[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
NAVIGATING THE SMALL BUSINESS ENVIRONMENT: CHALLENGES AND OPPORTUNITIES
=======================================================================
HEARING
Before the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
WASHINGTON, DC
__________
APRIL 2, 2002
__________
Serial No. 107-50
__________
Printed for the use of the Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
79-720 WASHINGTON : 2002
________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON SMALL BUSINESS
DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
ROSCOE G. BARTLETT, Maryland California
FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois
SUE W. KELLY, New York BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio DONNA M. CHRISTENSEN, Virgin
PATRICK J. TOOMEY, Pennsylvania Islands
JIM DeMINT, South Carolina ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota TOM UDALL, New Mexico
MICHAEL PENCE, Indiana STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York MARK UDALL, Colorado
TODD W. AKIN, Missouri JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania BRAD CARSON, Oklahoma
ANIBAL ACEVEDO-VILA, Puerto Rico
Doug Thomas, Staff Director
Phil Eskeland, Deputy Staff Director
Michael Day, Minority Staff Director
C O N T E N T S
__________
Page
Hearing held on April 2, 2002.................................... 1
Witnesses
Alvarado, Alberto, District Director, U.S. Small Business
Administration................................................. 5
Anderson, Colleen, Area Vice President, Wells Fargo Bank......... 7
Peterson, Regina Grant, Long Beach Area Certified Development
Corporation.................................................... 10
Tambakis, Paul, Southern California Hub Director, U.S. Commercial
Service........................................................ 12
Duran, Isabel, Director, Capital Partners Program Management..... 15
Venable, Phyllis Moore, Business Development Officer, City of
Long Beach Representing the City and Small Business Council,
Chamber of Commerce............................................ 27
Unangst, Pat, Workforce Investment Network....................... 29
Borden, Phil, Women's Enterprise Development Corporation......... 32
Brown, Rolina, Regional Director, Small Business Development
Center......................................................... 34
Appendix
Opening statements:
Issa, Hon. Darrell........................................... 40
Millender-McDonald, Hon. Juanita............................. 42
Prepared statements:
Alvarado, Alberto............................................ 52
Anderson, Colleen............................................ 61
Peterson, Regina Grant....................................... 67
Tambakis, Paul............................................... 70
Duran, Isabel................................................ 78
Venable, Phyllis Moore....................................... 81
Unangst, Pat................................................. 83
Borden, Phil................................................. 89
Brown, Rolina................................................ 98
NAVIGATING THE SMALL BUSINESS ENVIRONMENT: CHALLENGES AND OPPORTUNITIES
----------
TUESDAY, APRIL 2, 2002
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in the
Carson Community Center, Hall B, 3 Civic Drive, Carson,
California, Hon. Darrell E. Issa [chairman designate of the
committee] presiding.
Mr. Issa. Okay. If I could ask everyone to please take
their seats.
I want to thank everyone for coming here today. And
although this is an official hearing, because we are not in
Washington and in the interest of trying to have the freest
flow of communications, we will be a little less formal than we
would be in Washington.
We will ask that the opening statements for all of us be
limited to 5 minutes if at all possible. If you run a little
over, we are understanding.
And one formality we have to observe is, that without
objections, all testimony will be placed into the record. All
written testimony will be placed in the record. So if you do
not either exactly follow your written testimony or if you are
cut short, you will still have your entire statement as
submitted. And you have 5 business days after this hearing if
you would like to revise, extend. Perhaps questions that come
out during the hearing you may want to add to. So you can
supplement thoroughly in writing. So you do not have to feel
like you have to get everything in now, because many staff
members will pour over for weeks ahead anything that you supply
in writing.
I think it is worth noting that small business represents
the backbone of our economy, that over 99 percent of all
business is small business, and that small business employs
more than 52 percent of the workforce.
This Committee has held during this year hearings in
Pennsylvania, New York, New Mexico, New Jersey, South Carolina
and now here in the Los Angeles area.
It is our intention here today to concentrate on the impact
of small business on our economy, but more importantly, focus
on areas such as women-owned businesses, minority opportunities
and some of the areas in which the Small Business
Administration can positively impact that.
We have representatives here today from the field offices,
and I will not recognize all of them, but suffice is to say
that there is a great deal of interest by the Administration
and by the Small Business Administration in this hearing and
what you will all have to say here today.
I want to thank you again for taking your time out of your
day, both the witnesses and a sell-out crowd in the audience.
Thank you for being here today.
