Despite Federal Incentives, Fewer Veterans Are Starting Businesses

In 1996, military veterans founded one out of every eight new U.S. businesses, according to the Kauffman Foundation (PDF). Last year,] the figure was close to one in 20. Veterans are reaching retirement age faster than they are entering the workforce, creating opportunities for veterans to launch companies that contract with the government. What’s going on?

Here’s a closer look at entrepreneurship rates, showing the average percentage of working-age adults who start a business each month. Kauffman calls this the Index of Entrepreneurial Activity (PDF), and it shows veteran startup rates declining even faster than the rate for non-veterans.

The obvious explanation is demographic. Seven million veterans have turned 65 since 1999, according to (spreadsheet) the Department of Veterans Affairs. An additional 6 million will reach the traditional retirement age over the next 15 years. Recent wars in Iraq and Afghanistan mean that more veterans entering the workforce, though not enough to replace those leaving it.

Meanwhile, the pool of federal money available to veteran entrepreneurs is expanding. Congress created a preference for government contractors owned by service-disabled veterans in 2003. The program has grown from $760 million that year to $11 billion in 2014. The Small Business Administration, meanwhile, has offered steady support for loan programs designed to grease the wheels for veterans.

Both programs have come in for criticism. Federal agencies have awarded millions in contracts earmarked for veterans to companies that weren’t owned by veterans, according to a string of watchdog reports. The SBA program, meanwhile, has been criticized for putting veterans into loans they can’t afford.

Still, fewer veteran-owned companies are competing for the same amount of SBA loans and a vastly expanded pool of contracting dollars. Sounds like a good time to go into business.

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