Small business loans created specifically for veterans don’t really exist. That being said, the Small Business Administration’s (SBA’s) Express Loan Veteran Advantage Program should be your first stop if you’re a veteran looking to finance your business.
Available through participating private sector lenders, SBA loans generally have more favorable terms than even traditional bank loans (base interest rates are generally capped at around 3%), and the Veteran Advantage Program takes an additional 50% off loan guarantee fees on top of that. If you can’t get approved for an SBA loan, still apply for a traditional small business loan through your local bank or credit union, since they’ll be able to offer you the next most affordable rates.
If you can’t get approved for a traditional bank loan and have a credit score of 600 or more, platform lenders (online lenders) like StreetShares, Prosper, and LendingClub are going to be your next best bet. They offer the most favorable rates and repayment terms next to traditional banks. If your credit score is lower than 600, look to Kabbage or OnDeck. These lenders will charge you more in fees, but if you need fast cash, or have been unable to get funding from other sources, their lending terms are still reasonable.
The Simple Dollar’s Top Picks for Best Small Business Loans for Veterans
The best small business loan for you is the one you can get approved for – ideally with the lowest interest rate and most favorable lending terms possible. If you can’t get financing for your business through a traditional bank or credit union, these platform lenders are a great place to start.
Best for Borrowers With Credit Scores Over 600
Best if You Need to Borrow Less Than $100,000
Best if You Need to Borrow Less Than $35,000
Best if You’ve Been in Business 2+ Years and Need to Borrow Up to $300,000
Best for Borrowers With Credit Scores Under 600
Best if You Need to Borrow Less Than $150,000
Best if You Need to Borrow Up to $500,000
How I Found the Best Small Business Loans for Veterans
This article focuses on non-traditional “platform lenders” because they provide small business loans that are flexible, transparent, and available to most borrowers. Of course, your local bank or credit union can usually offer you the best rate and repayment terms on just about any loan, provided you can get approved.
If you’re a veteran who is trying to get approved for a business loan, but you have less-than-perfect credit history, platform lenders are going to be your best option.
To find the best small business loan options for the largest group of borrowers – veterans or otherwise – I looked at all of the most popular platform lenders, read the fine print, and assessed each on the same requirements described in our article on the Best Unsecured Business Loans, including:
- Wide range of loan amounts: No matter how much money you need to borrow, one (or more) of the platform lenders on our list can accommodate your goals.
- Competitive rates: Platform lenders typically charge higher rates than a bank, but if you cannot get approved for a bank loan, the APRs with platform lenders are often more affordable than you might expect.
- Flexible terms: Our recommended platform lenders tend to have flexible repayment terms so you can make your payments suit your budget.
- Fast release of funds: Platform lenders tend to work more quickly than banks to review your application, which means you can get your money in as little as one or two days, instead of weeks.
- Overall reputation: These platform lenders are all well-respected in the financial services industry for their financial strength and positive customer reviews.
- Simple application process: These platform lenders can typically process your loan application in just a few minutes, without the paperwork and bureaucratic delays of a traditional bank.
- Helpful websites: All of these platform lenders have intuitive, well-designed websites to help you get the information you need to make a well-informed decision about your loan options.
The Best Small Business Loans for Veterans
|Lender||Borrowing Limits||Credit Requirements||Annual Percentage Rate (APR)||Repayment Terms|
|StreetShares||$2,000 – $100,000||Minimum credit score of 600;
at least 1 year in business and $25,000 of annual revenue, or six months in business and $100,000 in annual revenue.
|9-40%||3 months – 3 years|
|Prosper||Up to $35,000||Minimum credit score of 640;
no business history or income requirements.
|5.99-32.99%||3 – 5 years|
|LendingClub||$5,000 – $300,000||Minimum credit score of 600
At least 2 years in business, $50,000 in annual revenue;
minimum 20% ownership of the business, and no recent bankruptcies or tax liens.
Origination fee of 0.99-6.99%
|1 – 5 years|
|Kabbage||$2,000 – $150,000||Minimum credit score varies;
at least 1 year in business and $50,000 in annual revenue.
|20-99%||6 months or 1 year|
|OnDeck||$5,000 – $500,000||Minimum credit score of 600
At least 1 year in business and $100,000 in annual revenue.
|Line of Credit: 13.99% – 39.99%
Term Loan: approximately 30-50%
|3 months – 3 years|
Best for Borrowers With Credit Scores Over 600
StreetShares is the only platform lender that has a true focus on veterans. The company was founded by veterans, they market extensively and provide resources for veteran borrowers, and they have veterans in their network of peer-to-peer investors that fund the loans. However, veterans do not get any special deals or discounts on the loan products at StreetShares. Instead, your loan is evaluated based on your creditworthiness like all other borrowers. But if you want to get your loan from a veteran-owned, veteran-focused platform lender, StreetShares is the best choice.
