VA Business Loans: Definition, Cost, Features, & Providers

VA business loans are specifically for veteran-owned businesses. While the Veterans Administration does not offer business loans, a number of providers do. If you have served in the armed forces, or are the spouse or immediate family member of a veteran and are seeking business financing, you may be eligible for a VA business loan.

What VA Business Loans Are

While most people refer to all business loans for veterans as VA business loans, this title is misleading. The Veterans Administration does not provide business loans. VA business loans are offered by lenders without any backing or support from the Veterans Administration. VA business loans are only available, or offer a specific advantage, to veteran-owned businesses.

Often the most difficult part of getting a VA business loan is finding a lender that has a program that meets the needs of your veteran-owned business, and truly offers an added benefit to their lending products for veteran-owned businesses. Potential sources for VA business loans include military credit unions, SBA loans with Veteran Advantage, and lenders and investors that are focused on funding for veteran-owned businesses.

Be mindful that not all financing opportunities advertised as VA business loans offer a true advantage to veteran-owned businesses. Though they may be labeled as business loans for veterans, in reality it is the same loan product that they offer to all businesses.

Additionally, it is important to pay attention to the actual costs associated with the loan that you are applying for. While one loan may offer reduced rates or fees for veterans, you may be able to find less expensive financing through another business financing product that does not offer specific veteran benefits.

Who VA Business Loans Are Right For

The obvious candidate for VA business loans are retired military personnel who own their own businesses. However, those who are currently serving in the military are eligible as well. Some VA business loans are targeted at specific veteran demographics (e.g., disabled veterans); others have broadened eligibility to include the spouses and families of veterans.

The following types of borrowers are eligible for VA small business loans:

• Retired and Honorably Discharged Military Personnel – If you are a retired or honorably discharged military veteran with your own business, or looking to start up your own business, you would meet the veteran qualification for a VA business loan. You will likely need to supply a copy of your DD-214 as proof of veteran status.
• Active Duty Military Personnel (including those actively serving in the National Guard or Reserves) – If you are currently serving in the military, and are seeking to start a new business or are already operating your own business, you meet the veteran qualification to be eligible for a VA small business loan. You may be required to show proof of military status (e.g., your military ID).
• Military Spouses – Some programs extend their veteran eligibility to the spouses and immediate family members of veterans (either active duty or retired military personnel). Check the veteran qualification requirements for the program that you are interested in to see if this applies. You will likely be required to supply proof of your relationship to an eligible veteran (e.g., military spouse ID).

Where to Get Business Loans for Veterans

Business loans for veterans are available from a number of different sources. Borrowers seeking longer-term loans may be interested in SBA Express Veteran’s Advantage loans, while those with smaller, shorter-term needs may look at other financing opportunities. Business seeking startup funding may be inclined towards angel investor opportunities targeted towards veteran-owned businesses.

SBA Express Veteran’s Advantage loans can be obtained through an SBA approved lender. There are thousands of approved lenders nationwide; however, selecting an experienced SBA lender will likely make the process easier for you. If you already have a banking relationship with a local lender, you may decide to apply for an SBA Express Veteran’s Advantage loan through that bank.

Additional sources of VA small business loans include military credit unions, online lenders, and angel investment firms. VA business loans through a credit union will have more stringent qualification requirements, but will offer you more favorable rates and terms. Business loans for veterans through an online lender are often easier to qualify for, but have higher interest rates. Angel investment firms are typically only interested in startup companies that are predicted to scale quickly.

Finding a provider that specializes in veteran financing can make the process of getting approved easier. It can often be difficult to qualify for small business loans, and can be even more challenging as a veteran small business owner. Brendon DiBella, Chief Commercial Officer at StreetShares, Inc., understands this concern:

“As any veteran small business owner knows, it can be difficult to qualify for traditional business loans as a military veteran. Luckily there are many great options for funding geared specifically towards the veteran entrepreneur. The Small Business Administration (SBA) is an excellent resource for veteran business owners, and many private lending institutions like StreetShares also offer great business funding options for veteran entrepreneurs. There are also grants available specifically for veteran business owners, especially those in the startup phase, such as the Veteran Small Business Award from the StreetShares Foundation.”

