We don’t always realize or appreciate the important work many veterans assume after they leave military service. Many start small businesses, creating jobs and opportunities for their families as well as for others. In fact, just shy of 10% of all small businesses are owned by veterans and vets are 45% more likely to be self-employed than non-veterans. I know, I am a veteran
As a veteran, (I am a veteran) you may be eligible for reduced fees (as little as zero!) for one of these loans.
Under the Veterans Entrepreneurship Act of 2015, up-front guaranty fees for SBA Express loans approved on or after October 1, 2015 through September 30, 2016 are set to zero for qualified businesses owned by a veteran and/or the spouse of a veteran.
And under SBA Veterans Advantage, fees for many 7(a) loans (other than SBA Express) approved through September 30, 2016, are reduced by up to 50%. Specifically:
The up-front guaranty fee for 7(a) loans (other than SBA Express) of $150,001 up to and including $5,000,000 approved to qualified small businesses (see below) will be reduced by 50%, as follows:
- For loans with a maturity in excess of 12 months:
- For loans of $150,001 to $700,000: 1.5% of the guaranteed portion;
- For loans of $700,001 to $5,000,000: 1.75% of the guaranteed portion up to $1,000,000 PLUS 1.875% of the guaranteed portion over $1,000,000;
- For loans with a maturity of 12 months or less: 0.125% of the guaranteed portion.
These fee reductions are available to businesses that are at least 51% owned and controlled by one or more owners who are in the following groups:
- Veterans (other than dishonorably discharged);
- Service-Disabled Veterans;
- 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.
What are the interest rates on these loans?
Interest rates may be fixed or variable, but they cannot exceed the rates allowed by the SBA. Because the SBA insures a significant portion of the loan, rates are often lower than those available elsewhere.
I am a vet and want to start a business. Where can I go for training and assistance?
A great place to start is with your Veteran’s Business Outreach Center. The mission of the VBOC is to “help create, develop, and retain veteran-owned small business enterprises.” VBOC’s provide training, counseling and mentoring and can help with creating a business plan, developing a feasibility study and more.
I am a service disabled vet, and my credit isn’t perfect. Will that stop me from getting a loan?
Don’t automatically assume you can’t qualify. You will generally need a minimum FICO SBSS score of 140 to pass the initial screening for loans under $1 million, however, so it would be a good idea to check that score as soon as possible. Currently the only place to get this score is through Nav’s premium plus service.
What do I need to qualify for an SBA 7(a) loan?
There are some basic requirements that you—and any other owners with a 20% or greater ownership in the business—must meet to be eligible for an SBA loan.
- You must operate (or plan to operate) a for-profit small business in the U.S or its territories.
- You should have “skin the game.” By that, we mean lenders will want to see you have personally invested a reasonable amount in your business and tapped personal resources, if available.
- The government doesn’t want to fund a business that hasn’t paid it back. In other words, you can’t be delinquent on other debts owed to the federal government such as federal taxes or federally guaranteed student loans. You also cannot have previously caused the federal government to incur a loss on a debt.
- Your business can’t be in an industry that is not eligible for these types of loans, such as gambling or pyramid schemes. (Tip: Check that your SIC and/or NAICS codereported on your business credit reports is accurate. These codes categorize your business by industry.)
- You won’t be eligible if you are currently incarcerated, on parole, on probation or a defendant in a criminal proceeding.
Do you qualify for an SBA loan? Check both your personal and business credit scores www.nav.com for your personal and FICO SBSS business score. SBA requires a minimum SBSS score of 140, most lenders set the score at 160.
Prepare Your Paperwork
Gathering and preparing the documentation many lenders will want to review when you apply for your loan.can be challenging. The SBA lists the loan document requirements on its website, but here is a summary:
- SBA Loan Application
- Personal Background and Financial Statement
- Business Financial Statements (Profit & Loss, 1-year projected financial statement)
- Ownership & Affiliations
- Business Certificate/License
- Loan Application History
- Income Tax Returns (3 years, personal and business)
- Resumes for each principal of the business
- Business Overview & History, including an explanation of how the loan will help the business
- Business Lease (if applicable)
- Purchase Information (if purchasing a business, additional information is required)
Getting a loan can be complicated, and most get turned down for lack of proper documentation or missing information not because you were not qualified. As a general rule, once you are turned down by one lender the chance of getting approved by another is very small.
At Lendingcapital we make all this easy, and have many approved preferred SBA lenders with our national reach. We have the ability to submit to many lenders without effecting your credit or alerting that we are shopping the loan. Your chances of approval with us increased dramatically-so why not let us do the work for you and make sure your submittal package is correct the first time. Get approved today