Should the Federal Gov’t Study Barriers to Veteran Business Ownership? (H.R. 3734)

What is H.R. 3734?

(Updated December 15, 2019)

This bill — the Successful Entrepreneurship for Reservists and Veterans (SERV) Act — would require the U.S. Comptroller General to produce a report on the ability of veterans and reservists ability to access credit for small businesses. The report would also detail the Interagency Task Force on Veterans Small Business Development’s activities, appointments, and outreach efforts.

Additionally, this bill would require the U.S. Small Business Association (SBA) to develop a plan for promotion and outreach to support programs that help veterans, service-disabled veterans, reservists, and spouses of veterans or reservists establish small businesses.

Finally, this bill would require the Government Accountability Office (GAO) to produce a report detailing the credit issues facing veterans, veterans’ spouses, military servicemembers, military spouses, and reservists who are entrepreneurs.

Argument in favor

Veterans face unique barriers to establishing and supporting small businesses. It’s important for the federal government to understand these challenges so it can address them properly. While there are numerous programs to support veterans looking to open, or who already own, small businesses, the reason(s) behind the recent decline in new veteran-owned small businesses and the role that access (or lack thereof) to credit plays in veterans’ small business ownership aren’t well understood.

Argument opposed

While the number of new veteran-owned small businesses is lower in the post-9/11 era than the post-World War II era, this is due to new veterans’ youth and excellent employment prospects for veterans, not necessarily to barriers to veterans’ entrepreneurship. With this in mind, it would be a waste of federal money and resources to study barriers to veterans’ small business ownership in the absence of strong evidence that veterans are actually facing increased barriers to entrepreneurship.

Impact

Veterans; veteran entrepreneurs; small businesses owned by veterans, service-disabled veterans, reservists, and spouses of veterans or reservists; U.S. Small Business Administration (SBA); Government Accountability Office (GAO); and the U.S. Comptroller General.

Cost of H.R. 3734

The CBO estimates that implementing this bill would cost less than $500,000 over the 2019-2024 period.

Additional Info

In-Depth: Sponsoring Rep. Sharice Davids (D-KS) introduced this bill to help veteran-owned businesses succeed and study barriers (such as lack of access to capital and credit) to such business’ success: 

“Growing up with a parent in the army, I saw firsthand the challenges our service members face when transitioning to new jobs after time in the military. There are so many veterans in Kansas with the entrepreneurial skills it takes to run a small business, and we must do a better job at setting them up for success. Access to capital is one of the most important first steps entrepreneurs take when starting a business, and it is also one of the biggest difficulties, especially for our Veterans. By studying the problem of access to credit for Veterans and Reservists, the SERV Act will be a crucial first step in identifying solutions that allow these businesses to thrive.” 

This legislation passed the House Committee on Small Business by voice vote with the support of six bipartisan cosponsors (three from each party).

Of Note: The Interagency Task Force for Small Business Development was established by statute and executed by executive order. It is chaired by the U.S. Small Business Administration and has representatives appointed by SBA's Administrator from a variety of agencies, including: the SBA's Office of Veterans Business Development (OVBD), the Dept. of Defense (DoD), Dept. of Labor (DOL), Treasury Dept. (Treasury), Dept. Veterans Affairs (VA), General Services Administration (GSA), and Office of Management and Budget (OMB). It also has four representatives from the following veterans service and military organizations: American Legion, Vietnam Veterans of America, StreetShares Foundation, and the Military Officers Association of America.

The Interagency Task Force for Small Business Development  is responsible for coordinating federal efforts to improve capital access, business development, and contracting goals for veteran- and service-disabled veteran-owned businesses. It’s required to meet regularly and file annual reports on a range of topics — however, it hasn’t met that obligation. Its last annual report was filed in FY2015.

Findings indicate a decline in veteran business ownership, but the cause(s) of this decline is unknown. Some studies suggest that lack of credit plays some role: veterans are more likely to be denied credit, and often rely on personal savings and credit cards to launch, finance, or grow their small businesses. Even with this decline, there are still over 2.5 million veteran-owned small businesses in the U.S., comprising about 10% of all small businesses.

Syracuse University researchers contend that the lower total number of businesses started by post-9/11 veterans is simply a function of the fact that veterans haven’t been discharged long enough to become entrepreneurs. Misty Stutsman, director of entrepreneurship and small business at Syracuse University's Institute for Veterans and Military Families, says, "Generally, people that start their own business tend to be a little older. When you're looking at a post-9/11 veteran, they're actually very similar to previous generation of veterans."

Moreover, thanks to increasing awareness of the problems facing veterans, there are more programs to help veterans with job placement. Today, the veteran unemployment rate is at a record-low 3%, which means there are simply fewer veterans looking to start their own businesses because they’re already employed.

In 2018, 2.52 million businesses that were majority-owned by veterans (comprising 9.1% of all U.S. businesses) generated $1.14 trillion in revenues. Of those 2.52 million businesses, 2.08 million were self-employed veteran businesses without employees, and the remaining 442,485 were veteran-owned businesses with employees. In total, veteran-owned businesses employed just over five million employees, paying $195 billion in payroll to those employees.

In 2018, Bank of America launched a program, the Veteran Entrepreneur Lending Program (VELP), to help connect veteran-owned businesses with affordable capital. As of early November 2019 (within a year of the program’s introduction), over $14 million had been deployed to more than 170 veteran small business owners.

Media:

• Sponsoring Rep. Sharice Davids (D-KS) Press Release
  
• House Committee on Small Business Committee Report
  
• CBO Cost Estimate
  
• Pacific Standard (Context)