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SBA Veterans Assistance Programs:
An Analysis of Contemporary Issues
Robert Jay Dilger
Senior Specialist in American National Government
Sean Lowry
Analyst in Public Finance
April 9, 2015
Congressional Research Service
7-5700
www.crs.gov
R42695
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SBA Veterans Assistance Programs: An Analysis of Contemporary Issues
Summary
Several federal agencies, including the Small Business Administration (SBA), provide training
and other assistance to veterans seeking civilian employment. For example, the Department of
Defense, in cooperation with the Department of Labor, Department of Veterans Affairs, and
several other federal agencies, including the SBA, operates the Transition Goals Plans Success
program (Transition GPS), which provides employment information and entrepreneurship
training to exiting military servicemembers to assist them in transitioning from the military to the
civilian labor force.
In recent years, the SBA has focused increased attention on meeting the needs of veteran small
business owners and veterans interested in starting a small business. In FY2014, the SBA
provided management and technical assistance services to more than 100,000 veterans through its
various management and technical assistance training partners (e.g., Small Business Development
Centers, Women’s Business Centers [WBCs], Service Corps of Retired Executives [SCORE], and
Veterans Business Outreach Centers [VBOCs]). In addition, the SBA’s Office of Veterans
Business Development (OVBD) administers several programs to assist veteran-owned small
businesses.
Congressional interest in the SBA’s veteran assistance programs has increased in recent years
primarily due to reports by veteran organizations that veterans were experiencing difficulty
accessing the SBA’s programs. Congress also has a continuing interest in assisting veterans,
especially those returning from overseas in recent years, in their transition from military into
civilian life. Although the unemployment rate (as of March 2015) among veterans (4.9%) was
lower than for nonveterans aged 18 years and older (5.5%), the unemployment rate of veterans
who have left the military since September 2001 (6.5%) was higher than the unemployment rate
for nonveterans.
The expansion of federal employment training programs targeted at specific populations, such as
women and veterans, has also led some Members and organizations to ask if these programs
should be consolidated. In their view, eliminating program duplication among federal business
assistance programs across federal agencies, and within the SBA, would result in lower costs and
improved services. Others argue that keeping these business assistance programs separate enables
them to offer services that match the unique needs of various underserved populations, such as
veterans. In their view, instead of considering program consolidation as a policy option, the focus
should be on improving communication and cooperation among the federal agencies providing
assistance to entrepreneurs.
This report opens with an examination of the current economic circumstances of veteran-owned
businesses drawn from the Bureau of the Census’s 2007 Survey of Business Owners, which was
administered in 2008 and 2009 and released on May 17, 2011. It then provides a brief overview
of veterans’ employment experiences, comparing unemployment and labor force participation
rates for veterans, veterans who have left the military since September 2001, and nonveterans.
The report describes the employment assistance programs offered by several federal agencies to
assist veterans in their transition from the military to the civilian labor force and examines, in
greater detail, the SBA’s veteran business development programs, the SBA’s efforts to assist
veterans’ access to capital, and the SBA’s veteran contracting programs. It also discusses the
SBA’s Military Reservist Economic Injury Disaster Loan program.
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Contents
SBA Assistance for Veterans ............................................................................................................ 1
An Economic Profile of Veteran-Owned Businesses ....................................................................... 3
Demographics ............................................................................................................................ 4
Employment, Payroll, and Receipts .......................................................................................... 5
Access to Capital ....................................................................................................................... 6
Veterans’ Employment Data ............................................................................................................ 7
Veterans’ Employment and Business Development Programs ........................................................ 8
The SBA’s Veterans Business Development Programs ............................................................. 9
Congressional Issues: Duplication of Services ........................................................................ 11
Veterans’ Access to Capital ............................................................................................................ 16
Congressional Issues: Access .................................................................................................. 19
Federal Contracting Goals for Service-Disabled Veteran-Owned Small Businesses .................... 20
Congressional Issues: Contracting Fraud ................................................................................ 23
The Military Reservist Economic Injury Disaster Loan Program ................................................. 26
Concluding Observations ............................................................................................................... 28
Tables
Table 1. Source of Capital for Veteran Business Owners
Starting or Acquiring Their Businesses, 2007 .............................................................................. 6
Table 2. Source of Capital for Veteran Businesses Owners Expanding or Making Capital
Improvements to Their Businesses, 2007 ..................................................................................... 7
Table 3. Federal Contracting Goals and Percentage of FY2013 Federal Contract Dollars
Awarded to Small Businesses, by Type ...................................................................................... 22
Contacts
Author Contact Information........................................................................................................... 29
Acknowledgments ......................................................................................................................... 29
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SBA Assistance for Veterans
The Small Business Administration (SBA) administers several programs to support small
business owners and prospective entrepreneurs. For example, it provides access to entrepreneurial
education programs to assist with business formation and expansion; loan guaranty programs to
enhance small business owners’ access to capital; and programs to increase small business
opportunities in federal contracting, including oversight of the service-disabled veteran-owned
small business federal procurement goaling program.1 The SBA also provides direct loans for
owners of businesses of all sizes, homeowners, and renters to assist their recovery from natural
disasters.
One of the SBA’s disaster loan programs, the Military Reservist Economic Injury Disaster Loan
(MREIDL) program, is of particular interest to veterans. The MREIDL program provides disaster
assistance in the form of direct loans of up to $2 million to help small business owners who are
not able to obtain credit elsewhere meet ordinary and necessary operating expenses that they
could have met but are not able to because an essential employee has been called up to active
duty in his or her role as a military reservist or member of the National Guard due to a period of
military conflict.2
In FY2014, the SBA provided management and technical assistance services to more than
100,000 veterans through its various management and technical assistance training partners (e.g.,
Small Business Development Centers, Women’s Business Centers, Service Corps of Retired
Executives [SCORE], and Veterans Business Outreach Centers [VBOCs]). In addition, the SBA’s
Office of Veterans Business Development (OVBD) administers several programs to assist
veteran-owned small businesses.3
In recent years, the SBA has focused increased attention on meeting the needs of veteran small
business owners and veterans interested in starting a business, especially veterans who are
transitioning from military to civilian life. For example, in FY2012, the SBA’s OVBD launched
the Operation Boots to Business: From Service to Startup initiative, “a comprehensive veteran
entrepreneurship initiative for transitioning servicemembers.”4 More than 20,000 servicemembers
participated in the Boots to Business program in FY2012.5
1 For further information and analysis concerning the Small Business Administration’s (SBA’s) entrepreneurial
education programs, see CRS Report R41352, Small Business Management and Technical Assistance Training
Programs, by Robert Jay Dilger. For further information and analysis concerning the SBA’s access to capital programs,
see CRS Report R41146, Small Business Administration 7(a) Loan Guaranty Program, by Robert Jay Dilger and CRS
Report R41184, Small Business Administration 504/CDC Loan Guaranty Program, by Robert Jay Dilger. For further
information and analysis of the SBA’s federal contracting programs, see CRS Report R42981, Set-Asides for Small
Businesses: Legal Requirements and Issues, by Kate M. Manuel and Erika K. Lunder; and CRS Report R43573,
Federal Contracting and Subcontracting with Small Businesses: Legislation in the 113th Congress, by Kate M. Manuel.
2 SBA, “Disaster Assistance Program: SOP 50-30-7,” May 13, 2011, p. 48, at https://www.sba.gov/sites/default/files/
sops/SOP%2050%2030%207.pdf; and 13 C.F.R. §123.508. For further information and analysis concerning the SBA’s
disaster assistance loan program, see CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible
Issues for Congress, by Bruce R. Lindsay.
3 SBA, “FY2016 Congressional Budget Justification and FY2014 Annual Performance Report,” pp. 97-101, at
https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF.
4 SBA, “FY2013 Congressional Budget Justification and FY2011 Annual Performance Report,” p. 62, at
https://www.sba.gov/sites/default/files/files/1-
508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR(1).pdf; and SBA, “Operation Boots to
(continued...)
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The Obama Administration requested, and Congress approved, $7 million to expand the Boots to
Business program in FY2014.6 The SBA indicated that the additional funds would enable the
program to be expanded “nationwide to the 250,000 yearly transitioning servicemembers in all
branches of the military.”7 The SBA also announced that the program “will become a standard
portion of the curricula offered at the revised Transition Assistance Program (TAP) to
servicemembers,” which is administered by the Department of Defense (DOD) in cooperation
with the Department of Labor (DOL), Department of Veterans Affairs (VA), Department of
Education (DOE), Department of Homeland Security (DHS), Office of Personnel Management
(OPM), and the SBA.8 Congress recommended in the explanatory statement accompanying P.L.
113-235, the Consolidated and Further Continuing Appropriations Act 2015, that the program be
provided $7.5 million in FY2015.9
Congressional interest in the SBA’s veteran assistance programs has increased in recent years
primarily due to reports by veteran organizations that veterans were experiencing difficulty
accessing the SBA’s programs. Congress also has a continuing interest in assisting veterans,
especially those returning from overseas in recent years, transition from military to civilian life.
Although the unemployment rate (as of March 2015) among veterans (4.9%) was lower than for
nonveterans 18 years and older (5.5%), the unemployment rate of veterans who have left the
military since September 2001 (6.5%) was higher than the unemployment rate for nonveterans.10
The expansion of federal employment training programs targeted at specific populations, such as
women and veterans, has also led some Members and organizations to ask if these programs
should be consolidated. In their view, eliminating program duplication among federal business
assistance programs across federal agencies, and within the SBA, would result in lower costs and
(...continued)
Business: From Service to Startup,” at http://www.sba.gov/bootstobusiness.
5 SBA, “FY2014 Congressional Budget Justification and FY2012 Annual Performance Report,” p. 65, at
https://www.sba.gov/sites/default/files/files/1-508-Compliant-FY-2014-CBJ%20FY%202012%20APR.pdf.
6 Ibid., p. 52. Recommended funding levels for the SBA’s non-credit programs for FY2014 were provided in the
Explanatory Statement accompanying the Consolidated Appropriations Act, 2014 (Division E- Financial Services and
General Government Appropriations Act, 2014), pp. 37-39, available at http://docs.house.gov/billsthisweek/20140113/
113-HR3547-JSOM-D-F.pdf.
7 SBA, “FY2014 Congressional Budget Justification and FY2012 Annual Performance Report,” p. 52, at
https://www.sba.gov/sites/default/files/files/1-508-Compliant-FY-2014-CBJ%20FY%202012%20APR.pdf.
8 The Department of Defense introduced a redesigned curriculum for the TAP program, called the Transition Goals
Plans Success pilot program (Transition GPS), at seven military bases in the summer of 2012. Transition GPS is now
offered nationwide. It includes a five-day core program intended to ensure that servicemembers are “career ready”
when they leave military service. The core curriculum includes the following modules: pre-separation counseling (4
hours), Department of Veterans Affairs benefits (6 hours), employment workshop (24 hours), financial planning (4
hours), resilient transition (1 hour), and a crosswalk between military and civilian skills that includes a “skills gap”
analysis (2 hours). Transition GPS is mandatory for nearly all exiting servicemembers. See U.S. Department of
Defense, “Turbo Tap,” at http://www.turbotap.org/register.tpp; and CRS Report R42790, Employment for Veterans:
Trends and Programs, coordinated by Benjamin Collins.
9 Rep. Harold Rogers, “Explanatory Statement Submitted by Mr. Rogers of Kentucky, Chairman of the House
Committee on Appropriations Regarding the House Amendment to the Senate Amendment on H.R. 83,” Congressional
Record, vol. 160, part 151 (December 11, 2014), p. H9740.
10 U.S. Department of Labor (DOL), Bureau of Labor Statistics, “Table A-5. Employment status of the civilian
population 18 years and older by veteran status, period of service, and sex, not seasonally adjusted,” at
http://www.bls.gov/news.release/empsit.t05.htm. Media reports typically cite national employment and unemployment
statistics for adults aged 16 and older. Discussions of the employment and unemployment experiences of veterans
usually use the employment and unemployment experiences of adults aged 18 years and older.
