• How to Apply for a Patriot Express Business Loan


    Editor’s note. This is an excerpt from an interview with Sue Malone under her company:  Strategies for Small Business.  Ms. Malone is a small business advocate who specializes in providing SBA small business loans, many for veteran-owned businesses. These loans are provided under the SBA program known as U.S. Patriot Express.  Asked to describe her passion, she responded: “My goal is to advocate the interests of small businesses. In so doing, bring back America economically, one entrepreneur at a time.”

    The purpose of this interview is to get a real, in the trenches, view of how the Patriot Express program works from someone who does it every day.  Does it is really benefit our veterans?


    Excerpts of interview—US Patriot Express Loan Program


    Q. Greetings, and thank you for giving me the opportunity to speak with you.

    A. My pleasure.

    Q.  I would like to begin by focusing on the U.S. Patriot Express Initiative Loan Program. Fancy title, but is it exactly?

    A.  It’s a long winded way of saying the Bush Administration came up with a SBA vet loan program for businesses. These are loans for veteran-own business owners.  The funding comes from private lenders and banks who are licensed with the SBA. As an incentive for the lenders to make a veteran loan, they are guaranteed for default, namely are reimbursed 85% of the value of loan. I have to tell you, this makes a big difference because it really motivates the lenders.  It gets them off the dime and makes them more willing to open up their coffers.

    Q.  So the money doesn’t come directly from the VA or the Small Business Administration?

    A.  Right.  The VA isn’t involved in loaning the money. The SBA directly loans taxpayers monies only under its disaster programs. In this program the SBA licenses the lenders and guarantees the defaults.  Private banks and lenders actually loan veterans the money.

    Q.  But it is called a SBA guaranteed loan program. Doesn’t that mean the approvals would be guaranteed if you’re a veteran?

    A.  I wish that was the case. It’s not the approvals that are guaranteed. If you make a vet loan and don’t make your payments and it goes into default, the bank has to alert the Federal government and after taking various steps and attempting to collect, the bank will eventually get paid 85% of the loan value. That’s the only part that is guaranteed.

    Q.  So the veteran doesn’t get any special consideration in the loan approval process?

    A.  By law, the lender has to use their usual, customary, and prudent credit review practices that are used for both conventional and SBA loans. But let me cut right through all of this. It depends a lot on the lender. I deal with small business and veteran friendly lenders. Way before this program became politically popular in June of 2007, one of my lenders had been doing this for six years and loves vets.  They have a favorable review of credit reports. In fact, they will not let the application out of the office until least two people have looked at it to give the maximum benefit to the veteran-owned business owner.

    Q.  OK, so far so good. Because of 85% guarantee, doesn’t that mean the vet only has to put up 15% collateral because the rest is secured by the guarantee?

    A.  Unfortunately, it does not work that way. First, most of my small business loans are unsecured and so they don’t even ask about collateral. You’re not describing your equity in your house, the value of you trade fixtures, or anything else. There are simply no liens on property. As to the secure loans, you also have to put up your own private assets. Remember, the guarantee is only between the bank and the Federal government–when there’s a default.  The guarantee does not adding any additional security.

    Q.  Do they check the personal or business credit of the veteran applicant?  I notice that there are a lot of online businesses that claim you can get business credit without using your personal social security number. Will that work in this case?

    A.  Unfortunately, the lender in most cases only checks your personal credit report through either Experian, TransUnion, or Equifax.  The lender I use deals with personal Experian. There are companies out there that promise to get you a credit card or unsecured small business loan only using your taxpayer ID number and not your social security number. Be careful. Although there are people who have been successful, there just as many who have failed doing so.  And it takes a lot of time, because you have to create credit in the business name first and then make the loan application.  Sorry to disappoint you, but that is simply the way banks work nowadays.  Typically, the payments are not reported each month on your personal credit report, like a credit card. They usually only show up on your personal credit if there has been a default. On the other hand, you can request the lender to report to Dunn and Bradstreet, which is the commercial credit reporting service.

    Q.  I’m a big boy and you can tell me like it is.  What is the minimum credit score required?

    A.  These loans are not like applying for a credit card. They rarely base the decision solely on your credit score. They look at the overall credit report. As to that report, they look at: 1) your credit paying history back seven to ten years, 2) the current status of your accounts, 3)  the number of accounts, 4) the quality of the accounts . . . there’s a big difference between a Capital One credit card and platinum American Express, 5) how long you have had the accounts, 6) matters of public record such as judgments and tax liens, and 7) how high your credit card balances are.