I would like to talk in a positive way also about
Representative Millender-McDonald. We never call each other by
our last names except in these kinds of events. Because her
staff really did the hard work to get this together to convince
the Chairman to allow for this hearing today and to prepare and
meet with the witnesses.
So with that, I would like to yield to the Ranking Member
for her opening statement.
[Mr. Issa's statement may be found in appendix.]
Ms. Millender-McDonald. Thank you so much. And I would like
to thank you and welcome you to the 37th Congressional
District, Congressman Issa. And I will call you Darrell in just
a short time.
He and I are very dear friends, and I can say one thing
about this gentleman to my right--to my right, yes.
Mr. Issa. We can switch places if you want.
Ms. Millender-McDonald. I had an amendment on a bill that I
wanted to get out to raise the appropriation for women business
centers. And, of course, the Chairman was a little tough on our
putting any amendments on a bill. It was Darrell who spoke so
firmly that we needed that to the degree that it did pass out
of Committee without any resentment or anything else after the
Chairman saw that Darrell, who is Republican, said we need
this. And so this type of gentleman just represent one of many
on the Small Business Committee.
So we welcome you, Darrell.
I would like to also welcome the staff from Washington, the
counsel and others, the Democratic staff Michael Day and the
subscriber who, as the Congressman has told you, this is an
official hearing and now we are in Los Angeles whereas we have
gone over many states.
I would like to thank my staff coming in from Washington,
my legislative director, as well as many other staff members
who are outside who came in to make sure that this would
happen.
And thanks to all of you for being here today as well.
I would like to make note of one elected official in the
city of Carson who has come in for a short time, and that's our
City Clerk Helen Helanoe. Is Helen still here? There she is in
the back. The best City Clerk in the nation, Helen Helanoe.
And I would like to thank the Chairman of our full
Committee, Representative Don Manzullo and the ranking member
representative Nydia Velazquez for their support of my request
for their field hearing.
I welcome all of the witnesses today and, of course you in
the audience for this field hearing and hope that the
information sharing will lead to a greater opportunity for
success in your future endeavors.
In the aftermath of the terrorist attacks of September the
11th there is an ever greater need for the services provided by
federal agencies and lenders for small businesses.
Traditionally, small businesses have been the engine that
drives our economy, but they have been devastated by the
economic fallout from the combination of the attacks of
September the 11th and the resulting downturn in the economy.
In response to the current economic realities, the Small
Business Committee offered legislation HR 3230 that will
provide support to small businesses. This bill authorizes the
SBA to make disaster loans to small businesses that have
experienced economic injury from September the 11th. HR 3230
also provides grants to small businesses to enable them to
bounce back.
It also provides a provision I authored that I spoke to you
about that this gentleman was just so generous and sensitive to
my requests for 2.5 million in the appropriation for women's
business centers. Now this bill, hopefully, should be coming to
the Floor soon.
Today's hearing is an excellent opportunity to hear
testimony from small business experts and to have them share
some of their experiences and some of their challenges. We will
gain perspective from the SBA and the Department of Commerce as
to what they are doing to support small business, many of which
are female and minority owned.
In addition, we are fortunate to have lenders who can speak
on what is necessary to secure funding for your businesses and
other pertinent information.
Our second panel will feature individuals who can provide
unique perspectives about the types of technical assistance
provided to businesses.
I have heard countless testimony about how critical it is
for small businesses to be able to acquire the necessary
technical support and management assistance that will assist
them in the overcoming of hurdles for developing business
plans, performing inventory analysis, projecting growth or even
conceptualizing starting a business.
As we address today's theme I wish to highlight some of the
Small Business Committee successes which members of the
Committee fought to improve in the 2003 budget.
We were able to secure $253 million increase in the budget
proposal which will support loans, entrepreneurial development
and technical assistance. We were also successful in cutting
the cost of the 7(a) loan programs so that it is more
affordable. However, there are still battles that need to be
resolved. Minority and low income communities continue to
suffer from the priorities outlined in the budget.
Although this budget represents movement forward, there is
much room for improvement. Two glaring problems remain. First,
this budget fails to provide any solution to the growing
problem of a subsidiary rate while also falling short in
funding the SBA's flagship 7(a) general business loan program.
Second, low income communities and minorities have been
disadvantaged relative to critical programs that have been
drastically under funded or simply eliminated.
The programs for investment in micro-entrepreneurs, which
is an important technical assistance program that helps small
businesses before they receive an SBA loan, once again, has not
been funded.
Business Link, which creates cooperative agreements between
small and large business were zeroed out.
