Yes, You Can Get VA Small Business Loan—Here’s How
Veteran-owned businesses tend to be small, and of course they require working capital. But where can veterans get a VA small business loan?
Programs for Veterans to Get a VA Small Business Loan and More
Veterans can get a VA business loan through entities like:
- The US government (SBA)
- Private websites
- Online lenders
Plus, there are programs not specifically for small business loans for veterans which they may qualify for as well.
Get a VA Small Business Loan via an SBA Veterans Advantage Guaranteed Loan
The SBA provides fee relief on small-dollar loans. This helps to reduce barriers for veteran-owned small business, so they can access capital and create jobs. The SBA uses a credit scoring model to help reduce underwriting costs and processing time for a VA SBA loan.
For loans of $150,000 or less, the upfront guaranty fee is zero. The upfront guaranty fee is also zero for SBA Express Loans. For loans not through SBA Express, the upfront guaranty fee for loans to veteran-owned small businesses for $150,001—$500,000 (inclusive) is 50% less than the upfront guaranty fee for non-veteran owned small businesses. For loans for over 12 months, the fee is 1.5% of the guaranteed part. And for loans for 12 months or less, the fee is 0.125% of the guaranteed part.
For loans of $500,001—$5,000,000 (inclusive), upfront guaranty fees for 7(a) loans made to veteran-owned small businesses depend on the loan amount and the loan’s. For loans with a term of over 12 months, guaranty fees are:
- Loans of $500,001—$700,000: 3% of the guaranteed part
- Loans of $700,001—$5,000,000: 3.5% of the guaranteed part up to $1 M
- Plus 3.75% of the guaranteed part over $1,000,000
For loans for 12 months or less, the guaranty fee is 0.25% of the guaranteed part.
Qualifying for SBA Veterans Advantage
A small business must be at least 51% owned and controlled by a person(s) in these groups:
- Honorably discharged veterans
- Active Duty Military service members eligible for the military’s Transition Assistance Program (TAP)
- Active Reservists and/or active National Guard Members; or
- Current spouse of any veteran, Active Duty service member, Reservist, National Guard member, or the widowed spouse of a service member who died while in service or due to a service-connected disability
FYI, if you’re looking for a Patriot Express loan, the SBA doesn’t offer those anymore.
Get a VA Small Business Loan from the Military Reservist Economic Injury Disaster Loan Program (MREIDL)
The Office of Veterans Business Development (OVBD) administers this program. Eligible small businesses can get loans up to $2 million. Pay a fixed 4% interest rate with a maximum repayment term of 30 years. The purpose of these loans is to cover operating costs a business cannot meet due to the loss of an essential employee called to active duty in the Reserves or National Guard. It comes directly from government benefits.
Or get a VA Small Business Loan from the Service-Disabled Veteran-Owned Small Business Concern Program
Government financing can also come in the form of preferences for contracting work. The federal government’s goal is to award at least 3% of all federal contracting dollars to service-disabled veteran-owned small businesses each year. To qualify, businesses must be at least 51% owned and controlled by one or more service-disabled veterans. And one or more service-disabled veterans must manage day-to-day operations and make long-term decisions. Eligible veterans must have a service-connected disability. These are some of the best business loans for disabled veterans.
SBA Microloans Can Be a Good Alternative to a VA Small Business Loan (If You Do Not Need Too Much)
Available to both veterans and non-veterans, the SBA provides microloans to small businesses that cannot typically qualify for other lending options. SBA microloans currently go up to $50,000.
Microloans often have higher interest rates of 8%—13%. Often, a microloan requires collateral and heavy paperwork, including a business plan, various tax returns and financial projections for the business. Average SBA microloan size is about $13,000.
Supplement a VA Small Business Loan with a Grant from The StreetShares Foundation
This is a 501(c)(3) nonprofit organization. Its programs provide access to capital opportunities, educational content, mentors, coaching, and networking events. Its programs serve military community entrepreneurs nationwide. Their VA small business grant program, the Veteran Small Business Award, provides financial support to help veterans start or grow small businesses.
