The Obama administration is offering a break to former military members who need capital to start or grow a business. The Small Business Administration has announced that it will waive its initial borrower fees for veterans who secure loans next year via the department’s Express Loan Program, through which the agency backs small-business loans of up to $350,000. Currently, the agency charges as much as 3 percent of the value of the loans.
Officials had already announced they would waive the fees this coming year for all loans of up to $150,000 – this latest move simply lifts the cap.
“Our nation’s veterans are highly skilled and highly trained leaders in their communities,” Jeanne Hulit, the agency’s acting administration, said in a statement, adding that the move “is part of the Small Business Administration’s broader efforts to make sure that veterans have the tools they need to start and grow a business.”
The announcement came at the end of the agency’s annual National Veteran Small Business Week, during which officials traveled the country to mentor veterans who already own or are considering starting a company. Supporting veteran owned small businesses is among the agency’s core responsibilities, and in the past year, it helped deliver $1.86 billion in loans to more than 3,000 veteran entrepreneurs. Most of those loans are made by banks, credit unions and other private lenders, but with a partial guarantee from the government.
New research from the Small Business Administration’s Office of Advocacy suggests that programs aimed at veterans may be working. Business ownership among young veterans is on the rise: In 2012, 7.1 percent of veteran business owners were under the age of 35, up from 4.6% in 2008. This runs counter to the trend among the general population, in which business ownership among non-veteran owners decreased from 18.5 percent to 16.3 percent in the same time period.
“The drawdown of Afghanistan and Iraq has affected the young age bracket,” says Office of Advocacy chief economist Janemarie Mulvey.
Female veterans are also increasingly becoming business owners. The Office of Advocacy research found that in 2012, 4.4 percent of veteran business owners were women, up from 2.5 percent in 2008. While business ownership for women is much higher in the overall population (35.9 percent of all business owners were women in 2012), the report says business ownership among female veterans is growing at a faster rate.
Loans made through the Express Loan Program, for example, qualify for up to 50 percent guarantee from the agency, and officials make a decision on the applications in no more than 36 hours. Started in 2004, the program consists of less paperwork and processing hurdles than those required to secure larger loans through the agency.
Nearly three-fourths of the Small Business Administration’s loans to veteran owners firms are for no more than $350,000, according to officials, meaning that vast majority of formal military personnel seeking loans next year would save some money.
Not all of the agency’s efforts on behalf of veterans have been a success. One of its recent initiatives, a separate pilot program called Patriot Express, has cost taxpayers millions in default payments and does not ensure that capital is actually going to former members of the military, according to a report released this fall by the Government Accountability Office. The Small Business Administration officials have said they are working to address the problems.
Still, for the most part, the department’s lending programs have provided a valuable lifeline to capital-starved entrepreneurs during what has proved to be a slow economic recovery. Officials recently announced that the department supported around $30 Billion in loans for the third straight year in fiscal year 2013, even as small business lending nationwide continued to decline in the wake of the recession.
Hulit made clear that her team is particularly committed to providing helpful, affordable services to those who put their lives on the line for their country.
“As we honor our veterans, and thank them for their service and sacrifice, let’s continue to identify ways to support them when they come home,” Hulit said.
These new no-upfront-fee loans are going to be available starting on January 1, 2014.