The number of veterans in business is impressive. According to the latest U.S. Census Bureau’s survey of small business owners, there are 2.52 million veteran majority-owned businesses in the U.S. Over the last two decades, a wave of “vetrepreneurship” has swept through the country. The SBA reports that 25% of Post-9/11 veterans want to start their own businesses.
Against this backdrop, some highly notable veteran-owned startups have emerged including Plated, RedOwl, Unite U.S., and Black Rifle Coffee Company (BRCC) to mention a few. But like other new business owners, veterans have problems accessing much-needed credit facilities to realize their dreams. Most veterans have poor credit ratings, have no security for financing or business experience.
Business loans for veterans come in handy to help these entrepreneurs power their investment dreams. If you have served in the military and you run a business, veteran business loans are a godsend to cushion your business in the current tough business environment. With these credit facilities, you give your business a competitive edge in your target market.
There are several small business loan options suitable for veterans and they all come with unique requirements. This post explores the 2021 top business loans for veterans to help you make the best financing decision.
A VA business loan is business financing offered through the SBA and commercial lenders. The VA loans seek to empower this important category of entrepreneurs who might not access other funding from traditional banks.
Qualifications/Requirements for VA Loans
To qualify for a VA business loan, you must meet certain eligibility criteria. The following categories qualify for VA loans:
- You should be a currently serving member of the military. Current spouses of active military officers, reservists, or national guard members also qualify for business loans for veterans
- Discharged honorably from military service
- Active national guard member or reservist
- Disabled while in service
- Widowed spouses of members of the military who died in service or because of disability while in service
For your application for a VA business loan to succeed, you need proof of service or discharge. The military ID, discharge papers (DD Form 214) come in handy for the loan application.
How to Apply for VA Loans
Every lender has unique requirements for VA loans but some of the common factors considered include the time you have been in business, personal and business credit score, annual business revenue and profit, financial records, tax returns, your business plan, licenses, and insurance among other factors.
With a good credit score and good business record, you enjoy the lowest interest rates and more favorable loan terms. Here are some considerations when you apply for small business loans for veterans:
- How much money do you need? Evaluate your financing needs first and determine the amount that will solve such needs. In any VA loan application, the lender needs clarity on how much you need and the purpose of such a loan. Startup funds are more difficult to qualify for compared to Small business financing for an ongoing business
- Secured vs. unsecured VA business loan: Compare these two loan options and determine which suits your business needs
- Look at different VA loan sources and check eligibility: Every VA loan suits specific business needs. You need to compare the loan programs available and requirements to determine what suits you best. Look beyond the SBA loans and check the list of VA loan programs listed below to consider the best option
- Prepare required documentation: For a seamless VA loan application process, collate all the documents required including bank statements, 3 years of business and personal tax returns, Personal and business credit score information, financial statements, tax records, and others
- Compare loan offers based on your needs and pick the best
- Check all the terms of the loan before submitting your application. Make sure you understand how the business loan works before signing any documents and specifically how the particular loan you are applying for works
Examples of VA Loans
To find the best VA loans, keep researching and discover the best funding resources out there. Some examples of
- SBA Veterans Advantage 7(a) Loan: This is the most popular program by Small Business Association. Veterans enjoy longer repayment terms, lower down payments than other financing options. For a loan under $125,000, the upfront guarantee fee will be $0.
- VA Office of Small & Disadvantaged Business Utilization (OSDBU): OSDBU is a financing program by the Department of Veterans Affairs. Through their Office of Small and Disadvantaged Business Program, veteran-owned businesses can access these loans that target economically disadvantaged individuals
- Nav’s Small Business Grant: The recently launched $10,000 “Legitify Your Small Business” grant is ideal for financing your veteran-owned business.
