The Patriot Express Loan program launched in 2007 to help provide business loans for veterans to start or expand their businesses. While the program expired in 2013, it was extremely popular and still gets attention from veteran business owners. 

Getting a Patriot Express Loan is no longer an option, but the U.S. Small Business Administration (SBA) still provides excellent small business loan options to veterans who qualify through the SBA 7(a) Express Loan and other programs. Here’s what you need to know about the expired program and what’s still available to help you get the financing you need.

A history of the Patriot Express Loan program

In 2007, the SBA introduced the Patriot Express Loan as a pilot product in its 7(a) loan guarantee program. Unlike other SBA loans, which are available to all business owners who qualify, the Patriot Express loan was designed specifically for veterans and other eligibility military members to get access to the financing they needed to start or expand their business.

While the SBA didn’t originate or service the loans itself, it provided insurance to SBA-approved lenders, reducing their risk and encouraging them to work with small business owners who qualified. 

For veterans and other eligible military members who qualified, the Patriot Express Loan provided up to $500,000 in funding and could be used for most business-related purposes. The program had one of the fastest turnaround times for approval among all SBA loans, and some of the lowest interest rates at just 2.25% to 4.75% above the prime rate, depending on the loan amount and repayment term.

All these features made the Patriot Express Loan an appealing financing option, and the SBA guaranteed more than $703 million through the end of 2012.

The problem was that the default rate on Patriot Express Loans was higher than other SBA loans, according to the U.S. Government Accountability Office. Among business owners who borrowed less than $25,000, for instance, one in five couldn’t repay the debt. Ultimately, the costs of providing the program exceeded the income, and the SBA discontinued the product at the end of 2013.

Alternatives to the SBA Patriot Express Loan in 2020

If you’re looking to apply for a Patriot Express Loan, you’ll be disappointed. But the SBA still provides several financing options to the more than 2.5 million businesses that are majority-owned by veterans. Here’s what to know about each.

Military Reservist Economic Injury Disaster Loan program

Called MREIDL for short, the program offers funding to businesses that have suffered economic loss because an essential employee was called up to active duty as a military reservist. The MREIDL loans are designed to help affected businesses meet their ordinary and necessary operating expenses until operations return to normal. 

The loan limit is $2 million, and you’ll need to provide collateral on loans over $50,000. The interest rate on the program is just 4%, and business owners can repay the debt over up to 30 years.

Unlike other business loans, MREIDL loans are not meant for anything beyond working capital needs. So it’s not an option if you’re looking to start a business, expand your current operations, refinance long-term debt or cover lost income or profits. 

Also, if your business has the financial capacity to fund its own recovery, it likely won’t qualify for a loan through the program. If you want to apply, call the Disaster Assistance Customer Service Center at 800-659-2955 or send an email to disastercustomerservice@sba.gov to get an application sent to you.

SBA 7(a) loan program

The SBA offers several different loans through its 7(a) program, giving you the chance to pick the one that’s the right for your needs. SBA 7(a) loans are best for business owners who are looking to gain access to working capital, purchase furniture and fixtures, make leasehold improvements, or acquire an existing business. 

Here are the loan options that are available, along with their highlights.

Standard 7(a) loan

• You can borrow up to $5 million
• Interest rates can vary but cannot exceed the maximum set by the SBA
• Collateral is not required for loans of up to $25,000
• Approval turnaround time is five to 10 days

7(a) small loan

• You can borrow up to $350,000
• Interest rates can vary but cannot exceed the maximum set by the SBA
• Collateral is not required for loans of up to $25,000
• Approval turnaround time is five to 10 days

SBA Express loan

• You can borrow up to $350,000
• Interest rates can vary but cannot exceed the maximum set by the SBA
• Collateral is not required for loans of up to $25,000
• Approval turnaround time is 36 hours or less

Export Express loan

• You can borrow up to $500,000
• Interest rates can vary but cannot exceed the maximum set by the SBA
• Collateral requirements can vary based on lender standards
• Approval turnaround time is 24 hours or less
• Loan is designed specifically for exporting businesses

Export Working Capital loan

• You can borrow up to $5 million
• Interest rates can vary but cannot exceed the maximum set by the SBA
• Collateral requirements can vary based on lender standards
• Approval turnaround time is five to 10 business days
• Loan is designed specifically for exporting businesses

International Trade loan

• You can borrow up to $5 million
• Interest rates can vary but cannot exceed the maximum set by the SBA
• Approval turnaround time is five to 10 business days
• Loan is designed specifically for exporting businesses

You can compare and apply for a 7(a) loan by finding an SBA-approved lender and working with them individually.