Minority entrepreneurs have been cut out from assessing
larger market places for their products. New markets which
would provide millions in venture capital to growing businesses
in low income communities has not received funding for the FY
2003, as of yet.
The One Stop Capital Shop initiative which began in 1994 to
support the President's Economic Empowerment Zone and
Enterprise Community initiative, a central initiative in the
effort to revitalize targeted under served communities, has not
received any funding.
Clearly there are many hurdles that make it difficult for
small businesses to prosper; however the hallmark of any good
business person is being tenacious and resourceful. Today's
hearing is intended to provide small businesses and aspiring
business owners with a sense of what types of programs and
resources are available to them so that they can grow their
businesses and fuel America's economy.
I wish to thank this distinguished panel and look forward
to the other panel and your testimony.
And, Mr. Chairman, thank you so much for this statement.
[Ms. Millender-McDonald's statement may be found in
appendix.]
Mr. Issa. Thank you, Juanita.
I am going to break the rule I made, because the advantage
of being sort-of the acting chair here, and introduce an old
friend, a colleague of Juanita's and my former assemblyman,
Bruce Thompson. If you would stand up for a moment.
If I am correct, Bruce is also our first panelist's boss,
and is the President's designee and appointee here in
California. So, it just sort of shows the level to which the
Administration considers these hearings. And to be honest, a
lot of what we hope to discover here today of importance.
And with that, I would like to introduce--and I will
introduce you all very quickly and then we will go through with
each of your statements and then we will go through with
questions, if that is all right with everyone. Sort of minimize
the back and forth where everyone says ``When am I going to get
my turn.''
But Albert Alvarado is the District Director for the Small
Business Administration. And again if you can indulge, normally
in Washington we would tell you a great deal about his many
years, the many times he was the acting head between political
appointees and so on. We will dispense with all that here today
so we can get right to testify.
Then Ms. Colleen Anderson, who's the Area Vice President of
Wells Fargo Bank, my bank for my entire business career here in
California. Full disclosure is always required.
Ms. Regina Grant-Peterson is a Long Beach Area Certified
Development Corporation representative.
Mr. Paul Tambakis, that is a great Greek name. I will work
on it. Southern California--let me put my glasses on and I will
be a little bit less----
Ms. Millender-McDonald. That is right.
Mr. Issa [continuing]. Hub Director, the U.S. Commercial
Service.
And last on the first panel, Ms. Isabel Duran, Director
Capital Partners Program Management. And I do not know more
about that, but I will look forward to learning more.
And with that, Mr. Alvarado, if you would begin.
STATEMENT OF ALBERTO G. ALVARADO, DISTRICT DIRECTOR FOR THE
SMALL BUSINESS ADMINISTRATION
Mr. Alvarado. Mr. Congressman, just as an aside, let me say
that not only is Mr. Thompson my boss, but he is the best boss
I have ever had. He said to me, ``Alberto, I have heard you say
that before.'' I said, ``But I really mean it this time.''
Mr. Issa. Thank you. Especially today.
Ms. Millender-McDonald. If I might just interject
something. He and I served in the state assembly together. And
while he has a big R behind his name, he is one of the finest
that I served with. So it is great to see Bruce back here and
in that capacity.
Mr. Issa. Absolutely.
Ms. Millender-McDonald. Now, I will bug him to death.
Mr. Alvarado. Thank you very much Chairman Issa and
Congresswoman Millender-McDonald.
I am Alberto Alvarado, District Director of SBA's Los
Angeles office. It is a pleasure for a kid from the barrio of
East LA to have the honor to testify before you.
I am proud to report that SBA staff has been recognized on
many occasions for thinking outside the box, either as the
``Outstanding Capital Access Division,'' or just last week, for
example, as the recipient of the President's award from the
Greater Los Angeles African-American Chamber of Commerce. We
have even been honored with a White House Presidential Rank
Award.
While my comments today reflect considerable activity in
the areas of access to capital technical assistance and
procurement, Administrator Barreto and I understand much
remains to be done in reaching out to our emerging markets,
engaging our banks to increase lending, utilizing new
technologies and in refining our products.
Our LA office is SBA's number one lending office. During
the past four years we have provided $2.8 billion, that is
billion with a B, to 9600 businesses. We also led the country
in lending to both minority entrepreneurs with 1.4 billion to
5100 businesses, 569 million to 2200 women entrepreneurs.
In a similar four year period, Congresswoman, we provided
170 million to 479 businesses in your district. This has been
accomplished through a proactive community lending and outreach
campaign where we take bankers on bus tours to see the money
making opportunities that await them and where we meet with
Asian-American bank presidents to reiterate the importance of
lending to all communities.
In Watts, for example, we held a ``Hit-the-Streets'' event
where we mobilized 50 financial service professionals going
door-to-door to visit businesses. These ``Hit-the-Streets''
events are aimed at changing the federal government's image to
one where residents come to believe that government can make a
difference.
Among our area capital access success stories are Carson's
Southland Bagel Company, a past Small Business Person of the
Year; Angela Walton owner of Melador Technologies, who just
received a multi-million dollar contract from Northrup; and
Spectrum Plating, a Torrance start-up, which now has 18
employees and a 20,000 square foot shop.
Our vast technical assistance network involves multiple
partnerships with local organizations and chambers of commerce,
such as Torrance, Lynwood and Long Beach. Our Women's Business
Center also in Long Beach provides business counseling in
multiple languages.
One of our technical assistance clients, Victoria Lowe, has
become the largest women owned business in Los Angeles County,
a sterling accomplishment for this community-minded African-
American woman.
Our high tech business information center at MidWilshire
has been SBA's number one ranked center serving 5500 largely
minority clients per year. Our small business development
center program assists entrepreneurs in preparing themselves to
approach lending institutions. Our pre-qualification loan
program has become an agency model in packaging 399 loans for
$42.4 million. We have assisted 7 local organizations including
Vermont Slauson Economic Development Corporation in helping
micro enterprises in low income communities.
In the area of procurement whether it is through our 13
HUBZone workshops attended by 1,000 area entrepreneurs, or
through our ``Small Business Showcases'' before major prime
contractors such as Boeing, TRW, Raytheon and Northrup Grumman,
we inform our businesses on how to access federal buyers and in
turn those buyers about the expertise of our small businesses.
Our High-Tech Procurement Conference co-sponsored with
NASA's Jet Propulsion Lab featured a remarkable 708 firms and
261 procuring activities. During the past year our district's
8(a) firms received 459 million in contract awards. Several
area firms: Gene Hale's G&C Equipment in Gardena, Willie
Thomas' Thomas Land Clearing in Long Beach and Mary Ann
Mitchell's CCOPS have been among our most successful.
We are proud that in the 37th Congressional District
federal government contracts worth 30.4 million, 282 contracts,
were awarded.
Looking back at LA a decade after the 1992 civil unrest
SBA's Los Angeles District Office is proud that we have
provided 1.4 billion in financing to 3000 businesses in the
Enterprise Zone and Enterprise communities.
Through our media campaign success stories many involving
minority and women entrepreneurs have been featured in the L.A.
Sentinel, La Opinion and the Korea Times, as well as on NBC
Nightly News, CNN and CBS Radio.
Congressman Issa, I do not want you to think that we have
not been busy in your district, which is served by our Santa
Ana district office. Quite to the contrary, last year we
provided 173 of your constituent businesses with 54.3 million
in financing.
Mr. Chairman, in closing I affirm to you our commitment and
that of Administrator Barreto to build an SBA that helps
businesses prosper and ultimately contribute to healthy
communities.
I know, Congresswoman, that you know that I and our staff
are dedicated to these tasks. We will work closely with your
local staff to ensure that we continue to address the concerns
of your business constituency.
Finally, we know that many outside this beautiful hall have
not been able to enjoy such wonderful surroundings and to
benefit fully from the opportunities available in our great
country. So it is on their behalf that we dedicate and continue
our noble work.
Thank you for your attention this morning.
[Mr. Alvarado's statement may be found in appendix.]
Mr. Issa. Thank you.
Ms. Anderson.
I apologize. We will have to do a little mike passing here.
STATEMENT OF COLLEEN ANDERSON, AREA EXECUTIVE VICE PRESIDENT OF
WELLS FARGO BANK
Ms. Anderson. Good morning, Chairman Issa and Congresswoman
Millender-McDonald. I am delighted to have this opportunity to
present to you today the powerful partnership between Wells
Fargo and small business owners.
My name is Colleen Anderson, and I am an Executive Vice
President of Wells Fargo Bank responsible for the company's
small business lending group in California and the highest
ranking executive in business banking in Southern California.
I am here today as the official spokesperson for Wells
Fargo Small Business Lending programs.
After 26 years of serving the financial needs of Wells
Fargo customers, I fully appreciate the business opportunity
and economic potential represented by the small business owner.
