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Today’s Top Lenders for Veteran-Owned Businesses

Today’s Top Lenders for Veteran-Owned Businesses; As a veteran with a small business, you’ve likely been impacted by the COVID-19 pandemic.
Lantern

Lantern

Updated July 28, 2021
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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.
As a veteran with a small business, you’ve likely been impacted by the COVID-19 pandemic. It’s a confusing  and difficult time for many, but there are programs to help, including government-backed small business loans for veterans. You can learn more about U.S. Small Business Administration (SBA) loan resources and guidance on its website dedicated to coronavirus relief.When you’re a veteran who owns a small business, you need funding just like any other entrepreneur. This may include startup financing or money to purchase property, buy inventory, or pay employees, among other needs. Whatever your specific need, we’re here to help simplify the process of finding the top small business loans and financing options for you.

Types of Small Business Loans for Veterans

The SBA offers programs to support veterans, including small business loans specifically for veterans with disabilities, reservists, active-duty service members, people transitioning out of service, and dependents or survivors. For serving our country, you have access to unique educational programs, funding options, and counseling to start and grow your small business. Contact your local Veteran Business Outreach Center (VBOC) for more information on how to take advantage of these programs.The SBA also has a Veteran’s Advantage program that provides eligible applicants with a  reduction on SBA loan fees to give veterans easier access to capital. Below, you’ll find small business loans for which you can use Veteran’s Advantage, as well as a few alternatives.

1. SBA 7(a) Loan

What is it?Government-backed loans for up to $5 million that can be used for almost any business-related costs, including purchasing commercial real estate. If you qualify, the Veteran’s Advantage can be applied to SBA 7(a) loans.Why choose it?If you need more capital, the SBA 7(a) loan program gives you access to funds you can use toward a variety of business expenses. Because these loans are backed by the government, SBA loans tend to have favorable terms and rates. Borrowers who qualify for the Veteran’s Advantage program can also take advantage of reduced fees. Keep in mind: Application turnaround time is 5 to 10 business days, which may be too long for some borrowers. If you need a relatively small amount of capital in a shorter period of time, you could consider an SBA Express Loan.SBA loans can be competitive. Lenders usually require borrowers to have strong credit, an established business, and some form of collateral to offer.

2. SBA Express Loan

What is it?  These small business loans are backed by the U.S. Small Business Administration and offered by banks, credit unions, and other approved lenders. SBA Express Loans come with an application review time of 36 hours and offer a maximum loan amount of $350,000.Why choose it?  SBA Express loans can help veteran-owned small businesses in need of immediate funding. Plus, with the Veteran’s Advantage program, qualified borrowers can save some cash with reduced loan fees. Keep in Mind:SBA Express loans are part of the SBA 7(a) loan program but have a faster turnaround time (36 hours), so if you need capital quickly, they may be an option. However, there are differences to consider between the standard 7(a) loans and Express Loans. For example:
  • The maximum amount you can borrow:
    • Standard: $5 million
    • Express: $350,000
  • The maximum amount guaranteed by the SBA:
    • Standard: 85% for loans up to $150,000; 75% for loans greater than $150,000
    • Express: 50% for all loan amounts
  • The duration of revolving lines of credit (excluding extensions):
    • Standard: Up to 10 years
    • Express: Up to 7 years

3. Military Reservist Economic Injury Disaster Loan (MREIDL)

What is it?The MREIDL Loan program is offered to small businesses with an essential employee who is “called-up” to active duty due to his or her position as a military reservist. These loans provide working capital to cover necessary business payments until the essential employee returns from active military duty.You cannot use an MREIDL loan to:
  • Cover lost income or profit
  • Expand your business
  • Refinance long-term debt
  • Replace typical commercial debt
Why choose it?If you or a vital employee is active duty military, the MREIDL may help support your business if you or the employee expect to be or have been called-up. The funds may help prevent losses that would be incurred in the absence of essential employees by offering loans to cover your business’s necessary obligations. Terms are as follows:
  • MREIDL interest rates will not exceed 4% a year
  • Loan maturity is based on your ability to repay the loan, with a maximum maturity of 30 years
  • The maximum loan amount is $2 million
Keep in mind:If your small business can access capital from non-government sources or you’re able to fund your own recovery, you should pursue that option first, as in those cases you will not be eligible for a MREIDL loan. Additionally, MREDIL loans over $50,000 require real estate as collateral.

Non-Government Small Business Loans for Veterans

If you’re having trouble qualifying for a government-backed small business loan, there are still a number of lending options for you to choose from. A few to consider include:
  • Loan from an online lender: Online lenders tend to have less stringent qualification requirements than banks. However, their interest rates may be higher and borrowing amounts may be lower. Make sure to compare small business lenders online before making a final decision.
  • Business line of credit: A business line of credit is similar to a personal credit card, with a credit limit and interest accrual only on the expenses you have not repaid. Banks and online lenders both offer business lines of credit.
  • Peer-to-Peer Network: A peer-to-peer network matches borrowers with independent investors. Because it doesn’t involve borrowing from a bank or online lender, a peer-to-peer network may be a good option when it comes to small business loans for veterans with brand-new businesses or bad credit.

