Overview of Veteran Business Loans
If you or your spouse is a former member of the military, you may be interested in a veteran, or VA business loan to start or expand your business. Unfortunately, although the Department of Veteran Affairs (VA) provides home loans, they don’t actually offer small business loans.
Luckily, however, there are still a number of business loan options designed specifically for veterans—including SBA loans and other commercial products. In this guide, we’ll walk you through everything you need to know about these loans, commonly referred to as VA business loans or veteran business loans—breaking down how to qualify, your top options, and how to apply.
The Ultimate Guide to Veteran Business Loans
VA Business Loan Requirements
First and foremost, it’s again important to understand that the Department of Veteran Affairs doesn’t actually offer business loans for veterans.
Instead, your VA small business loan options will, in some respects, be similar to any other business owners (which we’ll discuss in more detail below). Therefore, if you’re wondering how to qualify for a VA business loan, the requirements you’ll need to meet will largely depend on the lender you’re working with.
This being said, however, in addition to meeting some of the more general business loan requirements, you’ll also need to prove your veteran status. Generally, business owners in the following categories are eligible for VA business loans:
- Active duty military service members
- Honorably discharged veterans
- Active reservists or National Guard members
- Current spouses of any veteran, active duty service member, reservist, or National Guard member
- Widowed spouses of a service member who died in service or from a service-related disability
Veterans who received a dishonorable discharge are not typically eligible for VA small business loans.
So, if you fall under one of these categories and plan to apply for a veteran business loan, you’ll likely need to provide the applicable documentation to prove your status:
Military Economic Injury Loans
You’ll need a copy of DD Form 214. This form is to be used for any military member other than those that are dishonorably discharged.
You’ll also need a copy of DD Form 214. A service-disabled veteran can also provide documentation from the Department of Veterans Affairs (DVA) stating that you’ve been determined to have a service-connected disability.
SBA 8(a) Service-Disabled Veteran-Owned Business Contracting Program
You’ll need DD Form 2, “Armed Forces of the United States Identification Card (Reserve).”
7-Eleven Veterans Franchising
You’ll need evidence of your status as a current spouse and the veteran’s DD Form 214.
Hivers and Strivers
You’ll need DD Form 1173, “Department of Defense Guard Reserve Family Member Identification Card,” and evidence that you’re a current spouse.
SBA Express Loan Program
You’ll need paperwork and documentation from the Department of Defense (DOD) or DVA proving your status.
What to Do If Forms of Military ID Aren’t Available
If you’re a veteran but don’t have access to or can’t locate your DD Form 214, you can request a free copy online. You may also submit a Certification of Military Service or NA Form 13038 instead.
To qualify for a veteran business loan, you might also have 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:
- The service member’s full name
- The SSN or last four digits of SSN of the service member
- The entry date of active duty or reserve guard duty
- The duration of lost time for active duty
- The name of the person providing this information
A special note for service-disabled veterans: Make sure to make a note of your service-disabled status if you’re applying for an SBA loan, as the SBA offers additional programs and benefits specifically for service-disabled veterans.
How to Apply for a VA Small Business Loan
Now that you have a sense of the unique VA business loan requirements you’ll need to meet when applying for financing, let’s break down the application process in greater detail.
Overall, just as you’ll have to meet general requirements to qualify for a veteran business loan, the steps for applying and getting a VA small business loan aren’t too different from any other type of business financing.
In short, some of the processes will vary based on the lender you’re working with, but much of the loan application will look the same—with lenders emphasizing the same factors, such as credit history, time in business, and business revenue. It’s all about waiting for the right time to apply and putting your best foot forward in your loan application.
With this in mind, here’s how to apply for a VA small business loan:
- Personal and business bank statements
- Personal and business tax returns
- Financial statements
- Personal and business credit score information
Step 1: Determine how much money you need and what you're using it for.
It’s easy to say, “I need $50,000,” but many business lenders—and veteran business loan lenders—will want to know why you’re applying for that specific amount of capital, and what you’re going to use it for. Depending on how you’re intending to use the funds, you might qualify for one lender over another.
Additionally, this is particularly important if you’re looking for a VA business loan to start a business—as startup funding can be much more difficult to qualify for.
Plus, certain loan programs, especially within SBA loans—are better suited for specific purposes.
Moreover, as you’re going through the application process, it’s important to ensure that any loan you’re asking for is one that you can actually afford. This being said, a VA business loan calculator can help you estimate your monthly payments based on your loan amount and interest rates.
Use our term loan calculator to estimate the potential cost of your small veteran business loan.
Step 2: Get your loan documents in order.
Once you figure out why you need the funding and how much you can realistically afford, you’ll need to put time into organizing your loan documents.
As we explained above, one of the most important VA business loan requirements will be your documentation proving your military status. In addition, you’ll likely need common loan qualification documents including:
Ultimately, the documentation you need will vary by lender, but it’s helpful to get the basics sorted out ahead of time. Moreover, if you decide to apply for a VA small business loan through the SBA, you’ll have to prepare more extensive SBA loan requirements.
Step 3: Evaluate your loan options and apply.
With your VA business loan requirements in order, the next step will be to evaluate your options (as we’ll explore below).
Whether you decide to apply for an SBA loan, bank loan, or loan from an alternative lender, you’ll want to ensure that you follow the lender’s guidelines and submit a complete and accurate business loan application.
Doing so will not only increase your chances of qualifying, but also speed up the underwriting process.
Step 4: Choose the best loan offer and close on your loan.
Once you’ve submitted your VA business loan application and been approved, you’ll want to choose the best option for your business.
