The Veteran Advantage: Starting a New Business

Nancy BilyeauUpdated November 2, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Launching a small business is running into some tough headwinds. Economic conditions could be creating a credit crunch, a situation where banks may significantly raise their lending standards. However, there are still success stories to be found in this challenging environment, and a standout group among those successes appears to be U.S. veterans-turned-entrepreneurs. Veterans own almost 2 million businesses and employ over 5 million Americans, according to a Small Business Administration (SBA) study released in 2022. These businesses generate sales of $1.3 trillion.An earlier report by the SBA found that veterans were twice as likely to start their own business as their civilian counterparts. And it seems the strains of COVID-19 lockdowns and inflation didn’t change that dynamic.When it comes to veterans, “there has been a surge in entrepreneurship in the U.S. since the pandemic," according to a recent study conducted by the National Survey of Military Affiliated Entrepreneurs (NSMAE). November marks National Veteran and Military Families Month. Read on to learn what factors and qualities have helped veterans succeed as entrepreneurs, what their financing challenges have been, and what veteran loan programs are helping.

Funding Challenges for Veteran-Owned Businesses

A study by the Institute of Veterans and Military Families found that the reasons vets become entrepreneurs include "a desire for independence, flexibility, financial security, and dissatisfaction with the civilian workforce."But no matter how well suited they are to launch a business, a veteran still has to put together the money to get it off the ground and run the business–and that’s not a cinch for anyone.The NSMAE said that 96% of veteran-owned businesses required start-up capital for their businesses. Of these:

59% required less than $25,000 of funding
21% required between $25,000 and $99,000
20% required more than $100,000

Among this group, 92% said that once they had launched, they needed funding to expand or grow their business. However, small business loans were not always obtainable.In the study, 54% said they applied for credit or financing with a lender or creditor. When that happened:

60% were approved by the lender or creditor
8% obtained partial funding
32% were declined (of these, 62% did not reapply anywhere)

To succeed, these small business owners often could use some help. Programs for veteran entrepreneurs include the Entrepreneurship Boot Camp for Veterans (EBV), Boots to Business (B2B), Veteran Entrepreneurship Program (VEP), Bunker Labs, and VBOCs.The SBA’s Office of Veterans Business Development (OVBD) acts as the liaison between SBA’s network of district offices, resource partners, and collaborating Veteran Service Organizations to support veteran entrepreneurs through expanding access to capital and markets.Recommended: Mistake Proof Your Business Idea

Small Business Loans for Veterans

Government agencies and nonprofit organizations exist to coordinate or supply financing for veteran-owned businesses. Chief among them is the SBA.

SBA Veterans Advantage Program

The SBA offers a variety of loan programs that people can apply to in hopes of acquiring capital to start or grow in business. Online training courses and counseling are delivered through SBA’s network of resource partners to help veterans become lender-ready. The Veterans Advantage Program works with the SBA 7 (a) and SBA Express loans to provide an extra benefit and thus remove barriers to success for veterans.

SBA 7(a) Loan

Government-backed loans for up to $5 million can be used for almost any business-related costs, including purchasing commercial real estate. If you qualify, the Veterans Advantage can be applied to SBA 7(a) loans to reduce or remove loan fees.For the “fee relief,” the SBA utilizes a credit scoring model to help reduce underwriting costs and processing time. To learn more about the SBA Veterans Advantage Fee Relief initiative, contact your local SBA District Office which can be located online.

SBA Express Loan

These small business loans, offered by banks, credit unions, and other approved lenders, come with an application review time of 36 hours and offer a maximum loan amount of $500,000. The SBA Express loans can help veteran-owned small businesses in need of immediate funding. Again, with the Veterans Advantage program, qualified borrowers can save some cash with reduced loan fees.

Military Reservists Economic Injury Disaster Loans

The SBA also offers a Military Reservists Economic Injury Disaster Loan (MREIDL). This can be used by any eligible company that cannot meet its normal operating expenses because an essential employee is called to active duty as a reservist. The program offers loans of up to $350,000 to veteran-owned businesses. The loans can be used for a variety of purposes, including working capital, equipment purchases, and real estate.Recommended: What Are Common Small Business Loan Terms?

Veteran Small Business Certification

A new program that could provide key assistance to veteran businesses is Veteran Small Business Certification. Once certified, such businesses can compete for federal contracts, pursuing sole-source and set-aside contracts at the Department of Veterans Affairs under the VA’s Vets First Program.All federal government purchases between $10,000 and $250,000 are automatically set aside for small businesses, as long as there are at least two companies that can provide the product or service at a fair and reasonable price.If you are certified as a veteran-owned small business (VOSB), you are ready to compete. Also you can be certified as service-disabled veteran-owned (SDVOSB). At least 3% of all federal contracting dollars each year are set aside specifically for certified SDVOSBs. To establish an SBA account and apply for certification, visit the Veteran Small Business Certification portal.Through the application portal, you will be able to:

Access checklists and pre-application guides
Check your firm’s eligibility
Request information
Create an account, log in, and proceed with an application
Search for a certified VOSB or SDVOSB

The Takeaway

Veterans are pursuing small business opportunities with zeal. Like any other entrepreneur, they could use help getting financing. Along with the Veteran Advantage Program, veterans can get certified and compete for federal contracts, pursuing sole-source and set-aside contracts at the Department of Veterans Affairs under the VA’s Vets First Program. Whether you’re looking for a short-term business loan or an SBA loan, Lantern by SoFi is ready to help you discover the right lender for your business needs. By filling out a simple online form, you’ll be able to find a small business lender with ease in minutes.

Photo credit: iStock/sturti

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About the Author

Nancy Bilyeau

Nancy Bilyeau writes about student loans, mortgages, car insurance, medical debt and many other finance topics for Lantern. A veteran of the magazine business, she has edited stories on personal finance for Good Housekeeping and DuJour magazines and has written articles for The Wall Street Journal, Readers' Digest, Parade, Town & Country and Lifetime/A&E, among others. She is a graduate of the University of Michigan.

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