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improved services. Others argue that keeping these business assistance programs separate enables
them to offer services that match the unique needs of various underserved populations, such as
veterans. In their view, instead of considering program consolidation as a policy option, the focus
should be on improving communication and cooperation among the federal agencies providing
assistance to entrepreneurs.
This report examines the current economic circumstances of veteran-owned businesses drawn
from the Bureau of the Census’s 2007 Survey of Business Owners, which was administered in
2008 and 2009 and released on May 17, 2011.11 It provides a brief overview of veterans’
employment experiences, comparing unemployment and labor force participation rates for
veterans, veterans who have left the military since September 2001, and nonveterans.12 The report
also describes the employment assistance programs offered by several federal agencies to assist
veterans transitioning from the military to the civilian labor force and examines, in greater detail,
the SBA’s veteran business development programs, the SBA’s efforts to enhance veterans’ access
to capital, and the SBA’s veteran contracting programs. It also discusses the SBA’s Military
Reservist Economic Injury Disaster Loan program.
An Economic Profile of Veteran-Owned Businesses
Every five years since 1972, for years ending in “2” and “7,” the U.S. Bureau of the Census has
sent a questionnaire to a stratified random sample of nonfarm businesses in the United States that
file Internal Revenue Service tax forms as individual proprietorships, partnerships, or any type of
corporation, and with receipts of $1,000 or more.13 The questionnaire asks for information about
the characteristics of the businesses and their owners. Approximately 2.3 million businesses
received the 2007 Survey of Business Owners (SBO), and about 62% of these businesses
responded to the survey.14 The SBO provides “the only comprehensive, regularly collected source
of information on selected economic and demographic characteristics for businesses and business
owners by gender, ethnicity, race, and veteran status.”15
The Census Bureau uses information from the SBO to provide estimates of the number of
employer and nonemployer firms and their sales and receipts, annual payroll, and employment.
Data aggregates are provided by gender, ethnicity, race, and veteran status for the United States
by 2007 North American Industry Classification System (NAICS) classification; by the kind of
business; and by state, metropolitan and micropolitan statistical area, and county. The information
obtained from the SBO was combined with data collected through the Census Bureau’s main
economic census and administrative records to provide a variety of searchable data products on
11 U.S. Bureau of the Census, “Survey of Business Owners,” at http://www.census.gov/econ/sbo/index.html.
12 The Bureau of the Census 2012 Survey of Business Owners (SBO) is currently under way. Data from the 2012 SBO
concerning veteran-owned businesses are expected to be released in November 2015. See U.S. Bureau of the Census,
“2012 Survey of Business Owners Tentative Release Schedule,” at http://www.census.gov/econ/sbo/
releaseschedule12.html.
13 U.S. Bureau of the Census, “Survey of Business Owners: About the Survey,” at http://www.census.gov/econ/sbo/
about.html.
14 U.S. Bureau of the Census, “Survey of Business Owners: 2007 Methodology,” at http://www.census.gov/econ/sbo/
methodology.html.
15 U.S. Bureau of the Census, “Survey of Business Owners,” at http://www.census.gov/econ/sbo/about.html.
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Census’s website, http://www.census.gov/econ/sbo/, including the most detailed economic
information available on veterans and veteran-owned firms.
Demographics
The Bureau of the Census estimates that in 2007 about 9.0% of nonfarm firms in the United
States (nearly 2.45 million of 27.09 million) were owned by veterans.16 Four states had more than
100,000 veteran-owned firms: California (239,422), Texas (199,476), New York (127,156), and
Florida (176,727). Of the nearly 2.45 million veteran-owned firms in 2007,
• 79.9% (1.96 million) had no paid employees and 20.1% (491,349) had paid
employees. This ratio is very similar to comparable national figures for 2007,
according to which 78.8% of nonfarm firms had no paid employees (21.36
million) and 21.2% had paid employees (5.74 million).17
• 99.8% (490,560) had fewer than 500 employees and 0.2% (789) had at least 500
employees. This ratio is very similar to comparable national figures for 2007,
according to which 99.7% (5.72 million) had fewer than 500 employees and
0.3% (17,732) had at least 500 employees.18
• 94.8% (2.32 million) were owned by a male, 4.0% were owned by a female
(97,114), and 1.2% (29,593) were owned equally by a male and a female.
Veteran-owned firms were more likely than other firms in 2007 to be owned by a
male. The comparable national figures for 2007 are 52.9% (13.90 million) of
nonfarm firms were owned by a male, 29.6% were owned by a female (7.79
million), and 17.5% (4.60 million) were owned equally by a male and a female.19
• 90.7% (2.22 million) were owned by a Caucasian, 7.7% (188,820) were owned
by an African American, 1.3% (32,732) were owned by an Asian, 1.1% (27,111)
were owned by an American Indian or Alaska Indian, 0.2% (4,123) were owned
by a native Hawaiian or other Pacific Islander, and 0.1% (3,096) were owned by
“some other race.” Veteran-owned firms were somewhat more likely than other
16 An additional 1.2 million nonfarm U.S. firms (about 4.5% of all nonfarm U.S. firms) were owned equally (50%-
50%) by veterans and nonveterans. See U.S. Bureau of the Census, “Statistics for All U.S. Firms by Industry, Veteran
Status, and Receipts Size of Firm for the U.S. and States: 2007,” at http://factfinder2.census.gov/faces/tableservices/jsf/
pages/productview.xhtml?pid=SBO_2007_00CSA08&prodType=table. Veteran status was based on self-identification.
Respondents were asked to report if a business owner is a veteran of the U.S. military service including the Coast
Guard. Businesses could be categorized as: veteran-owned (U.S. military service veterans own 51% or more of the
equity, interest, or stock of the business); equally veteran/nonveteran-owned (50% veteran and 50% nonveteran
ownership of the equity, interest, or stock of the business); or nonveteran-owned (nonveterans own 51% or more of the
equity, interest, or stock of the business).
17 U.S. Bureau of the Census, “American Fact Finder: Statistics for All U.S. Firms by Industry, Veteran Status, and
Race for the U.S., States, Metro Areas, Counties, and Places: 2007,” at http://factfinder2.census.gov/faces/
tableservices/jsf/pages/productview.xhtml?pid=SBO_2007_00CSA04&prodType=table.
18 Of veteran-owned firms, 90.3% (443,495) had fewer than 20 employees, 8.2% (40,406) had 20 employees to 99
employees, and 1.4% (6,659) had 100 employees to 499 employees. See U.S. Bureau of the Census, “American Fact
Finder: Statistics for All U.S. Firms With Paid Employees by Industry, Veteran Status, and Employment Size of Firm
for the U.S. and States: 2007,” at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=
SBO_2007_00CSA12&prodType=table.
19 U.S. Bureau of the Census, “American Fact Finder: Statistics for All U.S. Firms by Industry, Veteran Status, and
Gender for the U.S., States, Metro Areas, Counties, and Places: 2007,” at http://factfinder2.census.gov/faces/
tableservices/jsf/pages/productview.xhtml?pid=SBO_2007_00CSA02&prodType=table.
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firms in 2007 to be owned by a Caucasian and somewhat less likely to be owned
by an Asian. The comparable national figures for 2007 are 83.4% (22.60 million)
were owned by a Caucasian, 7.1% (1.92 million) were owned by an African
American, 5.7% (1.55 million) were owned by an Asian, 0.9% (236,691) were
owned by an American Indian or Alaska Indian, 0.1% (37,687) were owned by a
native Hawaiian or other Pacific Islander, and 0.3% (80,777) were owned by
“some other race.”20
• 2.8% (68,891) were owned by an individual under the age of 35, 22.1%
(543,359) were owned by an individual aged 35 years to 54 years, and 75.1%
(1.84 million) were owned by an individual aged 55 years or older. Veteran-
owned firms were more likely than other firms in 2007 to be owned by an
individual aged 55 years or older. The comparable national figures for 2007 are
12.6% (2.54 million) of nonfarm firms were owned by an individual under the
age of 35; 50.8% (10.20 million) were owned by an individual aged 35 years to
54 years; and 36.5% (7.33 million) were owned by an individual aged 55 years or
older.21
• 8.3% (196,760) were owned by an individual who reported that he or she had a
service-connected disability.22
Employment, Payroll, and Receipts
In 2007, veteran-owned employer firms
• employed 5.8 million persons (about 4.9% of total U.S. employment);
• reported a total payroll of $210.0 billion (about 4.4% of total U.S. payroll);
• generated $1.125 trillion in total receipts (about 4.1% of total U.S. receipts); and
• had average receipts of $2.3 million.23
In 2007, veteran-owned nonemployer firms
• generated 7.7% ($93.8 billion) of the total receipts generated by veteran-owned
firms; and
• had average receipts of $47,931.
20 The total percentage exceeds 100 because each owner had the option of selecting more than one race and was
included in each race selected. See U.S. Bureau of the Census, “American Fact Finder: Statistics for All U.S. Firms by
Industry, Veteran Status, and Race for the U.S., States, Metro Areas, Counties, and Places: 2007,” at
http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=SBO_2007_00CSA04&prodType=
table.
21 U.S. Bureau of the Census, “American Fact Finder: Statistics for Owners of Respondent Firms by Owner’s Age by
Gender, Ethnicity, Race, and Veteran Status for the U.S.: 2007,” at http://factfinder2.census.gov/faces/tableservices/jsf/
pages/productview.xhtml?pid=SBO_2007_00CSCBO08&prodType=table.
22 U.S. Bureau of the Census, “American Fact Finder: Statistics for Veteran Owners of Respondent Firms by Owner’s
Service-Disabled Veteran Status and Gender for the U.S.: 2007,” at http://factfinder2.census.gov/faces/tableservices/
jsf/pages/productview.xhtml?pid=SBO_2007_00CSCBO10&prodType=table.
23 U.S. Bureau of the Census, “American Fact Finder: Statistics for All U.S. Firms With Paid Employees by Veteran
Status and Number of States in Which They Operate: 2007,” at http://factfinder2.census.gov/faces/tableservices/jsf/
pages/productview.xhtml?pid=SBO_2007_00CSA20&prodType=table.
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The comparable national figures for receipts in 2007 were $45,544 for all nonemployer firms and
$5.1 million for all employer firms.24
Access to Capital
As shown in Table 1, the source of capital most frequently used by veterans to start or acquire a
business in 2007 was personal or family savings (811,388 veterans, or 61.7% of respondents),
followed by a business loan from a bank or financial institution (128,895 veterans, or 9.8% of
respondents), a personal or business credit card (114,012 veterans, or 8.7% of respondents), and
personal or family assets other than the owner’s savings (98,113 veterans, or 7.5% of
respondents).
Table 1. Source of Capital for Veteran Business Owners
Starting or Acquiring Their Businesses, 2007
Source of Capital
Number of Veteran Respondents
% of Veteran Respondents
Personal or Family Savings
811,388
61.7%
Business Loan from a Bank or Financial
128,895 9.8%
Institution
Personal or Business Credit Card
114,012
8.7%
Personal or Family Assets Other Than
98,113 7.5%
the Owner’s Savings
Personal or Family Home Equity Loan
55,736
4.2%
Business Loan or Investment from
25,038 1.9%
Family or Friends
Government-Guaranteed Business
8,305 0.6%
Loan from a Bank or Financial
Institution
Business Loan from a Federal, State, or
8,001 0.6%
Local Government
Investment from Venture Capitalists
3,664
0.3%
Grant 1,364
0.1%
Other Source(s) of Capital
23,825
1.8%
Did Not Need Any Capital to Start or
284,505 21.6%
Acquire Their Business
Did Not Recall Where They Received
40,390 3.1%
the Capital to Start or Acquire Their
Business
Source: U.S. Bureau of the Census, “American Fact Finder: Statistics for Al U.S. Firms by Sources of Capital
Used to Start or Acquire the Business by Industry, Gender, Ethnicity, Race, and Veteran Status for the U.S.:
2007,” at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=
SBO_2007_00CSCB13&prodType=table.
