A 2022 Guide to Small Business Loans for Veterans

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Small business loans favored by veterans are becoming increasingly rare. Here’s how to find the best business loans for veterans.

The transition from military to civilian life is hard enough. Add to that starting a small business, and it’s enough to make you ask for help.

In this article, we’ll talk about the best sources of funding for veteran-owned businesses as well as some additional resources you can use. As with most government programs, loan options for veterans can fluctuate. We’re currently in an ebb phase, but I’ll let you know where to keep up to date if any new options come out.

6 types of small business loans for veterans:

  • Small Business Administration (SBA)
  • Federal Naval Credit Union
  • Economic Disaster Loan Program for Military Reservists (MREIDL)
  • Winters and Strivers
  • Street shares
  • Ordinary conventional loan

1. Small Business Administration

In the past, the SBA had loan options designed specifically for veteran-owned small businesses. You may remember names like SBA Veteran Advantage or SBA Patriot Express. These loan products are usually added to SBA bills as they float around Congress, but each has a time limit or dollar limit, and when reached, the product disappears.

Stay up to date with the SBA website and start a relationship with a bank with SBA specialists. When I worked on SBA loans, we would go to a few conferences a year hosted by the NAAGL (National Association of Government Guaranteed Lenders) to keep up to date with all the new products offered by the SBA.

Veteran-owned businesses (in this article, this generally means a business in which a U.S. Army veteran owns 51% or more of a business and works at least 40 hours a week to run it) can qualify for a fee waiver on SBA express loans.

SBA Express Loans were designed to provide working capital for start-ups or small businesses that needed cash for expansion or a large purchase. Express loans can total up to $350,000 with a maximum term of 10 years.

You can negotiate a lower rate, but in my experience the rate will likely be the maximum allowed by the SBA, which is Prime + 2.75%, and this rate adjusts quarterly. You can find the current prime rate here.

SBA express loans to other borrowers have a 3% SBA guarantee fee, which is how the SBA keeps the doors open. This fee is waived for veteran-owned small businesses. And the lender you work with may charge a wrapping fee of up to $2,500 or 1% of the loan amount, whichever is lower. Many lenders will also waive these fees for veteran-owned businesses.

If you are interested in an SBA loan, you can use the SBA Lender Program. I wouldn’t recommend using this program, though. If you do, your information will be distributed to all SBA lenders in your area.

This list includes many bottom feeders who find it hard to accept “no” for an answer. The best strategy would be to simply walk into your bank branch and ask to speak to a business loan officer. If you go to the bank where you already have deposits, you will have a head start.

2. Federal Navy Credit Union

The Navy Federal Credit Union (NFCU) is a highly specialized credit union. Only veterans and relatives of veterans can register. As a credit union, NFCU has far fewer regulations and lower auditing fees than a traditional bank and can use this advantage to lower interest rates. And, it’s not for profit, so its goal is to provide the best rates possible.

If you need a business loan, visit the Navy Federal page and contact one of their experienced loan officers who may be a veteran with similar experiences.

3. Economic Disaster Loan Program for Military Reservists

The MREIDL program is the only direct option for service members on this list. Perhaps unsurprisingly, it is only available for a very limited purpose. The program helps small businesses when a key employee is a military reservist and is called up for active duty.

In this case, the SBA will issue a loan (this is not a grant for veterans, it must be repaid with interest) of up to $2 million for economic harm, as calculated by the SBA. The SBA will also determine if your business can recover without this assistance, and if so, your business is not eligible for the loan.

4. Winters and Strivers

Winters and Strivers is an angel investment group that focuses on small businesses owned by graduates of US military academies. Angel investors invest in the seed rounds of start-up companies. Often this investment is pre-income. Winters and Strivers typically invests between $250,000 and $1 million at a time. You can submit your business idea on the website linked above.

5. Street shares

StreetShares was founded by two veterans to provide better options for businesses in need of so-called hard money loans.

Hard money loans are given to businesses that cannot qualify for bank financing. It’s not quite a loan that could end up breaking your legs, but if you get a hard money loan, you might be headed in that direction.

StreetShares has two main products: term loans and lines of credit. Interest rates on loans here at the low end are what you would find at the high end for a traditional bank loan. Loan origination fees are three or four times higher.

StreetShares has its place in the lending economy. If your business is struggling, you can use them to get back on your feet. Just be aware that you will have to pay for it. If your business is doing well, go to the bank.

6. Ordinary conventional loan

Our last option is the ordinary regular loan from the corner bank. It’s a good idea to start a depository relationship with the bank to gauge how you feel about their service. Some banks may waive or reduce fees for veteran-owned businesses, but don’t count on that.

That doesn’t mean you should avoid conventional banks. If you build a good relationship with the merchant bankers over time, you’ll see the same reduction in fees you could get with government loans to veterans.

Business Resources for Veterans

Now that you’ve seen the sad state of veteran-focused loan programs, let’s take a look at other resources you could take advantage of.

1.SBA

The SBA offers mentorship programs, success stories, and networking opportunities through its Veteran Business Outreach Centers.

You can find many training programs for veterans at the link above.

2.Front

The VA offers a Vets First program that allows your company to apply for government jobs with preferential offers. Unfortunately, there is no VA business loan. The VA helps veteran-owned small businesses by giving them work instead of lending them money.

3. Ownership of Disabled Veterans

I work for a Disabled Veteran Owned Small Business (SDVOSB). We are a general contractor working primarily on VA jobs. The VA reserves contracts for the Vets First program mentioned above, but many contracts can only be tendered by SDVOSBs.

This requirement can often limit bidding to just a few contractors, which can increase profits. Because the jobs are done in hospitals or military bases, the culture is what you have become accustomed to in the service.

And both political parties support programs that limit bidding for certain jobs to SDVOSBs, so you could potentially have business in the future without worrying about a new president cutting government spending.

Go take out a loan

In the army you have to learn to do things independently. In small businesses, this may be even more true. Keep an eye out for new loan programs and get training if you think it will help, but most importantly, be prepared to rely on yourself and your employees.

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