Who it’s good for: Business owners with strong revenues and credit scores of at least 600 who need less than $100,000 in funding.
Who should pass: Business owners that need larger loan amounts or who have credit scores lower than 600. StreetShares loans are currently not available for residents of North Dakota and South Dakota.
Prosper loans are not “business loans” per se; they are personal loans. However, business owners are able to borrow money as a personal loan and then use that money to help fund their business. If your company is still young and in startup mode, and you don’t have enough business history to qualify for a larger business loan, and you only need a small amount of money (less than $35,000), then Prosper is a good option. Prosper’s funding release turnaround time is not as fast as most lenders: it might take up to 2 weeks before you will receive the cash from your Prosper loan.
Who it’s good for: New businesses with good credit (640+ credit score) that need only a small loan (less than $35,000).
Who should pass: Business owners that need fast cash, business owners who want to borrow in the business’s name instead of getting a personal loan.
Lending Club is a credit marketplace or “peer-to-peer lender” that connects borrowers with investors who fund the loans. Lending Club wants its small business loan borrowers to have at least 2 years in business, at least $50,000 in annual revenue, at least 20% ownership of the business, and no recent bankruptcies or tax liens.
Who it’s good for: Business owners with at least 2 years in business and decent-to-good credit who need large loan amounts (up to $300,000).
Who should pass: Business owners with lower credit scores, new businesses with less than 2 years in business.
Best for Borrowers With Credit Scores Under 600
Kabbage is one of the fastest and most flexible lenders for small business owners with lower credit scores. Instead of evaluating you on just your credit score, they look at alternative sources of data on your creditworthiness, such as online sales and shipping data. If your business is an online retail shop, an Amazon store, or other businesses that make sales online, and you have less established credit, Kabbage might be the right choice.
Kabbage requires borrowers to have at least one year in business and a minimum of $50,000 in annual revenues. Kabbage offers small business lines of credit, where you get approved for a certain amount upfront, and then you can borrow as much or as little as you want (up to that credit limit) at anytime. You need to repay Kabbage funds within 6 or 12 months, including a percentage fee each month. Since they don’t charge prepayment penalties, you can save money if you pay your loan off early.
Who it’s good for: Relatively new businesses (at least one year in business) with limited credit history; business owners with lower credit scores (less than 600).
Who should pass: Business owners that have good credit (greater than 600) or who need to borrow larger loan amounts (greater than $150,000).
DISCLOSURE – In addition to writing for The Simple Dollar, I work as a freelance blog writer for Kabbage, but they did not pay me to write this article and they were not involved in its creation. I have personally interviewed many small business owners who are customers of Kabbage, and I know that Kabbage’s product can be a great solution for business owners who need fast, convenient access to working capital.
OnDeck has two types of business loans: Lines of Credit (for more established businesses) with APRs ranging from 13.99% to 39.99%, and Term loans for newer businesses that need smaller loan amounts. On the Term loans, instead of charging interest rates, OnDeck charges a fixed amount for every dollar borrowed, which comes out to a higher APR of up to 39.99%. OnDeck also charges a one-time origination fee of 2.5-4% ($250 per $10,000 borrowed). OnDeck issues loans of as little as $5,000 and up to $500,000 and can release funds quickly, in as little as a few days or sometimes 24 hours.
OnDeck’s payment terms go from 3 to 36 months, and you are required to repay your loan via automatic daily or weekly repayments. The structure of the OnDeck loan is a bit different from a standard term loan because OnDeck requires borrowers to repay a certain fixed amount of fees, there is not really any advantage to paying off your OnDeck loan early. OnDeck borrowers must have been in business for a minimum of 1 year, with a credit score of at least 600, and minimum annual revenues of $100,000.
Who it’s good for: Companies with poor or decent credit that need large amounts of money (up to $500,000). If you have better credit, try Lending Club first.
Who should pass: Companies with good enough credit scores to qualify for loans from other lenders that offer lower APRs.
How to Improve Your Credit Score
Having a good credit score is one of the most important factors in qualifying for a loan with favorable loan terms and lower loan costs. When your credit score is high, banks and lenders treat you as a lower-risk borrower. That means they think you’re more likely to repay the money that they lend you – and that means your interest rate will be lower, your approved credit limits will be higher, and your overall costs of borrowing will be more reasonable.
