[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
TAKING CARE OF SMALL BUSINESS: WORKING TOGETHER FOR A BETTER SBA
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HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
APRIL 5, 2017
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 115-014
Available via the GPO Website: www.fdsys.gov
______
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24-809 WASHINGTON : 2017
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
TRENT KELLY, Mississippi
ROD BLUM, Iowa
JAMES COMER, Kentucky
JENNIFFER GONZALEZ-COLON, Puerto Rico
DON BACON, Nebraska
BRIAN FITZPATRICK, Pennsylvania
ROGER MARSHALL, Kansas
VACANT
NYDIA VELAZQUEZ, New York, Ranking Member
DWIGHT EVANS, Pennsylvania
STEPHANIE MURPHY, Florida
AL LAWSON, JR., Florida
YVETTE CLARK, New York
JUDY CHU, California
ALMA ADAMS, North Carolina
ADRIANO ESPAILLAT, New York
BRAD SCHNEIDER, Illinois
VACANT
Kevin Fitzpatrick, Majority Staff Director
Jan Oliver, Majority Deputy Staff Director and Chief Counsel
Adam Minehardt, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 2
WITNESS
Hon. Linda McMahon, Administrator, United States Small Business
Administration, Washington, DC................................. 4
APPENDIX
Prepared Statement:
Hon. Linda McMahon, Administrator, United States Small
Business Administration, Washington, DC.................... 31
Questions for the Record:
From Hon. Chabot, Hon. Marshall, and Hon. Bacon.............. 34
Answers for the Record:
From Hon. Linda McMahon...................................... 36
Additional Material for the Record:
Talking Points/Remarks from Congresswoman Yvette D. Clarke... 39
TAKING CARE OF SMALL BUSINESS: WORKING TOGETHER FOR A BETTER SBA
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WEDNESDAY, APRIL 5, 2017
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, Radewagen, Kelly, Blum,
Comer, Gonzalez-Colon, Bacon, Marshall, Velazquez, Evans,
Murphy, Lawson, Clarke, Chu, Adams, Espaillat, and Schneider.
Chairman CHABOT. Good morning. The Committee will come to
order.
Here at the Small Business Committee, we have members from
all walks of life, all parts of the country, and certainly, all
political views. That is why we take every opportunity to
remind ourselves why we are here serving on this particular
Committee together. We know that every small business started
with an idea.
In the 21st century, there are more ways than ever for the
federal government to either help those ideas become reality
and create jobs, or squash them before they ever get off the
ground. I believe we have a new partner at the Small Business
Administration who understands this as well as anyone. Linda
McMahon is a living example of what can happen when risks are
weighted, chances are taken, and creativity is unleashed. When
that happens the world is your arena, and I do not use that
word loosely.
My long-time friend, our Ranking Member, often says that
there is no such thing as a Republican small business or a
Democrat small business; they are just small businesses trying
to succeed. I agree. And I believe the resounding support
Administrator McMahon received through her Senate confirmation
process is a sign that she shares our approach. Not to belabor
the point, but the Senate really seemed to like her, and they
do not like anybody.
This Committee has long believed that the SBA is an agency
in need of attention. The loan programs that provide crucial
access to capital need vigilant oversight. The training and
technical assistance programs that reach people through local
SBDCs need to keep up with rapidly changing times. Our job is
to ensure that SBA's programs are effectively and efficiently
serving the millions of Americans who work at, own, or want to
start a small business. We ended the last Congress with a lot
of unanswered questions from the SBA about how the agency will
address longstanding deficiencies in management, information
technology, and program oversight.
It is our intention that today will mark the official start
of a collaborative relationship that will address these issues
and any more that arise in the future. Administrator McMahon
has a record of spotting opportunity where few others could. I
think it is also safe to say that she does not put up with much
nonsense, not that this Committee would ever give her any but
we are looking forward to hearing directly from her today about
her plans for making the SBA a better agency.
Madam Administrator, welcome to the first of what I am sure
will be many productive conversations with this Committee. And
I would now yield to our ranking member, Ms. Velazquez, for her
opening statement.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. And welcome, Madam
Administrator. And thank you for being here today.
While there are many political and ideological differences
represented on this committee, one thing we all agree on is the
centrality of small businesses to our nation's economy.
America's small employers merit our attention because in a time
of partisanship they remain our common ground. They are the
voices this committee strives to make heard. Small businesses
need the focus of both the federal government and the private
sector. Today we will center our discussion on government
efforts to assist small business owners, principally those of
the Small Business Administration.
The SBA plays a vital role because it is the only agency in
the federal government tasked specifically with helping small
businesses grow and succeed. For small businesses to fully reap
the benefit from SBA's programs, it is important that the
agency operates efficiently and effectively, utilizing
taxpayers' dollars wisely. As such, one role of this committee
is conducting vigorous oversight so we know the agency is
serving small businesses well. In that regard, it is the duty
of our committee to raise our concerns with any proposal
eliminating or consolidating valuable SBA programs.
While cutting redundant programs is a worthwhile goal, SBA
programs serve an important purpose in reaching business owners
who often cannot access assistance elsewhere. In many cases,
businesses struggle to secure financing, and SBA initiatives
help fill these gaps. Last fiscal year, the agency supported
over $24 billion in lending through its 7(a) program alone.
Another $4 billion in lending was made available for capital-
intensive projects through the agency's 504 initiative.
The SBA also plays a vital role in helping small businesses
and disadvantaged firms secure their fair share of federal
contracts. When small firms win government contracts, our
entire nation benefits. Taxpayers receive quality goods and
services at fair prices.
At the same time, unlike their larger competitors, when
small businesses secure federal work, they often must scale up
quickly and that creates jobs.
We have seen some progress in federal agencies meeting
their small business contracting goals, but more work remains.
I will be interested to hear the administrator's view on how to
help more small firms break into the federal marketplace.
Beyond lending and contracting, entrepreneurs need the
technical know-how and guidance to help them with everything
from writing a business plan to learning to export.
The agency's Small Business Development Centers, Women's
Business Centers, and Veterans Business Outreach Centers are
spread throughout the country and help meet those needs, but
improvements can always be made. SBA must do more to support
minority- and women-owned businesses as they account for much
of the nation's small business growth. Women and minority
business owners face high interest rates, a lack of capital,
unmet contract goaling, and a lack of mentorship. These
business owners are invaluable to our economy and continued
disparities need to be addressed.
Nevertheless, the SBA remains an important institution for
America's small businesses. It is paramount that the agency's
scarce resources be invested wisely and that the agency has the
funds and people in it to carry out its mission. In that
regard, I found disconcerting this administration's proposal to
reduce SBA's budget by 5 percent. Likewise, I have concerns
about how the current hiring freeze and plans to reduce SBA's
workforce might restrict agency functions.
All of us in Congress and the administration agree that
small businesses are a cornerstone of our economy and deserve
our support. However, that requires more than lip service. It
involves a real commitment to invest in programs that work.
On that note, I look forward to hearing the administrator's
view regarding the agency's priorities for the long term. With
that, I thank the chairman for holding this hearing and, again,
I welcome the administrator. I yield back.
Chairman CHABOT. Thank you. The gentlelady yields back.
If Committee members have an opening statement prepared we
would ask that they submit them for the record.
And I would like to take just a moment to go over the time
restraints and the lighting system which we have already
discussed, but we basically operate under the 5-minute rule.
And you get 5 minutes and we do, too. And there is a lighting
system to assist you in that. The green light will be on for 4
minutes and the yellow light will come on and it gives you a
minute to wrap up, and then the red light will come on. If you
need a little more time since we just have one witness, we
usually have four, you do not get four times 5 minutes, 20, but
a little bit over would be fine.
So, and I would now like to officially introduce our
distinguished witness here this morning. It is my pleasure to
introduce The Honorable Linda McMahon, the 25th administrator
of the Small Business Administration. She is one of the
Nation's top female executives, has run for public office, and
has been recognized for her many philanthropic activities.
Administrator McMahon is the cofounder and former chief
executive officer of WWE, which grew from a small, regional
operation, to a publicly-traded global company with 800
employees worldwide; many of those employees, very big
employees.
Most recently, she served as the cofounder and former chief
executive officer of Women's Leadership LIVE, LLC, a company
that helps women to launch and expand their own businesses,
advance their careers towards executive roles, and pursue
opportunities for leadership in public service. Before assuming
the top post at SBA 6 weeks ago, she served on the boards of
Sacred Heart University in Fairfield, Connecticut; the Close Up
Foundation in Washington, D.C., which educates young people to
participate in our democracy; and American Corporate Partners
in New York City, which pairs returning veterans with mentors
in the workforce.
Administrator McMahon has received numerous honors,
including, among other things, the Humanitarian Award from
Catholic Big Sisters and Big Brothers in New York City and the
Spirit of Hope Award from Liberation programs in Norwalk,
Connecticut. She is a graduate of East Carolina University.
Administrator McMahon, we want to thank you again for
appearing this morning, and you are recognized for 5 minutes.
STATEMENT OF THE HONORABLE LINDA MCMAHON, ADMINISTRATOR, UNITED
STATES SMALL BUSINESS ADMINISTRATION
Ms. MCMAHON. Thank you very much, Chairman Chabot, Ranking
Member Velazquez, and members of the Committee, for inviting me
to speak with you today. I am so honored to be serving as
administrator of the U.S. Small Business Administration. I
would also like to express my gratitude to President Trump for
the opportunity to join his administration and for his support
of small businesses.
I want to right off the bat address recent reports that
came out last Friday relative to an article in a magazine that
indicated that SBA's flagship program, the 7(a) Business Loan
Guaranty program, may be at risk of exceeding its program
authority this year. I am here today to assure you that while
the agency is seeing increased demand by the small business
community, we are not currently in jeopardy of exceeding our
capacity to meet such needs. We have contacted and continue to
work with the SBA lending community to inform them that the
agency is in good financial position with sufficient resources
through the end of this fiscal year.
To ensure that America's small businesses can fully benefit
from the tools and resources provided by SBA and that this
support continues through the year uninterrupted, I do support
legislative changes that provide the administrator
circumstantial flexibility to increase its program authority
level. Such flexibility, such as through prior proposals to
increase the program authority by 15 percent following proper
congressional notification, could better equip SBA to meet
peaks in demand while continuing to operate at zero subsidy.
Today marks 50 days since I was sworn in as administrator
of SBA, and I have been drinking from a firehose a little bit.
I am continually impressed by the tremendous work being done by
SBA's team in support of our Nation's 28 million small
businesses. My goal as administrator is to revitalize the
agency and raise its profile and, in turn, revitalize the
spirit of entrepreneurship in America.
My hope is as more people learn about the services SBA
provides, they will have the confidence, skills, and resources
they need to start or grow their own businesses, to invest in
their communities, to create jobs, and to grow our economy. I
feel a tremendous commitment to each of SBA's stakeholders: our
small business owners; our team at SBA; President Trump, who
entrusted me with this position; and the taxpayers who expect
us to use their dollars effectively and efficiently.
When I first met with President-elect Trump back in
November about taking the top job at SBA, he communicated one
clear, specific request to me. As I was leaving his office, he
looked at me and he said, ``I have one request, and that is
that you do a good job.'' He said it with such sincerity, I
knew he meant it and was expecting me to deliver. I responded
that I would, adding that, ``If at any time my job is not good
enough, I trust you will tell me and I will step aside for
someone who would do it better.'' And his response to me was,
``Well, I could not ask for more than that.''
