What is a VA business loan?
A VA business loan is a type of loan program created by theU.S. Small Business Administration (SBA) to help military veterans fund their business ventures. The SBA helps connect qualified veterans with lending parties when they otherwise wouldn’t know where to start looking for funding. In addition, other government agencies and lending institutions offer similar services to service members.
Who is eligible for a VA business loan?
There are several ways you mayqualify for a VA business loan. The SBA’s 7(a) Loan program offers veterans and their families loans as a part of the Veterans Advantage program. Below are the categories you can review to see if you qualify:
- Any veteran, as long as they were honorably discharged
- Service-disabled veterans
- Active duty service members enrolled in the Transition Assistance Program (TAP)
- National Guard members
- Reservists
- Spouses of active-duty members, veterans, service-disabled veterans, reservists or National Guard members
- Widows of service members who died in combat
Additionally, these individuals and their businesses should have at least 51% ownership of the business in order to qualify for a loan.
Overview of VA loans
VA business loans may seem complex, but there are plenty of resources and loan options to help you through the process of choosing and applying for a VA loan. Here is an overview of VA loans to help you determine your next steps:
Types of VA loans
There are several different types of VA loans and loan programs you can pursue depending on which lender you go with:
- SBA Express Loan:Offered as part of the SBA’s Veterans Advantage Program, this loan is great for business owners with a limited credit history. Business owners can take out a loan of $350,000 or less and pay it back as a term loan or credit.
- SBA Veterans Advantage 7(a) Loan:This loan aims to provide veteran business owners with capital for their business ventures. This is a popular loan program because the SBA guarantees a fee of $0 for loans of $125,000 or less.
- Military Reservist Economic Injury Disaster Loan Program (MREIDL):This program provides veteran-owned businesses with up to two million dollars in capital when either the owner or one or more essential employees get called to active duty. It aims to help the business continue without essential personnel.
- Service-Disabled, Veteran-Owned Small Business Program:This program aims to help disabled veterans get government contracts for property, machinery and other business assets before other businesses do.
What do they cover?
VA loans can cover a variety of business expenses depending on your needs and the loan amount. Here are some examples according to MilitaryBenefits:
- Contribute to start-up costs.
- Pay off business debt.
- Purchase real estate.
- Purchase inventory.
- Hire new employees.
- Expand business by investing in new inventory, property or employees.
- Hire contractual professionals.
- Generate working capital.
- Repair damages from natural disasters.
Where to apply for VA business loans
According to LendingTree, there are a variety of ways you can apply for a VA business loan. Some veterans may choose to apply to a lending program through the U.S. Small Business Administration (SBA) or the U.S. Department of Veterans Affairs (VA), which connects them with potential lending institutions. Others may look to a local agency or private lending institution. It is important to ensure the lender’s credibility before providing personal information and paying fees to protect your privacy.
How to apply for a VA loan through the SBA
Here is one way to apply for a VA business loan through the SBA:
- Visit the SBA website.
- Select “Business Guide.”
- Go to “Grow Your Business.”
- Click “Veteran-owned businesses.”
- Scroll down to “Funding for Veteran-Owned Small Businesses.”
- Go to the “Lender Match” page and click “Find Lenders” to connect with SBA-approved lenders.
- Answer a questionnaire about your loan needs.
- Wait to be contacted by one or more lenders.
- Discuss rates to determine the best loan option for you.
- Organize documentation before completing your application. You may need your own or your spouse’s Social Security number, discharge papers and identification tags (dog tags).
- Complete and submit your application(s) to see if you qualify.
VA loan FAQs
How does a VA business loan work?
VA business loans work by helping veterans start a business or maintain their business. A government agency usually helps veterans get financially organized before connecting them with a potential lending institution. Loan receivers may need to pay a fee upfront to get the loan(s) followed by a monthly interest rate after a certain timeframe.
Can I get a VA business loan with poor credit?
The U.S. Small Business Administration uses a credit scoring model to help quicken the pace for veterans to receive loans. Therefore, those with good credit may receive loans faster than those who don’t. However, the SBA also offers training courses and counseling services that may help enhance the likelihood of receiving a loan, even with a lower credit score.
How much money can you get for a VA business loan?
According to the U.S. Small Business Administration, veterans can get up to two million dollars for their business through the Military Reservist Economic Injury Disaster Loan Program (MREIDL). Business owners should connect with LenderMatchto get exact details about what they can receive based on their qualifications and current situation.
