[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE SBA BUDGET FOR FY 2016: DOES IT MEET
THE NEEDS OF AMERICA'S SMALL BUSINESSES?
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
FEBRUARY 25, 2015
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-003
Available via the GPO Website: www.fdsys.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
TOM RICE, South Carolina
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
MIKE BOST, Illinois
CRESENT HARDY, Nevada
NYDIA VELAAZQUEZ, New York, Ranking Member
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
Kevin Fitzpatrick, Staff Director
Stephen Dennis, Deputy Staff Director for Policy
Jan Oliver, Deputy Staff Director for Operation
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velaazquez............................................ 2
WITNESS
Hon. Maria Contreras-Sweet, Administrator, United States Small
Business Administration, Washington, DC........................ 4
APPENDIX
Prepared Statements:
Hon. Maria Contreras-Sweet, Administrator, United States
Small Business Administration, Washington, DC.............. 20
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
National Association of Federal Credit Unions (NAFCU)........ 23
U.S. Women's Chamber of Commerce (USWC)...................... 24
THE SBA BUDGET FOR FY 2016: DOES IT MEET THE NEEDS OF AMERICA'S SMALL
BUSINESSES?
----------
WEDNESDAY, FEBRUARY 25, 2015
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 2:00 p.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, Luetkemeyer, Hanna, Rice,
Gibson, Brat, Hardy, Radewagen, Velaazquez, Chu, Hahn, Clarke,
Meng, Payne and Lawrence.
Chairman CHABOT. The Committee will come to order.
Good afternoon, everyone. We want to thank the
Administrator of the SBA, Maria Contreras-Sweet for joining us
here this afternoon. I believe this is her first appearance
this Congress--the 114th Congress. She is always a welcome
visitor to us. And I want to particularly acknowledge and thank
her for coming to my district a couple of weeks ago, to
Cincinnati, and we, together, had a number of events--in an
area called Over-the-Rhine, a number of small businesses, as
well as credit union, and met with the Chamber and did a town
meeting and a whole range of things. And she was obviously
extremely knowledgeable and I think made a wonderful impression
on the people of Cincinnati, and we thank you for coming. I
really do.
Today, the Committee will hear from the Administrator about
the President's Fiscal Year 2016 budget request. Two questions
arise. First, are the resources sufficient to help small
business grow the middle class jobs that America needs? And
second, are the resources allocated in an open and transparent
manner?
It is important to note that there are numerous other
policies that are as critical for small businesses as those
that will be raised today. Among those are the following: small
businesses deserve tax reform because the current code is so
complex, it makes their lives miserable. They need a regulatory
regime that protects health and the environment without
imposing outrageous costs. They need financial markets that are
not so burdened by government oversight that access to capital
to small businesses oftentimes is all but impossible. They need
a simple system for exports and imports, one that does not
require navigation of a maze-like bureaucracy.
Now, turning to the SBA budget request, I believe that it
is more than sufficient to meet the needs of America's
entrepreneurs. Where I disagree with that request is in the
priorities revealed in the request.
For example, the SBA budget makes no mention of hiring
additional key personnel who will help small businesses enter
the federal contracting marketplace, a key pillar of the Small
Business Act. The budget fails to allocate additional funds or
explain how the Agency will update its Loan Management
Accounting System that still utilizes 1960s computer
technology. The budget request disturbingly fails to mention
the absence of a chief information officer to oversee
implementation of computer technology. The budget request makes
no mention of resources needed to implement changes made to
SBA's government contracting programs that have yet to be
implemented.
Instead, the SBA budget request is replete with its own
initiatives and priorities. These include more funds for, among
other things: entrepreneurial outreach programs that duplicate
services in many instances provided by existing partners; a new
computer system not requested by Congress, the Loan Information
Network for Access to Credit that is intended to help small
businesses find SBA lending partners; and Executive Direction.
This request for more than $5 million in Executive
Direction is particularly troubling. After more than 60 years
of existence, Executive Direction from the SBA suddenly
determines that a more than century-old statute, the Anti-
Deficiency Act, applies to the closing of loans without any
explanation. Executive Direction from the Agency entails
waiting 30 years to update the application process for small
business investment companies and then failing to publish that
update in the Federal Register. Executive Direction forces
changes in cost accounting procedures for Small Business
Development Center grantees but provides no mechanism for
challenging that action. If these are the types of decisions
that will result from increased Executive Direction, it
represents very questionable use of resources in my opinion.
The SBA must reconsider its priorities to minimize risk to
taxpayers from a $100 billion loan portfolio while maximizing
opportunities that ensure small businesses will prosper and
create needed middle-class jobs. That should include a top-down
reexamination of the Agency's procedures for creating policy.
Ultimately, budgeting is about the bottom line for small
businesses. For the SBA, the budget is about accountability.
The budget request is the Agency's defense of its priorities to
taxpayers, current small business owners, entrepreneurs, and
Congress. If this is the Agency's defense, than it has not
gotten that accountability right.
And I would now yield to the ranking member, Ms.
Velaazquez, for her opening statement.
Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
Our economy continues exhibiting signs of strength, and
small businesses are vital to this resurgency. Last year,
companies with fewer than 500 workers expanded their payrolls
by more than two million positions. That is roughly two-thirds
of the three million total new hires. Clearly, as with previous
economic recoveries, our nation's small business sector will be
instrumental to our overall progress. Given the central role
small firms and entrepreneurs play in creating new jobs and
furthering growth, it is critical we work to ensure small
businesses have the tools they need to succeed. The Small
Business Administration plays a vital role in this regard.
Access to capital is the perennial challenge for all small
businesses. When private capital markets are insufficient for
small companies seeking affordable loans, the SBAs initiatives
help fill in the gaps. Last fiscal year, the agency supported
nearly $19 billion in lending through its 7A program alone.
Another $4 billion in lending was made available for capital-
intensive projects through the agency's 504 initiative. In many
instances, these were businesses that might struggle to secure
financing elsewhere. It is vital that the SBA's capital
programs function smoothly and continue serving as a backstop
to private capital markets.
For small firms to succeed, they need more than capital.
Technical know-how and guidance on everything from how to
develop a business plan to export products to new markets can
make a difference between whether a business thrives or goes
under. To help meet those needs, the SBA has a range of
entrepreneurial development initiatives. The agency's network
of Small Business Development Centers and Women's Business
Development Centers are spread throughout the country,
providing valuable counseling services to startups and growing
companies in every region.