And during my first town hall meeting with SBA's employees
last month, I asked every one of them to join me in that
commitment: do a good job and expect to be held accountable. I
have spent a lot of time getting to know our team and letting
our team get to know me. I want them to feel engaged and
empowered and know their expertise is valued. Since our town
hall meeting, the conversation has continued, whether in formal
settings or chats on the elevator or on social media. In fact,
our social media team tells me the agency's official Twitter
feed has added more than 100,000 followers since I came
onboard. Last week's Twitter chat called ``Business Success Her
Way,'' promoting women entrepreneurship, was a trending topic
nationwide. I am thrilled there is a buzz around SBA as it
draws attention to the services the agency offers, services
that will ultimately help people start, scale, and succeed in
business.
Our small businesses are our Nation's innovators and job
creators, and I am committed to serving as their advocate. Last
week, I had the privilege of joining Vice President Pence
visiting small business owners in West Virginia. Our host, Ron
Foster, grew his construction supply company with the help of a
504 loan from SBA. I relate to entrepreneurs like Ron because I
am an entrepreneur myself. I have shared the experiences of our
country's small business owners. My husband and I built our
business from scratch. We started out sharing a desk. Over
decades of hard work and strategic growth, we built it into a
publicly-traded, global enterprise with more than 800
employees. This past weekend, the business we created had a
global audience of millions as it broadcast the 33rd edition of
WrestleMania.
I am proud of our success. I know every bit of hard work
and sweat equity it took to create that success. I remember the
early days when every month I had to decide whether I should
continue to lease a typewriter or whether I could finally
afford to buy it. Yes, and believe it or not, that $12 a month
made a difference in the budget.
Like all small business owners, I know what it is like to
take a risk on an idea, manage cash flow, navigate regulations
and tax laws, and create jobs. Since stepping down as CEO of
WWE in 2009, I have worked to help more people have the
opportunity to pursue those goals. As a candidate for the U.S.
Senate in 2010 and 2012, I met with more than 500 small
business owners, touring their shops, restaurants, offices and
factories, and sharing ideas during roundtable discussions. Job
growth was a pillar of my campaign, and because small
businesses are responsible for half of all private sector jobs
and the majority of new jobs, they were my focus.
And for the past 2 years, I promoted women and
entrepreneurship as cofounder and CEO of a startup called
Women's Leadership LIVE. I wanted to share my vast experience
with others who are launching startups or looking to scale
their businesses. Through live events and webinars, we educated
entrepreneurs about things like applying for a loan and
developing a business plan. We also worked to build their
confidence. I always say that even entrepreneurs with the best
ideas just sometimes need a little wind beneath their wings. We
shared our stories of successes and failures, our networks of
contacts and resources, and our strategies for addressing
challenges. And now through SBA, I am committed to offering
small business owners the capital, the counseling, and the
confidence that will help propel them forward.
Small businesses have taken some tough blows in the past. I
know what it is like to take a hit, and I have learned it is
not how you fall, but how you get up that truly matters. Early
in my career when we were very young, my husband and I declared
bankruptcy. We invested in a company we did not understand and
trusted people we should not have. When that company went
under, we were left holding the bag. We worked really hard to
pay off those debts until we realized we just could not do it.
Bankruptcy was a really hard decision and a very tough time in
our lives. We lost our home. My car was repossessed in the
driveway. At that time we had a young son and a baby on the
way. We had no choice but to work hard and start building again
so we could support our family. When our daughter Stephanie was
born, a perfect little baby so full of promise and potential, I
took it as an omen that things were going to be okay. We owed
it to her and to our son that we would make it okay. And
fortunately, we were able to and we did.
As I visited small businesses all over the country, I have
seen that same resiliency over and over again. Entrepreneurs
are fighters. They work hard. When they get knocked down by
recession or a natural disaster, or simply a change in consumer
demand, they turn to their creativity to make it better. But
sometimes they need a helping hand. Now that I am the SBA
administrator, I am committed to ensuring that our agency is as
strong as it can be to lift up as many entrepreneurs as it can.
My commitment extends to making sure that all services we offer
to our customers are delivered effectively and efficiently and,
most importantly, that SBA and our partners are offering what
small businesses actually need to grow to innovate and to
create jobs. With small businesses as the driver of our
economy, I believe our country will remain strong, too.
Thank you so much for the opportunity to speak with you
today, and I look forward to answering your questions.
Chairman CHABOT. Thank you very much. And I will recognize
myself for 5 minutes to begin the questioning.
I was struck by your comment about not knowing whether you
should lease or buy the typewriter because I had a similar
experience when I, out of law school, opened up my law office
and I was a sole practitioner. And I used to go a mile down the
street to make copies at the end of every day at the Quick
Print because it was too expensive to lease or buy a copy
machine myself. And I did not buy one until 3 or 4 years after
having that. So it saved a lot of time not having to drive down
there, but I certainly can identify with that story.
And I also want to thank you for addressing the 7(a) loan
program issue at the beginning of your testimony because I had
also seen that same article and was concerned about that as
well because we had an experience here a couple years ago and
so we need to, in advance, plan for this. And I am very glad to
hear--was that just last year then? Yeah, recently. As recently
as last year. And so please, if you would not mind closely
monitoring that. We are glad you are, and if you could keep in
touch with our staff and will let both sides of the aisle know
how that is progressing down the road.
The Government Accountability Office reports, the GAO, they
found many longstanding SBA management challenges, all of
which, of course, were prior to your time at the administration
since you have only been there 6 weeks now. What sort of plans
do you have for completing the implementation of the GAO's
recommendations on the Small Business Administration, your
agency's management?
Ms. MCMAHON. Thank you very much for that question. You
know, coming on as the administrator of SBA is a lot like
assuming the position of CEO of a company. In fact, that is
clearly what it is. So when you first come on board you are
trying to evaluate employees, practices, what is good business,
what is not good business. And in this instance, you had a
little help in identifying some of those issues by the GAO. So
I can tell you that we have been incredibly responsive, it is
my understanding, to a lot of those issues and have already
closed some of those issues.
When I came, my first address in our town hall meeting was
to let our folks know that, look, I want this to be the best
SBA that has ever been, and I think it is a little stodgy. I
want us to update it. I want us to look at every instance we
can and make it better. So I appreciate the GAO and the
Oversight Committee's recommendations, and we will continue to
make sure that we are making those kinds of improvements.
Chairman CHABOT. Excellent. Thank you very much.
My next question, the SBA has been plagued with IT issues,
and, in fact, the GAO and the SBA's Office of Inspector General
have both reported that IT is a top management challenge for
the SBA. The GAO has even gone so far as to find that the SBA
is at serious risk of a cybersecurity attack, putting small
businesses and their personal data in jeopardy. What steps are
you planning to take to address the SBA's IT challenges, and
will these steps help the SBA to prevent cybersecurity attacks?
Ms. MCMAHON. It is certainly my goal to take the steps that
would help prevent those attacks. Just before I arrived in
October, the acting administrator hired a new CIO. And Marie
Roat's background is very thorough. She comes from the public
and the private sector. In fact, she has actually, just this
past Friday, received an award for her government service and
expertise. She kind of inherited a mess, and I think what she
has done so far is to put in policies and procedures that are
absolutely making things better.
We have a long ways to go. In fact, last Thursday evening
we had what was called a spoof email come through. It did not
affect our network. Our network was not hacked, but these are
attempts to get inside. What we found was a configuration error
in transferring from one email management system over to
Microsoft, so that was fixed immediately. But you do not know
that those things exist until it is tested. So what I asked
Maria and our deputy last week were what kind of beta tests are
we doing to make sure that we can identify in advance any of
these weaknesses? So they are in the process of doing that.
We are also in the process of upgrading our equipment
because what we found was we had a lot of equipment that no
longer had support, for instance, of Microsoft. So
identification of equipment throughout the enterprise, policies
and procedures, they are working very hard to get those in
place and I think we have some good people. The deputy came on
in January, so you know, the proof is in the pudding, but I
have seen positive results so far.
Chairman CHABOT. Thank you very much. My time is expired.
The Ranking Member is recognized for 5 minutes.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Administrator, you mentioned in your opening statement the
7(a) cap issue and how you have moved to alleviate fears of a
shutdown. What exactly do you mean by it?
Ms. MCMAHON. Well, first of all, we contacted our lenders
to make sure that they understood that this article was not
totally correct. One of the things the article stated was it
talked about the increase on a percentage basis of where we
were for loans this year relative to last year, and we had run
out of funds and had to come back and ask for more funds. That
is not the case. What the writer of the article did not look at
the program in totality.
So another thing that we did, I had our communications
department call the writer of the article and say we want to
work with you. If you have issues, please at least call us so
you can get the full information so that your story is correct
for both you and for us because you could create a panic in the
lending environment that would send people, you know, it could
be a run on the banks to get things done. So it was very
inappropriate, and I thought not as professional as it might
have been, so we offered to work with them. In addition, we
notified all of our employees that this was not an issue.
Ms. VELAZQUEZ. Okay. But the risk is real and we have dealt
with this issue before. So my question to you is to what extent
should SBA be given flexibility to increase 7(a) lending
authority beyond the congressional authorized cap?
Ms. MCMAHON. Well, thank you. And one of the things that I
have asked for is an ability to increase the cap by 15 percent
should we have surges that would be unanticipated and not
through anything that we have done. However, we do have, I
think, a really good lender oversight program now and are
really managing that risk. We watch it on a daily basis, so we
are totally on top of it.
Ms. VELAZQUEZ. Are you telling me that you are open to be
supportive of flexibility in increasing the 7(a) program
subsidy?
Ms. MCMAHON. Absolutely.
Ms. VELAZQUEZ. Okay, thank you.
Last week, I hosted a women's roundtable exploring women's
small business issues, and a common concern among participants
was the access women have to capital in order to start and grow
their businesses. The SBIC program that we have with SBA is a
stable and successful program, but it needs more women
investors. I think there is a real opportunity for Congress,
the Small Business Administration, and the industry to work
together to support getting more women into investing and for
more women-run businesses to receive investment. Will you work
with this committee and the industry to get more women licensed
as SBIC fund managers?
Ms. MCMAHON. I certainly will because I think it is just
that important as well.
Ms. VELAZQUEZ. Thank you.
In 2014, the GAO reported that many ineligible firms were
allowed to enter into the Women's Procurement program because
of their ability to self-certify. In order to prevent fraud in
the program, the 2015 National Defense Authorization Act
required SBA to implement its own certification program. I
would like to know, when SBA expects to have its certification
process up and running?
Ms. MCMAHON. Very soon. As a matter of fact, it is a focus
right now that is going on in SBA. I do not have an exact
timeframe for you, but we are looking at having that program up
and running very soon.
Ms. VELAZQUEZ. And at that time, when can we expect the
repository currently used by self-certifying businesses to be
eliminated?
Ms. MCMAHON. Let me take a look at that and get back to
you.
Ms. VELAZQUEZ. Okay. In the 114th Congress, bipartisan
legislation was introduced that included redefining credit
elsewhere to focus on the borrower's ability to obtain credit
instead of a lender's ability to provide it. We continue to
hear concerns over how the credit elsewhere test is applied. To
what extent do you believe Congress should enact legislation
that provides clarity to the definition of credit elsewhere?
Ms. MCMAHON. I think that it is incumbent upon the agency.
Maybe not necessarily government.
Ms. VELAZQUEZ. Okay.
Ms. MCMAHON. To continue to look at making sure that our
lenders are the ones that we need for our programs when our
borrowers cannot get money elsewhere.
Chairman CHABOT. The gentlelady's time is expired. Does the
gentlelady need additional time?
