Everything You Need to Know About Veteran-Friendly Business Loans

The Different Types of Business Loans Available to Veterans

Banks and credit unions, traditional financial organizations, may provide small business loans and financial solutions geared toward veterans. Qualified veteran-owned firms may also get financing from a variety of different sources bad credit ok @ Bridge.

Loans Online

Online business loans are a popular way for enterprises, particularly those owned by veterans, to get funding. The loans often have less stringent qualifying standards than typical business lender funding and may provide more flexible loan amounts and payback periods. Numerous internet lenders also offer a range of financial solutions, in addition to traditional term loans and lines of credit, such as equipment financing and invoice factoring.

However, keep in mind that these more accessible loans often have higher annual percentage rates (APRs) than conventional equivalents. This increases their cost—particularly for small company owners who may not qualify for the most competitive rates.

Veterans Advantage Program of the SBA

Veterans Advantage is a program administered by the Small Business Administration that waives guaranty costs on certain kinds of SBA 7(a) loans made to veteran-owned small companies. As initially promised by the Obama administration, the SBA Express program fee reduction effort was set to expire in 2014 and was replaced with the current savings structure in 2015. The fee reduction is given under the program to small enterprises that are at least 51% owned and managed by one of the following:

  • Veterans who have received an honorable discharge
  • Veterans who have suffered a service-connected disability
  • Military personnel on active duty which is qualified for the military’s Transition Assistance Program (TAP)
  • Reservists and active members of the National Guard

Current spouse of a veteran, active duty service member, reservist, or member of the National Guard, or bereaved spouse of a service member who died in the line of duty or due to a service-connected disability.

Express SBA Loan

SBA Express loans, a subset of 7(a) loans, provide qualifying company owners with up to $500,000. Funds are available as a line of credit or a lump-sum term loan. The SBA waives guarantee costs for enterprises owned and managed (51% or more) by veterans, some active-duty military, and other applicants who qualify based on military service and their spouses.

The SBA guarantees up to 50% of loan funds, and although interest rates are lender-specific, they cannot exceed the ceiling established by the SBA (5 percent or 6 percent, depending on the loan amount). However, the turnaround time is noteworthy—prospective borrowers may anticipate a response to their application within 36 hours.

Economic Injuries to Military Reservists Disaster Loan

The Military Reservist Economic Injury Disaster Loan (MREIDL) program is available to firms with a critical employee who is a military reservist summoned to active service. Loans up to $2 million are offered at a 4% interest rate. Payment periods of up to 30 years are available without prepayment penalties or fees.

While an MREIDL is a flexible borrowing option for qualifying firms, loans more than $50,000 need collateral—something of value to secure the loan. The funds may only be utilized for regular and necessary running expenses—not to compensate for lost revenue or profits. Additionally, MREIDL loan monies cannot be used to grow the company and can’t be used to replace or repay conventional commercial debt.

at Smithfield Charitable Trust (Smithfield Foods Inc.)

Grants for Veteran-Owned Businesses

Several prizes and grants are available to entrepreneurs and military spouses who want to establish or expand their businesses. Unlike loans, donations are not repaid. However, some monetary infusions may entail an exchange of ownership stake. Consider the following veteran-specific grants:

  • Foundation for StreetShares. The StreetShares Foundation is a 501(c)(3) nonprofit organization that assists military entrepreneurs, particularly veterans. Veteran Small Business Award grants provide qualifying veterans with the funding necessary to establish and expand their enterprises and educational materials and activities.
  • Veterans Leadership Program of the Good Funds for the World. With the help of Smithfield Foods Inc. (Smithfield Foods, Inc.), the Global Good Fund gives cash and leadership resources to veteran business entrepreneurs. Veterans who qualify get leadership materials, access to a worldwide network of like-minded peers, expert leadership coaches and business mentors, and targeted financing.
  • Hivers & Strivers Angel Investment Fund Though not officially a grant program, Hivers & Strivers is an angel investment company that gives capital to military veteran-led businesses between $250,000 and $1 million. Along with financial investments, Hivers & Strivers assists companies in achieving success via counseling and experience.

Additionally, Many business tools are available for veterans and spouses who want to start their businesses. For instance, Bunker Labs’ Launch Lab Online provides online courses and programs designed to educate veterans on the foundations of entrepreneurship through an online learning platform.

Financing Alternatives for Veteran-Owned Businesses

New firms offer a more significant risk to lenders, making it more difficult for startups to get necessary financing—particularly at reasonable rates. However, new veteran-owned firms may qualify for the Small Business Administration’s Microloan Program, which provides funding for working capital and other expenditures to qualifying enterprises in underprivileged regions.

Frequently, this involves veterans (as well as women and minorities). Loans of up to $50,000 are available with payback durations of six years. APRs vary per lender but commonly range from 8% to 13%.

If you cannot get an SBA Microloan, try obtaining a company credit card. Credit card interest rates usually are higher (between 10% and 35%), but you’ll only pay interest on what you borrow—and you’ll pay no good if you pay off your card each month. Based on your credit score, you may qualify for a 0% introductory APR offer.

Alternatively, you may be eligible for a veteran personal loan based on your credit score, income, or collateral, such as your home. However, not all lenders of personal loans permit the use of money for commercial reasons.

Resources for Veteran-Owned Businesses from the Small Business Administration

Along with pursuing a small business loan, veteran-owned firms may take advantage of the SBA’s training programs and development opportunities. Consider the following programs if you wish to develop your entrepreneurial abilities and grow as a leader:

  • Boots to the grindstone. The Boots to Business (B2B) program includes business training programs, such as the Introduction to Entrepreneurship course and the B2B Revenue Readiness online course, as well as other tools provided by the SBA and its network of business development partners.
  • Women Entrepreneurship Training Program for Veterans (WVETP). The WVETP, which is dedicated exclusively to female veterans, female military members, and female spouses of service members and veterans, provides many training programs SBA-funded resources include Network for Native American Entrepreneurship (ONABEN), Lift Fund – San Antonio, and IVMF – Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE)
  • Entrepreneurship Training for Service-Disabled Veterans (SDVETP). The SDVETP, like the WVETP, focuses on entrepreneurship training for service-disabled veterans. IVMF – Veterans Entrepreneurship Program (VEP), Dog Tag, and Entrepreneurship Bootcamp for Disabled Veterans (EBV) Inc. are accessible to existing or prospective company owners.

Veteran Entrepreneurship Training Program for Federal Procurement. While most SBA veteran programs concentrate on general entrepreneurship training, the Veteran Federal Procurement Entrepreneurship Training Program (VFPETP) is explicitly targeted at veteran-owned enterprises involved in federal procurement.