Anyone who has or is looking to start a business knows that securing financing is one of the biggest roadblocks you face. You may be surprised to learn, however, that this roadblock is even more significant for military veterans pursuing small business ownership.
Because of gaps in credit history that often occur when military personnel are on active duty or deployed, veterans often struggle even more than civilians when it comes to getting approved for business loans.
Luckily, the SBA—in addition to serving the wider small business population—offers funding avenues and resources specifically for veteran-owned businesses.
In this guide, we’ll break down everything you need to know about SBA loans for veterans, so you can find the right financing for your business.
The Ultimate Guide to VA SBA Loans
First and foremost, it’s important to explain what a VA SBA loan is.
In reality, the phrase “VA SBA loan,” is misleading—as the VA, which stands for the Department of Veterans Affairs, does not provide loans directly to business owners. Instead, therefore, the phrase VA SBA loan is generally used to refer to SBA loans for veterans.
This being said, though, the SBA does not offer a loan program wholly for veterans. Through a number of their loan programs, however, the SBA does offer certain benefits that are unique to veteran-owned businesses, as well as provide additional resources for veterans.
Now that we’ve clarified what the term “VA SBA loan” actually means, let’s break down the types of SBA loans that are available to veterans.
On the whole, if a veteran-owned business thinks they can qualify, they can apply for any type of SBA loan. This being said, however, as we mentioned above, through the Veterans Advantage Program, there are certain SBA loan programs that offer benefits that are unique to veterans.
Through the Veterans Advantage Program, veteran-owned businesses can receive discounted fees on 7(a) loans—including Express loans.
Additionally, through the SBA disaster loan program, military reservists who are called to active duty can apply for financial relief through the Military Reservist Economic Injury Disaster Loan Program (MREIDL). It’s important to note, however, that the MREIDL is separate from the Veterans Advantage program that applies to SBA 7(a) loans.
To start, the SBA 7(a) loan program is one of the most popular SBA loan programs for small businesses.
Through this program, you can apply for loans of up to $5 million with terms as long as 25 years. SBA 7(a) loans can be used for virtually any business purpose—including working capital, expanding your business, purchasing equipment or real estate, and more.
Like the majority of SBA loans, 7(a) loans are actually issued by SBA lending partners—including banks and other financial institutions—and guaranteed (up to 85%) by the SBA. Interest rates for these VA SBA loans range depending on the loan size, terms, and lender—but can be as low as the prime rate plus 2.25%.
Although SBA 7(a) loans are not exclusive to veterans, veteran-owned businesses can access reduced fees through the Veterans Advantage Program. Typically, the SBA charges the lender a guarantee fee on these loans, which is usually passed on to the borrower. The SBA guarantee fee can range from 2% to 3.75% depending on the size and term of the loan.
For veteran-owned businesses who qualify for the Veteran Advantage Program, however:
Therefore, if you’re looking for a VA SBA loan for your business—with long terms, low interest rates, and a reduced guarantee fee, the 7(a) loan is a great option.
Next, the SBA Express loan—which is actually a subset of the 7(a) program—is another type of VA SBA loans available for veteran-owned businesses.
As the name implies, SBA Express loans are designed to have a faster time to fund. Compared to typical SBA loans, which can take weeks or months to fund, SBA Express loans have a turnaround time of 24 to 36 hours.
These loans are available as a term loan or line of credit with amounts up to $350,000. Similar to traditional 7(a) loans, SBA Express loans can be used for a variety of purposes—working capital, real estate purchases, debt refinancing, etc. Terms range from five to 25 years depending on how you plan to use the funds.
This being said, due to the expedited process of these loans, you’ll see slightly higher interest rates than typical SBA 7(a) loans. The SBA loan rates on Express loans range from the prime rate plus 4.5% to 6.5%.
Once again, although these loans are not exclusive to veteran-owned businesses, veterans can receive discounted fees through the Veterans Advantage program. In fact, for SBA Express loans, the SBA completely waives the guarantee fee. Typically, the guarantee fee would be 2% to 3% of the guaranteed loan amount.
