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As a veteran with a small business, you need funding. This may include startup financing or money to purchase property, buy inventory, or pay employees, among other needs.
Small business loans could help, but grants, government funding, and private business options are also available. These funding sources could make a big difference to a veteran-owned business. Read on to learn what’s out there.
Key Points
• The Small Business Administration (SBA) offers multiple loan programs to veterans, including various types of 7(a) loans.
• 7(a) loans provide up to $5M for a wide range of business expenses, while Express loans offer faster decisions with lower borrowing limits.
• Veteran-owned businesses may qualify for access to government contracts set aside for service-disabled veterans.
• Veterans who do not qualify for SBA loans can explore online lenders, business lines of credit, or peer-to-peer funding.
• Grants provide debt-free funding for veteran-owned businesses, but applicants must meet eligibility requirements and submit a strong proposal.
Four Types of Small Business Loans for Veterans
The SBA offers support for veterans, including access to loans, business training, and mentoring programs. The SBA also offers a specific loan to small businesses with employees who are military reservists called to active duty. These resources are available to veterans, reservists, active-duty service members, and military families.
To learn details about the educational programs, funding options, and counseling available to veterans, you can contact your local Veterans Business Outreach Center (VBOC).
Here are four loan programs available to veterans.
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1. SBA 7(a) Loan
What is it?
These are government-backed loans of up to $5M that can be used for almost any business-related costs, including purchasing commercial real estate.
Why choose it?
If you need more capital, the SBA 7(a) loan program provides access to funds for a variety of business expenses. Because these loans are backed by the government, SBA loans tend to have favorable terms and rates.
Keep in mind
Application turnaround time is usually 5-10 business days. If you need a relatively small amount of capital in a shorter period of time, you may want to consider an SBA Express Loan.
SBA loans can be competitive. Lenders usually require borrowers to have strong credit, an established business, and some form of collateral to offer.
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2. SBA Express Loan
What is it?
These small business loans are backed by the SBA and offered by banks, credit unions, and other approved lenders. SBA Express Loans come with an average application review time of 36 hours and offer a maximum loan amount of $500K.
Why choose it?
SBA Express loans can help those in need of immediate funding.
Keep in mind
There are differences to consider between the standard 7(a) loans and SBA Express loans. For example:
The maximum amount you can borrow:
• Standard 7(a): $5M
• SBA Express: $500K
The maximum amount guaranteed by the SBA:
• Standard 7(a): 75% for all loan amounts
• SBA Express: 50% for all loan amounts
The duration of revolving lines of credit (excluding extensions):
• Standard 7(a): Not available
• SBA Express: Up to 10 years
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3. Military Reservist Economic Injury Disaster Loan (MREIDL)
What is it?
The MREIDL program is offered to small businesses with an essential employee who is called to active duty due to his or her position as a military reservist. These loans provide working capital to cover necessary business payments until the essential employee returns from active military duty.
You cannot use MREIDL funds to:
• Cover lost income or profit
• Expand your business
• Refinance long-term debt
• Replace typical commercial debt
Why choose it?
If you or a vital employee is on active duty in the military, MREIDL assistance may help support your business. These funds may help prevent losses that would be incurred in the absence of essential employees by offering loans to cover the ordinary and necessary operating expenses of your business.
Keep in mind
If your small business can access capital from non-government sources or fund its own recovery, you could pursue those options first, as in those cases, you’ll be ineligible for MREIDL funding. Additionally, MREIDLs over $50K require the borrower to pledge available collateral. The SBA may accept real estate as collateral when available, but a loan will not be declined solely for lack of collateral if the SBA reasonably believes the borrower can repay.
4. Non-Government Small Business Loans for Veterans
If you’re having trouble qualifying for a government-backed small business loan, there are several lending options. A few to consider include:
• Loan from an online lender: These lenders tend to have less stringent qualification requirements than physical banks. However, their interest rates may be higher, and borrowing amounts could trend lower.
