[Senate Report 114-411]
[From the U.S. Government Publishing Office]


                                                      Calendar No. 542
114th Congress      }                                    {      Report
                                 SENATE
 2d Session         }                                    {     114-411

======================================================================



 
          THE VETERANS ENTREPRENEURIAL TRANSITION ACT OF 2015

                                _______
                                

               December 20, 2016.--Ordered to be printed

   Filed, under authority of the order of the Senate of December 10 
                  (legislative day, December 9), 2016

                                _______
                                

Mr. Vitter, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1870]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 1870) to amend the Small 
Business Act to require the Administrator of the Small Business 
Administration to carry out a pilot program on issuing grants 
to eligible veterans to start or acquire qualifying businesses, 
and for other purposes, having considered the same, reports 
favorably thereon with an amendment, and recommends that the 
bill (as amended) do pass.

                            I. INTRODUCTION

    The Veterans Entrepreneurial Transition Act of 2015 (S. 
1870) was introduced by Senator Moran on July 27, 2015.
    The Veterans Entrepreneurial Transition Act establishes a 
three-year grant program within the Small Business 
Administration (SBA) that would provide funding to no more than 
250 eligible veterans to start or acquire a qualifying 
business. To be eligible, a veteran or group of veterans would 
need to complete entrepreneurship training and prepare a 
business plan that must be approved by an SBA-authorized 
advisor.
    Senator Vitter filed a manager's amendment in the nature of 
a substitute which further clarified the eligibility 
requirements for veterans participating in the pilot program. 
The amendment includes the additional requirement that the 
grant be used for purposes consistent with the activities and 
objectives set forth in the applicant's business plan. It also 
includes a GAO report to be done within one year of conclusion 
of the pilot program in order to evaluate the program for 
issues pertaining to administrative difficulties, fiscal 
responsibility and whether the program is consistent with the 
original purposes of the GI Bill.
    The bill, as amended, was approved by voice vote.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    According to the U.S. Census Bureau, there are over 21.8 
million veterans in the United States. Since 2001, over 2 
million men and women have completed tours of service in the 
U.S. military and returned to civilian life. It is projected 
that an additional million will leave the Armed Forces over the 
next five years. That number could be much larger with planned 
force reductions.
    Veterans own an estimated 2.4 million businesses in the 
United States, accounting for approximately one-tenth of all 
businesses nationwide (U.S. Census Bureau). According to the 
Kauffman Foundation, 45 percent of veterans start their own 
business after their military service is completed. Veterans 
who wish to engage in entrepreneurship need access to 
resources, training, and support to pursue their dreams, start 
a business, employ other Americans, and generate growth in the 
economy.
    In the Office of Veteran Business Development at the SBA, 
there are several different resources or programs available to 
assist veterans in starting a small business. Some of these 
programs are effective, but there is room for improvement to 
tailor programming to the needs of veterans on their path of 
entrepreneurship. The Kauffman Foundation reports that 
``veteran entrepreneurship shares have been declining steadily 
over the past two decades. In 1996, veterans represented 12.3 
percent of all new entrepreneurs. By 2011, veterans comprised 
just 6 percent of new entrepreneurs.'' The research by Kauffman 
attributes this decline to the fact that ``younger veterans now 
have less support from within their own community.'' As they 
consider their own entrepreneurial ventures there are fewer 
networking opportunities, mentors and funders.

                      III. HEARINGS & ROUNDTABLES

    In the 113th Congress:
    On April 18, 2013, the Committee held a roundtable 
entitled, ``The State of Veteran Entrepreneurship: 
`Vetpreneur.''' The seven roundtable participants included 
representatives from the SBA, GallantFew, Troop ID & Troopswap, 
Maestro Blocks, TechStars Patriot Boot Camp, Kauffman 
Foundation FasTrac Veteran's Initiative, and American Legion. 
During the roundtable, the Committee examined the success of 
the existing programs that assist veterans in general, and that 
assist veterans in launching their own small businesses. The 
committee also considered ideas from participants on how these 
current programs may be improved to better support veteran 
entrepreneurs.