Although SBA Express loans are available in smaller amounts, they are great for faster, yet still affordable funding. Plus, the SBA has found that 73% of loans funded for veterans are for amounts of $350,000 and below—making this a particularly worthwhile option for a VA SBA loan.
Finally, it’s important to note that the current SBA Express loan is different from the Patriot Express Loan. The Patriot Express loan program, which was available exclusively for veterans, expired in 2013. Even though this program no longer exists, veterans can find a similar loan product with the current SBA Express loan.
Finally, the last type of SBA loan that can be considered a VA SBA loan is the Military Reservist Economic Injury Disaster Loan (MREIDL).
Part of the SBA disaster loan program, this loan is designed to offer financial assistance to business owners who are unable to meet their ordinary and necessary operating expenses because an essential employee has been called to active duty as a military reservist.
Through this program, you can apply for loan amounts up to $2 million—however, the SBA will decide the specific amount based on their calculations of your economic injury. Unlike the other VA SBA loans we’ve discussed, MREIDLs are actually issued by the SBA itself.
These loans have a maximum interest rate of 4% and terms up to 30 years.
This being said, it’s important to note that MREIDLs are not intended to cover lost income or lost profits and the capital can’t be used in place of regular commercial debt, to refinance long-term debt, or expand your business. If you can find funding for your business elsewhere, you won’t be eligible for this type of VA SBA loan.
Ultimately, as we mentioned, veteran-owned businesses are eligible to apply to any type of SBA loan—however, if you’re looking for an SBA loan with specific benefits for veterans—you’ll want to consider the three VA SBA loan options we discussed above.
This being said, however, in addition to loan options, the SBA offers a variety of other veteran-specific resources—including classes, training, and contracting opportunities.
Therefore, if you’re looking to make the most of the veteran advantages the SBA has to offer, you’ll also want to look into these programs:
Combining a two-day introduction to entrepreneurship classroom course with an eight-week ongoing online training, the SBA’s Boots to Business program is designed to set U.S. military veterans up for success in entrepreneurship as they make the transition from military to civilian life.
By offering fundamentals in business funding, management, marketing, and more this program gives active-duty military who anticipate starting a business in their civilian lives a kickstart toward that goal.
Designed specifically for women veterans and female military spouses or partners, the V-Wise program helps to guide these unique women entrepreneurs through the transition from a business idea or a skill set to a successful, thriving business endeavor.
Through educational events, online training, and ongoing mentorship, this program offers a great opportunity for veteran women and military spouses to network with and learn from other women in business who share their unique perspective.
This program offers entrepreneurship training to service-disabled veterans who are looking to start or currently own a small business.
The SDVETP is funded through grantees—including the Institute for Veterans and Military Families, the Spears School of Business at Oklahoma State University, St. Joseph’s University, and Dog Tag Inc.
The VFPETP offers training to veteran-owned and service-disabled veteran-owned businesses around the U.S. who are interested in (or currently are) pursuing federal procurement.
Through the SDVOSBC program, the SBA gives procuring agencies the authority to set aside contracts for exclusive competition amongst veteran-owned businesses. You can learn more about this program here.
Finally, through the Office of Veterans Business Development, the SBA seeks to maximize the availability of business development education and tools for the veteran community, providing tailored programs that are specific to the needs of veterans, service-disabled veterans, and their dependents or survivors.
You can visit the Office of Veterans Business Development’s online headquarters to learn more about the wide variety of in-person and online resources made available for the veteran business community.
This being said, through all of these programs, the SBA does more for veterans than just offering VA SBA loans. In addition to giving veteran-owned businesses funding options, the SBA also provides educational and practical support and resources to make sure that veterans are successful in starting and continuing their small businesses.
Now that you have a better sense of how the SBA supports veteran-owned businesses—including VA SBA loans and beyond—let’s break down everything you need to know to qualify for one of these loans.
Overall, the VA SBA loan requirements that you’ll need to meet will vary based on a number of factors—namely, the type of loan you’re applying for and the lender you’re working with.
This being said, however, there are specific requirements you’ll need to meet if you want to qualify for the Veterans Advantage Program, as well as general SBA loan requirements that will be worth considering if you’re looking to apply for one of these VA SBA loans.