Ms. VELAZQUEZ. No. I will go in the second round. Thank
you.
Chairman CHABOT. Okay. Okay. Okay. Thank you.
Ms. VELAZQUEZ. I yield back.
Chairman CHABOT. The gentlelady yields back.
The gentlelady from American Samoa, Mrs. Radewagen, who is
the chairman of the Subcommittee on Health and Technology, is
recognized for 5 minutes.
Mrs. RADEWAGEN. Thank you, Mr. Chairman and Ranking Member.
Talofa. I want to welcome you, Administrator McMahon, for
testifying today.
Just a few weeks ago, my colleagues in this Committee were
all joking about March Madness and their districts' various
college basketball teams. Unfortunately, American Samoa does
not have a college basketball team, but I can boast about
something the other members of this Committee cannot, and that
is professional wrestling. American Samoa has given the
wrestling world Pita Maivia, Roman Reigns, the Usos, Samoa Joe,
and of course, my friend and cousin, The Rock. The WWE has done
a great job of raising awareness of American Samoa.
Administrator McMahon, during the last administration, the
CIO post remained vacant for long periods of time, which likely
contributed to many IT challenges, and I am glad to learn that
you now have one. I also represent American Samoa, and one of
the main issues that our small businesses face is a lack of
capital. Under your direction, how will SBA address access to
capital?
Ms. MCMAHON. In general terms you mean?
Mrs. RADEWAGEN. Yes.
Ms. MCMAHON. We are already addressing that access to
capital. I think we are looking always for more qualified
lenders, but we want to make sure that they are the right
lenders. We have lender training programs. Our field offices
are constantly in touch with our lending partners. And as we
can see, there is more demand for capital. So I think we have a
good program in place but it is one that we will continue to
monitor to make sure that we are making as much capital
available, you know, to our women programs.
Mrs. RADEWAGEN. And thirdly, my last major concern is the
Disaster Loan program. American Samoa has suffered from
hurricanes and tsunamis and cyclones which have nearly
destroyed our economy. Will SBA be ready to help assist small
businesses and homeowners when the next disaster strikes?
Ms. MCMAHON. I think we learned a lot from Katrina and
Sandy, and it is my understanding that we were not prepared to
handle the magnitude of those storms. In fact, when I first
learned that disaster relief came under SBA, I was actually
quite surprised. And in my Senate hearing I testified that it
would be one of the areas that I would take the first look at
because you never know when that next disaster or catastrophe
is going to strike. And we have to be ready because when our
businesses, when our entrepreneurs or operators have lost their
businesses, that not only impacts them, it impacts the local
economy, it impacts our national economy. So we want to make
sure that we can get them back on their feet, not only from
their business perspective but also from their home
perspective.
So the leader of our Disaster Relief program, James Rivera,
I think has done an excellent job in responding to the
magnitude now of Disaster Relief. In fact, let us see, in May,
I will tour our facility in Dallas-Fort Worth, from which
everything fans out from when we get a disaster program. It is
sort of the headquarters of Disaster Relief, so I am looking
forward to that. But I feel confident that James--in fact, I
believe he is testifying before this Committee later this
month. I think he has put in really good, solid programs to
make sure that we do not get caught like we did with Katrina
and Sandy.
Mrs. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
Chairman CHABOT. Thank you. The gentlelady yields back.
The chair would note that the administrator mentioned
Hurricane Sandy, and the Ranking Member was instrumental in
proposing bipartisan legislation to improve the response to
tragedies like Sandy, and that is something in a bipartisan
manner that made it into law in the last Congress. So I would
like to commend the Ranking Member for that. Absolutely.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Chairman CHABOT. Absolutely. Well, it is well deserved.
So I would now like to recognize the gentlelady from
Florida, Ms. Murphy, who is a ranking member of the
Subcommittee on Contracting and Workforce, for 5 minutes.
Ms. MURPHY. Administrator McMahon, thank you for being here
today, and we look forward to working with you.
As you mentioned in your testimony, you have spent
considerable time visiting small businesses across the country.
I recently met with my constituents from my district who told
me that you are familiar with the National Entrepreneur Center
located in Orlando and have been supportive of the range of
services that they offer.
For my colleagues who may not be aware of the NEC, the
center is a public-private collaboration between various
community resource partners: SBA, Orange County, and the
University of Central Florida, among many others. It is home to
various chambers of commerce and SBDC and our SCORE chapter,
and serves as a one-stop shop for many entrepreneurs and small
business owners to receive free or low-cost business
development training and assistance, and I want to thank you
for your support of the NEC.
Last week, our Subcommittee held a hearing on SBA's
entrepreneurial development programs, and we discussed the
ongoing concerns that the SBA's resource partners with the
agency's data collection. For example, the SBDCs in my State
are concerned that the goals and metrics set by the SBA are not
geared towards demonstrating quality of services and economic
impact. Can you speak to this concern, and will you be meeting
with leaders from the SBDC, SCORE, and WBCs to learn more about
their programs firsthand? And then also, what do you think the
metrics should be to measure quality of service?
Ms. MCMAHON. It is interesting that you first spoke about
the National Entrepreneur Center because it was very
impressive. And actually, the head of that, Jerry Ross, and I
met in my offices here in Washington just last week, because I
think there are elements of it that could absolutely be
incorporated with some of our SBA district offices that would
make us more efficient and effective. Those two words I heard
from Ranking Member Velazquez. It is the two words that I
constantly say from a management perspective at SBA, the two
things that are your guiding principles here, are our programs
effective and efficient?
One of the things that I asked when I came onboard, I was
sitting with our CFO and I said, ``Tell me how we measure
success at SBA. How do we measure success of our programs?''
And while there are some really good metrics in place, I think
we have room for improvement. Some have been put in place over
the last year or so. But I am not really satisfied that we have
the kind of metrics that we need. I think right now we are
measuring more output than outcomes, and I want that tightened
up because I want them to be efficient and effective, and I do
think we have room for improvement.
Ms. MURPHY. Great. And then another question is despite
multiple attempts by this Committee, several agencies
continually fail to meet their small business contracting
goals. Why do you think this is the case, and how can we work
together to ensure that agencies meet contracting goals and
take their duty to contract with small firms more seriously?
Ms. MCMAHON. Well, I think we absolutely have to be
vigilant for that because I think it is a privilege, quite
frankly, to get a government contract. You know, to get a
contract from the greatest customer in the world is really
quite a coup. And if it is not being valued and serviced and
really looking at what we need to do, then I think we need to
look elsewhere, and maybe that contractor does not deserve that
contract.
Ms. MURPHY. And then finally, as you know, the Small
Business Investment Program has a legacy of empowering women in
the private equity community through greater deployable
leverage and rigorous standards for operating a fund. With your
support for the program, we can continue to empower women and
other represented communities in the private equity community
to support them as they build their businesses through
receiving that investment. In your opinion, what can we do as
partners to ensure that the program is well supported for these
purposes?
Ms. MCMAHON. Well, as I read in my opening statement, after
I left my company, my former company and started a new company,
Women's Leadership LIVE, one of the things that I did discover,
what made me want to be involved in that particular company
with my two other cofounders was looking at the availability of
capital for women. I think it is an educational process on the
one side. I did find, and this is not any sort of blame for
women, but I did find out that in the business world,
especially with startups, they are not quite as confident going
forth.
So part of what we need to do is to help them write their
business plans. Help them where they are transitioning in their
own company from a management level to a C suite, whether they
are going to a board, mentorship and networking is so vital.
And I think we have to provide that through our counseling at
our Women Business Centers. I think that is really critical.
And in our Office for Entrepreneurial Development it is a key
thing to mentor because sometimes, as I said in my opening
statement, you need a little wind beneath your wings. And what
I mean by that is support systems. And so we are constantly
evolving. In my short tenure at SBA, I have seen some of the
progress we are making, but it is something I would like to
expand.
Ms. MURPHY. Great. Thank you.
Chairman CHABOT. Thank you. The gentlelady's time is
expired.
The gentleman from Mississippi, Mr. Kelly, who is the
chairman of the Subcommittee on Investigations, Oversight, and
Regulations, is recognized for 5 minutes.
Mr. KELLY. Thank you, Mr. Chairman, and our ranking member.
And thank you, Administrator McMahon, for being here.
You know, small business and entrepreneurs, and those small
ideas that start in garages or places everywhere, are the
American dream that turn into giant corporations. And I do not
think there is a better representative of someone who has done
that, taken it, all this pain and strife and dreams and wishes
and turned those into reality in something that is worldwide
recognized, and so I thank you for that. I think you are the
exact kind of idea and person we need in this job to make sure
that other people have those same opportunities going forward.
I am extremely concerned to make sure that we continue to
reach out with veterans. I am a veteran and still currently
serve, and so a lot of those guys have the right ideas, guys
and girls. They have the right ideas. They have the right
hearts. They have everything in place except sometimes they do
not know how to do that. We have a VBOC at Mississippi State
University, which is just right outside of my district, but
does such a great job. And so presenting those ideas to
veterans is very important to me.
But I want to start with talking about Executive Order
13771, which the president signed, which says that, ``We will
reduce regulatory burdens by identifying two regulations for
elimination for every one new regulation that we promulgate.''
What steps has the Small Business Administration taken to
identify rules and other requirements that could be repealed or
streamlined?
Ms. MCMAHON. Thank you very much. Just to, if I may, just
to comment. Thank you for your compliment relative to where WWE
went in the world and to come from recovering from bankruptcy
to take a company public and to have a global brand is the
American dream. And I really want to make it possible through
efforts of SBA to make more entrepreneurs, to give them the
opportunity of living the American dream.
What we have done relative to the regulatory issue is to
form an advisory committee that is now going through
regulations, et cetera, at SBA, to see if there are those that
we would like to get rid of. So it is an ongoing process.
Mr. KELLY. And as kind of a follow-up, does the Small
Business Administration plan to issue a Federal Register Notice
to publicly solicit input from particular small businesses on
regulations, guidance, and other reporting and recordkeeping
requirements that should be repealed or streamlined?
Ms. MCMAHON. I am always interested in hearing what our
small businesses have to say, or have, you know, their
suggestions, their concerns, their questions. We have conducted
business roundtables and will continue to do that. And I do not
think there is any better source of understanding what the
perils and the issues are than to listen to the business
community. Because if you are not there, you are not
experiencing it and we need that input.
Mr. KELLY. Thank you for that comment. I think you hit the
nail on the head. We do not know the impacts as Congress or as
administrators near as greatly as those small businesses who it
is impacting.
The final thing I want to talk about is transparency. It
was an issue in the past with the SBA. For example, during the
last administration, the SBA made decisions with no formal
written record of the decision or how the decision was made.
How will you ensure that the SBA is transparent under your
leadership?
Ms. MCMAHON. It is just something I will require and I will
not tolerate it being any less.
Mr. KELLY. And then finally, and I do not think I have
enough time to really get into an in-depth answer of this, but
one of the other things that I think is just so important that
you look at as a new administrator in providing your leadership
and ideas is the SOPs. We have over 150 SOPs, or standard
operating procedures, throughout the Small Business
Administration, and I just ask that you and your team look
really, really closely with that to make sure that we have the
right ones in place. And much like the executive orders, those
parts and pieces and SOPs that are really no longer SOPs or we
need, please do away with those and streamline it so it truly
is a standard operating procedure instead of just a bunch of
rules and regulations that no one complies with.
And with that, Mr. Chairman, I yield back.
Chairman CHABOT. Thank you. The gentleman yields back.
I assume the administrator did not have any comments on
that question?
