In the United States, there are approximately 2.52 million veteran-owned businesses, with a vast majority being small businesses and sole proprietorships. Even more importantly, veteran-led businesses employ tens of thousands of people across the country.
Like many small businesses, veteran-owned companies often walk a fine line between success and failure. Occasionally, that line gets thinner because of issues related to financing.
Whether your cash flow is held up because of late payments from clients or you identify an important equipment upgrade that is just out of your financial reach, access to affordable funding can get you out of various jams. For that reason, knowing where to find the best business loans is crucial for veteran business owners.
Not every loan option will be a perfect fit for your business. That being said, there are some standouts in the space. Here are the best business loan options for veterans.
The U.S. Small Business Administration (SBA) is a federal government agency known as an excellent resource for and champion of small businesses. One of the agency's primary functions is to guarantee loans to small business owners, encouraging banks to lend to small and new enterprises at rates typically reserved for more established companies.
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The SBA has a variety of small business loan programs, some of which are specifically geared toward (or made easier for) our nation's veterans. Three SBA programs, in particular, are excellent loan options for veteran business owners:
1. Veteran's Advantage for SBA 7(a) and SBA Express
The SBA 7(a) loan is the SBA's most popular loan program, guaranteeing millions of dollars in funding for the working capital needs of all business owners.
Veteran business owners, however, are eligible for the Veteran's Advantage program. This program waives the guarantee fee for any loans of $125,000 or less, or discounts it by 50% for any loans greater than $125,000.
The Veteran's Advantage also applies to SBA Express loans: The guarantee fee is completely waived, and veterans can borrow up to $350,000. SBA Express loans have slightly higher rates than 7(a) loans, but the qualifications are less stringent and the underwriting and turnaround time is faster – measured in weeks, rather than months.
2. SBA 8(a) Service-Disabled Veteran-Owned Small Business Concerns program
For veterans who both are business owners and were harmed in the line of duty, the SBA helps you secure government contracts through the SDVOSBC program. According to the SBA, its goal "is to award at least 3% of all federal contracting dollars to service-disabled veteran-owned small businesses each year."
This program helps veteran business owners avoid competing with thousands of other business owners in their industry for lucrative contracts. It also provides a mentor-protege program to help veterans navigate the process of competing for contracts.
3. Military Economic Injury Loans
For veteran business owners who were called into active duty and their small business suffered financially as a result, there's the Military Reservist Economic Injury Disaster Loan program. The SBA sponsors the MREIDL program, offering low-interest loans (around 4%) with terms up to 30 years. [Interested in small business loans? Check out our reviews and best picks.]
Veterans Business Fund
The Veterans Business Fund is a 501(c)(3) nonprofit that is available as a funding resource to veterans who want to start or grow their businesses or purchase a franchise.
The VBF can't fund your business initiative outright: You'll need to bring 50% of the equity capital required, as well as an outside lender, to the table. Additionally, the VBF will only approve applications for veterans who are unsuccessful in securing bank financing because of the lack of equity.
Assuming you qualify and once the VBF accepts your application, however, the terms are quite generous: VBF loans are non-interest-bearing "to the extent permitted by law," with repayment terms of five years or longer.
Hivers and Strivers
This angel investment group – which includes many investors who served in the military – supports startups run by graduates of U.S. military academies such as West Point. Its goal is to support young veteran entrepreneurs, whom it calls "often the most overlooked and underfunded group of entrepreneurs in the nation."
Unlike the other options on this list, Hivers and Strivers does not provide debt financing, but investing. The investors from H&S may become board members, advisors and consultants to your business.
Another organization owned and run by veterans and for veterans, StreetShares is a lender geared toward supporting veteran business owners. It offers loans up to $100,000 (and lines of credit in specific circumstances that depend on your location and industry) through a peer-to-peer lending network.
As short-term lenders go, StreetShares is an excellent option for veterans for a few reasons: It can offer funding within just a few hours in some cases; it has reasonable APRs that will never exceed 39%; and it provides a multitude of information and resources to help business owners succeed. That's the goal here, after all.
Business credit cards
Although there are no business credit cards specific to veteran business owners, we would be remiss if we didn't go over this solid option for business funding. Business credit cards can function as a source of short-term, revolving credit. If you're a veteran business owner with an excellent personal credit history, you may even qualify for a 0% APR introductory offer from your card issuer. This is essentially an interest-free loan for the life of your offer – typically between nine and 15 months. No other short-term loan option can beat that.
Explore your business credit card possibilities – taking note of which issuers and cards offer the best perks and rewards as well.
Tips on how to qualify for VA loans
Here are some best practices to qualify for SBA loans and other grants as a veteran-owned business:
1. Build your personal credit score.
A high personal credit score will tell lenders just how financially responsible you are, which can help you secure more funding from them. If your credit score is low, it could hinder your chances of getting a loan.
Credit scores range from 300 to 850 – the higher score, the better – and provide insight into how you repay debts like credit cards, car loans and mortgages. When you continuously pay your bills on time, you raise your credit score, making you more attractive to lenders. Build up your personal credit before applying for loans to increase your funding options.
2. Understand lenders' minimum qualifications.
To appeal to lenders, you need to meet their minimum qualifications and requirements. While some lenders are flexible, meeting or exceeding all the minimum requirements will make you a stronger applicant. Such qualifications might include your credit score, years in business and annual revenue.
Certain lenders are stricter than others. For instance, the SBA has size standards, since it only serves small businesses. It also requires strong personal credit and business revenue, as well as a clean record of repaying government loans.
Other lenders, such as online ones, tend to be more lenient. While they still have some qualifications for borrowers, they tend to be less stringent and more forgiving with things like weak credit scores or a recent bankruptcy.
3. Prepare your financial and legal documents.
Traditional lenders usually require the submission of financial and legal documents during their application process. Such documents might include the following:
- Tax returns
- Balance sheet and income statement
- Bank statements
- Commercial leases
- Business licenses
- Articles of incorporation
- Resume of relevant business experience
- Financial projections
Online lenders have a more streamlined application process that doesn't require as many documents. If you're in a rush to gain funding, you might want to consider this option instead of the traditional route.
4. Write a strong business plan.
Your business plan is the road map for your company. Before agreeing to an investment, most lenders ask to review a business's plan so they can understand the risks involved. In your business plan, include financial projections that assure lenders you will be able to afford both your regular business expenses and your loan repayments, as well as information like your company description and SWOT analysis.
5. Identify potential collateral.
To qualify for a business loan, some lenders require you to identify potential collateral. Collateral is typically an asset that a lender can possess and sell to get their money back when you can't afford your repayments, like equipment, real estate or inventory.
SBA loans require both collateral and a personal guarantee (a promise to accept responsibility for any debts) from businesses, while online lenders often just ask for the latter. However, the more collateral you can provide, the more lending options you will have.
Business owners from all backgrounds understand the importance of maintaining access to funding in times of plenty as well as in times of distress. In fact, one of the best times to apply for and use a business loan is when business is booming, rather than faltering.
Military veterans are some of the country's best organizers, planners, motivators and leaders. If you're a veteran, explore these business loan options as part of your due diligence when starting or building a business. You won't be sorry you did.
Sean Peek contributed to the writing and research in this article.