Traditional financial institutions like banks and credit unions can offer small business loans as well as financial products for veterans. That said, eligible veteran-owned businesses can also borrow funds from a number of other sources.
Online business loans are a common source of funds for businesses, including those owned by veterans. Loans often come with less stringent qualification requirements than financing offered by traditional commercial lenders and may offer more flexible loan amounts and repayment terms. Many online lenders also offer a variety of financial products, including equipment financing and invoice factoring, in addition to standard term loans and lines of credit.
Keep in mind, though, that these more accessible loans typically have higher annual percentage rates (APRs) than their traditional counterparts. This makes them more expensive, especially for business owners who don’t qualify for the most competitive rates.
SBA Veterans Benefit Program
The SBA’s Veterans Advantage program reduces guarantee fees for certain types of SBA 7(a) loans issued to veteran-owned small businesses. The program was originally launched by the Obama administration in 2014 to provide fee relief under the SBA Express program and, after expiring in 2015, was replaced by the current savings structure. Under the program, fee relief is available to small businesses that are at least 51% owned and controlled by one of the following entities:
- Honorably Discharged Veterans
- Disabled veterans
- Active duty military service member eligible for the Army’s Transitional Assistance Program (TAP)
- Reservists and/or active members of the National Guard
- Current spouse of a veteran, active duty member, reservist, National Guard member, or widowed spouse of a service member who died in service or as a result of disability service-related
SBA express loan
SBA Express loans are part of the 7(a) loan program and offer qualified business owners up to $500,000. Funds are accessible as a line of credit or lump-sum term loan, and the SBA waives guarantee fees for businesses owned and controlled (51% or more ownership) by veterans, certain active duty military personnel, and other applicants who qualify on the basis of military service and their spouses.
Up to 50% of the loan funds are guaranteed by the SBA and, although interest rates are lender specific, they cannot exceed the maximum imposed by the SBA (5% or 6%, depending on the amount of the loan). ready). Most notable, however, is the turnaround time – potential borrowers can expect a response to their request within 36 hours.
Economic disaster loan for military reservists
The Military Reservist Economic Disaster Loan (MREIDL) program is for businesses that have an essential employee who is a military reservist called up for active duty. Loans are available for up to $2 million and carry an interest rate of 4%. Repayment terms extend up to 30 years, with no penalties or prepayment charges.
Although a MREIDL is a flexible borrowing option for qualified businesses, collateral – something of value that secures the loan – is required for loans over $50,000. Funds may only be used for ordinary and necessary operating expenses, not to cover lost revenue or profits. Additionally, MREIDL loan funds cannot be used to expand the business and are not available in lieu of regular business debt or to refinance other debts.