The road to small business loans for veterans is invaluable. However, even the most squared away veterans may find the transition from service life to the civilian side challenging. Some veterans struggle to transition to typical 9-5 occupations after their time in the service of their country.

As a result, many choose to be entrepreneurs and join the community of veteran-owned businesses. A community spanning about 5.9% (337,934) of all companies, according to a 2019 Annual Business Survey.

These businesses boast an estimated $947.7 billion in receipts and approximately 3.9 million employees. So it’s no wonder that veteran business loans are highly sought after.

Here we will take a look at some elements around business funding options, including:

  • What is a V.A. Loan?
  • Small Business Loan Eligibility for Veterans
  • Applying for a business loan for veterans
  • How the Veterans Business Outreach Center helps military personnel transition to civilian life and even purchase a business
  • Alternative Funding Solutions for Veteran Business Owners

And so much more! Read ahead and learn how veteran-owned businesses can secure the funding they need.

 

What is a V.A. Loan

Loans designated exclusively for veterans are frequently referred to as V.A. loans, even though they are not managed by the Veterans Administration (V.A.). The SBA and other pro-veteran organizations offer veterans and their families business loans.


Many veterans want to start a small business, get funding for operational expenses of running their existing business, or secure financing for expansion. Fortunately, those same service personnel can access capital thanks to small business loans. 

These small business loans for veterans tend to have lower costs, preferential interest rates, and more favorable terms overall. If you’re a veteran and unsure if you’re eligible for a V.A. business loan, continue reading to find out if you are.

 

Veteran Small Business Loan Eligibility

As the name suggests, your business will need to fit a few standards to qualify for a veteran business loan. In securing funding, you will need to demonstrate that the company is at least 51% owned or operated by a veteran.

In addition, each lender will review a set of requirements that your firm must meet. Understanding each is the first step before applying for a small business loan for veterans.

The veteran requirement can also typically be satisfied by falling into one of the categories below: 

  • Honorably discharged members of the armed forces

  • Active service members participating in a military transition assistance program

  • A veteran with a disability

  • The spouse of any of those listed above 

  • A widow or surviving dependent of a service member who passed away in the line of duty

 

There are also resources available today that can help veterans take ownership of their future with tools to transition to civilian life.

 

Applying for a Business Loan for Veterans

Assuring those with access to small business loans for veterans share the appropriate service history is crucial. As a result, many documents and a loan application may be required.

The typical business items required are still a regular feature. These items include business plans, financial statements, tax information, and general information about business ownership. Also necessary to apply for a business loan for veterans is a Form DD214 indicating separation from the branch of the armed services.

In the case of active duty members transitioning, a D.D. Form 2, “U.S. Armed Forces Identification Card (Active)” or D.D. Form 2, “Armed Forces of the United States Geneva Conventions Identification Card (Active) are also needed. 

Reservists and National Guard members must provide D.D. Form 2, “Armed Forces of the United States Identification Card (Reserve).”

Current spouses of veterans need to provide the veteran’s Form DD 214 and evidence that they are a veteran’s current spouse.

Current spouses of transitioning active members of current reservists/National Guard members need to provide D.D. Form 1173, a Department of Defense Guard Reserve Family Member Identification Card, and evidence they are the current spouse.

Widows of those who died in the line of duty or from injuries sustained while serving need to provide documentation from the Department of Defense or the Department of Veterans Affairs proving that’s the case.

Following the submission of all necessary documents, the V.A. lender—like most conventional lenders—will probably request a copy of your credit report to assess your creditworthiness. Unfortunately, if the V.A. lender rejects your application, this inquiry could lower your credit score, making it more difficult for you to obtain funding.

 Veteran’s Business Outreach Center and Small Business Loans for Veterans

The Veterans Business Outreach Center (VBOC) exists with service men and women in mind. Transitioning service members and military spouses interested in entrepreneurship can find numerous resources from this center.

 

Included in how this office helps veterans are resources to train, counsel, and build resource partner connections. These resource partner connections include the Small Business Administration (SBA). Moreover, this partnership represents a chance to secure small business loans for veterans. 

Assisting service spouses and veterans with starting and growing their own small businesses are at the VBOC mission’s heart. Providing the knowledge and support required to be successful in business is how this genuinely unique endeavor serves veteran business owners.

 

Alternative Funding Solutions for Veteran Business Owners

 

In addition to the traditional routes for business loans for veterans, there are numerous options for financing a business. Even when cash flow is challenging, there are ways to generate capital to help with business expenses.


