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, most 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 (U.S. Small Business Administration) loans are a viable option for many veteran-owned businesses, but they can take a long time to come through—a couple of 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. Some of these options include term loans, SBA loans, short-term loans (STL), and lines of credit (LOC). There are even some lenders that specialize in business loans for veterans.

In this post, I’ll talk about the best places veterans can get small business loans, whether you have good credit, bad credit, fair credit, or something in between. I’ll also go over some VA SBA loans.

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 qualify for an SBA loan, you will find out that these loans have the best rates and terms compared to any other type of business loan. There are even a few SBA loans 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 three 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.
• 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. Borrowers might be eligible for loans of up to $350,000.
• Military Reservists Economic Injury Disaster 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. Loans of up to $2 million are eligible.

If you think you might qualify for one of these SBA loans for vets, learn how to apply for an SBA loan.

StreetShares

Outside of the SBA, StreetShares 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 competitive interest rates for veteran borrowers. This lender offers term loans, lines of credit, and contract/invoice financing, with a typical time-to-funding of less than a week.

StreetShares provides especially low rates to veterans for a couple of 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.

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. These loans are good for a semi-established SMB (at least a year in business) with at least fair credit (score in the 600s). 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

SmartBiz offers SBA loans, but with fast turnaround time, an easy application process, and low interest rates. SmartBiz is essentially an SBA/online-loan hybrid. Loan offerings include SBA Working Capital and Debt Refinancing Loans, Bank Term Loans (non-SBA loans), and SBA7(a) Commercial Real Estate Loans.

SmartBiz loans are most appropriate for established (2 years in business), small and large businesses with at least average credit (scores in the high 600s). They are a smart 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.

Note that SmartBiz SBA loans still require all the documentation any SBA loan requires.  Depending on how quickly you provide all the needed paperwork, total time to funding can be anywhere from a week to a month.

OnDeck

Many veterans leave the military with low credit scores because their careers have prevented them from participating in credit-building activities, such as paying off a mortgage. OnDeck is one of the few reputable small business loan providers that might lend you money if you have a credit score as low as 600. However, a lot of good-credit borrowers also get funded through OnDeck.

OnDeck offers both short-term loans and lines of credit, both of which are remarkably easy to apply for. 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. Startups should look elsewhere for financing, as OnDeck will not lend to businesses that have been operating for less than a year.

Note that you will have to repay OnDeck loans a lot faster than you would an SBA loan or a traditional bank loan. STLs also have a unique fee and repayment model which you should inform yourself about before you accept a loan offer.

Kabbage

Kabbage is another short-term business financing product that is super easy to apply for. Specifically, Kabbage offers lines of credit. Businesses with bad credit are welcome to apply, as Kabbage has no minimum stated credit score requirement. However, you’re more likely to get approved if you have at least fair credit. As with OnDeck, Kabbage loans are fast and simple, featuring very relaxed borrower requirements — with the caveat that they can carry high fees. Kabbage loans are not available to startups.

Kabbage financing can be a convenient source of working capital to established veteran-owned businesses that have bad-to-fair credit and/or need money ASAP.

In addition to offering SMB lines of credit, Kabbage can also connect your customers to invoice financing, using a link that you attach to outgoing invoices. If your customers cannot afford to pay their invoices right away, the customer can apply for financing with Kabbage, and Kabbage will pay you the outstanding total immediately upon the customer’s approval.

LoanBuilder: A PayPal Service

LoanBuilder is a PayPal-owned lender that offers short-term loans to qualified businesses, including businesses with poor credit scores in the mid-500s. You do not need to be a PayPal seller in order to qualify, but having a PayPal account makes the already-fast application process go even faster. LoanBuilder loans are also sometimes advertised as “PayPal Business Loans.”

With a maximum term length of 12 months, you will be repaying your LoanBuilder loan pretty expediently. However, LoanBuilder does not charge an origination fee, so you will receive more money upfront. On approval, funds will be deposited in your account as soon as the next business day.

It’s important to know ahead of time if you can afford your loan repayments, and one thing we really like about LoanBuilder is that during the application stage, it lets you adjust your prospective loan amount and term length so you can choose a weekly repayment amount that works for you. LoanBuilder also has relaxed borrower qualifications and is a suitable choice for poor-credit businesses with decent cash flow.

Fundbox

Fundbox offers two easy-to-qualify business financing services, including small lines of credit and invoice financing. Because it doesn’t have any specific time-in-business or credit score requirements, Fundbox is suitable for many small businesses, even if they don’t have perfect credit. The amount you are eligible for will depend on the strength of your business’s financials, and you may become eligible for more funds over time. Additionally, B2B and B2C businesses may find Fundbox’s invoice financing service a convenient way to get paid for outstanding invoices.

While Fundbox is a quick and easy way to obtain a business line of credit or get paid for outstanding invoices, their rates and fees can be on the high side, and the repayment terms are very short. More qualified businesses will probably want to seek a line of credit from a bank, credit union, or online lender that can offer them lower rates.

BlueVine

BlueVine offers lines of credit and invoice factoring services similar to Fundbox’s. BlueVine’s financing is more difficult to qualify for compared to Fundbox, but you might qualify for more money and you’ll have a longer time to repay what you borrow. Still, BlueVine requirements are much less stringent than a bank’s, as they are available to newer businesses with below-average credit.

Be aware that even though many online lenders such as BlueVine will lend to businesses with bad credit, those same lenders may offer better financing options and/or lower borrowing fees if you have good credit (and a longer time in business). BlueVine, for example, while extending 6-month lines of credit to poor-credit borrowers, offers 12-month lines of credit to more established businesses with better credit. Thus, it’s a good idea to take some steps to improve your credit score before applying for business loans.

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.
• 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, there are special grants for veteran farmers and grants for veteran franchise owners.
• Contact your local SBA resources for veteran business owners: Office of Veterans Business Development, SCORE, and Boots to Business. These programs offer both business training and mentoring.
• Consider other non-government resources for vet-owned businesses, such as VetToCEO, the Global Good Fund, and Coalition for Veteran-Owned Businesses.

How To Get A VA Business Loan

Now that you know all your options, it’s time to start applying for loans. Here are some of the basic steps you need to take to secure a business loan as a veteran.

Before Applying For A Loan

• Draft a written business plan that outlines why you need the loan and what you plan to do with it.
• Check your credit score online and do what you can to improve your credit score quickly.
• Calculate how large of a loan you need and can afford to repay, taking into account your business’s Debt Service Coverage Ratio (DSCR).
• Gather all your important business documents—bank statements, business license, business lease, tax returns, balance sheet, etc.
• Bolster your business’s online presence.
• Compare lenders whose qualifications you meet, either by doing your own research online, or using a free loan aggregation service like Lendio.

The Loan Application Process

If you are well-prepared by taking the above actions, applying for loans should go pretty smoothly. You’ll simply need to prove you can meet the borrower requirements for the loan you want, supplying all the needed documentation. As mentioned, online loan applications are typically much quicker and easier than applying with a bank. Nevertheless, you will still generally have to provide much of the same documentation as you would for a bank loan.

This blog post on how to get a first-time business loan is a good resource that includes more information about what you’ll need to apply for a loan and the best practices for business loan applications.

Final Thoughts

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 LoanBuilder and OnDeck 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.

Finally, if all the online loan options seem overwhelming, you might want to try a free loan matchmaking service, often called a “loan aggregator,” that lets you pre-apply to multiple loans with a single application—Lendio is a popular example of this type of service.

Good luck!