Ms. MCMAHON. Just quickly to say that that process is
already in place. We are reviewing those and it is part of what
our CFO is doing, our COO's office, you know, with input from
the other agencies as well, the other offices. So I am looking
forward for streamlining. I am all about streamlining.
Chairman CHABOT. Thank you. The gentleman yielded back.
The gentlelady from New York, Ms. Clarke, is recognized for
5 minutes.
Ms. CLARKE. I thank you, Mr. Chairman and our Ranking
Member Velazquez. And I welcome Administrator McMahon here this
morning, for giving your testimony.
I wanted to ask a bit about the HUBZones. I am from New
York City, and, in concept, the HUBZone program should be an
economic boom. A recent GAO report found significant issues
with HUBZone firms who are seeking recertification. In addition
to the backlog that currently exists, the firms are not
required to submit supporting documentation for their reviews.
Is SBA taking any actions to correct these issues raised in the
GAO report? And what actions are being taken to reduce fraud
and abuse during recertification?
Ms. MCMAHON. Well, thank you very much for that question.
HUBZones, I will be frank, I do not think is one of our stellar
programs right now because we need to look at them much closer.
Now, I have not had much of an opportunity to really delve into
the HUBZone issue, but I do know that there have been these
questions raised.
One of the things that I want to do, in fact, I have talked
to Secretary Carson about visiting some HUBZones with him as he
is coming in from HUD, and I think that that will give more of
an insight into how we can make them more effective. But we
have got a ways to go, and you have my commitment that I am
going to be looking at it much closer.
Ms. CLARKE. Wonderful. We hope to work with you to fine
tune it because, conceptually, it should yield great things in
terms of economic stimulation----
Ms. MCMAHON. I agree.
Ms. CLARKE.--particularly in areas that have been stagnant
for quite some time.
My second question is while the overall number of loans--
and this is going back to the 7(a) loan program--has increased,
the percentage of (7)a loans going to women-owned and minority-
owned firms have remained fairly stagnant, fairly flat, since
2010. What actions will SBA take to improve access to capital
for these firms?
Ms. MCMAHON. Well, thank you. And clearly what we are doing
is making sure that we have more and more women especially
applying for those loans. And I think that gets back to Women's
Business Centers and our Entrepreneurial Development Office to
encourage the development of these businesses. But, you know,
quite often a great idea does not make a good business, and I
think part of what we need to do when we have entrepreneurs
come into our offices for counseling, is to also take a look at
it and let them know, you know what? This is a great idea, but
it may not be the best idea. Here is how you might improve your
business plan. Here is how you might think about how you would
scale your business. And helping them walk through that whole
process, then putting forth the opportunity to have access to
capital, go for capital.
But we are absolutely looking at our lending institutions
as well to make sure that women are not being discriminated
against because we know right now that women do not get as many
loans. Often, there is a higher interest rate for that money.
And you know what? That is part of our lender oversight,
because we want to make sure that they are not doing that.
Ms. CLARKE. Well, I am glad that you are looking at all
aspects of this because indeed there is discrimination. And we
need to call it what it is and remove those obstacles for
women- and minority-owned firms that are already in business,
but have been, for whatever reason, discriminated against and
tend not to be given those opportunities through our
traditional lending mechanisms. So I appreciate the fact that
you are looking at this in a holistic manner.
And with that, Mr. Chairman, I yield back.
Chairman CHABOT. The gentlelady----
Ms. MCMAHON. May I just make another comment?
You know, the entrepreneurial environment in our country
over the past few years have been declining startups, but the
startups that are on the rise are women businesses and they are
also more successful. And also, women minority-owned businesses
are even the lead in that. So it is certainly to the benefit of
SBA, to our economy, to our country, to continue to grow this
aspect. I mean, we are 51 percent--we, women are 51 percent--of
the population, make 80 percent of the purchasing decisions in
our home, so the economy misses out by not having that part of
the population have the same access to capital and the same
opportunity to be treated fairly and equally.
Chairman CHABOT. The gentlelady yielded back.
The gentleman from Kentucky, Mr. Comer, is recognized for 5
minutes.
Mr. COMER. Thank you, Mr. Chairman, Administrator McMahon.
Ms. MCMAHON. Good morning.
Mr. COMER. I am James Comer from Kentucky. Welcome.
Ms. MCMAHON. Thank you. Good basketball there.
Mr. COMER. Yeah, absolutely. We should have beat North
Carolina, but that is another story.
Ms. MCMAHON. Well, no, I am a North Carolina girl, so I
was, you know.
Mr. COMER. My first question is what is your definition of
a small business? And I ask that because a lot of the Federal
contracts that are awarded specify that a certain percentage of
the contract is supposed to go to small business vendors or
subcontractors. And a lot of my small business subcontractors
do not get the contract and they complain and say that the
company that won the contract was a big business. And I did not
know if you had a definition of exactly what a small business
was.
Ms. MCMAHON. Before I came to SBA, when I thought about a
small business, I thought about the barber shop on the corner,
the deli down the street, the dry cleaning establishment, et
cetera. I know that there are different criteria for different
industries in SBA. A general rule is 500 employees or under.
For manufacturing, it is a little bit bigger. There are some
bottom-line aspects to it as well. But I think the bigger issue
that you want to address is to make sure that it is not medium
to large businesses that are given preferential treatment over
our small businesses in our contracts and our capital access
program and all of that. And that is something I want to be
really vigilant about and have given that instruction.
Mr. COMER. The SBA guarantees loans all over the country. I
have been a director of a small bank, and some of the banks in
my district do a lot of small business loans, SBA loans. Some
of them do not because of the paperwork. Two questions. Just
out of curiosity, do you have any idea what the delinquency
rate is? I know this would have happened before you got there,
but what percentage of SBA loans fail and the SBA has to cover
those loans?
And second, what are some things that we can do with
President Trump? Obviously, he is focused on reducing the
regulatory burden. Are there other things this Committee can do
to reduce the regulatory burden to make it more advantageous
for banks to do SBA loans?
Ms. MCMAHON. Well, relative to the regulatory environment,
it is such a big issue. A lot of what you hear from small
businesses, which I heard when I traveled across the State of
Connecticut was just the paperwork alone to comply with the
regulatory environment, you know, they are small business
owners. I mean, you have got, let us call it the CEO, who also
sweeps up at night and closes the business, he does not have
time or she does not have time to do it herself, or she does
not have the income to hire the people to do that. So in all
areas, if we can look at what regulations are really necessary,
because nobody thinks that we should be able to just run and do
things the way we want, you know, there are regulations that
are very important.
But I think it is incumbent upon us to listen to the small
business community about what is choking them. And that is one
of the things that I want to do is to have more and more
listening sessions around the country so that we can help those
things that SBA can directly affect as well as what suggestions
or advice we might offer to the administration. This is what we
are hearing. So if you would take that into consideration as
well.
Mr. COMER. And hopefully, we will do some things from a
lending standpoint, like repeal Dodd-Frank, and do some things
that will make it easier to obtain capital. But back to the
question about the percentage of loans that are delinquent, do
you have any idea of what that number would be?
Ms. MCMAHON. No, I do not have the percentage, but I do
know that we are reducing the default rate, which I think is
good. And that goes into, also, you know, better oversight of
our lenders because, ultimately, lenders make the decision as
to whom they are going to have as a customer. We, then,
guarantee that loan.
Mr. COMER. Right.
Ms. MCMAHON. So we want to make sure we are really
qualifying our lenders so that they are really good at what
they are doing. If we see a pattern or a trend of defaults in
those areas, we know we have the wrong lenders in place.
Mr. COMER. Thank you, Mr. Chairman. I yield back.
Chairman CHABOT. The gentleman yields back. Thank you.
The gentlelady from California, Ms. Chu, is recognized for
5 minutes.
Ms. CHU. Administrator, I would like to ask you about the
Community Advantage Lending program. This was the program that
was started in 2011 by the SBA as a loan guaranty allowing
certain mission-driven lenders, including CDFIs and micro
lenders, access to 7(a) loan guarantees for up to $250,000 made
to small businesses in underserved markets. In this case,
underserved markets include low- to moderate-income communities
in economically distressed areas, both urban and rural. The
initiative has gained a great deal of success. In fact, each
year it has become more and more active. And in February alone
there were 3,093 loans that were approved for a total value of
$390 million. What is even better is that the average loan size
was $127,000, which is much smaller than other SBA guaranty
programs.
So I believe that it is imperative for the SBA to continue
encouraging this kind of small-dollar lending activity,
especially in the underserved markets and to support businesses
that are oftentimes perceived as not bankable so that they can
eventually become bankable.
So Administrator McMahon, could you tell us your thoughts
on the community advantage guaranty and whether it should be
maintained, if not strengthened?
Ms. MCMAHON. I definitely think it should be maintained. It
kind of serves an interim area, if you will. It is not
microloans which are up to $50,000, but it goes up to the
$250,000 mark. Oftentimes, businesses are already in place and
are growing, but in order to scale up or continue to grow, now
they need some additional funding. And that is one of the
things that the Community Advantage program can do is to help
continue those businesses because clearly, as those businesses
continue, they are going to hire more people. They are going to
create more jobs and it is going to be clearly accretive to our
economy.
Ms. CHU. Well, let me ask this. Many of these mission-based
lenders have reported great interest from local small
businesses in getting these loans. However, since it is a
pilot, the lenders face uncertainty because the initiative must
be extended each time upon expiration. Do you think that there
could be benefits to making the program permanent?
Ms. MCMAHON. Well, I do believe in performance-based
awards. So as we continue to look at the success of these
programs, I think it is too new to say right now that it should
be permanent. I think we should still continue to look at how
it performs. And I am all in favor of that and want to continue
programs that we are seeing that kind of success with because I
think it helps so many small, but also getting close to a
little bit of a medium-sized business.
Ms. CHU. And on another note, Administrator McMahon, I was
interested in learning about your years encouraging women to
become entrepreneurs, and I want to thank Ranking Member
Velazquez for bringing up the issue of women having access to
the SBIC funds. That is an issue that is very important to me.
Last year, I held a field hearing in my district to learn
more about why venture capital and angel investment is
particularly difficult for women entrepreneurs to access, and
we learned that it is because there are very few women in
lending positions, and it is a problem because when you do have
women in lending positions, they do tend to encourage more
women borrowers and actually lend those monies. So the SBA's
SBIC program is so great because it provides a critical
investment capital to small businesses across the country, but
there are still too few SBIC investments in women-led firms and
even fewer SBICs with women partners. And so while SBIC
programs have a higher proportion of female managers than the
broader VC community, more must be done to increase these
numbers in both realms. So do you think there are ways to work
within the SBIC program to ensure that there are more women
qualified to become fund managers when the opportunities become
available?
Ms. MCMAHON. Well, I think one of the things we can look at
when we are looking at these venture capital firms is what is
the makeup of the group that is part of that company and say,
you know what? We would like to see more women, and to then
start to identify some of those venture capital firms that do
have more women. I think we can clearly do that.
Ms. CHU. Thank you. I yield back.
Chairman CHABOT. The gentlelady yields back. Thank you.
The gentlelady from Puerto Rico, Ms. Gonzalez-Colon, is
recognized for 5 minutes.
Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. Thank you, Ms.
Ranking Member. And thank you for having us here in this public
hearing and thank you, Administrator, for being here. Actually,
I am inviting you to come to Puerto Rico and help us there.
One of the questions I want to make is about the HUBZones.
Ms. MCMAHON. I am sorry, what?
Ms. GONZALEZ-COLON. HUBZones. The underutilized business
zones, HUBZone program.