Beyond capital and technical assistance, the SBA also plays
a vital role in helping small businesses and disadvantaged
firms secure their fair share of federal contracts. Federal
procurement efforts are responsible for $500 billion in
economic activity. When small firms are awarded these type of
projects, the benefits are twofold. Taxpayers receive quality
goods and services at fair prices, while small companies are
able to grow, and in many cases add employees to their payroll.
In that sense, the SBA's contracting programs are another
element critical to our overall economic health. Given the
myriad of ways the small business administration can be
critical to the health of the small business sector, it is
paramount that the agency's scarce resources be invested
wisely.
I look forward to hearing the administrator's views
regarding the agency's priorities moving forward.
With that, I thank the chairman again for holding this
important hearing, and I want to thank the administrator for
being here today. I yield the balance of my time.
Chairman CHABOT. Thank you very much.
We will now introduce our sole witness here this afternoon,
the administrator, who took her position in April 2014 becoming
the 24th administrator of the U.S. Small Business
Administration, and a member of President Obama's cabinet on
April 7, 2014. Prior to her arrival in Washington, Contreras-
Sweet founded the first Latino-formed commercial bank in
California in more than 35 years that focused on serving small-
and medium-sized businesses.
We welcome you here again this afternoon, Madam
Administrator, and we generally have a five-minute rule but we
open it up to you to take such time as you might consume within
reason since there is just one witness. Thank you very much for
being here.
STATEMENT OF MARIA CONTRERAS-SWEET, ADMINISTRATOR, UNITED
STATES SMALL BUSINESS ADMINISTRATION
Ms. CONTRERAS-SWEET. Thank you. Thank you again for that
generous introduction, Chairman Chabot. And, of course, to
Ranking Member Velaazquez and the distinguished members of the
Committee. Thank you for this opportunity to testify about
SBA's FY 2016 budget.
Chairman, congratulations. It is nice to see you come back
to your Committee. Your leadership and your record on
bipartisanship and your commitment to the small businesses is a
great tribute to our country. Thank you for that.
I know there are many new faces on the committee, and I
have already had some productive conversations with some of
you, and I look forward to visiting with all of you and your
districts in the months ahead.
Entrepreneurs, I agree, Ms. Velaazquez, are the backbone of
our economy. They exude confidence. They exude courage and
character. The programs in this budget have one thing in
common: they seek to maximize opportunities for small business
owners to create jobs and contribute their talents to our
economy.
That is the Agency's mission, and that is why I am here. To
accomplish this goal, we must continue our work to modernize
the SBA, so that we are accessible and relevant to the business
community in the 21st century.
To that end, I want to share with you an important
achievement in this document before you. Our Fiscal Year 2016
budget proposal contains a zero subsidy request for our core
capital programs. Those would be the 7(a), the 504 and the
Small Business Investment Company (SBIC) programs. We are proud
of this achievement and the fiscal responsibility that it
represents.
I am an entrepreneur and a former community banker. I take
my fiduciary responsibility seriously, and this budget
represents my commitment to be a good steward of taxpayer
dollars. For Fiscal Year 2016, the SBA requests $860 million.
In time of tight budgets, the SBA is doing more with less.
SBA's zero subsidy achievement means that this proposed budget
comes in three percent below our current budget.
The SBA is making good loans, and we project we will cover
any loan losses through fees in Fiscal Year 2016. We have
achieved this despite waving fees on small-dollar loans. This
fee relief helped us increase lending to minority-owned
businesses by 23 percent last year, so we propose continuing it
in Fiscal Year 2016.
I have completed 10 months on the job now. And thanks to
the bipartisan support we have enjoyed from this Committee, we
have made some important progress together. Together, we met
our 23 percent small business goal contracting goal for the
first time in eight years. We supported nearly $29 billion in
lending last year, which created or sustained nearly 600,000
jobs. In the same period, our resource partners counseled 1.2
million entrepreneurs. Our SBIC funds increased their
investments by 60 percent and provided $5.5 billion in patient
capital to promising small firms. We expanded our Boots to
Business program to train more than 15,000 service members at
165 military installations worldwide.
In his State of the Union address, the President spoke
about our economic recovery and job growth. I will tell you
something you already know: It is our small businesses that are
leading this economic comeback.
This budget requests an increase in our 7(a) lending
authorization to meet the growing demand for SBA capital. Last
year, Congress raised our 7(a) authorization level as we
approached our lending cap, resulting in an all-time lending
record of $19.2 billion in approvals. This year, we are asking
for our highest authorization level yet of $21 billion.
This budget also seeks full funding for our resource
partners. The loan counseling provided by our Small Business
Development Centers, our SCORE partners, the Women's Business
Centers and the Veterans Business Outreach Centers helps
entrepreneurs across America start, grow, or reinvigorate their
businesses.
Partnering with them is one of the smartest investments we
can make.
This budget seeks a modest $950,000 increase for veterans
outreach programs. We propose to offer SBA's Boots to Business
entrepreneurial training program to the National Guard, the
Reserve component members, and additional military
installations. We are asking to offer our Boots to Business
Reboot program to veterans who have already transitioned out.
And we are proposing to continue the fee reductions on
loans to veterans, so we can serve these heroes as well as they
have served us.
We are also asking to expand SBA's microloan program level
by
40 percent to increase the ability of microlenders to
capitalize startups and provide technical assistance. We are
Convinced this expansion would fill a real need for more
small-dollar loans in the current commercial market. It will
help underserved and rural businesses turn a profit and create
more jobs.
This budget also seeks to improve our customer service. As
a former community banker, I understand that the best way to
make SBA more effective is to make our products and processes
easier, quicker, and more cost-effective. This budget structure
accomplishes this critical goal by migrating more of our
services online, where more and more banking is taking place
today.
This April, we will roll out our highly anticipated SBA One
system. This is the automation of the entire 7(a) loan
application. It is going to significantly cut the cost and time
of our application process. We recently demonstrated this new
service to our bankers, and the feedback has been
overwhelmingly positive.
Last year, I rolled out my modernization plan to fashion a
21st century SBA that stands for smart, bold and accessible.
Smart means implementing systems that harness technology to
deliver capital more effectively. Bold means opening new
markets for small business owners both at home and abroad. And
accessible means making our services available to all,
including women, veterans, rural entrepreneurs, seniors, and
the disadvantaged.
As the ranking member indicated, more than two million of
the three million jobs generated last year were created by
small businesses. This budget would help us build on this
momentum. It would give us the resources we need to perform our
core mission and help more small businesses innovate, launch,
hire, and grow.
Again, many thanks to the members of this Committee and to
our very committed staff at the SBA across the country.
Thank you, Mr. Chairman.
Chairman CHABOT. Thank you very much for your testimony,
Madam Administrator, and I will recognize myself for five
minutes.
