When a military veteran seeks small business funding, they have access to VA business loans, which provide benefits not available to those who haven’t served in the military. These loans are a specialized form of financing intended to assist veterans as they pursue their business goals.
The most desirable VA business loans are handled by the Small Business Administration’s Veterans Advantage program. These loans are identical in most ways to the general loans offered by the SBA, but they also carry unique benefits for veterans. For example, the guarantee fees are usually waived or discounted.
The Best Loans for Veterans
Among the most popular loans offered by the SBA are those found in the SBA 7(a) program. Veterans can qualify for waived guarantee fees on all loans with amounts less than $125,000. When the loan exceeds $125,000, veterans will still benefit from a significantly reduced fee.
If you are a military reservist who owns a small business, you could potentially qualify for the SBA’s Military Economic Injury Loans. This type of financing helps those who own a small business that was negatively affected while they were away on active duty. These loans can help your business recover by offering favorable terms with no collateral for smaller amounts.
It’s also worth noting that the SBA provides the 8(a) Service-Disabled Veteran-Owned Business Contracting Program. While not a loan program, it assists those who have been physically impacted during their service by connecting them with government contracts not available to other entrepreneurs.
In addition to these SBA loans, many financing options available to the general public can also be an excellent fit for veterans. This list includes business term loans, short term loans, equipment financing, business acquisition loans, and merchant cash advances.
Business Grants Are Another Possible Route
Veterans should also be aware of special business grants. Like loans, grants provide money that can be used to start, sustain, or even grow your business. The difference is that grant money never needs to be repaid.
It should be noted that grants are more difficult to acquire than loans. There’s usually more competition from entrepreneurs and less money available. But the allure of free money is always compelling, so it’s worth checking into possibilities such as:
This organization leverages skills developed in the military to provide mentoring, training, and grants to “vetrepreneurs.” Because it was founded by veterans, Warrior Rising offers a strong sense of community and provides much more than just grant money.
This organization’s goal is to support veterans and their families with various resources and grant opportunities. The awards provided by StreetShares can be a crucial financial boost for veterans and their spouses.
The United States Department of Agriculture uses its 2501 program to provide funding to veteran and socially disadvantaged farmers. If you qualify, you’ll receive grant money and other resources to help your ranch or farm succeed.
Choosing Your Funding
After you’ve done an initial review of your loan and grant options, it’s important to figure out exactly how much money you’ll need and when you’ll need to have it available. These two factors can help you quickly narrow down the potential financing options, as many are structured to have very different dollar amounts and timelines.
When you have the top contenders identified, it’s time to apply some cold, hard math to find out which is best for your business. The most popular pricing metrics include Total Cost of Capital (TCC), Annual Percentage Rate (APR), Average Monthly Payment, and Cents on the Dollar.
You can get a quick assessment of the situation by using a small business loan calculator. These handy tools show you in basic terms how much any given loan would cost in the short and long term.
Proceed With Precision
When applying for a veteran loan or grant, it’s important to take your time and make sure you carefully handle the details. After all, the quickest way for your application to wind up in the garbage can is to fill it with errors.
Here are 4 of the most common mistakes applicants make:
- Choosing a bad fit
Many loans are targeted to specific business needs and scenarios. If you don’t meet those qualifications, there is literally no chance you’ll get approved. So don’t waste a single minute applying to loans that aren’t relevant to your business.
- Submitting an incomplete application
When a lender asks for documentation, it’s more of a demand than a suggestion. Make sure you gather all of the necessary details before you push the submit button on any application. Failing to get your ducks in a row can immediately sink your chances.
- Missing the credit requirements
Different loans require different credit scores to qualify. Always monitor your credit with TransUnion, Experian, and Equifax. When you know your score, you’ll know what you qualify for, and the application process will be much more efficient.
- Missing deadlines
There’s a wide variety of timelines associated with various small business loans. If a business loan has a specific deadline, don’t miss it by a single hour. Your ability to stay on task could very well be the key to getting approved.
As you focus on doing everything in your power to make yourself a good candidate for veteran loans and grants, you’ll separate yourself from the competition and set the stage for sustained success. The discipline you developed in the military will be crucial, allowing you to analyze details and act with precision.
Whether you pursue business loans, grants, or other funding sources, remember that there’s a willing community ready to support you. Organizations like Warrior Rising and StreetShares have plenty of resources to help you follow your dreams, identify the right opportunities, develop your business, and achieve your goals.