Ms. VELAZQUEZ. I am sorry, I am just not understanding.
Ms. GONZALEZ-COLON. HUBZone.
Ms. MCMAHON. HUBZones. Sorry. I am sorry. Thank you.
Ms. GONZALEZ-COLON. You may be aware, the expansion of
those HUBZone designated areas is a topic that the General
Accountability Office has been studying, and I aware that they
are going to have a report this summer. But also, the Puerto
Rico Oversight Management and Economic Stability Act, known as
PROMESA, expanded the number of HUBZone designated areas,
adding over 500 of those in the island. Can you generally speak
about how this increase will help Puerto Rico's economy if you
can help us in that?
Ms. MCMAHON. Well, thank you. And sorry that I was not
understanding what you were saying. I apologize for that.
Actually, I think SBA got in a little bit of trouble in
Puerto Rico because we took a little bit of expansion and kind
of made it more than island-wide and it was not authorized for
us to do that. So we are dealing with that a little bit now.
I actually have not looked at Puerto Rico so closely since
I came on board, but what we have done, as a matter of fact, I
asked one of the members at SBA who is a young man--actually,
might even be here this morning. His name is Michael Morales.
He was born in Puerto Rico. His grandparents still live there.
He is a White House fellow with SBA. He is a lieutenant colonel
in the Air Force, and I asked him to research Puerto Rico and
some of the programs that we have in place, and he actually now
has proposed a plan. He wants to go and visit the lenders and
visit the communities and see how SBA can have more of an
impact in Puerto Rico and what our programs ought to be. So we
are taking that initiative, but it has just started. I just got
the research.
Ms. GONZALEZ-COLON. I know, and I really thank you for
that, and I am able to help you in that.
Ms. MCMAHON. Thank you. I might have to come myself and,
you know, Puerto Rico is a very nice place to visit.
Ms. GONZALEZ-COLON. I know. I can tell you that. And
actually, I can drive you around. There are so many areas. One
of those is----
Chairman CHABOT. Would the gentlelady yield? Would the
gentlelady yield for a second?
Ms. GONZALEZ-COLON. Yes.
Chairman CHABOT. One thing I might bring to the
administrator's attention, and there is no reason for her to
know this, but the gentlelady was the speaker of the house in
Puerto Rico, so she is very familiar with virtually everything
that goes on down there. And the ranking member has a lot of
knowledge relative to Puerto Rico and she is chomping at the
bit, I think, to say something. So if the gentlelady does not
mind, I will give her additional time.
Ms. VELAZQUEZ. Would you yield?
Ms. GONZALEZ-COLON. I just want to have my time. I do not
mind.
Chairman CHABOT. I am going to give you a little extra.
Ms. VELAZQUEZ. He will give you more time.
Ms. GONZALEZ-COLON. Okay, perfect.
Ms. VELAZQUEZ. Administrator McMahon, let me just stress
the fact that Puerto Rico is in deep trouble financially.
Ms. MCMAHON. Yes.
Ms. VELAZQUEZ. And that we work here in Congress in a
bipartisan way to provide tools for Puerto Rico to deal with
the public debt, but yet, it requires more of the federal
government. And in that sense I am working and I will be
working with the chairman and the gentlelady from Puerto Rico
to work on a bipartisan package that will help SBA put together
a comprehensive way to help small business formation and
economic development in Puerto Rico, and I am looking forward
to working with you.
Ms. MCMAHON. Thank you. And I look forward to that
opportunity. You and I talked a little bit about that in your
office, and I would be excited to help.
Ms. VELAZQUEZ. Thank you.
Ms. MCMAHON. And look forward to that.
Chairman CHABOT. Thank you. And the chair would note that
the gentlelady should be happy that we have put another minute
back on there and we stopped the clock running, so you have got
3 minutes and 1 second to continue.
Ms. GONZALEZ-COLON. More than happy to hear that and that
bipartisan effort. I thank the ranking member and Mr. Chairman
for the help.
And actually, I do understand that the work that the task
force on PROMESA, the report that told us about to do something
with the SBA and the island, is the right path to Puerto Rico's
economy. So I thank you, Ranking Member and the Chairman of the
Committee, for allowing that to happen.
There are 676 HUBZone areas representing as you may say 82
percent of the island, the whole island, and one of the main
questions regards or the concern is what is the main problem to
achieve the 3 percent contract with the Federal Government?
Because people do not know about how to do it. How do you think
we should help or say the government may help the SBA
administration to achieve the 3 percent prime contracting goal?
Ms. MCMAHON. Well, as Ranking Member Velazquez said, you
know, these are programs that she is looking at as well, and I
look forward to working with her. I do not have that answer
today.
Ms. GONZALEZ-COLON. Okay.
Ms. MCMAHON. But I can tell you this, that the success rate
in Puerto Rico when SBA has come in to help with small
businesses has been there. So we would like to continue it.
Finding lenders is paramount, but we also need to help with the
counseling. It is going to be a big project and one that I am
actually not qualified to talk about this morning. But I look
forward to getting back to you.
Ms. GONZALEZ-COLON. I thank you for your sincerity and
honesty. I think that is what makes you a great administrator.
Ms. MCMAHON. Thank you.
Ms. GONZALEZ-COLON. One of the issues I would like to
address is about I know the SBA is currently exploring some
issues regarding the island seminars, visiting some towns. With
that, I would like to help in that area and be the coordinator
between State government and the Federal Government to make
that goals to be achieved.
One of the other areas is the Disaster Loan program and, as
you already state, we are on an island so we get hit by
hurricanes in a common year many times, and we saw what
happened in Katrina, we saw what happened in Sandy. So we want
to be able to know what responsibilities directly is the SBA
role of the Disaster Loan program to the small business
community?
Ms. MCMAHON. Do you find that today there are deficiencies?
Ms. GONZALEZ-COLON. In the past?
Ms. MCMAHON. Yes.
Ms. GONZALEZ-COLON. Yes.
Ms. MCMAHON. Could you help me identify what they have been
so that as we move forward with our programs we will know,
okay, this is what did not work, this is where you did not step
up to the plate to help us? Maybe there is a reason for that; I
do not know. But we want, regardless of where the area is, our
commitment to our Disaster Relief program is paramount. So I
would like to know what the issues are so that we can be very
effective in addressing them.
Ms. GONZALEZ-COLON. I will do that, and thank you,
Administrator, for your commitment to small business.
Thank you, Mr. Chairman, I yield back.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
The gentleman from Illinois, Mr. Schneider, who is the
ranking member of the Subcommittee on Agriculture, Energy, and
Trade.
Ms. VELAZQUEZ. He just left.
Chairman CHABOT. Oh, he just left. Okay.
Mr. Evans is recognized for 5 minutes. Thank you.
Mr. EVANS. Thank you, Mr. Chairman.
Madam Administrator, in your statement you were speaking of
revitalizing the agency and raising its profile as you want to
initiate Small Business Development Centers, and I also
understand the President also indicated that this is a
priority. Now there is an opportunity to make honest
assessments of the Small Business Development Centers and other
entrepreneurial programs. Are you open to meeting with these
people and can you speak a little bit to some of your thoughts
and ideas at this point relating to these organizations?
Ms. MCMAHON. Absolutely, and thank you for asking me that.
Not only am I willing, I think it is mandatory to go in so
that we can help evaluate, see where we need to be stronger and
better. One of the things that I have talked about from the
beginning at SBA, I mean, I come from a company that created
its success from marketing and promotion. One of the things
that I found about SBA is we do not toot our own horn enough.
There are not enough people that know what our services are and
how we can be helpful, so I really want to change that. I want
our field offices to know that they have our support. I want to
visit with them. I want to make sure that they are connecting
with the community, connecting with lenders, and I think we
cannot--I cannot get a handle on how all of the programs are
operating if I am not visiting them and asking those questions.
So not only am I willing, but it is clearly something I intend
to do. And we look forward to working with any members who are
here when we are coming into your districts because you
obviously know your districts better than we do, so I would
really look forward to that.
Mr. EVANS. Can you speak to goals or metrics that either
are in place or will be in place for programs that are geared
to improving the performance, programs offered by SBA and
quality services thus resulting in economic impact? I heard you
talk a little bit about just generally asking what works and
what does not. Any thoughts in terms about economic impact?
Ms. MCMAHON. Well, I think the phrase that I used before
was I think that our metrics right now--well, in the past they
have already started to improve and to be reconfigured, but the
metric that I am looking for is to measure outcomes, to measure
successes, not to measure output. For instance, I will just use
a little example. You know, if a worm is crawling along and he
has got to get here and he is just crawling at a slow pace, he
is just going to keep after it and keep after it and keep after
it and keep after it. But he actually may not be taking the
best path to get to his goal. Now, I want to make sure that
everyone in SBA is taking the best path to get there, but
before they start out, I want to make sure that the
accountabilities are in place.
One of the things that I found when I came, when I asked
the question about how do we measure success, I clearly was not
satisfied with the answer. So we are putting more metrics in
place at this point, but in terms of giving you a specific
example, just let me say that we are working across the board
to make sure that our measurements, A, that people know what
they are to start with and that they are going to be measured
against those accountabilities.
Mr. EVANS. Madam Administrator, we have obviously heard a
lot of talk about tax reform, and obviously that seems to be
across the board and the general discussion. What is your
thoughts about the implementation of tax reform at this
particular point and the potential impact it has? I mean,
obviously there was a discussion of tax reform in 1986.
Reality, here we are in 2017. The world has changed a lot since
1986. Give me a little thought about if you had your crystal
ball relating to tax reform and its impact.
Ms. MCMAHON. Well, I certainly do support President Trump's
policies for tax reform, for reducing taxes at a corporate
level, for making sure that our middle-income taxpayers have
greater breaks in tax reform, because I firmly believe that
reduction in taxes will actually grow our economy. And when I
first started my company, we were a sub S corporation, so all
of our income passed through to sub S and we were taxed at the
same rates. And I think that when we do pass tax reform, it
needs to apply to those LLCs and those subchapter S
corporations so that they recognize the benefit from tax reform
and, therefore, can grow their businesses. So I think from a
small business perspective, as well as from a large company and
economy, tax reform is going to help us be more competitive in
the world. So I am clearly supportive of the President's
efforts to do that.
Mr. EVANS. Thank you, Mr. Chair. I yield back the balance
of my time.
Chairman CHABOT. Thank you very much. The gentleman's time
is expired.
The gentleman from Kansas, Dr. Marshall, is recognized for
5 minutes.
Mr. MARSHALL. Thank you, Mr. Chairman.
Madam Administrator, the National Small Business
Administration recently met like 2 or 3 weeks ago and we have a
great relationship back home with some of these people, and
they walked out of that meeting and they said their biggest
concern is health care. It overtook regulation. For years,
overregulation had been their biggest concern. We spend most of
the time up here talking about Medicaid and small individual
groups. Do you have any suggestions or concepts, what are the
biggest problems with health care for small businesses and what
are your suggestions going forward? Is there anything that we
can do working together to help with this biggest problem they
are describing, health care?
Ms. MCMAHON. Well, from my own experience, when I was
campaigning in the State of Connecticut for the Senate, one of
the things I heard so often from our small businesses was the
increase in premium costs. Clearly under Obamacare, which had
come into place at that time, they were having great
difficulty. They were either wanting to stay on the side of the
50 employees or they were having to reduce benefits. They had
asked their employees to increase their copays, but it had
gotten to a point that they could not increase copays anymore,
so they were faced with oftentimes laying off some of their
employees. So that is the one specific example, you know, that
I can cite that I heard over and over again was it was the cost
of healthcare premiums.
