Around two million veterans who started their own small businesses gained help from agencies that include the US Department of Veterans Affairs and the Small Business Administration’s Office of Veterans Business Development. These government agencies provide veterans the resources they need to fund their business concepts and grow them.
For veterans looking to start their own small business but do not have the required capital, below are some of the types of loans you can obtain to help you get started.
Secure a VA Small Business Loan
Veterans looking for help to fund their startup business can obtain mortgage assistance from the government by applying for a VA Small Business Administration (SBA) loan. This is different from the VA loan granted to individuals looking to buy their own homes, as instead of the loan being provided by the VA with a $0 downpayment, a VA small business loan is guaranteed partially by the SBA. Typically, banks or other financial institutions supply the loan, such as a credit union.
As a guarantee, the SBA will reimburse the partial amount to the bank or financial institution once the borrower defaults on the loan. The veteran can use the VA SBA loan not only to fund the required capital for the startup but also to fund the maintenance and growth of the small business. VA SBA loans offer lower interest rates and fees. They also offer better terms to the veterans compared to those loans offered to non-veterans.
Know the Various Loans Offered to Veterans
VA small business loans come in various types. These include the SBA standard 7(a) loan program, military reservist economic disaster loan (MREIDL), SBA microloan, and the SBA 504 loan program.
The SBA Standard 7(a) Loan Program
This is the primary and the most popular type of loan offered by the SBA to veterans. This loan type offers lower down payments to make sure that the veterans can secure the funds they need for their startup. Generally, the veteran seeking a loan will work with a financial institution. The SBA will assist by offering a guarantee that a portion of the loaned amount will be paid by the agency once the borrower starts to default on the loan. In this type of loan, the SBA also ensures that the interest rates are lowered and that fees are limited to make it easier for the veterans to obtain the loan.
Military Reservist Economic Disaster Loan
This loan is for businesses struggling to meet their operating expenses due to an employee being called to active duty as a military reservist. The primary purpose of this loan is to help the small business fund its operating capital so that it can meet the necessary expenses required for it to operate until the reservist employee is allowed to return to regular work and released from active duty. The loan can be paid for up to 30 years with interest rates.
SBA Microloan
Proceeds obtained from this type of loan can be used for operating expenses, supplies inventory, purchase of furniture and fixtures to be used in the business, and the purchase of certain types of equipment crucial for the operations of the company. The SBA microloan cannot be used to pay off a business’s existing debts or to purchase real estate. The small business should be able to pay off this type of loan within six years.
SBA 504 Loan Program
This type of loan can be used for the construction or purchase of assets necessary for the small business’s operations, such as new facilities, land or existing buildings, and equipment and machinery that the company will use for the long term. This can also improve existing facilities and enhance the streets, land, parking spaces, and overall landscaping of a business’ office to attract its customers. The proceeds obtained from this type of loan cannot be used to consolidate, repay, or refinance debts. They cannot also be used to invest in rental real estate or as working capital.
These types of loans may have different requirements for approval. They also have different interest rates and repayment terms. They also vary in terms of how much can be obtained from them when approved. If looking to get a loan, whether for startup, refinancing, inventory, or growing your business, take time to research each of these loan types first before sending your application to the different institutions. Understanding each loan type can help you decide which loan is best for you and your business. It also helps to get you more chances of having your loan application approved.
