What is The Veteran's Advantage and is it the only Small Business Loan the VA offers?
Sometimes, I’ve learned, simple questions have complicated, nuanced, deeper answers. “Does the VA Offer Small Business Loans?” is one of those questions.
While at face value, it’s not overly complex (the answer is technically No). There is a little more to it than that, though. And (again, technically) there is a small business loan product out there available exclusively to veterans.
Here, as you know, we do VA Home Loans.
Well, the VA doesn’t actually lend anyone mortgage money either. The banks lend the money and the VA collects a “Funding Fee” up front and insures—provides a “guaranty”—for 25% of that amount back to the lender to compensate them for the added risk and entice them to lend.
The Veteran’s Advantage small business loan (formerly, the Patriot Express) works similarly, except the VA is not technically involved. This time, the SBA—or Small Business Administration—backs the loans and covers its fees on behalf of the veteran.
Enough small talk, here’s how this works. If you’re a veteran, you go to a SBA approved lender—either a bank or credit union—and apply for an SBA Express loan just like anyone else. You’ll have to qualify for the loan, and if you do, here’s where your benefit kicks in. The Veteran’s Advantage program allows the SBA to waive your funding fee if you meet the following criteria, which could be as much as 3%:
From The SBA:
SBA Veterans Advantage Qualifications:
In order to qualify for this, businesses must be 51% or more owned and controlled by an individual or individuals in one or more of the following groups:
Veterans (other than dishonorably discharged);
Active Duty Military service member participating in the military’s Transition Assistance Program (TAP);
Reservists and National Guard Members; or
Current spouse of any Veteran, Active Duty service member, or any Reservist or National Guard member; or widowed spouse of a service member who died while in service or of a service-connected disability
Typically, loan amounts up to $350,000 are available.
But remember, you aren’t borrowing this money from the VA, and you aren’t borrowing it from the SBA, you’re actually borrowing it from a bank. According to local experts here in this region, one of the challenges with this program is that the bank themselves often have better, non-SBA solutions available to qualified borrowers. So, though the program exists, and though it may be available, it may not be the best option for a veteran small-business owner.
For a great place to start the process, check out the SBA section dedicated to Veteran Owned Businesses.