Now, you know, we know that employer health care is one of
the best that we have in the country, and my former company,
WWE, was self-insured because we--up to a certain level and
then catastrophic came in and that is what the company paid for
over and above. We were fortunate to be able to do that, but
small businesses cannot. I would like to see consortiums where
small businesses could buy in. I would like to be able to buy
insurance across State lines because I do think competition is
going to drive down the cost of health care, and small
businesses really would be great beneficiaries of that.
Mr. MARSHALL. And maybe just expand a little bit on that.
So you would envision associations of small business, so maybe
even the National Small Business Association could have their
own health insurance plan across State lines?
Ms. MCMAHON. Potentially, if that worked for them and we
found that it was cost-effective. I do not know that particular
studies have been done relative to that. If there are, I am not
familiar with them, but I would be very interested in seeing
them because as we talk to our small businesses as they are
trying to plan and write their business plans, they have to
look at what the cost of business is, whether they have
mandates, whether they have more options is often a make or
break situation for a small business.
Mr. MARSHALL. Exactly. Let us talk about maybe
overregulation for a little bit. Any specific examples, or what
can your department do to help with the regulations? Or what
would you suggest Congress be doing to work on these
regulations that affect specifically small businesses?
Ms. MCMAHON. Let me give you one example. Again, when I was
campaigning, because that is when I was traveling to these 500
different companies, there was a small business in Connecticut
that used chemicals, et cetera, in its process for stripping
metal and for applying the next coat of metal. And the CEO of
that company said to me, he said, ``Look, I absolutely believe
that I should be regulated. You know, test to make sure I am
not putting poisonous vapors into the environment. Make sure
that I have got safety regulations in place because these are
caustic chemicals.'' He said, ``I do not have any issue with
that whatsoever.'' And he said, ``But when regulators come in
and they really do not find issues relative to those things,
but feel that they must find something wrong,'' he said, ``I
was fined $15,000 because the lettering on the men's and
women's bathrooms was not at a size that had been specified in
the regulation.'' Clearly readable. Nobody was going into the
wrong bathroom, but $15,000 can be a big hit to small
businesses.
So I mean, that is an extreme example, but it is an example
of some of the things that a small business might face. And it
was not as though the regulator said, ``You know what? Fix
this. I will be back in 30 days.'' The fine was levied that day
and he had to pay.
Mr. MARSHALL. If I can ask my last question, what can we as
a small business group here or in Congress do to help empower
you to do your job better? What can we do to help you?
Ms. MCMAHON. The fact that you are willing to sit with me
and SBA, to counsel us, to show us where we have weaknesses,
where we might can improve, or to show us where we are really
doing well, and how can you and your local areas help us be
more effective would be a great benefit to SBA, and we will
seek your counsel and working with you. And I look forward to
it.
Mr. MARSHALL. Thank you, Madam Administrator. I yield back.
Chairman CHABOT. Thank you. The gentleman's time is
expired.
The gentleman from Illinois, Mr. Schneider, has returned,
and he is now recognized for 5 minutes.
Mr. SCHNEIDER. Thank you, Mr. Chairman. I apologize for
stepping out. I am bouncing between two Committees and they
called a vote.
Ms. MCMAHON. I figured you had heard all you needed to
know.
Mr. SCHNEIDER. No, but I will tell you, with all due
respect, Madam Administrator, I have been very pleased with
what I have heard, and thank you for being here and sharing
with us your perspective. I come from small business, as do
you. I think it is so important. You touched on the growth of
small business, the highlight that women entrepreneurs have
been starting up businesses, but also the concern that we are
not seeing enough startups. I will share the concern that since
the Great Recession, typically, every previous recession it was
small business that led us to the recovery. In this one it is
small business that has lagged and I think there is a number of
reasons for that, including concerns about uncertainty and
policy, access to capital, access to talent, which is so
important.
You talked about in your opening remarks the importance of
trying to revitalize the agency and raise the profile of the
SBA, your words. I just wanted to touch on that a little bit.
What do you see as your vision? How do we go about doing that
and how can we help you in that mission?
Ms. MCMAHON. Thank you. One of the things I said when you
were out was that I do not think SBA toots its horn enough, and
I think we need to make sure that in the communities that there
is a greater awareness of what benefits the SBA might bring.
And I am a perfect example. Growing the business, I did not
know about SBA. And when you are just starting a business that
maybe does not have brick and mortar or hard assets and your
business is really valued on cash flow, it would be incredibly
helpful to have a SBA partner who could understand and see that
progress and help be, you know, your advocate, maybe direct you
to lenders who could help evaluate that. And I think that is
one of the things that SBAs ought to do.
My first couple of weeks as administrator, I was gathering
different groups within the company because I wanted to hear
what they had to say and we had this vibrant young group. I
called them ``the kids.'' That just shows how old I am. But
they were very enthusiastic about social media, about Twitter,
Facebook, all of the things that at WWE we used very, very
well, and we are just beginning to use them in SBA. But I asked
this group, you know, what do you see? How can we be better at
what we are doing? We do not want to be your father's SBA. We
want to be today's SBA, growing companies and making sure
entrepreneurs are feeling more comfortable about taking risks.
Because that is what entrepreneurs do; they take risks. And if
they are operating in an environment where the risk is too
great, they are not going to take the risk. So I think through
education and through SBA being a little bit more vocal, it can
help entrepreneurs understand that that is changing, that
lenders are more willing to lend at this particular point.
There was a terrible time where community banks, you know,
we lost our community banks. Big banks bought them up and so
there was not that access to capital that entrepreneurs had at
one particular time, so I think we are seeing more and more of
that today. So I want to make sure that--you always have to
manage the downside, but that upside that you reach a little
bit for the brass ring, but through counseling and good advice
I think we can do that.
So this group, back full circle, this group of young people
that I had, I challenged them. I said, ``I want you to come
back in 2 weeks. I want to see your marketing plan. I want to
see what you want to do.'' And they left there buzzing, their
little groups in the hallways talking about what they could do.
That kind of life in a company is just critical. So if you can
generate that kind of internal buzz, you know you have got
programs that are doing well.
Our 7(a) loans are being very proficient, but what is going
to happen when we get the morale issue? And we have dealt with
a morale issue. If we can get that buzz going to our district
offices and everywhere, you wait and see what kind of SBA
programs get put into place, how many more jobs we create, how
we encourage entrepreneurs to come in. And I am all about that.
And these young people came back with a great plan and part of
it is being implemented now.
Mr. SCHNEIDER. Well, if I add just a couple things,
entrepreneurs have dreams. Right?
Ms. MCMAHON. They do.
Mr. SCHNEIDER. They see a future. They see things.
Hopefully, they see things that the rest of us do not see and
that creates opportunities for more people. Oftentimes they may
see the dream, but they do not see the how or they do not see
the steps. If our shared role can be helping teach people the
how, making it easier to access the how, which is both having
talent, having capital, having the ability to write a business
plan, but also clearing the obstacles in their paths and making
sure that their paths are steps forward rather than having to
go around barriers, and that is something I hope we can work
together on.
Ms. MCMAHON. Thank you. I think that would be critical, and
I look forward to that. Thanks so much.
Mr. SCHNEIDER. Thank you, and I yield back.
Chairman CHABOT. Thank you. The gentleman's time is
expired.
The gentleman from Iowa, Mr. Blum, who is the chairman of
the Subcommittee on Agriculture, Energy, and Trade, is
recognized for 5 minutes.
Mr. BLUM. Thank you, Chairman Chabot. Is that correct?
Chairman CHABOT. It is correct, and I thank the gentleman
for that.
Mr. BLUM. I am a business person. I am slow, but I am
trainable.
Ms. MCMAHON. But you are not like all business people then.
Mr. BLUM. Administrator McMahon, good to see you again.
Thank you for being here today. Thank you for stopping by our
office. I thoroughly enjoyed swapping stories with you about--
--
Ms. MCMAHON. So did I.
Mr. BLUM.--our startups. The tough times. We both ended up
with companies that went public, and I also would, first of
all, thank you for that.
Second, I would like to salute President Trump on his
choice of yourself for this position. I have often thought that
it makes a lot of sense to have someone in your position that
has signed the fronts of paychecks, that has been there, done
that. And we have that person in you, so I salute the
President. Congratulations, and thanks for stopping by our
office. I appreciate you very much.
Ms. MCMAHON. Thank you.
Mr. BLUM. 2008, we are well aware of what happened that
year. Federal Government, the Federal Reserve, we had to bail
out the big banks in the financial meltdown crisis. And a lot
of taxpayers were upset by that, and rightly so. And rightly
so. It seems to them that we privatized profits and socialized
losses, and I am with them. We should not be doing these
bailouts.
So something I am always concerned about and ask about is
the exposure to taxpayers, and I think of the loan portfolio,
guaranty portfolio that the SBA carries. And I want to make
sure that that does not somehow end up on the taxpayers' backs.
Maybe I will ask you, how large is that portfolio of loan
guarantees today?
Ms. MCMAHON. As for our SBIC program, it is about 14- or 15
billion. Through just our loan programs we are up to about 24
million, 24-, 25 million I think is where we are.
Mr. BLUM. Billion?
Ms. MCMAHON. Mm-hmm.
Mr. BLUM. Billion, yeah. The number I had was like 33
billion in total. It is not a gotcha question.
Ms. MCMAHON. About right.
Mr. BLUM. That is a lot of money. What is the default rate?
Are you aware of what the default rate on those guarantees are?
Because by nature they are a little bit riskier than your
average loan.
Ms. MCMAHON. You know, I am sorry, I should have that
number for you today, but I do not. I just know that we
carefully monitor our lenders and that is why we want to make
sure we qualify our lenders so that we do not have that kind of
default rate because we are guaranteeing it, yes. Taxpayers are
at risk.
Ms. VELAZQUEZ. Would the gentleman yield?
Mr. BLUM. Absolutely, I yield.
Ms. VELAZQUEZ. On 7(a), it is less than 1 percent.
Mr. BLUM. Thank you.
Ms. MCMAHON. And I started to say that, but I could not
remember if that was exactly the right answer or not.
Mr. BLUM. Given the risky nature, 1 percent is fantastic.
That is great. That is a low default rate. Very good.
Ms. MCMAHON. If the ranking chairman says it is less than 1
percent, I buy that, yes, she is right.
Chairman CHABOT. Do not argue with her either.
Ms. MCMAHON. No, I am not going to argue with that because
I know she knows her facts.
Mr. BLUM. How are those loan guarantees reviewed? Are they
reviewed by the normal bank examiners, the Federal Reserve and
the State examiners that come through? Or does the GAO review
those? How are those reviewed to make sure we are not sitting
today on top of a future bad situation?
Ms. MCMAHON. Well, I do know from internally at SBA, we
look at them on a daily basis and we constantly are in touch
with our lenders to make sure that they are lending to
creditworthy people. And as I said before, they are the ones
who qualify the lenders in terms of, you know, it is a regular
bank, but I would be guessing to tell you how all that
oversight goes. But I would be happy to get back to you with
that because I do not----
Mr. BLUM. These are not gotcha questions.
Ms. MCMAHON. Yeah, I do not know. You know, they are banks,
so they are under the regulatory environment as all banks would
be. But in terms of the totality of that I could not speak to
that today.
Mr. BLUM. And I believe my following statement is true, but
you can confirm this and it is a feather in the cap of the SBA,
by the way, I believe that the losses that are incurred on the
loans are more than covered by the fees charged on all the
loans.
