VA Small Business Loans: Complete Guide for Veterans

What Is a VA Loan?

You might have heard of “VA Loans.” These are a type of mortgage offered through the Department of Veterans Affairs. The program allows veterans, service members, and surviving spouses to purchase homes with very little down payment, and sometimes no down payment at all. VA loans also don’t require borrowers to purchase private mortgage insurance and approved applicants can typically expect low interest rates compared to other mortgage lenders.

While the term “VA Loan” commonly refers to this mortgage program, there are several federally backed financing options for veteran-owned small businesses, like Department of Veterans Affairs Small Business Grants. Additionally, some organizations offer financing for veteran small business owners, like Warrior Rising.

What Types of Loans are Available to Veterans?

Veterans can apply for the same types of small business financing as any other entrepreneur, but there are several special loans and grants that are aimed specifically at veteran small business owners. Many of these are aimed at veteran entrepreneurs working in a specific industry, like some USDA grants for farms run by veterans, or operating a business that matches an organization’s mission, like the StreetShares Awards. All of these programs are outlined below.

When seeking small business financing, you should compare all your options. This includes financing tailored for veterans as well as options available to all. Compare repayment terms and interest rates. Grants and awards are fantastic and worth applying for, as well, but they are often competitive and have involved applications. When strategizing how to fund your small business, keep an open mind. 

Qualifying for Veteran Business Grants and Loans

You might be wondering how to qualify for VA business loans, VA business grants, and other business loans and grants for veterans. It depends on multiple factors, as each entity will have its own set of rules.

But you usually will be required to meet at least 1 of these qualifications:

• You are active duty and participating in the Transition Assistance Program (TAP)
• You are a reservist
• You are a National Guard member
• You are an honorably discharged veteran
• You are a service-disabled veteran
• Your spouse is active duty, a reservist, a national guard member, or a veteran
• Your spouse died during military service or from a disability connected to their service

Beyond the qualifications listed above, you’ll also need to meet the various other requirements for the grant or loan. These include factors such as your credit score, years in business, and your industry.

Where to Apply for Veteran Business Grants and Loans

Small business loans with special perks, such as those from the SBA, are undeniably helpful to millions of entrepreneurs. But grants are an alternative form of financing that boasts an incredible feature you won’t find even with an SBA loan: the money you receive doesn’t need to be paid back. That’s right—a small business grant is the closest most entrepreneurs will ever get to free money.

Several amazing business grants are earmarked for veterans, while others accept a wider range of applicants. As you might expect, business grants are extremely popular, and it can be difficult to receive one even if you meet the qualifications. But it’s always worth looking into this avenue of funding to see if you can give your business a boost with an influx of untethered money.

Here are 10 small business grants you should check out first:

1. StreetShares Awards: No veteran stands alone, so this organization strives to provide support for the families of those who serve our country. Multiple grant options are available through StreetShares as well as other resources to aid your entrepreneurial pursuits.
2. USDA Grants: The United States Department of Agriculture started the 2501 Program as a way to support veterans and other socially disadvantaged farmers. If you work in the farming or ranching industry and qualify for one of the USDA’s grants, you can get money and additional benefits to support your business.
3. Warrior Rising Grants: The Warrior Rising organization was founded by military veterans dedicated to helping their fellow “vetrepreneurs.” There’s a strong sense of camaraderie among those who participate—and participants benefit mightily from the grants, training, and mentorship provided.
4. Department of Veterans Affairs Small Business Grants: These grants are offered to veterans who helm nonprofit organizations. If you’re looking to make a positive impact in your community, check out the qualifications and see if one of these VA small business grants could work for you.
5. National Association for the Self-Employed (NASE) Growth Grants Program: The goal of these business development grants is to help small business owners from all backgrounds to reach their goals.
6. The Tony Burch Foundation’s Fellows Program: This program awards grants to women in small business, which includes veterans. The grants are valued at $5,000.
7. Open Meadows Foundation: If your small business is doing something to make the world a better place, consider seeking a grant from this popular program.
8. FedEx Small Business Grant Contest: The competition can be fierce for these grants, but your efforts can pay off in a big way if you’re awarded a $50,000 grant.
9. Rural Business Development Grants: If your business operates in a rural area, you might be able to secure a lucrative grant from this program.
10. The Save Small Business Fund: These grants are intended to provide a crucial boost to small businesses with 20 employees or fewer.

