Best Small Business Loans For Veterans
Veteran-owned businesses are an important contributor to the national economy and account for a whopping 9 percent of US companies, according to the US Census Bureau. Census data also shows that the majority of veterans (61.7%) rely on personal savings to start their business, while fewer than 10 percent of vet-owned firms get business loans.
Small business loans have historically been very difficult to obtain (unless you get an exorbitantly priced “payday loan”). Before handing you money, banks and other lending institutions require you to have been in business for at least two years and have stellar credit, which can make getting startup funds pretty difficult – especially when you’re just reentering civilian life after a military career.
SBA (Small Business Administration) loans are a viable option for many veteran-owned businesses, but they can take a looonng time to come through – a couple months, at least.
Fortunately, with the emergence of online loans and peer-to-peer lending, today’s veterans have more options when it comes to securing financing to start or expand a small business. There are even some lenders which specialize in business loans for veterans.
In this post, I’ll talk about the best places veterans can get small business loans. I’ll also go over SBA programs for veterans.
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SBA Loans for Veterans
As mentioned, the time to funding with SBA loans can be prohibitively lengthy. These loans also require you to fill out a lot of paperwork and meet strict eligibility requirements. Nevertheless, if you can get an SBA loan, it might be a good option for you. The Small Business Association even offers a few programs designed especially for veterans.
- SBA Express: The SBA no longer offers the Patriot Express Loan for veterans, but veteran applicants to the regular SBA Express program do not have to pay the upfront guaranty fee. SBA Express loans also have much faster turnaround times than standard SBA loans – it should take only 3 days to find out if your application is approved. These are standard 7(a) loans for up to $350,000, and terms vary depending on the lender. Learn more about SBA Express loans here.
- Veterans Advantage Guaranteed Loans: The SBA also provides Veterans Advantage Guaranteed Loans. As with Express loans, the SBA works with outside lending institutions to provide these loans. However, the SBA guarantees from 50 to 85 percent of the loan, waiving or reducing fees on that portion of the loan. Learn more about these SBA loans for veterans here.
- Military Reservists Economic Injury Loans: This is a specific type of SBA loan that provides funds for small businesses that are unable to meet operating expenses because an essential employee has been called to active duty (due to their role as a military reservist). MREIDL loans have an interest rate of 4 percent and repayment terms of up to 30 years. Learn more here.
Outside of the SBA, StreetShares (see our review) is the only lending institution designed specifically for veterans (though civilians can also use it). StreetShares is a peer-to-peer (P2P) lending platform whereby lenders compete to offer you a loan, resulting in a competitive interest rate – typically ranging from 6 to 14 percent, and on the lower end of that range for veteran borrowers.
StreetShares provides especially low rates to veterans for a couple key reasons: there is a built-in interest rate discount to veterans, and StreetShares employs a “social lending” model. According to StreetShares CEO Mark Rockefeller, StreetShares investors, many of them veterans themselves, are eager to lend to veterans, typically bidding 2-4% lower interest rates compared to non-veteran business owners.
StreetShares loan terms are as follows:
- Term length: 3 months to 3 years
- Repayment terms: Weekly
- Max borrowing amount: $100,000
- Interest rates: 6 –14%
- Lendee time in business: 6 months if your biz has already made $100K, or 1 year
- Lendee credit score: 620
This lender offers term loans and lines of credit, both with amazing interest rates. Time to funding is usually less than a week!
To sum up, StreetShares loans have more relaxed requirements than do bank loans and are much quicker and easier to get, with great rates for veterans to boot. This is an excellent funding option for vet-owned businesses that need a quick infusion of capital to grow their business. If you have bad credit or need startup funds for a brand-new business, you should probably look elsewhere for your loan.
SmartBiz (see our review) offers SBA general 7(a) small business loans, but with a fast turnaround time, easy application process, and low interest rates. SmartBiz is essentially an SBA/online-loan hybrid.
