How can veterans fund a new or growing business?

Start with the real number

Before looking for money, work out how much you need and why. Separate one-time start-up costs, such as equipment, deposits, licensing, and initial inventory, from the working capital needed to cover expenses until revenue catches up. Include a cushion for slow months and late payments. Government and commercial customers commonly pay 30 days or more after invoicing, so a business can be profitable on paper and still run short of cash.

Then match the money to the need. Long-lived assets such as real estate or heavy equipment usually suit long-term loans. Short-term needs such as inventory or a gap between invoicing and payment usually suit a line of credit. Early experiments are often best funded with savings or small amounts of revenue rather than debt.

SBA-guaranteed loans

SBA explains that when a bank considers a business too risky for a conventional loan, SBA may guarantee the loan so the lender has less risk and may be more willing to lend. SBA states that its guaranteed loans generally have rates and fees comparable to non-guaranteed loans, and that some come with counseling and lower down payments or no collateral for some loans. SBA also notes that even borrowers with bad credit may qualify for startup funding, depending on the lender and program.

• 7(a) loans: SBA’s primary program for long-term financing, delivered by SBA 7(a) lenders. SBA describes uses including real estate, equipment, inventory, working capital, refinancing business debt, or buying a small business.
• 504 loans: long-term, fixed-rate financing through community-based Certified Development Companies, typically for buying or renovating real estate or buying heavy equipment.
• Microloans: loans of $50,000 or less provided through intermediary lenders, which are often nonprofit community organizations.
• Export loans: SBA programs that help small exporters finance operations and orders.

Use Lender Match to find lenders

SBA’s Lender Match tool connects you with SBA-approved lenders in your area. You describe your business and funding need, and lenders that may be interested respond. It is not a loan application or a guarantee of approval, but it is a fast way to find lenders that participate in SBA programs. Community banks and credit unions in Texas may also offer SBA-backed and conventional small-business loans.

Prepare a loan request lenders take seriously

SBA advises preparing a business case and financial statements before requesting funding. Write a short statement of the total amount requested and the specific reasons for it, and update your business plan to include this stage of funding.

Lenders want evidence you can repay. Be ready to show revenue, expenses, and profit history if you have it, personal and business credit, a cash-flow forecast with explained assumptions, the collateral available, and how much of your own money is invested. Review your business credit file for errors before you apply.

• A clear use-of-funds table showing what every dollar buys.
• Twelve to 36 months of cash-flow projections with conservative and expected cases.
• Personal financial statement and tax returns, as the lender requests.
• Formation documents, licenses, leases, major contracts, or letters of intent.

Funding tied to military service

If an essential employee who is a member of the Reserves or National Guard is called to active duty, SBA’s Military Reservist Economic Injury Disaster Loan program provides loans to help eligible small businesses with operating losses caused by that absence. Check SBA for current eligibility.

For veterans with service-connected disabilities, VA’s Veteran Readiness and Employment Self-Employment track offers business planning help, training, and guidance in getting the right resources. See TVEN’s guide to using VA benefits for what the program does and does not cover.

The truth about grants

SBA states that the federal government does not provide grants to start a business. Federal research grants such as the Small Business Innovation Research and Small Business Technology Transfer programs, known as America’s Seed Fund, do exist, but they fund research and development on topics agencies publish and are highly competitive.

In Texas, the Texas Veterans Commission’s Fund for Veterans’ Assistance awards grants to eligible nonprofit organizations and local government agencies that serve veterans, not to individual veterans or ordinary for-profit businesses. TVC’s business consultants also note that most available grants are for nonprofit organizations. Some corporations, foundations, and pitch competitions do offer awards to veteran-owned businesses; treat them as a possible bonus, not a funding plan.

• A legitimate grant program does not require you to pay a fee to receive a grant.
• Government agencies do not cold-call or text offering free grant money.
• Verify the sponsor on its own official site, read the eligibility and permitted uses of funds, and note the deadline.
• Be wary of anyone asking for bank login details, gift cards, or a processing fee.

Other legitimate options

SBA lists familiar alternatives for growing businesses, including small-business loans, credit cards, and crowdfunding. Selling an ownership stake to investors is another option, but SBA notes it dilutes current owners, and for veteran owners it can affect eligibility for programs with ownership and control rules, such as SBA VetCert’s 51% requirement or Texas franchise-tax treatment that requires 100% veteran ownership. Understand those rules before accepting investment.

Free help with funding

SBA resource partners, including Small Business Development Centers, SCORE, and Veterans Business Outreach Centers, can help you prepare financial statements and a loan package at no or low cost. The Texas Veterans Commission’s Veteran Entrepreneur Program lists financing among its consulting services and refers veterans to third-party lenders for non-traditional options.

Frequently asked questions