First and foremost, to be eligible for a VA SBA loan and Veterans Advantage Program benefits, you’ll need to meet the following qualifications:
Your business must be 51% or more owned and controlled by an individual or individuals that fall into one or more of these groups:
If you meet these qualifications, you’ll be able to access the reduced fees associated with the Veterans Advantage Program—if your business can qualify for an SBA loan. This being said, however, to prove that you meet these VA SBA loan requirements, you’ll need to submit certain documentation with your SBA loan application to confirm your eligibility:
If you’re a veteran, you’ll need to include a copy of Form DD 214. This form is to be used for any military member other than those that are dishonorably discharged.
If you’re a service-disabled veteran, you’ll need to include a copy of Form DD 214. A service-disabled veteran can also provide documentation from the DVA stating that the veteran has been determined to have a service-connected disability.
If you’re a transitioning active duty military member you’ll need to include DD Form 2, “U.S. Armed Forces Identification Card (Active),” or DD Form 2, “Armed Forces of the United States Geneva Conventions Identification Card (Active).”
DD Form 2648 (Active Duty Military member) or DD Form 2648-1 (Reserve Component member) are also accepted.
If you’re a Reservist or National Guard member, you’ll need to include DD Form 2, “Armed Forces of the United States Identification Card (Reserve).”
If you’re the current spouse of a veteran, you’ll need to provide evidence of your status as a current spouse (like a marriage license) and veteran’s Form DD 214.
If you’re a current spouse of a transitioning active duty military member, current Reservist, or National Guard member, you’ll need to provide DD Form 1173, “Department of Defense Guard Reserve Family Member Identification Card,” and evidence that you’re a current spouse.
In this case, you’ll need to provide paperwork and documentation from the DOD or DVA proving your status.
If you’re a veteran but don’t have access to or can’t locate your Form DD 214, you may submit a Certification of Military Service or NA Form 13038 instead.
Many of the above-listed categories also require you to submit a photocopy of your military ID. If you don’t want to submit a copy of your military ID, you may submit a statement of service. A statement of service must be signed by or under the direction of the adjutant, personal office, or commander of the unit or higher headquarters you’re attached to.
Different military offices and branches use different forms, so there’s no one statement of service. These statements are typically on military letterhead but can be printed from a computer.
The statement of service must show:
For reservists and guard members, the statement of service must show that the applicant is “active” and not in a control group or inactive.
A special note for service-disabled veterans: You’ll want to be sure to make a note of your service-disabled status within your VA SBA loan application, as the SBA offers additional programs and benefits specifically for service-disabled veterans.
By meeting the qualifications listed above and providing the necessary documentation, you’re showing the SBA that you’re eligible for veteran-specific benefits. This being said, however, you’ll also need to meet requirements to complete your application and show that your business is qualified to receive an SBA loan.
Generally, you should:
Once again, although some of the requirements will vary based on the type of loan you’re applying for, as well as the lender you’re working with, you can expect to need to provide the following with your application:
So, at this point, you may be wondering how to apply for a VA SBA loan.
Ultimately, based on the information we’ve reviewed thus far, you should have most of the background information you need to complete this process. With this in mind, however, the process can be broken down into a few simple steps:
At the end of the day, although the term “VA SBA loan,” is a little misleading—the SBA supports veteran-owned businesses in a variety of ways.
This being said, if you’re looking for an SBA loan for your veteran-owned business, you’ll want to consider the 7(a) loan program, as you can receive reduced or waived guarantee fees through the Veterans Advantage Program with these loans.
Additionally, whether or not you decide to apply for a VA SBA loan, you’ll certainly want to explore the classes, training programs, and other resources the SBA offers for veterans.
Of course, you may decide that an SBA loan is not right for your business, or you might not be able to qualify. In this case, you might start exploring some of the other options for veteran business loans to find the financing your small business needs.
Randa Kriss is a senior staff writer at Fundera.
At Fundera, Randa specializes in reviewing small business products, software, and services. Randa has written hundreds of reviews across a wide swath of business topics including ecommerce, merchant services, accounting, credit cards, bank accounts, loan products, and payroll and human resources solutions.