If you have limited credit history or have suffered some financial setbacks, your credit score might be lower than you might prefer. Here are some quick tips on how to raise your credit score:
- Pay your bills on time: Your credit score is a reflection of your previous history in successfully paying your bills on time. If needed, set up automated reminders to pay your bills on or before the due date.
- Pay bills more frequently: If you struggle to make a full payment on the due date, try making multiple smaller payments throughout the month. Every payment you make on a loan or credit card account will help reduce your “credit utilization” ratio and will help you look like a better-situated borrower when applying for a business loan.
- Have a variety of types of credit: It will usually help your credit score if you have several different types of credit accounts open, such as a credit card (or two), an installment loan, and a line of credit.
- Keep accounts open: If you’re struggling with bad credit, you might be tempted to close your credit card accounts – but this is actually bad for your credit score. The more unused credit you have – the more “open space” you have in your credit limits – the better your credit score looks to lenders.
- Pay off balances faster: It sounds obvious, but the best strategy to boost your credit score is to pay off your debts as fast as possible. This means that if you have multiple credit cards, pay off the lowest balances first – getting those cards to zero will boost your credit score more quickly than putting the same dollar amounts toward all of your accounts (but without paying off any balances in full).
Small Business Loan Alternatives for Veterans
SBA Express Loans
The Small Business Administration (SBA) Express Loan program offers loans that are issued by banks and backed by the federal Small Business Administration, which agrees to guarantee a portion of your loan in case you are unable to repay the bank. But with an SBA loan, you don’t borrow from the government directly; you borrow from one of the government’s approved lenders (banks or loan companies). Each lender has its own criteria and rates for these loans. For example, Bank of America has a good description of its SBA lending options here.
SBA Express loan amounts range from $10,000 to $350,000. The SBA loan process requires additional paperwork, but terms are often better for borrowers than what they might otherwise qualify for – because the loans are partly backed by the government.
John Moshier, President of ReadyCap Lending in New Providence, New Jersey, said that although the SBA does not offer special deals for veterans on loan terms or interest rates, there is a special program called the Veteran Advantage program which was mentioned earlier and provides a 50% discount off loan guarantee fees for veterans.
“The way SBA loans work is, the loan rates are determined by the different lending institutions, and the SBA sets a maximum ceiling on how high the lenders can set their rates, with the final rates determined by the size of the loan,” said Moshier. “SBA loans are a way for lenders to offer more favorable terms to a business that may not qualify for a traditional conventional loan.”
SBA loans can offer a few significant advantages compared to a traditional bank loan. John Moshier said, “It depends on the business and the purpose for the loan. Some businesses may be growing, and an SBA loan can provide them with a longer term to repay the loan, and this can help the borrower manage cash flow better, or qualify with a lower down payment than a traditional loan would allow.”
To find an SBA loan, ask your bank if they are an SBA Preferred Lender, or check out this list of most active SBA Lenders. There are two types of SBA loan programs: the SBA Express Loan (with a maximum loan amount of $350,000 and a guaranteed decision within 36 hours of applying for the loan) and the SBA 7(a) loan (which offers higher amounts – up to $5 million – but also tends to have a slower application process).
Also consider organizations such as nonprofits that work with veterans. Sometimes these groups have loan programs available or can help connect you with lenders. Fundera has a very good list of resources for veteran entrepreneurs – check it out to see if any of these organizations or programs could be helpful to your business:
- Veteran Entrepreneur Portal: A partnership of the VA and BusinessUSA, this website connects veterans with entrepreneurship best practices, information, and resources
- Veteran Business Services: This organization provides consulting for veterans who are interested in purchasing a franchise business.
- SBA Service-Disabled Veteran Owned Businesses Contracting Program: If you are a service-disabled veteran, your business can get preferential access to do business as a government contractor.
- UPS Store Franchise Fee Discount: Qualifying veterans who want to start a UPS Store franchise business will receive a $10,000 discount on the UPS Store franchise fee, as well as a 50% discount on the initial application fee.
The Bottom Line
If you’re a veteran looking for a small business loan, you’ll still need to to shop around and compare interest rates and loan terms from multiple lenders. You’ll also want to reach out to veterans’ organizations like VetToCEO, the Veterans Business Resource Center, or other organizations listed here if you have questions or need help with getting a small business loan, creating a business plan, or other aspects of starting and running your own business. When it comes to applying for loans, start with SBA or traditional bank loans to find the best terms. If you can’t get approved for one of those, try one of the platform lenders highlighted in this article.