- Accion: This is a nonprofit organization that targets the growth of small businesses. They focus on those categories of entrepreneurs who can’t access financings such as women, minorities, and veterans. The program also helps you connect with peers, local organizations, and banks
- Military Reservist Economic Injury Disaster Loan Program (MREIDL): This loan specifically targets veteran-owned businesses, which has an essential employee called to military service as a reservist. The SBA program gives you loans of up to $2 million through the MREIDL program
- Service-Disabled, Veteran-Owned Small Business Program: Many veterans are in the contracting business but have no cash to qualify for tenders. This program provides veteran-owned businesses with contract financing. You can shore up your finances and boost its growth
- LendingClub Veteran Loan: One of the biggest private lenders offering credit to veterans is LendingClub. Financing ranges from $5,000 to $300,000
- StreetShares Foundation: The organization targets veteran-owned businesses with term loans, lines of credit, and government contract financing. You can get financing for your payroll or equipment purchases before invoices are paid by clients
- VA VR&E Business Ownership Track: If you suffered an injury in service and you wish to start a business, the VA VR&E Business Ownership Track has a financing option for you. The key requirement is enrollment in the VR&E and you must have proof that your disability handicaps you from gainful employment
- SBA Express Loans: SBA also offers the SBA Express Loan program which is part of the 7(a) loan program but with faster approvals. Veterans who qualify can access loans of up to $350,000.Veterans who qualify have their upfront guarantee fees on SBA Express Loans waived
VA loans FAQs
- Can I use a VA loan to start a business? Yes. The VA loans are available for both startups and existing businesses
- Can I get a VA businessloan with bad credit? Yes, you can access VA loans with less-than-perfect credit profile but this comes with potentially higher fees and the terms are shorter
- How much can you get for a VA business loan? The amount you get depends on the lender with some offering up to $5 million and others with lower limits
- How does a VA business loan work? Every VA loan facility differs from the other. The credit facility has veterans in mind because these businesses have a hard time accessing credit. Repayments come from the business run by the veteran
What is a Term Loan?
Another option for veteran financing is a term loan. Financial institutions issue this type of financing with a fixed amount, fixed repayment schedule. The major attraction for a term loan is the repayment in regular payments over a fixed period.
If you have a veteran-owned business, this is one of the most flexible credit facilities to offset major equipment purchases and other huge expenses. If yours is a new business or you want to expand, a term loan offers a quick way to access working capital.
You can choose a short-term, intermediate, and long-term loan (up to 84 months) depending on your financing needs. Lenders include banks whose terms are stringent and online lenders who offer the loans faster and with fewer requirements. You can also access term loans from online peer-to-peer lending or institutional lending companies.
The costs of the term loan might go up when you consider other factors such as the fixed fees, origination fees, down payment (for real estate or business purchase), other fees and the closing costs for the loan when applicable.
Who Can Apply?
Terms loans are ideal for veterans who want working capital, purchase of equipment, real estate with payment between one and 25 years. If you have a good business plan, a term loan can help you set up the business idea.
What Are the Requirements?
General qualifications include:
- Business should have been in operation for two years or more
- Good credit score ideally above 750
- Collateral may be required
- Business credit history of a small business
- Financial statements and bank records
- Minimum time in business requirement
When you apply for a term loan, you have the option to borrow from a bank or an online lender. Banks have strict requirements including collateral and good credit scores but you also get a longer-term for repayment. Online lenders may have less stringent requirements and have a fast application process.
Term loans give you access to large amounts of cash for multiple businesses uses. This is an option for a VA business loan if you want to repair your credit through reliable repayments.
Line of Credit
What is a Line of Credit?
Running a business is tough, and there are many times when cash flow can constrain your operations. If you’re a veteran running a business, a line of credit helps unlock any cash flow problems.
So, what is a business line of credit? This is a flexible financing arrangement where the lender qualifies you for a preset financing offer. You can access money from the LOC at any time until you reach the limit.
As you continue repaying the loan, you can borrow again if your bank offers an open line of credit. The biggest advantage of the line of credit (LOC) is the flexibility and availability of funds in a never-ending cycle. For the repayments, you can opt to clear the outstanding balance all at once or go for monthly payments.
