Start with VA Business Loans
Many of the best financing sources for veterans are available through the Small Business Administration’s Veterans Advantage program. These loans are set aside specifically to help veterans succeed as entrepreneurs, and they’re a prime example of special benefits not available to the general public.
According to the SBA, 73% of all loans they provide to veterans are for amounts of $350,000 or below. Based on this data, the agency has created perks to help make their financing solutions even more impactful.
“The US Small Business Administration (SBA) has implemented a new measure to help get small business loans into the hands of veterans,” says an announcement on the agency’s website. “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 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.”
Overall, the SBA is a treasure trove for veterans. There are the Military Economic Injury Loans designed to help military reservists who run small businesses 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.
Consider Applying for a Business Grant
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 even find with an SBA loan: the money you receive doesn’t need to be paid back. That’s right—a business grant is the closest most entrepreneurs will ever get to free money.
Several prominent grant options are set aside for veterans. 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 3 of the business grants you might want to check out first:
- 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.
- 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.
- Warrior Rising Grants: The Warrior Rising organization was founded by military veterans who are dedicated to helping their fellow “vetrepreneurs.” There’s a strong sense of comradery among those who participate, and they benefit mightily from the grants, training, and mentorship provided.
Beyond these veteran-specific grants, you should also check out grants.gov to explore various options 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.
You should also take the time to look into additional grants from private sources. Visit each of the following websites and see if you might qualify:
See What a Microloan Can Do
One more option to consider is a microloan. Just as the name suggests, these financing products provide amounts that are smaller than most. However, they offer relaxed qualification requirements and a streamlined application process. A few of the most popular sources for microloans are Accion loans, Kiva loans, and Opportunity Fund loans.
The purpose of most microloan lenders is to get money to disadvantaged entrepreneurs. This focus means they are often awarded to those in economically challenged communities or in countries where there are limited financial options available.
The average microloan in the United States is worth about $13,000. But you can sometimes find them for as much as $100,000, so keep them in mind if you have a small-to-moderate-sized need.
Veteran Offerings from Bank of America
Another way for veteran entrepreneurs to access more affordable financing is the Veteran Entrepreneur Lending Program started in 2018 by Bank of America. This program is intended to provide a crucial boost to those wanting to launch or expand a small business.
“Helping our veterans translate their skills and become entrepreneurs driving the US economy is one of the ways Bank of America is thanking them for their service,” explained CEO Brian Moynihan in a press release at the time.
This program sets aside a total of $20 million that can be accessed through participating community development financial institutions (CDFIs). Bank of America chose to pursue this partnership because CDFIs are nonprofit institutions that are uniquely positioned to help entrepreneurs on the local level.
To qualify for the Veteran Entrepreneurship Lending Program, you’ll need to sign up for the corresponding 2-month training program. By the end of the course, you’ll have technical knowledge and robust resources that will help pave a smoother path for your small business.
Additional Financing Sources 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 small business access the money they require:
- 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 think of. Better yet, the money can become available in just 2–3 days and comes with borrower-friendly interest rates that begin at 6%.
- 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 term loan.
- 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 at 18%.
- 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%.
- 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’s the same way your personal credit card works. 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%.
- 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.
- 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%.
- 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.
- Startup Loan: Everything has to start sometime, 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. Depending on the specific financing product, your interest rate could range from 0–17%
- Business Acquisition Loan: A business acquisition loan can be perfect for veterans who are 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.
How to Pick Your Best Financing Option
While this guide has listed many different types of funding, the amount of money you need and the timeframe for receiving it will organically help you narrow down the list.
To continue refining your search, you’ll need to 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 is that 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 make disclosure standards more understandable. There are currently 3 different versions available to small business owners:
As you leverage all the tools and resources available, you will be better able to sift through the ambiguity and find solid answers.
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 thoroughly complete your submission.
Because lenders receive so many requests from entrepreneurs, they must be judicious in who they work with. One of the fastest ways to disqualify yourself from the running is to send in an incomplete or incorrect application.
These 5 mistakes have sunk more than a few applications:
- 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 applying for loans that you qualify for.
- 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 line up with a lender’s specifications before you click submit on any application.
- 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.
- 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.
- 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. 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 from time to time, as every entrepreneur does. But your commitment to excellence will serve as the engine that drives your business and propels it to new heights.