My first question, as you know, I had introduced
legislation last Congress to help small businesses, the
investment companies, SBICs. What is the SBA doing to make that
application process more open, transparent, and less complex?
Ms. CONTRERAS-SWEET. First of all, let me compliment you on
sponsoring, or I should say sort of being the patron of the
Family of Funds program. We are really looking forward to
having that tool, so I want to thank you right at the front end
for that leadership. We think it is an important tool for job
creation. The fact that we have a cap. I know if you have
success fund or another it prohibits you from going on to the
next, so I just wanted to thank you for that foremost.
But, you know, on the SBICs, we have been at zero subsidy
now for about 11 years, and I have to tell you that that
program has seasoned executives that really vet these
applications, and as a result, I think we are having that kind
of success. If you are hearing that the process is arduous, I
would be more interested in learning more about that because it
is, you know, the government obviously guaranteeing investments
that are higher risk, and so we just wanted to make sure that
we are doing our complete due diligence and maintaining the
kind of confidence that you have in us.
Chairman CHABOT. Thank you.
I will have my staff follow up with your staff on the
particulars because I only have five minutes. So I do not want
to take up all the time on that.
Ms. CONTRERAS-SWEET. Sure. Thank you.
Chairman CHABOT. The SBA uses private sector partners to
provide capital, as you know, to small businesses. These
programs have specific missions. What procedures does the SBA
have to ensure that small business investment companies, 7(a)
lenders, certified development companies, and microloan
intermediaries are complying with their statutory mission?
Ms. CONTRERAS-SWEET. We do a couple of things. Well,
several things, but one of the things that I am installing
recently that I think you will be pleased to know is in
banking, as you generously mentioned, when I was back in Los
Angeles, I founded a community business bank. And one of the
things that we always enjoyed was having a sense of
predictability. No one wants too much government regulation,
but at least when you know what it is and you understand why it
exists in terms of banking, for example, it is really important
to be able to anticipate what is going to happen. So I felt
that in terms of our regulation, for example, as you mentioned,
in CDCs, our regulation, or rather our oversight I should say
was not as clear to people when we went in to examine it. There
was a standard process through which we regulated or examined
these partners. And so we are installing a new program that we
call PARRiS. And it will do just that, sir. It will make sure
that we have a standard, anticipated, confident program that
people can plan to, manage to, so that when we get there, we
all talk in the same language.
Chairman CHABOT. Thank you.
I had a meeting, along with a couple other members of this
Committee with--and one who is on Ways and Means and was not a
member of this Committee, but with a number of small businesses
from around the country. There were eight, exactly, and some
groups, and we discussed a number of issues. We met for about
an hour. And one of the issues, not surprisingly, these were
small businesses that are actually engaged in trade,
international trade for the most part. I think seven of the
eight were. And as you know, trade is critical to our economy.
Ninety-six percent of the consumers around this globe are
located outside the boundaries of the United States, and
unfortunately, one to two percent of small businesses are
engaged in international trade, and that is despite the
Internet and access that was unheard of years ago.
But one of the principal topics that they wanted to talk
about--there were a number. They talked about Ex-Im Bank and
other things, but we talked about the importance of, first of
all, TPA (Trade Promotion Authority), which used to be called
Fast Track years ago which no president has had in a while. But
we have got to do that first. And then TPP is hopefully
something that would not be too far down the road from there,
the Trans-Pacific Partnership. And then T-TIP with Europe.
So my question for you, Madam Administrator, would be I
know and understand from others that the President has really
stepped up his game in working on both sides of the aisle. He
really only needs to work one side of the aisle; we are working
the other side of the aisle. But it is going to take--this will
truly have to be bipartisan to get this done. So could you
comment on what the Administration is thinking relative to
moving TPA, TPP, T-TIP?
Ms. CONTRERAS-SWEET. I admire your interest, and I am
grateful for your interest in the globalized economy because I
think whether we want to be a part of it or not, it is upon us.
When you light up your website, you are already there.
And so first, if I may go to the specific and then go to
the general, let me just say that specifically at the SBA, when
I mentioned in my opening address about the smart, bold, and
the accessible, the bold really meant about--was speaking to
the market making. I do think that we have to help small
businesses engage and protect them. Not protectionist but
rather guide them through the international marketplace. And so
to that extent, you know that we have USIACs that we deploy. We
have products that help. We have really strong products that
have a 90 percent guarantee. Lamentably, it is just not a well-
known product and so that is one place where we can work
together.
But then to your general point about the administration,
clearly, the president has made this a top priority of his. He
understands that if we do not set some rules of engagement,
China will set them for us. And so in that regard, I know the
president has asked all of us at Cabinet to make this a top
priority. And so I have been traveling across the country to
try to engage the conversation, have people give us feedback
about what that could look like. I have been meeting directly
with Mike Froman, my cabinet colleague about an SME chapter and
what that should include. We are taking valid input across the
country from people, and it is informing our process. But to
the extent that we get TPA and TPP, we think that that will set
a great foundational framework for T-TIP.
Chairman CHABOT. Thank you very much. My time has expired.
But to the extent that I can, please let me urge you to do
everything within your power to emphasize to the Administration
the importance of passing these trade pieces of legislation are
to small businesses across the country, and you and I in our
different capacities I think should do everything we can to do
that. So thank you very much. I appreciate it.
And I now recognize the gentlelady from New York, the
ranking member of the Committee, Ms. Velaazquez.
Ms. VELAAZQUEZ. Thank you, Mr. Chairman. And welcome,
Administrator Contreras-Sweet.
You know, one of the biggest challenges that we face in our
country is the income inequality, the widening gap. For few,
the economy is doing extremely well, but for a big majority
they are not. And so one of the programs that we have within
the Small Business Administration is the PRIME program that
serves to help very low income entrepreneurs. However, the
program is slated for termination by your agency. And instead,
the SBA chooses to target the most wealthy business owners
through programs like Emerging Leaders, which require almost
half a million dollars in annual revenues to gain entry. So I
would like to ask you, of the new pilot programs, the new
initiatives that you are proposing this year, which one of them
is designed specifically for very low income entrepreneurs,
like PRIME?
Ms. CONTRERAS-SWEET. Yes. Let me just say that, first of
all, you know how simpatico I am to your disposition about the
underserved. It is something that I feel that I have been
trying at least to emulate your work and to do it in my own
little way in Los Angeles in my bank that was stood up just to
serve the underserved. So you know that that is where I come
from. When you are an immigrant, as I am, and you navigate, you
know, any assistance along the way is something that is very
well received.
Ms. VELAAZQUEZ. But it is not only immigrants.
Ms. CONTRERAS-SWEET. No, I know.
