VA SBA Loans
The Patriot Express Loan or "Patriot Business Loan" was more or less a VA commercial loan which was commonly referrred to as the "VA SBA Loan."
It was a well intentioned and extremely popular program while it lasted. It offered expedited processing for active duty military service members - or anyone who met the SBA's definition of a veteran-owned business.
The Patriot Express loan was created to help veteran small business owners with their business financing needs. It could be used to buy a property, buy equipment, start a business, purchase a business or refinance and recapitalize a business.
Unfortunately, the default rate for the program was so high that the SBA had to discontinue it.*
These days there really isn't a VA commercial loan worthy of the name: "VA SBA Loan" - at least nothing that rivals the benefits once offered by the Patriot Express Loan - but there are SBA lenders who are making a concerted effort to help veterans by offering their own versions of a "patriot business loan."
Numerous lenders are doing what they can to help veterans finance their businesses and business property using both the SBA 7a and the SBA 504 loan programs.
Both of these programs can be an exceptionally good value - especially the SBA 7a loan - as it is extremely flexible and there are some lenders who will offer 100% financing or even over 100% financing for the right transactions.
So while the Patriot Express Loan has long since been discontinued, there are options in the form of the 7a and 504 programs, and while they are not specifically meant for just veterans or active military, there are lenders who will try harder to find a way to approve a loan for a veteran.
VA Loan for Commercial Property
Again, these loans are not necessarily VA SBA Loans, but they are very definitley available to veterans and there are numerous banks and lenders who have a proven track record of getting them done.
Also, since many veterans and active-duty service members get 100% home loans, the expectation is generally that there should be a 100% financing program for commercial real estate that veterans can take advantage of, and there is for small businesses, IF you already own a successful business.
To clarify, there is a small minority of SBA 7a lenders who will offer 100% financing to an existing business in the following circumstances:
- An existing, profitable business looking to purchase a property where the business (employees, equipment, inventory, etc.) will occupy at least 51% of the square footage of the property. Aside from the owner(s) having decent credit, no character issues, affordable personal overhead, etc. the business itself must be doing well under management of the veteran. In other words, you can't typically have recently purchased a business that is renting space and then almost immediately go out and buy a building for it right away. Lenders like to see that you can capably own and manage the business for a period of time before allowing you to take on new debt.Of course, there are exceptions to a lot of rules, and there have been situations where borrowers with a lot of very relevant, very recent experience running a similar operation have been approved for a commercial real estate loan soon after buying a business.
- An existing, profitable business looking to expand operations by acquiring another similar type business or a competitor.
- An existing, profitable business looking to grow by opening a brand new location.
What is not mentioned above is commercial investment property financing, and this is because the SBA is only for small businesses that will legitimately "owner-occupy" the property. You cannot use the program for multi-family, apartments, 1-4 family, single family, strip centers, office buildings or properties where your business does not legitimately occupy at least 51% of the space.
The whole SBA "owner-occupied" terminology is admittedly confusing, so the key is to know that it is all about closely held businesses where again, the business needs the majority (51% or more) of the square footage to effectively operate and the rest can be leased out to tenants.
The SBA rule is slightly different for ground up construction projects, which can also be financed at or above 100% loan to value/loan to cost, as your business needs to initially occupy 60% of the square footage.
For more info about 100% financing: click here.
VA Commercial Loans
The SBA 7a loan is a program that allows a veteran to purchase a business OR a commercial property to operate the business. The 7a is also available to veterans who already own a business and need capital for any other business purpose.
The 504 is a 2 loan structure and it's value lies in the fact that the 2nd mortgage is fixed for 25 years, although well qualfied borrowers might also be able to get a 25 year fixed rate first mortgage as well. The 504 is for commercial real estate, although it can be used for "long life" equipment.
Veteran Small Business Loan Maximum Amount
The typical maximum small business loan amount for the SBA 7a loan is $5 million. There are some lenders who will lend much more than that using a 7a small business loan by adding a 2nd mortgage behind the first mortgage, although the 2nd mortgage would not be guaranteed by the Small Business Administration, so this structure is only available for the strongest of transactions.
The approximate small business loan maximum amount for the SBA 504 loan is in the range of $15 million+. The 504 program is exclusively for large real estate or expensive equipment transactions.
VA Business Loan for Rental Property
VA business loans for rental property can only be used for certain types of SBA eligible "rental property." The following can be financed: self storage, RV and boat storage, RV parks, marinas, campgrounds and hotels and motels,as long as the veteran business owner will be either running the business, have an employee running the business, employing an eligible third party management company OR in the case of self-storage, mini-storage or RV/Boat Storage it is possible to get an SBA loan for a storage facility that is fully automated (with proper security, a self-service kiosk, etc, which can be very desireable from an ownership standpoint.
The SBA has specific requirements for what they consider to be owner-occupied business property and none of the following are eligible: multi-family, apartments, 1-4 family, single family, strip centers, office buildings or properties where your business does not legitimately occupy at least 51% of the space.
In the case of an SBA loan for an RV park, marina or campground the only way it is eligible is if more than 50% of revenues (or projected revenues in the case of a new or expanding business) are from guests/customers who are short term stays (less than 30 day), although some lenders are okay with parks that are set up to accomodate seasonal guests.
