The best tips for veterans seeking a business loan will be specific to the type of loan you seek. The VA provides many wonderful resources to our military veterans. However, providing business loans is not one of them.
In general, the SBA doesn’t make direct loans. SBA loans are designed to help small businesses that cannot easily obtain affordable access to capital.
However, the exception to this would be funds available within the Disaster Loan program. Keep in mind that the usual role of the SBA is to guarantee loans made by lenders.
Before Going Any Further Reading Best Tips for Veterans Seeking A Business Loan, Are You Eligible For A Loan Based On Military Service
Veteran owned businesses need loans, too
Eligibility for a VA loan is based on your meeting one or more of these requirements
- Served a minimum of 90 days on active duty during wartime
- Served at least 181 days on active duty during peacetime
- Completed six years or more of service in the National Guard or Reserves
- “You are the surviving spouse of a veteran or service member who died in the line of duty or from a service-connected disability”
These are general guidelines. There may be exceptions. It is important for you to get your Certificate of Eligibility early on in the loan process. You can do this either from the VA directly or via the help of a VA lender.
Where Veterans Should Start Seeking A Business Loan
A Good Starting Place To Look For Loans Is The OVBD (Office of Veterans Business Development)
One of the divisions of the Small Business Administration (SBA) is the OVBD At its core is the mission to maximize the applicability, usability, and availability of all administration small business programs for U.S. Veterans.
Some loans are created specifically just for Veterans. Others are for Veterans in general and others are more specific in nature. Some of the major loan categories are as follows.
- Veterans
- Service-disabled veterans
- Reserve component members
- Dependents or survivors
The Small Business Administration (SBA) has created a variety of small business loans designed specifically for Veterans. Because of their specificity, you need to verify with the Small Business Development Center what documents are required when applying for each specific type of loan.
Some of the Small Business Loans and Grants Available For Veterans
The Patriot Express Loan has now ended. It has been replaced by its normal Express Loan program. Veterans may qualify for loans of up to $350,000 . There are zero upfront fees. These factors are why it is the most popular loan delivery method among Vets. Over the past decade, almost 60 percent of all 7(a) loans have been through the program.
SBA Veterans Advantage 7(a) Loan
This loan has helped thousands of Vets to start up a business or to increase the working capital needed to grow their business. It has also helped their businesses to recover from natural disasters of all kinds. Some of the specific business needs covered by such loans are as follows.
- purchase equipment,
- buy real estate for your business to occupy,
- buy the inventory to sell
- hire business management,
- expand your business,
- set up to sell goods and services to the government (contracting),
- set up your business for the possibility of your deployment
- recover from declared disasters such as hurricanes, tornadoes, and earthquakes.
Military Reservist Economic Injury Disaster Loan Program (MREIDL)
The MREIDL loans were created solely for Reservists, both current and veteran. If your small business was negatively impacted when you were called into active military duty, this may be the loan for you. It has a very attractive interest rate of 4%. The veteran can extend the repayment period up to 30 years. However, you will have to provide collateral if your loan is for >$50,000.
Hivers and Strivers Angel Fund
This is an Angel investment group. HSAF is focused on the provision of early- funding for startups. The businesses must be run and managed by graduates from military academies. The most prominent academies represented are from the Air Force, Annapolis, the Coast Guard, and, of course, West Point.
VA Office of Small & Disadvantaged Business Utilization (OSDBU
“The Office of Small and Disadvantaged Business Utilization (OSDBU) is an advocacy and advisory office responsible for promoting the use of small, small disadvantaged, 8(a), women-owned, veteran-owned, service-disabled veteran-owned, and HUBZone small businesses within the U.S. Department of Commerce’s (DOC) acquisition process.”
VA Small Business Grants
Details regarding grants and loans are found via this portal. https://www.va.gov/osdbu/entrepreneur/index.asp
Service-Disabled, Veteran-Owned Small Business Program
Streetshares
This is an unique online financing marketplace. Veterans created and run Streetshares for other veterans with small businesses. Their goal is to make the best connection between investors and applicants. The business must be at least one year old a the time of application. They may borrow up to $250,000 and the interest rates are very competitive.
