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Veterans own nearly two million small businesses in the U.S. and employ nearly 5.3 million Americans, according to the U.S. Small Business Office of Advocacy. If you’re a veteran looking to start or expand a business, you may be reviewing small business loans.
There are several types of loans you could pursue, including financing from the SBA, a traditional bank loan and online funding. Each one has different strengths and purposes, so be sure to consider all of your options before accepting a loan.
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Types of Small Business Loans for Veterans
There are many business loans for veterans in need of financing, including loans from the SBA, banks, credit unions and online lenders.
1. SBA 7(a) Loans
SBA 7(a) loans offer flexible funding up to $5 million for a range of purposes, including purchasing or improving real estate, buying equipment or inventory, or acquiring working capital. You can also use a 7(a) loan to refinance business debt, purchase another small business or finance a partner buyout.
7(a) loans come in a variety of loan types, including standard loans, working capital loans, lines of credit, among others. Depending on the loan type and what you use the funds for, repayment terms can be as long as 25 years.
These loans are available to for-profit business owners who have already exhausted other sources of funding. You’ll apply with an SBA lender, such as a bank, and get a loan offer based on your credit, revenue and other financial factors. The interest rate on your offer can’t exceed the SBA’s maximum cap of 15%, as of November 2023, but that maximum rate varies between loan amounts and types.
In the past, the Veterans Advantage program waived or reduced fees on 7(a) loans for veterans. However, that program ended in 2018. Although you can still pursue an SBA 7(a) loan, you’ll have to pay the usual loan fees, which may include an origination fee.
2. SBA Express Loans
Although veterans no longer get reduced fees on other 7(a) loans, they can qualify for a fee waiver on SBA Express loans, which are one type of 7(a) loan. Specifically, veterans don’t have to pay any upfront fees on Express loans.
SBA Express loans offer funding up to $500,000 with repayment terms up to 10 years. You can get an approval decision within 36 hours, but it may take longer to receive your loan.
Interest rates on an SBA Express loan can be higher than the rates on a 7(a) loan. To qualify, your business must be at least 51% owned by a qualifying veteran, active duty service member, reservist, National Guard member or eligible spouse.
3. Military Reservist Economic Injury Disaster Loan
The MREIDL program may provide assistance if an “essential employee” in your business is called for active duty in the National Guard or Reserve. This program offers low-interest loans up to $2 million, and they can be used to cover expenses you can no longer afford because an employee has been called away for active duty.
4. Bank and Credit Union Loans
As a business owner, you can pursue a traditional small business loan from a bank or credit union. Loan amounts and interest rates vary by institution, so it’s best to shop around and compare your options. Some lenders offer rate discounts to existing customers.
Borrowing requirements also vary, but you may need a minimum credit score of at least 600 and a business that’s at least six months to two years old. The lender may also require that your business have at least $100,000 to $200,000 in annual revenue.
If you choose to borrow from a credit union, you’ll often need to become a member. Some credit unions are open to anyone, whereas others cater to people who live in certain areas or work with specific employers. Some credit unions, such as Navy Federal Credit Union, are designed specifically for veterans and military service members.
5. Online Loans
There are also online lenders that offer small business loans to veterans and other business owners. The borrowing process takes place entirely online, though you’ll often be able to chat with customer support over the phone, web chat or email.
Online lenders often have more flexible borrowing requirements than traditional banks and they often can process your veteran business loan more quickly. However, it’s worth comparing offers from both traditional banks and online lenders to see which offer you the best rates and terms.
Other Small Business Resources for Veterans
There are a variety of other resources to help veterans start and grow their businesses. Some helpful programs include:
- Boots to Business. The SBA offers Boots to Business as part of the Department of Defense’s Transition Assistance Program (TAP). It offers education and training for entrepreneurs.
- American Corporate Partners (ACP). The ACP group offers year-long mentorship programs to help veterans transition back into civilian life.
- Office of Veterans Business Development (OVBD). Consider the OVBD for trainings, mentorship opportunities and workshops for business owners.
- Veterans Business Outreach Centers. The Veterans Business Outreach Centers can help you prepare a business plan, as well as connect you with counseling and mentorship services.
- Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE). The V-WISE group provides business training resources for women who are veterans and entrepreneurs.
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Frequently Asked Questions (FAQs)
What business loan amount can a veteran get?
The business loan amount for a veteran depends on the type of loan, as well as their financial profile. SBA 7(a) loans, for example, are available for up to $5 million, while SBA Express loans offer up to $500,000. Banks and online lenders set different maximums, with some offering up to $150,000 and others providing up to $5 million.
What credit score do you need for a VA small business loan?
The U.S. Department of Veterans Affairs (VA) doesn’t provide small business loans, but veterans can qualify for loans from the SBA or other lenders. Some lenders will accept personal FICO scores as low as 500, but you’ll likely need a good score of at least 670 to access better interest rates (personal FICO scores range from 300 to 850).
For an SBA 7(a) loan, a lender may look at your FICO Small Business Scoring Service (SBSS) score, which ranges from 0 to 300. The minimum SBSS score for a 7(a) small loan is 155 at the time of publishing.