SBA Loans For Veterans: Guide To The SBA VA Loan Programs
After serving their time in the military, many veterans choose to start a business. Military veterans own about 7.5% of the businesses in the United States.
Just like any other small business owner, there comes a time when these entrepreneurs need funding, whether it’s for purchasing equipment, expanding the business, or funding a startup project. And like civilians, many veterans are looking for a business loan that will help them expand their business.
For these business owners, an SBA VA loan could be the answer.
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What Is The SBA?
SBA stands for Small Business Administration. It’s a government organization that assists small businesses.
Through the SBA, business owners have access to education, information, and training. The SBA serves as an advocate for small businesses and provides a critical piece of the entrepreneurial puzzle: business financing.
How The SBA Helps Veterans
The SBA offers a number of programs — loan and otherwise — to help veterans and active servicemembers.
The SBA currently offers two loan programs for veterans:
Previously, the SBA also offered a program called “SBA Patriot Express Loan Program”. However, this program is no longer in operation. People interested in the defunct Patriot Express program should consider applying for an SBA Express Loan through the Veterans Advantage Loan Program.
The SBA does not offer any grants to veterans. Find other grant options in our guide to the best business grants for veterans.
The organization also provides a variety of resources to give veterans the tools they need to succeed in business. SBA training programs for veterans include:
- Boots to Business
- Thee Women Veteran Entrepreneurship Training Program
- Service Disabled Veteran Entrepreneurship Training Program
- The Veteran Federal Procurement Entrepreneurship Training Program.
Learn more about the training programs for veterans through the SBA website.
Learn more about the two main SBA loan programs for veterans below.
Veterans Advantage Loan Program
The Veterans Advantage Loan Program is a popular choice for veterans because you can use the loan for most business purposes, such as expanding or acquiring a business, purchasing equipment, working capital, or debt refinancing.
Loan Program Terms, Rates, & Fees
These are the current rates and fees for the SBA Veterans Advantage Loan Program:
|Borrowing Amount||Up to $5 million|
|Term Length||Usually 5-10 years for working capital and equipment; up to 25 years for real estate|
|Percent Guaranteed by SBA||50% – 85% depending on loan amount and loan program specifics|
|Interest Rate||See current rates|
|Guarantee Fees||Between 0% and 3.75% depending on loan amount; ongoing fee of 0.55%|
|Borrower Requirements||The business must be for-profit; must meet SBA size standards; must be in an approved industry; must show that you are capable of loan repayment; must be at least 51% veteran-owned|
The Veterans Advantage Loan Program is part of the SBA’s most popular program — the SBA 7(a) Loan Program. When you apply for a Veterans Advantage Loan, you go through the standard SBA 7(a) Loan process (or optionally through the SBA Express Loan process if the loan is for $350,000 or less).
The main advantage of the SBA’s VA loan program is that veterans have access to reduced guarantee fees compared to other borrowers.
One of the most significant drawbacks to an SBA 7(a) Loan is the timeline for receiving the money. The application, approval, and funding process can take months in most cases. However, the SBA Express Loan program can provide faster approval.
How To Qualify
To qualify for a Veterans Advantage Loan, you must meet the requirements for an SBA 7(a) loan. These include:
- Must run a for-profit business
- Must meet the SBA definition of a small business
- Must prove you can repay the loan
- Must not be delinquent on any debts or have any recent bankruptcies
Additionally, you must show that your business is at least 51% owned and controlled by veterans. The SBA definition of veterans includes:
- Active-duty military in the Transition Assistance Program
- Reservist or National Guard member
- Spouse of any of the above, including those who were widowed because of death during service or from service-related disabilities
How To Apply
For the SBA Veterans Advantage Loan program, you must find a qualified lender to work with, such as a bank or credit union.
The SBA offers a Lender Match service that connects businesses with a lender in their area. While some applications can be completed online, lenders generally require a phone call or in-office visit by the applicant.
After getting in touch with a lender, you will need to put together an application. You must be prepared to show that you can repay the loan and operate your business successfully. The application process will require additional documentation, including:
- Business and personal income tax returns
- Financial statements, projections, business certificates, and licenses
- A business plan
- SBA forms such as DD Form 214, DD Form 1173, or a different relevant form
Military Reservist Economic Injury Disaster Loan Program (MREIDL)
Th Military Reservist Economic Injury Disaster Loan Program is designed to help cover operating costs while a veteran is on active duty. Military reservists and members of the National Guard who face economic hardship during or after a deployment can get the financing they need for their business with an MREIDL.
Loan Program Terms, Rates, & Fees
These are the current rates and fees for an MREIDL:
|Borrowing Amount||Up to $2 million|
|Term Length||Up to 30 years|
|Collateral||Required on all loans over $50,000|
|Borrower Requirements||Must show you are capable of loan repayment; must get insurance for collateral (for loans over $50,000)|
While the SBA does typically require collateral on Military Reservist EIDL, it’s important to note that the SBA will not turn down a loan simply for lack of collateral. Still, the borrower will be required to put up any available collateral, including real estate.
These loans are very attractive to military veterans because of their repayment terms and low-interest rates. SBA Veteran Loan rates are currently set at 4%. These loans provide the working capital needed to pay necessary expenses; funds can not be used for income or profit loss, refinancing debt, or business expansion.
How To Qualify
The Military Reservist Economic Injury Disaster Loan Program is available to service members, reservists, or National Guard members who are on active duty.
To qualify, service members must apply for the loan while on active duty or for a period of one year following the end of active service or discharge.
How To Apply
For the Military Reservist Economic Injury Disaster Loan Program, contact the Disaster Assistance Customer Service Center via phone or email to obtain an application.
VA SBA Loans: Final Thoughts
Although the process of applying for an SBA loan isn’t easy, the competitive terms make it worth it for many service members, veterans, and their families.
SBA Veteran Loans allow those who serve their country to be able to truly live the American Dream through successful ownership of their own business.