                        IV. DESCRIPTION OF BILL

    The bill will provide veterans the opportunity to pursue 
their small business and entrepreneurial aspirations by giving 
them access to resources through the Small Business 
Administration. The bill will establish a 3-year pilot program 
that enables up to 250 GI Bill benefit-eligible veteran's 
applicants to start a new business or purchase as existing 
business or franchise. The pilot program includes a thorough 
applications process and requires participation in an approved 
entrepreneurial training program. The entrepreneurial training 
program will require them to develop a business plan to be 
approved by their training camp advisor and the SBA's Associate 
Administrator for Veterans Business Development. Once the 
veteran's business plan is approved, they may receive an amount 
equivalent to that of their GI Bill benefit in the form of a 
grant in order to implement their business plan and start their 
small business enterprise. The bill does not purport to 
interfere with the existing GI Bill eligibility or benefits.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on July 27, 
2015.
    A motion to adopt the Veterans Entrepreneurial Transition 
Act, a bill to allow veterans the opportunity to pursue their 
small business and entrepreneurial aspirations by giving them 
access to resources through the Small Business Administration 
was approved by voice vote with the following Senators present: 
Vitter, Gardner, Peters, Heitkamp, Shaheen, Enzi, Booker, 
Cantwell, Hirono, Fischer, Ernst, and Scott.

                           VI. COST ESTIMATE

    In compliance with rule XXVI (11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                                September 16, 2015.
Hon. David Vitter,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1870, the Veterans 
Entrepreneurial Transition Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.

S. 1870--The Veterans Entrepreneurial Transition Act of 2015

    Basis of estimate: For this estimate, CBO assumes that S. 
1870 will be enacted near the end of calendar year 2015, that 
the necessary amounts will be appropriated each year, and that 
spending will follow historical patterns for similar grants. 
CBO estimates that implementing S. 1870 would cost $80 million 
over the 2016-2020 period, assuming appropriation of the 
necessary amounts. The bill would establish a three-year grant 
program within the Small Business Administration (SBA) that 
would provide funding to no more than 250 eligible veterans to 
start or acquire a qualifying business. To be eligible, a 
veteran or group of veterans would need to complete 
entrepreneurship training and prepare a business plan that must 
be approved by an SBA-authorized advisor.
    Participating veterans who complete the required training 
and develop an approved business plan would be eligible to 
receive a grant equal to their unused veteran's education 
benefits plus a monthly housing allowance for each month they 
participate in the program. Participants also would be 
reimbursed for costs associated with the required 
entrepreneurship training. (Receipt of a grant would not affect 
veterans' eligibility for education benefits.)
    Although S. 1870 would authorize only 250 grants, the bill 
would allow groups of veterans to apply; each group would be 
treated as a single application against the maximum of 250 
grants. The amount funded under each grant, however, would be 
calculated based on the number of veterans participating in the 
group. Because the bill would create an incentive for veterans 
to team up in order to maximize the grant funding available for 
their business, CBO expects that half of the applications would 
be for individual proprietors and the remainder would consist 
of larger groups of veterans. (According to the SBA, 70 percent 
of small businesses are sole proprietorships.) We estimate that 
each application would, on average, consist of three eligible 
veterans; therefore, benefits would be available to about 750 
individuals. The amount available to each participant would be 
broken into three components:
    An amount equal to the number of months of educational 
assistance available to the veteran at the time the application 
is submitted multiplied by the monthly rate for educational 
assistance under current law. Based on the costs for veterans 
that are using education assistance benefits for other 
purposes, we estimate the educational assistance benefits would 
be worth about $1,900 per month, on average, and that 
participating veterans would be eligible for about 32 months of 
those benefits. Assuming appropriation of the necessary 
amounts, we estimate that those grants would cost $45 million 
over the 2016-2020 period.
    Summary: S. 1870 would establish a pilot program to provide 
grants to veterans that would be used to start or acquire a 
small business. The program would be authorized to award no 
more than 250 grants during a three-year period.
    CBO estimates that implementing S. 1870 would cost $80 
million over the 2016-2020 period, assuming appropriation of 
the necessary funds. Pay-as-you-go procedures do not apply to 
this legislation because enacting the bill would not affect 
direct spending or revenues.
    S. 1870 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary effect of S. 1870 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                 By fiscal year, in millions of dollars--
                                                         -------------------------------------------------------
                                                            2016     2017     2018     2019     2020   2016-2020
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION
 
Estimated Authorization Level...........................        *       27       26       26        *        80
Estimated Outlays.......................................        *       23       26       26        4        80
----------------------------------------------------------------------------------------------------------------
Notes: Components may not sum to total because of rounding. * = less than $500,000.

