As a veteran, you've probably picked up an extensive -- and in some cases, highly specialized -- skill set. You're also used to taking charge, you appreciate a challenge, and odds are better than even that you don't have much patience for the way things are done just because that's the way they've always been done. It's no wonder that so many veterans do well as business owners.
The one thing you have in common with your civilian friends is that sooner or later, the time will come that you want to start or grow a business. To do that, you're going to need funding. Luckily for you, a number of small business loan options are available specifically for vets.
What Qualifies As A Veteran-Owned Business?
Similar to women-owned businesses, there are a few basic criteria to qualify as a veteran-owned business. In contrast to women-owned businesses, however, there is no accreditation or certification body for veteran-owned businesses. Your certification, in most cases, consists of your honor -- and honorable discharge -- and your DD 214s; there are exceptions for businesses working with the VA, DoD and other government agencies under Service-Disabled Veteran-Owned Small Business/Veteran-Owned Small Business (SDVOSB/VOSB) Set-aside and Sole Source Contracts. However, the SBA and several lenders that serve veterans do have a working definition of a veteran-owned business:
- 51% or more of the business (or its stock) must be owned by one or more veterans.
- The management, operation, and long-term strategy of the business must be under the stewardship of one or more veterans.
- The business's highest officer position must be held by a veteran.
Many banks carve out additional allowances for active-duty military members, reservists, and immediate family. Most banks, and even many non-traditional lenders, will not lend to businesses that fall into certain categories, including -- but not limited to -- adult entertainment, gambling, liquor, MLMs and pyramid schemes. Your lender will advise whether your business meets these eligibility requirements.
How to Apply for a Veteran Small Business Loan
While loan applications vary in their length and complexity, in one form or another they're asking for much the same information. The lender will want to know how long you have been in business, how long it's been under its current ownership, the type of business, and the purpose of the loan. Additional documentation -- tax returns, a P&L, paperwork relating to outstanding financial obligations, and proof of your debt-to-asset ratio -- will usually also be required to round out the application. Ensure that all information is as complete and accurate as possible to avoid the delay or rejection of your loan.
Business Loan Alternatives for Veterans
Between low pay, long deployments, deployment overseas, moving expenses, missed payments because the bill went to Michigan while you were in Germany, and a host of other financial challenges faced by active duty service members, reservists and vets, it's no surprise that your credit might be a bit less than sterling. Unfortunately, banks turn down the majority of small business loan requests they receive, meaning that often as not only those with very good (or better) credit are approved. If you need a business loan and have been turned down by the bank because of poor credit, alternatives exist.
Loan Providers for Veteran-Owned Businesses
Most major banks and credit unions offer loans, working capital, lines of credit, and microfinance to veteran-owned businesses. Assistance in locating and vetting appropriate lenders is available via the SBA and the VA.
The SBA and Business Services for Veterans
While not a loan provider, the Small Business Administration is a loan guarantor that works with several major lenders. Their advantage is that they have a better understanding of the needs and challenges faced by startups. You can read more about the Administration's general programs and loans on our dedicated SBA page, but there are several programs available only to veterans that deserve mention.
Military Reservist Economic Injury Disaster Loans mitigate the impact of an essential employee being called to active duty. Loan and grant search tools assist in finding state and nonprofit entities that provide financial assistance to veteran-owned businesses. Operation Boots to Business helps veteran-owned businesses in their early stages. Veterans Business Outreach Centers and the Office of Veterans Business Development provide training and other assistance. The National Veterans Business Development Conference & Expo and other business resources are also offered to veteran-owned small businesses, with additional assistance available for service-disabled veterans.
Rank has its privileges. As it turns out, your service brings with it certain privileges in the world of business as well. For all the challenges you've faced and overcome in and out of uniform, the loans and programs available to veterans via the government and private lenders alike can be a significant help in overcoming the challenges of running -- and financing -- your small business.