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What are small business loans for veterans?

Small Business
A smiling female military veteran speaks with a loan officer.
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Key takeaways

  • Veteran-owned small businesses make up 5.2 percent of employer firms in the U.S.
  • The U.S. Small Business Administration offers several types of loans which veterans can apply for
  • Many resources and organizations exist to help veterans open businesses, get government contracts and receive valuable training

According to the 2022 Annual Business Survey, there are 5.9 million employer firms in the U.S., of which 5.2 percent or 304,823 are veteran-owned businesses.  Many small business owners, including retired and active-duty service members, turn to small business loans to start a business or grow an existing one. 

The U.S. Small Business Administration, banks, credit unions and online lenders all offer business loans to veterans, but they each carry different requirements. If you want to decide which is the best small business loan for you, take a look at each option.

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The U.S Small Business Administration (SBA) used to offer small business loans at a reduced cost to veterans through the Veterans Advantage program, but that program has been discontinued.

Small business loans for veterans

The Veterans Advantage program is no longer an option, but veterans looking for small business loans can consider options through the SBA and other lenders, including banks and credit unions.

SBA 7(a) loans

While the Veterans Advantage program that reduced or eliminated fees on SBA 7(a) loans for veterans has been discontinued, veterans are still eligible to apply for SBA 7(a) loans. Loans are good for up to $5 million in funding. To qualify, businesses must be for-profit and must not be delinquent on any debts to the U.S. government. Also, the business owner must have exhausted other funding sources, including their own pockets.

SBA business loans are appealing as there are interest rate caps, which often make them less expensive than alternatives. And if you’re approved for an SBA 7(a) loan, you can use the funds for the purchase of equipment, real estate, supplies and more. This is also a chance to build business credit, which is important for a business just opening its doors. 

SBA Express loans

If you’re a veteran or spouse of a veteran, you can qualify for fee discounts on one type of SBA 7(a) loan: the SBA Express loan. Veterans currently pay no upfront fees (essentially, origination fees) on these loans.

With an SBA Express loan, the approval process takes a maximum of 36 hours. It will take longer than that to actually get your money, but knowing whether you are approved or not can be useful.

SBA Express loans are capped at $500,000, with terms of up to ten years. Keep in mind that SBA Express loans usually carry higher interest rates than 7(a) loans since the government guarantees less of the loan amount.

To qualify for this fee relief, your business must be at least 51 percent owned by someone who falls into one of these groups: 

  • A veteran who didn’t receive a dishonorable or bad conduct discharge
  • A service-disabled veteran
  • An active duty military service member in the Transition Assistance Program
  • A reservist or National Guard member
  • A current spouse of one of the above, or one whose spouse died while in service or of a service-connected disability

Military Reservist Economic Injury Disaster Loan (MREIDL)

The SBA’s Military Reservist Economic Injury Disaster Loan Program (MREIDL) provides low-interest business loans when an “essential employee” is called up for active duty in the Reserve or National Guard. The loan provides up to $2 million to help business owners cover operating expenses that they would have been able to pay if the employee had not been called up.

Bank and credit union loans

Many banks and credit unions offer small business loans to veterans and other types of business owners. Though banks usually have more stringent eligibility requirements, you may find that the APR range is more competitive than what online lenders offer. Plus, if you already have a relationship with the lender, you may be offered an APR discount. 

Certain banks, including Huntington Bank, even offer veterans discounted fees and interest.

You can also apply for small business loans through a credit union that caters to veterans, like Navy Federal Credit Union. Since credit unions are member-owned, not-for-profit institutions, they tend to have less strict borrowing requirements than traditional banks.

Online loans

Several online lenders also offer small business loans to veteran business owners. Loans from alternative lenders typically come with less stringent eligibility requirements than traditional lenders like banks and credit unions. However, a potential trade-off to keep in mind is that they usually have higher average APRs than traditional options — especially if you have bad credit.

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Consider using a business loan calculator when determining which loan is best for your business. It can give you estimated monthly payment amounts based on interest rates and loan amounts.

Other resources for veteran business owners

 The SBA and other organizations offer various resources geared toward veterans to help them excel as entrepreneurs, including classes on military bases, mentorships, online programs for women veterans and training in how to bid on government contracts.   

Grants for veterans

Business loans are risky. Your business and personal credit score could plummet if you default on the loan, so you have to be careful with this type of funding. 

Grants are a great alternative to business loans because they don’t have to be repaid, and they don’t impact your credit score. Organizations like Second Service Foundation and Warriors Rising offer small business grants for veterans in varying amounts. Veterans can also find small business grants through Grants.gov. 

But be prepared: Grants are often competitive, and funding timelines may be long. Have a backup plan in case you can’t land funding through a grant.

The bottom line

VA loans, in the traditional sense, ended in 2019. However, veterans still have plenty of small business loan options to choose from. For some, SBA Express or MREIDL may be the best option. Other veteran business owners may prefer getting their small business loans through their local credit unions, online or peer-to-peer lenders or state programs.

Frequently asked questions about small business loans for veterans

  • Although you’re not likely to receive the best interest rates, it’s still possible to receive a small business loan with bad credit. Before choosing the best bad-credit loan for your small business, be sure to compare loan terms, interest rates and fees.
  • Veterans Advantage small business loans are no longer available. However, small business owners have several options for funding, including an SBA 7(a) loan, an SBA Express loan and a Military Reservist Economic Injury Disaster Loan (MREIDL).
  • The Department of Veterans Affairs does not offer business loans. Instead, the VA’s website directs veterans to check out the SBA’s offerings.
  • Through 2018, the Small Business Administration (SBA) had reduced fees for veteran business loans through the Veterans Advantage program. SBA loans for veterans worked the same way as regular SBA loans — private lenders made the loans, and a portion of the loans were guaranteed by the federal government. Then the money could be used to start a business, pay operating expenses, buy equipment or real estate or pay down higher-interest debt.The reduced fees for VA business loans expired in 2019. While veterans are still eligible to apply for SBA 7(a) loans, they pay the same fees as all other applicants.

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