Note: The total percentage exceeds 100 because each owner had the option of selecting more than one source
of capital.
24 Ibid.
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As shown in Table 2, the source of capital most frequently used by veterans to expand or make
capital improvements to an existing business in 2007 was personal or family savings (384,517
veterans, or 30.0% of respondents). The next most frequently used source of capital to expand or
make capital improvements to an existing business was a personal or business credit card
(139,260 veterans, or 10.9% of respondents), followed by business profits or assets (138,440
veterans, or 10.8% of respondents), and a business loan from a bank or financial institution
(107,614 veterans, or 8.4% of respondents).
Table 2. Source of Capital for Veteran Businesses Owners Expanding or Making
Capital Improvements to Their Businesses, 2007
Source of Capital
Number of Veteran Respondents
% of Veteran Respondents
Personal or Family Savings
384,517
30.0%
Personal or Business Credit Card
139,260
10.9%
Business Profits or Assets
138,440
10.8%
Business Loan from a Bank or Financial
107,614 8.4%
Institution
Personal or Family Assets Other Than
54,479 4.3%
the Owner’s Savings
Personal or Family Home Equity Loan
50,793
4.0%
Business Loan or Investment from
9,720 0.8%
Family or Friends
Business Loan from a Federal, State, or
4,938 0.4%
Local Government
Government-Guaranteed Business
4,511 0.4%
Loan from a Bank or Financial
Institution
Investment from Venture Capitalists
1,591
0.1%
Grant 1,438
0.1%
Other Source(s) of Capital
9,200
0.7%
Did Not Expand or Make Capital
631,242 49.3%
Improvements in 2007
Did Not Recall Where They Received
18,692 3.7%
the Capital to Expand or Make Capital
Improvements to Their Business
Source: U.S. Bureau of the Census, “American Fact Finder: Statistics for Al U.S. Firms by Sources Used to
Finance Expansion or Capital Improvements by Industry, Gender, Ethnicity, Race, and Veteran Status for the U.S.:
2007,” at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=
SBO_2007_00CSCB28&prodType=table.
Note: The total percentage exceeds 100 because each owner had the option of selecting more than one source
of capital.
Veterans’ Employment Data
The Department of Labor’s Bureau of Labor Statistics (BLS) provides monthly updates of the
employment status of the nation’s veterans. The BLS reports that as of March 2015, there were
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21.3 million veterans.25 There were 10.9 million veterans in the civilian labor force (i.e., they
were either employed or unemployed and available for work, except for temporary illness, and
had made specific efforts to find employment sometime during the four-week period ending with
the reference week). Of those veterans in the civilian labor force, about 10.3 million were
employed and about 535,000 were unemployed.26
As of March 2015, veterans, as a group, had a lower unemployment rate (4.9%) than nonveterans
aged 18 years and older (5.5%), and veterans also had a lower labor force participation rate (the
percentage of the available workforce that is employed or actively seeking employment) than
nonveterans aged 18 years and older (51.0% compared with 65.3%).27 A report by the Council of
Economic Advisers and the National Economic Council attributed the lower labor force
participation rate for veterans to several factors, including the difficulty many civilian employers
have in understanding a military resume and how military job titles translate into civilian job
skills, the presence of a service-connected disability, especially among the post-9/11 veteran
population, and the number of post-9/11 veterans (about 217,000) who have been diagnosed with
post-traumatic stress disorder.28
The employment experiences of veterans who left the military since September 2001 differ
somewhat from the employment experiences of veterans who left the military before September
2001. As of March 2015, veterans who left the military since September 2001 had both higher
levels of unemployment (6.5% compared with 4.4%) and higher levels of labor force
participation (82.4% compared with 45.0%) than veterans who left the military before September
2001. The higher labor force participation rate for veterans who left the military since September
2001 was not wholly unexpected. They entered the civilian workforce more recently and have
had less time to develop a reason (e.g., health issue, family responsibility, discouragement,
retirement) to withdraw from the civilian workforce than veterans who left the military before
September 2001.
Veterans’ Employment and Business
Development Programs
Several federal agencies, including the SBA, sponsor employment and business development
programs to assist veterans in their transition from the military into the civilian labor force. As
will be discussed, the expansion of federal employment and business development training
programs targeted at specific populations, such as women and veterans, has led some Members
25 DOL, Bureau of Labor Statistics, “Table A-5. Employment status of the civilian population 18 years and over by
veteran status, period of service, and sex, not seasonally adjusted,” at http://www.bls.gov/news.release/empsit.t05.htm.
26 Ibid.
27 Ibid.
28 Executive Office of the President, Council of Economic Advisers and the National Economic Council, “Military
Skills for America’s Future: Leveraging Military Service and Experience to Put Veterans and Military Spouses Back to
Work,” May 31, 2012, pp. 4-6, at http://www.whitehouse.gov/sites/default/files/docs/veterans_report_5-31-2012.pdf.
The report indicated that military spouses also face a number of employment barriers. For example, military spouses
are “ten times more likely to have moved across state lines in the last year compared to their civilian counterparts,”
affecting job tenure, advancement opportunities, and, for those in occupations requiring a state-specific occupational
license or certification, the need to re-qualify for their license or certification after moving across state lines. See ibid.,
pp. 8-10.
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and organizations to ask if these programs should be consolidated. Others question if the level of
communication and coordination among federal agencies administering these programs has been
sufficient to ensure the programs are being administered in the most efficient and effective
manner.
The SBA’s Veterans Business Development Programs
In an effort to assist veteran entrepreneurs, the SBA has either provided or supported management
and technical assistance training for veteran-owned small businesses since its formation as an
agency.29 In FY2014, the SBA provided management and technical assistance training services to
more than 100,000 veterans through its various management and technical assistance training
partners (e.g., Small Business Development Centers, Women’s Business Centers, Service Corps
of Retired Executives [SCORE], and Veterans Business Outreach Centers [VBOCs]).30 In
addition, the SBA’s OVBD administers several programs to assist veteran-owned businesses,
including
• the Entrepreneurship Bootcamp for Veterans with Disabilities Consortium of
Universities, which provides “experiential training in entrepreneurship and small
business management to post-9/11 veterans with disabilities” at eight
universities;31
• the Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE) program,
administered through a cooperative agreement with Syracuse University, which
offers women veterans a 15-day, online course focused on entrepreneurship skills
and the “language of business,” followed by a 3-day conference (offered twice a
year at varying locations) in which participants “are exposed to successful
entrepreneurs and CEOs of Fortune 500 companies and leaders in government”
and participate in courses on business planning, marketing, accounting and
finance, operations and production, human resources, and work-life balance;32
• the Operation Endure and Grow Program, administered through a cooperative
agreement with Syracuse University, which offers an eight-week online training
program “focused on the fundamentals of launching and/or growing a small
business” and is available to National Guard and reservists and their family
members;33
• the Boots to Business program, which is “an elective track within the Department
of Defense’s revised Training Assistance Program called Transition Goals, Plans,
Success (Transition GPS) and has three parts: the Entrepreneurship Track
Overview ‒ a 10-minute introductory video shown during the mandatory five-day
29 U.S. Congress, Senate Committee on Banking and Currency, Extension of the Small Business Act of 1953, report to
accompany S. 2127, 84th Cong., 1st sess., July 22, 1955, S.Rept. 84-1350 (Washington: GPO, 1955), p. 17.
30 SBA, “FY2016 Congressional Budget Justification and FY2014 Annual Performance Report,” pp. 97-101, at
https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF.
31 Syracuse University, “About the EBV,” Syracuse, NY, at http://whitman.syr.edu/ebv/about/.
32 Syracuse University, “Women Veterans Igniting the Spirit of Entrepreneurship (V-WISE),” Syracuse, NY, at
http://whitman.syr.edu/vwise/about.aspx.
33 Syracuse University, “About Operation Endure and Grow,” Syracuse, NY, at http://vets.syr.edu/education/endure-
grow/.
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Transition GPS course which introduces entrepreneurship as a post-service career
option; Introduction to Entrepreneurship ‒ a two-day classroom course on
entrepreneurship and business fundamentals offered as one of the three Transition
GPS elective tracks; and Foundations of Entrepreneurship – an eight-week,
instructor-led online course that offers in-depth instruction on the elements of a
business plan and tips and techniques for starting a business”;34 and
• the VBOC program, which provides veterans and their spouses management and
technical assistance training at 15 locations, including assistance with the Boots
to Business program, the development and maintenance of a 5-year business
plan, and referrals to other SBA resource partners when appropriate for
additional training or mentoring services.35
The SBA indicated in its FY2016 congressional budget justification document that it “will
continue to assist veterans by conducting outreach through VBOCs, maintaining strategic
alliances with the Department of Defense and other agencies, growing partnerships with
universities, and refocusing district office outreach initiatives.”36 To help meet veteran
entrepreneurs’ needs, the SBA indicated that, in addition to expanding the Boots to Business
program, in FY2015 and FY2016 it will
• expand the Entrepreneurship Boot Camp for Veterans with Disabilities (EBV)
program by increasing both the number of course offerings and the number of
participating business schools; and
• expand the V-WISE program to more large and mid-sized cities serving women
veterans.37
The SBA also continues to work closely with the Interagency Task Force for Veterans Small
Business Development, which was established by executive order on April 26, 2010, held its first
public meeting on October 15, 2010, and issued its first report on November 1, 2011, to identify
“gaps in ensuring that transitioning military members who are interested in owning a small
business get needed assistance and training.”38 The task force’s second report, issued on
34 SBA, “Operation Boots to Business: From Service to Startup,” at https://www.sba.gov/offices/headquarters/ovbd/
resources/160511; and SBA, “Operation Boots to Business: Fact Sheet,” at https://www.sba.gov/sites/default/files/files/
B2B_Fact%20Sheet.pdf.
35 SBA, “Veterans Business Outreach Centers,” at https://www.sba.gov/offices/headquarters/ovbd/resources/362341.
VBOC grants, starting at $180,000, “are made for up to a three-year period of performance, consisting of a base period
of 12 months from the date of award and up to two renewal option periods of 12 months each. Exercise of the option
periods will be solely at SBA’s discretion and is subject to continuing program authority, the availability of funds, and
the recipient’s continued satisfactory performance and compliance.” Also, “funding per VBOC will vary based on
proposed Boots to Business (B2B) program delivery and associated outreach.” See SBA, Office of Veterans Business
Development, “FY 2015 Program Announcement No. VBOC-2015-02,” pp. 6-7, at https://www.sba.gov/offices/
headquarters/ovbd/spotlight. In FY2013, the Veterans Business Outreach Centers Program conducted its ninth annual
“Customer Satisfaction Survey.” The FY2013 survey found that 91% of the clients using the centers were satisfied or
highly satisfied with the quality, relevance, and timeliness of the assistance provided. See SBA, “FY2015
Congressional Budget Justification and FY2013 Annual Performance Report,” p. 81, at https://www.sba.gov/sites/
default/files/files/FY%202015%20CBJ%20FY%202013%20APR%20FINAL%20508(1).pdf.
36 SBA, “FY2016 Congressional Budget Justification and FY2014 Annual Performance Report,” p. 100, at
https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF.
37 Ibid.
38 SBA, Office of Veterans Business Development, “Interagency Task Force,” at https://www.sba.gov/offices/
headquarters/ovbd/resources/14372; and The Interagency Task Force on Veterans Small Business Development,
(continued...)
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November 29, 2012, focused on progress made since the initial report.39 The task force continues
to meet on a quarterly basis to foster communication and monitor agency progress in assisting
transitioning servicemembers.
