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Small Business Funding for Veterans

Small Business Funding for Veterans

According to the Small Business Administration, one in 10 businesses are veteran-owned businesses, and those small businesses employ six million workers, generating $1.2 trillion in annual receipts. Additionally, according to the International Franchise Association, one in seven franchises are owned and operated by veterans who generate more than $41 billion.

SBA Administrator Maria Contreras-Sweet has made it her mission to spearhead efforts to increase small business loans for veterans, resulting in a 100 percent increase in 2015 to 3,091 business veteran loans totaling $1.2 billion (up from $605 million in 2014).

The Office of Veterans Business Development under the SBA has also created Boots to Business a two-step entrepreneurial training program that includes the following:

  • Introduction to Entrepreneurship – A two-day classroom course offered as one of three Transition GPS elective tracks.
  • Foundations of Entrepreneurship – An eight-week, instructor-led online course that offers in-depth instruction on the elements of a business plan and tips and techniques for starting a business. To learn more about Boots to Business or to find classes in your area, visit their website.

SBA Funding for Veterans

Previously, the SBA offered two loan programs that were created specifically for veteran-owned businesses: the Patriot Express Loan (which expired in 2013) and the SBA Veterans Advantage Loan Program (which expired in October 2014).

Although the Patriot Express Loan and the SBA Veterans Advantage Loan Program are no longer available, there are still several small business loans for veterans that can be taken advantage of.

1. Basic 7(a) Loan Program – This loan allows veterans to receive a 50 percent reduction in upfront guarantee fees for all other 7(a) loans during the Fiscal Year 2016. This year President Obama also signed into law the Veterans Entrepreneurship Act, which waives the upfront guarantee fee for veterans applying for 7(a) express loans through the SBA.

To be eligible for this loan, borrowers must use the loan for the purpose of starting or acquiring a small business. Borrowers must apply through a participating lender. The specific loan amounts are negotiated between a borrower and an SBA-approved lender. The 7(a) loans have a maximum amount of $5 million.

2. Military Reservists Economic Injury Loans (MREIDL) This is an emergency loan that exists for members of the military who are Reservists. The purpose of the program is to provide funds to eligible small businesses to meet ordinary and necessary operating expenses that could not be met because the essential employee was called up or returned to active duty. The particulars of the loan include:

  • Credit Requirements: The borrowers must be able to repay the loans.
  • Collateral Requirements: Collateral is required for all MREIDLs over $50,000.
  • Interest Rate: 4.0000 percent
  • Loan Amount: $2,000,000 limit
  • Insurance Requirement: Each borrower must obtain appropriate insurance including hazard insurance for the collateral property.

Other Ways to Obtain Small Business Funding for Veterans

In addition to SBA-backed loans, there are other options for veterans. Below are just a few additional funding options that you can explore:

Traditional Business Loans – Despite the fact that it has become increasingly difficult for veterans to access small business loans for veterans from banks, it is possible to obtain a traditional business loan. However, keep in mind that veteran business owners who opt to go this route generally incur more fees, longer waiting periods and experience a higher rate of denial.

Platform Lenders – Veteran-owned businesses can now borrow from innovative online platform lenders such as Kabbage. Platform lenders have essentially changed the way small businesses have access to capital, creating a more even landscape for small businesses. Here are a few benefits of using Kabbage when applying for a small business loan for veterans:

  • Automated Approvals – The simple online process allows veteran business owners to know in minutes if they are approved for a loan. This is a huge contrast to the waiting period imposed by traditional banks.
  • Review of Real-Life Data – Kabbage uses the real-life data of the business, including online sales, banking transactions and industry trends, to make a determination.
  • Flexible Terms – Borrowers can apply for a secure Line of Credit up to $100k. There is no cost to set up the line and borrowers have the flexibility to use what they need when they need it.

Angel Investors – Hivers and Strivers is an option for veteran business owners who are graduates of U.S. Military Academies. The group investments range from $250,000 to $1 million.

Alternate Lenders – StreetShares is an online lending marketplace for veteran entrepreneurs. The premise of the marketplace is that veterans can tell their story and pitch their business ideas to investors who place bids to fund a portion of their loan. Veteran business owners can apply for small business loans up to $75,000.

The Future is Bright for Veteran-Owned Businesses

There is good news on the horizon for veteran business owners. New legislature has been introduced to help veterans in their quest to seek business loans. The Veterans Entrepreneurial Transition Act of 2015 (also known as the VET Act) would enable veterans to use their G.I. Bill toward starting a new business or purchasing an existing business or franchise. The three-year pilot program would be overseen by the SBA in consultation with the agency’s Advisory Committee on Veterans Business Affairs and the Secretary of Veteran Affairs. As of July 28, 2015, the proposed legislation was referred to the House Committee on Small Business.


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Kabbage Team

Kabbage is here not only to provide access to the small business funding you need, but to also help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.