Key takeaways
- Veteran-owned small businesses make up 4.7 percent of employer firms in the U.S.
- The U.S. Small Business Administration offers several types of loans which veterans can apply for.
- Many resources and organizations exist to help veterans open businesses, get government contracts and receive valuable training.
Of the estimated 5.9 million U.S. employer firms, 273,542, or 4.7 percent, are owned by veterans. For many veterans and transitioning service members, entrepreneurship offers a path to apply their skills and continue serving their community in a new way.
Securing funding, however, can be one of the biggest challenges. A VA loan for business, particularly through the U.S. Small Business Administration, can offer critical support with lower fees, flexible terms, and dedicated resources. Understanding how these loans work and comparing them to those from banks, credit unions, and online lenders can help veterans determine which type of small business loan fits their funding needs best.
Bankrate insight
The U.S Small Business Administration (SBA) used to offer small business loans at a reduced cost to veterans through the Veterans Advantage program, but that program has been discontinued.
Small business loans for veterans
The Veterans Advantage program is no longer an option, but veterans looking for small business loans can consider options through the SBA and other lenders, including banks and credit unions.
SBA 7(a) loans
While the Veterans Advantage program that reduced or eliminated fees on SBA 7(a) loans for veterans has been discontinued, veterans are still eligible to apply for SBA 7(a) loans. The VA small business loan maximum amount is $5 million, so this option may appeal to veterans needing a large amount of funding.
To qualify, businesses must be for-profit and must not be delinquent on any debts to the U.S. government. Also, the business owner must have exhausted other funding sources, including their own pockets.
SBA business loans are appealing as there are interest rate caps, which often make them less expensive than alternatives. And if you’re approved for an SBA 7(a) loan, you can use the funds for the purchase of equipment, real estate, supplies and more. This is also a chance to build business credit, which is important for a business just opening its doors.
SBA Express loans
If you’re a veteran or spouse of a veteran, you can qualify for fee discounts on one type of SBA 7(a) loan: the SBA Express loan. Veterans currently pay no upfront fees (essentially, origination fees) on these loans.
With an SBA Express loan, the approval process takes a maximum of 36 hours. It will take longer than that to actually get your money, but knowing whether you are approved or not can be useful.
SBA Express loans are capped at $500,000, with terms of up to ten years. Keep in mind that SBA Express loans usually carry higher interest rates than 7(a) loans since the government guarantees less of the loan amount (50 percent instead of 75 percent).
To qualify for this fee relief, your business must be at least 51 percent owned by someone who falls into one of these groups:
- A veteran who didn’t receive a dishonorable or bad conduct discharge
- A service-disabled veteran
- An active duty military service member in the Transition Assistance Program
- A reservist or National Guard member
- A current spouse of one of the above, or one whose spouse died while in service or of a service-connected disability
Military Reservist Economic Injury Disaster Loan (MREIDL)
The SBA’s Military Reservist Economic Injury Disaster Loan Program (MREIDL) provides low-interest business loans when an “essential employee” is called up for active duty in the Reserve or National Guard. The loan provides up to $2 million in working capital to help business owners cover operating expenses that they would have been able to pay if the employee had not been called up.
Interest rates are fixed at 4% and have repayment terms of up to 30 years. Loans over $50,000 require collateral, and funds can only be used for ordinary operating costs, not for lost income, debt refinancing, or expansion. Businesses can apply from when an employee receives active-duty orders until one year after their release from service.
Bank and credit union loans
Many banks and credit unions offer small business loans to veterans and other types of business owners. Though banks usually have more stringent eligibility requirements, you may find that the APR range is more competitive than what online lenders offer. Plus, if you already have a relationship with the lender, you may be offered an APR discount.
Certain banks, including Huntington Bank, even offer veterans discounted fees and interest. As an SBA preferred lender, Huntington can evaluate your business’s creditworthiness and funding needs to determine whether a traditional or VA loan is the best fit for you.
You can also apply for small business loans through a credit union that caters to veterans, like Navy Federal Credit Union. Because credit unions are member-owned, not-for-profit institutions, they tend to have less strict borrowing requirements than traditional banks.
Online loans
Several online lenders also offer small business loans to veteran business owners. Loans from alternative lenders typically come with less stringent eligibility requirements than traditional lenders like banks and credit unions. However, a potential trade-off to keep in mind is that they usually have higher average APRs than traditional options — especially if you have bad credit.
Consider using a business loan calculator when determining which loan is best for your business. It can give you estimated monthly payment amounts based on interest rates and loan amounts.
Other resources for veteran business owners
The SBA and other organizations offer various resources geared toward veterans to help them excel as entrepreneurs, including classes on military bases, mentorships, online programs for women veterans and training in how to bid on government contracts.
- American Corporate Partners (ACP): ACP provides support to veterans during their transition back to civilian life by providing veterans with their long-term career goals through a yearlong mentorship.
- Boots to Business: Training and resources available to veterans via domestic and international military installations.
- Office of Veterans Business Development (OVBD): Entrepreneurial resources such as workshops, mentorship and training, with locations across the country.
- The Veteran Entrepreneurial Training & Resource Network (VETRN): VETRN offers a free, online MBA program designed to help veteran small business owners, service-disabled veterans, National Guard members and their families develop strategic business plans, improve financial management and access capital, with mentorship and networking opportunities to support sustainable growth.
- Veterans Business Outreach Centers: Offers entrepreneurial development resources such as business plan preparation, training and counseling, and mentorship.
- Veteran Entrepreneur Portal (VEP): VEP provides essential resources to support veterans in starting, financing and growing small businesses, including access to federal contracting opportunities and specialized programs like the Vets First Certification and Direct Access Program.
- Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE): Women-specific resources to help train veteran entrepreneurs.
- Warrior Rising: This nonprofit helps veterans and their immediate family members create sustainable small businesses by providing coaching, education and mentorship, with a goal of assisting 16,000 veterans in 2025.
Grants for veterans
Business loans are risky. Your business and personal credit score could plummet if you default on the loan, so you have to be careful with this type of funding.
Grants are a great alternative to business loans because they don’t have to be repaid, and they don’t impact your credit score. Organizations like Second Service Foundation and Warriors Rising offer small business grants for veterans in varying amounts. Veterans can also find small business grants through Grants.gov.
Be prepared: Grants are often competitive, and funding timelines may be long. Have a backup plan in case you can’t land funding through a grant.
The bottom line
VA loans, in the traditional sense, ended in 2019. However, veterans still have plenty of small business loan options to choose from. For some, SBA Express or MREIDL may be the best option. Other veteran business owners may prefer getting their small business loans through their local credit unions, online or peer-to-peer lenders or state programs.
Frequently asked questions
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