Veterans help fuel American small businesses. However, they face significant challenges that can make it more difficult to grow their businesses and get financing. Here we’ll share options for veteran business owners to get the help and funding they need to start and grow their businesses.
First, a few important observations, according to SCORE’s report, The Megaphone on Mainstreet: Unsung Entrepreneurs:
- Veterans represent 9.1% of all American small businesses and generate $1 trillion annually in receipts.
- Veterans are 35.4% more likely to start their businesses to supplement their primary income.
- They are 23.3% more concerned than non-veterans about financing.
- Nearly 42% of the veteran business owners surveyed have a service-related disability. Many note the obstacles they face due to disability or bias.
One bright spot? That same report found that online lenders approved veterans’ requests for funding twice as often as non-veterans.
Qualifications for Veteran Business Loans and Grants
Generally, to qualify for small business loans or other government opportunities for military veterans, you must fall into one of the following categories:
- Honorably discharged veterans (some grants may specify a particular conflict or time period, e.g. post-9/11 era)
- Service-disabled veterans
- Active duty military service member participating in the military’s Transition Assistance Program (TAP)
- Reservists and National Guard members; or
- Current spouse of any veteran, active duty service member, or any reservist or National Guard member; or widowed spouse of a service member who died while in service or of a service-connected disability
Small Business Loans for Veterans
The good news is that there are several financing programs available, both geared toward veterans and others generally available to small business owners.
An SBA loan should be on your list of loan options to consider for your veteran-owned business. These loans carry attractive rates and terms for those who qualify.
The U.S. Small Business Administration is not a lender (with the exception of SBA Disaster Loans), but instead guarantees loans made by participating lenders, such as banks and non-profit Community Development Financial Institutions (CDFIs).
If you’ve seen the term “VA SBA loan,” you may think that the VA makes SBA loans, but it does not. In fact, there is no VA SBA loan program. In the past, there was a program specifically for veteran entrepreneurs called the Patriot Express Pilot Program. However, that program was discontinued on December 31, 2013. It provided loans of up to $500,000 to veterans and their spouses.
There are a number of SBA loan programs that are available to all qualifying small business owners—including veterans—and there are some special breaks on fees for veteran business owners. The main SBA loan programs are:
- SBA 7(a) loans
- SBA Express loans
- 504 CDC loans
- SBA Microloans
These loans can be used for working capital, business expenses, and real estate purchases. You’ll find a complete guide to SBA loans here.
You may have heard of the SBA Veterans Advantage program. In 2014, the Obama Administration waived the up-front, one-time loan guaranty fee for veteran loans under the SBA Express program (loans up to $350,000) from January 1, 2014, through the end of fiscal year 2015. This program was known as Veteran’s Advantage. While that program expired, subsequent legislation provided fee relief for veteran-owned businesses. Most recently, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) essentially permanently dropped that fee for SBA Express loans to zero. This benefit makes these loans even more attractive for qualified borrowers.
If you are interested in SBA loans, you’ll need to work with a lender that is approved by the SBA to make them. Keep in mind that while lenders must ensure these loans meet the SBA’s minimum requirements they may also have their own requirements, as long as they don’t discriminate against borrowers on a prohibited basis. That means you may have to shop around a bit to find the right SBA lender to work with.
Military Reservist Economic Injury Disaster Loan Program (MREIDL)
The Military Reservist Loan program falls under the SBA’s disaster loan umbrella, so these loans are made by the SBA. With MREIDL, if an essential employee has been called to active duty, a small business may qualify for one of these loans for up to $2 million. (The SBA will calculate the loan amount based on economic injury.) These are low-rate loans with terms of up to 30 years.
Funds from this loan program can be used to “provide the amount of working capital needed by a small business to pay its necessary obligations as they mature until operations return to normal after the essential employee is released from active military duty.” Learn more and apply at SBA.gov.
Hivers and Strivers Angel Fund & Veteran Capital for Veterans
Veterans looking for investment capital, rather than a loan, should check out the Hivers and Strivers Angel Fund. It has invested solely in businesses led by veterans and many of the entrepreneurs they have funded are service academy graduates. Moving forward, Venture Capital for Veterans will continue to invest in businesses led by those who have served in America’s Armed Forces so that’s where you will go to apply.
Investments range from $200,000 to $500,000. Among the requirements, your business must be beyond the concept stage, positioned for significant growth, and be led by a veteran
Does the VA Offer Small Business Loans?
While you might think that the Office of Veteran Affairs might offer small business loans to vets, that’s not the case. You’re better off looking into one of the loans mentioned above or one of the other options below.
4 Other Financing Options for Veteran-Owned Businesses
As we mentioned earlier, you will want to cast a wide net when looking for small business financing. In addition to SBA loans, consider these options:
1. Business Credit Cards
Business credit cards can be an appealing option for startups as well as more established businesses that want the flexibility of a credit line they can tap when needed. The Megaphone on Main Street report cited earlier found that Veteran owners are more likely to tap business credit cards at a rate that is 26.3% greater than non-veterans.
Crowdfunding lets you raise money online from backers who are interested in supporting small businesses. There are several types of crowdfunding available, including:
- Rewards-based: You offer a tangible reward for those who contribute to your campaign
- Equity-based: You give others the opportunity to invest in your company, often by offering shares in your company.
- Lending-based: You borrow money that will be repaid back.
- Donor-based: You solicit donations from those who want to support your business.
Finding the right platform and crafting an effective campaign takes work, but the fact that you have served in the U.S. military may be appealing to some backers on these platforms.