Top Veteran Loan Providers

Some good sources of VA business loans are:

1. Wells Fargo for an SBA Veterans Advantage Loan

The SBA Express Loan offers funding of up to $350,000 for working capital, a line of credit, or for commercial real estate. The term varies by the loan purpose and the useful life of the collateral, typically ranging from five to 25 years. Interest rates for SBA loans range from 7.5% to 10%. Through the SBA Veterans Advantage, the upfront guarantee fee for these loans is waived for veterans.

Wells Fargo was the top SBA loan provider in 2018, and is very well versed in the nuances of SBA loans. To apply for an SBA loan with Wells Fargo, you’ll need to go into a branch location and talk to a business banker. Wells Fargo will collect all necessary documentation from you to determine your SBA loan eligibility. The process typically takes between 30 and 60 days, if all documentation is accurate and provided upfront.

Visit Wells Fargo

2. Navy Federal Credit Union Business Loans

There are military credit unions nationwide, like Navy Federal Credit Union, that offer membership to military members, veterans, and their families. Most of these credit unions offer discounted interest rates for veterans. If you prefer going to a physical location to handle your financing needs, your local military credit union may be your first stop.

To receive a small business loan through Navy Federal Credit Union, you must be a member. Membership is open to veterans and their families, making veteran-owned businesses also eligible. To become a member of the credit union, you simply need to open a deposit account. Navy Federal Credit Union offers small business loans of up to $100,000 at competitive interest rates, with terms up to five years.

Visit Navy Federal Credit Union

3. StreetShares for a Patriot Express Line of Credit

StreetShares offers a line of credit, short-term loans, and contract financing. Funding amounts for lines of credit and short-term loans range from $5,000 to $250,000 (up to 90% advance rate for contract financing), with interest rates starting at 6% (1% for contract financing). The repayment term ranges from three to 36 months, with weekly payments. You can apply online, and pre-approval takes just minutes.

Brendon DiBella, Chief Commercial Officer, at StreetShares, Inc., shares the company’s mission to help veteran-owned businesses succeed, saying:

“We love veterans— we were founded by veterans, we hire veterans, and we want to help veterans succeed however we can. Ninety percent of our funds go to U.S. veteran small businesses. We understand the challenges veteran entrepreneurs face when they’re re-entering the civilian workforce, and we always give veteran business owners the best rates possible and work with them personally to get the funding they need.”

StreetShares also provides education, coaching, and resources to veteran entrepreneurs via the StreetShares Foundation.

Visit StreetShares

4. Hivers & Strivers

Hivers & Strivers is an angel investment group that specializes in funding startups that are owned and operated by military academy graduates. Their typical investments range from $250,000 to $1,000,000. While this option is not available to all veterans, it does present a unique financing opportunity to veterans who are military academy graduates.

To inquire about angel investing from Hivers & Strivers, you can contact the investment group via a form on their website. Simply provide them with information about your business, and they will contact you to request any additional information that is needed for them to evaluate your business as an investment option.

Visit Hivers & Strivers

VA Business Loan Costs

VA business loans are virtually the same as traditional business loans, except that they offer additional perks to veterans. Most VA business loans will offer reduced interest rates and fees to veteran-owned businesses, making them very beneficial. You may receive reduced interest rates (as much as 1% to 2% lower than standard rates), and fees may be reduced or waived entirely.

The typical costs that you might encounter with a VA business loan are:

• Interest Rate – You will want to pay attention to the interest rate on your loan. While VA business loans may offer a reduction in your interest rate due to your status as a veteran, it is still important to be aware of the rates that you are being charged.
• Additional Fees – In addition to the interest rate, the lender may charge additional fees, such as origination fees or prepayment penalties. You will want to find out about any of these fees upfront to ensure that you are selecting the best financing option for your business.
• Expected APR – The expected Annual Percentage Rate (APR) takes into account both the interest rate and all of the additional fees and converts them into a percentage value. This value is consistently calculated in such a manner that you can compare the APR of any two loan products to determine which one will be the better value for you.

