According the Small Business Association, veteran-owned businesses make up 9.1 percent of all US businesses — and they all need capital to get and keep them going. But securing financing for a startup or a small business is almost never easy. And it can be even more difficult for veterans, who may have gaps in their financial history due to time in active duty.
Luckily, there are a few options for business loans for veterans. Some are government-funded, while others come from the private sector. Let’s take a look first at government-funded business loans for veterans and then dive into the private sector.
The Small Business Association (SBA) administers the most well known business loans for veterans: the Veterans Advantage program — which includes the 7(a) Loan and the Express Loan — as well as Military Reservist Economic Injury Disaster (MREIDL) loans.
The SBA’s Veteran’s Advantage Loan program applies to loans for up to $350,000. The program applies to two SBA loans: SBA Express and SBA 7(a) loans.
Who is eligible for a Veterans Advantage loan?
In order to be eligible for a Veterans Advantage Loan, small businesses and startups must meet the following requirements:
While the SBA 7(a) Loan Program is for both veterans and non-veterans, there are some special perks for vets under the Veterans Advantage program.
For loans up to $125,000, vets can get upfront guaranty fees of zero. For loans greater than $125,000, vets are promised a 50 percent reduction of guaranty fees. Loans can be for up to $350,000.
Requirements for a 7(a) Loan Program SBA small business loan
The 7(a) Loan Program is the most popular SBA small business loan. 7(a) Loan Program SBA small business loans can be used for purchasing fixed assets, working capital, to finance startups, to purchase an existing business, and for debt repayment.
In order to qualify, a company must first meet the SBA size standards. Because SBA loans are specifically for small businesses, they’ve created a “size standards tool” that helps founders and small business owners determine whether or not they qualify.
Once you’ve determined whether or not your company qualifies under the size standards, here is a checklist of the remaining requirements for qualifying for a 7(a) Loan Program SBA small business loan:
Who is ineligible for a 7(a) Loan Program SBA small business loan?
While most small businesses will qualify for a 7(a) Loan Program SBA small business loan, there are some characteristics that make a small business or startup ineligible.
Advantages of a 7(a) Loan Program SBA small business loan:
Disadvantages of a 7(a) Loan Program SBA small business loan:
The SBA Express loan is basically a 7(a) loan, but with faster turnaround time. Applicants can expect to hear back from the SBA within 72 hours of applying.
Under the Veteran’s Advantage program, all upfront loan guaranty fee are waived on loans between $150,001 and $350,000.
Advantages of a SBA Express loan
Disadvantages of a SBA Express Loan
Military Reservist Economic Injury Disaster (MREIDL) loans are for small businesses and startups whose owner — or an “essential employee” — is called up for military service.
The goal of these loans is provide working capital to those businesses in order to help them stay alive while the service member is gone. This loan is not to replace lost profits but to pay obligations and replace working capital.
These loans have an interest rate of 4 percent, loan terms with a maximum of 30 years, and a loan amount limit of $2 million.
Requirements for a Military Reservist Economic Injury Disaster (MREIDL) loan
Once you’ve determined whether or not your company qualifies under the SBA size standards, here is a checklist of the remaining requirements for qualifying for a Military Reservist Economic Injury Disaster (MREIDL) loan:
The SBA will determine whether credit in an amount needed to accomplish full recovery is available from non-government sources, without creating an undue financial hardship to the applicant.
That means if you can get the money somewhere else without it being too much of a hit, you won’t qualify. However, 90 percent of businesses that apply for this loan meet this requirement.
Collateral is required for loans over $50,000. However, the SBA will not decline loans for lack of collateral.
StreetShares is an online, peer-to-peer lender that was started by veterans, for veterans. They offer both business loans between $2,000 and $100,000 and lines of credit between $5,000 and $100,000.
Once you apply, funders will compete to fund your business. Take some time crafting your personal story in order to have an advantage at that stage.
The APR range is 8.00 percent to 39.99 percent and if you have excellent credit, you may qualify for a a single digit APR.
Loan terms are three to 36 months and payments are weekly.
Who is eligible for a StreetShares loan or line of credit?
Who is ineligible for a StreetShares loan or line of credit?
Advantages of a StreetShares loan
Disadvantages of a StreetShares loan
Loan terms are relatively short — three to 36 months — and weekly payments can be difficult for some founders.
How to apply for a StreetShares loan
StreetShares is an online lender, so their application is fairly simply and completely online. You’ll need:
While not technically loans, we decided to include venture capital and angel investment firms in this roundup because they’re a unique opportunity for military and veteran startup founders to access funding.
Hivers and Strivers is an angel investment group that invests in early stage startups founded and run by graduates of the U.S. Military Academies.
Their investors are military service people who are generally senior executives in a range of industries. They believe that young military graduates are an excellent investment and that they will “provide superior returns.”
Their typical investment is $250,000 to $1 million and they are willing to partner with other investors if startups are seeking more funds than that.
They also commit to active involvement, advisory and board roles, and mentorship in order to ensure the success of their investment companies.
There are also several veteran entrepreneurship training programs, many — but not all — of which are run by the SBA.
The Service-Disabled Entrepreneurship Development Training Program is a training grant available for up to six grant awardees with a minimum award of $50,000 and a maximum award of $150,00.
Its purpose is supporting organizations that currently deliver entrepreneurship training program(s) to service-disabled veteran entrepreneurs who want to become small business owners or who currently own a small business.
Veterans Institute for Procurement (VIP) is an accelerator program with three training programs: VIP GROW, VIP START, and VIP INTERNATIONAL.
All three programs are in-residence training programs for owners, principals, and C‐level executives of veteran-owned small businesses and service-disabled veteran-owned small businesses.
The programs consist of a 27‐hour, 3‐day comprehensive certification program and covers over 20 topics, including contracting, teaming agreements, human resources, accounting, finance, program controls, and business development.
It takes place in Washington, DC, four times per year and is offered at no charge to qualifying businesses.
Boots to Business is the two-step program offered by the SBA on military installations around the world as a training track of the Department of Defense’s (DODs) Transition Assistance Program (TAP).
The Introduction to Entrepreneurship course is also available 24/7 through DOD’s Joint Knowledge Online. Upon completion, service members can continue training via an eight-week online Foundations of Entrepreneurship course.
Boots to Business Reboot extends the entrepreneurship training offered in TAP on military installations to veterans of all eras.
Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE) is an SBA-funded program provided by the Institute for Veterans and Military Families.
V-WISE includes online training, a conference, and mentorship to female veterans.
VetsInTech is a private sector training program that connects current and returning veterans with reintegration services and also with the tech ecosystem.
They offer tech-related education opportunities, connections with tech jobs, and workshops and bootcamps to help veteran startup founders boost their businesses.
If you’re interested in learning about other financing options that aren’t veteran-specific, check out our following guides: