By Jason Stverak
Congress should pass the Veterans Member Business Loan Act before the 119th Congress ends. Lawmakers have a practical opportunity to help veterans build businesses, support their families, and put their experience to work in their communities. They should take it.
Washington rarely struggles to find something appreciative to say about veterans. The harder test comes when supporting them requires changing a law. On business lending, Congress has allowed an outdated restriction to stand between credit unions and veterans they could responsibly serve. Another expression of gratitude will not fix that.
The problem is straightforward. Federal law generally limits covered credit unions’ member business lending to 12.25 percent of their assets, although exceptions apply and a lower limit can apply depending on net worth. That ceiling measures the lender’s overall business loan portfolio. It does not decide whether an individual veteran has a sound business plan or can repay a loan.
An Example to Consider
Consider the illustrative example, a veteran mechanic needs $250,000 for equipment. The credit union has only $150,000 remaining under its lending cap. Assume the borrower qualifies, the business can repay, and the lender has the resources and expertise to make the loan. Without an applicable exception, the cap still blocks that full loan.
Explain that to the mechanic waiting to expand the shop. The customers may be there. The equipment may make financial sense. Yet a restriction written in Washington can prevent a willing credit union from financing the next step. Congress has the power to remove that obstacle.
H.R. 507 and S. 110 would exclude qualifying credit made to veterans from the member business lending cap. The bipartisan effort is led by Representatives Vicente Gonzalez and Brian Fitzpatrick and Senators Dan Sullivan and Mazie Hirono. Congress should turn that bipartisan support into an enacted law.
The proposal preserves the lender’s responsibility to make prudent decisions. Credit unions would still evaluate repayment ability, manage concentration risk, and maintain adequate capital and liquidity. Excluding a qualifying loan from the cap does not remove it from the balance sheet. The credit union still bears the lending risk, and the borrower still owes the money.
No New Program, No New Fed Funds
The introduced bills also create no new federal lending program, appropriate no new loan funds, and provide no new government loan guarantee. Credit unions would finance these loans with their own resources. Congress can expand opportunity by changing an unnecessary restriction on responsible lending.
The economic stakes deserve attention. Census Bureau datashow veterans owned approximately 1.6 million American businesses in 2023, generating about $1 trillion in receipts. Those businesses are part of the everyday economy. When a veteran expands a repair shop or buys equipment for a growing construction company, the potential benefits reach employees, suppliers, and customers nearby.
Access to financing matters beyond the day a business opens. A Government Accountability Office report, drawing on 2022 survey data, found 82 percent of veteran business owners used personal savings and assets to finance ongoing operations and improvements, compared with 68 percent of nonveteran owners. That reliance can put business needs and household emergencies in direct competition for the same savings.
A suitable business loan carries costs and risks, but it can provide another option. Veterans deserve the chance to compare responsible offers and choose what works for them. Congress should make that choice easier to obtain.
A Particular Stake
Defense credit unions have a particular stake in getting this right. Our relationships with military communities can continue through a member’s transition to civilian life. A veteran considering business ownership should be able to bring that ambition to a credit union that understands military service and has earned the member’s trust.
For rural and underserved communities, another capable lender can matter enormously. The existence of unused lending capacity somewhere else does little for a veteran whose local credit union offers the right relationship and expertise but is constrained by the cap. Access has to work where the borrower actually lives and does business.
The American Legion recognizes the importance of this issue. In January, it joined DCUC in urging congressional leaders to advance this legislation. DCUC renewed the case for veteran lending relief in its September comments on Main Street capital access. Congress has heard the rationale. It should act on it.
The Real Debate
Banking trade groups may prefer a debate about credit union competition. Veterans need a debate about their financing options. Banks can compete for these borrowers by offering attractive terms and strong service. Protecting an incumbent lender from competition is a poor reason to limit a veteran’s choices.
Congress should resolve the practical drafting details, including clear treatment of businesses organized as companies, and move the legislation. The House Financial Services Committee and Senate Banking Committee should advance it, and congressional leaders should secure a path to enactment this year, including an appropriate legislative package if necessary. A veteran should not have to wait through another election cycle for this straightforward reform.
Credit union leaders should ask their representatives and senators for a concrete commitment to passage. Veterans and their advocates should ask when support will become a vote. Every additional Congress spent reintroducing this proposal leaves the same avoidable barrier in place.
Veterans have already demonstrated a willingness to take responsibility and do difficult work. Congress should give them greater freedom to build their next chapter. Pass the Veterans Member Business Loan Act and let credit unions do more to help them succeed.
Jason Stverak is chief advocacy officer with the Defense Credit Union Council.