Ms. VELAAZQUEZ. Very low income could be rural America.
Ms. CONTRERAS-SWEET. Yes. So I just wanted to say I hope
that you noticed that we did amp up the technical assistance
component under the microloan assistance program to accommodate
that. It is why in large measure we zeroed out fees on the
loans under $150,000.
Ms. VELAAZQUEZ. I understand. My question to you is on the
new programs and initiatives, if there are any being designed,
tailored, to help very low income entrepreneurs. You have
Emerging Leaders and other programs, and you are going to tell
me that maybe, you know, the Microloan program could fill that
gap, but I can tell you that the SBDCs offer training as well
as Emerging Leaders does. So if we are going to say that it is
duplicative, well, the Emerging Leaders Program might not
require the type of technical assistance that low income
entrepreneurs need.
Ms. CONTRERAS-SWEET. Right. The way I--and again, only from
my experience as a banker and then as a business person trying
to start two businesses, I felt that there were three things
that we needed to do to help this target community that you are
identifying. And one is to provide them counseling. We launched
a program also--and you know, again, I am reluctant to call it
a program because I think it is a segmentation, but it is
called My Brother's Keeper, and it speaks to focus on clearly
the underserved. And so we are working with community colleges.
We are working with churches. And we are going across the
country. In fact, it is a program that we are launching very
imminently. And again, I am reluctant to use the word
``program,'' but this initiative, this effort very soon to
target that very population.
And then the second thing is that I have just been working
with the credit unions of late to make sure that they make
those $50,000 loans and under more available, and so we have
entered into a partnership with them.
And then third, the technology to make the system more
efficient.
Ms. VELAAZQUEZ. So we have two new programs, Emerging
Leaders and ScaleUp America. Both of them provide training for
very successful businesses. I have a concern, I have a problem
with that picture because here we are creating new pilot
programs to assist businesses that really do not need it. If
you are a small business that has revenue of $500,000 and have
been in existence for three years, you are already up and
running. How can we fill the gap of those small businesses that
are struggling? It goes to the core mission of what the Small
Business Administration should be doing.
I just want to share with you that I will be fighting to
make sure that the PRIME program gets funded.
Ms. CONTRERAS-SWEET. Just, if this is any consolation, I
hope that you also noticed that we amped up by a million
dollars for the Women Business Centers, which are wholly
dedicated to underserved communities as well in addition to My
Brother's Keeper.
Ms. VELAAZQUEZ. I would like to talk to you about the
SBICs.
Chairman CHABOT. The gentlelady's time has expired. Would
you like an additional minute or so?
Ms. VELAAZQUEZ. Yes, please.
Chairman CHABOT. Okay. The gentlelady is recognized for an
additional minute.
Ms. VELAAZQUEZ. Let me call your attention to the fact that
the agency is claiming you achieved the 23 percent contracting
goal, and I am very happy about that. But then I cannot
reconcile that with the inspector general report that says that
one billion dollars of small business contracting actions were
awarded to big firms, ineligible firms. How do you reconcile
that? My point is, you must have better mechanisms and
oversight to make sure that those contracting actions go to
those who thy were intended for in the first place, small
businesses. And one billion dollars going to big firms and then
being counted as small firms is just not right.
Chairman CHABOT. The ranking member's time is expired but
you can answer the question.
Ms. CONTRERAS-SWEET. Well, just let me say, I could not
agree with her more than when we have a program that is focused
on small business, that is what we want to do, and so just to
say that the SBA has committed several programs put in place to
make sure that this is not taking place. We have disbarred more
people, three times more at the rate since we took office than
in the prior 10 years. So I want you to know we are on it. We
are adding more personnel. We are conducting more anomaly
reports, and just every tool available to us is being deployed.
Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
Chairman CHABOT. The gentlelady's time is expired.
The gentleman from Nevada, Mr. Hardy, who is the chairman
of the Subcommittee on Investigations, Oversight, and
Regulations is recognized for five minutes.
Mr. HARDY. Thank you, Mr. Chairman.
You know, I am a small business owner myself, or was, and I
was out in the district this last week, and my district is
District 4, which hosts Nellis Air Force Base. We probably have
the largest veteran population in my district of any place in
Nevada. With that being said, the SBA claims that the Veterans
Business Opportunity Centers are underfunded; however, SBA
makes no requests for increase of funding for that program, but
instead requests an increase of around $5 million for Executive
Direction. If these centers are underfunded, then why not
request Executive Direction allocation for those funds to the
Veterans Business Opportunity?
Ms. CONTRERAS-SWEET. Sir, I have to go back and check on
the number, because we are asking full funding for all of our
partners to continue the programs that we are doing, and we are
asking for an amplification, an expansion on the reboot
program. And so we are asking for more funding for the
veterans' programs, so I have to review what number you are
referring to because we want to relaunch the Reboot program
which is for those who already transitioned out. So my
understanding is that our request is an increase. So I will
have to look to see.
Mr. HARDY. According to the report, I looked at it, there
were some questions about whether that was what was actually
happening. So we can get with each other after.
Ms. CONTRERAS-SWEET. I would be delighted, sir. Thank you.
Of course.
Mr. HARDY. The other thing is the inspector general
question. Why does the SBA require the Office of Inspector
General to clear all the proposed final rules, and can you
speak of how the role of the inspector general works with SBA?
Ms. CONTRERAS-SWEET. We have, you know, I try to visit with
the inspector general on a monthly basis and to have a
proactive--I always think it is better to prevent than to
detect. It is sort of my Japanese training. When I was in
corporate, you know, the private sector, it is not about
detection, it is about prevention. So to the extent that I can
meet with the inspector general in advance of promulgating
something to get the feedback, then I think it helps us to be
more efficient to not have to get caught up in messy quagmires
at the end of the process.
Mr. HARDY. Okay. If you could, could you explain to me how
the SBA works with veterans on getting access and moving
forward to access those funds? And the question I also have is
it expresses that the program is at about $350,000. Is that
sufficient for small businesses? Because it seemed like a
pretty low number to me.
Ms. CONTRERAS-SWEET. Thank you for allowing me the
opportunity to clarify that point. What we are saying is that
up to $350,000, we have zeroed out fees, but they can take
loans up to $5 million. It is just the fee structure. So we are
waiving fees for veterans on loans up to $350,000. That is the
point on that; not that we are limiting to that size of loan.
So that is the clarification on that SCORE.
I am sorry, and your other question was?
Mr. HARDY. It was about the process about how a veteran
actually utilizes their benefit to be able to get part of the
SBA.
