Deploying Capital for Veteran Entrepreneurs

Veteran Loan Fund is putting $5 million from Wells Fargo to work for veteran small business owners.
Feb 7, 2023 9:22 AM ET
Man stands in front of car wash with his dog
U.S. Army veteran Xiaobo Guan was struggling as a first-time business owner until capital and education from the Veteran Loan Fund helped him make improvements to his self-service car wash business.

During one of Xiaobo Guan’s scouting drives around the Norcross, Georgia, area, it dawned on him that his newly acquired self-service car wash couldn’t compete with the others in town. The competition was able to charge double, but Guan’s machines were so old that he couldn’t raise his prices — or capitalize on the potential of his new business. He needed funds to purchase upgraded equipment.

Guan is not alone. According to SCORE Association, a network of business mentors, veterans represent 9.1% of all American small business owners and generate $1 trillion annually in receipts, but there is an estimated annual demand for $100 million in capital from veteran entrepreneurs who do not receive any kind of funding for their businesses. Guan was also struggling as a first-time business owner. “It was really hard in the beginning,” he said. “I had no idea how to do things.”

His situation did an about-face after he reached out to ACE (Access to Capital for Entrepreneurs), a community development financial institution, or CDFI, in Georgia. “When I told them I was a disabled Army veteran, they said I qualified for a loan from the Veteran Loan Fund,” Guan said.

Specialized support for veterans

The Veteran Loan Fund matches military veterans and their spouses with affordable capital from one of its growing number of member CDFIs that currently include Access to Capital for Entrepreneurs (Georgia), Appalachian Community Capital (Virginia), Black Business Investment Fund (Florida), Business Impact Northwest (Washington), Colorado Enterprise Fund (Colorado), DreamSpring (New Mexico), Economic and Community Development Institute (Ohio), Justine Petersen (Missouri), Pathway Lending (Tennessee), PeopleFund (Texas), Pursuit (New Jersey), and Wisconsin Women’s Business Initiative Corporation (Wisconsin). This includes loans with single-digit interest rates, financial education, and a professional network of accountants, lawyers, and experienced business owners.

Many veterans find that the skills they hone in the military — like operational leadership, discipline, and strategic planning — can be hard to translate into a resume in a way that makes sense to a hiring manager, said Grant Bennett, director of the Veteran Loan Fund and a U.S. Army and Texas Army National Guard veteran. However, those skills translate very well to small business ownership. “Veterans make really good entrepreneurs,” said Bennett.

“Entrepreneurship can be a very rewarding career path as people transition out of the military, but veterans need more access to capital and expertise to operationalize their business plans,” said Jenny Flores, head of Small Business Growth Philanthropy at Wells Fargo. “We support the Veteran Loan Fund’s vision for a more inclusive economy and are proud to offer seed funding for this national effort to boost veteran-owned businesses.”

In addition to a $3.5 million loan to the Veteran Loan Fund from the company’s Community Lending and Investment business, Wells Fargo provided a $1.5 million grant from its Open for Business Fund to make it possible for the CDFIs participating in the Veteran Loan Fund to offer affordable loans to eligible veterans and for the fund to break even.

“When a CDFI like ACE borrows $1 million from the Veteran Loan Fund, they also receive a $100,000 grant,” explained Bennett. “They can use the grant money as loan loss reserves, on operational expenses to build out their veteran programs, or whatever they need to support their veteran programs, either on the balance sheet or operationally.”

Since the launch of the fund, member CDFIs have deployed more than $18 million in loans, helping create or retain more than 1,400 jobs and providing close to 5,000 hours of free technical assistance.