VA Small Business Loan service members often develop skills that translate into essential entrepreneurship skills: leadership, grit, determination, and resourcefulness. Many veterans are adept at adapting to new situations, overcoming adversity, and improvising creative solutions to complex problems.
Unsurprisingly, those who sacrificed so much in the service of their country continue contributing to the American way of life by opening and running VA Small Business Loan . According to a recent SBA Office of Advocacy Study, there are over 2.5 million veteran-owned businesses in the US, accounting for just over 9% of all firms.
That translates to over 5 million people employed by a veteran-owned business and an average of $1.14 trillion in total annual revenues. Despite these numbers, veterans, like many business owners, struggle to get approved for VA Small Business Loan .
Fortunately, veterans have various business funding options, sometimes called “VA Small Business Loan .” This guide covers what veteran business owners should know about small business loans to help them get the funding they need.
What is a VA Small Business Loan?
The term “VA Small Business Loan” is often used as a catch-all for various VA Small Business Loan that can help veteran-owned businesses. However, it’s inaccurate as the Department of Veterans Affairs (VA) provides VA Small Business Loan .
The VA does provide numerous resources for veterans who own or plan to own a small business. One of those resources is directing veterans to the US Small Business Administration (SBA) for veteran VA Small Business Loan .
Veteran-owned businesses can use VA Small Business Loan proceeds for various business purposes, such as:
- Working capital to support operations.
- Purchasing needed business equipment.
- Buying, building, or renovating commercial real estate.
- Refinancing business debt.
- Covering temporary cash flow gaps.
- Business expansion.
- Business acquisitions.
- Seasonal business needs.
- Startup costs.
Does the Small Business Administration provide VA Loans?
SBA loans are available to veteran-owned small businesses, but the government agency does not directly approve or fund the loans. Instead, small business owners must apply to an SBA-approved financial institution, which could be a bank, credit union, or alternative business financing facilitator, like UCS.
The SBA partially guarantees the loans up to 85%. It also sets rules for lenders to follow and caps interest rates and fees.
SBA guarantees mean the federal government will reimburse lenders for losses if the business defaults. In most cases, the lender and SBA will attempt to recoup losses in a loan default by pursuing business and personal assets.
Small business owners must sign a personal guarantee to get an SBA loan. The personal guarantee promises to be personally liable if the business defaults.
The SBA provides the difference if there are not enough personal and business assets to cover the loss. With backing from the federal government, lenders can offer higher borrowing amounts, lower interest rates, and longer repayment terms. SBA loans are often considered the gold standard of small business financing.
Discontinued Veteran SBA Loan Programs
The SBA previously had two dedicated veteran VA Small Business Loan : The SBA Patriot Express Loan and the SBA Veterans Advantage program.
SBA Patriot Express Loans launched in 2007 and were phased out in 2018. The veteran VA Small Business Loan program helped veterans get an SBA Express loan with streamlined paperwork and an enhanced guaranty.
The SBA Veterans Advantage program was phased out in 2020. The program offered fee reductions for veteran-owned businesses.
What are the available SBA Loans for Veterans?
Here are the various VA Small Business Loan programs that could benefit veterans.
SBA 7(a) Loans
- Maximum Loan Amount: $5 million.
- SBA Guarantee: Up to 85%.
- Terms: Up to 25 years for real estate; 10 years for other purposes.
Small businesses can use SBA 7(a) loan funds for various business purposes, including purchasing equipment, funding working capital, purchasing commercial real estate, and business expansion. The SBA guarantees 85% for loans up to $150,000 and 75% for loans over $150,000.
SBA interest rates are based on the Prime interest rate plus the lender’s rate (sometimes called the lender’s spread). As of July 2023, the Prime is 8.5%, but it’s subject to change depending on various economic factors.
SBA Express Loans
- Maximum Loan Amount: $500,000.
- SBA Guarantee: 50%
- Terms: Up to 7 years if used as a line of credit.
The SBA Express Loan was designed for businesses needing urgent funding. The average turnaround time on the express loan is within 36 hours. The expedited time means the SBA only guarantees 50% of the loan.
The SBA grants more authority to lending institutions to review and approve SBA Express Loans. The increased autonomy for the lender means a faster turnaround time for borrowers.
SBA Express loans of $25,000 or less do not require collateral. The lender’s collateral requirements apply to loans between $25,000 and $350,000. For any loan over $350,000, the SBA requires the lender to collateralize the loan to the “maximum extent possible.”
SBA Community Advantage Loan
- Maximum Loan Amount: $5 million.
- SBA Guarantee: Up to 85%.
- Terms: Up to 25 years for real estate; 10 years for other purposes.
SBA Community Advantages loans are a pilot program under the umbrella of SBA 7(a). The SBA launched the pilot program to help fund businesses in underserved markets.
Specifically, the loan program provides funding to startups, newer businesses, and companies in riskier industries and helps fund underrepresented business owners, such as women, minorities, and veterans.
The SBA launched the pilot program in 2011. It was initially scheduled to end in 2020 but has since been extended to September 30, 2024. The SBA could extend it further, make it a permanent part of the 7(a) loan program, or let it expire on its scheduled date.
The most significant difference is that businesses must apply to a specialized Community Advantage lender, often shortened to “CA lender.” CA Lenders must apply to the SBA to receive the special status to service Community Advantage loans.
Are there Other Business Loans for Veterans?
Traditional Business Loans
Some traditional lenders, like banks and credit unions, offer small business loans for veterans. However, traditional lenders usually have more stringent qualifications and take a long time to fund. It can be more challenging to qualify for a business bank loan than an SBA loan.
Veterans might have more luck getting funding from financial institutions that cater to active or former military members. For example, The Navy Federal Credit Union specializes in banking and financing services for members of the Department of Defense, National Guard, and all branches of the US Military. It offers Commercial Real Estate Loans, Business Lines of Credit, and Business Vehicle Loans.
Alternative Business Loans
A veteran-owned business might have more opportunities with alternative business lenders, which aren’t as stringent as traditional lenders. Online lenders or lending marketplaces are non-bank institutions that can often provide funding for younger businesses and credit-challenged business owners.
They’re sometimes called fintech lenders because they use financial technology (fintech) tools to underwrite and fund business loans quickly. Most provide convenient online applications with minimal documentation requirements.
Many alternative lenders take a holistic approach to reviewing your business and approving loans. Instead of just looking at traditional factors like credit scores, time in business, revenue, and assets, alternative lenders examine your cash flow and potential for growth. That’s one reason they’re often more lenient about credit and how long you’re business has been in operation. “va mortgage leads“
The following small business loans are available through our lender network. While they are not exclusive to veterans, many of these funding solutions are easier to obtain for any business owner who can’t qualify for traditional lending.