Small yet Economic: Military Loans for Reservists

There are different kinds of military loans each of them catering to what suits the military personnel. Like loans exclusive for active military personnel, loans for veterans and loans for small economic injury loans for reservists. For active military personnel there are personal loans like for home improvement or auto loans. There are also loans used to help their spouses with initial expenses at home.

There are also loans coming from various institutions like bereavement loans, leadership and career service. Loans are also offered to the Department of Defense Civilians and National Guardsmen and Reservists. Loan companies usually go after new recruits since they have almost little money to spare by the end of the month so caution these new recruits when it comes to loan offers.

The Veteran’s Administration home loans are available to those who have served the military given that they are no longer on active duty. An organization called the VA Loan Guaranty Service, which is under the Veterans Benefits Administration, is responsible for administering the home loan program.

Their purpose is to help veterans or those in active duty to retain homes as recognition of service to the nation. Participants of this program are treated courteously in a responsive and timely manner. They are also assured that the program will operate as efficiently as possible in order to minimize costs and ensuring the worth of the participant’s money.

For military economic injury loans we have the MREIDL or the Military Reservist Economic Injury Disaster Loan Program. They provide funds for small business for the necessary operating expenses of the business in cases that the employee is called to active duty as a military reservist. However these loans only provide the working capital needed to necessary obligations until the essential employee returns from his active duty.  It is not the purpose of MREIDL to cover-up for lost income, replace regular commercial debt, or to finance long term debt and business expansions.

Requirements

As a requirement of the federal law the SBA will determine if the amount needed to accomplish full recovery is available from non-government sources. They determined that at least 90% of the loan applicants can’t recover without the help of the federal government due to their insufficient financial resources. However applicants who are financially capable aren’t eligible for MREIDL assistance and therefore they are advised to fund their own recovery. This is because MREIDL are taxpayer subsidized.

Since SBA assists in loans they must be assured that the loan can and will be repaid. $50,000 will be taken as required collateral. Usually SBA takes real estate as collateral but they will not decline a loan just because of the lack of collateral they require borrower to pledge a collateral once it is available. As for the interest rate would be 4.000%. According to the law loan terms a maximum of 30 years is given. The borrower’s financial circumstances and ability to repay will help SBA to determine the actual loan term.

The actual amount of the loan is up to the maximum which is $2,000,000 and it is limited by SBA’s calculation of the actual economic injury. SBA has the authority to waive the $2,000,000 limit provided that business is a major source of employment. Lastly for the protection of borrowers SBA requires them to maintain appropriate insurance. Hazard insurance is to be maintained for the life loan on the collateral property. Borrowers whose collateral properties are under the special flood hazard should also maintain flood insurance for a full insurable value of the property for the life of the loan.

Benefits

SBA loan applications aren’t complicated and hard to complete. The application forms ask the same information generally required for bank loans. SBA personnel will be willing to assist at no charge. Legal representatives such as accountants or attorneys may be used as long as they are reliable. Use of your own money or borrowed money from the bank is not needed since SBA uses the resources of the business to determine if the business will recover without the Federal Government’s help.

Applying for the loan begins on the date the employee receives a notice of call-up to active duty. It ends a year after the employee is discharged or released from duty.

Filling requirements are always included at the beginning of the application in addition they require a copy of the employee’s official call-up orders (expected call-up, discharge or release), a statement from the small business owner stating that the reservist is essential to the everyday operations of the business, an estimation or explanation of how the employee’s military service will affect the small business, a description of the steps the business is taking to avoid economic injury and lastly a certification that the employee will have the similar or same job upon return from active duty.

Once they are satisfied that the business is able to repay the loan the application will be processed. The faster it is processed and submitted the work can be done faster. Decisions are made within 7 to 21 days and a final approval will only occur once the employee has received official call-up orders.

The loan will be disbursed only when the employee is officially called to active duty. Required documents are needed and once they are received the fund may be disbursed.