Did you recently transition from actively serving in the armed forces to civilian life? If a traditional job is not in the plans or you want to start a side business, chances are, you’ll need funding to get operations up and running. That’s where veteran business loans come in if you don’t have the cash on hand. These loans provide access to capital in exchange for monthly payments. Banks, credit unions, and online lenders provide several options that can align with your business goals and make monthly payments more affordable. You can also explore an alternative form of financing through a reputable lender, like National Business Capital, to secure capital for your new business venture.
What Are Veterans Business Loans?
As the name suggests, veteran business loans are designed to help veteran entrepreneurs secure the funding they need to start or grow their businesses. But, unlike VA loans, which are mortgage products reserved for veterans and their spouses, these loans are not backed by the U.S. Department of Veterans Affairs.
Veteran-owned businesses can get better loan terms and capital amounts than small business owners who are not veterans. Some programs and grants favor veterans, but you can also use financing meant for any small business.
Who Is Eligible for Veterans Business Loans?
Eligibility guidelines vary by lender, but most require that you meet specific criteria. For starters, you should have a business that’s at least 51 percent owned by an active-duty service member that’s part of the military Transition Assistance Program, an honorably discharged veteran, a member (or reservist) of the National Guard, or a service-disabled veteran. In addition, current or widowed spouses (due to service-related incidents) of these individuals also qualify for funding.
Is It Hard to Get a Veterans Business Loan?
Not necessarily. If you meet the eligibility requirements and can demonstrate your ability to repay the loan, you likely won’t find it challenging to secure a veteran business loan. However, many lenders have requirements around credit scores, revenue, and business experience, which you’ll have to meet in order to qualify.
How Do You Apply for Veterans Business Loans?
Each lender has its own application process. You’ll be required to gather certain documents and submit them to the lender for review when applying for a loan. The lenders will ask for basic information such as your Employer Identification Number (EIN) and Social Security Number (SSN), but they will also ask for information about your business. This may include recent tax returns, financial statements, your company’s business plan, business licenses, business certifications, and other relevant resources.
The following will also be required to verify your history in the armed forces:
- Transition Assistance Program participants: DD Form 2 (United States Uniformed Services Identification Card), DD Form 2648 (Pre-separation Counseling Checklist), or DD Form 2648-1 (Pre-separation Counseling Checklist For Reserve Component Service Members Released From Active Duty)
- Honorably discharged veterans: Form DD 214 (Certificate of Release or Discharge From Active Duty)
- National Guard members and reservists: DD Form 2
- Service-disabled veterans: Form DD 214 or any documentation you have on hand to prove your disability is the result of a service-related incident
- Current spouses of veterans: Form DD 214 and documentation that proves your status as the spouse of a veteran
- Current spouses of Transition Assistance program participants: DD Form 1173 (Next Generation Uniformed Services ID Card) and documentation to prove you’re a current spouse
- Widowed spouses of veterans: Any documentation to substantiate your status as the widowed spouse of a veteran
What Can Veterans Use the Funds For?
If you’re able to secure funding, there are several ways you can use the loan proceeds in your business.
Startup Costs
Veterans who are just getting started and have minimal reserves can use a portion or all of the borrowed funds to launch their company. Common startup costs include registration fees with the state and county (if applicable), liability insurance, accounting software, training facility costs, payroll, supplies, marketing, and inventory. This type of veteran small business loan is riskier for the lender since startups need time to prove themselves, but some will offer financing to veteran-owned businesses with a few months of experience.
Operating Expenses
It could take some time before your company turns a profit, but you can use the loan proceeds to cover the expense gap and keep operations running smoothly in the meantime. Working capital loans help business owners generate initial cash flow. While these are typically short-term small business loans, you can extend the loan’s duration to minimize monthly payments. Lower payments make it easier to pay off the loan while addressing operating expenses.
Hire Employees
Some companies are able to operate profitably with just a few employees, while others find success as a one-man show. The reality is that it’s challenging and risky to run the business alone for an extended period. You can make mistakes and miss deadlines when working alone. Bringing more people on your team can address skill gaps and feeling like you don’t have enough time.
Many small businesses hire employees, and that investment can pay off in the long run, but payroll concerns cause some business owners to hesitate, even if it’s clear that employees can make a big difference. If you are not financially prepared to bring employees on your team, you can use veteran business loans to cover these expenses.
You can pay your employees with the loan proceeds and generate enough business with their involvement to repay the loan. Delegating less profitable and time-consuming business activities gives you more time to pursue more profitable activities, such as calling prospects and building partnerships.
Purchase Property and Equipment
Property and equipment costs can seem exorbitant, especially when you’re just starting out. However, buying real estate can be a great move for your business. A real estate location establishes your place in a local community. People will see your property and company’s branding during regular commutes and may visit you. Some locals can become regular customers and recommend you to their friends. Those outcomes are only possible if you buy real estate in a desirable location. Most people don’t have enough capital to buy real estate in full, and it’s not the best use of capital, even if you could buy it in full.