Being aware of the interest rates, any additional lender fees, and ultimately the expected APR for each of the VA business loan options that you evaluate will help you to make an informed financing decision. Pay close attention to the overall cost of capital for the financing that you are applying for. Just because a lender offers a veteran advantage doesn’t always mean that you are getting the best deal; there may be other non-veteran loan options that are less expensive.

VA Business Loan Terms & Qualifications

VA loan eligibility is essentially the same as qualifying for a standard business loan. The lender will evaluate you based on a set of criteria that include credit score, repayment ability, and the length of time that your business has been operational. Exact qualification requirements will vary by lender and by the type of loan that you are applying for.

The most common types of loans that you will encounter are short-term loans, small business lines of credit, long-term loans (e.g., SBA loans), and angel investor financing.

Some of the common qualification requirements for VA small business loans will include:

• Credit Score: Lenders will evaluate your credit score as part of the application process. For short-term loans and lines of credit, you will likely be required to have a credit score of at least 600. For long-term loans, a lender will likely require a credit score of at least 650.
• Time in Business: This requirement will vary by lender. Most short-term loans and lines of credit require that your business has been operational for at least one year (some lenders only require six months of business operations). Traditional bank financing may require over a year of business operations. Startup businesses can qualify for SBA loans provided they meet the other qualification requirements.
• Repayment Ability: To measure your repayment ability, a lender will determine your annual business revenues and use this information to calculate your debt service coverage ratio (DSCR). For long-term loans, the lender will likely require a DSCR of 1.25x or greater.

If you have questions about the qualification requirements for a specific loan, most lenders post the basic requirements on their websites, or provide a contact number for their lending specialists.

How to Apply for VA Business Loans

The application process for most VA small business loans can be started online through the lender’s website. For short-term loans, the entire application process can be done online in a matter of minutes. For long-term loans, like SBA loans, the application process is more daunting due to the amount of documentation required, but can still be started from your lender’s website.

Most online lenders of short-term loans only require you to provide very basic personal and business information. The application can be completed online within minutes, and you can receive pre-qualification information almost immediately.

The information typically require to apply for a short-term small business loan for veterans is:

• Name
• Address
• Business revenue
• Amount of financing you need

The application process for long-term VA business loans is lengthier. SBA loans are among the most common long-term VA small business loans. To learn more about the process, you can read our article on how to apply for an SBA loan. If you are applying for an SBA Express Veteran’s Advantage loan, you should have pre-qualification information within a few days of submitting your application.

You’ll typically need to gather the following documents before you apply for an SBA loan:

• Detailed allocation of how you’ll use all funds
• Proof of business ownership
• Loan application history
• Business overview and history
• Current business financials
• Year-to-date P&L (profit and loss) statement
• Year-to-date balance sheet
• Business tax returns (two years)
• Projected financials (one to three years)
• Business licenses
• Business leases
• Personal financial statement
• Personal tax returns (two years)
• Owner resume

The exact documentation requirements for a VA business loan will vary by lender. You may need to submit other items that are not on these lists. It is important to promptly provide the lender any information that they ask for, as this will help keep the application process moving forward.

Pros & Cons of VA Business Loans

VA business loans can be advantageous to the veteran business owners. Some programs are only available to veteran-owned businesses; others offer savings through reduced interest rates or waived fees. The drawbacks to VA business loans are that finding a VA lender can be difficult, and despite discounts there is still a cost of capital.

