United States
Updated: October 9th, 2023
Finding capital to grow a small business is not for the faint of heart — it can be a daunting (and overwhelming) endeavor. And oftentimes, securing a small business loan can be even more challenging and complex for veterans due to potential gaps in financial history or being called in for active military duty.
With this in mind, we’ve created a guide to financing for veteran-owned businesses. The business loans and grants outlined below are just some of the many opportunities available to help veterans start, grow, and/or sustain their businesses. Let’s take a closer look at the VA small business loan options available to this community.
There are many different types of Small Business Administration (SBA) loans, all of which are available to veterans. The SBA partners with intermediaries (SBA-approved banks, credit unions, community development organizations, nonprofits, and other lenders) to provide low-cost, government-backed loans to small businesses.
By providing a guarantee (up to 85% of the total loan amount) the SBA reduces risk for lenders and makes borrowing capital more accessible and manageable for entrepreneurs. Preparation is key when it comes to SBA loans if you’re a veteran entrepreneur, as it can take as long as six months to get funds in your bank account.
The Small Business Administration offers two programs that are specifically designed for veterans: The SBA Veterans Advantage (which offers fee waivers on loans authorized under the SBA Express Loan program) and the MREIDL VA loan.
The SBA Express Loan program is a part of the SBA 7(a) loan umbrella. As the name implies, the approval process for SBA Express loans is faster than standard SBA 7(a) loans — in fact, you’ll receive a response to your application from the SBA within 36 hours. However, borrowers still need to go through the underwriting process with individual lenders, which can take a few weeks. You can borrow up to $350,000, but these loans are only guaranteed up to 50% by the Small Business Administration.
This quicker funding process and lower guarantee mean interest rates tend to be higher with SBA Express loans in comparison to other SBA loans as lenders take on a greater risk through this program (other loan programs are guaranteed up to 85% by the SBA). So, what’s the benefit for veteran entrepreneur borrowers? Currently, most borrowers have to pay an upfront guarantee fee of 3% for SBA Express loans of $150,001 to $350,000. However, under the SBA Veterans Advantage program, this fee is reduced from 3% to 0% for qualifying veterans in an effort to assist veteran-owned businesses.
The Military Reservist Economic Injury Disaster Loan program is a VA loan program that provides working capital (of up to $2 million) to cover “ordinary and necessary operating expenses” when an essential employee is called to active duty. The interest rate is capped at 4% and offers terms of up to 30 years (although the maximum maturity is based on your ability to repay the loan). Keep in mind: collateral is required for all MREIDLs over $50,000.
According to the SBA, businesses must be at least 51% owned and controlled by an individual in one or more of the following groups to qualify:
In addition, businesses must be for-profit, have fewer than 500 employees, and have less than $7.5 million in annual sales.
Funds from an SBA Express loan can be used for just about any business purpose. A few common examples include:
The MREIDL program for veteran-owned businesses comes with more stringent limitations because it is solely designed to help business owners maintain operations until the essential employee returns from active duty — not to compensate for lost income or profits. Additionally, a MREIDL VA loan cannot be used to refinance long-term debt or to fund business expansion.
Every VA small business loan program and lending institution has slightly different requirements. However, here are three basic steps to guide you through the process for this financing option.
Regardless of what kind of business loan you are applying for, lenders want to know why you are applying and what the capital will be used for, as well as how the funds help grow your business. Defining the purpose and amount of your loan could impact your ultimate funding.
At this stage, it’s important to get down to specifics and think through your financing options and how much money you will need to get the job done. Ask yourself:
This process will not only help you determine how much capital you need and the loan amount to seek but also prove to be valuable in conversations with potential lenders. The more details you can provide the better.
After defining the purpose and your loan amount, it’s time to get prepared for the application process. For the best chance of approval (as well as lower interest rates), check your personal and business credit scores and make sure they are in good shape. You also will want to organize the necessary documents. Most lenders will want to see the following:
While some veterans may have difficulty accessing all of the information outlined above, its important to provide what you can. To identify yourself as a veteran, be sure to include the following documentation:
First-time applicants of VA small business loans should not hesitate to reach out to veteran resource groups (outlined at the end of this article) for guidance. You can also find additional details on the required forms here.
The best VA loan will depend on your specific business needs, which is why it is critical to do your research beforehand. This is especially true for veteran-owned businesses with less-than-stellar credit. Careful research will not only help you understand your options but also help you avoid paying higher fees than necessary. Before accepting a business loan, thoroughly review the agreement (fine print included!). You should feel confident about the loan terms and repayment structure.
In addition to loans offered through the SBA, there are a few other funding options that are exclusively available to veteran entrepreneurs.
In addition to VA small business loans, business grants are another option for veteran entrepreneurs. There are a number of grants available from both public and private sponsors.
Unlike business loans for veterans, one major advantage of a grant is that you don’t need to repay it. The hard part? Obtaining one. Grants are often catered to specific locations, industries, and causes, making the competition tough.
Below are a few grants sponsored by the federal government, nonprofit organizations, and even corporations.
The application process for every grant differs. Some require creating a short business profile, writing a detailed business plan, or even filming a short video on your business idea.
Like any application, your grant proposal should be professional and detailed. If possible, research past grant winners to get a better understanding of what a winning application looks like. You should be able to thoroughly defend your request for capital with as much supporting documentation as possible.
Whether you are applying for a VA business loan or grant, we’ve provided additional resources below to ensure you have the support you need throughout this process. You can check out the SBA for additional training programs and support created specifically for veterans.
Veterans are a critical community within the small business ecosystem. Whether it’s through the SBA or independent organizations, there are a variety of financing options available and institutions seeking to help veterans access capital.
If you are a veteran with an existing business of two years or more, Funding Circle is another option for financing. We’re committed to offering:
Check out the FAQs below for more information about our financing programs and eligibility requirements.
The underwriting process at traditional banks can be lengthy and confusing.. At Funding Circle, we’ve taken the best parts of an SBA business term loan — like fixed and affordable once-monthly payments and no prepayment penalties — and created something faster and more flexible. Unlike traditional lenders, we also deliver a best-in-class and transparent experience to our business customers. You’ll work with a dedicated account manager who will guide you through the entire application process and remain focused on meeting your unique financing needs. We strive to deliver a decision quickly — often in as little as 24 hours after document submission.
Funding Circle’s application process is quick, easy, and transparent. You can apply for a business loan and get a decision in as little as 24 hours after document submission.
We like to support all kinds of entrepreneurs, but our focus right now is on helping established small businesses grow and thrive. To qualify for a loan through our marketplace, veteran-owned businesses must be in operation for at least two years.
*SBA 7(a) interest rates are based on the Prime Rate. The current Prime Rate is 8.0% – WSJ March 22, 2023.
Paige Smith is a content marketing writer who specializes in writing about the intersection of business, finance, and tech. Paige regularly writes for a number of B2B industry leaders, including fintech companies, small business lenders, and business credit resource sites.
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