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Why You Need to Consider Small Business Loans for Veterans

Small Business Loans for Veterans

If you are a veteran running your own business or thinking about opening your own business, you are in good company. Throughout the country, more than 21 million veterans are business owners, and roughly 10 percent of small businesses and 14 percent of franchises are owned by veterans. Regardless of the type of business you run, you will likely require an injection of capital at some point or another, and many lenders have created special loans designed just for veterans.

6 Reasons to Consider Small Business Loans for Veterans

  1. Capital success

The expression “you have to spend money to make money” has endured because it’s true, especially in a business context. If you want a successful business, you need capital to get it started. If your doors are already open, you may need an injection of funds to jump on a new opportunity, expand your employment rosters, launch a new website or for other endeavors. The main reason to explore small business loans for veterans is because they help lay the foundation for entrepreneurial and capital success.

  1. Special programs for vets

As a veteran, you are privy to many special loan programs, some of which are still in the creation stage. For example, in 2015, Congress began drafting and debating a bill that would extend veterans the right to use their GI bill as collateral on small business loans.

The move was prompted because only half of veterans are using their GI benefits, and many veterans starting their own businesses have to bootstrap their way to success utilizing credit cards or personal family loans. This bill seeks to change that reality and help more veterans get their businesses off the ground. As you wait for the government to act on this possibility, there are other lending programs with features designed specifically for vets.

  1. Fee reductions for veterans

The Small Business Administration (SBA) guarantees loans for all kinds of small business owners, but it offers special fee reductions for vets. When the SBA guarantees a small business loan, the organization requires the borrower to pay a certain percentage of the guaranteed amount as a fee. This amount is typically around 3.5 percent, but in 2015, President Obama extended a fee reduction program for veterans. The extension lasts until late 2016, and it cuts the guarantee fee in half.

To illustrate, imagine you take out a $100,000 small business loan from a local lender. The SBA guarantees 75 percent of the loan or $75,000. Typically, the SBA charges a 3.5 percent fee or $2,625, but the fee reduction for veterans brings that amount down to 1.75 percent or $1,312.50 which can be wrapped into the repayment schedule over the life of the loan.

To qualify for this program, borrowers must use the loan to start or buy a small business, they must work with a participating lender and they cannot borrow more than $5 million.

  1. Loans paired with entrepreneurship training

Some loans designed for veterans offer more than just cash. Rather, they are paired with entrepreneurship programs to help you develop as a business leader and guide you as you shift your military skills into the business world. In particular, the Small Business Administration offers a Boots to Business program.

Through this program, vets receive a two-step training program that includes a two-day classroom course or an eight-week online course. Both contain tips on how to start and grow a business with a special focus on the areas veterans most need to consider.

  1. Not just for veterans

Many programs focused on providing small business loans and other opportunities to veterans are not exclusively reserved for veterans. Rather, some of these programs also extend services to current spouses of veterans, active duty service members, National Guard reservists and widowed spouses of service members who died in service or due to a disability connected with service. If you fall into one of these categories, you may also want to investigate small business loans for veterans.

  1. Reduced operating capital due to employee called to service

In addition to special loans for vets, there are also loans designed to help businesses that are struggling because their essential employees have been called into active duty. In particular, Military Reservists Economic Injury Loans (MREIDL) are designed for small businesses that are struggling to meet operating expenses due to the absence of an employee called to duty.

These loans are not designed to start a business or to expand one, but rather to cover gaps in operating capital in an emergency. Unfortunately, you cannot access one of these loans unless your business is really struggling. Businesses able to get by without the extra capital are typically turned away from the program.

 

If you are a veteran who owns a business, you may have access to special loans, educational programs and reduced fees that non-veterans cannot access. If you want to expand your business, you should look into these programs before exploring conventional loans. These small businessĀ loans for veterans often provide the capital you need at a price you can afford, and they help you achieve the success you deserve.

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Kabbage Team

The Kabbage Team is here to not only fund the small business loans you need, but to 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.