Business loans help veterans fund operating expenses, buy equipment, and invest in their companies. The right loan can provide you with adequate financing at an attractive APR. We will discuss veteran business loans and your choices.
What Is a Veteran Business Loan?
A veteran business loan provides funds for veterans with businesses. The VA provides various financing options for veterans, but the U.S. Small Business Administration offers veteran business loans.
Who Is Qualified to Receive a VA Loan?
The Department of Veterans Affairs has service time requirements based on when you served in the military and in what capacity. 90 days of wartime service or 181 days of peacetime service each qualify you for a loan. National Guard and Reserves members could get a loan if they served for six years. Spouses can also receive a VA loan if their loved one died in battle or from a disability incurred during service. Applicants will also need a valid Certificate of Eligibility along with sufficient credit and income.
Veteran Business Loan Options
Veterans can explore several financing options to raise capital. We have highlighted some of those choices below.
SBA Backed Loans — 7(a) and 8(a)
The Small Business Administration issues business loans for veterans at attractive rates and terms. The 7(a) loan is one of the administration’s most popular loans for veteran business owners. Before approving an application, lenders will look at a company’s history, credit, and revenue streams.
It also offers an 8(a) loan to small businesses owned by socially and economically disadvantaged individuals. Approved applicants will also receive training to help grow their companies. You must demonstrate good character and have been in business for at least two years.
Hivers and Strivers Angel Fund & Veteran Capital for Veterans
Veterans with established businesses and compelling outlooks can look for investment capital instead of loans. Two venture funds stand out for veterans. The Hivers and Strivers Angel Fund and Veterans Capital for Veterans firm invest in veteran-owned small businesses. Venture capital investors are often service academy graduates and veterans. Small business owners can receive over $200,000 from these firms.
Military Reservist Economic Injury Disaster Loan Program (MREIDL)
Some small business owners employ veterans who end up on active duty during employment. Small businesses can’t and shouldn’t penalize employees who take a break from work to serve the country. MREIDL provides small business loans to compensate for essential employees serving the military. Qualifying businesses can get up to $2 million with a low-interest rate.
Bank Business Loans
Banks offer various business loans for veterans who served in the armed forces. Lenders will ask about your credit score, revenue, and business experience. These requirements make them more difficult to access, but you will also get low-interest rates. In addition, some lenders offer discounts for veteran borrowers.
Microloans
Community Development Financial Institutions (CDFIs) offer small business owners microloans of up to $50,000. These institutions finance disadvantaged small business owners and veterans.
Personal Loans
You can use a personal loan for any reason, including business expenses or real estate. Some banks and online lenders offer discounts to veterans. A lower interest rate will make the debt more manageable.
Working Capital Loans
Every business has to meet payroll for their staff and manage other short-term expenses. A working capital loan provides funds to cover these costs. If you have good credit, you may not need to put down any collateral for the loan. However, unsecured loans also have higher interest rates. Small business owners can use collateral to back these loans.
Business Credit Card
Business cards offer a line of credit you can utilize at any time. Many of these cards provide up to $50,000, which you can borrow and repay at your convenience. Borrowers should prioritize quick repayment to avoid the repercussions of high-interest rates.
Invoice Factoring
Some small business owners have invoices promising future payments, but they need the funds now. Most customers will wait for the due date instead of paying early. Invoice factoring can help your business obtain invoice funds sooner. Invoice factoring companies will buy your invoices and give you a percentage of the invoice’s face value. You get additional financing without taking on any debt.
Invoice factoring companies will not look at your credit score. Instead, they will look at your relationships with customers to determine the risk of each invoice. You can receive funds without having to worry about paying back a loan.
Merchant Cash Advances
Merchant cash advances provide the same promise as a loan. You get financing that you can use to grow your business. However, you will have to repay the loan through a percentage of sales instead of fixed monthly payments. These loans have APRs up to 200%, but the Military Lending Act caps these loans at 36% APR for veterans.
Business Lines of Credit
A business line of credit is a non-obligation loan. You can tap into the funds whenever you need them, and you don’t pay interest unless you borrow against the line of credit. When a small business owner repays the line of credit, they still have access to the additional funds. You don’t have to fill out another application if you want to borrow against your line of credit again.
Grants for Veterans
Small business owners enjoy receiving grants because they don’t have to get repaid. The government offers several grants for business owners who served in the armed forces. You can search for grants, see which ones you qualify for, and submit applications. Veterans can use the following resources to find grants:
- Grants.gov
- StreetShares Foundation — more about this foundation soon
- Grantwatch.com
Veterans Business Outreach Centers
Veteran Business Outreach Centers provide instruction and guidance for veteran business owners. These centers help veterans build their networks and provide free workshops. You can meet colleagues while learning new skills to help you raise funds and grow your business.
StreetShares Foundation
StreetShares Foundation offers grants to business owners who served in the armed forces. The foundation organizes a competition and spreads the proceeds among the winners. Here are the current awards from the foundation:
- 1st place: $15,000
- 2nd place: $6,000
- 3rd place: $4,000
Boots to Businesses
The SBA’s Boots to Business educational program helps veterans with their entrepreneurial journeys. Service members and their spouses can attend these training sessions at no cost.
The Global Good Fund Veterans Leadership Program
Leadership is a vital skill for all business owners. Veterans learn how to become leaders during their years of service. The Global Good Fund Veterans Leadership Program helps veterans continue to lead as business owners. The program pairs veterans with coaches and business executives and provides targeted funding.