SmartBiz’s loan terms are clear and don’t vary much from business to business:
- Term length: 10 years
- Repayment terms: Monthly
- Max borrowing amount: $350,000
- Interest rates: Prime rate + 3.75% for loans between $30K and $49K; Prime rate + 2.75% for loans between $50K and $350K
- Lendee time in business: 2 years
- Lendee credit score: 650
As with StreetShares, SmartBiz loans are for established small businesses with good credit. They are a good choice for veterans who want to get an SBA loan, but are frustrated by the lengthy signup process and want a faster turnaround. SmartBiz can determine your loan eligibility in just a few minutes and upon approval, provide funding in about a week.
Note that SmartBiz loans are still SBA loans, which means they require all the documentation an SBA loan requires. But as soon as you turn those documents in, your funds come through almost immediately. Depending on how quickly you provide all the needed paperwork, total time to funding can be a from a week to a month.
Finally, one more advantage of a SmartBiz loan over a traditional SBA loan is that SmartBiz assigns you a representative to guide you through the entire application process.
Lending Club (see our review) is a good choice for veterans looking to start new businesses because they offer “personal” loans of up to $40K. These loans can be used for business purposes; there are no requirements as to revenue or how long you’ve been in business. Veterans have an advantage with this P2P lender for the same reason they do with StreetShares – investors tend to bid lower interest rates to veteran-owned businesses.
In general, Lending Club loans follow these guidelines:
- Term length: 3 or 5 years for personal loans; 1 to 5 years for business loans
- Repayment terms: Monthly
- Max borrowing amount: $40K for personal loans; $300,000 for business loans
- Interest rates: 5.32% – 30.99% for personal loans; 5.99% – 30.99% for business loans
- Lendee time in business: No requirements for personal loans; 2 years for business loans
- Lendee credit score: 640
In addition to personal loans that can be used for business, Lending Club also offers business term loans and lines of credit up to $300,000. For these loans, you must have been in business for at least two years and have annual revenues of at least $75,000.
LC’s rates are somewhat higher than you might get with a bank, but they are easier and faster to get (about 1-2 weeks’ time-to-funding), and a viable option if you need $40K or less to start a new business.
Many veterans leave the military with low credit scores because their career has prevented them from participating in credit-building activities, such as paying off a mortgage. OnDeck (see our review) is one of the few reputable small business loan providers that will give you money if you have bad credit.
- Term length: 3 years
- Repayment terms: Daily or weekly
- Max borrowing amount: $500K
- Interest rates: 5.99% and higher
- Lendee time in business: 1 year
- Lendee credit score: 500
OnDeck offers term loans of up to $500K and lines of credit up to $100K; interest fees start at 5.99% (though yours could be a lot higher – your APR could potentially be as high as 98%). A one-time origination fee ranging from 2.5-4% of your loan amount will also be applied.
OnDeck’s loans typically aren’t the cheapest, but they are quite fast – you can potentially get the funds to expand your vet-owned small business within just 24 hours.
Additional Funding Resources For Veteran-Owned Businesses
- Get certified as a veteran-owned business to increase your appeal to lenders and win federal contracts; service-disabled veteran owned businesses may qualify for a separate federal contracting program.
- Look into nonprofit lenders like Veterans Business Fund (which is not accepting applications just yet).
- Look into angel investors to get startup funds. Example: Hivers and Strivers.
- See if you qualify for any grant programs for veteran-owned businesses – for example, grants for veteran farmers or grants for veteran franchise owners.
- Contact your local Veterans Business Outreach Center (VBOC), VetToCEO, or SCORE for business training and mentoring.
Veterans face unique challenges when securing funds to start or expand their businesses, especially if they lack a lengthy credit history or haven’t been in business for very long. Compared to a traditional bank or SBA loan, the online loans you can get from places like SmartBiz and Lending Club are typically faster and easier for less established businesses to procure. Some online lenders, such as StreetShares, are even geared specifically toward veteran-owned businesses.
If you need more help in your search for the best small business loans for veterans, contact us or ask a question in the comments! We’re happy to help in any way we can.