    Q.  Who can qualify for these Patriot Express loans?

    A.  The good news is it applies to a lot of individuals. You can be a veteran, current active duty service personnel, service disabled, in the reserve component’s or National Guard, or the spouse or widow of any of the above.  And if you are the spouse of a veteran, you can apply in your own name.  You do not have to be a combat veteran. All you need is your honorable discharge papers which are in the form of a DD 214.

    Q.  Can any business qualify? I mean, can it be everything from raising chickens to developing software for weapons control systems?

    A.  It’s funny you should say that, because I have done both of those. There are very few categories that make you ineligible, including multi-marketing, speculative real estate, fishermen, farmers, and ranchers, in-home residential care facilities, your own private investments or self-owned real estate, to name some of the bigger exceptions.

    Q.  All right, we have some of the basics under our belt. How much can you apply for?

    A.  They go anywhere from $5,000 to $500,000.  I specialize in the smaller ones from $5,000 to $50,000, which do not require any collateral.  Above that will require security. In the good ol’ days about a year ago, the bank’s considered using your trade fixtures or business personal property. Then when the economy got worse, they started requiring some form of real estate equity. Now on the big loans, most of them are requiring 100% real estate equity, which is getting tougher in these times because people’s home values are falling.

    Q.  Well that’s easy. Since I am a vet, I want the full $50,000.

    A.  I am with you, but remember it’s not what we want—it is what the bank wants to give you. They look at such factors as length of time in business, industry experience, personal credit, gross income you are making now or projecting in the future if a start-up, and the nature of the business. They put it all together and through their internal matrix grading system, come up with the amount they want to lend you.  I try to push as many through as I can for higher amounts, but at a certain point the lender politely tells me to back-off because they can’t reconsider each application.

    Q.  What is this loan going to cost me? What are the monthly payments and interest rate?

    A.  Although it is a tough time for credit, it is a great time for low payments. The lender I work with is now at 9%, which equates to $71 per $5,000 borrowed.  These are ten year fully amortized, principal and interest loans. Because there is no prepayment penalty, you can pay them off early and stop the interest. 

    Q.  So the payments can go up?

    A.  The smaller unsecured small business loans are variable and not fixed. But because the payments are spread out over such a long period of time, as interest goes up, there is not a precipitous increase in the monthly payment. Historically, they started out six years ago at $89 per $5,000 borrowed and are now down to $71.00.

    Q.  Under your loan program, do I have to put up the equity in my house or have liens on my business assets?

    A.  Not at all. They are 100% unsecured. As a matter of fact, they don’t even ask you to list or describe your assets.

    Q.  I’m in the process of finishing my business plan. Can I submit the loan application without one?

    A.  You can. It is not required. On the other hand, it helps. So I tell people if they are a couple of hours away from finishing their business plan, by all means do so. It is beneficial to have even if you do not apply for the Patriot Express loan. But if it is going to take you two or three weeks, don’t sweat it, and simply send in the application.

    Q.  How long will this take, from start to finish?

    A.  The larger veteran loans take longer because there’s more paperwork and more review required by the lenders. But the small ones I do are extremely quick. We usually get answers within 24 hours and money is wired into your business account within approximately ten days. Our lender has set us up with special software that allows an expedite to the process. And, the program mandates a quick issuance of an SBA loan number from the central processing centers throughout the nation–so once everything is finished, you can usually get an SBA loan number within one or two days and then the money is wired.

    Q.  Do most banks to these types of loans?

    A.  Any bank that is already licensed by the SBA is able to do these Patriot loans. But the sad fact is that most banks do not do them. I’ve even run into lenders who have never even heard of the program. They will simply run you through their application process without concentrating on the fact that you’re a veteran. The lender I use is veteran friendly and encourages these applications.

    Q.  Before this interview, I didn’t really know what a Patriot loan was. How come this has not been disseminated to the veteran community better?

    A.  The plain fact is it is not been properly brought to the attention of our vets. This bothers me. I work with veterans associations and they are an excellent source of info. But other than that, other government entities have done a poor job. I run into veterans all the time that have never heard of the program. What a shame.