Non-SBA Small Business Loans for Veterans: Our Top Picks

Below are Lantern’s top 11 picks for small business loans for veterans (in alphabetic order). These picks are based on criteria that include minimum credit score, maximum loan terms, and whether the lender offered special programs for veterans. See a full breakdown of our rating methodology at the end of this article. (Lender data was accurate as of March 3, 2021.) 

Applying for a Small Business Loan for Veterans

If you plan on applying for an SBA 7(a) or Express loan, you can start by reviewing the Veteran’s Advantage eligibility requirements to see if you qualify for it. From there, you can compare your options and apply for the capital your business needs.

SBA Veteran’s Advantage: Eligibility Requirements

To apply for an SBA small business loan for veterans using the Veteran’s Advantage program, you and your business must meet the eligibility requirements outlined below. The business needs to be 51% or more veteran-owned. This includes owners who are:
  • Active duty
  • Service-disabled
  • Reservists and/or active National Guard members
  • A spouse of a service member
 The applicant must have the appropriate documentation* of his or her status as a:
  • Veteran: Copy of Form DD 214, which is provided to veterans who were not dishonorably discharged
  • Service-disabled veteran: Copy of Form DD 214 or a letter from the Department of Veteran Affairs (DVA) that you have a disability connected to your time in service.
  • Transitioning active duty military member: Any of the following:
    • DD Form 2, U.S. Armed Forces Identification Card (Active)
    • DD Form 2, Armed Forces of the United States Geneva Conventions Identification Card (Active) and DD Form 2648, Active Duty Military Member
    • DD Form 2648-1, Reserve Component member
  • Reservist and National Guard member: DD Form 2, Armed Forces of the United States Identification Card (Reserve)
  • Current spouse of a veteran: Current proof of your spousal relationship and the veteran’s Form DD 214
  • Current spouse of a transitioning active duty military member or current Reservist/National Guard member: Current proof of your spousal relationship and DD Form 1173, Department of Defense Guard Reserve Family Member Identification Card
  • Widow of an active duty military member who died in service or veteran who died of a service-related disability: A letter from the Department of Defense (DOD) or DVA explaining your situation.
* Alternatives: If you do not have your Form DD 214, you can present a “Certification of Military Service” instead. As an alternative to presenting a copy of your Military ID, you can present a “statement of service” signed by the personnel office or commander of the unit you or your spouse was a part of. For more information, contact the Veteran Business Outreach Center in your region.

Small Business Loan for Veterans: Applying in 7 Steps

If you meet the eligibility requirements above, you may then opt to take the following steps to apply for a small business loan:
  1. Determine the needs of your business and why you need the loan. Add up the costs and decide which needs are highest priority for your business.
  2. Choose the type of small business loan for veterans that serves the needs of your business and your situation.  
  3. Choose the type of lender(s) that offers what you need. Examples include:
    • An online lender, like those you can compare and apply with using our online form
    • A bank
    • A credit union, which is a group of contributing members who deposit and lend out their own money to other union members. Credit unions tend to have lower loan fees compared to banks and may offer better customer service
    • A peer-to-peer network, which connects borrowers directly to investors
4. Check your business and personal credit history against the minimum requirements of the lender(s) you’re interested in to determine what you’ll qualify for.  5. Prepare appropriate documentation like bank statements, legal documents, business expenses, tax returns, and veteran status documents. 6. Research and compare small business lenders to find the right fit.   7. Apply for loans that align with your credit, budget, veteran status, and any other specific needs.

Small Business Support for Veterans with Disabilities

To further support veterans, the SBA offers the Service-Disabled Veteran-Owned Small-Business Program, which allows eligible veteran-owned small businesses to compete for contracts set aside specifically for disabled veterans. Eligibility requirements are as follows:
  • The company must operate as a small business.
  • The business must be owned and controlled by one or more service-disabled veterans, at a minimum of 51%.
  • One or more service-disabled veterans must be responsible for managing operations and making long-term decisions.
  • Eligible veterans must have a disability connected to their past service.
For additional information on business contracts for veterans, visit the Office of Veterans Business Development.

Top Picks Methodology

To arrive at our top lender picks, we analyzed the top 30 banks and online lenders by monthly search volume. Then we ran those lists against the following criteria: 
  • Minimum credit score is 650 or below
  • Minimum time in business is 1 year or less
  • Minimum annual revenue is $100,000 or less
  • No collateral required
  • Interest rates starting at 20% or below
  • Maximum loan term is 25 years or longer
  • Max loan amount is $500,000 or higher
  • Simple application (online, no mailing or going into bank required)
  • Time to funds is less than a week
  • Whether it offers 24/7 support (online or phone)
  • Special benefits/terms for the interest group, if applicable (veterans)
Whichever lenders best met the above criteria received the highest rankings. (Lender data were accurate as of March 3, 2021.)  Looking for a small business loan? Find the one that's right for you.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. SOLC20003

Frequently Asked Questions

How do veterans get small business loans?
What is an SBA 7(a) loan?
Who can apply for small business loans for veterans?
How much money can veterans borrow with a small business loan?

About the Author

Lantern

Lantern

Lantern is a product comparison site that makes it easy for individuals to shop for products and compare offers with top lenders. Lantern is owned and operated by SoFi Lending Corp., the digital personal finance company that has helped over one million people get their money right.
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