Pros of VA Business Loans

Some of the benefits of a VA business loan are:

• Reduced Interest Rates – Some VA small business loans offer interest rate reductions for veteran-owned businesses, which can lead to a significant savings over the term of a loan.
• Reduced or Waived Fees – As a veteran-owned small business, you may be eligible for reduced origination or other fees. Depending on the financing product you choose, the fees may be waived entirely.
• Programs Are Only Available to Veterans – There are some VA loans and grants that are only available to veteran-owned businesses. This is advantageous to those who qualify, and you can be assured that lenders offering these products understand the challenges that face veteran entrepreneurs.

Cons of VA Business Loans

Some for the negative aspects of a VA business loan are:

• Finding a Lender Can Be Challenging – One of the most difficult challenges of VA business loans is finding a lender that offers small business loans geared towards veterans, or that offer a veteran advantage on their financing products.
• The Costs Associated with Borrowing Funds – While not unique to VA business loans, the cost of financing a small business loan is a standard negative feature. Depending on the financing product you select, the cost of capital could become burdensome if you aren’t aware of the costs upfront.

Alternatives to VA Business Loans

While there are various financing alternatives that could be used in place of a VA small business loan, many of them are standard business financing sources and are not geared directly towards veteran-owned businesses. Three financing options that may be more beneficial to veterans are business grants for veterans, alternative small business loans, and SBA disaster loans for military reservists.

Three alternatives to VA small business loans are:

Business Grants for Veterans

Depending on your business and your financing need, you may be eligible for a business grant. Grants are typically highly competitive, but since you don’t have to repay them, they can be an excellent source of capital for your small business. You can search for federal grant opportunities through grants.gov, or apply for private grants from providers like The StreetShares Foundation. Additionally, there are many resources for veterans that can help assist you with establishing your business and finding financing.

Alternative Small Business Loans

Online lenders offer a variety of small business loans, from short-term loans to invoice factoring. There are even lenders that will lend based on your online marketplace receivables. Some of the best online lenders have relatively easy qualification requirements and simple application processes, making it easy to get business financing. If you need fast funding, an online small business loan may be a good choice.

SBA Military Economic Injury Disaster Loan

Through the SBA Military Economic Injury Disaster loan program, small businesses can receive up to $2 million. These loans are provided to alleviate substantial economic burden caused by an essential employee’s absence while serving on active duty as a reservist. If your business has been impacted by a recent deployment, you may be eligible for an SBA Military Economic Injury Disaster loan.

VA Business Loan Frequently Asked Questions (FAQs)

A lot of basic information about VA small business loans has been shared in this article, including some potential business financing sources and an overview of how a VA small business loan works. If you have any questions about any of the information presented here, you can post them in the Fit Small Business forum.

Some of the most frequently asked questions regarding VA business loans are:

Is There a VA Business Loan?

The Veteran’s Administration does not offer business loans of any kind, so technically there are no VA business loans. However, there are a number of small business loan options available to veterans, or that offer a veteran preference. The term “VA business loan” has come to refer to this broader financing category for veteran-owned businesses.

How Do I Qualify for a VA Business Loan?

To be eligible for a VA business loan, you must meet all of the requirements of the lender. Additionally, in order to receive any veteran advantages, you will need to provide proof of your veteran status. Retired and honorably discharged veterans will likely need to provide a copy of their DD-214 in most cases.

What Is the Patriot Express Loan?

The Patriot Express Loan was a pilot loan program that was offered through the Small Business Administration. Unfortunately, this program no longer exists. However, there are other similarly-named financing options for veterans. The Patriot Express Line of Credit, which is offered by StreetShares, offers veteran-owned businesses a line of credit up to $250,000.

What Is the Servicemembers Civil Relief Act (SCRA)?

If you are a military service member considering taking out a loan, and are concerned about what might happen if you are called to active duty or deployed, you should be aware that the SCRA provides you with certain protections while you are in active duty status (e.g., reduced interest rates, protections for missed payments, etc.).

Bottom Line

VA business loans offer advantages to veteran-owned businesses, often in the form of reduced interest rates and/or reduced or waived fees. If you are a military veteran business owner, or a veteran who is considering starting up a small business, you may be eligible to receive financing from a VA business loan provider.