Beyond these grants, you should also check out Grants.gov to explore veteran business grants provided by the federal government. You’ll find everything you need to get started on the website, including eligibility details and information on how to apply.

Making Your Application as Strong as Possible

While it’s exciting to find your ideal small business loan, don’t forget that there’s still work to do. Make sure to give yourself ample time to prepare for the application process and complete your submission thoroughly.

Because lenders receive so many requests from entrepreneurs, they must be judicious in who they select. One of the fastest ways to disqualify yourself is to send in an incomplete or incorrect application.

5 mistakes have sunk more than a few applications:

1. Not meeting the credit requirements: Every loan has specific requirements for your financial history—and your application won’t even get a glimpse if you don’t have a qualifying credit score. Nip this problem in the bud by monitoring your score with Experian, TransUnion, and Equifax, and then only apply for loans that you qualify for.
2. Choosing a loan that doesn’t match up with your needs: Beyond the credit requirements, numerous factors make certain loans optimal for various business scenarios. For example, some lenders refuse to work with businesses in high-risk industries. Make sure you align with a lender’s specifications before you click submit on any application.
3. Failing to complete the application: This mistake sounds obvious, but you’d be surprised how many well-meaning entrepreneurs submit applications without filling out all of the pages. Following the lender’s instructions dutifully is the best way to get them to return the favor by reviewing your application.
4. Not including all the necessary documents: If a lender requests a certain document from applicants, they expect to see it—so it’s a red flag when you fail to follow directions from the get-go. Make sure you’ve gathered all the required documents, and then double-check that you’ve included them before sending in your application.
5. Not hitting deadlines: Lenders typically run a tight ship. Carefully make a note of all deadlines associated with a loan application, then stay at least 1 day ahead of them. That way, if something unpredictable arises, you’ll have time to find a solution.

By approaching each loan application with strategy and precision, you’ll be able to prove your mettle to lenders. You’ll still face rejection at various stages in the process, as every entrepreneur does. But your commitment to excellence will serve as the engine that drives your business and propels it to new heights.

What are Small Business Loans for Veterans?

Important, neither the SBA or VA loan money directly to veteran-owned small businesses. Generally, most SBA loan programs utilize another lender to actually service SBA loans. Again, the term “VA loan” usually refers to a type of home mortgage that cannot be used for businesses.

The SBA used to run a lending program for veterans called Veterans Advantage 7(a) loan program, but that program no longer exists.  These VA small business loans were set aside specifically to help veterans succeed as entrepreneurs, and they were a prime example of special benefits not available to the general public. You might also hear about Patriot Express loan program, another business lending operation by the SBA which was a version of its popular SBA Express loan program built specifically for veterans. The program ran from 2007 to 2013 and is no longer available.

While VA business loans, Patriot Express loans, and Veterans Advantage 7(a) loan programs do not exist as of March 2022, the SBA does have several options tailored for veteran entrepreneurs.

For example, the SBA waives guaranty fees for veterans applying for Express loans. This relief for veteran small business owners was passed as part of the 2020 CARES Act aimed at mitigating the COVID-19 pandemic’s impact on small businesses.

Overall, the SBA is a treasure trove for veterans and you should pour over its offerings first. There are Military Economic Injury Loans designed to help military reservists who run small businesses to overcome any negative impacts that may have occurred during the time they were on active duty.

The agency also provides assistance to those who have been disabled during the time of their service with the 8(a) Service-Disabled Veteran-Owned Business Contracting Program. This program helps qualifying veterans apply for lucrative government contracts that aren’t available to the general public.

In addition to financing, the SBA also provides training, mentorship, and other resources. It’s definitely worth your time to research the various benefits and take full advantage of what the agency has to offer.

How Can VA Business Loan Funds Be Used?

The Department of Veterans Affairs does not provide loans for small businesses. Therefore, there is no such thing as a “VA Business Loan.” However, SBA loans and most other forms of business financing can be used for nearly all facets of running your business. This includes:

•       Buy land or property, or paying rent for an office
•       Payroll
•       Buying an existing business
•       Refinancing your existing debt
•       Buying inventory or equipment
•       Buying any other needed furniture or supplies

With any financing or grant, check the terms closely to ensure you can use the funds on what your business needs.  

Top Small Business Loans to Consider

You should also carefully review the vast array of small business loans available to the general public. While these loans lack the veteran-specific benefits included with some of the programs listed above, they often make up for that by connecting you with more accessible and versatile funding.

Here are 10 loan products that can help your small business access the money it requires:

1. Business Term Loan: There are plenty of reasons that business term loans have been around for so long. They provide amounts as high as $2,000,000, and you can use that money for just about any business-related expenses you can imagine. Better yet, the money can become available in just 2–3 days and comes with borrower-friendly interest rates that begin at 6%.
2. Short Term Loan: Perhaps you need even more speed than a business term loan can provide. Short term loans deliver this by compressing the repayment terms and delivering the cash to your bank account in as little as 24 hours. Given the leaner design, these loans max out at $500,000, and the interest rates can be considerably higher than with a regular termloan.
3. Merchant Cash Advance: As the “advance” in the name implies, this financing product lets you borrow money against your business’s future earnings. The money can be downright speedy, reaching your bank account in just 24 hours. You can qualify for up to $200,000, with interest rates beginning at18%.
4. Business Line of Credit: While loans deliver a lump sum to your account, a business line of credit provides you with revolving access to a pool of money. You simply use the money you require and then repay that specific amount. This arrangement is advantageous because you only owe interest on the money you use, rather than the full amount. A business line of credit usually tops out around $500,000, with rates in the neighborhood of 8–10%.
5. Business Credit Card: As with a line of credit, a business credit card allows you to draw from a revolving form of credit. Essentially, it works the same as your personal credit card. A business credit card can be a streamlined way to access money, as the application and approval process are sleeker than with other financing products. The maximum amount you can qualify for is usually around $500,000, with interest rates starting at 8%.
6. Equipment Financing: This option is one of the most heavy-duty financing options available to small business owners. You can qualify for as much as $5,000,000, and the interest rates can be as low as 7.5%. Equipment loans can move fast for their size, potentially delivering cash to your account in just a couple of days.
7. Commercial Mortgage: If your business has property-related needs, consider a commercial mortgage. These loans are relevant for everything from restaurants to warehouses to offices to retail shops. Depending on the property involved, the amounts can be as large as $5,000,000, and the interest rates can start as low as 4.25%.
8. Accounts Receivable Financing: If you have unpaid purchase orders and receivables dragging down your business, this type of financing lets you sell them to a lender. You’ll receive up to 80% of the value, while the lender is then on the hook to collect the money from your debtors. Factor rates for accounts receivable financing start at 5%, with the money hitting your account in just a few days.
9. Startup Loan: Every business has to start somewhere, and this family of loans helps make that possible. Startup loans include SBA loans, equipment financing, lines of credit, short term loans, and business credit cards. Intended for new businesses, they provide as much as $750,000—and depending on the specific financing product, your interest rate could range from 0–17%.
10. Business Acquisition Loan: A business acquisition loan can be perfect for veterans planning to purchase a franchise or existing business. You can receive up to $5,000,000, with interest rates beginning around 5–6%. It’s worth noting that the funding process with business acquisition loans can really drag, so you may not receive your money for up to a month.