If your business needs a smaller amount of funding (usually $50,000 or less) you may be able to get a microloan through one of many Community Development Financial Institutions (CDFIs) or other nonprofit organizations. The SBA also has a microloan program, where the average loan amount is about $14,000.
Many microlenders strive to assist traditionally disadvantaged entrepreneurs, including veterans, so you may find a warm welcome. It will take some research to find the right lender, though, as these organizations don’t typically have large marketing budgets. Learn more about how to get a microloan here.
4. Online Loans
Good news here: The Megaphone on Mainstreet report found that online lenders approved veterans’ requests for funding twice as often as non-veterans. There are many online small business lenders offering a variety of different types of financing options ranging from long- and short-term loans to lines of credit to equipment financing.
Small Business Grants for Veterans
Grants are coveted by small business owners because those funds don’t have to be repaid. Searching for grants can take as much work as searching for new clients or customers, however, and the outcome is never guaranteed. So while searching for small business grants for veterans may be part of your strategy to fund your business, don’t overlook other sources.
Here are several sources for veteran grants worth investigating:
This is the official site for searching for government grants. It is free to use. Federal government grant opportunities will be listed at Grants.gov. There are numerous opportunities listed so plan to take time to review grant opportunities to see whether they may apply to your business.
This site continually updates available grants, and you can search by many different criteria. You’ll want to spend time researching as many as possible to identify opportunities that may apply. There is a subscription fee to access the Grantwatch database and you can join for a short period of time to see if it’s a good fit.
The StreetShares Foundation presents the Military Entrepreneur Challenge in partnership with the Samuel Adams Brewing the American Dream program. This competition will choose 8-15 finalists and then award prizes of $15,000 (first place), $6,000 (second place), and $4,000 (third place). Learn more and enter here.
Nav’s Small Business Grant
Nav understands the challenges of starting, financing, and running a small business. To give small business owners a lift, Nav offers a quarterly $10,000 small business grant. While you don’t have to be a veteran to apply, veterans have participated and been awarded grants in this competition.
Free Help For Veteran-Owned Businesses
While it may be challenging to secure free money for your business, you can get free expert help from several organizations that want to help veteran business owners succeed. Here are several you can tap:
Veteran Business Outreach Centers
A program of the U.S. Small Business Administration, the Veterans Business Outreach Center (VBOC) program is designed to provide entrepreneurial development services such as business training, counseling, and resource partner referrals to transitioning service members, veterans, National Guard & Reserve members, and military spouses interested in starting or growing a small business.
Free services include pre-business plan workshops, business plan preparation, comprehensive feasibility analysis, entrepreneurial training and counseling, mentorship, and more. Find your VBOC here.
Launch Lab Online
Launch Lab Online is a program of Bunker Labs. It offers an all-online educational platform with a gamified, interactive way to get an entrepreneurship education—from anywhere in the world, on your time, at your own pace.
Office of Small & Disadvantaged Business Utilization
The Department of Veterans Affairs offers potential assistance to businesses owned by economically disadvantaged individuals through its Office of Small and Disadvantaged Business Program. Their goal as a department is to provide these businesses with as many government contracts as possible. While these are not government grants or loans, these contracts could mean money in the bank if your business qualifies.
Be sure to register with their office. Once your business has been verified, it will be added to their directory of small businesses and could be called upon for a government contract.
Frequently Asked Questions (FAQs)
How much money can you get with a VA business loan?
VA loans generally refer to loans guaranteed by the Veteran’s Administration (VA). Many veterans are familiar with the VA home loan program for mortgage loans to qualifying veterans. However, there are no VA small business loans made through the Veteran’s Administration. The VA does not make or guarantee small business loans, unfortunately.
Are there grants for veterans to start a business?
The vast majority of small business grants are made to existing businesses and not to startups. To get a grant, you will generally need to have a business that is already producing a product or service to apply. As a reminder, neither the federal government nor the VA offer grants to start a business.
Can I get a veteran business loan with bad credit?
Although veteran small business owners can find financing with a less-than-perfect credit profile, expect to pay higher interest rates with shorter terms. To give you an idea of what’s available outside the SBA, here are some things to consider.
- Qualifying for a conventional bank loan will usually require a personal credit score above 680 (preferably into the 700s).
- Online lenders typically require a personal credit score of 600 or better (although some will go lower).
- Most non-traditional lenders, like online lenders, will require at least a year in business (although there are some that will accept six months), $100,000 in annual revenue, and sufficient cash flow to service debt.
- Specifically identified collateral is not a requirement for many non-traditional lenders, but they will often require a general lien and a personal guarantee.
You should expect that a strong personal and business credit profile will be necessary to get the best interest rates and most favorable terms when looking for a small business loan.
In addition to financing, with a weak credit profile, you might want to consider crowdfunding as an option if your business or product has enough appeal to attract the support of the crowd. There are crowdfunding options that don’t require a strong credit profile and are solely based on whether or not you can attract the crowd to your business idea.
VA Business Loans and Grants Summary
While funding via grants or small business loans is often top of mind for any small business owner, there are other resources that can help veterans looking to start a business or level up. Veteran-owned businesses can seek out their local Office of Veterans Business Development for various resources for veterans, including training programs for adjusting to civilian life, technical assistance, business training, and other tools that may not be available at traditional small business development centers.
They may also have more information on VA loans including VA business loans and eligibility, various grant programs, and ways to help your business dream get rolling.
If you dream of running your own business, invest time in finding out which veteran financial and small business resources can help with start-up costs and planning.