Congressional Issues: Duplication of Services
The SBA’s OVBD, which serves as the SBA’s focal point for its veteran assistance programs, was
created by P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act of
1999. The act addressed congressional concerns that the United States generally, and the SBA in
particular, was not, at that time, doing enough to meet the needs of veteran entrepreneurs,
especially service-disabled veteran entrepreneurs.40 At that time, several Members of Congress
argued that “the needs of veterans have been diminished systematically at the SBA” as evidenced
by the agency’s elimination of direct loans, including direct loans to veterans, in 1995; and a
decline in the SBA’s “training and counseling for veterans … from 38,775 total counseling
sessions for veterans in 1993 to 29,821 sessions in 1998.”41 To address these concerns, the act
authorized the establishment of the federally chartered National Veterans Business Development
Corporation (known as the Veterans Corporation and reconstituted, without a federal charter, in
2012 as Veteranscorp.org).42 Its mission is to
(1) expand the provision of and improve access to technical assistance regarding
entrepreneurship for the Nation’s veterans; and (2) to assist veterans, including service-
disabled veterans, with the formation and expansion of small business concerns by working
with and organizing public and private resources, including those of the Small Business
Administration, the Department of Veterans Affairs, the Department of Labor, the
Department of Commerce, the Department of Defense, the Service Corps of Retired
Executives …, the Small Business Development Centers …, and the business development
staffs of each department and agency of the United States.43
(...continued)
“Report to the President: Empowering Veterans Through Entrepreneurship,” November 1, 2011,at
https://www.sba.gov/sites/default/files/FY2012-Final%20Veterans%20TF%20Report%20to%20President.pdf.
39 The Interagency Task Force on Veterans Small Business Development, “Heroes on the Home Front: Supporting
Veteran Success as Small Business Owners,” November 29, 2012, at http://www.sba.gov/sites/default/files/files/
Veterans_Report_FINAL.pdf. The Interagency Task Force on Veterans Small Business Development includes senior-
level representatives of the SBA, the Departments of Defense, Labor, Treasury, and Veterans Affairs, the General
Services Administration, the Office of Management and Budget, and four representatives from veterans’ service or
military organizations appointed by the SBA administrator. SBA Associate Administrator Rhett Jeppson serves as its
chair. See Executive Order 13540, “Interagency Task Force on Veterans Small Business Development,” 75 Federal
Register 22497-22498, April 29, 2010; and U.S Small Business Administration, “Inter-Agency Task Force on Veterans
Small Business Development: Kick Off Meeting Wednesday, September 15, 2010,” at http://www.sba.gov/about-sba-
info/14368.
40 P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999, Section 101. Findings.
41 U.S. Congress, House Committee on Small Business, Veterans Entrepreneurship and Small Business Development
Act of 1999, report to accompany H.R. 1568, 106th Cong., 1st sess., June 29, 1999, H.Rept. 106-206 (Washington: GPO,
1999), pp. 14-15.
42 Veteranscorp, “About Us,” Oxford, MD at http://www.veteranscorp.org/2012/01/a-new-veteranscorp-org-gets-the-
chance-to-help-veteran-entrepreneurs-2/.
43 P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999, Section 33. National
Veterans Business Development Corporation. Also, see 15 U.S.C. §657c.
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P.L. 106-50 reemphasized the SBA’s responsibility “to reach out to and include veterans in its
programs providing financial and technical assistance.”44 It included veterans as a target group for
the SBA’s 7(a), 504 Certified Development Company (504/CDC), and Microloan lending
programs. It also required the SBA to enter into a memorandum of understanding with SCORE
to, among other things, establish “a program to coordinate counseling and training regarding
entrepreneurship to veterans through the chapters of SCORE throughout the United States.”45 In
addition, it directed the SBA to enter into a memorandum of understanding with small business
development centers, the VA, and the National Veterans Business Development Corporation
“with respect to entrepreneurial assistance to veterans, including service-disabled veterans.”46 The
act specified that the following services were to be provided:
(1) Conducting of studies and research, and the distribution of information generated by such
studies and research, on the formation, management, financing, marketing, and operation of
small business concerns by veterans.
(2) Provision of training and counseling to veterans concerning the formation, management,
financing, marketing, and operation of small business concerns.
(3) Provision of management and technical assistance to the owners and operators of small
business concerns regarding international markets, the promotion of exports, and the transfer
of technology.
(4) Provision of assistance and information to veterans regarding procurement opportunities
with Federal, State, and local agencies, especially such agencies funded in whole or in part
with Federal funds.
(5) Establishment of an information clearinghouse to collect and distribute information,
including by electronic means, on the assistance programs of Federal, State, and local
governments, and of the private sector, including information on office locations, key
personnel, telephone numbers, mail and electronic addresses, and contracting and
subcontracting opportunities.
(6) Provision of Internet or other distance learning academic instruction for veterans in
business subjects, including accounting, marketing, and business fundamentals.
(7) Compilation of a list of small business concerns owned and controlled by service-
disabled veterans that provide products or services that could be procured by the United
States and delivery of such list to each department and agency of the United States. Such list
shall be delivered in hard copy and electronic form and shall include the name and address of
each such small business concern and the products or services that it provides.47
The SBA’s OVBD was established to address these statutory requirements by promoting
“veterans’ small business ownership by conducting comprehensive outreach, through program
and policy development and implementation, ombudsman support, coordinated agency initiatives,
44 U.S. Congress, House Committee on Small Business, Veterans Entrepreneurship and Small Business Development
Act of 1999, report to accompany H.R. 1568, 106th Cong., 1st sess., June 29, 1999, H.Rept. 106-206 (Washington: GPO,
1999), p. 14.
45 P.L. 106-50, Section 301. Score Program.
46 Ibid., Section 302. Entrepreneurial Assistance.
47 Ibid.
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and direct assistance to veterans, service-disabled veterans, reserve and National Guard members,
and discharging active duty servicemembers and their families.”48
As mentioned previously, the OVBD provided, or supported third parties in providing,
management and technical assistance training services to more than 100,000 veterans during
FY2014.49 These services were provided
through funded SBA district office outreach; OVBD-developed and distributed materials;
websites; partnering with DOD [Department of Defense], DOL [Department of Labor] and
universities; agreements with regional veterans business outreach centers; direct guidance,
training and assistance to Agency veteran customers; and through enhancements to intra-
agency programs used by the military and veteran communities.50
The expansion of the SBA’s outreach efforts to veterans has led some Members and organizations
to ask if the nation’s veterans might be better served if some of the veteran employment and
business development programs offered by federal agencies were consolidated. For example, as
mentioned previously, DOD, in cooperation with several federal agencies, operates the recently
revised Transition Assistance Program, Transition GPS, which provides employment information
and training to exiting servicemembers to assist them in transitioning from the military into the
civilian labor force. In addition, DOL’s Jobs for Veterans State Grants program provides states
funding for Disabled Veterans’ Outreach Program specialists and Local Veterans’ Employment
Representatives to provide outreach and assistance to veterans, and their spouses, seeking
employment.51 DOL also administers the Veterans Workforce Investment Program, which
provides grants to fund programs operated by eligible state and local government workforce
investment boards, state and local government agencies, and private nonprofit organizations to
provide various services designed to assist veterans’ transitions into the civilian labor force.52 The
DOL-administered Homeless Veterans Reintegration Program provides grants to fund programs
operated by eligible state and local government workforce investment boards, state and local
government agencies, and private nonprofit organizations that provide various services designed
to assist homeless veterans achieve meaningful employment and to aid in the development of a
service delivery system to address problems facing homeless veterans.53
Advocates of consolidating veteran employment and business development programs argue that
eliminating program duplication among federal agencies would result in lower costs and
improved services. For example, H.R. 4072, the Consolidating Veteran Employment Services for
48 SBA, “FY2013 Congressional Budget Justification and FY2011 Annual Performance Report,” p. 62, at
https://www.sba.gov/sites/default/files/files/1-
508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR(1).pdf.
49 SBA, “FY2016 Congressional Budget Justification and FY2014 Annual Performance Report,” pp. 97-101, at
https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF.
50 SBA, “FY2013 Congressional Budget Justification and FY2011 Annual Performance Report,” p. 62, at
https://www.sba.gov/sites/default/files/files/1-
508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR(1).pdf.
51 For information on the Disabled Veterans’ Outreach Program and Local Veterans’ Employment Representatives
Program see DOL, “Jobs for Veterans State Grants,” at http://www.dol.gov/vets/grants/state/jvsg.htm.
52 For further information and analysis of federal programs outside of the SBA that are designed to assist veterans
seeking civilian employment, see CRS Report RS22666, Veterans Benefits: Federal Employment Assistance, by
Christine Scott.
53 For further information and analysis concerning the Homeless Veterans Reintegration Program, see CRS Report
RL34024, Veterans and Homelessness, by Libby Perl.
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Improved Performance Act of 2012, which was introduced during the 112th Congress and ordered
to be reported by the House Committee on Veterans’ Affairs on April 27, 2012, would have
transferred several veteran employment training programs from the DOL to the VA.54
Also, in 2011, 2012, 2013, 2014, and 2015 the House Committee on Small Business, in its
“Views and Estimates” letter to the House Committee on the Budget, recommended that funding
for the SBA’s VBOCs be either eliminated or transferred to the Department of Veterans Affairs
because, as it stated in 2012, “the SBA already provides significant assistance to veterans who are
seeking to start or already operate small businesses. The VBOCs duplicate services already
available from the SBA, other entrepreneurial development partners and programs available from
the Department of Veterans Affairs.”55 In 2014, the House Committee on Small Business also
recommended that if additional funds were to be provided to VBOCs, those funds should come
from the SBA’s Boots to Business initiative.
Advocates of consolidating federal veteran employment and business development programs
point to various U.S. Government Accountability Office (GAO) reports that have generally
characterized the broader category of federal support for entrepreneurs, including veteran
entrepreneurs, as fragmented and having overlapping missions. For example, in 2012, GAO
identified 53 programs within the SBA and the Departments of Commerce, Housing and Urban
Development, and Agriculture designed to support entrepreneurs, including 36 programs that
provide entrepreneurs technical assistance, such as business training, counseling, and research
and development support. GAO found that “the overlap among these programs raise[s] questions
about whether a fragmented system is the most effective way to support entrepreneurs” and
suggested agencies should “determine whether there are more efficient ways to continue to serve
the unique needs of entrepreneurs, including consolidating programs.”56
Instead of consolidating programs, some argue that improved communication and cooperation
among the federal agencies providing entrepreneur support programs, and among the SBA’s
management and technical assistance training resource partners, would enhance program
54 U.S. House of Representatives, Committee on Veterans’ Affairs, “Debunking the Myths: H.R. 4072,” at
http://veterans.house.gov/4072.
55 U.S. House of Representatives, Committee on Small Business, “Views and Estimates of the Committee on Small
Business on Matters to be set forth in the Concurrent Resolution on the Budget for Fiscal Year 2012,” March 17, 2011,
at http://smallbusiness.house.gov/uploadedfiles/march_17_views_and_estimates_letter.pdf. Also, see U.S. House of
Representatives, Committee on Small Business, “Views and Estimates of the Committee on Small Business on Matters
to be set forth in the Concurrent Resolution on the Budget for Fiscal Year 2013,” March 7, 2012, at
http://smallbusiness.house.gov/uploadedfiles/views_and_estimates_fy_2013.pdf; U.S. House of Representatives,
Committee on Small Business, “Views and Estimates of the Committee on Small Business on Matters to be set forth in
the Concurrent Resolution on the Budget for Fiscal Year 2014,” February 27, 2013, at http://smallbusiness.house.gov/
uploadedfiles/revised_2014_views_and_estimates_document.pdf; U.S. House of Representatives, Committee on Small
Business, “Views and Estimates of the Committee on Small Business on Matters to be set forth in the Concurrent
Resolution on the Budget for Fiscal Year 2015,” March 25, 2014, at http://smallbusiness.house.gov/uploadedfiles/3-25-
2014_revised_budget_views_and_estimates__fy_2015_v2.pdf; and U.S. House of Representatives, Committee on
Small Business, “Views and Estimates of the Committee on Small Business on Matters to be set forth in the Concurrent
Resolution on the Budget for Fiscal Year 2016,” February 12, 2015, at http://smallbusiness.house.gov/uploadedfiles/2-
12-2015_views_and_estimates_document.pdf.