Ms. CONTRERAS-SWEET. So the program is really quite dynamic
and interesting. It is part of the federal TAP program, the
Transitioning Assistance Program. So we go into the
installations globally around the world and we introduce them
first to a couple hour video. And if they are interested in
entrepreneurship, then we put them into an eight-hour--excuse
me, into a two-day program where we actually have in-person
training about entrepreneurship. And then if they are
interested in that, then they go into the complete program that
is a very extensive program where they actually develop a
business plan so that when they come out they are ready to
start their business. So there is no languishing when they are
out in the community and trying to navigate through a labyrinth
of what are they going to do with their lives after they have
served us. So that is the counseling portion. And then they can
go to a Veterans Business Outreach Center where they can get
counseling for contracting opportunities where we have set-
asides for veterans. And then as I said, our fee structure for
veterans is very favorable. So the entire longitudinal track
for veterans I think is a strong one, and we are seeing
enormous success from that. And the success rate of veterans
who are starting businesses is outstanding. It is their
discipline, their rigor, and so we are experiencing strong
success there.
Mr. HARDY. One last question. Through this process, is
there specific things that the SBA looks at and how somebody is
qualified for a certain business or get involved in it? Do they
have to have any real world experience in that industry that
they are trying to get into, a small business? How do you
qualify individuals? Is there an education factor or criteria
that you have to meet?
Ms. CONTRERAS-SWEET. You know, we do not think it is our
place to say to somebody that they are qualified for a business
or not. And I will give you an example.
Since you have been asking me about veterans, I was in
Denver, and I met Sheilagh. And Sheilagh was a Fine Arts major
as a captain--I believe she was a captain--lieutenant, excuse
me. And anyway, the point, she was a Fine Arts major, but she
was in this intelligence unit where they trained our Blackhawk
helicopter pilots. And she always wanted to fix the training,
but yet her family brought her home, her daughter needed her at
home. Long story short, she ended up hiring some engineers and
came to the SBA, and so we provided her counseling to build her
plan out and then we guided her so that she could get certified
and actually apply for an SBIR grant that she was able to take
to commercialization. And now she has a multi-million dollar
business, and she is creating jobs and building a very
important supply chain. So it is not to us to decide what they
want to do or that their major matches. If we feel that they
have the passion and the wherewithal, they build a business
plan and we help them navigate through it. And if they are
successful, more power to them.
Chairman CHABOT. The gentleman's time is expired.
There are votes on the floor. We will go through one more
five-minute round of questions here; then we will go over and
vote. Now, there are three votes and there is a motion to
recommit, so it probably pushes us up to around 4:00, I think,
before we are able to come back for votes.
Ms. CONTRERAS-SWEET. Okay.
Chairman CHABOT. So I think we do have other members on
both sides that want to ask questions. So if you are able to
come back, I know that you had a 4 o'clock time, but if you are
able to modify that, and just let our staff know what the
status is, I would appreciate it.
Ms. CONTRERAS-SWEET. All right. Thank you.
Chairman CHABOT. The gentlelady from California, Ms. Chu,
is recognized for five minutes.
Ms. CHU. Okay. Administrator Contreras-Sweet, I am struck
by how much initiative the SBA has taken to address the
critical problems that small businesses are facing in this
nation, and I would like you to tell us about how three of
these initiatives work. I know these are pilot programs that
have been approved by Congress via the Appropriations bill.
The first one I would like you tell us more about is the
Boots to Business program, and I know that veterans returning
home after serving our country face so many struggles of just
finding employment and have unavoidable difficulties of
resuming life as a civilian. I once had a veteran working in my
office who told me that when he deactivated from the military,
all he received was a list of benefits that were recited to
him, and yet he really needed employment alternatives. And yet,
the Boots to Business program is designed to help veterans
before they get deactivated so they will not feel so lost.
And then there is a whole other area, and that is the young
entrepreneurs and the high-tech innovators who are not the
typical types to join the Chamber of Commerce, and oftentimes
the last place they would look for assistance is the federal
government. How has the SBA worked to change that mindset and
tap into the young, entrepreneurial energy we see exuding from
places like the Silicon Valley through the Growth Accelerator
Fund?
And finally, I know that there are places around this
country with high unemployment and economic stagnation that
could become the next Silicon Valley if here were the right
partnerships that took place between universities, government,
and business. How does the Clusters initiative address this
kind of issue?
Ms. CONTRERAS-SWEET. Thank you, Congresswoman.
Let me just say that the Boots to Business program is, as I
was outlining to Mr. Hardy, is a program that has been
exceedingly well received. In fact, recently, I was at a
cabinet meeting with several of my counterparts who were so
interested. They wanted to know how to get this program. But
essentially, the Defense Department came to us and said that
while they are preparing--the men and women in uniform are
preparing to transition out into civilian life, that many of
them wonder about what their future is going to be and do not
have a sense of direction. And so one of those options can be
entrepreneurship. As I was outlining, we introduced them, a
very cursory, quick introduction, and then if it peaks their
interest, then we take them through a series of other processes
to eventually help them complete a business plan that we think
is viable, realistic, that we can help guide them through. And
then when they get out into civilian life working through the
VBOCs or SBDCs or the other programs, they can get the
counseling that they need to continue to start and grow their
business, access capital, and then eventually contracts.
With respect to the young entrepreneurs, there are so many
ways in which we think that we need to engage the young
entrepreneurs, so we have a millennials program. And again,
these are segmentations. I call them just different channels;
they are not programs but merely segmentation in our strategy.
It is still counseling, and it is still the same kind of
effort, just different lines of effort in a new target, but
those programs have been well received by our millennials and
we are directing them now to these growth accelerators.
We thought that we would try to understand what was taking
place in this new phenomenon. Some people call them incubators,
and we put out an invitation to compete for prizes of $50,000,
and we had $2.5 million that you awarded to us for that purpose
that was appropriated. And essentially, we had 823
applications. And so it was really nice to have several
positive outcomes as a result of this competition. First, we
were able to introduce the growth accelerators to each other so
that they could meet and learn best practices. Second, we
brought them in so they could learn more about federal
resources available to them. And then number three, we now have
an ongoing communication, another outreach where we can
continue to promote the SBA services in their communities. And
last, to your last question, the Cluster. You and I are both
from California, and we know and we appreciate and respect the
Silicon Valley model and what it has done for the world in many
ways. Not just the job creation, but the innovation and the
many full contributions to health, to sciences, to so much of
society. And so we see that there are some underserved
communities that can use a little oomph, if you will. That is a
technical term. And essentially, what we try to do is pilot a
program that would test how these work. And I have to tell you
that it is always nice when you see that P3s can happen, I
believe in public-private partnerships. And so when a large
financial institution came forward, seeing the results of these
programs and is now duplicating our efforts, it holds promise,
and eventually it could be that we either sunset this program
and allow the marketplace to take hold, but we are really
heartened by its success to date.
