Veterans are the majority owners of over 1.6 million firms in the United States. They represent 5.5% of business owners in the country and employ close to 3.3 million workers, according to the Small Business Administration.
Finding the best business loans for veterans is key to success, and this guide will help you do that.
Benefits of a veteran business loan
Some of the biggest benefits for veterans to have access to large amounts of capital include:
- Fee reductions or waivers: Many veteran loan programs, like the SBA Veterans Advantage, offer reduced or eliminated guarantee fees, saving veterans thousands in upfront costs.
- Lower interest rates: Some veteran-specific loan programs offer below-market interest rates exclusively for veteran entrepreneurs.
- More flexible credit requirements: Many veteran-specific programs have more lenient credit score thresholds, acknowledging the unique financial circumstances that military service can create.
- Specialized business mentoring: Most veteran business loan programs include access to veteran-specific business advisors who understand the military-to-business transition.
- Extended repayment terms: Some veteran loan programs offer longer repayment periods than standard business loans, reducing monthly payment amounts.
- Reduced or waived collateral requirements: Certain veteran loan programs require less collateral or offer unsecured options not typically available with conventional financing.
- Expedited application processing: Many lenders offer faster approval timelines for veteran applicants as part of their commitment to serving the veteran community.
- Training programs integration: Veteran business loans often connect directly with specialized entrepreneurship training programs designed specifically for veterans.
For all of these reasons, veteran business loans can make a real positive difference in helping former servicemembers succeed in growing their companies.
The key is to find the right kind of funding and have clear goals to reap these benefits and make the most of the available capital.
Best types of business loans for veterans
There are many funding opportunities for veterans looking to start their own company. Finding the best veterans business loan program will depend on each business owner’s specific needs, including what the capital will be used for, the desired repayment schedule, and more.
Here are some of the best types of business loans for veterans that are worth considering.
Business line of credit
A business line of credit is one of the most flexible funding solutions for those looking for loans for veterans. The company is given access to a line of credit, so it can borrow up to a set amount as needed. For example, a veteran line of credit might offer $500,000 of credit to the business.
Unlike some types of loans, such as a term loan, you wouldn’t have to access all of this credit at once. You could borrow $10,000, pay it back, borrow $20,000, pay it back, borrow $50,000, pay it back, and so on.
Business lines of credit work like credit cards, but with larger lines of credit and more affordable interest rates. The big benefit is that you access the capital only as needed and pay interest only on the amount borrowed.
Cash flow financing
Cash flow financing is a funding option that allows veteran business owners to borrow against expected future revenues or accounts receivable. This type of financing is ideal for businesses with reliable cash flow but temporary gaps between providing services and receiving payment.
Unlike traditional loans that evaluate assets or credit history, cash flow financing focuses primarily on your business’s revenue streams and projected income. Lenders analyze your cash flow patterns to determine loan amounts and terms.
For veterans experiencing seasonal fluctuations or working with clients who have extended payment terms, cash flow financing provides immediate working capital. This solution helps maintain daily operations, meet payroll obligations, or seize growth opportunities without waiting for customer payments. The financing amount typically ranges from 70-90% of the invoice value, with the remainder (minus fees) paid once customers settle their accounts.
Term loan
A term loan is a good option when getting a business loan. It involves borrowing funds for a set period, such as 5, 10, or 20 years.
Your business receives the entire amount you’re borrowing up front at once, and you pay it back with interest over the loan term.
Term loans are usually used to meet specific medium-term or long-term goals, such as financing company growth by investing in inventory or staffing. Businesses can choose a term length and loan amount that makes sense given their goals for the capital.
There are different types of business term loans. If the interest rate is fixed, monthly payments are guaranteed for the life of the loan. Some term loans do have variable rates and are tied to a financial index, like the prime rate, which creates more risk of payments and costs rising because of fluctuating interest rates, resulting in payment increases, and other factors.
Most term loans are unsecured, so there is no collateral guaranteeing the loan.
Equipment financing
Equipment financing is one of several types of business loans for veterans. However, this specific type of veteran business loan is designed to allow for the purchase or repair of business equipment by making payments over time.
Equipment loans are usually secured loans, with the equipment serving as collateral. This can result in easier approval and lower interest rates, but greater risk because the equipment could be seized in the event of a default.
Franchise financing
Franchise financing involves borrowing capital to cover the cost of franchise fees, including purchasing inventory and equipment.
Lenders offering veteran commercial loans to buy franchises will usually require the would-be franchisor to pay for a part of the cost of securing the franchise, such as 10% to 30% of the total amount.
Veteran grants
Most of the above business loan types are available to any business owner, not just disabled veterans.
However, veterans can get dedicated assistance from some government agencies as they work toward starting a business.
- Boots to Business is one example of an SBA program, which provides education and training to service members and military spouses.
- The LiftFund Heroes Program provides dedicated small business loans for veterans valued at up to $100,000, with fixed interest rates of 5.00%.
Many disabled veterans use these financing options to expand their business operations and take their company’s performance to the next level.
Veteran business loan requirements
When you are applying for a veteran business loan, there are specific requirements you will typically need to meet. For example, the SBA Veterans Advantage program requires:
- Proof of military service, such as a DD-214 or Certificate of Release from Active Duty
- 51% veteran ownership, control of the business, and participation in day-to-day operations
- U.S.-based business location and ownership
- Small business size designation, per SBA size standards
- Rejection on reasonable terms from non-government sources
The key will be to be able to prove honorable military service and to show that your company will be able to repay the loan.
Find the right veteran funding options with National Business Capital
Whether you need access to $10 million in capital or a much smaller SBA loan or line of credit, you’ll want to be sure you do your research to find the best borrowing option for you. Choosing a lender usually requires shopping around, getting quotes, and understanding the loan requirements.
For those looking for the best business loans for veterans, National Business Capital is a great resource. With National Business Capital, you can get competitive veteran small business loans options from us and our lending partners that many former service members can qualify for and use for any business needs.
National Business Capital also has expert business advisors to help you find the right funding and guide you through the entire application process.
If you’re ready to secure the capital you need to take your company to the next level, submit a digital application to get a quick decision on funding, or contact National Business Capital today to learn more.
Frequently asked questions
There are some dedicated business loans for veterans that may be easier for former service members to qualify for. However, all veterans applying for financing do need to meet lender requirements, including demonstrating a viable business model and good credit.
The amount a veteran can borrow with a business loan varies depending on the loan type and desired purpose. The best way to find out how much credit is available is to explore loan options.
You may be able to use veteran business loans to purchase an existing business, depending on the loan program you’re interested in and the amount you need to borrow. Reach out to your preferred lender to find out what loan funds can be used for so you can make an informed choice.
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