    Additional assistance equal to the basic allowance for 
housing that the Department of Defense pays to enlisted service 
members with dependents and a rank of E-5, multiplied by the 
number of months the veteran participates in the program (the 
housing allowance would be reduced by half if the veteran is 
also employed elsewhere). CBO estimates housing assistance 
would be worth about $1,650 per month, on average, and that 
participating veterans would be eligible for about 75 percent 
of that amount for the duration of the pilot program (because 
we expect half of the recipients would be employed elsewhere). 
Assuming appropriation of the necessary amounts, we estimate 
that this additional assistance would cost $32 million over the 
2016-2020 period.
    Training assistance equal to the cost of entrepreneurial 
training, if requested by the participant. Based on the costs 
of entrepreneurial training programs offered at several 
institutions of higher education, we estimate that training 
assistance would cost about $1 million over the 2016-2020 
period, assuming appropriation of the necessary amounts.
    Finally, we estimate that SBA would spend $2 million to 
administer the program over the 2016-2020 period.
    Pay-As-You-Go considerations: None.
    Intergovernmental and private-sector impact: S. 1870 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal costs: Susan Willie and David 
Newman; Impact on state, local, and tribal governments: Melissa 
Merrell; Impact on the private sector: Logan Smith.
    Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                  VII. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI(11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS

    Section 1. Short title: Designates this bill as the 
``Veterans Entrepreneurial Transition Act of 2015'' or the 
``VET Act of 2015.''
    Section 2: Amends Section 32 of the Small Business Act to 
add the Veterans Small Business Entrepreneurship Pilot Program
    No later than 90 days after the enactment of the Act, that 
the Administrator, in consultation with the Advisory Committee 
on Veterans Business Affairs (15 U.S.C. 657b) and the Secretary 
of Veterans Affairs, shall begin a pilot program designed to 
assess the feasibility and advisability of providing grants to 
eligible veterans who wish to start or acquire a small 
business.
    The Administrator shall promote efficiency, accountability 
and competition in carrying out the pilot program.
    The Administrator and Advisory Committee will determine as 
appropriate the qualifying business enterprises for eligibility 
are a small business as defined by the Small Business Act, a 
franchise business, or any other category of business, such as 
a start-up.
    Restricts the number of grants awarded by the Administrator 
to no more than 250 eligible veterans in the pilot program, 
ensures geographic diversity of grants awarded and the duration 
of the pilot is three years beginning on the date the pilot 
program is implemented by the Administrator.
    In order to qualify and possibly receive a grant through 
the pilot program, eligible veterans are required to submit an 
application within the first two years of the pilot program. 
The application must include: A description of how the grant 
amount will be used, including a description of the qualifying 
business enterprise. A description of the expected return on 
investment resulting from the grant amount. A certification 
that the eligible veteran will complete the required education 
and training program and that the veteran understands that he 
or she will not receive the grant amount until the required 
education and training program has been completed. Any other 
certification that the Administrator and Advisory Committee 
determine are necessary by rule, depending on the type of 
business enterprise and as determined appropriate, such as: 
Proof of good standing, profitable operation, and guarantees 
relating to the purchase of the enterprise if a veteran is 
purchasing an already existing small business; proof of 
compliance with applicable State and Federal laws on franchises 
and proof of training in conformation with the industry 
standard if the eligible veteran is starting a franchise 
enterprise; or a proposal for operation that leads to a 
profitable operation if a veteran pursues a startup or an 
enterprise not in operation at the time of application.
    A certification that the eligible veterans understands when 
applying for the grant that he or she will not receive funds 
through the grant until after his or her business plan has been 
approved under the required procedures.
    A group of eligible veterans may apply as a group under the 
pilot program, and they will be treated as a single eligible 
veteran for the purposes of the program, except in regards to 
the maximum amount of the grant, which is to be calculated by 
multiplying the maximum amount available for one rant by the 
number of members of the group.
    Each eligible veteran must complete an entrepreneurship 
readiness program approved by the Administrator that will 
prepare the veteran for ownership and management of their 
qualifying business enterprise in order to receive a grant.
    An approved training program may include any program 
approved by the Administrator or Secretary of Veterans Affairs 
for entrepreneurship training; a program available through the 
Department of Defense's Transition Assistance Program; any 
program approved by the Administrator in consultation with the 
Advisory Committee that is determined appropriate because of 
the expertise it offers relating to a certain type of business 
enterprise (such as a startup); or through any of the following 
as outlined in the Small Business Act: Small Business 
Development Center, Women's Business Center, Veterans Business 
Outreach Center, and the SCORE program.
    An eligible veteran must submit a business plan for 
approval that contains, but is not limited to the following in 
order to qualify for the grant: Description of how the business 
enterprise will achieve a profitable operation in a reasonable 
amount of time. An assessment of relevant economic indicators, 
consumer data, production and sales data, and market any 
industry analysis. Any other information determined appropriate 
by the Administrator in consultation with the Advisory 
Committee. The Associate Administrator for Veterans Business 
Development of the Small Business Administration shall review 
and approve or disapprove a veteran's business plan in 
coordination with the veteran's training program advisor.
    The maximum grant amount includes funds for the purpose of 
starting a business enterprise and any additional assistance 
amount provided on a monthly basis.
    The maximum grant amount will be equal to the amount of the 
number of months of educational assistance an eligible veteran 
is entitled to on the date of their application through their 
GI Bill benefits as determined in Chapters 30 and 33 of Title 
38.
    The veteran is eligible for additional assistance in the 
form of a basic housing allowance for each month that he or she 
participates in the pilot program, which is calculated based on 
chapter 33 of title 38 and is dependent on the employment 
status of the veteran at the time of application to the pilot 
program. If a veteran is not employed on the date of the 
application and the SBA pilot program to start a small business 
is their full-time means of employment, they may be eligible 
for the full amount of additional assistance just as a full-
time student in higher education under title 38 is calculated 
according to the rate in effect for each veteran. If a veteran 
is employed on the date of the application for the SBA pilot 
program, they may be eligible for half of the amount of 
additional assistance just as a part-time student in higher 
education under title 38 is calculated according to the rate in 
effect for each veteran. If necessary, the Administrator may 
pay for the entrepreneurial training program pursued by a 
veteran. The amount of the grant may be disbursed to the 
veteran in installments (no earlier than 3 months or later than 
1 year from the previous installment), and only after the 
veteran has completed the required entrepreneurship training, 
their business plan has been approved and according to 
established milestones, as appropriate in their business plan.
    In accordance with any rules and limitations that the 
Administrator, in consultation with the Advisory Committee, 
establish; and for purposes relating to starting or acquiring 
their qualifying business enterprise that the Administrator and 
Advisory Committee determine appropriate, including purchasing 
goods or services needed for creating the operation, funding a 
project directed toward any economic development objective as 
outlined by the Small Business Investment Act, or for acquiring 
a qualifying business enterprise.
    In implementing the pilot program, the Administrator shall 
maximize existing relationships with the public and private 
sector to ensure successful outcomes for participants in the 
pilot program and to prevent redundancy with existing public 
and private programs.
    The Administrator shall submit a report, no later than 2 
years after the start of the pilot program, to the House and 
Senate Committees on Small Business and Entrepreneurship and 
Veterans Affairs that provides the following: An assessment of 
the pilot program, a survey of all the grantees under the pilot 
program, and the number of grantees that participated in each 
of the described training programs, recommendations regarding 
which aspects of the pilot program should be made permanent, 
and the means to ensuring geographic and demographic diversity 
as well as business enterprise diversity within the program, 
assessment of whether grants should be distributed through 
installments or a one-time, lump-sum payment; assessment of the 
additional assistance, particularly the accountability and use 
of the additional assistance; analysis of and recommendations 
regarding the process for approving business plans; 
recommendations for improving accountability of advisors.
    Not later than 1 year after the date where the pilot 
programs is terminated, the Comptroller General of the United 
States will submit a report to Congress that evaluates the 
pilot program in respect to: Administrative difficulties, 
issues of fiscal responsibility, duplication with existing 
entrepreneurship pilot programs within the Federal Government, 
and whether the pilot program is consistent with the Post-9/11 
G.I. Bill.
    There is no modification to any time limitation or period 
during which an individual is entitled to educational 
assistance under the GI Bill.
    Definitions for the following: Advisor, Advisory Committee, 
Business Plan, Eligible Veteran, Franchise Business Enterprise, 
Franchisee, Franchisor, Pilot Program, Qualifying Business 
Enterprise, Startup and Subfranchisor.

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