Chairman CHABOT. Thank you very much. The gentlelady's time
is expired.
The Committee is going to head over to vote now. Mr. Rice,
you will be next if you should choose to come back.
Mr. RICE. I will.
Chairman CHABOT. Excellent. So we will be back hopefully in
a half hour approximately, or perhaps shorter than that. But if
there is no further business, we are in recess for as long as
it takes to get done with the votes.
Ms. CONTRERAS-SWEET. Thank you.
[Recess]
Chairman CHABOT. The Committee will come back to order. And
we will now yield to the gentlelady from New York, Ms. Clarke,
for five minutes. And we want to once again thank the
Administrator for being so understanding and so gracious and
not just running out. So we appreciate very much you sticking
around. Thank you.
Ms. CLARKE. And thank you, Mr. Chairman, and thank our
ranking member, and echo our Chairman's sentiments to our
administrator. Thank you for indulging us today and for sharing
your testimony with us today.
Advances in technology continue to impact the needs of
small businesses and entrepreneurs. Small businesses face the
need to adapt to new technological environments quicker than
ever before. I am pleased to hear that one of your focal points
is the modernization of the SBA, and I support your efforts to
implement your new online programs.
My question, Madam Administrator, is would you discuss in
more detail the new technological tools that the SBA plans to
implement, particularly how these tools may reach out to
economically and socially disadvantaged citizens that may
benefit from the many opportunities afforded by the SBA?
Ms. CONTRERAS-SWEET. Thank you again for that question. Let
me just say that technology allows us to do quite a bit, and
one of those is the goal that you just framed. When we think
about access, just my experience bank-wise, if I said to a
relationship manager, ``You have a goal of $10 million,'' they
would try to go out and get two $5 million loans to make their
bogey. And so when you have--and so the challenge is about
finding--you know, I would say, ``No, I want you to put out,
you know, 10 $500,000 loans or even smaller.'' And so then it
was about how much foot traffic could we get into the bank? How
do we identify them? It is just as much work to underwrite a
small loan as it is to do a larger loan. So what technology
allows us to do is, number one, through LINC, it allows us to
create that kind of foot traffic.
Just during our break today, we just met with the Women's
Business Center who outlined to us that in just one week she
was able to get incredible foot traffic through the LINC
program that is a dating match program where people who are
looking for loans get real-time responses from banks, and they
are allowed to make a match. And then they get a date, if you
will, and so it allows you to connect with the banker much more
quickly. So it is foot traffic, if you will, in very real time.
So that allows more people to get in and to be heard by banks.
Number two, it allows then the relationship manager to get
a whole bunch of more people; that he does not have to go out
and scout. So it is more efficient for community banks.
The next level is this what we call a liquid FICO score,
and that is a second initiative that we put in place. And that
allows us to expedite the way in which we underwrite and the
global cash flows and the debt service coverage considerations
that we do in our underwriting systems. This allows us to do
that for the community bank that heretofore did not want to do
SBA loans because they were so cumbersome. So thank you for
asking the question because we think that this is going to be
an important advancement to allow banks to do more of our SBA
loans. And clearly, there is strong evidence that when we
compare our SBA loans to the general market conventional loans,
there are so many more minorities that benefit from SBA loans.
And the third, and the one that we think is going to be the
most transformative, is SBA One. And that is going to come
online in a couple of months, and that is going to completely
transform the way we interact with our lending partners. And
so, again, we think that our loans will become more attractive
to banks and make them more available to our targeted
disadvantaged communities, particularly our small business
communities, and therefore, we think positive outcomes will
ensue. Thank you.
Ms. CLARKE. That sounds like a real game changer, Madam
Administrator. I am looking forward to seeing the results of
the online rollout, and just how people really adhere to the
usage of it because, you know, you were probably dealing with
some areas that are more fluent in the use of online services
versus others that are sort of getting up to speed on it. So I
am looking forward to that.
Just sort of very quickly, the SCORE association has been a
great resource for small businesses, particularly in my
district in Brooklyn. Can you express to us what plans, if any,
you have to expand and grow the collaboration between SBA and
SCORE chapters? How would you sort of rate the relationship as
it stands today?
Ms. CONTRERAS-SWEET. SCORE is one of the most impressive
organizations in America. When you think that these are
seasoned executives who have already had success and they come
back and volunteer their services to help replicate their
stories, I think that is an admirable story.
I was recently visiting with them at their 50th
anniversary, and it was really quite impressive to see the
generosity of these men and women who come before. To your
earlier question, I know that they are also working to address
more diversity in their outreach, and that is something that we
are working to support. And so that is another important thing.
But just generally speaking, we are asking for full funding for
SCORE because we think they are important partners, and to the
extent that they can continue to recruit volunteers, I think
their programs will clearly grow and the counseling will grow
and we will be able to create more jobs. So we are very
heartened by the work of SCORE, and we consider them top
partners, if you will. They are priority partners with us, and
I have enjoyed visiting with them. And many of them are co-
located in the SBA offices. So we have a very intimate
relationship.
Ms. CLARKE. Thank you, Mr. Chairman, for your indulgence. I
yield back. Thank you, Madam Administrator.
Chairman CHABOT. The gentlelady's time is expired.
If the administrator can stay a few more minutes, I have
got a few more questions, and Nydia has a couple questions.
Ms. VELAAZQUEZ. I do not have any more questions.
Chairman CHABOT. Oh, you do not? Okay.
Well, I will ask just a couple quick ones.
Ms. CONTRERAS-SWEET. Sure, sir.
Chairman CHABOT. You have been at the SBA for not quite a
year, I guess April of last year. What is the most significant
challenge in managing the agency that you have found since you
have been there?
Ms. CONTRERAS-SWEET. You and I sort of discussed this
briefly, and that is that unfortunately, our products are seen
as cumbersome. And so I think that people see the SBA as their
grandfather's SBA, and that is what we are really working hard.
The arc of our work, sir, is to make certain that we are
responding to the technological advances and the way people
take in information. And so I think that overall that will be
the arc of our work, is the way we take the SBA and bring it
into the 21st century.
When you think about the technology that we need to use and
need to become familiar with to make sure that we are helping
small businesses navigate through the technology that they can
deploy and will be encountering in their work. So that is one
part of the modernization effort.
