We don’t always realize or appreciate the important work many veterans assume after they leave military service. Many start small businesses, creating jobs and opportunities for their families as well as for others. In fact, just shy of 10% of all small businesses are owned by veterans and vets are 45% more likely to be self-employed than non-veterans.
If you’re a veteran with a growing small business, an SBA loan can help you take it to the next level. And as a veteran, you may be eligible for reduced fees (as little as zero!) for one of these loans.
Under the Veterans Entrepreneurship Act of 2015, up-front guaranty fees for SBA Express loans approved on or after October 1, 2015 through September 30, 2016 are set to zero for qualified businesses owned by a veteran and/or the spouse of a veteran.
And under SBA Veterans Advantage, fees for many 7(a) loans (other than SBA Express) approved through September 30, 2016, are reduced by up to 50%. Specifically:
The up-front guaranty fee for 7(a) loans (other than SBA Express) of $150,001 up to and including $5,000,000 approved to qualified small businesses (see below) will be reduced by 50%, as follows:
a. For loans with a maturity in excess of 12 months:
i. For loans of $150,001 to $700,000: 1.5% of the guaranteed portion;
ii. For loans of $700,001 to $5,000,000: 1.75% of the guaranteed portion up to $1,000,000 PLUS 1.875% of the guaranteed portion over $1,000,000; and
b. For loans with a maturity of 12 months or less: 0.125% of the guaranteed portion.
These fee reductions are available to businesses that are at least 51% owned and controlled by one or more owners who are in the following groups:
- Veterans (other than dishonorably discharged);
- 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.
Here are some frequently asked questions about this program:
Where can I get one of these loans?
SBA loans are made by banks, credit unions or certified development companies. A lender approved under the Preferred Lender Program will have demonstrated experience working with SBA loan applicants. You can use the SBA Linc tool to connect with lenders.
What do I need to qualify for an SBA 7(a) loan?
There are several different programs that fall under the SBA 7(a) loan umbrella. This guide to SBA loans explains at a glance the basic qualifications required.
What are the interest rates on these loans?
Interest rates may be fixed or variable, but they cannot exceed the rates allowed by the SBA. Because the SBA insures a significant portion of the loan, rates are often lower than those available elsewhere.
I am a vet and want to start a business. Where can I go for training and assistance?
A great place to start is with your Veteran’s Business Outreach Center. The mission of the VBOC is to “help create, develop, and retain veteran-owned small business enterprises.” VBOC’s provide training, counseling and mentoring and can help with creating a business plan, developing a feasibility study and more.
I am a service disabled vet, and my credit isn’t perfect. Will that stop me from getting a loan?
Don’t automatically assume you can’t qualify. You will generally need a minimum FICO SBSS score of 140 to pass the initial screening for loans under $1 million, however, so it would be a good idea to check that score as soon as possible. Currently the only place to get this score is through Nav’s premium plus service.