Veterans Affairs (VA) loans refer to loan guarantees that are made by the SBA to soldiers or veterans who have returned from military services or are going off to serve. The loans are not actually from Veterans Affairs and can be given to widows or wives. The SBA has a small office that is dedicated to dealing with VA loans. These loans are not grants, as they come with an interest rate.
What kinds of VA business loans are available
There are two kinds of VA loans: Patriot Express Pilot Loan Initiative and Military Reservist Economic Injury Disaster Loan (MREIDL). The former was supposed to expire in 2010; however, it was so successful that it was extended to 2013. The small business administration also provides training and counseling for receivers of this loan and this has made it very successful.
The MREIDL loan is meant to give working capital to businesses that have met their obligations and keep doing the same.
Who is eligible for this loan?
All active military personnel, service-disabled veterans, and other veterans are eligible for the VA loan. However, if you are a veteran who received a dishonorable discharge, you do not qualify for the loan. Are you a retiree who is within 2 years of retirement or active personnel within a year of separation? You could qualify for the Pilot Express Loan Program.
Which businesses are eligible for this loan?
To take out the loan, you must own at least 51 percent of a business. Most businesses are eligible except lending businesses, pyramid schemes, as well as gambling businesses. Moreover, the business has to be for-profit, not nonprofit.
What can I use the loan for?
You can use a Patriot Loan for most of your business needs. For instance, you can use it for startup costs, working capital, buying real estate for your company to occupy, purchasing equipment, and growing your business. You can use it for anything that helps your business.
How much can you borrow?
The amount of money that you qualify for depends on the lending institution that you use. The Patriot Loan program usually guarantees the borrowers at least 85 percent of the money they borrow up to 150,000 dollars. On the other hand, they guarantee less than 75 percent of any amount that you borrow between 175,000 and 500,000 dollars.
Does the VA loan program work?
The SBA does not personally loan the funds to veterans, lending institutions such as credit unions and banks make the loans. If you plan to borrow less than 25,000 dollars, you do not require collateral. However, if you want more than that, the lender might choose to invoke her/his collateral policy.
Your rates of interest will vary from 2.25 to 4.75 percent above the prime rate of interest. However, you can always attempt to negotiate lower rates of interest. Do you need help finding a lender? The SBA has offices in every state that can come in handy whenever you need help.
What is the purpose of the MREIDL loan?
When an essential employee is called to serve in the military, the business he/she owns will be eligible for this loan. The main purpose of the MREIDL loan is to provide for the business expenses that the essential employee cannot provide for in absentia. The loan is not meant to replace lost profits but to replace working capital so that your business survives. When choosing the best loan for your business, you should look for a va business loan interest rates review. Doing so gives you a good idea about VA loan interest rates.