Best VA Small Business Loans

According to the 2012 U.S. Census Bureau’s Survey of Business Owners, 2.52 million businesses in the United States were majority-owned by veterans, and 99.9 percent were small businesses.

Veteran-owned companies had annual payrolls of 195 billion dollars, employing over 5 million people.

Interestingly, almost all of these businesses fell into two distinct industries--construction on the one hand, and professional, scientific, and technical services on the other.  

Most of these firms are small, with one to nineteen accounting for a little over 80 percent.

These figures were gathered by the Small Business Administration (SBA) which has made this segment of the market a research priority since 1999

 Veterans Entrepreneurship and Small Business Development Act, as part of its advocacy for veteran entrepreneurship.

What Is the Secret to the Success of Veteran-Owned Businesses?

The reasons for veteran entrepreneurship care manifold, though some financial experts attribute veterans' business successes to lessons learned in the military: the ability to thrive in small groups and unique situations, flexibility, leadership skills, teamwork, competitive spirit, mission-orientation, and focus.

For many veterans, transitioning back to a regular civilian lifestyle can be difficult. Embracing the development and sustainability of their own small business may be a response to finding that working a simple 9-to-5 job lacks something of the challenging nature of the military.

In fact, even businesses that aren’t veteran-owned have turned to ex-service personnel in their hiring practices, creating military programs for active recruitment of veteran personnel.

This has come as a result of seeing how well military talent and leadership lends itself to business objectives, thanks to above-average performance levels.

2 Steps to a VA Small Business Loan

All small businesses will likely require outside funding during some stage of their development. Influxes of cash may be needed to purchase equipment, deal with short-term expenses, or hire new employees.

Obtaining finance may be more difficult for veterans, however, since they may have gaps in their financial history due to time in active duty.

1. Determine Your Need

When you start looking for a VA small business loan, the first thing to figure out is what your greatest need is. Are you a startup, or are you growing so fast you need capital for expansion? Do you have a mountain of unpaid invoices dragging you down financially? Is it working capital that you need?

Setting your goals and priorities (including approximate budgeting), will make it easier to work on the next step, which is deciding the type of loan most suited to your need.

2. Which VA Small Business Loans Are Available for Me?

As you read about small business loan programs designed for veterans, you’ll find that the Small Business Administration (SBA) holds a prominent place in most lists. This makes sense, as its Office of Veterans Business Development is dedicated to maximizing the SBA’s programs, creating opportunities for veterans, service-disabled veterans, reserve component members, and their various dependents and survivors.

SBA Loan Options for Veterans

SBA resources designed specifically for veterans include the Entrepreneurship Bootcamp for Veterans (EBV) program, government certification as a veteran-owned business, and the Small Business Administration's (SBA) Boots2Business.

The SBA also offers three types of so-called VA loans, though the money does not originate from the Veterans Administration. These three loans are actually loan guarantees that the SBA provides to veterans and their spouses, with special benefits through the Veterans Advantage program. For loan products, the SBA supports veterans by providing access to business counseling and training, as well as capital and business development opportunities through government contracts.

SBA 7(a): This loan provides up to $5 million in funds for both veterans and non-veterans—however, with the Veteran’s Advantage program, there are no upfront guaranty fees for loans $125,000 and under, and a fifty percent discount for loans over that amount. The funds from these loans can be used for working capital, start-up costs, real estate or equipment purchases, inventory, business expansion, contracting, setting up the business for possible deployment, recovery from declared disasters, or hiring business management personnel.

SBA Express Loan: This loan is open to both vets and non-vets, but again, the Veteran’s Advantage Program waives all guaranty fees. Borrowers can access up to $350,000 in funds. The SBA Express can be used for all the same purposes as the SBA 7 (a).

Military Reservist Economic Injury Disaster (MREIDL) Loan: This loan offers working capital to businesses whose principal owner has been called up for military service, resulting in the company being unable to meet its obligations.

SBA 8(a) Service-Disabled Veteran-Owned Business Contracting Program: Though technically not a loan per se, this program aids small business owners who have been harmed in the line of duty to obtain a specific amount of government contracts.

Alternative Lenders

Many veterans may find that obtaining small business loans is a challenge, forcing them to submit more applications than the average consumer, while generally getting approved for less money than they were looking for.

According to a report from November 2018, published jointly by the SBA and the Federal Reserve Bank of New York, there may be several different reasons why veterans seem to have to jump through hoops to get approval for their small business loans.

Veterans usually apply for small loans of $100,000 or under, which aren’t preferred by big banks. In addition, the military lifestyle itself may make building a solid credit history next to impossible.

It may also be possible that not knowing enough about the resources available to them may also make it difficult to locate the opportunities for veterans. For instance, PenFed Foundation, in cooperation with the PenFed Credit Union, launched an initiative in April 2018 to provide seed capital for veteran-owned startups.

Given the particular needs of our country's service members, and also the special programs and assistance for which they may qualify, we've compiled this list of the best small business loan providers for veterans. We encourage you to get quotes from several lending institutions, and not limit yourself to veteran-specific programs.

Most financial institutions provide access to different types of small business loans with varying terms and qualifications. Traditional banks may be best suited to larger loans, good for creating significant investment in your business.

Alternative lenders can be excellent choices for getting money fast, or if you’re finding it difficult to meet the requirements of more traditional lenders. Alternative lenders can also be better for borrowers looking for a small amount that’s still larger than a microloan.