Using a mortgage helps you acquire a real estate property with less money. You can use the remaining capital in other areas or build a financial buffer to protect yourself from slower seasons. You may also have to purchase equipment to make the property usable for your business. Restaurants have to make several equipment purchases to serve their customers.
You could rent or get an equipment lease instead, but those monthly payments never go away. If you want to establish firm roots with your business, it’s better to own equipment and real estate than renting and leasing them from others. If you need to purchase either of these assets, taking out a veteran business loan could be a beneficial move.
Stocking Up Inventory and Supplies
Another common use for veteran business loans is for inventory and supply purchases. Having an adequate stockpile on hand is an effective way to avoid interruptions in business operations and can help lead up to a busy season. Many businesses are seasonal due to their products, location, and other factors. Christmas ornament sales heat up at the end of the year, while beach towns get most of their business in the summer.
A veteran small business loan gives you the capital you need during slower seasons to load up on inventory and supplies. That way, you are prepared for busier seasons. The livelihoods of some small business owners depend on a few months, and having inventory and supply issues because of a lack of funding can make it more difficult to stay open.
Marketing
Word of mouth is an effective way to market your business. However, it’s also a good idea to invest in other forms of marketing, like website development, social media marketing, and digital/print advertisements. An online presence allows you to scale your marketing. Every blog post, video, or podcast you produce can act like a 24/7 salesperson for your business. These resources introduce new people to your brand and demonstrate that you can provide value. Some people may hear about you through free content and then decide to become customers.
An advertising budget can also bring more people to your business. You can figure out ads yourself or hire an expert with a history of running successful ad campaigns. Online advertising has the edge over print solutions because online advertising platforms provide more data. You can see how visitors experience your ad, how many clicks you get, and what you can do to optimize results. There are many ways to spend money on marketing, but if you’re short on funds, a veteran small business loan can help you get started.
Where Can Veterans Get Business Loans?
Businesses need money to survive and grow. Some companies do it with cash flow, but many business owners use loans to get started or scale operations. Here are a few viable options to consider when seeking capital for your business:
Traditional Banks and Lenders
Veterans with good or excellent credit scores and a steady source of income may find business loan options with competitive terms at traditional banks or credit unions. However, be mindful that the application process could be lengthy, and the lender will likely require a ton of paperwork to process your loan application. Furthermore, they typically limit business funding to entrepreneurs who’ve operated for at least two years.
Veteran business owners can choose between an installment loan or a business line of credit. Installment loans have monthly payments, while you only pay interest on a business line of credit when you borrow against the credit limit. You can also take out a business credit card and accumulate rewards if you prefer using lines of credit to fund your company’s operating expenses and expansion.
U.S. Small Business Administration
SBA loans are the most sought-after loans for business owners. These loans have higher requirements and can take more time to obtain, but the competitive interest rates and long durations make them compelling choices. Traditional banks, credit unions, and online lenders offer these loans. While it can take a while to receive funds, you can apply for SBA express loans if you don’t want to wait as long for capital. Applicants receive a response within 36 hours if they apply for SBA express loans.
Veteran Grants and Programs
Winning a grant is always the preferred option. As long as you use the funds for their intended purpose, you won’t have to repay the funds, allowing you to grow your business without worrying about the expense. Veterans can apply for grants and programs for small business owners, but there are also veteran programs just for them. Several companies and nonprofit organizations offer these programs to help members of the armed forces and their spouses get the capital they need for their businesses. Here are some of the grants and programs veteran business owners should consider:
- StreetShares Foundation: The nonprofit organization’s grant program rewards up to $15,000 to veteran business owners. The foundation recently opened up a grant program for female veteran business owners.
- Hivers and Strivers: Several angel investors pool their funds together to invest in veteran-owned small businesses. The initial investment is between $250,000 and $1 million.
- The Office of Small and Disadvantaged Business Utilization: The U.S. Department of Veterans Affairs oversees this program. It helps veterans obtain federal contracting opportunities along with business financing and other resources.
- Veteran Readiness and Employment: This program helps service-disabled veterans receive grants to fund their businesses. Eligible veterans will have to attend an orientation session to learn more about the program and how it can help them.
- Warrior Rising Small Business Grants: The nonprofit organization provides educational training and resources for veterans. The organization also offers grants for veteran business owners who need help covering startup costs.
The U.S. Department of Veterans Affairs
The U.S. Department of Veterans Affairs provides VA business loans for qualifying individuals. Several banks offer these loans to active duty service members and people who previously served in the military. VA business loans have more competitive rates and terms than the average small business loan. You may need a good credit score to get one of these loans, but each lender has different requirements.
Alternative Funding
Alternative funding offers more versatility for veteran small business owners. Alternative lenders have various interest rates and credit score requirements. It’s possible to get quick financing on competitive terms with alternatives.