56 U.S. Government Accountability Office (GAO), 2012 Annual Report: Opportunities to Reduce Duplication, Overlap
and Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP, February 28, 2012, p. 55, at
http://www.gao.gov/assets/590/588818.pdf. Also see GAO, Entrepreneurial Assistance: Opportunities Exist to Improve
Programs’ Collaboration, Data-Tracking, and Performance Management, GAO-12-819, August 23, 2012, pp. 60-61,
at http://www.gao.gov/assets/650/647267.pdf.
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efficiencies while preserving the ability of these programs to offer services that match the unique
needs of various underserved populations, such as veterans. For example, during the 111th
Congress, the House passed H.R. 2352, the Job Creation Through Entrepreneurship Act of 2009,
on May 20, 2009, by a vote of 406-15. The Senate did not take action on the bill. In its committee
report accompanying the bill, the House Committee on Small Business concluded at that time that
each ED [Entrepreneurial Development] program has a unique mandate and service delivery
approach that is customized to its particular clients. However, as a network, the programs
have established local connections and resources that benefit entrepreneurs within a region.
Enhanced coordination among this network is critical to make the most of scarce resources
available for small firms. It can also ensure that best practices are shared amongst providers
that have similar goals but work within different contexts.57
The bill was designed to enhance oversight and coordination of the SBA’s management and
technical assistance training programs by requiring the SBA to coordinate these programs “with
State and local economic development agencies and other federal agencies as appropriate” and to
“report annually to Congress, in consultation with other federal departments and agencies as
appropriate, on opportunities to foster coordination, limit duplication, and improve program
delivery for federal entrepreneurial development activities.”58
In a related development, as mentioned previously, the Obama Administration formed the
Interagency Task Force for Veterans Small Business Development by executive order on April 26,
2010. The SBA’s representative chairs the task force, which is composed of senior representatives
from seven federal agencies and four representatives from veterans’ organizations.59 One of the
task force’s goals is to improve “collaboration, integration and focus across federal agencies, key
programs (e.g., the Transition Assistance Program), veterans’ service organizations, states, and
academia.”60
On November 1, 2011, the task force issued its first set of recommendations, which included
several recommendations designed to increase and augment federal entrepreneurial training and
technical assistance programs offered to veterans. For example, it recommended the development
of a “standardized, national entrepreneurship training program specifically for veterans” that
“could utilize expert local instructors, including academics and successful small business owners,
to provide training in skills used to create and grow entrepreneurial ventures and small business.
The national program could provide engaging training modules and workshops dedicated to the
basics of launching a business.”61 The task force also recommended the development of a web
portal “that allows veterans to access entrepreneurship resources from across the government.”62
57 U.S. Congress, House Committee on Small Business, Job Creation Through Entrepreneurship Act of 2009, report to
accompany H.R. 2352, 111th Cong., 1st sess., May 15, 2009, H.Rept. 111-112 (Washington: GPO, 2009), pp. 17-18.
58 H.R. 2352, the Job Creation Through Entrepreneurship Act of 2009, Section 601. Expanding Entrepreneurship.
59 The seven federal agencies are the SBA, U.S. General Services Administration, U.S. Office of Management and
Budget, and the Departments of Defense, Labor, Treasury, and Veterans Affairs. The four veterans’ organizations are
Association of State Directors of Veterans Affairs, Student Veterans of America, the American Legion, and VET-
Force. SBA Deputy Administrator Marie Johns served as the task force’s chair until she left the agency in May 2013.
60 Interagency Task Force on Veterans Small Business Development, “Report to the President: Empowering Veterans
Through Entrepreneurship,” November 1, 2011, p. 6, at https://www.sba.gov/sites/default/files/FY2012-
Final%20Veterans%20TF%20Report%20to%20President.pdf.
61 Ibid., p. 15.
62 Ibid., p. 8.
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The task force issued its second report on November 29, 2012. The document was essentially a
progress report concerning the task force’s activities since the initial report’s release:
In FY2012, the Task Force, along with the interagency Veterans Employment Initiative,
developed and piloted a re-designed military transition program, entitled Transition GPS,
that includes an entrepreneurship training program called “Operation Boots to Business:
from Service to Startup.” This program is expected to be rolled out nationally in the coming
year. The Task Force has also worked to streamline programs and cut paperwork for veteran
small businesses through support for initiatives such as BusinessUSA [an online website
with links to over 1,000 federal and state resources, over 130 success stories, and over 3,750
events nationwide] and QuickApp for [SBA-guaranteed] surety bonds [under $250,000
featuring a streamlined application process] and it has continued the efforts begun last year
to make the process of winning Federal government contracts simpler and easier for service-
disabled veterans and veteran-owned small business.63
Veterans’ Access to Capital
The SBA administers several loan guaranty programs, including the 7(a) and the 504/CDC
programs, to encourage lenders to provide loans to small businesses “that might not otherwise
obtain financing on reasonable terms and conditions.”64
The SBA’s 7(a) loan guaranty program is considered the agency’s flagship loan guaranty
program. Its name is derived from Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as
amended), which authorizes the SBA to provide business loans to American small businesses.
The 7(a) loan guaranty program provides SBA-approved lenders a guaranty of up to 85% of loans
of $150,000 or less and up to 75% of loans exceeding $150,000, up to the program’s maximum
gross loan amount of $5 million (up to $3.75 million maximum guaranty). In FY2014, the
average approved 7(a) loan amount was $368,737.65
Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation,
acquisition, or expansion of an existing business. Specific uses include to acquire land (by
purchase or lease); improve a site (e.g., grading, streets, parking lots, and landscaping); purchase,
convert, expand, or renovate one or more existing buildings; construct one or more new
buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies,
and raw materials; finance working capital; and refinance certain outstanding debts. The 7(a)
program’s loan maturity for working capital, machinery, and equipment (not to exceed the life of
the equipment) is typically 5 years to 10 years, and the loan maturity for real estate is up to 25
63 The Interagency Task Force on Veterans Small Business Development, “Heroes on the Home Front: Supporting
Veteran Success as Small Business Owners,” cover letter and introductory material, November 29, 2012, at
https://www.sba.gov/sites/default/files/files/Veterans_Report_FINAL.pdf.
64 SBA, Fiscal Year 2010 Congressional Budget Justification, p. 30, at https://www.sba.gov/sites/default/files/
aboutsbaarticle/Congressional_Budget_Justification_2010.pdf. Also see no credit elsewhere clause in P.L. 83-163, the
Small Business Act (as amended).
65 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/2014),” at https://www.sba.gov/sites/default/files/
aboutsbaarticle/WebsiteReport_asof9_30_2014.pdf.
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years. Interest rates are negotiated between the borrower and lender but are subject to maximum
rates.66
In FY2014, the SBA approved 52,044 7(a) loans totaling $19.19 billion, including 2,113 loans to
veterans (4.1%) totaling $597.96 million (3.1%). In FY2014, the average approved 7(a) loan
amount to a veteran was $282,992.67
The SBA’s 504/CDC loan guaranty program is administered through nonprofit certified
development companies (CDCs). It provides long-term fixed rate financing for major fixed assets,
such as land, buildings, equipment, and machinery. Of the total project costs, a third-party lender
must provide at least 50% of the financing, the CDC provides up to 40% of the financing through
a 100% SBA-guaranteed debenture, and the applicant provides at least 10% of the financing. The
504/CDC program’s name is derived from Section 504 of the Small Business Investment Act of
1958 (P.L. 85-699, as amended), which provides the most recent authorization for the sale of
504/CDC debentures.68 In FY2014, the average approved 504/CDC loan amount was $713,582.69
In FY2014, the SBA approved 5,885 504/CDC loans totaling $4.2 billion, including 263 loans to
veterans (4.4%) totaling $168.1 million (4.0%). In FY2014, the average approved 504/CDC loan
amount to a veteran was $639,216.70
The SBA also administers several 7(a) loan guaranty subprograms that offer streamlined and
expedited loan procedures to encourage lenders to provide loans to specific groups of borrowers
identified by the SBA as having difficulty accessing capital. In the past, the Patriot Express
program (2007-2013) encouraged lenders to provide loans to veterans and their spouses. It
provided loans of up to $500,000 (with a guaranty of up to 85% of loans of $150,000 or less and
up to 75% of loans exceeding $150,000).71
The SBA considered the Patriot Express program a success, but some veterans’ organizations
expressed concern that many veterans, especially during and immediately following the Great
Recession (December 2007 to June 2009), experienced difficulty finding lenders willing to
66 For further information and analysis concerning the SBA’s 7(a) loan guaranty program, see CRS Report R41146,
Small Business Administration 7(a) Loan Guaranty Program, by Robert Jay Dilger.
67 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/2014),” at http://www.sba.gov/sites/default/files/
aboutsbaarticle/WebsiteReport_asof9_30_2014.pdf.
68 For further information and analysis concerning the SBA’s 504 Certified Development Company (504/CDC) loan
guaranty program, see CRS Report R41184, Small Business Administration 504/CDC Loan Guaranty Program, by
Robert Jay Dilger.
69 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/2014),” at https://www.sba.gov/sites/default/files/
aboutsbaarticle/WebsiteReport_asof9_30_2014.pdf.
70 Ibid.
71 Eligible businesses were required to be owned and controlled (51% or more) by one or more of the following groups:
veteran, active duty military participating in the military’s Transition Assistance Program, reservist or National Guard
member or a spouse of any of these groups, a widowed spouse of a servicemember who died while in service, or a
widowed spouse of a veteran who died of a service-connected disability. See SBA, “SOP 50 10 5(E): Lender and
Development Company Loan Programs,” (effective June 1, 2012), pp. 83, 127, at https://www.sba.gov/sites/default/
files/SOP%2050%2010%205(E)%20(5-16-2012)%20clean.pdf. The program’s interest rates were negotiable with the
lender, subject to the same maximum rate limitations as the 7(a) program, which vary depending upon the size and
maturity of the loan. It also had the same fees as the 7(a) program, which also vary depending on the size and maturity
of the loan.
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provide them Patriot Express loans.72 In addition, GAO reported in September 2013 that with the
exception of loans approved in 2007, Patriot Express loans defaulted at a higher rate than regular
7(a) loans and loans made under the SBAExpress program (a 7(a) loan guaranty subprogram
offering streamlined borrower application and lender approval procedures).73 Over its history, the
Patriot Express program disbursed 9,414 loans totaling more than $791 million.74
On January 1, 2014, the SBA implemented a new, streamlined application process for 7(a) loans
of $350,000 or less. As part of an overall effort to streamline and simplify its loan application
process, the SBA also eliminated several 7(a) subprograms, including the Patriot Express
program. In anticipation of ending the Patriot Express program, the SBA announced on
November 8, 2013, that it would waive the up-front, one-time loan guaranty fee for all veteran
loans under the SBAExpress program from January 1, 2014, through the end of FY2014 (called
the Veterans Advantage Program).75
The SBA announced that this fee waiver was part “of SBA’s broader efforts to make sure that
veterans have the tools they need to start and grow a business.”76 The Obama Administration has
continued this fee waiver for veterans through the end of FY2015. Legislation was introduced
during the 113th Congress (S. 2143, the Veterans Entrepreneurship Act) to make the fee waiver
permanent. P.L. 113-235, the Consolidated and Further Continuing Appropriations Act, 2015,
provided statutory authorization for the fee waiver for FY2015.
The SBAExpress program is designed to increase the availability of credit to small businesses by
permitting lenders to use their existing documentation and procedures in return for receiving a
72 U.S. Congress, Senate Committee on Small Business and Entrepreneurship, Assessing Federal Small Business
Assistance Programs for Veterans and Reservists, hearing, 110th Cong., 1st sess., January 31, 2007, S.Hrg. 110-209
(Washington: GPO, 2007), p. 32; U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee on Economic
Opportunity, Status of Veterans Small Business, hearing, 111th Cong., 2nd sess., April 29, 2010, House Committee on
Veterans’ Affairs Serial No. 111-74 (Washington: GPO, 2010), pp. 17, 75; SBA, “Popular SBA Patriot Express Loan
Initiative Renewed for Three More Years,” December 10, 2010, at https://www.sba.gov/content/popular-sba-patriot-
express-loan-initiative-renewed-three-more-years; and U.S. Congress, House Committee on Veterans’ Affairs,
Subcommittee on Economic Opportunity, Status of Veterans Small Business, hearing, 111th Cong., 2nd sess., April 29,
2010, House Committee on Veterans’ Affairs Serial No. 111-74 (Washington: GPO, 2010), p. 17.
