Veterans looking to launch their own brands should know about the Small Business Administration. President Dwight D. Eisenhower founded this agency in 1953. For decades, it’s helped countless aspiring entrepreneurs get their businesses off the ground, including special guidance for veterans. In this article, you’ll learn everything you need to know about SBA loans for veterans.
What Types of SBA Loans are Available for Veterans?
While the SBA isn’t the only place providing small business loans for veterans, they still offer lots of great options. The loans listed below assist veterans in different situations.
SBA Veterans Advantage 7(a) Loan
SBA 7(a) loans are enormously popular, even for those who haven’t served. Veterans Advantage loans can provide you with as much as $350,000 in loans. Plus, veterans who own 51 percent or more of their business receive lowered fees for other SBA loans.
To qualify for a Veterans Advantage 7(a) Loan, a veteran must have been honorably discharged, including being service-disabled. Active-duty members with Transition Assistance Program eligibility are also accepted, as are active reservists and National Guard members. Spouses of the people mentioned before are also eligible, as are widows/widowers whose spouses died in action or because of a disability received during their service.
SBA Microloans cap out at $50,000. On average, these loans give borrowers around $13,000. They also typically require the borrower to provide some form of collateral. Additionally, a good deal of documentation is needed. This includes individual credit reports, tax returns for borrowers and their businesses, and financial and business plans.
Interest rates for SBA Microloans are between 8 and 13 percent. Monthly payments are required. As with any loan, it’s essential to understand your responsibility as a borrower and what the penalties for choosing a high-interest loan could be. You may consider an SBA Microloan if you've exhausted all other options.
Military Reservist Economic Injury Disaster Loan
If a military member is on leave and running a business, being called into action could cause chaos. The Military Reservist Economic Injury Disaster Loan provides relief to help companies to stay afloat while their owners serve their country.
These loans top out at $2 Million. However, this may be increased, depending on the number of employees. The primary purpose of this loan is to help with operating costs. There's also a flat interest rate of 4 percent and no fees or penalty for prepayment. Any loan above $50,000 requires collateral.
SBA 504 Loan Program
SBA 504 loans are long-term, fixed-interest loans, with financing provided by three different parties. A Certified Development Corporation, an SBA-certified non-profit , provides 40 percent. A lender provides 50 percent. Finally, the borrower provides 10 percent.
You can get support from one of the more-than 260 CDCs in the United States. Some of the assets that can be purchased with financing including buildings and land, renovations and construction, and machinery.
However, refinancing debt is not allowed unless it’s for business expansion purposes. Business net worth cannot exceed $15 Million, and their net income, after federal taxes, cannot be greater than $5 Million for the last two years. Non-profit businesses are also exempt from these loans.
Qualifications and Eligibility
Across the board, eligibility requirements for SBA loans for veterans are quite similar. Aside from meeting the various standards for each loan, veterans also need to meet any of the following criteria:
- Honorable discharge status
- National Guard membership and/or on active reserve
- Spouse of any of the aforementioned categories
- Widowed spouse of someone who died in action or as a result of a service-related disability
Therefore, dishonorably discharged veterans are ineligible for SBA loans. Businesses also have to meet various criteria. In addition to being recognized as a legitimate organization, the business in question cannot be a lending or gambling organization. Additionally, non-profit organizations are eligible for SBA loan consideration.
You might meet any of those criteria but still worry about not getting accepted due to your financial status or have other questions. We cover the most critical issues below.
SBA Loans for Veterans With Bad Credit
There are small business loans for veterans with bad credit. While lenders won't just give loans to anyone with veteran status with any credit score, there are ones who are more generous. For instance, ROK Financial approves 90 percent of veteran business loans. Check out our options here.
Bad credit can happen even to financially responsible individuals. Work on rebuilding your credit, even if it means putting off starting your business for a few years. Don’t take out loans you’re not sure you can repay or make the required payments for. Business loans for veterans with bad credit help give veterans hope.
What is Used for Collateral on SBA Loans for Veterans?