In almost every case, the best option for your business will be the least expensive option. To this point, however, it’s worth noting that veteran business owners with struggling credit tend to only qualify for steep interest rates. If you’re in this scenario, you might not many options, but you should still shop around with a few lenders.
This being said, before you sign any business loan agreement, you’ll want to review it thoroughly, and perhaps even consult a business attorney.
You should look into the fine print for any fees that might come with your loan and the loan term that you’re agreeing to. You want to be fully confident before going into your loan that it’s affordable for your business (fees included) and that the right repayment structure for you.
Best Veteran Business Loan Options
With all of this information in mind, let’s walk through some of the best options you can consider when you’re looking for a VA small business loan.
Once again, it’s worth remembering that many of your loan options will be the same as any other business. These six options, below, however, each have a unique veteran-specific component.
1. Military Reservist Economic Injury Disaster Loans (MREIDL)
First and foremost, the Military Reservist Economic Injury Disaster Loan (MREIDL) program is run by the U.S. Small Business Administration (SBA). Unlike other SBA loans, which are offered through banks and direct lenders, the SBA provides loans of up to $2 million directly to veterans through the MREIDL program.
Not intended for all veterans, however, this veteran SBA loan program is geared particularly toward small businesses that are unable to meet their operating expenses because the owner or an essential employee was called to active military duty. The loan helps small business owners cover their expenses until the employee can return.
If you own a small business that has struggled financially as a result of your active-duty military service or that of a key employee, consider applying for this program. You can qualify for a low-interest business loan (the current interest rate is 4%) that may be able to help your business get back on its feet.
The loan is available to businesses that apply between when the owner or employee is called to active duty and within one year of their release from active duty. The program allows for repayment terms up to 30 years. However, keep in mind that the program requires collateral for loans over $50,000.
2. SBA 7(a) Loans
The SBA 7(a) loan is the most popular type of SBA loan for small business owners. This loan, open to both veterans and non-veterans, offers up to $5 million to finance a variety of business needs. SBA 7(a) loans have long repayment terms—as long as 25 years for real estate—and low interest rates.
This being said, although the SBA 7(a) loan program isn’t exclusive to veterans, it does include the “Veterans Advantage Program,” which is a unique added benefit for veteran-owned businesses.
Through the Veterans Advantage program, the SBA waives the upfront guarantee fee for veterans for 7(a) loans of $125,000 or less. They offer a 50% reduction of the guarantee fee for SBA 7(a) loans greater than $125,000 and going up to $350,000. The SBA also provides counseling and training to qualifying borrowers, which can aid the transition from military life to entrepreneurship.
3. SBA Express Loans
Another SBA loan program that’s a good choice for veterans is the SBA Express Loan program. SBA Express Loans are a subprogram within the 7(a) loan program, offering loans up to $350,000 and fast approval decisions.
This being said, it’s important to note that if you’re looking for the Patriot Express loan program—which was an SBA loan program exclusively for veterans—it was terminated in 2013. The SBA Express loan, however, is certainly one of the best alternatives to the Patriot Express loan.
Both veterans and non-veterans can apply for SBA Express Loans, but the SBA also offers the Veterans Advantage program for these loans—through which it waives the upfront guarantee fee for veterans who qualify. Normally, this fee is 2% to 3% of the loan amount. Veterans, reservists, national guard members, and spouses are eligible to have the fee waived.
One potential drawback for borrowers of the SBA Express Loan is that the maximum funding amount you can receive is $350,000. However, veterans can apply for and receive funding through this loan program.
Consult our guide for more information about VA SBA loans.
4. Veterans Business Fund
The Veterans Business Fund (VBF) is an up-and-coming resource for veterans who are seeking funding to open or expand a small business or purchase a franchise business.
This 501(c)(3) nonprofit relies on donors to provide funding for VA business loans at favorable terms. According to the site, this small business loan for veterans will be non-interest bearing to the extent permitted by law. The loan terms are for a period of five years or longer.
Veterans won’t be able to finance their business entirely through VBF, as the program will offer loans only in conjunction with the business owner’s personal equity. Generally, the applicant must bring 50% of their own funds to the table, and VBF will extend the remaining half as a loan.
Application cycles depend on VBF’s own fundraising efforts.
Next, as a veteran-owned and operated business, the lender StreetShares has a passion for funding veteran business loans.
This online lender provides a variety of different types of small business loans and business lines of credit. Although you don’t need to be a veteran to qualify for a StreetShares loan, a significant portion of their lending dollars goes to veteran-owned businesses.
As an online lender, StreetShares has a strong focus on providing fast VA business loans.
They have a quick, 10-minute application process, and there’s no need to provide a ton of documents to qualify. You should, however, make sure that you meet their minimum eligibility requirements before applying.
You need at least one year in business, a 600 credit score, and $25,000 in business revenue to qualify for a StreetShares term loan or line of credit.
Finally, you might consider Accion as one of the best options for VA business loans.
Accion is a nonprofit organization dedicated to helping small businesses grow and thrive, particularly those in underserved markets—including women, minorities, and veterans.
Through Accion, you can quickly and easily apply for a loan, whether online, in-person, or over the phone.
With Accion, you can access loans of up to $1 million, with interest rates varying based on your qualifications and location.
Overall, Accion has flexible requirements and can work with startups, businesses with average credit, and those within a variety of industries. Accion is also a particularly noteworthy microlender if you’re looking for a smaller amount of financing.
Moreover, Accion can help you connect with peers, local organizations, and banks to help you through your financing and general business processes.
The Bottom Line
At the end of the day, if trying to determine how to qualify and apply for a VA business loan, the process is fairly straightforward. When it comes down to it, other than obtaining the necessary military identification, the remainder of the process will mirror any other type of business financing.
Use our guide for more information on starting and financing a veteran-owned business.