VA SBA Small Business Loans for Veterans

VA SBA Small Business Loans for Veterans

More veterans than non-veterans start small businesses in the U.S. Veteran-owned firms have a marked effect on the American economy, employing 5.8 million individuals. Military service has a real impact on the number of small businesses in the U.S. since 45% more veterans than non-veterans are likely to be self-employed and, therefore, employ other people. Because of this, veterans need VA small business loans. 

Since so many veterans return from serving their country to start a small business, veterans need VA small business loans both for start-up capital and ongoing funding for their businesses. If you or your spouse served in the military and would like to fund your small business, you can take advantage of several favorable loan options for veterans. 

What Is a VA Small Business Loan? 

VA small business loans are not made by the Veterans Administration (VA). They are, instead, partially guaranteed by the Small Business Administration (SBA). The loans are made by a bank or another financial institution, like a credit union. A partial loan guarantee means that the SBA will partially repay the financial institution that made the loan if the borrower defaults on the loan. 

The SBA has an Office of Veterans Business Development that oversees business loans for veterans. These funds are not provided as grants. They are standard loans that need to be repaid with interest.  

The SBA also provides counseling and training to go along with its loans to give borrowers support in their business ventures. You can use the Lender Match website to find lenders for certain types of loans. 

You can also find local help with your business planning through the SBA here. 

Veterans who receive a dishonorable discharge are not eligible for the loan programs. If you are active-duty personnel within 12 months of separation or a retiree within 24 months of retirement, you can qualify for the SBA Express Loan Program. Reservists and National Guard are also eligible. The business must be at least 51% owned by a qualified veteran according to the definition above. 
 

Types of Small Business Loans for Veterans 

If a veteran does not meet the requirements of a financial institution to obtain a small business loan through conventional loan programs, the Small Business Administration’s loan programs provide several types of small business loans. 

SBA Standard 7(a) Loan Program 

This is the SBA’s most used loan program and the most common for veterans. SBA 7(a) loans guarantee up to $5 million, although the recipient might have to pay a fee for the loan guarantee. This loan program is not for start-up businesses. You must have been in business for at least two years, have a good credit score, and your business must generate excellent cash flow. They are excellent loans with low interest rates, low monthly payments, and long terms. These loans can be used for debt consolidation, working capital, and commercial real estate.

The SBA Express Loan is an expedited application process for SBA 7(a) loans for veterans up to $350,000. They have a quick turnaround time for the application process, and their loan guarantee is only up to 50% of the loan. Almost 60% of all SBA 7(a) loans are SBA Express Loans. 

Military Reservist Economic Injury Disaster Loan (MREIDL) 

This type of business loan is the MREIDL or Military Reservist Economic Injury Disaster Loan. This loan provides working capital to businesses that could have met their obligations and continued to meet their obligations had their principal owner not been called up for military service. This type of loan gives the business what it needs in working capital until the essential employee comes back to work after returning from being “called up.” There may be no upfront fees on these loans and a 50% loan guarantee. 

SBA Microloan 

The SBA Microloan program is for small businesses who do not have access to other types of financing. The maximum loan amount is $50,000. The interest rate on these loans is usually between 8% to 13% and collateral is usually required. Microloans require a significant amount of documentation to qualify for them, such as: 

• Written business plan 
• Business and personal tax returns 
• Balance sheets and profit and loss statements 
• Financial projections or budget 
• Resumes of business owners 
• Personal financial statements 
• Personal credit report 
• Articles of incorporation 
• Applicable business licenses and permits 

SBA Business Loan Information for Veterans

The U.S Small Business Administration has implemented a new measure to help get small business loans into the hands of veterans.  This new measure sets the borrower upfront fee to zero for all veteran loans authorized under the SBA Express program up to $350,000.  This initiative started on January 1st and will continue through the end of the fiscal year.

Of all SBA loans that go to veterans, 73 percent are $350,000 and below.  The SBA Express Loan Program, which supports loans under $350,000, is SBA’s most popular loan delivery method, with nearly 60 percent of all 7(a) loans over the past decade being authorized through the program. Since the program’s inception, it has also been one of the most popular delivery methods for getting capital into the hands of veteran borrowers.

This policy announcement means that veteran borrowers will no longer have to pay an upfront fee for any loan up to $350,000 under the SBA Express program.  This will make the loans cheaper for the borrower, another way SBA is looking to serve small business owners as they look for ways to access capital.

SBA provides veterans access to business counseling and training, capital and business development opportunities through government contracts.

Guaranty Fee Reduction:

Currently, SBA Express loans of $150,001 to $350,000 have an up-front guaranty fee of 3%. To continue supporting America’s veterans, the SBA Veterans Advantage reduces the up-front guaranty fee from 3% to 0% for SBA Express loans over $150,000 approved to small businesses owned by qualified veterans. This will encourage greater participation in SBA lending programs with a direct benefit to veteran-owned small businesses.

SBA Veterans Advantage Qualifications:

To qualify for this, businesses must be 51% or more owned and controlled by an individual or individuals in one or more of 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

SBA Veterans Advantage Documentation Requirements:

Lenders must document in their loan file a borrower’s eligibility using the following documentation:

1) Veteran: Copy of Form DD 214, which is provided for other than dishonorably discharged veterans.

2) Service-Disabled Veteran: Copy of Form DD 214 or documentation from the DVA that the veteran has been determined as having a service-connected disability.

3) Transitioning Active-Duty Military Member: DD Form 2, “U.S. Armed Forces Identification Card (Active),” or DD Form 2, “Armed Forces of the United States Geneva Conventions Identification Card (Active)” and, DD Form 2648 (Active-Duty Military member) or DD Form 2648-1 (Reserve Component member).

4) Reservists and National Guard: DD Form 2, Armed Forces of the United States Identification Card (Reserve).

5) Current Spouse of Veteran: The veteran’s Form DD 214 and evidence of status as a current spouse.

6) Current Spouse of Transitioning Active-Duty Military Member or Current Reservist/National Guard Member: DD Form 1173, Department of Defense Guard Reserve Family Member Identification Card and evidence of status as the current spouse.

7) Widow of Active-Duty Service Member who died in service or Widowed Spouse of Veteran who died of a service-connected disability: Documentation from DOD or from DVA clearly showing this to be the case.

–  In the event that the veteran’s DD 214 is unavailable, a “Certification of Military Service” (NA Form 13038) is an acceptable equivalent.

–  For any category listed above that requires a photocopy of a military ID, as an alternative to photocopying the military ID, the service member may provide a “statement of service” signed by, or by the direction of, the adjutant, personnel office, or commander of the unit or higher headquarters they are attached to. There is no one unique form used by the military for a statement of service. While statements of service are typically on military letterhead, some may be computer-generated. The statement of service must clearly show:

1.  The Service member’s full name;

2.  The Service member’s Social Security Number (SSN) or the last 4 digits of SSN;

3.  The entry date on active duty or the entry date of applicant’s Reserve/Guard duty, as applicable (depending on whether the applicant is on active duty or is a current member of the Reserves or National Guard);

4.  The duration of lost time, if any (for active duty); and

5.  The name of the command providing the information.

Note for Current Reserve/Guard Members: The statement must clearly indicate that the applicant is an “active” reservist and not just in a control group (inactive status).

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