Best Business Financing Options for Veterans

Veterans transitioning from military service to business ownership bring unique skills and discipline to their ventures.

However, veteran business owners may face unique challenges when it comes to accessing financing, as time spent serving in the military may leave gaps in their credit history. 

Fortunately, several financing options are tailored to veterans to help them start or grow their businesses. People who have served in the military may qualify for more favorable terms and reduced interest rates with some financial products. However, the right financing option varies based on each business’s needs. Understanding the strengths and weaknesses of each business loan for veterans can empower veteran entrepreneurs to make the best financing choices.

 Types of Business Financing Options for Veterans

 SBA 7(a) Loans 

The Small Business Administration (SBA) offers many loans for small business owners that veterans may take advantage of. SBA 7 (a) loans are a category of financing options with minimal fees. While qualified lenders may set their own interest rates for 7(a) loans, they can’t exceed the maximum the SBA sets. Previously, veterans could save on fees with 7(a) loans through the Veteran Advantage program. However, that program ended in 2018. While veterans still benefit from the same limited fees and interest rates as other small business owners, they now must pay the standard fees. 

You may have to wait a while between applying for an SBA 7(a) loan and receiving the money, as applications undergo an extensive review process. Veterans looking for funds within a short timeframe may want to apply for SBA Express loans. These loans have expedited review processes, which often means applicants could have money in hand within a couple of days of applying. Plus, businesses owned and operated by veterans or their spouses pay no Upfront Fee for express loans.  

 Veteran Personal Loan

While it may seem counterintuitive, some veterans may find that personal loans are the best fit for their business needs. While business lenders typically assess your venture to determine your creditworthiness, including your business credit score and standings, personal loans depend on your personal credit score and financial circumstances. That usually means new business owners with a limited history are more likely to qualify for personal loans. 

A personal loan could provide the capital you need to launch a new business. However, personal loans have some limitations, including the fact that many may not offer the larger loan amounts typically needed for significant business investments or expansions. Plus, personal loans often have higher interest rates than business loans. If you decide to take out a personal loan for your business, keep in mind that missed payments and other issues affect your personal credit score. 

 Military Reservist Economic Injury Disaster Loan

In certain circumstances, the Military Reservist Economic Injury Disaster Loan program (MREIDL) could help small businesses access emergency funding to remain operational. If an essential employee at a business is a military reservist called to active duty, that business may apply for MREIDL assistance to cover necessary expenses until they return. Funds can’t be used to cover lost profits or expand the company, so they’re not necessarily an alternative to more flexible business financing. However, small businesses that are struggling to make ends meet after an essential employee enters active duty may want to consider MREIDL before looking at other options.  

 Business Term Loan

A business term loan is the standard loan you might take out from a bank or credit union to cover business expenses. These loans come as a lump sum up front, with a fixed interest rate and repayment period. 

Many veterans who recently completed active service may find business term loan requirements challenging. While each lender is different, financial institutions often require borrowers to have strong business and personal credit before qualifying for a term loan. These qualifications may pose a challenge for veterans who are still building their credit and developing their businesses. However, more established veterans may find that business term loans offer the right rates and repayment terms for major projects, growth initiatives, or new equipment.  

 Tips When Comparing Business Financing Options for Veterans

Navigating the landscape of business financing can be complex, especially for business owners that are just beginning to look at financing options. To help you assess the best financing options for your small business, consider the following tips.

 Look at Your Business Needs

Before diving into financing options, look at what your business needs to grow and thrive. Begin by estimating how much funding you need and what the funding is for. Then consider what a reasonable repayment structure might look like for your business. 

 Verify Eligibility

Familiarize yourself with the eligibility requirements for each financing option. Outside of military service, some programs may have specific criteria related to business size, industry type, or annual revenue. Verifying your eligibility allows you to focus on financing options that match your business.

 Compare Interest Rates, Fees, and Terms

The rates, fees, and terms of each financing option will determine the repayment schedule and, ultimately, the affordability of the loan. Taking time to compare rates, fees, and terms could help you find the most affordable option based on your business revenue and growth.

 Join Veteran Business Owner Networks

With so many veterans transitioning into business ownership, networks can be an excellent place to find valuable business advice. Keep in mind that other business owners may have a unique perspective, but that perspective may not align with your business needs. 

 Consider Long-Term Implications of Financing

Think about the long-term implications that each financing choice could have on your business. Does the loan’s repayment schedule meet your needs, or could fixed repayments become an issue during a slower season? Does a variable-rate loan put too much unpredictability in your monthly finances? Consider the pros and cons of each loan option before beginning your application.

 Where can Veterans find Financing for Small Businesses?

Veterans looking for small business financing have a range of options to explore. Traditional banks and credit unions typically offer business loans with specific terms for veterans. Online lenders offer convenience and accessibility, presenting a streamlined application process and flexible eligibility criteria. Whichever financing option you choose, take the time to research the loan and lender, and compare each loan product to find the best fit for your small business.

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