SBA Small Business Loans for Military Veterans
US Military Veterans and Service Disabled Veterans* are eligible for commercial financing with the SBA 504 and SBA 7a loan programs.
VA commercial loans: The 504 is a 2 loan structure and it's value lies in the fact that the 2nd mortgage is fixed for 25 years, although well qualfied borrowers might also be able to get a 25 year fixed rate first mortgage as well. The 504 is for commercial real estate, although it can be used for "long life" equipment.
VA Business Loans
The SBA 7a loan is a program that allows a veteran to purchase a business OR a commercial property to operate the business. The 7a is also available to veterans who already own a business and need capital for any other business purpose.
100% Commercial Loans for Veterans
100% financing is available for owner occupied business properties/commercial real estate for existing, profitable businesses with the 7a. It is also available for current business owners expanding their business by acquiring a competitor or if a franchise, acquiring another franchise location.
For more info about 100% financing: click here. ("Owner occupied" means your business will occupy 51% to 60% of the property depending on whether it is an existing building or ground up construction).
VA Business Loan for Rental Property
SBA loans for veterans CANNOT be used for any type of "traditional" investment property (multi-family, apartments, 1-4 family, single family, etc.), as the SBA has specific requirements for what they consider to be owner-occupied business property, however self storage, RV and boat storage, RV parks, marinas, campgrounds and hotels and motels are eligible as long as the veteran business owner will be either running the business, have an employee running the business, employing an eligible third party management company OR in the case of self-storage, mini-storage or RV/Boat Storage it is possible to get an SBA loan for a storage facility that is fully automated (with proper security, a self-service kiosk, etc, which can be very desireable from an ownership standpoint.
In the case of an SBA loan for an RV park, marina or campground the only way it is eligible is if more than 50% of revenues (or projected revenues in the case of a new or expanding business) are from guests/customers who are short term stays (less than 30 day), although some lenders are okay with parks that are set up to accomodate seasonal guests.
If purchasing commercial real estate that will be used by the business then a 25 year term is available. If purchasing a business then a 10 year term is possible.
The 504 is good for veterans who already own a business and need to do one of the following:
- Purchase real estate where your business will occupy the majority of the space
- Expand, remodel, renovate or retrofit an existing building or facility
- Install Green or Renewable Energy Equipment as part of a renovation
- Purchase expensive business equipment with a useful life of at least 10 years
- Refinance an existing commercial loan including a refinance of an existing SBA 7a loan as those can now be refinanced with a 504 as of 2021
The 7a is good for all of the above as well as business acquisitions, buyouts, startups and any other business purpose.
SBA Loans for Veterans - Benefits
- There is no SBA Loan Guaranty Fee for some loans under $350,000.
- Closing costs and soft costs can be financed. making 90% loan to cost and in many cases 100%+ commercial financing possible
- Long term, fully amortized loans with no calls, balloons, re-qualifying or refinancing required
- Zero down or 10% down payment/equity injection when most commercial lenders require at least 20% down
- 25 year fixed rates are available for commercial real estate
- 10 year fixed rates are available for business acquisitions
- You can finance manufacturing or Green Building projects in the range of $20,000,000
- No financial convenants
- Credit and credit scores do not need to be perfect and you can get an SBA loan after a bankruptcy from some SBA lenders. You will need to have an acceptable explanation and typically be approx 3 years from discharge for most lenders. Foreclosures, short sales, collections, lates, etc. also need to be explainable.
After the last Recession there were a few significant benefits for veterans obtaining small business loans with SBA assistance, in that veterans were only charged 1/2 of the regular SBA loan fee that is financed into an SBA loan. There was also a program for veterans called the Patriot Express loan. These programs/benefits have since expired, but some small business lenders are committed to helping veterans get financing and will typically be more open minded when it comes to underwriting a VA business loan. Startups are always challenging as most lenders would rather make a loan to an existing business whether it is veteran-owned or not and obviously there are limitations to what lenders will do and they will only take so much risk, but we have seen where ceratin lenders will go the extra mile to try approve a loan for a veteran.
SBA Definitions of Veteran and Veteran-Owned Business
The SBA defers to the Department of Veterans Affairs for definitions concerning eligibility. The following definitions are taken from US Code, Title 38:
Veteran: A person who served on active duty with the U.S. Army, Air Force, Navy, Marines or Coast Guard who was discharged or released under conditions other than dishonorable.
Reservists or members of the National Guard called to Federal active duty can also qualify.
Veteran-Owned Business: Is a business where not less than 51% of it is owned by one or more veterans. If it is a publicly owned business, not less than 51% of the stock of the company must be owned by one or more veterans and the management and daily operations would need to be controlled by one or more veterans
Service-Disabled Veteran: A veteran with a disability rating letter issued by the Department of Veterans Affairs that establishes a service-connected rating between 0 and 100% or one with a disability determination from the Department of Defense.
Service-Disabled Veteran-Owned Business: Is a business where not less than 51% of the business is owned by one or more service-disabled veterans. If it is a publicly owned business, not less than 51% of the stock of the business must be owned by service-disabled veterans.
Management and business operations would also need to be controlled by one or more service-disabled veterans except in the case of a veteran with a permanent and severe disability. In that case, a spouse or permanent caregiver can manage or operate the business on behalf of the veteran.
SBA refinances under the 504 program are also available
More SBA 504 Loan info: 504 Loans
Please also see: SBA Renewable Energy Loans for those that want to "go green."
Other SBA Loans for Veterans
There are other SBA resources for Veterans wishing to start a business or for those in need of working capital and you can find out more about those programs from The Office of Veterans Business Development at: https://www.sba.gov/offices/headquarters/ovbd
Please contact us at 1-800-414-5285 if you need help with a VA business loan. We have had much more success helping existing veteran business owners with commercial property loans that may or may not include additional funds for working capital, business debt consolidation, inventory, etc., and we have helped a lot of veterans get loans at or above 100% of the value of their business property, but if we are unable to help we will do our best to point you in the right direction.