Active-duty military, former members of the military, and their current spouses may be interested in a veteran business loan, often referred to as a VA business loan, to start or expand their business.
VA business loans aren’t offered by theDepartment of Veteran Affairs (VA). Instead, veterans and spouses can find small business loans through the SBA and commercial lenders.
In this guide, we’ll walk you through everything you need to know about veteran business loans, including how to qualify, how to apply, and your top options.
To receive a VA business loan, you’ll need to meet some of the more general business loan requirements, such as credit score, financials and time in business. Additionally, you’ll need to prove your veteran status. Generally, business owners in the following categories are eligible for VA business loans:
Veterans who received a dishonorable discharge are not typically eligible for VA small business loans.
If you fall under one of these categories and apply for a veteran business loan, you may need to provide a military ID or discharge papers, such as DD Form 214, to prove your veteran status.
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.
Now that you have a sense of the unique VA business loan requirements, let’s break down the application process in greater detail.
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:
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. A VA business loan calculator can help you estimate your monthly payments based on your loan amount and interest rates.
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. You may also 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. And if you decide to apply for a VA small business loan through the SBA, you’ll have to prepare more extensive SBA loan requirements.
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.
Ideally, you’ll have multiple loan offers to choose from and will need to decide which is best for you and your business. In almost every case, the best option for your business will be the least expensive option (typically the one with the lowest interest rate and fees). But veteran business owners with struggling credit tend to only qualify for steep interest rates. If you’re in this scenario, you may not have many options, but you should still shop around with a few lenders.
Before you sign any business loan agreement, review it thoroughly and consider consulting a business attorney.
Read 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 repayment structure is right for you.
With all of this information in mind, let’s walk through some of the best options for a VA small business loan.
As a reminder, many of your loan options will be the same as any other business. But the four options listed below each have a unique veteran-specific component.
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.
Previously the SBA offered the Veterans Advantage Program, which offered discounted or waived guarantee fees on 7(a) loans for veterans. However this program has since expired. The SBA does provide counseling and training to qualifying borrowers, which can aid the transition from military life to entrepreneurship.
Another SBA loan program veterans should explore is the SBA Express Loan program. SBA Express Loans are part of the 7(a) loan program and offer loans up to $350,000 with fast approval decisions.
The SBA Express loan is one of the best alternatives to the Patriot Express loan—which was an SBA loan program exclusively for veterans. The Patriot Express loan program was terminated in 2013. Both veterans and non-veterans can apply for SBA Express Loans, but the SBA waives the upfront guarantee fee on SBA Express Loans 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.
Consult our guide for more information about VA SBA 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 online, in-person, or over the phone. 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.
This loan option, administered through the SBA, has a specific use case: Businesses that have an essential employee who is a military reservist called to active duty.
Unlike other SBA loans, which are offered through banks and direct lenders, the SBA provides loans of up to $2 million through the MREIDL program.
This SBA veteran loan program is geared particularly toward small businesses that are unable to meet their operating expenses because 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 program allows for repayment terms up to 30 years. Collateral is required for loans over $50,000.
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.
Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera.
Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.