SBA 504 loan program

While the 7(a) loan program is more popular, the SBA also offers another program that’s designed to help finance the purchase fixed assets and certain soft costs. More specifically, you’re allowed to use 504 loan funds for:

• The purchase of existing buildings
• The purchase of land and land improvements, including grading, street improvements, utilities, parking lots and landscaping
• The construction of new facilities or modernizing, renovating or converting existing facilities
• The purchase of long-term machinery
• The refinancing of debt in connection with an expansion of the business through new or renovated facilities or equipment

The maximum amount you can borrow is $5 million, which you can repay over 10 or 20 years. Interest rates are fixed and based on the current market rate for five- and 10-year U.S. Treasury issues. You will, however, need to provide a down payment of at least 10%, and possibly more if you’re a startup or specialty business, such as a gas station or medical clinic.

You can compare and apply for a 7(a) loan by finding an SBA-approved lender and working with them individually.

SBA microloans

If you’re just starting out with your business, you may be able to qualify for an SBA microloan. The program offers loans of up to $50,000 — though the average is closer to $13,000 — to help you start up or expand your company. 

You can use microloan funds for working capital, inventory and supplies, furniture or fixtures and machinery or equipment. You can’t use the loan funds to purchase real estate or pay off existing debt.

SBA microloan repayment terms can depend on several factors, but the maximum time you’ll have to repay what you owe is six years. Interest rates range from 8% to 13%, which is higher than some other SBA loans but lower than what you might find from a private lender.

Unlike other SBA loans, microloans are typically offered through nonprofit, community-based organizations rather than traditional bank lenders. 

For more information on SBA microloans and lenders in your area who can help, contact your local SBA district office. 

How to qualify for an SBA veteran loan

If you’re looking to get a small business loan as a veteran or another member of the military community, it may be better to try for an SBA loan than a traditional bank loan or other option. That’s because veterans and other members of the military community who get approved for SBA loans may qualify for the Veterans Advantage program, which provides reduced loan fees. 

To qualify for an SBA veteran loan, here are some things to keep in mind.

You need decent personal credit

In addition to considering the strength of your business, lenders that offer SBA loans typically also look at your personal credit history. Of course, different loans have different credit requirements. 

For example, an SBA 7(a) small loan typically requires a minimum credit score of 650, while a standard SBA loan of up to $5 million usually requires 675 or higher. SBA microloans may be available to business owners with even lower credit scores. 

Keep in mind that SBA loans are made through SBA-approved lenders and not the government agency itself. As a result, each lender may have its own credit requirements you’ll need to meet to qualify. So it’s wise to shop around and compare loans from several lenders.

You may need time in business

SBA microloans are designed for startups, but most other loans insured by the agency require that you be in business for two or three years. As you consider which loan is best for your needs, think about where your business is and what you might reasonably qualify for based on its track record.

Know the other eligibility requirements

In addition to checking your creditworthiness and the stability of your business, you may need to pass other requirements to qualify for an SBA loan. For example, you may have a hard time qualifying if you have any tax liens or recent bankruptcies or foreclosures. And delinquency or default on a current government loan can be a deal-breaker.

Each loan has different criteria, so check with lenders to find out what you need before you apply, so you can save yourself time. 

Have a strong business plan

A business plan is an essential component of your application for an SBA loan and provides lenders with the real reasons to invest in your small business via a loan. You’ll want to include things like:

• An overview of your product or service
• A competitive analysis
• Marketing strategy
• Financial statements and projections
• Purpose for loan proceeds
• Plan for paying back the debt

Again, you’ll want to make it clear what sets your business apart and why you’re a risk worth taking.

Have collateral ready

Not all SBA loans require collateral, but you may have a hard time getting approved for some without it. Even if you don’t need it, adding collateral into the mix and improve your chances of getting approved and qualifying for a better interest rate. 

Your collateral can be anything you’re willing to use to secure the loan, such as real estate, inventory or equipment. 

The bottom line

While the Patriot Express Loan pilot program didn’t continue past 2013, there are plenty of ways veteran business owners can get access to the financing they need to start or expand their businesses. There are also small business loans available outside of the SBA that could be a good fit.

As you consider each option, think about what makes the most sense for your needs, and be sure to shop around and compare loans from multiple lenders before you settle on one. Some marketplaces, such as SmartBiz, allows you to apply and get connected with SBA-approved lenders, so you don’t have to go through the process with each one individually. 

The process of getting an SBA loan can take time, but if you qualify, it can be worth it in the long run for the interest savings and other favorable features.