73 GAO, Patriot Express: SBA Should Evaluate the Program and Enhance Eligibility Controls, GA)-13-727,
September 13, 2013, pp. i, 10, 16-20, 25-30, 46-49, at http://www.gao.gov/assets/660/657793.pdf.
74 SBA, Office of Congressional and Legislative Affairs, correspondence with the author, February 21, 2014.
75 The SBAExpress program’s fees are the same as the 7(a) loan program’s fees. SBAExpress loans of $150,000 or less
approved in FY2014 do not have an up-front, one-time loan guaranty fee, and these loans do not have an annual,
ongoing loan servicing fee. SBAExpress loans of $150,001 to the SBAExpress limit of $350,000, with a maturity of
one year or less, have a 0.25% up-front, one-time loan guaranty fee and a 0.52% annual, ongoing loan servicing fee.
SBAExpress loans of $150,001 to the SBAExpress limit of $350,000, with a maturity over one year have a 3.0% up-
front, one-time loan guaranty fee and a 0.52% annual, ongoing loan servicing fee. To qualify for a waiver of the 3.0%
up-front, one-time loan guaranty fee, the business must be 51% or more owned and controlled by an individual or
individuals in one or more of the following groups: veterans (other than dishonorably discharged); service-disabled
veterans; active duty military servicemembers participating in the military’s Transition Assistance Program (TAP);
reservists and National Guard members; current spouse of any veteran, active duty servicemember, or any reservist or
National Guard member; or widowed spouse of a servicemember who died while in service or of a service-connected
disability. See SBA, “SBA Announces New Measures to Help Get Small Business Loans Into the Hands of Veterans,”
November 8, 2013, at https://www.sba.gov/content/sba-announces-new-measures-help-get-small-business-loans-hands-
veterans; and SBA, “Procedural Notice: SBA Veterans Advantage,” December 18, 2013, at https://www.sba.gov/sites/
default/files/lender_notices/5000-1299_0.pdf.
76 SBA, “SBA Announces New Measures to Help Get Small Business Loans Into the Hands of Veterans,” November 8,
2013, at https://www.sba.gov/content/sba-announces-new-measures-help-get-small-business-loans-hands-veterans.
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reduced SBA guaranty on loans.77 It provides a 50% loan guaranty on loan amounts up to
$350,000. In FY2014, the SBA approved 26,545 SBAExpress loans (51.0% of total 7(a) program
loan approvals) totaling $1.91 billion (9.9% of total 7(a) program amount approvals).78
In FY2014, the SBA also waived the up-front, one-time loan guaranty fee and the annual,
ongoing servicing fee for all 7(a) loans of $150,000 or less. The Obama Administration has
continued these fee waivers through the end of FY2015. In addition, “to encourage lending to
veteran-owned small businesses” the Administration is waiving 50% of the up-front, one-time
loan guaranty fee on all non-SBAExpress 7(a) loans to veterans exceeding $150,000 in FY2015.79
Congressional Issues: Access
As mentioned previously, the SBA has indicated in both testimony at congressional hearings and
in press releases that it views the Patriot Express program and its own overall effort to enhance
veterans’ access to capital as a success.80 For example, when the SBA announced its veterans’ fee
waiver for the SBAExpress program, it also announced that its lending to veteran-owned small
businesses had nearly doubled since 2009 and that “in FY 2013, SBA supported $1.86 billion in
loans for 3,094 veteran-owned small businesses.”81
Congressional testimony provided by various veteran service organizations provides a somewhat
different perspective. The SBA’s self-evaluation of its success in assisting veterans access capital
has focused primarily on the agency’s efforts to streamline the loan application approval process
(e.g., minimizing paperwork requirements and reducing the time necessary for the SBA to review
and approve applications submitted by local lenders) and aggregate lending amounts (e.g., the
number and amount of loans approved). In contrast, veteran service organizations focus primarily
on program outcomes, especially the likelihood of a veteran being approved for a SBA loan by a
local lender. For example, a representative of the American Legion testified at a congressional
hearing in 2010 that, at that time, being turned down for a SBA Patriot Express loan by a private
lender “is probably the largest, most frequent complaint that we receive from our business
owners.”82 At that same congressional hearing, a representative of the Vietnam Veterans of
America testified in response to that statement that “I would have to concur … in talking with
some of the veterans with regard to the Patriot Express Loan, they are having difficulties also to
acquire that capital. The rationale seems to be … the banks in general seem to be tightening the
credit, their lending practices, so that is … what we are hearing.”83 More recently, GAO reported
77 SBA, “The SBA Express Pilot Program: Inspection Report,” June 1998, p. 3.
78 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/2014),” at https://www.sba.gov/sites/default/files/
aboutsbaarticle/WebsiteReport_asof9_30_2014.pdf.
79 SBA, “SBA Information Notice: SBA Veterans Advantage – Renewal and Expansion of Fee Relief,” September 19,
2014, at https://www.sba.gov/sites/default/files/lender_notices/5000-1319.pdf.
80 U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee on Economic Opportunity, Status of Veterans
Small Business, hearing, 111th Cong., 2nd sess., April 29, 2010, House Committee on Veterans’ Affairs Serial No. 111-
74 (Washington: GPO, 2010), p. 75.
81 SBA, “SBA Announces New Measures to Help Get Small Business Loans Into the Hands of Veterans,” November 8,
2013, at https://www.sba.gov/content/sba-announces-new-measures-help-get-small-business-loans-hands-veterans.
82 U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee on Economic Opportunity, Status of Veterans
Small Business, hearing, 111th Cong., 2nd sess., April 29, 2010, House Committee on Veterans’ Affairs Serial No. 111-
74 (Washington: GPO, 2010), p. 17.
83 Ibid.
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in 2013 that “selected loan recipients, lenders, and veteran service organizations said that a low
awareness of the Patriot Express program among the military community was among the most
frequently cited challenges.”84
No empirical assessments of veterans’ experiences with either the SBA’s Patriot Express or
SBAExpress loan programs exist that would be useful for determining the relative ease or
difficulty for veteran-owned small business owners of accessing capital through the SBA’s loan
programs. Since 2010, many lenders report that they have eased their credit standards, at least
somewhat, for small business loans, suggesting the experiences of veterans seeking a SBA loan
guaranty today may be improved compared with their experiences in 2010. However, GAO found
in 2013 that many veterans were not fully aware of the SBA’s Patriot Express program and that
“over half of the Patriot Express loan recipients, six of the eight lenders, and two veteran service
organizations … said that [the] SBA could do more to increase outreach to veteran entrepreneurs
and better market the program to the military community.”85 GAO reported that low awareness of
the SBA’s Patriot Express program and the SBA’s participating lenders were a continuing
challenge for the SBA.86
One option to provide additional information concerning veterans’ experiences with the SBA’s
lenders would be to survey veterans who have received a SBA guaranteed loan. The survey could
include questions concerning these veterans’ views of the programs, including the application
process. However, obtaining a comprehensive list of veterans to survey who have been turned
down for a SBA guaranteed loan by a private lender would be difficult given privacy concerns.
Federal Contracting Goals for Service-Disabled
Veteran-Owned Small Businesses
Since 1978, federal agency heads have been required to establish federal procurement contracting
goals, in consultation with the SBA, “that realistically reflect the potential of small business
concerns” to participate in federal procurement. Each agency is required, at the conclusion of
each fiscal year, to report its progress in meeting the goals to the SBA.87 The SBA negotiates the
goals with each federal agency and establishes a small business eligible baseline for evaluating
the agency’s performance.
The small business eligible baseline excludes certain contracts that the SBA has determined do
not realistically reflect the potential for small business participation in federal procurement, such
as contracts awarded to mandatory and directed sources, awarded and performed overseas, funded
predominately from agency-generated sources, not covered by Federal Acquisition Regulations,
and not reported in the Federal Procurement Data System (e.g., contracts or government
84 GAO, Patriot Express: SBA Should Evaluate the Program and Enhance Eligibility Controls, GA)-13-727,
September 13, 2013, p. 33, at http://www.gao.gov/assets/660/657793.pdf.
85 Ibid.
86 Ibid.
87 P.L. 95-507, a bill to amend the Small Business Act and the Small Business Investment Act of 1958.
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procurement card purchases valued less than $3,000).88 These exclusions typically account for
18% to 20% of all federal prime contracts each year.
The SBA then evaluates the agencies’ performance against their negotiated goals annually, using
data from the Federal Procurement Data System–Next Generation, managed by the U.S. General
Services Administration, to generate the small business eligible baseline. This information is
compiled into the official Small Business Goaling Report, which the SBA releases annually.
Over the years, federal government-wide procurement contracting goals have been established for
small businesses generally (P.L. 100-656, the Business Opportunity Development Reform Act of
1988, and P.L. 105-135, the HUBZone Act of 1997—Title VI of the Small Business
Reauthorization Act of 1997); small businesses owned and controlled by socially and
economically disadvantaged individuals (P.L. 100-656); women (P.L. 103-355, the Federal
Acquisition Streamlining Act of 1994); small businesses located within a Historically
Underutilized Business Zone, or HUBZone (P.L. 105-135); and small businesses owned and
controlled by a service-disabled veteran (P.L. 106-50, the Veterans Entrepreneurship and Small
Business Development Act of 1999).
The current federal small business contracting goals are
• at least 23% of the total value of all small business eligible prime contract awards
to small businesses for each fiscal year;
• 5% of the total value of all small business eligible prime contract awards and
subcontract awards to small disadvantaged businesses for each fiscal year;
• 5% of the total value of all small business eligible prime contract awards and
subcontract awards to women-owned small businesses;
• 3% of the total value of all small business eligible prime contract awards and
subcontract awards to HUBZone small businesses; and
• 3% of the total value of all small business eligible prime contract awards and
subcontract awards to service-disabled veteran-owned small businesses.89
There are no punitive consequences for not meeting the small business procurement goals.
However, the SBA’s Small Business Goaling Report is distributed widely, receives media
attention, and heightens public awareness of the issue of small business contracting. For example,
agency performance as reported in the SBA’s Small Business Goaling Report is often cited by
Members during their questioning of federal agency witnesses in congressional hearings.
As shown in Table 3, the latest Small Business Goaling Report, using data in the Federal
Procurement Data System as of February 19, 2014, indicates that federal agencies met the federal
contracting goals for small businesses generally (for the first time in eight years) and for small
disadvantaged businesses in FY2013. Federal agencies awarded 23.39% of the value of their
small business eligible contracts to small businesses, 8.61% to small disadvantaged businesses,
88 See U.S. General Services Administration, Federal Procurement Data System—Next Generation, “Small Business
Goaling Report: Fiscal Year 2013,” at https://www.fpds.gov/downloads/top_requests/
FPDSNG_SB_Goaling_FY_2013.pdf.
89 15 U.S.C. §644(g)(1)-(2).
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4.32% to women-owned small businesses, 1.76% to HUBZone small businesses, and 3.38% to
service-disabled veteran-owned small businesses.90
For comparative purposes, the table also provides the percentages of total reported federal
contracts (without exclusions) awarded to small businesses, small disadvantaged businesses,
women-owned small businesses, HUBZone small businesses, and service-disabled veteran-owned
small businesses in FY2013.
