Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Nov 14, 2012

Advertiser Disclosure

Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.

The war in Afghanistan is scheduled to end in a military withdrawal in 2014 by the Obama Administration. Additionally, the Pentagon will be cutting $600 billion in January 2013 as part of the sequestration cuts. Once the US concludes its operations in Afghanistan, whether or not the Taliban have been defeated, it will no longer be necessary to have such an expensive or large military. As a result, the Small Business Administration has estimated that over 250,000 service members will transition from active duty to civilian status. This will lead to more military members being discharged from the Armed Forces and thrust back into the civilian job market over the coming years.

A Bittersweet Homecoming

Veterans often have questions about business loans and how they can “get the ball rolling” for starting a business since job prospects are sadly less-than-favorable for military service members. In October, the unemployment rate for former military personnel rose to 10 percent compared to 7.9 percent for civilians—a bittersweet prospect for many of those returning home. Wisely, many returning veterans have decided that entrepreneurship—essentially self-employment—is a far more independent and self-determining path to take than endlessly submitting applications. A quarter of the returning 250,000 personnel will want to begin a business.

However, starting a commercial enterprise is no small feat and business loans are oftentimes a necessity for cash-strapped civilians, let alone low-income members of the Armed Forces. Fortunately, veterans have access to some benefits. One of these benefits is the Small Business Administration, which is keen to work with former military applicants seeking commercial financing.

Reaping the Benefits of Service

Veterans have the benefit of qualifying for the Patriot Express program. Under the program, financing is capped at $500,000, but typical loans average in amounts from $15,000 to $50,000. Former military service members do not have to apply solely to the Patriot Express program. The SBA has a number of other options for military service members in conjunction with the VA. Aside from federal government options, former military members can always try to apply for conventional business loans from their local banks or credit unions. However, the SBA is generally more accommodating than private lenders.

Even though the SBA tries hard to work with veterans, former service members do not automatically qualify for a business loan.

Lenders always require that applicants have credit scores of a certain level. A common and unfortunate aspect of the military is that most of its members are young, financially inexperienced, and earn low-wages. As a result, they do not always have the best credit scores nor the necessary capital that would permit them to bypass borrowing money to start a commercial enterprise. Due to those reasons, it is also not uncommon for members of the Armed Forces—despite their sacrifice and willingness to engage in combat on behalf of our republic—to be denied financing.

Furthermore, credit scores and collateral aren’t the only requirements to get approval.

Planning for Victory

Applicants must also submit a business plan. Lenders view applicants as commercial opportunities, not as entitled entrepreneurs. In commercial lending, a lender only makes money by receiving the monthly payments that borrowers send in. When tallied, these payments are totaled at more than the amount of the loan due to accumulating interest. In order to prove to a lender that giving out a business loan is a smart investment, veterans should create a great business plan.

These plans highlight exactly how a new entrepreneur plans to succeed in their chosen industry. They need to show lenders why the commercial entity will succeed—like a battle plan in a way. Perhaps an applying veteran is proficient in some industry, or has invented some breakthrough, or simply has identified a gap in the market. Whatever the case, the plan needs to conclude that the applicant’s idea will succeed and that any lender would be foolish to not lend him or her money.

Unfortunately, not all applicants will obtain financing. Most of the returning military are young, have multiple injuries, and may lack the skills that would make them desirable hires in the civilian job market. Many employers are also hesitant to hire employees with injuries and Post Traumatic Stress Disorder, which can prove costly to insure and accommodate in the civilian workplace. In the end, competing for a job or for a business loan to launch a start-up should be a far more manageable battle than one fought in a foreign country.