Who Can Apply?
Line of credit is an apt financing facility for your veteran-owned business if you experience cash flow problems or want to execute on a great business opportunity. Some LOCs are unsecured but you may be able to get better terms with a secured line of credit. This form of credit is available from banks, credit unions or other alternative financing companies.
If your veteran-owned business qualifies, it’s possible to access cash up to the maximum amount offered by the lender for a set period. Fees only applies to the borrowed amounts. Once you repay the borrowed funds, your line of credit becomes available again and you can start the cycle and continue borrowing any time you need the funds.
A line of credit is a great option to sort your cash flow issues. This is the best option when you run a stable business whose revenues can easily repay the borrowed funds. You never have to worry about problems with working capital as long as you maintain your LOC in the best state.
What Are the Requirements for LOC?
The terms of a line of credit can me a little stricter than other types of financing. Your business must have been in operation for at least six months to one year. A financing company may also require a minimum annual revenue to qualify for a business line of credit.
For the line of credit, you may need a better credit score to obtain better terms or larger LOC. When you choose LOCs, consider is there are fees and limits on the amount you can borrow any single time.
Another critical consideration is the draw period, which refers to the period within which you can draw money from the account. Confirm the draw period and determine if it suits your business financing needs.
Documentation required includes personal and business tax returns, bank account records, and business financial statements. Your business credit score is an important consideration and with a higher score, you can access better terms.
Business Credit Card
What Is a Business Credit Card?
Your veteran-owned business has multiple expenses to cater to daily. Such expenses might not require an application for veteran business loans. A business credit card comes in handy in this case to finance ongoing expenses and provide working capital.
With a business credit card, you can easily separate your business and personal expenses to ensure better bookkeeping and tax purposes. Your business credit card gives you easier access to cash for different business purposes.
Other advantages of a business credit card include the ability to your business’s financial history. You also don’t have to worry about cash flow issues because the credit card gives you enough cash for your operational needs.
If you run a busy business, the credit card allows you to delegate spending to the workers with good tracking.
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Who Can Apply?
If your veteran-owned business requires easy access to cash and you don’t want to go through the long-wining loan application process, a business credit card is a perfect solution. This is also an ideal way to manage and itemize business expenses.
The card works best if you need lower cash amounts up to $50,000 to cater for urgent expenses. You don’t need a strong credit score to get a card and this is the best option for working capital, emergency expenses, and ongoing expenses.
If you have been using your personal credit card for business purchases and other operational expenses, you need to apply for a business credit card. This is a simple strategy to promote better financial management and also access much-needed cash injection in your business.
If you have a hard time separating personal and business finances, your business credit card can help you do this. You don’t charge everything on your personal credit card anymore. It’s also an important step in building your business credit for future access to financing.
What Are the Requirements?
Some requirements for a business credit card include financial statements, proof of individual income, bank statements, legal name, contact information, and social security number, proof of business registration, tax details, and annual business revenue, and estimated monthly spend.
Veteran-owned enterprise plays a critical role in the country’s economy. This is a special cadre of businesses who gave everything to guarantee the country’s safety and prosperity. The least the financial industry can do is to support veteran-owned businesses with easy-to-access and cheap loans.
Veterans can access diverse financing options either to fund their startups or to boost their businesses. This guide offers a comprehensive overview of some of the best financing options that you should consider for your veteran-owned business.
The VA loans from diverse programs and organizations offer cheap, flexible, and reliable funding. Term loans are the best Small business loans for veterans already in business. This is a business loan that can sort out major expenses in your business.
For easy access to cash every time you need it, a line of credit is the best solution. Similar to a line of credit is a business credit card but in this case, there’s no draw period to limit the time within which you can use the credit availed.
Whatever kind of veteran-owned business, there’s a financing option suited to your business needs.