Ms. MCMAHON. They are.
Mr. BLUM. So we are actually running a profit. Imagine
that. It has to be one of the few agencies in the Federal
Government who run a profit.
Ms. MCMAHON. Well, we are at zero subsidy. We are at zero
subsidy and that is where, you know, that is where we want to
stay.
Mr. BLUM. Congratulations to that.
Ms. MCMAHON. Thank you.
Mr. BLUM. And now I only have 45 seconds back. I want to
address the 800-pound gorilla in the room that no one has asked
you so far, but I will. And some of my constituents want to
know this as well, Administrator McMahon, is why did it take
John Cena so long to propose marriage to Nikki Bella? Now,
remember, you are under oath.
Ms. MCMAHON. You would have to ask him.
Mr. BLUM. Thank you. And with that I yield back my time.
Chairman CHABOT. The gentleman yields back. And the
chairman has no idea, so I am not going to get into that.
The gentleman from Florida, Mr. Lawson, the ranking member
of the Subcommittee on Health and Technology, is recognized for
5 minutes.
Mr. LAWSON. Thank you, Mr. Chairman and Madam
Administrator.
Last week, I introduced a bill that provided support for
women business centers. The bill clarified the mission of the
Office of Women Business Ownership is to assist women
entrepreneurs to start, grow, and compete in a global market.
Our bill also raises the cap that organizations may receive to
start and operate women business centers to $185,000 with an
additional $65,000 available. In your testimony, you mentioned
creative startup for women and entrepreneurship. What are your
goals for women business centers and how can my office and SBA
work together in providing the maximum amount of support for
women development centers?
Ms. MCMAHON. Well, you have certainly gone a long way
already with your bill and we appreciate that very much.
Basically, I think in the women business centers, they need
advice and counsel, and to the extent that we can provide that
with entrepreneurs who have had success, and to the extent that
we can work with Congress to say in my district these are some
things that we really need to address, that would be very
helpful to SBA and we would look forward to working with you on
that.
Mr. LAWSON. Okay. Thank you very much.
And the second question centers around the concern that was
initiated by a colleague of mine, Congressman Emanuel Cleaver,
who expressed concern about some of the lending practices by
financial institutions where small business owners are looking
for loans. What are the thoughts on this, and how can SBA work
with CFPBs to provide small firms, particularly minority-owned
firms, with discriminatory lending practices?
Ms. MCMAHON. One of the things as I mentioned earlier that
SBA is doing with its lender oversight, we are really focusing
on all of the issues relative to our lenders. And to the extent
that we find those practices are happening, it just will not be
tolerated.
Mr. LAWSON. Okay. Thank you very much, Mr. Chairman. Since
I look forward to working with the administration on small
business centers and this legislation that we have going, I
think it is significant and going to make a very big difference
in terms of where we stand with women in the small business
market that yields so many jobs in this country. I yield back.
Chairman CHABOT. Okay, thank you very much. The gentleman
yields back.
Ms. MCMAHON. May I have a comment?
Chairman CHABOT. Absolutely, yes.
Ms. MCMAHON. Actually, a lot of what I found when I started
the company, Women's Leadership LIVE, I wanted to make sure
that access to capital, that lenders were not being
discriminatory against women. And so, you know, I have had some
really good conversations, some over dinner, some directly in
offices, to just say, come on, what is up with that? I mean,
you know, what are you doing relative to that? What is your
thought process? How can we, if you have preconceived notions,
how can we help dispel those? Or if we need to come back to
you--we, I am talking about Women's Leadership LIVE--if we need
to come back to you with more concrete information, what is
that that you need to see? What is that we are not providing
that you are getting more from our male counterparts when they
come in for businesses? What is making that sort of
discrimination?
And so I think that is part of what we need to continue to
do. It is reaching out to the lenders and it is asking them why
are you more comfortable, or at least apparently more
comfortable, making these loans? What is it that we need to do
to encourage you not to have blinders on, if you do?
Chairman CHABOT. Thank you very much, Madam Administrator.
Before I wrap up I would like to yield to the Ranking
Member, who would like to make a comment.
Ms. VELAZQUEZ. Thank you, Mr. Chairman, and thank you,
Madam Administrator.
I would like to take this opportunity to encourage you to
sit down and use the leverage of your agency in talking to
lenders and trying to incentivize them to make smaller loans to
women, minorities, because that is the area where we are seeing
a vacuum and we need to address that.
Ms. MCMAHON. Thank you. Above and beyond or enhancing the
microloan area, as well as the community advantage area, are
you speaking relative to those?
Ms. VELAZQUEZ. In 7(a). The 7(a).
Ms. MCMAHON. The 7(a), okay.
Ms. VELAZQUEZ. The 7(a) program is there to provide lending
to those who might have problems getting traditional loans in
the private sector, but when you look at the portfolio and just
see big loans made, not the $200,000 or $150,000 that are so
needed for those who are starting their businesses and for
women and minorities, then we have a problem.
Ms. MCMAHON. Thank you. And we will work with you to help
address those issues as well.
Chairman CHABOT. Thank you very much. And the chair would
just note a couple things. One thing, as you can see, the
Committee takes its oversight roles very seriously and we
really do work in a bipartisan manner in this Committee. We
even compliment each other once in a while, and so there is an
air of good feeling once you walk in that door back there. But
the agency that you have been in charge of for all of 6 weeks
now does have some longstanding challenges that certainly need
to be addressed, and I think you are aware of that to ensure
that the agency works as efficiently and effectively as
possible for small businesses all across the country, and we
hope to continue to work with you very closely to resolve these
issues and look forward to your future appearances before this
Committee. And hopefully, they will all be as pleasant as this.
Right, Ranking Member?
Ms. VELAZQUEZ. Oh, yes.
Chairman CHABOT. Oh, yes, she said.
I would request, we noted that the default rate in 7(a) is
below 1 percent, we think. There are a number of loan programs
that the SBA has from 7(a) to 8(a) to microloans, et cetera. If
you could have your folks prepare the latest figures on those
just so we have them readily available and can keep an eye on
them and making sure that they are within reason, or if they
are not that we work on that.
And I would also invite, if there are members who have
additional questions that they would like to submit in writing,
we would be happy to get those to you. If you could have your
folks or if you could respond to them.
And I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record. Without objection, so ordered.
And if there is no further business to come before this
Committee, we are adjourned. Thank you very much.
Ms. MCMAHON. Thank you very much.
Chairman CHABOT. Thank you.
[Whereupon, at 12:40 p.m., the Committee was adjourned.]
A P P E N D I X
Taking Care of Small Businesses: Working Together for a Better SBA
Testimony of Linda McMahon
House Small Business Committee
April 5, 2017
Thank you, Chairman Chabot, Ranking Member Velazquez, and
members of the Committee for inviting me to speak with you
today. I'm so honored to be serving as Administrator of the
U.S. Small Business Administration. I'd also like to express my
gratitude to President Trump for the opportunity to join his
Administration and for his support of small businesses.
Today marks 50 days since I was sworn in as Administrator
of SBA. I am continually impressed by the tremendous work being
done by SBA's team in support of our nation's 28 million small
businesses. My goal as Administrator is to revitalize the
agency and raise its profile... and in turn, revitalize a
spirit of entrepreneurship in America. My hope is that as more
people learn about the services SBA provides, they will have
the confidence, skills and resources they need to start or grow
their own businesses, to invest in their communities, to create
jobs, and to grow our economy.
I feel a tremendous commitment to each of SBA's
stakeholders--our small business owners; our team at SBA;
President Trump, who entrusted me with this position; and the
taxpayers who expect us to use their dollars effectively and
efficiently.
When I first met with President-Elect Trump back in
November about taking the top job at SBA, he communicated one
clear, specific request to me: ``Do a good job.'' He said it
with such sincerity, I knew he meant it and was expecting me to
deliver. I responded that I would, adding, ``If at any time my
job isn't good enough, I trust you will tell me.'' And during
my first town hall meeting with SBA's employees last month, I
asked every one of them to join me in that commitment: do a
good job and expect to be held accountable.
I have spent a lot of time getting to know our team, and
letting our team get to know me. I want them to feel engaged
and empowered and know their expertise is valued. Since our
town hall meeting, the conversation has continued, whether in
formal settings or chats on the elevator or on social media. In
fact, our social media team tells me the Agency's official
Twitter feed has added more than 100,000 followers since I came
on board. Last week's Twitter chat called ``Business Success
Her Way,'' promoting women entrepreneurship, was a trending
topic nationwide. I am thrilled there is a buzz around SBA as
it draws attention to the services the Agency offers--services
that will ultimately help people start, scale and succeed in
business.
Our small businesses are our nation's innovators and job
creators, and I am committed to serving as their advocate. Last
week I had the privilege of joining Vice President Pence
visiting small business owners in West Virginia. Our host, Ron
Foster, grew his construction supply company with the help of a
504 loan from SBA. I relate to entrepreneurs like Ron because I
am an entrepreneur myself. I have shared the experiences of our
country's small business owners.
My husband and I built our business from scratch. We
started out sharing a desk. Over decades of hard work and
strategic growth, we built it into a publicly traded global
enterprise with more than 800 employees. This past weekend the
business we created had a global audience of millions as it
broadcast the 33rd edition of WrestleMania. I am proud of our
success--I know every bit of the hard work it took to create
that success. I remember the early days when every month I had
to decide whether I should continue to lease a typewriter or if
I could finally afford to buy it. Yes, that $12 a month really
made a difference in our budget.
Like all small business owners, I know what it's like to
take a risk on an idea, manage cash flow, navigate regulations
and tax laws, and create jobs. Since stepping down as CEO of
WWE in 2009, I have worked to help more people have the
opportunity to pursue those goals.
As a candidate for the U.S. Senate in 2010 and 2012, I met
with more than 500 small business owners--touring their shops,
restaurants, offices and factories and sharing ideas during
roundtable discussions. Job growth was a pillar of my campaign,
and because small businesses are responsible for half of all
private-sector jobs and the majority of new jobs, they were my
focus.
And for the past two years, I promoted women in
entrepreneurship as co-founder and CEO of a startup called
Women's Leadership LIVE. I wanted to share my vast experience
with others who are launching startups or looking to scale
their businesses. Through live events and webinars, we educated
entrepreneurs about things like applying for a loan and
developing a business plan. We also worked to build their
confidence. I always say that even entrepreneurs with the best
ideas sometimes need a little wind beneath their wings. We
shared our stories of successes and failures, our networks of
contacts and resources, and our strategies for addressing
challenges. And now through SBA, I am committed to offering
small business owners the capital, the counseling and the
confidence that will help propel them forward.
Small businesses have had some tough blows in the past
decade. I know what it's like to take a hit, and I have learned
it's not how you fall, but how you get up that truly matters.
Early in my career, when we were very young, my husband and I
declared bankruptcy. We invested in a company we didn't
understand and trusted people we shouldn't have. When that
company went under, we were left holding the bag. We worked
really hard to pay off those debts until we realized we just
couldn't. Bankruptcy was a really hard decision and a tough
time in our lives. We lost our home. My car was repossessed in
the driveway. We had a young son and a baby on the way. We had
no choice but to work hard and start building again so we would
support our family. When our daughter Stephanie was born--a
perfect little baby so full of promise and potential--I took it
as a omen that things were going to be okay. We owed it to her
and to our son that we would make it okay. And fortunately, we
did.
As I have visited small businesses all over the country, I
have seen that same resiliency over and over again.
Entrepreneurs are fighters. They work hard, and when they get
knocked down by a recession or a natural disaster or simply a
change in consumer demand, they turn to their creativity to
make it better. But sometimes they need a helping hand.