The other is that our population used to compete. Our
target market--one florist competed against another florist
across the street, and now they find themselves as you
identified, in a global marketplace. So the marketplace is
different. We need to make sure that we are modernizing the way
we think about market making. And I heard you address markets,
and I think that is a salient point that we need to address as
well and I think are doing nicely with those initiatives that I
discussed that we are putting in place.
And the third is that the population is dramatically
changing, so we need to address whether we have cultural
competency as the ranking member mentioned. We need to make
sure that we are responding to how many--I was going to use the
word ``seniors,'' but let us just call them ``encore
entrepreneurs.'' I tell my husband that the 60-year-olds are
now the new 40s. Our population is changing, and so we need to
make sure that we have products that respond to the dynamic
changing demographics for our seniors, for our vets as we
mentioned, the millennials who now want to start more
businesses than ever. And so all in all, I would say the arc of
the work is the modernization agenda.
Chairman CHABOT. Thank you. You mentioned kind of the
perception among folks of the challenge that it is to go
through and get loans, for example, through the SBA. We had
eight, those businesses I mentioned this morning, that were
principally in international trade. That is why we met. And I
asked them how many of you have ever gotten loans through the
SBA or attempted to, and three of the eight had attempted, but
ultimately, either did not go through with the process or were
rejected. I think the limits were not conducive to what they
were trying to do and they just thought the paperwork was kind
of daunting and they just sort of dropped out. So those were
folks that we had not prompted. I was not sure what they would
say, but just so you know, you do not necessarily have to
respond, but that is what they told me.
One other, my final thing that I would want you to respond
to if you could, the Judiciary Committee passed the Regulatory
Flexibility Act that we have passed in previous congresses a
couple of weeks ago, and it is a small business bill to some
degree, so I was the principal sponsor, but it did not actually
go through this Committee because we wanted to go ahead and get
it to the floor. We had already been through this Committee in
past congresses. Anyway, in general, the Regulatory Flexibility
Improvements Act--because it was improvements. But the
Improvements Act does a couple of things. But the principal
thing that it does is require that when federal agencies are
considering new rules or regulations, they have to get input
from small businesses and determine what the impact will be,
both direct and indirect. That is one of the differences
between the existing and the old bill, or the old legislation,
is that it would include indirect impacts on small businesses.
And so it passed, passed the House. It was bipartisan. I forget
exactly how many democratic votes we got on the floor. It was,
I think, 29 or 30 or something like that, virtually all the
republicans. And the President shortly after that--it has not
gone through the Senate yet--but issued, and we have seen a
fair number of these coming out recently, a veto threat which I
was--I cannot say surprised, but did not particularly--was not
happy about it. Do you have anything about that at this point
that you might want to shed any light, or if you would like to
come back at a later--get back to me in the future after you
have had more of an opportunity to find out the
Administration's position, I would be happy to wait till then,
but I will leave it open to you at this point.
Ms. CONTRERAS-SWEET. Thank you. But if I may just go back a
step to your earlier comment. I wanted to assure you, I wanted
to leave you with this assurance because I noted that you
referenced in your opening comments about the LMAS system, our
Loan Management Accounting System. And I just wanted to give
you the wonderful news. I stated it in September when I was
here, but maybe I just need to punctuate it or state it with
the fine out, our LMAS system project, the mainframe, we have
migrated off the mainframe. We are on longer working--we have
done that work and it is a completed project. And it is the
basis for which we were able to launch the LINC and the SBA
One. So I wanted to give you that assurance that that project
is now behind us and we are moving forward in a system that is
now compatible with other systems. And so we are no longer in a
proprietary system that was asked about in September and to
which you eluded in your opening remarks.
But as it relates to regulatory, I have not read the
specifics of the legislation, and so I am happy to go back and
review the specifics. But generally speaking, I believe in
smart regulation. I do not believe in overregulation. I believe
in smart regulation. As a banker, I did not appreciate the
regulation that I had to navigate through to start my bank and
certainly to operate the bank. But I understood that some were
appropriate for consumer protection. And so it is trying to
find that right balance. I have not heard that the president
indicated that he would veto. I have heard that some of his
staff said that they might advise him to veto it, but I have
not heard that he has actually made a final decision on that.
So I would be delighted to get back to you once I learn more
about what the administration's position is.
Chairman CHABOT. I appreciate that very much.
And I will now yield to the gentleman from New Jersey, Mr.
Payne, for five minutes.
Mr. PAYNE. Thank you, Mr. Chair. I am looking forward to
serving with you on this Committee and us working together to
improve the circumstances for our constituents as it relates to
small business. And to the ranking member, who has been a
consummate proponent for small businesses across the country.
And Ms. Contreras-Sweet, welcome.
Ms. CONTRERAS-SWEET. Thank you.
Mr. PAYNE. First, let me say that I have been very
impressed with the work that you have done in the short time
that you were here under the circumstances you found yourself
and have been able to move SBA in the right direction. We know
there is definitely a lot more work to do, but your hands-on
leadership bodes well for small businesses and entrepreneurs
across this country.
And I was delighted to have you in my district for an SBA
small business seminar along with Senator Booker, I believe had
it, and I was able to join. And also, the attention that your
office has shown to me and my constituents, and I appreciate
that.
Let me say that, you know, as you know, Hurricane Sandy
heavily impacted New Jersey, and the Government Accountability
Office found that the SBA took well above the goal of 21 days
to process disaster relief applications. I see in the budget
there is a request for another $159 million for major disasters
and $28 million for other disasters. Can you tell the Committee
what additional improvements SBA intends to make to ensure
better response in the future? And we know that was not under
your initial purview, but moving forward, how do you see that?
Ms. CONTRERAS-SWEET. I have to share with you that since I
am from Los Angeles, I experienced the Northridge earthquake
and was on the Rebuild Los Angeles Board after we had the South
Central Los Angeles riots. And so I have been through
situations where we really needed SBA and FEMA and others to
come in to give us support, so this was something that was very
important to me. And as soon as I took office, this was the
first office that I sat down to review. So we started just from
my experiences things that I felt needed to be done and the
initiative of the good men and women who are trying to evolve
at the department, we have done several things.
First, what we found in the response rates and the
timeframe that it took to respond to the requests, the loan
requests, it was because there was one queue. So what we did is
we have now double-tracked the queue to have one for businesses
and one for mortgage recovery. So we now have experts in each
queue and they are able to process them a little faster.
Another was that we took them manually. We went in and we
gave them the paperwork and they completed it manually. We have
now gone from 36 percent that came online to now 82 percent
that are coming online, so that is allowing us to be more
efficient.