Veterans Business Fund Is A 501(c)(3) nonprofit.
This is a fairly new veteran resource for those wishing to open or grow a small business. This includes those vets seeking to own a franchise-style business. The VBF uses the money from donors who will offer funds with attractive terms to assist our veterans. It requires the participation of an independent financial institution. The owner of the business must have personal equity involved in the transaction.
What If You Have Bad Credit?
Veterans seeking a loan without good credit
One example of a small-business loan for veterans with bad credit is QuarterSpot. They only require a credit score of 550 to qualify. As of June, 2020, this is among the lowest of credit scores acceptable.
Banks Have Tough Requirements
Banks are usually the hardest lenders to satisfy. Commonly, they have the toughest requirements. Most of the veterans who are denied VA small business loans will be one of two reasons. It will either be due to having a less than stellar financial history or for a low credit score. Unfortunately, these two factors may not be under their power to control.
Best Tips For Veterans Seeking A Business Loan Include These Important Factors
Loan Type Common Loan Terms Typical Loan Amounts Time to Funding
Bank Term Loan 3-10 years $50,000+ depending on the bank. Average loan size is $500,000 14-60 days
SBA Loan 5-25 years Starting at $10,000. Average loan size is $350,000 30-90 days
Short-Term Online Loan 3-24 months $5,000 to $250,000 24-48 hours
Long-Term Online Loan 1-5 years $5,000 to $500,000 As quickly as 48 hours
Merchant Cash Advance 3-18 months $5,000 to $500,000 As quickly as 48 hours
Online Invoice Financing Can factor individual invoices or enter 1+ yearly contract $100,000 to $2,000,000 As quickly as 5 days
Equipment Financing 2-10 years $100,000 to $2,000,000+ As quickly as 5 days
SOURCE https://www.ondeck.com/resources/understanding-common-small-business-loan-terms
How does an SBA 7a loan work?
Although the range of funding amounts is quite extensive, reaching from $125,000 to $20 million, the down payment is only 10%. Small Business Owner loans are limited to the amount for which they can apply. These loans are limited to $5 million and can be used for working capital or to purchase a business.
These loans require only a 10 percent down payment by the small business owner and funding amounts range from $125,000 to $20 million. On the other hand, Veterans Seeking A Business Loan
SBA 7a loans can be used to buy a business or obtain working capital. The maximum loan for an SBA 7a loan amount is $5 million.
There are some requirements you need to know.
- Your business must have fewer than 500 employees
- There must have been <$7.5 million revenue on average for each of the past three years.
- Your net income must be <$5 million (after taxes and not counting carry-over losses),
- Your tangible net worth must be <$15 million.
You Can Use SBA Loans For Many Things
The SBA reduces the degree of risk a lender accepts when making a loan to the veteran. They do not make the loan itself but agree to repay the loan if the one taking the loan fails to repay it. The borrower may use the loan money for many things. Veterans use the loan money for various things.
- To buy real estate or land
- For working capital,
- Spent on equipment costs.
- To refinance existing debt.
Can You Get A SBA Loan If you Have No Money?
If you do not have the required funds for the down payment required or fail to meet all the requirements, there is still hope, SBA also offers microloans. These loans are limited to < $50,000. Sometimes, the applicant must make a down-payment.
In Conclusion…
The best tips for veterans seeking a business loan will be specific to the type of loan you seek. Remember that the VA does not offer loans to our veterans. Nor does the SBA offer loans to veterans. They do, however, provide backing for vets obtaining a loan from other sources.
Source:
https://www.valoans.com/articles/military-service-requirements/
https://www.sba.gov/offices/district/pa/pittsburgh/resources/sba-business-loan-information-veterans
https://www.sba.gov/business-guide/grow-your-business/veteran-owned-businesses
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