Guide to small business loans for veterans

A veteran is in a field for a very long period and has vast experience in it. According to the Small Business Administration, more than 2 million small businesses are currently owned by veterans.

Veterans are holding their businesses in almost all the industries, including:

  • Finance
  • Transportation
  • Construction
  • Mining, oil, gas
  • Manufacturing
  • Wholesale
  • Utilities
  • Real estate and many more

Like any other business owner or a start-up, veterans also need to figure out their company’s operations and financial requirements. Primarily, they operate and manage their financial needs from their own pockets. According to the SBA, about half of them start their business with their savings and family’s support, but half of them apply for specialised business loans for veterans. Not everyone has their capital to create their enterprises. So, in some of the cases, they can get their VA loans approved from the SBA.

What kinds of loans are available for veterans?

As per banks tightening their lending standards, many veterans face problems getting financial support and loans. Now, to come out of the situation, many federal governments and some pro veterans groups have merged to ensure that they get the funds and capital they need for their small businesses. Now, the loans earmarked explicitly for the veterans are known as VA loans or business loans for veterans.

Types of small business loans for veterans

SBA Standard 7 (a) Loan Program

SBA’s most common loan program for veterans guarantees up to $5 million, primarily for working capital, debt consolidation, and commercial real estate. The program is suitable for businesses that have been for a minimum of two years, generating good cash flow, and having an excellent credit score.

The long-term loan is available at low-interest rates and low monthly payments. Its proceeds cover almost all business purposes such as adding working capital, purchasing equipment, buying property, buying inventory, hiring business management, recovering disasters, etc.

SBA Microloan

Small businesses with no access to any financing loan can avail of the SBA Microloan program. Veterans can secure the maximum loan amount of $50,000 on an interest rate of between 8% to 13%. Microloan documentation requires

  • a written business plan
  • resumes of business owners
  • personal credit report
  • balance sheets
  • profit and loss statements
  • incorporation details
  • licenses
  • budget

Microloans cover everything except debt consolidations and real-estate purchases.

Military Reservist Economic Injury Disaster Loan

MREIDL is to claim working capital in the absence of an employee. It demands no upfront fees.

SBA 504 Loan Program

SBA 504 Loan Program allows businesses to purchase fixed assets and perform their upgradation for the long term. The loan has fixed interest rate financing. Nonprofit corporations like CDC use 504 clones for the economic development of society.

Alternative sources of financing

Some private loans can be from Street Shares, Smartbiz, Connect2Capital, and Hivers and Strivers. These companies are recognized for their fast disbursement procedures and counseling.

Eligibility for veteran loans

Generally, every lender would have their slightly different set of requirements to check your eligibility to grant you the loan. So, before applying, you should make sure to check every aspect of your lender and match their expectation. Generally, for using a loan, a business must be at least 51% controlled and owned by the following:

  • A veteran
  • An active-duty member who is participating in the military transition.
  • A spouse of any of them.
  • A widower of a service member who died while on duty.
  • Or a service-disabled veteran.

Reservists and national guards can also qualify for the loan.

Lending or gambling businesses and veterans with dishonorable discharge are not eligible for VA small business loans.

How to apply for a veteran loan?

Like any other business form, veterans applying for the loans need to gather a set of documents. Apart from the specific location of documents like- financial statements, and business plans, veterans along with their families have to provide some particular forms to prove their histories:

  • A Form DD 214 for the veterans.
  • Form DD 214 or documents that confirm they gave injuries related to their service for disabled veterans.
  • Form DD 2 for the transforming active-duty members.
  • Veteran’s form DD 214 for the current spouse of a veteran.
  • Documents from the department of defense for the widowed veteran who died while on duty.

For any reason, if form DD214 is not available at the time of application, NA form 13038 can be used.

How to use funds from the loans?

Covering startup cost

Not everyone has their capital and savings to start their desired business or start-up, so the veteran loan the person has acquired can kickstart his startup.

Covering expenses

Once you are done setting up your business, you can use your VA funds to cover up your expenses like utilities, costs, taxes, etc.

Hiring employees or subordinates

As you cannot continue to manage everything individually, you will be seeking employees to help you cope. With VA loans’ funds, you can hire subordinates and pay them according to your need.

Buying tools and property

At some point, you will be sick of paying rents every month, so with VA loans, you can buy property and equipment as per your requirement.

Opening a branch or an additional location

To expand your current business, you can always use your VA loan’s funding to open another branch and location.

Building a website

These days, e-commerce businesses are taking place in the market; every other enterprise needs to build their online website to gain online customers and reach a wider audience at the same time. It will also make your customers know more about you and your business much more conveniently. So, to build that website and reach a much wider audience, you can use your VA loan’s funding.

Grants available for the veteran-owned business

There are many grants and funding available for veteran entrepreneurs and business owners. The StreetShares Foundations offered three awards of $5000, $3000, and $2000 to the veteran business owners.