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According to the U.S. Small Business Advocate, veterans run nearly 2 million small businesses in the United States and employ nearly 5.3 million Americans. If you're a veteran looking to start or expand a business, you may be considering a small business loan.
There are several types of loans available, including loans from the SBA, traditional bank loans, and online financing. Each has different strengths and objectives, so be sure to consider all your options before accepting a loan.
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Types of small business loans for veterans
There are many business loans available for veterans in need of funds, including loans from the SBA, banks, credit unions, and online lenders.
1. SBA 7(a) Loans
SBA 7(a) loans provide flexible financing of up to $5 million for a variety of purposes, including purchasing or improving real estate, purchasing equipment and inventory, and obtaining working capital. 7(a) loans can also be used to refinance business debt, acquire another small business, or finance the acquisition of a partner.
There are many different types of 7(a) loans, including standard loans, working capital loans, and lines of credit. Depending on the type of loan and how the funds are used, the repayment period can be up to 25 years.
These loans are available to commercial business owners who have already exhausted other sources of financing. Apply to her SBA lender, such as a bank, and receive a loan offer based on your credit score, income, and other financial factors. As of November 2023, the interest rate on the offer cannot exceed his SBA maximum cap of 15%, but that maximum interest rate varies depending on the loan amount and type.
In the past, the Veterans Advantage program waived or reduced fees on 7(a) loans for veterans. However, that program ended in 2018. You can still pursue an SBA 7(a) loan, but you will have to pay regular loan fees, which may include origination fees.
2. SBA Express Loan
Although veterans are no longer eligible for fee discounts on other 7(a) loans, they can still qualify for fee waivers on one type of 7(a) loan, the SBA Express loan. Specifically, veterans do not have to pay upfront fees for Express Loans.
SBA Express loans provide up to $500,000 in financing with repayment terms of up to 10 years. Approval decisions can be obtained within 36 hours, but it may take longer to receive a loan.
Interest rates on SBA Express loans can be higher than interest rates on 7(a) loans. To qualify, at least 51% of your business must be owned by eligible veterans, active duty military, reservists, National Guard members, or eligible spouses.
3. Reserve Officer Economic Injury Disaster Loan
The MREIDL program may provide assistance if a company's “essential employees” are called to active duty in the National Guard or Reserves. This program offers low-interest loans of up to $2 million that can be used to cover expenses that can no longer be paid because an employee is called to active duty.
4. Bank and credit union loans
Business owners can obtain traditional small business loans from banks and credit unions. Loan amounts and interest rates vary depending on the financial institution, so we recommend that you carefully consider and compare the options. Some financial institutions offer interest rate discounts to existing customers.
Borrowing requirements also vary, but may require a credit score of at least 600 and a business that has been established for at least six months to two years or more. Lenders may also require that your business have at least $100,000 to $200,000 in annual revenue.
If you want to borrow from a credit union, you often need to become a member. Some credit unions are open to everyone, while others target people who live in a certain area or work for a particular employer. Some credit unions, such as Navy Federal Credit Union, are designed specifically for veterans and military personnel.
5. Online loans
There are also online lenders that offer small business loans to veterans and other business owners. The borrowing process takes place entirely online, but customers can often chat with his support by phone, web chat, or email.
Online lenders often have more flexible borrowing requirements than traditional banks and can often process veteran business loans more quickly. However, it's worth comparing offers from both traditional banks and online lenders to see which one offers the best interest rates and terms.
Other small business resources for veterans
There are a variety of other resources available to help veterans start and grow their businesses. Some useful programs include:
- From boots to business. SBA offers Boots to Business as part of the Department of Defense's Transition Assistance Program (TAP). We provide education and training for entrepreneurs.
- American Corporate Partners (ACP). ACP Group offers a year-long mentoring program to help veterans transition back into civilian life.
- Veterans Business Development Bureau (OVBD). Consider OVBD for training, mentoring opportunities, and workshops for business owners.
- Veterans Business Support Center. The Veterans Business Outreach Center can help you develop a business plan and provide counseling and mentorship services.
- Veteran Women Igniting Entrepreneurship (V-WISE). V-WISE Group provides business training resources to military veterans and entrepreneurial women.
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Frequently asked questions (FAQ)
How Much Business Loan Can a Veteran Receive?
The amount of a veteran's business loan depends on the type of loan and your financial situation. For example, SBA 7(a) loans are available up to $5 million, while SBA Express loans are available up to $500,000. Banks and online lenders have different limits, with some offering up to $150,000 and others offering up to $5 million.
What credit score is required for a VA small business loan?
Although the U.S. Department of Veterans Affairs (VA) does not offer small business loans, veterans may be eligible for loans from the SBA or other financial institutions. Some lenders will accept an individual's FICO score up to 500, but you'll likely need a good score of at least 670 to take advantage of better interest rates (an individual's FICO score ranges from 300 to 850).
For SBA 7(a) loans, lenders may check your FICO Small Business Scoring Service (SBSS) score, which ranges from 0 to 300. The minimum SBSS score for a 7(a) small loan is 155 at the time of financing. To publish.