Table 3. Federal Contracting Goals and Percentage of FY2013 Federal Contract
Dollars Awarded to Small Businesses, by Type
Percentage of FY2013
Percentage of FY2013
Federal Contracts
Federal Contracts
Business Type
Federal Goal
(small business eligible) (all reported contracts)
Smal Businesses
23.0%
23.39%
19.89%
Small Disadvantaged
5.0% 8.61% 6.97%
Businesses
Women-Owned Smal
5.0% 4.32% 3.49%
Businesses
HUBZone Smal Businesses
3.0%
1.76%
1.42%
Service-Disabled Veteran-
3.0% 3.38% 2.73%
Owned Small Businesses
Source: U.S. Small Business Administration, “Statutory Guidelines,” at http://www.sba.gov/content/goaling-
guidelines-0 (federal goals); U.S. General Services Administration, Federal Procurement Data System—Next
Generation, “Small Business Goaling Report: Fiscal Year 2013,” at https://www.fpds.gov/downloads/
top_requests/FPDSNG_SB_Goaling_FY_2013.pdf; and U.S. General Services Administration, Federal
Procurement Data System—Next Generation, at https://www.fpds.gov/fpdsng/ (contract dol ars).
Notes: The Federal Procurement Data System (FPDS) is a dynamic system with records updated daily. The FY
2013 Smal Business Goaling Report is based on FPDS data as of February 19, 2014. It reports that smal business
eligible contracts at that time totaled $355.4 billion and that $83.1 billion was awarded to small businesses, $30.6
billion to small disadvantaged businesses, $15.4 billion to women-owned small businesses, $6.2 billion to SBA-
certified HUBZone small businesses, and $12.0 billion to service-disabled veteran-owned small businesses. The
Smal Business Goaling Report for FY2013 does not indicate the total amount of federal contracts reported in
the FPDS as of February 19, 2014. Therefore, the percentages provided in the column for all reported contracts
in FY2013 were calculated using FPDS data as reported on December 4, 2014: $462.3 billion in total contracts,
$92.0 billion awarded to small businesses, $32.2 billion to small disadvantaged businesses, $16.1 billion to
women-owned small businesses, $6.5 billion to HUBZone small businesses, and $12.6 billion to service-disabled
veteran-owned small businesses.
90 U.S. General Services Administration, Federal Procurement Data System—Next Generation, “Small Business
Goaling Report: Fiscal Year 2013,” at https://www.fpds.gov/downloads/top_requests/
FPDSNG_SB_Goaling_FY_2013.pdf.
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Congressional Issues: Contracting Fraud91
The prevention of fraud in federal small business contracting programs, and in the SBA’s loan
programs as well, has been a priority for both Congress and the SBA for many years, primarily
because reports of fraud in these programs emerge with some regularity.92 Of particular interest to
veterans, GAO has found that “the lack of an effective government-wide fraud-prevention
program” has left the service-disabled veteran-owned small business program “vulnerable to
fraud and abuse.”93
Under the Small Business Act, a small business owned and controlled by a service-disabled
veteran can qualify for a federal government procurement set-aside (a procurement in which only
certain businesses may compete) or a sole-source award (awards proposed or made after
soliciting and negotiating with only one source) if the small business is at least 51%
unconditionally and directly owned and controlled by one or more service-disabled veteran.94 A
veteran is defined as a person who has served “in the active military, naval, or air service, and
who was discharged or released under conditions other than dishonorable.”95 A disability is
service related when it “was incurred or aggravated ... in [the] line of duty in the active military,
naval, or air service.”96
Federal agencies may set aside procurements for service-disabled veteran-owned small businesses
only if the contracting officer reasonably expects that offers will be received from at least two
responsible small businesses and the award will be made at a fair market price (commonly known
as the “rule of two” because of the focus on there being at least two small businesses involved).97
Federal agencies may award sole contracts to service-disabled veteran-owned small businesses
when (1) the contracting officer does not reasonably expect that two or more service-disabled
veteran-owned small businesses will submit offers; (2) the anticipated award will not exceed $3.5
million ($6 million for manufacturing contracts); and (3) the award can be made at a fair and
reasonable price.98 Otherwise, sole-source awards may only be made to service-disabled veteran-
91 For additional information and analysis concerning federal procurement small business issues see CRS Report
R42981, Set-Asides for Small Businesses: Legal Requirements and Issues, by Kate M. Manuel and Erika K. Lunder;
and CRS Report R43573, Federal Contracting and Subcontracting with Small Businesses: Legislation in the 113th
Congress, by Kate M. Manuel.
92 For example, see GAO, Small Business Administration: Undercover Tests Show HUBZone Program Remains
Vulnerable to Fraud and Abuse, GAO-10-920T, July 28, 2010, at http://www.gao.gov/assets/130/125130.pdf; GAO,
8(a) Program: Fourteen Ineligible Firms Received $325 Million in Sole-Source and Set-Aside Contracts, GAO-10-425,
March 30, 2010, at http://www.gao.gov/assets/310/302472.pdf; GAO, Service-Disabled Veteran-Owned Small
Business Program: Case Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain Millions of Dollars in
Contracts, GAO-10-108, October 23, 2009, at http://www.gao.gov/products/GAO-10-108; and GAO, Service-Disabled
Veteran-Owned Small Business Program: Vulnerability to Fraud and Abuse Remains, GAO-12-697, August 1, 2012, at
http://www.gao.gov/assets/600/593238.pdf.
93 GAO, Service-Disabled Veteran-Owned Small Business Program: Preliminary Information on Actions Taken by
Agencies to Address Fraud and Abuse and Remaining Vulnerabilities, GAO-11-589T, July 28, 2011, p. 3, at
http://www.gao.gov/products/GAO-11-589T.
94 15 U.S.C. §632(q)(1) & (4); P.L. 108-183, the Veterans Benefits Act of 2003; and P.L. 109-461, the Veterans
Benefits, Health Care, and Information Technology Act of 2006.
95 38 U.S.C. §101(2).
96 38 U.S.C. §101(16).
97 15 U.S.C. §657f(b).
98 15 U.S.C. §657f(a)(1)-(3) (statutory requirements); and 48 C.F.R. §19.1406(a) (increasing the price thresholds).
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owned small businesses under other authority, such as the Competition in Contracting Act.99
Service-disabled veteran-owned small businesses are not eligible for price evaluation preferences
in unrestricted competitions.
In addition, the Department of Veterans Affairs (VA) is statutorily required to establish annual
goals for the awarding of VA contracts to both service-disabled veteran-owned small businesses
and small businesses owned by other veterans.100 The VA is authorized to use “other than
competitive procedures” in meeting these goals. For example, it may award any contract whose
value is below the simplified acquisition threshold (generally $150,000) to a veteran-owned
business on a sole-source basis, and it may also make sole-source awards of contracts whose
value (including options) is between $150,000 and $5 million, provided that certain conditions
are met. When these conditions are not met, the VA is generally required to set aside the contract
for service-disabled or other veteran-owned small businesses.101
Service-disabled veteran-owned small businesses can generally self-certify as to their eligibility
for contracting preferences available under the Small Business Act.102 However, in an effort to
address fraud in VA contracting, veteran-owned and service-disabled veteran-owned small
businesses must be listed in the VA’s VetBiz database and have their eligibility verified by the VA
to be eligible for preferences in certain VA contracts.103
Firms that fraudulently misrepresent their size or status have long been subject to civil and
criminal penalties under Section 16 of the Small Business Act; SBA regulations implementing
Section 16; and other provisions of law, such as the False Claims Act, Fraud and False Statements
Act, Program Fraud Civil Remedies Act, and Contract Disputes Act.104
Several bills were introduced during the 112th Congress to address fraud in small business
contracting programs in various ways. Of particular interest to veterans, S. 3572, the Restoring
Tax and Regulatory Certainty to Small Businesses Act of 2012, and S. 633, the Small Business
99 10 U.S.C. §2304(c)(1)-(7) (procurements of defense agencies); and 41 U.S.C. §3304(a)(1)-(7) (procurements of
civilian agencies). See also 48 C.F.R. §§6.302-1 to 6.302-7; and CRS Report R40516, Competition in Federal
Contracting: Legal Overview, by Kate M. Manuel.
100 P.L. 109-461 and P.L. 110-389, the Veterans’ Benefits Improvements Act of 2008. In FY2014, the Department of
Veterans Affairs’ small business procurement goals were 34.77% for small businesses generally, 12.00% for veteran-
owned small businesses, 10.00% for service-disabled veteran-owned small businesses, 5.00% for small disadvantaged
businesses (including Section 8(a)), 5.00% for women-owned small businesses, and 3.00% for Historically
Underutilized Business Zone (HUBZone) small businesses. See The Secretary of Veterans Affairs, “Memorandum for
Under Secretaries, Assistant Directors, Other Key Officials, Deputy Assistant Secretaries, Heads of Contracting
Activity, and Field Officers: Fiscal Year (FY) 2014 Department of Veterans Affairs (VA) Socioeconomic Procurement
Goals,” August 25, 2014, at http://www.va.gov/OSDBU/docs/VA-SmallBusinessGoalsFY2014.pdf.
101 For further information and analysis of federal contracting legal authorities generally and affecting the Department
of Veterans Affairs, see CRS Report R42391, Legal Authorities Governing Federal Contracting and Subcontracting
with Small Businesses, by Kate M. Manuel and Erika K. Lunder.
102 13 C.F.R. §125.15.
103 38 U.S.C. §8127(a)(1)(A). P.L. 109-461 requires the Secretary of Veterans Affairs to “establish a goal for each
fiscal year for participation in Department contracts (including subcontracts)” by veteran-owned small businesses. The
Secretary is also required to establish a separate goal for the participation of service-disabled veteran-owned small
businesses in agency contracts and subcontracts. 38 U.S.C. §8127(a)(1)(A). However, the latter goal can be no less than
the government-wide goal for the percentage of contract and subcontract dollars awarded to service-disabled veteran-
owned small businesses given in Section 15(g)(1) of the Small Business Act (currently 3%), while the former goal is
within the Secretary’s discretion. See 38 U.S.C. §8127(a)(2)-(3).
104 See 15 U.S.C. §645; and 13 C.F.R. §125.29.
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Contracting Fraud Prevention Act of 2011, would have, among other changes, amended Section
16 of the Small Business Act to expressly include service-disabled veteran-owned small
businesses among the types of small businesses subject to penalties for fraud under that section.105
The bills would also have required service-disabled veteran-owned small businesses to register in
the VA’s VetBiz database, or any successor database, and have their status verified by the VA to be
eligible for contracting preferences for service-disabled veteran-owned small businesses under the
Small Business Act.
In addition, during the 113th Congress, S. 2334, the Improving Opportunities for Service-Disabled
Veteran-Owned Small Businesses Act of 2013, and its companion bill in the House, H.R. 2882,
and H.R. 4435, the Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal
Year 2015, which was passed by the House on May 22, 2014, included a provision that would
have authorized the transfer of the VetBiz database’s administration and the verification of
service-disabled veteran owned small businesses from the VA to the SBA.
Advocates of requiring service-disabled veteran-owned small businesses to register in the VetBiz
database and have their status verified by the VA (or the SBA) to be eligible for contracting
preferences under the Small Business Act argue that doing so would reduce fraud.106 As then-
Senator Snowe stated on the Senate floor when she introduced S. 633, “Our legislation attempts
to remedy the spate of illegitimate firms siphoning away contracts from the rightful businesses
trying to compete within the SBA’s contracting programs.”107
Others worry that requiring service-disabled veteran-owned small businesses to register in the
VetBiz database and have their status verified by the VA (or the SBA) to be eligible for
contracting preferences under the Small Business Act may add to the paperwork burdens of small
businesses. They seek alternative ways to address the need to reduce fraud in federal small
business procurement programs that do not increase the paperwork requirements of small
businesses.108 Still others note that the effectiveness of any change to prevent fraud in veteran-
owned and service-disabled veteran-owned small business procurement programs largely depends
upon how the change is implemented. For example, in July 2011, the VA’s Office of Inspector
General concluded that the VA’s implementation of its veteran-owned and service-disabled
veteran-owned small business procurement fraud prevention programs needed improvement:
We project that VA awarded ineligible businesses at least 1,400 VOSB [Veteran Owned
Small Business] and SDVOSB [Service-Disabled Veteran Owned Small Business] contracts
valued at $500 million annually and that it will award about $2.5 billion in VOSB and
105 Currently, Section 36 of the Small Business Act, which governs set-asides and sole-source awards for service-
disabled veteran-owned small businesses, provides that “[r]ules similar to the rules of paragraphs (5) and (6) of Section
637(m) of this title shall apply for purposes of this section.” Section 8(m) governs set-asides for women-owned small
businesses and itself provides that such businesses are subject to penalties for fraud under Section 16. Thus, an
argument could potentially be made that service-disabled veteran-owned small businesses are currently subject to
penalties under Section 16 even if they are not expressly included there. See CRS Report R43573, Federal Contracting
and Subcontracting with Small Businesses: Legislation in the 113th Congress, by Kate M. Manuel.
