Securing a VA Business Loan

By Gretchen Wegrich Updated on 7/31/2017

VA loan for business Patriot Express Loans and Military Reservist Economic Injury Disaster Loans are guaranteed loans offered by the Small Business Administration (SBA) for Veterans, active duty servicepersons, and their spouses.

While not a common type of VA loan, VA business loans can be utilized by VA-eligible borrowers to start up a new business, expand an existing business, or fund a business related purchase.

What is a VA Business Loan?

Divided into two categories, the Patriot Express Loan and the Military Reservist Economic Injury Disaster Loan, VA business loans provide eligible military borrowers with access to loans for business funding or expansion.

Patriot Express Pilot Loan Initiative

The SBA Patriot Express Pilot Loan Initiative is a loan program provided by a network of Small Business Association lenders nationwide with one of the quickest loan approval turnaround time frames.

Borrowers can secure up to $500,000 through a Patriot Express loan, with the SBA guaranteeing up to 85% of the loan for those less than $150,000 and up to 75% for loans between $150,000 and $500,000. However, loans over $350,000 will require lender repossession of all available collateral in the event of default.

Patriot Express Loan Uses

Patriot Express VA loans can be applied toward a variety of business-related expenses, including but not limited to the following:

Business start-up costs.
Equipment procurement.
Commercial real estate purchases.
Creating an inventory.
Supplementing working capital.
Business management expenses.
Expansion of a pre-existing business.
Preparing the business in the event of possible deployment.
Arranging the selling of goods and services to the government.
Economic recovery from confirmed disasters.

PEPLI Versus SBA Express

The Patriot Express Pilot Loan Initiative (PEPLI) utilizes much of the same process as the SBA Express Loan program, concerning streamlined documentation and expedient procedures for loan acquisition; however, these loans differ in several critical ways.

Particularly, the SBA extends much larger loan guarantees for PEPLI loans; while the SBA will guarantee up to 85% of loans under $150,000, the SBA guarantees a maximum of 50% for SBA Express loans.

Also, the PEPLI loan allows borrowers to secure greater amounts of funding. While the SBA Express only offers loans up to $350,000, VA-eligible borrowers can secure PEPLI loans for up to $500,000.

Furthermore, the PEPLI loan offers more favorable interest rates than the SBA Express loan. While SBA Express loan guidelines allow higher interest rates, PEPLI loan interest rates match those of the standard SBA regulations for the 7(a) loan program, which is noticeably lower.

Eligibility for PEPLI

To qualify for a loan through the Patriot Express Pilot Loan Initiative, borrowers must be able to satisfy the traditional eligibility requirements for the 7(a) loan. These requirements include the usage of the funds, the size of the business, the ability to repay the loan to a specific schedule, and the generation of a feasible business plan.

In addition to these requirements, borrowers must also meet VA eligibility qualifications regarding military service.

Military Reservist Economic Injury Disaster Loan

The second type of VA business loan available to borrowers is the Military Reservist Economic Injury Disaster Loan (MREIDL), which provides funding for businesses which have been adversely affected by their owners’ involvement in military service.

Basically, if a borrower fails to meet obligations to the business as a result of military service, he or she can secure a MREIDL loan to utilize the funds as working capital.

Business Eligibility for VA Business Loans

For a business to qualify for these military benefits, the business must be at minimum 51% owned by the veteran borrower. In general, most businesses are eligible for these loan programs, excluding pyramid schemes, gambling business, or lending.

Additionally, businesses must be for-profit to qualify, meaning that non-profit businesses will not be eligible for either of these loan programs.

Additionally, MREIDL loans require an evaluation from the SBA before approval of the loan. Federal law mandates that the Small Business Administration evaluates whether the business can recover once the essential employee returns to his or her position.

If they determine that this is not possible, the business can apply for the loan. The SBA has assessed that approximately 90% of businesses which apply for this loan cannot recover without additional assistance.

VA Business Loan Limits

As previously indicated, the maximum loan limit for the Patriot Express Pilot Loan Program is $500,000, although the amount which a borrower will be able to acquire may vary from lender to lender depending on his or her qualifications and circumstances.

For the Military Reservists, Economic Injury Disaster Loan will be limited by the amount of financial damage caused by the circumstances which was not compensated by business interruption insurance and which does not exceed the ability of the business or the owner to repay.

For businesses which are a significant source of employment, the SBA carries the authority to set aside the $2,000,000 statutory limit.