The StreetShares Veteran Small Business Award
Apply via video pitch. Tell the Foundation about the business and its social impact on the military community. Convey, in the written application or video pitch, your strategy for resilience in response to rapid market change prompted by the pandemic crisis.
They also evaluate your nonprofit or business entity on its positive social, community, educational, military-transition, veterans’ employment, health & wellness, or veterans’ mental health/spiritual impact, on the American military and veteran community. This is in addition to or in conjunction with business or nonprofit functions. Awards run $4,000—$15,000.
The StreetShares Foundation Military Entrepreneur Challenge
Qualified applicants submit their pitch on video. 8—15 finalists are chosen, then voted on, at the Foundation website. Awards are as follows:
- $15,000 for first place
- $4,000 for second place
- $2,500 for third place
Qualifying for The StreetShares Foundation Military Entrepreneur Challenge
Applicant must be a veteran, reserve or transitioning active duty member of the US Armed Forces. Or they can be a spouse of a military member or the child or immediately family member of a Military Member who died on active duty. Applicants must own at least 51% of the business entity described in the application. Grant funding is for veterans and military spouses who are low-income or otherwise lack financial means and have a goal to start or grow an early-stage business or nonprofit.
So FYI, the USAA small business loan program with Street Shares has ended.
Get Work Vessels for Vets and Use a VA Small Business Loan for Other Expenses
This charity offers grants to veteran-owned small businesses. Their purpose is to help returning vets transition from military service to the civilian workforce. The program provides new or used equipment (adapted to accommodate injuries if needed) to returning veterans starting a non-farming business. So this equipment has been everything from laptop computers to commercial fishing boats.
They also have a program for vets starting farms or ranches, and a program for nonprofits serving veterans. Still, they give preference to post-9/11 returning combat veterans. To qualify, you must provide a business plan.
Average vessel value runs about $5,000—$6,000. But the charity defines ‘vessel’ as anything a vet would need to do business, like tools or farm fencing. Charity Navigator gives them a failing score, but that may be more due to a lack of information versus anything nefarious.
Hivers and Strivers
Hivers and Strivers is an Angel Investment Group. They focus on early-stage investments to support start-up companies founded and run by graduates of US Military Academies. Also, they typically invest $250,000—$1 M in a single funding round and provide active involvement.
Hivers and Strivers involvement includes serving as board members and advisors and providing counsel and offering expertise. Venture Capital for Veterans will soon take over funding. Because they are affiliated with Hivers and Strivers.
Veteran Ventures Capital
This is an investment group. Any veteran-owned businesses can apply for funding. They also offer a full range of consulting services to ensure business success. As a Service-Disabled Veteran Owned Small Business, they also have ties to government contracting. So, this is to aid veteran entrepreneurs in expanding their opportunities to work with federal agencies.
Through their government solutions branch, they offer help with budgeting and professional staffing, also with product procurement, and getting government contracts.
Veterans Business Fund
VBF is a not-for profit organization, established to aid veterans by providing supplemental capital required to satisfy the equity requirements for a small business loan. The VBF provides capital in the form of a non-interest bearing loan with very favorable repayment terms. Currently, the VBF is not taking applications, while they go through a fundraising round.
More Funding Choices
So there’s more out there than veteran business loans and grants. Veterans and non-veterans alike may qualify for:
- Merchant cash advances (if their business has incoming revenues)
- Crowdfunding is an option for all, but conventional businesses tend to not do so well
- Veteran and non-veteran business owners can also sell equity in their business to angel investors for funding
Yet more options include collateral-based funding, business credit, and our credit line hybrid. Our credit line hybrid is a form of unsecured funding—good for both veterans and non-veterans. Get business funding without having to supply bank statements or credit stubs.
Getting a VA Small Business Loan: Takeaways
VA loans and other financing are out there. Also, you can get grants or even venture capital investment in your business. There are also nonprofits which give money to veteran-owned businesses. But never forget about the SBA and their programs, and programs not specific to veterans, like our credit line hybrid.