Veterans interested in running their own businesses have a variety of both VA and non-VA resources. Did you know the Small Business Administration offers business help and advice to veterans? The results of one U.S. Census includes documentation of more than two million veteran-owned businesses.
One resource popular in the mid-2000s was known as the Patriot Express loan, created to lend operating capital and other funds to businesses that are at least 51% veteran-owned.
Such loans were available for as much as $500,000. For a veteran starting a small business that loan limit can offer some potentially important help for a new company just starting out or a company that is settling into operations over the long term.
In the first four years of its existence, the SBA Patriot Express Loan program funded veteran businesses for just over $660 million in loans. More than seventy-six hundred veterans received assistance.
What Happened To The SBA Patriot Express Loan?
SBA Patriot Express Loan was a pilot program. According to some sources, one of the reasons that particular veteran lending program was terminated was due to higher-than-expected loan default rates. Some reports state one out of five borrowers (who all borrowed an amount at or below $25,000) could not repay.
The SBA guarantees its business loans in a manner similar to FHA home loans or VA mortgages. For every loan default, the Small Business Administration is required to pay the lender as part of the agreement.
Too many loan defaults caused a financial burden on the program and it was ultimately shut down in 2014.
Replacing the SBA Patriot Express Program
The Patriot Express shut down in 2013, but since then there have been similar veteran-specific Small Business Administration Loan programs launched. The SBA Patriot Express ran under the 7(a) Loan Program like the programs available today.
While intended applicants, terms, and conditions vary between 7(a) programs, veterans will find several resources among these types of loan offerings.
SBA participating lenders may choose to offer one or more of the following SBA Small Business Loan programs in the 7(a) category:
- Standard 7(a)
- 7(a) Small Loan
- SBA Express
- Export Express
- Export Working Capital
- International Trade
- Veterans Advantage
- CAPLines
Of these programs, Veterans Advantage is the loan veterans turn to most for a loan similar to the SBA Patriot Express and the one explored first.
Not all the options listed above are specifically aimed at veterans, but Veterans Advantage may be the closest option to the old Patriot Express loan.
SBA Eligibility Requirements
The qualifying requirements include the following. (Please note: this is NOT a list of financial requirements.) Instead, this is a list of people who are welcome to apply for this type of business loan, which features “fee relief” for veterans in the form of reduced costs for the loan.
Eligibility requires at least 51% controlling interest in the business by a qualifying person who is one or more of the following:
- Honorably discharged veterans
- Active Duty troops eligible for the military’s Transition Assistance Program
- Service-disabled veterans
- Reservists
- Active National Guard members
- Current spouse of any veteran, active duty service member, Reservist, or National Guard member
- The widowed spouse of a service member who died while in service
- The widowed spouse of a service member who died as a result of a service-connected disability.
Who Needs a Veterans Advantage Business Loan?
The Congressional Research Service published a study including some revealing data on more than 60% of participating veterans. These veterans reported using personal financial resources to fund their businesses–family savings, personal assets, etc.
Some of those surveyed used a personal credit card or took out a business credit card to fund their business, and only about 10% of those surveyed turned to a business loan to help themselves stay in business.
It’s important to consider this data for those who want to protect their livelihood and find alternative financial resources through the SBA.
What It Takes to Apply for a Small Business Loan
If you want to consider applying for an SBA small business loan for a veteran-owned business venture, your first act should be to visit the Small Business Administration official site and sign up for the Lender Match program which will place you with a select group of participating lenders.
When you fill out the online Lender Match form, you’ll indicate that you are a veteran or that your business is at least 51% veteran-owned. Submit the Lender Match form and within 48 hours you should be contacted about your needs.
But submitting your information in this way assumes you are ready to seriously talk to a lender about your business needs. That means having a profit-and-loss statement, business plan, two years minimum of tax records, and records of your military discharge ready to submit to a lender on request.
Once you have been matched with a lender or group of lenders you will have the option to call or email to discuss your loan, the interest rate, and other terms upon approval. You may also speak to the lender about the different types of business loans, including loans for operating capital, loans to purchase a business or equip one you already own, and other options.
Advantages with a Veterans’ Small Business Loan
This is one of the most common questions asked about small business lenders. The SBA’s 7(a) loan program (which includes loans for veteran-owned businesses) allows you to use loan funds to do the following:
- Working capital
- Seasonal financing
- Construction costs
- Equipment purchases
- Real estate purchases
- Construction projects
- Establish a new business
- Buy an existing business
- Refinance existing business debt (sometimes)
Restrictions on SBA Business Loan Funds
Borrowers are not permitted to use the funds from an SBA backed loan for the following purposes:
- Repaying delinquent taxes
- Financing a change of business ownership
- Reimbursing or otherwise pay off previous business owners
- Refinancing certain kinds of business debt
What You Need To Know About SBA Loans
You may be required to put up collateral for your SBA loan. Your business assets may be required to have a first lien placed on them to secure the loan. Not all SBA loans are created the same; you may find the minimum loan amounts for some programs such as operating capital loans may be lower than loans to buy real estate for the business or purchase a business itself.
Remember, the SBA does NOT lend money—it helps the borrower and the lender get together to do business and provides a guarantee for the loan. That guarantee makes the loan more attractive for a lender and makes the loan easier for the veteran to be approved for.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News.
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