A New Attempt to Goose Lending for Veteran-Owned Businesses

Last week, the Small Business Administration made it easier for business owners to get loans backed by the agency, waiving fees for borrowing up to $150,000. This week, the SBA is extending a similar offer to veteran-owned businesses, eliminating fees for loans up to $350,000 from Jan. 1 to Sept. 30, 2014. The waiver program “is part of SBA’s broader efforts to make sure that veterans have the tools they need to start and grow a business,” SBA acting chief Jeanne Hulit said in a press release.

On average, the waiver could save borrowers around $4,000 in fees. That should help increase the number of veteran-owned businesses, which has decreased (PDF) to 1.7 million in 2012, from 1.9 million in 2008, according to the SBA Office of Advocacy. The SBA backed $1.9 billion in loans to more than 3,000 veteran-owned businesses in the year ended Sept. 30. About three-quarters of those loans were for less than $350,000.

A separate SBA lending guarantee program to veteran-owned businesses has been the subject of recent criticism. In September, the Government Accountability Office published a report questioning the effectiveness of the SBA’s Patriot Express loan program, which guarantees loans of up to $500,000 for military veterans. From June 2007 through the end of 2012, the SBA backed about $703 million under the pilot program, which has been authorized to run through the end of this year.

Patriot Express loans were more likely to fail than those made under related SBA programs, and lax oversight (PDF) made it difficult to ensure that borrowers were actually veterans, the GAO said. The fee waiver announced by the SBA today is for loans to veteran-owned businesses made under another SBA program, and may signal that the agency doesn’t intend to continue the Patriot Express pilot when it expires at the end of the year.

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