Running a business is no small feat, and a number of veterans have taken the leap to own and operate their own enterprise after serving our country. According to a recent report published by the United States Census Bureau, veteran-owned businesses made up about 5.2% (304,823) of all businesses, with an estimated $922.2 billion in receipts, approximately 3.3 million employees, and about $179.9 billion in annual payroll.
One key financing option available to veteran-owned businesses is SBA veteran loans, which are specifically designed to help veterans secure the funding they need.
Even with the freedom to be in the driver’s seat, you may face some financial challenges as a veteran entrepreneur. Growing a successful business takes more than a great product or service: Keeping on top of cash flow is essential. Here are some financing options that may help your veteran-owned business thrive.
If you’ve been in business for over two years and have strong credit and cash flow, SBA loans are generally considered the gold standard. These loans offer long repayment terms, longer repayment terms, and manageable monthly payments.
Veterans may also qualify for the SBA Veterans Advantage Program, which offers reduced fees and other benefits. This may make SBA loans even more appealing for veteran-owned businesses.
The primary SBA loan options include the SBA 7(a), the Express loan, the CDC/504 loan, and the microloan program. While the SBA doesn’t directly issue these loans, it guarantees a portion of the loan, reducing the risk for lenders and improving the chances of approval.
For businesses majority-owned by veterans, the SBA has their Veterans Advantage Loan program. The SBA Veterans Advantage is a comprehensive program that includes various loan options in addition to other benefits designed to support veterans. The program applies to both the SBA Express and SBA 7(a) loans.
The Veterans Advantage program offers many benefits to veteran-owned businesses looking for financing.
Remember, while the Veterans Advantage program offers significant benefits, it still requires a solid credit score and strong business financials. However, it may be an excellent way for eligible veteran entrepreneurs to access capital and grow their businesses.
You and your business must meet certain requirements to qualify for a Veterans Advantage loan from the SBA. These requirements include:
The following are also considered:
Additionally, you must provide documentation of your veteran status, such as a DD Form 214 or a letter from the Department of Veterans Affairs. Getting ahead of these requirements and preparing in advance will increase your chances of securing the right SBA loan for your veteran-owned business.
SBA 7(a) loans are not exclusive to veterans; however, there are some additional benefits for veterans who qualify under the Veterans Advantage program. For those who qualify, loans under $150,000 have no guarantee or service fee, and loans under $350,000 have a 50% reduction in guarantee fees.
SBA 7(a) loans may offer flexible solutions to help your business grow while keeping costs manageable. These funds may be used in a variety of ways to support your business goals.
For more details on the SBA 7(a) loan, check out our guide: What is an SBA loan?
SBA 7(a) loans typically offer significant benefits for veteran-owned businesses that qualify. Since the government partially guarantees these loans, lenders like SmartBiz® face less risk, which may make it easier for veterans to secure financing even if they don’t meet the strict criteria of traditional loans. Some of the key advantages of SBA 7(a) loans for veterans may include:
You will need to explore the various SBA loan options available and discover which one best fits your business needs.
Each lender and loan program has its own eligibility requirements, but to apply for an SBA loan through SmartBiz, you’ll generally need to meet the following criteria:
When you are ready to apply, here’s a quick breakdown of the application process:
You can also watch our step-by-step video on how to apply for an SBA loan.
SBA Express loans are a type of loan that offers flexible and fast financing options for small businesses, including those owned by veterans. These loans are similar to the SBA 7(a), but with a faster turnaround time. They provide up to $350,000 in funding and may be used for a variety of business purposes, such as working capital, real estate acquisitions, and equipment purchases. SBA Express loans have a faster application process than traditional SBA loans, with an application response time of around 36 hours or less. These loans are available through approved SBA lenders nationwide.
SBA Express loans under the Veterans Advantage program have the same great benefits as the SBA 7(a) loan, plus a faster turnaround time for veterans who apply. The expedited process of SBA Express loans generally makes them an attractive option for small businesses that need quick access to funds. With a streamlined application and faster approval times, veteran business owners may secure the financing they need without the lengthy wait. This flexibility empowers veteran business owners to meet pressing business demands while seizing growth opportunities as they come their way.
Veteran-owned businesses may also consider the SBA 504 loan program, which provides affordable financing for business expansion or modernization. Under this program, SBA-backed lenders typically cover up to 50% of the project costs, with Community Development Corporations (CDCs) contributing another 40%. The remaining 10% is a cash down payment required from the business owner.
A 504 SBA loan may be a good fit for veteran-owned small business owners interested in purchasing commercial real estate. Visit the SBA to find your local CDC.
For smaller businesses, the SBA Microloan Program provides up to $50,000 in funding. Each lender may have different requirements to qualify. While microloan funds may be used for many types of business expenses, they cannot be used for paying down existing debt or purchasing real estate.
While SBA loans typically offer many benefits, there are also some disadvantages to consider. These include:
Being aware of these potential challenges may help you make a well-informed choice about whether an SBA loan is the right fit for your business. While the benefits are generally significant, the challenges may be substantial, and it’s important to weigh these factors carefully. By being aware of these disadvantages, you may better prepare and navigate the loan application process.
Low-cost SBA loans typically have some of the lowest interest rates and lowest monthly payments available. However, only some business owners initially qualify, and some businesses need funds more quickly than the SBA application process can provide.
SmartBiz works to offer clients another loan option – a bank term loan.
Unlike the 10-year term of an SBA loan, non-SBA loans generally have shorter repayment periods. These loans typically provide a practical solution for obtaining the funds needed to grow or maintain your business until you qualify for an SBA loan.
SmartBiz currently offers non-SBA loans. Here are the details:
When applying for an SBA loan as a veteran, there are generally several common mistakes to avoid. Some of these include:
Avoiding these common mistakes may boost your chances of securing an SBA loan and obtaining the capital necessary to grow your business. Thoroughly preparing your application, understanding the eligibility criteria, and working with an experienced SBA loan partner may make a substantial difference in the approval process.
Ready to apply for an SBA loan? Apply now without impacting your credit score.*
If you need more time to get ready for an SBA loan, our loan experts will help you explore other options.