Acquiring the necessary capital can be tricky for small business owners who are looking to finance their startup company. USAA members who have returned from active military duty might come home and decide to impact their local community by starting their own business. But, with a lack of funding, rising costs, and confusing loan options, they could be stuck.
However, there are numerous alternatives to business loans from USAA that can help small businesses get off the ground. Although USAA doesn't offer business loan options for members, that doesn't mean they don’t have other useful services for entrepreneurs. Plus, with other financial methods, like invoice factoring and business lines of credit, owners can still make their dreams a reality.
What is USAA?
United Services Automobile Association (USAA) is a company that aims to help members achieve financial security through multiple avenues, including providing top-tier products, exceptional customer service, and respected advice.
USAA offers members insurance, banking, retirement, investing, and financial advice to help them plan accordingly. USAA offers personal, business, and health insurance, investment opportunities, retirement funds, and banking options to help members learn how to save money, finance their businesses, and get back on their feet.
However, USAA has changed recently and veered away from offering traditional business loans to members. Instead, they currently provide auto, personal, RV, boat, motorcycle, and leisure vehicle loans for members – but lack business funding options for small business owners or startups.
Does USAA Offer Business Loans?
Despite being a well-known financial company that provides benefits for military members and families, USAA no longer offers small business loans to veterans, family members, or current active military personnel. Therefore, USAA policyholders or small business owners will have to look elsewhere to fund their startup operations.
So, why did USAA stop offering business loans? The financing company's main focus was to prioritize its services for veterans and families, giving more resources toward financial pathways for those who have served in the military.
In short, USAA aimed to streamline its efforts and finances to focus on banking, investments, and insurance that are more suitable for veterans post-service.
USAA Career Starter Loan
One alternative to a small business loan from USAA is the USAA Career Starter Loan. This type of loan allows individuals to build credit responsibly, avoid debt, fund purchases, and build their savings accounts.
The Starter Loan can be used for buying a vehicle, consolidating credit card debt, funding emergency savings, or paying for military uniforms.
To apply for a USAA Career Starter Loan, you must follow these steps:
- Become a USAA Member
- Open a USAA Federal Savings Bank checking account
- To apply for the loan, you must provide details such as current income statements, savings, housing ownership/renting information, and commissioning information.
Business Loans: USAA Alternatives
Although USAA no longer provides business loans for its customers, there are alternatives suitable for many small businesses, new companies, entrepreneurial endeavors, and mid-size companies.
Business Lines of Credit
One alternative to a USAA business loan is a business line of credit. This financing option gives owners quick access to capital that can be used for daily cash flow, short-term capital needs, making payroll, purchasing inventory, and financing campaigns.
Companies can choose between either a Secured Business Line of Credit or a Unsecured Business Line of Credit.
- Secured: Short-term liability; businesses must pledge assets as collateral.
- Unsecured: Does not require assets as collateral; high risk to lenders.
The main advantage of a business line of credit for a new company is that it provides immediate cash flow to get your new startup off the ground. It can cover various needs, including short-term expenses, one-time purchases, payroll, funding inventory, and other items for your small business.
Business Term Loans
Business term loans are used to finance businesses’ acquisition of assets required for the company to operate as intended, such as vehicles, equipment, property, structures, or land. This specific funding option covers large-scale purchases that require extensive upfront capital—something that many small business owners do not have.
The pros of term loans are that they can cover immediate requirements, provide low interest rates compared to business credit cards, and improve new business owners’ credit scores so they can qualify for other financing options in the future.
Invoice Factoring
Invoice factoring requires an entity, an invoice factoring company, to fund a business based on its unique needs. These ‘factors’ can work with specific businesses based on their annual revenue, invoice volume, particular industry, or creditworthiness.
The main benefit of invoice factoring for a new business is that it can help startup companies receive immediate capital without going into debt. Plus, it provides hands-on access to capital so your company can continue operating as usual.
Merchant Cash Advance
Business loans from USAA used to provide cash on hand for business owners to use on daily operating expenses. Now that they are no longer providing quick access to cash, there has to be an alternative—like a merchant cash advance.
This funding option is a cash advance rather than a loan, giving small business owners direct access to money for any purchase. The business then agrees to repay the lender through daily or weekly debits from the merchant account.
The benefits of using a merchant cash advance for your business are fast access to capital, flexible repayment terms, and no collateral required to secure the ‘loan.’
Working Capital Loans
An owner can use a working capital loan to cover operational expenses, including paying off debts, paying monthly rent, restocking inventory, and paying employees.
Working capital loans are either short-term or long-term, working with the business’ flexibility and funding needs. This type of loan covers businesses' overhead and operating expenses to pay employees, make one-time purchases, and pay for repeat expenses.
The perks of working capital loans versus other business funding options are that they are fast, easy to obtain, and can be received in a lump sum. This makes them easily accessible and immediately usable for companies to fund one-time purchases, pay off items that are on a deadline, or make rent.
Business Financing Options for Veterans
Since USAA no longer offers business loans for veterans and their family members, ex-military personnel might wonder how they can fund a new startup venture or small business.
In addition to the aforementioned business loan alternatives to USAA funding, there are veteran-specific financing tools geared specifically towards veterans, active military personnel, and veterans’ families.
Veterans Business Loans
There are more than 2.5 million veteran-owned businesses in the U.S. alone, totaling nearly 10% of all companies. This staggering number shows the desire for veterans to reintegrate into society after serving their country—and they should have the backing of U.S.-based financial institutions.
‘VA small business loans’ are useful for veterans who plan to own a small business. They provide funding for necessities such as working capital, purchasing equipment, buying commercial real estate, refinancing debt, expanding their businesses, and paying for startup costs.
Although the Veterans Association does not administer these specific business loans themselves, they are often referred to as ‘VA small business loans’ because the VA provides numerous resources and support for veterans who plan to own a small business and apply for an SBA loan from the government.
Small Business Administration Loans
Another funding option ideal for veterans is a small business administration loan from the SBA. SBA loans are specifically designed to meet the financial needs and timeline of startups and small businesses, providing lower interest rates, easier financing criteria, and various financing solutions that can work for different aspects of businesses’ needs.
SBA loans offer financial support, professional advice, and helpful tools to help veterans determine how to best make their dreams come true. The main perks of SBA loans include competitive terms (comparable to non-guaranteed loans), counseling and continued support, and lower down payments.
Business Loans USAA: What are My Options?
If you plan on using a business loan from USAA to help fund your new startup venture, you could be out of luck. Although USAA offers numerous funding options, insurance policies, and other financial aid, they no longer provide business loans.
However, despite discontinuing funding for small businesses and startups, USAA has alternatives that can work for members, such as the Career Starter Loan. In addition to the loan alternative, there are other financial options for small business owners to consider, such as invoice factoring, business lines of credit, and other helpful tools.
If you don’t know where to start when it comes to securing immediate capital for your small business, consider using Business Loans to see which path is right for you. You can search between SBA loans, lenders, VA loans, and other alternatives that meet your unique business needs.
We are here to make starting a business as seamless as possible, whether you are interested in a small business or a mid-level company. Get in touch with Business Loans today to see how to fund your upcoming adventure.
