American Legion and Defense Credit Union Council send letter to congressional leadership urging quick passage of Veterans Member Business Loan Act.
On Jan. 21, The American Legion and the Defense Credit Union Council (DCUC) sent a joint letter to congressional leaders to quickly advance H.R. 507 and S. 110, the Veterans Member Business Loan Act. The legislation would expand access to capital for veteran-owned small businesses at no cost to taxpayers.
The letter, sent to Speaker Mike Johnson, Senate Majority Leader John Thune, Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, stresses how too many veterans face unnecessary barriers when seeking financing to start or grow businesses after their military service.
While veteran-owned businesses already employ more than 5.3 million Americans and generate nearly $963 billion annually, the share of U.S. businesses owned by veterans has declined sharply in recent years, falling from 11 percent in 2014 to just over 8 percent in 2020.
“This important legislation will empower our nation’s veterans to access the capital they need to start and grow small businesses in their civilian lives by removing outdated barriers that currently prevent credit unions from fully serving those who have served us all,” the letter said. “In short, this bill is a common-sense, zero-cost reform that will help fulfill the promise of opportunity our veterans have earned through their service.
“After putting their lives on the line for our country, many veterans return home eager to launch small businesses, yet too often these aspiring veteran entrepreneurs face an uphill battle in accessing capital. They bring home the same dedication, discipline, and technical skills that served our nation so well, only to find the financing system isn’t working for them. We hear the stories of decorated veterans with solid business plans being turned away by traditional lenders or offered loans on terms that would cripple their new ventures.”
The letter notes that studies show veteran entrepreneurs are approved for business loans at lower rates than non-veterans and are more likely to rely on personal savings due to financing gaps. Seventy-five percent of veterans cite access to capital as a top challenge when starting or expanding a business, while 72 percent of veteran business owners end up using personal or family savings as their primary source of startup capital. That’s compared to 62 percent of non-veterans.
“This capital gap is not due to any lack of effort or skill on the part of veterans. In fact, according to the U.S. Small Business Administration, veteran business owners are more likely to be denied loans or given smaller loan amounts than their non-veteran counterparts even when they have strong business plans and credit histories,” the letter said. “Simply put, traditional lenders are not fully meeting the needs of those who have worn this nation’s uniform. The result is a loss of potential: fewer veteran-owned startups, fewer local jobs created by veterans, and a dimming of the economic contribution of a generation that has so much to offer. We find this unacceptable.”
Both the Legion and DCUC noted credit unions can be part of the solution. “If banks aren’t meeting veterans’ financing needs, then America’s credit unions – particularly defense credit unions dedicated to military communities – are eager to fill this gap,” the letter said. “These member-owned, not-for-profit institutions often have branches right on bases or in the towns where service members settle after duty. They understand the unique circumstances of military life and are mission-driven to serve those who have served our nation. Credit unions have a strong track record of reaching underserved borrowers and offering the kind of patient, personalized small business lending that veteran entrepreneurs need.”
The Veterans Member Business Loan Act would remove a barrier for credit unions to act: An arbitrary federal cap on member business lending is blocking credit unions from fully helping veteran-owned businesses. Since 1998, federal law has limited most credit unions to lending no more than 12.25 percent of their total assets to businesses. Both the Legion and DCUC noted the law forces credit unions to turn away deserving veteran borrowers once the cap is reached, even if the credit union is financially strong and eager to do more.
“This legislation amends the Federal Credit Union Act to exclude loans made to veteran-owned businesses from the definition of a ‘member business loan,’ thereby exempting such loans from the 12.25-percent lending cap,” the letter states. “In practical terms, if this bill becomes law, any business loan a credit union makes to a veteran entrepreneur would no longer count against the cap. Credit unions would finally be free to lend to veteran-owned businesses up to the full extent that safety, soundness and prudent underwriting allow – just as they already can for home mortgages and farm loans.
“This is a prudent change that maintains all regulatory oversight and safety requirements on credit unions, while simply lifting a rigid ceiling that now prevents veterans from getting fair access to capital. By unlocking credit unions’ capacity to serve veteran entrepreneurs, we can unleash a new wave of veteran-led small business growth across the country.”
Read the entire text of the letter here.
- Veterans Business