloan
The microloan is for veterans who want to start a small business but have few other options for funding. The maximum amount you can borrow is $50,000, but the interest rate for these loans can be as high as 13% and veterans must give an extensive amount documentation to qualify. Most lenders will typically ask for:
- Business plans
- Tax returns
- P&L statements
- Financial projections
- Personal financial statements
- Credit reports
- Articles of incorporation
- Any business licenses/permits
5. SBA 504 Loan Program
This loan isn’t just for veterans, but veterans do have access to the loan just like anyone else. These loans give small-business owners the capital needed to purchase “fixed assets” such as real estate, machinery, and equipment. The maximum amount of the loan is $5 million but can go up to $5.5 million if the money is to be used for energy efficiency goals.
Eligibility Requirements for VA Small Business Loans?
- A veteran who was honorably discharged
- Service-disabled veterans
- Current active duty servicemembers who are eligible for the Transition Assistance Program
- All active-duty reservists
- All members of the Nation Guard
- Current spouses of any of the above military members
- The widow of a spouse of a servicemember provided they died while serving or occurred due to a service-connected disability
If you’re active duty servicemember within 12-months of separation or you’re a retiree within 24-months of retirement, you may be able eligible for the SBA Express Loan Program. Additionally, if you’re in the Reserves and/or National Guard you can apply for the Express Loan.
If you have been dishonorably discharged from service or less than 51% of your business is owned by a veteran, then you are not eligible for VA Small Business Loans.
Alternative Financing for Veterans?
There are also private lenders who are not associated with the SBA who have loan programs for veterans. Here are a few options to consider:
- Street Shares: Businesses owned by veterans (that have existed for over a year) can get a maximum loan amount of $250,000 from this online lender.
- Hivers and Strivers:This company provides financing to military service academy graduates that are also veterans. Veterans can borrow up to a maximum of $1,000,000 and the investors will actively help the company get started.
- Connect2Capital: This company connects the owners of small business to funding sources and offers professional advisement and education.
- Service-Disabled Veteran-Owned Small Business Program: This isn’t a loan necessarily, but you may be eligible for various federal contracts if you’re a disabled veteran with an honorable discharge.
Where Do I Start?
If you’re interested in learning more about VA loans for small businesses or you’d like to apply for one, then visit the Office of Veterans Business Development either online or in person at one of their Veterans Business Outreach Centers across the country.
Dr. Phillip Gold is President/CEO of Empire Resume and has vast experience writing resumes for service-members transitioning from the military into civilian roles. He served as a Captain in the U.S. Air Force responsible for leading nuclear missile security. Phillip is a Certified Professional Resume Writer and holds a BA in Communications from The Ohio State University, an MS in Instructional Technology, an MBA in Finance, and a PhD in Finance.