The Small Business Administration this week unveiled a loan program designed to encourage lending to military veterans and their families who own or want to start a business.
The Patriot Express loan is a 7(a) product that offers fast turnaround and special rates for veterans, their spouses, and their widows or widowers.
Steven C. Preston, the SBA's administrator, said the agency had wanted to develop a product specifically for veterans because large numbers of them are returning home from wars in Afghanistan and Iraq.
"Veterans make great entrepreneurs," Mr. Preston said in an interview.
"They have a sense of commitment and tenacity for a mission they are trying to fulfill," qualities that business owners need, he said.
The program is open to all veterans, not just those who have served in the current conflicts. Mr. Preston said that there are about 25 million veterans in the United States and that about 15% of them are self-employed.
Lenders certified by the SBA to make loans under the SBA Express program are also eligible to make Patriot Express loans. (Roughly 2,000 lenders are certified as preferred lending partners.)
Both programs offer 36-hour turnaround, though Patriot Express loans have higher maximum amounts and come with higher guarantees.
The SBA offers a guarantee of up to 85% on Patriot Express loans of up to $150,000 and up to 75% on loans ranging from $150,000 to $500,000. Lenders are required to take all collateral on loans above $350,000.
Borrowers and lenders receive a 50% guarantee on SBA Express loans, up to a maximum of $350,000.
Patriot Express loans also offer more favorable rates - 2.25% to 4.75% over prime, depending on the size and maturity of the loans, compared with up to 6.5% over prime for SBA Express loans.
At a press conference Wednesday, Mr. Preston gave an example of how much a borrower could save with a Patriot Express loan. A six-year, $100,000 SBA Express loan at the rate of 4.5% over prime would have total payments of $143,580. At the Patriot Express rate of 2.25%, total payments would be $135,200.
In addition to starting the loan program, the SBA is encouraging its district offices to do more outreach to veterans, such as setting up events for veteran-owned businesses to help them win government contracts.
"When you consider the sacrifices these people have made for our country over the years, they deserve our best effort," Mr. Preston said.
David Bartram, the president of SBA lending for U.S. Bank, a unit of U.S. Bancorp in Minneapolis, said the program combines the best parts of the 7(a) program - its guarantees - and the best part of the SBA Express program, a turnaround time that allows some loans to be approved in under a day.
"It means we are going to be able to reach a larger group of customers that might not qualify for SBA Express," Mr. Bartram said. "Not only are we able to approve more loans but we are going to be able to do it in the best possible way for the customers."
The only concern he had was how banks would be expected to prove the borrowers were veterans or the spouses or widows or widowers of veterans.
"That's one piece of the puzzle the SBA hasn't clarified yet. I want to be assured that we know exactly what it is we need to get," Mr. Bartram said.
But he said that was easy to fix and that he expected the SBA to explain it once the program is rolled out this month.
