The characteristics of small businesses owned by veterans closely align with those owned by nonveterans, as revealed by GAO’s analysis of 2020 Annual Business Survey data. Common traits among both types include a predominance of businesses with fewer than 10 employees, primarily situated in urban areas. GAO’s examination of Small Business Credit Survey data further identified shared challenges faced by veteran-owned businesses in accessing capital, with notable issues being prolonged wait times for credit decisions, cumbersome application processes, and elevated interest rates.
To foster small business ownership among veterans, the Small Business Administration (SBA) administers training and education through veterans business outreach centers, operated by state and local agencies and other eligible organizations. However, GAO discovered that certain quarterly performance reports submitted by these centers lacked essential information, such as the number of counseling sessions. Implementing procedures to ensure compliance with reporting requirements would enhance SBA’s oversight capabilities.
SBA plays a pivotal role in facilitating capital access for small business owners, including veterans, through three distinct loan programs. The 7(a) program offers financing through commercial lenders, the 504 program caters to financing needs for fixed assets like buildings or machinery, and the Microloan program provides financing up to $50,000 alongside technical assistance. Notably, veteran-owned small businesses secured approximately 2–5 percent of all loans within these programs from fiscal years 2016 to 2021.
Percentage of Loans to Veterans, for SBA’s 7(a), 504, and Microloan Programs, Fiscal Years 2016–2021
SBA currently lacks established policies and procedures to adhere to specific statutory requirements related to veterans. Notably, SBA’s standard operating procedures lack clarification on how the agency intends to provide special consideration to veterans, as mandated by the Small Business Act and SBA’s implementing regulation. Moreover, SBA does not have formal procedures for reporting to congressional committees, resulting in an inability to demonstrate compliance in recent years. Implementing comprehensive policies and procedures for these statutory requirements is essential to ensure SBA’s adherence to legal obligations, provide special consideration to veterans, and keep Congress duly informed.
Despite veterans constituting approximately 6 percent of businesses with paid employees in 2020, veteran entrepreneurs encounter challenges in accessing small business capital. The Small Business Act mandates certain SBA small business lending programs and requires the agency to give special consideration to veterans, further authorizing the establishment of veterans outreach programs.
This report, prompted by the need to examine capital access for veteran-owned small businesses and SBA’s role in serving them, addresses key objectives. These include describing characteristics of veteran-owned businesses and their capital access challenges, scrutinizing SBA’s performance data on its veterans outreach program, assessing SBA lending to veteran-owned small businesses from 2016 to 2021, and evaluating the agency’s policies and procedures for compliance with selected statutory requirements concerning veterans. GAO conducted a comprehensive review of national small business data, SBA policies, procedures, and lending program data, alongside interviews with agency officials, 22 veterans outreach center directors, and 11 veterans who participated in SBA programs.
Read the full GAO report here.