Invoice Factoring

Invoice factoring is one funding solution for veteran business owners. This method leverages existing unpaid invoices to cut out the time spent collecting from clients. An invoice factoring company will pay you, at a discount, for those outstanding invoices but not without costs. Upwards of 20% of revenue can be a part of what you fork over in this process.


Merchant Cash Advances

For businesses that process credit card transactions, a merchant cash advance can be a way to receive financing against those receipts. The repayment terms generally apply against daily receipts until the advance is repaid in full.


Business Lines Of Credit

You might be able to resolve your cash flow issues by obtaining a business line of credit.

When you get a business line of credit, unlike other types of financing, you don’t have to pay interest on the entire amount you borrow. In contrast, you only pay interest on the amount of credit you utilize.

Depending on your company, there are different steps involved in applying for and receiving a line of credit. However, advancements in A.I. and the internet have significantly sped up these procedures.

You can frequently obtain credit limits of up to $150,000 with alternative lenders who provide company lines of credit.

Make sure you work with a lender ideal for your particular situation.

Crowdfunding

 

If you create an exciting campaign, you may get the money you need through crowdfunding on websites like Indiegogo and Kickstarter. This kind of funding is excellent for businesses that manufacture goods or provide services, but, generally speaking, it isn’t for the world’s accountants and landscapers. 

Nevertheless, crowdfunding could enable you to finance things without depositing any of your own money upfront if you’re prepared to invest the time and resources necessary to create a successful campaign.

Ensure that you can keep your commitments by doing as you say. On the other hand, if your campaign is unsuccessful, you can spend a lot of time and money with nothing but bad publicity and embarrassment.

Selling Equity in Your Company

 

You could always choose to sell shares to an investor if debt funding is unattractive. You’ll receive the money you won’t have to repay in exchange for a portion of ownership. Additionally, you will be able to benefit from the investor’s knowledge and contacts; after all, they will want a return on their investment. 

However, selling equity means losing the total command of your business. You’ll also have to give up a portion of the revenues.


Why Veteran Business Owners Might Want to Consider an Alternative Lender

 

Non-conventional lending options exist for veteran business owners. In addition, many alternative tech-powered lenders have emerged in recent years to satisfy the financial demands of small businesses.

You might be able to acquire the funding you require to expand your business by working with a different lender that is veteran-friendly. These cutting-edge fintech companies provide various small business finance solutions, including loans, business lines of credit, and invoice financing.

There are often favorable interest-free scenarios in the case of family and friends loans. However, due diligence is vital to each option to ensure you can handle the debt responsibly.


Service Corp of Retired Executives (SCORE) 

A nonprofit with members that give free assistance and consulting to business owners is called the Service Corps of Retired Executives (SCORE). It is unnecessary to be a SCORE member to receive counseling from the organization; any veteran-owned small business owner can phone and schedule a meeting with their regional SCORE chapter.

 

Assistance and advice from business experts for $0 can improve your business knowledge at no cost to owners. Mentoring and training services can also give veteran business owners an edge when navigating funding solutions. 


U.S. Small Business Administration (SBA) Patriot Express Loans

One of the SBA’s quickest response times for loan applications is supplied by the network of participating lenders for Patriot Express loans, which are available nationally. Up to $500,000 in Patriot Express loans are available.


The Patriot Express Loan is based on the highly successful SBA Express program. Business loans for veterans are more versatile than ever, with the support you need. Faster access to capital for your business can empower you to make growth decisions when the opportunity arises.

 

SBA’s Military Reservist Economic Injury Disaster Loan Program (MREIDL)

The Military Reservist Economic Injury Disaster Loan (MREIDL) provides money to assist a qualified small business in meeting expenses it could have paid. Still, it cannot do so because an essential employee was called up to active duty in their capacity as a military reservist.

With a maximum amount of $2 million, this business loan for veterans can enable service men and women to thrive during a reservist’s transition to active duty. 


Smarter Banking Gets Borrowers back in the Driver’s Seat 

The mission to serve men and women who have been in the service of their country is an incredible one. Now, more intelligent banking options allow information about business loans for veterans to be clearer. A simpler path forward is possible with Small Business Bank and the professionals waiting to serve you. 

 

Log on now and find out how Small Business Bank is creating the neighborhood bank experience for small, medium, and large enterprises.

Posted in Blog