Americans who own their own businesses feel a certain pride. Small businesses bring economic value to their communities by offering services and jobs, and they enhance the atmosphere of their city or town. Business loans for disabled veterans give those who served our country a better path to business ownership. When veterans start businesses, the whole community benefits from the skills and work ethic they developed in the military.
A business loan can be used to start a new project from scratch or to grow an existing business. There are different types of loans available for specific needs, and there is plenty of help for veterans looking for financial backing for their business goals.
If you are a veteran weighing your options for securing a loan for a new or existing business, the Small Business Administration is a great place to start.
SBA-Backed Business Loans for Disabled Veterans
The U.S. Small Business Administration (SBA) offers assistance to people who wish to start a small business. In addition to supporting training programs and contracting programs for veterans, the SBA also has several loan options that make securing funds easier for new and existing business owners.
At one time, the SBA offered loan programs tailored for veterans, such as the Patriot Express and Veterans Advantage programs. Both are now discontinued, but the SBA is still among the best options for disabled veterans.
SBA-backed loans are specifically designed to assist people who wish to start new businesses or grow existing businesses. The SBA does not loan the money themselves, but acts as an intermediary between business owners and lenders. By guaranteeing a portion of the loan, the SBA reduces the risk for lenders and makes it easier for business owners and entrepreneurs to secure the financing they need.
In addition to counseling and education, the advantages of SBA-backed loans often include lower down payments compared to traditional loans, better interest rates, no collateral required, and more favorable repayment periods.
Eligibility Requirements for SBA Loans
As per SBA guidelines, eligibility requirements for SBA-backed loans are:
- The loan must be for a small business as defined by the SBA.
- The loan must be for a for-profit business that is officially registered and operates legally.
- Your business must do business in the U.S., meaning it is located and operates in the United States or its territories.
- To reasonably ensure loan repayment, you and your business must be creditworthy.
- You must exhaust financing options, meaning the loan you are seeking is not available on “reasonable terms” via non-government sources.
Types of SBA-Backed Loans
The Small Business Administration offers several loans that can assist disabled veterans who wish to start a business.
SBA 7(a) Loan
The SBA 7(a) Loan offers flexible financing options for new business owners. It is designed to help small businesses with basic needs or for refinancing an existing loan. Business owners may borrow up to $5 million, with terms that vary based on the reason for the type of interest rate (fixed vs. variable), the loan, and the lender.
An SBA 7(a) loan may be used for:
- Working Capital
- Equipment Purchases
- Real Estate
- Refinancing Debt
- Inventory
- Starting or Expanding a Business
Because the loan is backed by the SBA, interest rates are usually lower than traditional loans. The SBA guarantee on a portion of the loan makes it easier to obtain through an SBA-approved lender.
SBA 504 Loan
The SBA 504 Loan is a way for small businesses to acquire assets like real estate or major equipment. This is a long-term, fixed-rate loan that requires a partnership between a Certified Development Company and a private lender. A Certified Development Company is a non-profit company that promotes economic development in its region and is certified by the SBA.
The SBA will usually cover up to 40% of the costs through the Certified Development Company, where a private lender covers around 50% and the borrower contributes the rest. As with SBA 7(a) loans, through the SBA 504 loan borrowers have access to up to $5.5 million with favorable terms from 1 to 25 years. The fixed interest rates are typically lower than what is available through other types of loans.
SBA Microloan
Microloans through the Small Business Administration are small, short-term loans up to $50,000 for small businesses. They are designed for startups that need quick funding for equipment, inventory, and working capital.
Terms range from six months to seven years, with favorable interest rates. Applicants must qualify by meeting the same standards as other SBA-backed loans. SBA Microloans are perfect for small business owners who might not qualify for traditional loans.
The Service-Disabled Veteran-Owned Small Business Program
The Service-Disabled Veteran-Owned Small Business (SDVOSB) Program is a federal program intended to offer support to small businesses owned and operated by veterans and service-disabled veterans. To qualify for the SDVOSB, businesses need to be at least 51% owned and managed by one or more veterans. An owner who is a veteran must be actively involved in the operations of the business.
In addition, the business must operate in the United States, meet SBA size requirements as a small business, and be a for-profit entity. Businesses must obtain certification through the SBA or the VA’s Center for Verification and Evaluation.
The Service-Disabled Veteran-Owned Small Business Program offers benefits such as access to federal contracts and opportunities for subcontracting with larger companies.
Veteran Business Outreach Centers
Veteran Business Outreach Centers (VBOCs) offer mentoring, counseling, and training for veterans who are small business owners or wish to start a small business. They can offer advice and guidance for applying for loans and other financial resources.
VBOCs are a piece of a larger network that offers support to veterans and service-disabled veterans in starting, managing, and growing their own businesses. They are a great place for veterans to get access to resources for starting or running a business.
Depending on the location, they may offer:
- Counseling: Through one-on-one counseling sessions, VBOCs can help veterans with financing, marketing, and other aspects of business ownership.
- Training: Veterans may take part in workshops and seminars to learn more about financial options, business development, and what types of federal contracting are available.
- Resources: Through VBOCs, veterans may connect with additional resources, like loans, contracting opportunities, and support services.
- Networking: VBOCs often hold networking events where veterans can compare notes with other small business owners and industry experts.
Through VBOCs, veterans can learn about business loans and other options for financing a new or existing business. If you have one in your area, this is a smart place to start.
Angel Investors
Angel investors are typically wealthy people who help startups get off the ground by offering financial resources. Usually, they will expect equity in the company. They are helpful for risky or unusual businesses that struggle to find traditional financing.
Angel investors are like venture capitalists, except they are typically betting their own money on an idea that gets them excited, rather than looking for an idea that has a strong chance of paying off for them. They play a big role in assisting new startups by filling the gap between personal investment and more significant venture capital funding.
Some angel investors support specific causes, such as offering loans for disabled veterans. To find an investor who might be interested in funding your veteran-owned business, use resources available through your local Veteran Business Outreach Centers. There are also several resources online that help match veterans with angel investors.
Additional Business Loan Resources for Disabled Veterans
In addition to federal programs that provide business loans for startups, there may be state and local business loan options available for disabled veterans.
State Veterans Affairs Offices can provide guidance for state-specific business programs and loans for veterans. State economic development agencies may offer loans to veteran entrepreneurs.
Your state may offer specific veteran business programs you can use as a resource for discovering funding opportunities. Look for city and county programs that provide help for the local veteran entrepreneurs.
While the federal government funds Veteran Business Outreach Centers (VBOCs), they often establish strong ties with the community and can provide local information resources. Local economic development corporations can offer funding and support for veteran-owned businesses.
Some local financial institutions, such as credit unions and banks, may offer specialized loans and good terms for veterans. The local chamber of commerce may present veteran-focused initiatives and programs.
Local veterans service organizations such as the American Legion and Veterans of Foreign Wars bring together veterans from all walks of life and are a place to network and get information.
Find the Best Business Loans for Disabled Veterans
The men and women who serve America face many challenges when they return to civilian life. For those who wish to start a business, there are loans and services available to help.
Still, sorting through all the available options can get a bit confusing. It helps to reach out to a trusted source that can help you along the way.
Businessloan.com is a resource that can connect you with the right business loans for disabled veterans. Find out how we can help get your business idea off the ground.