If purchasing commercial real estate that will be used by the business then a 25 year term is available. If purchasing a business then a 10 year term is possible.
The 504 is good for veterans who already own a business and need to do one of the following:
- Purchase real estate where your business will occupy the majority of the space
- Expand, remodel, renovate or retrofit an existing building or facility
- Install Green or Renewable Energy Equipment as part of a renovation
- Purchase expensive business equipment with a useful life of at least 10 years
- Refinance an existing commercial loan including a refinance of an existing SBA 7a loan as those can now be refinanced with a 504 as of 2021
The 7a is good for all of the above as well as business acquisitions, buyouts, startups and any other business purpose.
SBA Loans for Veterans - Benefits
- There is no SBA Loan Guaranty Fee for some loans under $350,000.
- Closing costs and soft costs can be financed. making 90% loan to cost and in many cases 100%+ commercial financing possible
- Long term, fully amortized loans with no calls, balloons, re-qualifying or refinancing required
- Zero down or 10% down payment/equity injection when most commercial lenders require at least 20% down
- 25 year fixed rates are available for commercial real estate
- 10 year fixed rates are available for business acquisitions
- You can finance manufacturing or Green Building projects in the range of $20,000,000
- No financial convenants
- Credit and credit scores do not need to be perfect and you can get an SBA loan after a bankruptcy from some SBA lenders. You will need to have an acceptable explanation and typically be approx 3 years from discharge for most lenders. Foreclosures, short sales, collections, lates, etc. also need to be explainable.
SBA Definitions of Veteran and Veteran-Owned Business
Active-duty service members, service-disabled veterans, veterans, transitioning service members, and their dependents or survivors are eligible for commercial financing with the SBA 504 and SBA 7a loan programs.
The SBA defers to the Department of Veterans Affairs for definitions concerning eligibility. The following definitions are taken from US Code, Title 38:
Veteran: A person who served on active duty with the U.S. Army, Air Force, Navy, Marines or Coast Guard who was discharged or released under conditions other than dishonorable.
Reservists or members of the National Guard called to Federal active duty can also qualify.
Veteran-Owned Business: Is a business where not less than 51% of it is owned by one or more veterans. If it is a publicly owned business, not less than 51% of the stock of the company must be owned by one or more veterans and the management and daily operations would need to be controlled by one or more veterans
Service-Disabled Veteran: A veteran with a disability rating letter issued by the Department of Veterans Affairs that establishes a service-connected rating between 0 and 100% or one with a disability determination from the Department of Defense.
Service-Disabled Veteran-Owned Business: Is a business where not less than 51% of the business is owned by one or more service-disabled veterans. If it is a publicly owned business, not less than 51% of the stock of the business must be owned by service-disabled veterans.
Management and business operations would also need to be controlled by one or more service-disabled veterans except in the case of a veteran with a permanent and severe disability. In that case, a spouse or permanent caregiver can manage or operate the business on behalf of the veteran.
SBA refinances under the 504 program are also available
More SBA 504 Loan info: 504 Loans
Please also see: SBA Renewable Energy Loans for those that want to "go green."
SBA Express Loan for Veterans
There is a program for smaller SBA loans - the SBA Express program - which offers a discount on the SBA Loan Guaranty Fee for veterans. The SBA Express program is for loans under $500,000, and while it offers expedited process to get a decision from underwriting and approval turnaround
There are other SBA resources for Veterans wishing to start a business or for those in need of working capital and you can find out more about those programs from The Office of Veterans Business Development at: https://www.sba.gov/offices/headquarters/ovbd
Other SBA Loans for Veterans
Please contact us at 1-800-414-5285 if you need help with a VA business loan. We have had much more success helping existing veteran business owners vs. startups and commercial property loans that may or may not include additional funds for working capital, business debt consolidation, inventory, etc. are easier than other types of loans, but we have helped a lot of veterans get loans at or above 100% of the value of their business property.
If we are unable to help we will do our best to point you in the right direction.
* here is link to the US Government Accountability Office report on the Patriot Express Loan: GAO Report
100% financing is available for owner occupied business properties/commercial real estate for existing, profitable businesses with the 7a. It is also available for current business owners expanding their business by acquiring a competitor or if a franchise, acquiring another franchise location.
("Owner occupied" means your business will occupy 51% to 60% of the property depending on whether it is an existing building or ground up construction). We have assisted a lot of veterans with this program in many different industries including online businesses, manufacturing businesses, veteran-owned fitness centers and crossfit gyms, all types of automotive-related industries, assisted living facilities and many others.
More About the Patriot Business Loan aka Patriot Express Loan Program
After the last recession there were a few significant benefits for veterans obtaining small business loans with SBA assistance, in that veterans were only charged 1/2 of the regular SBA loan fee that is financed into an SBA loan. There was also a program for veterans that was commonly referred to as the Patriot Business Loan called the Patriot Express loan. Unfortunately, these programs/benefits have since expired, but some small business lenders are committed to helping veterans get financing and will typically be more open minded when it comes to underwriting a VA business loan. Startups are always challenging as most lenders would rather make a loan to an existing business whether it is veteran-owned or not and obviously there are limitations to what lenders will do and they will only take so much risk, but we have seen where ceratin lenders will go the extra mile to try approve a loan for a veteran.