Many borrowers look for collateral loans. These are typically less restrictive in terms of credit and often come with decreased interest rates, as well as higher loan amounts. As a rule, SBA loans require collateral. Below is some of the collateral accepted for SBA loans for veterans:
- Owner’s personal assets, including home and vehicle
- Business inventory or assets
- Accounts receivable
When taking out a collateral loan, borrowers need to firmly understand the terms of the agreement and what will be at stake for not meeting them. There are organizations outside of SBA that offer business loans for veterans without requiring collateral.
Banks with SBA Loans for Veterans
Your bank can be a great source to help you receive an SBA loan as a veteran. Give them a call or stop by a branch to inquire. This list should also help you find the right bank for SBA loans.
- Live Oak Bank
Live Oak Bank has one of the best reputations for SBA loans. In one quarterly period, they approved more than $1.4 billion in loans for small businesses. This made them by far the most active of SBA lenders. They also have a section on their website offering advice for veterans starting their own businesses.
- Wells Fargo
Another good source of startup business loans for veterans is Wells Fargo. Their SBA Veterans Advantage program waives upfront guarantee fees for borrowing veterans.
PeoplesBank is a Pennsylvania-based bank. They offer plenty of useful information for veterans looking into SBA loans.
Small Business Loans for Veterans with Disabilities
There are SBA loans for a more specific type of veteran: those with disabilities. Through the Service-Disabled Veteran-Owned Small Business Program, the federal government plans to award three percent or more of federal contracting money to service-disabled, veteran-run small businesses annually.
Eligibility requirements for small business loans for veterans with disabilities are easy to understand. Borrowers need to have at least one service-disabled veterans owning more than half of the business and running it in a meaningful capacity. Their disability must also be one received during service.
Other Lending Options for Veterans
Outside of the SBA, there are numerous high-quality small business loans for veterans. These aren't necessarily veteran-exclusive loans, and they still require borrowers to meet different thresholds. Overall, they can be very advantageous for veterans looking for as many options as possible. These are some of the best non-SBA loan options for veterans.
Rok Financials Veteran Support
At Rok Financial, we are dedicated to all of our customers, including veterans. We offer multiple forms of assistance, including asset based loans and startup funding to help veteran entrepreneurs.
Our applications are quick and friendly, helping you find the right offer in 15 seconds. If your credit is shaky, you're in good hands. We have no minimum FICO requirements. Plus, applicants find our fundings extremely generous. You can get your loan with us started on the same day you apply.
StreetShares Foundation is a non-profit focused specifically on helping veterans launch small businesses. They even started on Veterans Day in 2016. In just a few years, they've established themselves as one of the best organizations for business-minded veterans.
Nav’s Small Business Grant
Nav’s Small Business Grant is a very-inclusive program, offering business support to veterans and non-veterans alike. Grants are given quarterly, and winners can receive up to $10,000. There's also a runner-up prize of up to $5,000. Even if you can't solely rely on this grant, winning can still help you get your business off the ground.
VA Office of Small & Disadvantaged Business Utilization
The VA Office of Small & Disadvantaged Business Utilization (OSDBU) doesn’t offer direct loans or grants to veterans. However, they can act as an excellent liaison, helping veterans who may be facing financial difficulties. Veterans register their businesses. If accepted, they'll become part of a directory, listing small businesses eligible for government contracts.
LendingClub Veteran Loan
LendingClub is another private lender helping veterans. Their veterans’ loans last between one and five years. Veterans are also able to borrow between $5,000 and $300,000, as long as they have a credit score of 600 or higher. Eligible businesses must also be at least two years old and earn $50,000 or more each year.
Hope for Veterans
SBA loans for veterans are a great way for lenders and the government to support people who have fought and sacrificed so much for this country. While there are some eligibility requirements to meet, there are few obstacles to overcome. If you’re a veteran who’s always dreamed of starting their own business, SBA loans for veterans are an amazing thing. We hope you can find the right one for you and your business.
About the Author, Madison Taylor
Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates! Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.