106 See 13 C.F.R. §§125.9-125.13.
107 Senator Olympia Snowe, “Statements on Introduced Bills and Joint Resolutions,” remarks in the Senate,
Congressional Record, vol. 157, part no. 41 (March 17, 2011), p. S1843.
108 U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on Technology,
Information Policy, Intergovernmental Relations and Procurement Reform, Jobs for Wounded Warriors: Increasing
Access to Contracts for Service Disabled Veterans, 112th Cong., 2nd sess., February 7, 2012, Serial No. 112-143
(Washington: GPO, 2012), pp. 86-90.
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SDVOSB contracts to ineligible businesses over the next 5 years if it does not strengthen
oversight and verification procedures. VA and the Office of Small and Disadvantaged
Business Utilization (OSDBU) need to improve contracting officer oversight, document
reviews, completion of site visits for “high-risk” businesses, and the accuracy of VetBiz
Vendor Information Pages information.109
For further information and analysis concerning legislation designed to address fraud in small
business contracting programs, see CRS Report R43573, Federal Contracting and
Subcontracting with Small Businesses: Legislation in the 113th Congress, by Kate M. Manuel.
The Military Reservist Economic Injury Disaster
Loan Program
P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999, signed
into law on August 17, 1999, authorized the SBA’s Military Reservist Economic Injury Disaster
Loan (MREIDL) program. The SBA published the final rule establishing the program in the
Federal Register on July 25, 2001, with an effective date of August 24, 2001.110
The Senate Committee on Small Business provided, in its committee report on the Veterans
Entrepreneurship and Small Business Development Act of 1999, the following reasons for
supporting the authorization of the MREIDL Program:
During and after the Persian Gulf War in the early 1990’s, the Committee heard from
reservists whose businesses were harmed, severely crippled, or even lost, by their absence.
Problems faced by reservists called to active duty and their small businesses were of a varied
nature and included cash-flow problems, difficulties with training an appropriate alternate
manager on very short notice to run the business during the period of service, lost clientele
upon return, and on occasion, bankruptcy. These hardships can occur during a period of
national emergency or during a period of contingency operation when troops are deployed
overseas.
To help such reservists and their small businesses, the Committee seeks to provide credit and
management assistance to small businesses when an essential employee (i.e., an owner,
manager or vital member of the business’ staff) is a reservist called to active duty. The
Committee believes that financial assistance in the form of loans, loan deferrals and
managerial guidance are effective ways to minimize the adverse financial demands of the
call to active duty. They not only ameliorate financial difficulties but also strengthen small
businesses.111
109 U.S. Department of Veterans Affairs, Office of Inspector General, “Audit of Veteran-Owned and Service-Disabled
Veteran-Owned Small Business Programs,” July 25, 2011, p. i, at http://www.va.gov/oig/52/reports/2011/VAOIG-10-
02436-234.pdf.
110 SBA, “Military Reservist Economic Injury Disaster Loans,” 66 Federal Register 38528-38531, July 25, 2001.
111 U.S. Congress, Senate Committee on Small Business, Veterans Entrepreneurship and Small Business Development
Act of 1999, report to accompany H.R. 1568, 106th Cong., 1st sess., August 4, 1999, S.Rept. 106-136 (Washington:
GPO, 1999), p. 4.
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The House Committee on Small Business also supported the program’s authorization, indicating
in its committee report that the program
will also fulfill a long unmet need to assist our military reservists who are small business
owners. Often these individuals, called to service at short notice, come back from fighting to
protect our freedoms only to find their businesses in shambles. H.R. 1568 will establish loan
deferrals, technical and managerial assistance, and loan programs for these citizen soldiers so
that while they risk their lives they need not risk their livelihoods.112
As mentioned previously, the SBA provides direct loans for owners of businesses of all sizes,
homeowners, and renters to assist their recovery from natural disasters. The SBA’s MREIDL
program provides disaster assistance in the form of direct loans of up to $2 million to help small
business owners who are not able to obtain credit elsewhere to (1) meet ordinary and necessary
operating expenses that they could have met but are not able to meet; or (2) enable them to
market, produce, or provide products or services ordinarily marketed, produced, or provided by
the business that cannot be done because an essential employee has been called up to active duty
in his or her role as a military reservist or member of the National Guard due to a period of
military conflict.113 Under specified circumstances, the SBA may waive the $2 million limit (e.g.,
the small business is in immediate danger of going out of business, is a major source of
employment, employs 10% or more of the workforce within the commuting area in which the
business is located).114
P.L. 106-50 defines an essential employee as “an individual who is employed by a small business
concern and whose managerial or technical expertise is critical to the successful day-to-day
operations of that small business concern.”115 The act defines a military conflict as (1) a period of
war declared by Congress; or (2) a period of national emergency declared by Congress or the
President; or (3) a period of contingency operation. A contingency operation is designated by the
Secretary of Defense as an operation in which our military may become involved in military
actions, operations, or hostilities (peacekeeping operations).116
The SBA is authorized to make such disaster loans either directly or in cooperation with banks or
other lending institutions through agreements to participate on an immediate or deferred basis.
The loan term may be up to a maximum of 30 years and is determined by the SBA in accordance
with the borrower’s ability to repay the loan. The loan’s interest rate is the SBA’s published
interest rate for an Economic Injury Disaster Loan at the time the application for assistance is
approved by the SBA. Economic Injury Disaster Loan interest rates may not exceed 4%.
112 Ibid., p. 15.
113 SBA, “Disaster Assistance Program: SOP 50-30-7,” May 13, 2011, p. 48, at https://www.sba.gov/sites/default/files/
sops/SOP%2050%2030%207.pdf; and 13 C.F.R. §123.508. For further information and analysis concerning the SBA’s
disaster assistance loan program see CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible
Issues for Congress, by Bruce R. Lindsay.
114 13 C.F.R. §123.507.
115 P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999, Section 402. Assistance
To Active Duty Military Reservists; and 15 U.S.C. §636(b). The SBA’s Military Reservist Economic Injury Disaster
Loan Program applies to economic injury suffered or likely to be suffered as the result of a period of military conflict
occurring or ending on or after March 24, 1999.
116 P.L. 106-50, Section 402 and 15 U.S.C. §636(c).
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The SBA is not required by law to require collateral on disaster loans. However, the SBA has
established collateral requirements for disaster loans based on “a balance between protection of
the Agency’s interest as a creditor and as a provider of disaster assistance.”117 The SBA generally
does not require collateral to secure a MREIDL loan of $50,000 or less. Larger loan amounts
require collateral, but the SBA will not decline a request for a MREIDL loan for a lack of
collateral if the SBA is reasonably certain the borrower can repay the loan.118
In FY2014, the SBA disbursed one MREIDL loan amounting to $19,500. Since the MREIDL’s
inception through September 30, 2014, the SBA has disbursed 345 MREIDL loans amounting to
$32.37 million. Of these 345 loans, 84 loans (24.3% of the total number of MREIDL loans
disbursed), amounting to $7.42 million (22.9% of the total amount of MREIDL loans disbursed),
have been charged off (a declaration that the debt is unlikely to be collected) by the SBA.119
Because the MREIDL program is relatively small and noncontroversial, this report does not
present a discussion of the congressional issues affecting the program.
Concluding Observations
Congressional interest in federal programs designed to assist veterans in their transitions from
military into civilian life has increased in recent years for a variety of reasons, especially because
of the relatively high rate of unemployment experienced by veterans who have left the military
since 2001. The SBA’s veteran assistance programs have also experienced a heightened level of
congressional interest and scrutiny in recent Congresses. For example, the SBA’s veteran business
development programs, loan guaranty programs, and federal procurement programs for small
businesses generally, including service-disabled veteran-owned small businesses, have all been
subject to congressional hearings during the past two Congresses. Also, as has been discussed,
several bills have been introduced in recent Congresses to address the SBA’s management of
these programs and fraud.
Given the many factors that influence business success, measuring the effectiveness of the SBA’s
veteran assistance programs, especially the programs’ effect on veteran job retention and creation,
is both complicated and challenging. For example, it is difficult to determine with any degree of
precision or certainty the extent to which any changes in the success of a small business result
primarily from that business’s participation in the SBA’s programs or from changes in the broader
economy. That task is made even more challenging by the absence of performance outcome
measures that could serve as a guide. In most instances, the SBA uses program performance
measures that focus on indicators that are primarily output related, such as the number and
amount of loans approved for veteran-owned small businesses and the number and amount of
federal contracts awarded to service-disabled veteran-owned small businesses.
117 SBA, “Disaster Assistance Program: SOP 50-30-7,” May 13, 2011, p. 152, at https://www.sba.gov/sites/default/
files/sops/SOP%2050%2030%207.pdf.
118 13 C.F.R. §123.513.
119 SBA, Office of Congressional and Legislative Affairs, “Correspondence with Robert Dilger,” December 6, 2014. In
FY2011, the SBA disbursed 10 MREIDL loans amounting to $1.15 million. In FY2012, the SBA disbursed seven
MREIDL loans amounting to $834,300. In FY2013, the SBA disbursed three MREIDL loans amounting to $121,200.
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Both GAO and the SBA’s Office of Inspector General have recommended that the SBA adopt
more outcome-related performance measures for the SBA’s loan guaranty programs, such as
tracking the number of borrowers that remain in business after receiving a SBA guaranteed loan
to measure the extent to which the SBA contributed to their ability to stay in business.120 Other
performance-oriented measures that Congress might also consider include requiring the SBA to
survey veterans who participate in its business development programs or who have received a
SBA guaranteed loan. This survey could provide information related to the difficulty the veterans
experienced in obtaining a loan from the private sector, their experiences with the SBA’s loan
application process, and the role the SBA loan had in creating or retaining jobs. The SBA could
also survey service-disabled veteran-owned small businesses that were awarded a federal contract
to determine the extent to which the SBA was instrumental in their receiving the award and the
extent to which the award contributed to their ability to create jobs or expand their scope of
operations.
Author Contact Information
Robert Jay Dilger
Sean Lowry
Senior Specialist in American National Government
Analyst in Public Finance
rdilger@crs.loc.gov, 7-3110
slowry@crs.loc.gov, 7-9154
Acknowledgments
The authors would like to express their appreciation to CRS legislative attorneys Kate Manuel and Erika
Lunder. Much of this report’s section on Congressional Issues: Contracting Fraud was drawn from their
work on small business contracting issues, especially CRS Report R42390, Federal Contracting and
Subcontracting with Small Businesses: Issues in the 112th Congress, by Kate M. Manuel and Erika K.
Lunder and CRS Report R43573, Federal Contracting and Subcontracting with Small Businesses:
Legislation in the 113th Congress, by Kate M. Manuel.
120 GAO, Small Business Administration: 7(a) Loan Program Needs Additional Performance Measures, GAO-08-
226T, November 1, 2007, p. 2, http://www.gao.gov/new.items/d08226t.pdf; and SBA, Office of the Inspector General,
SBA’s Administration of the Microloan Program under the Recovery Act, December 28, 2009, pp. 6, 7,
http://www.gao.gov/new.items/d08226t.pdf.
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