Now that I am the SBA Administrator, I am committed to
ensuring that our agency is as strong as it can be to lift up
as many entrepreneurs as it can. My commitment extends to
making sure that all services we offer to our customers are
delivered effectively and efficiently and, most importantly,
that SBA and our partners are offering what small businesses
actually need to grow, innovate and create jobs. With small
business as the driver of our economy I believe our country
will remain strong, too.
Thank you for the opportunity to speak with you today. I am
happy to take your questions.
Questions for the Record
Committee on Small Business
Hearing: ``Taking Care of Small Business: Working Together for
a Better SBA''
April 5, 2017
Chairman Steve Chabot
1. SBA has nearly 150 standard operating procedures.
Only a small subset are available on the Agency's
website. According to the Freedom of Information Act,
SBA must make its standard operating procedures and
manuals available to the public. Do you plan to make
all these documents available on SBA's website?
2. A significant portion of SBA's budget is devoted
to providing outreach and technical assistance to small
businesses through its successful partnerships with
SBDCs. WBCs and SCORE. Unfortunately, SBA has created a
number of its own untested initiatives that duplicate
the training and assistance that these proven
organizations or other federal agencies provide. Under
your leadership, will the SBA re-focus itself on proven
programs rather than untested SBA initiatives?
3. We continue to see a lack of resources serving and
less populated areas, while city centers have a
plethora of options for startups and small businesses.
What will you do to ensure the entrepreneur in a less
populated area has the same SBA resources available to
him or her?
4. With large prime contracts, the large prime
contractor is required to create a subcontracting plan,
which maximizes small business utilization as
subcontractors. While large primes must act in ``good
faith,'' SBA has yet to define ``good faith''
compliance. This failure has weakened oversight,
letting large prime contractors off the hook. What
action will SBA take to strengthen compliance with
subcontracting plans to maximize small business
utilization?
5. Executive Order 13771 issued by President Trump on
January 30, 2017 requires federal agencies to take
significant steps to reducing regulatory burdens by
identifying 2 regulations for elimination for every 1
new regulation they would like to promulgate.
a. What steps has SBA taken to identify rules
and other requirements that could be repealed
or streamlined?
b. Will SBA issue a Federal Register notice
to publicly solicit input from small businesses
on regulations, guidance and other reporting
and recordkeeping requirements that should be
replaced or streamlined?
6. Executive Order 13777, which President Trump
issued on February 24th, requires agency heads to
designate a Regulatory Reform Officer within 60 days
and establish a Regulatory Reform Task Force.
a. Have you designated a Regulatory Reform
Officer, and if so, who is that person?
b. Have you established a Regulatory Reform
Task Officer, and if so, who is serving on it?
7. SBA is required under the Small Business Act to
appoint small business owners, operators, or officers
to the Regional Regulatory Fairness Boards for terms of
three years or less after receiving recommendations
from the chair and ranking members of the Committees on
Small Business in the House and Senate. In the past,
SBA has not adhered to these requirements. What will
you do to ensure that the agency complies with these
requirements?
8. What is the agency doing to improve the user-
friendliness of its website to ensure that small
businesses can find the information they need?
Rep. Roger Marshall
1. Administrator McMahon, on March 27, 2017,
President Trump announced the new Office of American
Innovation initiative at the White House aimed at
reducing government bureaucracy and streamlining
federal agencies, in partnership with many high-profile
CEOs. There is little mention of the inclusion of small
businesses in this project, even though entrepreneurs
are constantly developing new, innovative ways to grow
their businesses. Are there ways we can encourage the
involvement of small businesses in this initiative?
Rep. Don Bacon
1. Congress, and this Committee in particular, has
been very supportive of the Office of Advocacy's work
to reduce regulatory burdens on small businesses. As
you know, the Office of Advocacy is housed within, but
independent from, the SBA. Once a confirmed Chief
Counsel for Advocacy is leading the office, how do you
plan to work with him or her to improve the regulatory
environment for small businesses?
Question for the Record
Committee on Small Business
Taking Care of Business: Working Together for a Better SBA
April 5, 2017
Responses by SBA Administrator Linda McMahon
1. Executive Order 13771 issued by President Trump on
January 30, 2017 requires federal agencies to take significant
steps to reduce regulatory burdens by identifying 2 regulations
for elimination for every 1 new regulation they would like to
promulgate.
a. What steps has SBA taken to identify rules and
other requirements that could be repealed or
streamlined?
b. Will SBA issue a Federal Register notice to
publicly solicit input from small businesses or
regulations, guidance and other reporting and
recordkeeping requirements that should be repealed or
streamlined?
SBA Response:
SBA has formed a regulatory reform task force and solicited
recommendations from all of its program offices. We have also
worked to create a process to identify and prioritize
regulations for elimination or modification. Yes, SBA has
drafted and will soon publish a Federal Register notice to
solicit input from small businesses and other members of the
public.
2. SBA is required under the Small Business Act to appoint
small business owners, operators, or officers to the Regional
Regulatory Fairness Boards for terms of three years or less
after receiving recommendations from the chair and ranking
members of the Committees on Small Business in the House and
Senate. In the past, SBA has not adhered to these requirements.
What will you do to ensure that the agency complies with these
requirements?
SBA Response:
SBA will consult the Chair and Ranking Members of the
Committees on Small Business in the House and Senate as we
search for qualified candidates to serve on the Regional
Regulatory Fairness Boards.
3. Administrator McMahon, on March 27, 2017, President
Trump announced the new Office of American Innovation
initiative at the White House aimed at reducing government
bureaucracy and streamlining federal agencies, in partnership
with many high-profile CEOs. There is little mention of the
inclusion of small businesses in this project, even though
entrepreneurs are constantly developing new, innovative ways to
grow their businesses. Are there ways we can encourage the
involvement of small businesses in this initiative?
SBA Response:
SBA is constantly working with the White House to provide
the voice of small business on ways to reduce regulatory
burdens for small business overall.
4. Congress, and this Committee is particular, has been
very supportive of the Office of Advocacy's work to reduce
regulatory burdens on small businesses. As you know, the Office
of Advocacy is housed within, but independent from, the SBA.
Once a confirmed Chief Counsel for Advocacy is leading the
office, how do you plan to work with him or her to improve the
regulatory environment for small businesses?
SBA Response:
Administrator McMahon looks forward to working closely with
the Chief Counsel for Advocacy on ways to reduce the regulatory
burden for small businesses. Though the Office of Advocacy is
independent from the SBA, they provide invaluable advice on the
impact of regulations, as well as economic research concerning
the small business environment.
5. SBA has nearly 150 standard operating procedures. Only a
small subset is available on the Agency's website. According to
the Freedom of Information Act, SBA must make its standard
operating procedures and manuals available to the public. Do
you plan to make all these documents available on SBA's
website?
SBA Response:
SBA has traditionally posted to its public facing website,
those standard operating procedures that our customers need to
complete applications and to review program products, services
and requirements. The fifty-nine SOPs found on the SOP webpage
reflect that approach. The remaining eighty-six SOPs are
generally internal operating procedures, and those that are
non-privileged are available to anyone who might request them.
SBA will continue to make sure that SOPs that affect our
customers and partners are posted for easy access and use.
6. With large prime contracts, the large prime contractor
is required to create a subcontracting plan, which maximizes
small business utilization as subcontractors. While large
primes must act in ``good faith,'' SBA has yet to define ``good
faith'' compliance. This failure has weakened oversight,
letting large prime contractors off the hook. What action will
SBA take to strengthen compliance with subcontracting plans to
maximize small business utilization?
SBA Response:
Section 1821 of the National Defense Authorization Act for
Fiscal Year 2017 (NDAA), PL 114-318, approved Dec. 23, 2016,
directed SBA to provide examples of failure to make a good
faith effort with a subcontracting plan. The NDAA established a
270-day deadline for SBA to act. In accordance with the NDAA,
SBA is in the process of defining the characteristics of what
constitutes failure to make a good faith effort. SBA will use
this definition to evaluate Large Business Prime contractors
that have a required small business subcontracting plan but may
not be meeting the negotiated goals for the given contract.
SBA's GCBD office is engaging with civilian and DOD agency
contracting officers, industry representatives, and the Defense
Contract Management Agency (DCMA) to develop good faith
characteristics that reflect realistic and measurable efforts
to comply. This will enable contracting officers to make
necessary actions with contractors that are not attaining their
negotiated goals and not meeting the threshold of good faith.
SBA anticipates issuing guidance within the 270 day deadline
established in Section 1821 of the NDAA.
7. A significant portion of SBA's budget is devoted to
providing outreach and technical assistance to small businesses
through its successful partnerships with SBDCs, SBCs and SCORE.
Unfortunately, SBA has created a number of its own untested
initiatives that duplicate the training and assistance that
these proven organizations or other federal agencies provide.
Under your leadership, will the SBA re-focus itself on proven
programs rather than untested SBA initiatives?
SBA Response:
As soon as I arrived, I put all initiatives on hold. I did
this so that we could dive deeper and truly learn whether each
initiative should continue, then review and decide the future
of some of these initiatives. As we continue with the review
process, it's important to state that SBA is committed to
ensuring that taxpayers' dollars are spent wisely, and on
programs that prove to be beneficial.
8. We continue to see a lack of resources serving rural and
less populated areas, while city centers have a plethora of
options for startups and small businesses. What will you do to
ensure the entrepreneur in a less populated area has the same
SBA resources available to him or her?
SBA Response:
One of my top priorities as Administrator is to ensure that
entrepreneurs in rural communities have the same resources
available to them as those in metropolitan areas and other
communities. Toward that end, I am pleased to report that just
this month the Office of Entrepreneurial Development announced
the availability of supplemental funding to Small Business
Development Companies that prioritized efforts to increase
business development in rural communities. In addition, I am
committed to entering into more public-private partnerships to
allow us to leverage the private sector's knowledge and
experience via existing SBA entrepreneurial development and
business assistance programs in order to further address rural
development issues. SBA is also a member of the President's
Rural Prosperity Task Force led by the Department of
Agriculture to provide insights and support for small
businesses in rural area across the nation.
Congresswoman Yvette D. Clarke
Taking Care of Business: Working Together for a Better SBA
with SBA Administrator Linda McMahon
April 5, 2017 at 11:00
RHOB 2360
----------------------------------------------------------
Talking Points/Remarks
Thank you Mr. Chairman and Ranking Member
Velazquez and a pleasant good morning to everyone.
A special good morning to Ms. McMahon, who is here
with us for the first time today.
As we all know, small businesses are the backbone
of our economy--and the Small Business Administration is
essential to ensuring their success.
The SBA's professional staff of over 3,000 people
oversees programs that allow women, veterans, historically
disadvantaged minorities, and businesses located in
economically distressed communities to prosper for the benefit
of us all.
These programs help entrepreneurs in Central
Brooklyn and across the country take risks that improve their
lives and enrich our economy.
However, this is not to say that SBA management
could not be improved.
Numerous reports have shown that participation in
the HUBZone Program and 8(a) programs is declining.
Similarly, the participant pool for the 7(a)
program is becoming less diverse and numerous programs,
including the Disaster Assistance Program and Service-Disabled,
Veteran-Owned Small Business Program could benefit from
stronger oversight.
Addressing these challenges is hard enough under
the best of circumstances, but would be made even harder by the
five percent proposed cuts from this administration.
I look forward to hearing more about your ideas
for addressing these challenges and to working together to make
small business ownership attainable for all Americans.
[all]