Veterans make up approximately 7% of the population and own approximately 10% of small businesses. While your military service prepared you for the business world by helping you develop traits such as leadership, determination, discipline, and more- you need funding to get started.
Over the years, veteran-owned businesses have proven to be successful and have generated over $1 trillion for the economy. However, you need money to start and/or grow your business. Veteran business loans can help- but, with all of the options available, it’s important to do your research.
There are several factors you’ll need to consider when choosing a loan, including:
- Overall personal and business financial health
- Credit score
- Business History
This blog will explain everything you need to know about applying for a veteran business loan.
4 Things You Need to Know
Below, we’ll go over the top 4 things you need to keep in mind when applying for veteran business loans.
Understand the unique challenges of veteran small business owners
While there seem to be many small businesses owned by veterans, the numbers are much lower than expected. In fact, since 2001, only 4.5% of military members have started a business. This is much lower than the nearly 50% of WWII veterans that started a business.
Research indicates that one of the biggest challenges for veteran business owners is the lack of adequate access to capital. This is partial because the current G.I. bill doesn’t provide veterans with low-interest loans. Therefore, veterans must understand their options for financing.
Applying for a Veteran Business Loan
The application process for veteran business loans is the same as for traditional loans. You will need to have copies of your financial statements, a business plan, and other business documentation.
SBA Veteran Business Loans
The SBA, or Small Business Administration, does not directly lend money. Instead, they work with lenders to offer loans with lower interest rates and flexible terms. The SBA guarantees a portion of the loan in case the borrower defaults, reducing the risk to the lender.
SBA loans are only for small businesses that have exhausted all other options. This means that if you have not applied for other loans, you will probably not qualify for an SBA loan.
The SBA works with the Office of Veterans Business Development to offer entrepreneurial training for veterans, which teaches the basics of entrepreneurship. This includes topics like business financing, writing a business plan, and more. In addition, the SBA offers a program called Veteran’s Advantage, which is for businesses that are 51%+ owned by a veteran or the spouse of a veteran. This program makes it easier and more affordable for veterans to obtain funding for their small businesses.
Choosing Veteran Business Financing
The process of applying for veteran business loans does take time and resources but is fairly straightforward. The tricky part is choosing the option that best meets your needs and goals. When done right, a business loan will take your small business to the next level.
Before you apply for funding, you must determine how you plan to use the funds- which will help you determine the best option:
- Business credit cards
- A business line of credit
- Invoice factoring
- Merchant cash advance
- Equipment Financing
- Traditional loans
- SBA loans
As you evaluate your options, you’ll also want to consider your financial health. After all, weak finances and poor credit history will make it challenging to obtain funding with a low-interest rate.
Should You Pursue Veteran Business Financing?
If you are a military member, veteran, or a spouse of a military member or veteran, and are considering starting a business, it’s important to consider veteran business loans to get started. Let the professionals at Scarlan Capital Group help you weigh your options and find the funding source that best meets your needs.