    Q.  If my credit is not very good, can I use a co-signer?

    A.  Unfortunately no. On the other hand, anyone with a 20% or more interest in the business will fill out the application and have their credit checked. But bear in mind you have to have at least a 51% or more interest from veterans to qualify.

    Q.  What happens if I have gone through bankruptcy? Have I shot myself in the foot?

    A.  We have applicants all the time that have worked hard after bankruptcy and have their credit score in the high 600’s. Some banks won’t touch you, but my lender will. They require  you conclude the bankruptcy, wait approximately 6 to 8 months after that to re-establish credit, and show that you’re paying your bills absolutely on time after that. This means you can’t go on an “all cash” basis because they will not be able to see your post-bankruptcy payment history. Of course, this is not a guarantee, but I always try my best on these.

    Q.  Assume I pay my bills religiously on time, but I have high credit card balances. Will this hurt my chances?

    A.  This has become a very big problem. As a member of Obama’s small business transition team, I have recommended the relaxing of credit requirements, especially in this regard. We have lots of people who pay their bills absolutely on time, but have high credit limits. This is now a factor seriously considered by the lenders. The more you have and the higher your limits, the more negatively it is considered.  The only problem is that many businesses stay afloat only with their credit cards, and had no other options because the banks are not making loans.

    Q.  What about business financial statements and tax returns?

    A.  This is definitely required on the larger loans, but not on the small unsecured business loans. The paperwork is meant to be short and sweet so they can be processed quickly.

    Q.  Do you have to incorporate or form an LLC?

    A.  Not all. You can be a sole proprietorship. The nature of the business entity is not one of the factors in making the credit decision.

    Q.  I have a good credit score and do not want any more enquiries which bring down my score. Is there anything I can do?

    A.  That is a definite problem. There have been times I have handed a recent credit report to the lender and asked them to make a tentative decision. They prefer not to do so. They like to use the phrase: “you can’t get into the circus unless you buy a ticket.”  On the other hand, my staff can give you a general idea of your chances if we know your credit score. That way you’ll not be disappointed.

    Q.  Do you find that the vets you deal with like the program?

    A.  They absolutely love it. For good reason: they have put their lives on the line and they feel  entitled to a fair shake in starting or expanding their business. They are grateful there is a program out there for them.

    Q.  Do you have any inside suggestions as to how a person can increase their chances?

    A.  Sure:  The following really helps: 1) a business plan with financials. Financials are the most important part. But I also tell people you’re not trying to get an “A” on a term paper. Just do a good basic job and trying for a “C+”. 2) tell them exactly what you’re going to be using the loan for. Just saying you need it for cash flow doesn’t impress the banker. I had a case once where someone had a restaurant and were expanding their kitchen. They had spent weeks shopping around and gave a detailed list of the exact equipment, model numbers, and the pricing.  It was impressive to the lender. 3) a well written letter accompanying the application that positively describes the market and your future plans. Make it pretty.  Our record so far is fourteen typos in one sentence!

    Q.  Are some businesses considered more risky?

    A.  Yes, but we are still able to fund them. For example restaurants and dry cleaners are considered more risky as a result of Federal and state studies.

    Q.  Are you finding more people are inclined to go into business themselves as opposed to working for someone else?

    A.  No question on that one. The days are gone when our citizens are employed in factories, large corporations, and government offices, sometimes working for only one employer their whole career. There has been a massive unleashing of such persons because of our lack of jobs, and many of them are out in the private sector trying to start their own businesses. It’s both sad and exciting at the same time.  For this reason, the SBA must provide more loans to the 27 million small businesses that can fuel our economy.

    Q.   Now let us talk real practicality. We are in a credit crunch like never before. How has this affected your success rate?

    A.  You hit the nail on the head. We are definitely in a credit crunch, and I am seeing the lenders requiring better credit reports. Fortunately, my lender was not involved in the toxic sub-prime mortgage fiasco and has funds to loan.  But remember they are supervised by the SBA and the big problem is the secondary market has shut down. Although this makes it more difficult, my lender is still very veteran friendly and gives special consideration to them.  We continue to loan too veterans, several a day, and plan to do so in the future

    Q.  Overall, how would you rate this loan program?

    A.  It’s a great and well-deserved program. If I were to improve it, I would increase the outreach so more veterans knew about it.

    Q.  Thank you for your time.

    A.  That wasn’t too bad. My pleasure.



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