• Business line of credit: This is similar to a personal credit card, with a credit limit and interest accrual only on the expenses you have not repaid. Banks and online lenders both offer business lines of credit.
• Peer-to-peer network: This type of funding matches borrowers with independent investors. Because it doesn’t involve borrowing from a bank or an online lender, a peer-to-peer network may be a good loan option when it comes to small business loans for veterans with either brand-new businesses or credit that needs work.
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Small Business Support for Veterans With Disabilities
To further support veterans, the SBA offers the Service-Disabled Veteran-Owned Small-Business Program, which allows eligible veteran-owned small businesses to compete for contracts set aside for disabled veterans.
Eligibility requirements:
• The company must operate as a small business.
• The business must be owned and controlled by one or more service-disabled veterans, at a minimum of 51%.
• One or more service-disabled veterans must be responsible for managing operations and making long-term decisions.
• Eligible veterans must have a disability connected to their past service.
Businesses must be certified by the SBA through the Veteran Small Business Certification (VetCert) program. For additional information, visit the Office of Veterans Business Development.
How to Get a Small Business Grant for Veterans
Unlike a small business loan, a grant doesn’t have to be paid back. It is essentially debt-free financing that provides the capital you need to start or grow a business.
Almost any business can apply for a grant, but there are some specifically geared toward veteran-run businesses. Given the amount of competition the average federal grant inspires, you may have a better chance of getting one if the pool is limited to veteran business owners.
Grants provide capital that can be used for many purposes, from covering startup costs to hiring employees. You could use the funds to buy equipment or technology that boosts your productivity — it all depends on the grant itself.
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Grants to Help Vets Start a Business or Expand One
Many government small business grants are available to veterans. It’s just a matter of knowing where to look to find the right one for you and your business. Here are some resources to help you get started.
Grants.gov
Grants.gov is a large database of all the federal grants available to anyone, including veterans. You can search by agency, category, or eligibility. Each grant has different eligibility requirements, and only certain types of organizations may apply. It’s important to read the requirements carefully to make sure you qualify.
GrantWatch
Another database is GrantWatch. Here, you can find grants from federal, state, and local government agencies, as well as foundations and corporations in each state.
Your State’s Veteran Business Outreach Center
Most states have web portals with resources for veterans living in that state. For example, California has CalVet, which lists resources for veterans, including self-employment grants for service-disabled veterans. You can also find local VBOCs by zipcode.
How to Get a Small Business Grant for Veterans
Small business grants are available for veterans in many situations, from disabled vets to those starting a brand-new business. While requirements vary, for most, you need to be a veteran, reserve, or a transitioning active duty member of any branch of the U.S. military. Some grants are also open to spouses of military members.
Reviewing Requirements
To apply, first review the eligibility requirements. Pay close attention to deadlines so you don’t waste time filling out paperwork for a grant that’s already closed its window for applications.
Putting Together Your Proposal
Gather the required paperwork, which might include a business plan, key financial statements, and a mission statement. Next, allot plenty of time to write your grant application or proposal. Be prepared to explain how your business started and how you’ll use the funds. Answer honestly, but don’t be shy about singing your company’s praise. This is your opportunity to display what’s unique about your business.
Reviewing and Polishing
Finally, carefully review your application and make sure you include everything required. Proofread your proposal and consider asking a colleague to provide a second set of eyes. You want your application to be as flawless and engaging as possible.
You may also consider hiring a grant writer. This is someone who fills out grant applications for a living. They will likely be more familiar with the process and what reviewers are looking for in an application.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
Does the Veterans Administration offer business loans especially for military veterans?
No, the Veterans Administration no longer provides loans for businesses. However, veterans can borrow up to $500K through the SBA’s Express loan program.
Is it easier or harder for veterans to get business loans?
There is no special barrier for veterans to overcome. However, they will need to present the same creditworthiness and financial profile as any other successful loan applicant to secure funds.
Can veterans use GI Bill benefits to start a business?
Veterans cannot currently use GI Bill benefits to start a business. However, the GI Bill may be used for training to become a business owner or entrepreneur.
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