The Ultimate Guide to SBA Loans for Veterans

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

• Types of Loans
• Other SBA Resources for Veterans
• Qualification Requirements
• How to Apply

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.

With this in mind, and as we’ll explain in greater detail below, the benefits that veterans can receive with particular SBA loans are available through what’s called the Veterans Advantage program.

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:

• The SBA waives the guarantee fee for 7(a) loans of $125,000 or less
• For loans greater than $125,000 and up to $350,000, the SBA offers a 50% reduction of the guarantee fee

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.

With this in mind, however, MREIDLs are a worthwhile option for veteran-owned businesses who are experiencing this specific economic situation.

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:

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:

• Veteran (not dishonorably discharged)
• Service-disabled veteran
• Active duty military member participating in the Transition Assistance Program (TAP)
• Reservist
• National Guard member
• Current spouse of a veteran, active duty service member, reservist, or national guard member
• Widowed spouse of a service member who died while in service or of a service-connected disability

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:

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:

• Be a for-profit operation located in the U.S.
• Meet the SBA definition of a small business
• Have exhausted other financing options
• Have at least two years in business
• Have invested your own time and equity into the business
• Have great personal credit (ideally 700 or above)

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:

• Basic personal information
• Basic business information
• Personal and business tax returns
• Personal and business credit scores
• Bank statements
• Business debt schedule
• Collateral or SBA personal guarantee
• Legal and contractual documents

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:

1. First, you’ll need to decide which type of VA SBA loan will meet your needs and therefore, which one you want to apply for.
2. Next, unless you’re applying for a Military Reservist disaster loan, you’ll need to find an SBA lender to work with.
3. Then, you’ll want to gather all of your documentation and complete the actual application with your lender.
4. Once you’ve submitted your application, you’ll want to make sure that you answer any questions and provide any additional documentation that your lender requests—this will help speed up the underwriting process.
5. If you receive a loan offer, you’ll want to review the agreement and make sure that you understand all of the terms before completing the closing paperwork.
6. After you sign the agreement, you’ll work with the lender to finish closing the loan—and then you’ll be on your way to receiving your funds.

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.