Choosing the Best Veteran Business Grants and Loans

While this guide has listed many different types of funding, the amount of money you need and the timeframe for receiving it will help you narrow down the list organically.

To continue refining your search, you should use pricing metrics to find out which financing product is optimal for your business. Here are some of the most commonly used metrics:

•       Annual Percentage Rate (APR)
•       Total Cost of Capital (TCC)
•       Average Monthly Payment
•       Cents on the Dollar

It can be helpful to use a small business loan calculator as you’re crunching the numbers. These online resources are perfect for checking your math and improving your understanding of various loans

One problem you may encounter: various lenders don’t always list their disclosures the same way. For example, you could see inconsistent metrics for factoring or APR. To help small business owners get better clarity, the Innovative Lending Platform Association partnered with some of the industry’s top lending platforms to create a loan comparison resource called SMART Box™ (Straightforward Metrics Around Rate and Total cost).

“Access to capital is a top priority for NSBA, and we appreciate how SMART Box™ allows small businesses to more fully assess and compare lending options,” explains Todd McCracken, president and CEO of the National Small Business Association. “This type of price transparency, along with best practices like the ones adopted by the Coalition for Responsible Business Finance (CRBF), will help solidify the trust between non-bank lenders and small businesses.”

SMART Box™ is designed to promote common language between financing products and to make disclosure standards more understandable. There are currently 3 different versions available to small business owners:

•     Term loans
•     Merchant cash advances
•     Lines of credit

As you leverage all the tools and resources available, you’ll be better able to sift through the ambiguity and find solid answers.

Consider a Veteran-Friendly Lending Platform

Comparing small business financing options and applying for funding can be daunting, even for veterans. Fortunately, you can now search for financing quickly and easily online using lending platforms like Lendio. At Lendio, we respect veterans and we’re dedicated to helping them achieve their small business dreams. We’ve worked with many veteran entrepreneurs before, and we have in-depth knowledge about the various programs and discounts you are eligible for.

FAQs about VA Small Business Loan 

Does the VA Offer Business Loans?

The VA does not offer business loans or grants for veterans running a business or interested in starting one up. As of March 2022, the SBA does not offer specific loans for veterans, but some fees are waived for veterans applying for SBA Express loans. This situation might change, so pay attention to the SBA as well as platforms that publish small business lending news like Lendio.  

Can a VA Loan Be Used for Business?

A VA loan, in common parlance, refers to a home mortgage product offered through the Department of Veterans Affairs. Because these loans are strictly for purchasing, building, repairing, and improving homes, or for refinancing existing mortgages, they cannot be used as a business loan. However, if might be possible to use a home bought with a VA loan as collateral for small business loans.

How Much Can You Get for a VA Business Loan?

Remember, there is no such thing as a VA Business Loan. Veterans can get some fees waived for SBA Express loans, and these loans max out at $500,000.   

Additional Resources and Small Business Loans for Veterans

We’ve already reviewed some incredible veteran business grants and business loans, but rest assured that the list is far from complete. There are plenty of other valuable resources and funding sources tailored to veterans.

Here are 3 prime options to check out:

1. The Hivers and Strivers Angel Fund: This fund provides cash for entrepreneurs who graduated from a military academy. If this description matches your experience, you should definitely check out this well-respected angel fund.
2. VA Office of Small & Disadvantaged Business Utilization (OSDBU): Here’s another impactful resource provided by the Department of Veterans Affairs. For small business owners who rely on government contracts, it can open some exciting opportunities.
3. Bank of America Veteran Entrepreneur Lending Program: This program is intended to provide a crucial boost to those wanting to launch or expand a small business. It sets aside a total of $20 million that can be accessed through participating community development financial institutions (CDFIs).

As with all of the other options listed in this guide, the individual requirements for these funds and resources vary dramatically. Be sure to review the qualifications carefully before applying.