Our third initiative is that when people needed help, the
limit, the cap limit of the unsecured limit was set at $14,000,
and we have now raised it to $25,000. And another one is that
when we see that there is some strong credit and so we really
do not have to take a lot of time underwriting and
understanding what their financials are, we put them now in an
even more rapid line. So these are the kinds of initiatives
that we have put in place very recently. I know we can do more.
I recently met with FEMA to understand what their role is
and how we can complement each other a little more effectively,
and so just know that the work is ongoing.
Mr. PAYNE. Okay. We appreciate that.
One of the SBA's objectives is to provide timely and
instructive and useful information through digital and in-
person outreach efforts. With the rollout of the SBA One and
LINC programs, how do you plan to handle the pushback from our
constituents who have more trust in in-person lending, and how
will you gauge the success of this program?
I can tell you that this is not obviate or supplant the
process and that there should still be some engagement in the
process. For example, the date with the lender, you can come in
and visit with the lender, and in most cases you still have to
go in and interact with the lender. But this is not a mandatory
program. This is an opt-in. You choose to be on this program.
So, you know, for example, my mother is never going to go
online. She still wants to gauge and be personally addressed.
And so this does not affect that system whatsoever. It is just
an added program. It is another layer of programming. So I do
not see that that would--I do not think that would supplant the
personal engagement that needs to take place. At the end of the
day, particularly community banks, what we do, at least I did
in my bank is I would always consider character as well. And so
it is important to get to know the person and to develop the
relationship and have a sense of their trustworthiness, credit
worthiness.
Mr. PAYNE. Thank you.
Chairman CHABOT. The gentleman's time is expired.
Madam Administrator, we want to thank you very much for
your testimony here this afternoon. We are sorry that because
of votes you ended up having to stay beyond the time that you
had originally allotted, and we appreciate you doing that.
And I would ask unanimous consent that members have five
legislative days to submit statements and supporting materials
for the record. And if there is no further business to come
before the Committee, we are adjourned. Thank you.
Ms. CONTRERAS-SWEET. Thank you very much. Thank you.
[Whereupon, at 4:25 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Chabot, Ranking Member Velazquez, and
distinguished members of the Committee, thank you for this
opportunity to testify about SBA's FY 2016 budget. Chairman
Chabot, welcome back to the leadership of this committee. Your
track record and bipartisan commitment is an asset to this
country's small businesses.
I see a number of new faces on the committee. I've already
had productive conversations with many of you. I look forward
to working with all of you and visiting your districts in the
months ahead.
Entrepreneurs are the backbone of our economy. They exude
courage and character. The programs in this budget request have
one thing in common: They seek to maximize opportunities for
small business owners to create jobs and contribute their
talents to our economy.
That's the agency's mission, and that's why I'm here. To
accomplish this goal, we must continue our work to modernize
the SBA, so we're accessible and relevant to the business
community in the 21st century.
To that end, I want to share an important achievement in
this document. Our FY16 budget proposal contains a zero subsidy
request for our core capital programs--7(a), 504 and the Small
Business Investment Company (SBIC) program. We are proud of
this achievement and the fiscal responsibility it represents.
I'm an entrepreneur and a former community banker. I take
my fiduciary responsibility very seriously, and this budget
represents my commitment to be a good steward of taxpayer
dollars. For FY16, the SBA requests $860 million. In this time
of tight budgets, the SBA is doing more with less. SBA's zero
subsidy achievement means this proposed budget comes in three
percent below our current budget.
The SBA is making good loans, and we project we will cover
any loan losses through fees in FY16. We've achieved this
despite waving fees on small-dollar loans. This fee relief
helped us increase lending to minority-owned businesses by 23
percent last year, so we propose continuing it in FY16.
I've been on the job now for nearly a year. Thanks to the
bipartisan support we've enjoyed from this committee, we've
made some important progress together.
Together, we met our 23 percent small business goal
contracting goal for the first time in eight years. We
supported nearly $29 billion in lending last year, which
created or sustained nearly 600,000 jobs. In the same period,
our resource partners counseled 1.2 million entrepreneurs. Our
SBIC funds increased their investments by 60 percent and
provided $5.5 billion in patient capital to promising small
firms. And we expanded our Boots to Business program to train
more than 15,000 service members at 165 military installations
worldwide.
In his State of the Union address, the President spoke
about our economic recovery and job growth. I'll tell you
something you already know: It's our small businesses that are
leading this economy back.
This budget requests an increase in our 7(a) lending
authorization to meet the growing demand for SBA capital. Last
year, Congress raised our 7(a) authorization level as we
approached our lending cap, resulting in an all-time record of
$19.2 billion in approvals. This year, we're asking for our
highest authorization level yet of $21 billion.
This budget also seeks full funding for our resource
partners. The loan counseling provided by our Small Business
Development Centers, SCORE partners, Women's Business Centers
and Veterans Business Outreach Centers helps entrepreneurs
across America start, grow or reinvigorate their businesses.
Partnering with them is one of the smartest investments we can
make.
This budget seeks a modest $950,000 increase for veterans
outreach programs. We propose expanding SBA's Boots to Business
entrepreneurial training program to the National Guard, Reserve
component members, and additional military installations. We're
asking to broaden our Boots to Business Reboot program that
serves veterans who've already transitioned out. And we're
proposing to continue the fee reductions on loans to veterans,
so we can serve these heroes as well as they've served us.
We're also asking to expand SBA's microloan program level
by 40 percent to increase the ability of microlenders to
capitalize startups and provide technical assistance. We are
convinced this expansion would fill a real need for more small-
dollar loans in the current commercial market. It will help
underserved and rural businesses turn a profit and create more
jobs.
This budget also seeks to improve our customer service. As
a former community banker, I understand that the best way to
make SBA more effective is to make our products and processes
easier, quicker, and more cost-effective. This budget seeks
funding to accomplish this critical goal by migrating more of
our services online, where most banking takes place today.
This April, we'll roll out our highly anticipated SBA One
system. This is the automation of the entire 7a loan
application. It's going to significantly cut the time and cost
of our application process. We recently demonstrated this new
service to bankers, and the feedback has been overwhelmingly
positive.
Last year, I laid out my modernization plan to fashion a
21st century SBA that stands for Smart, Bold and Accessible.
Smart means implementing systems that harness technology to
deliver capital more effectively. Bold means opening new
markets for small business owners both at home and abroad.
Accessible means making our services available to all,
including women, veterans, rural entrepreneurs, seniors and the
disadvantaged.
I'd like to close by expressing my thanks members of this
committee and to our committed SBA staff across this country.
More than 2 million of the 3 million jobs generated last year,
we're created by small businesses. This budget would help us
build on this momentum. It would give us the resources we need
to perform our core mission and help more small businesses
across the country innovate, launch, hire, and grow.
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