As the chairperson of Mayor Hann's LA Minority Business
Opportunity Committee, the past vice chair of the Community
Financial Resource Center in South Central LA, and an active
participant in Latin Business Association, among many others, I
represent a collective force dedicated to serving the needs of
small business regardless of ethnic gender or demographic
distinctions.
Wells Fargo's a $308 billion diversified financial services
company headquarters in San Francisco providing banking,
insurance, investment, mortgage and consumer finance for more
5,400 stores, the Internet and other distribution channels
across North America.
With more than 1.5 million small business customers, Wells
Fargo is a leading financial service provider to small business
owners. In fact, as of 2000 Wells Fargo was the country's
largest small business lender among banks for loans under
$100,000, and we lent the most dollars to small businesses
located in low to moderate income census tracks according to
PCI Services, Inc. in Boston.
Today Wells Fargo has over $26 billion in small business
loan commitments. Wells Fargo made the most loans in California
to small businesses in 2000, Wells Fargo made more than 62,000
loans totaling more than $2.4 billion in California in 2000 and
lent more than 692 million to 15,000 California businesses in
low and moderate income census tracks.
In the Los Angeles metro area Wells Fargo is the second
largest financial institution in the whole consumer and
business market and the number one provider for all financial
services to small businesses. We also provide significantly to
the California and Los Angeles areas by being number one lender
in home equity and home mortgage.
Today by some counts there are approximately 30 million
small businesses in the U.S. These businesses create more than
half of the private workforce and half of the GDP. These
businesses are responsible for about 75 percent of new jobs.
Small business represents the backbone of our country's current
and future economy.
In 1989 Wells Fargo became one of the first major banks to
form a banking division dedicated exclusively to the financial
needs of small business. Studies found that the bulk of small
businesses with less than $1 million in revenues and annual
credit needs of $100,000 or less were grossly under served.
Small businesses have found our programs extremely
attractive. Since 1993 many competitors have followed suit with
direct lending programs of their own. Loans obtained through
direct lending are used to find working capital, payroll, tax
payments, cash flow and short term financing requirements of
small businesses.
To date Wells Fargo has made an unprecedented commitment to
supporting the development and success of small businesses.
Wells Fargo has become integrated in the small business
communities and in particular into the emerging market segments
through various outreach initiatives. The Wells Fargo Los
Angeles metro president has established a community board
comprised of community leaders that meet monthly to focus
exclusively on the under served markets. The forum has created
partnerships between Wells Fargo and FAME Renaissance, the
Valley Economic Development Center, Operation Hope, LA Mayor's
Minority Business Opportunity Committee among many others in an
effort to provide access to capital and aid for financial
literacy to small business owners and consumers in low to
moderate income communities.
Wells Fargo has also maintained relationships with the
Latin Business Association, the United States Hispanic Chamber
of Commerce, CHARRO, the National Council of Asian American
Business Associations, 100 Black Men, local Asian business
associations, NAWBO and other organizations as a means to
continue to connect directly with their constituencies.
Our involvement with these organizations include the
sponsoring of events, presenting financial workshops,
partnering on research and supporting the development of their
organizations.
Wells Fargo partners with some of the organizations such as
the U.S. HCC and NAWBO to extend the efforts of the four small
business services programs that provide the emerging markets
including women, Latino, African-American and Asian American
small business segments information on the availability of
financial services from Wells Fargo
As another demonstration of Wells Fargo commitment to the
small business markets emerging segments, we have publicly
stated our goal to lend $16 billion to these four market
segments 1995 through 2012.
Our connection with small business owners is also extended
through our branch network. In Southern California we have a
total of 418 store locations. We reach our customers via 247
traditional stores, 153 locations in supermarkets and 18
business centers. We have adopted a format in favor of fully
staffed outlets in order to provide complete and one-to-one
service in our various types of store configurations.
In line with our philosophy to out local of the nationals,
we have balanced our national outreach to emerging markets
specific initiatives. We have tailored the approach to
accommodate new entrants into the U.S. Our staff is completely
bilingual in our branches in the cross border locations of San
Ysidro and Calexico. We are now accepting the Matricula card as
a form of identification to open consumer and business accounts
in our stores nationwide.
Wells Fargo has worked hard to provide financial services
to a broad range of customers including small business owners.
The Internet has been an effective vehicle to get busy small
business customers information and the ability to transact and
apply for products that make them successful without having to
visit a branch.
The Resource Center for Small Business Owners on the
wellsfargo.com site provides solutions with products and
services as well as helpful information and a dedicated section
called ``Business Tips.''
Wells Fargo has been especially involved in providing
alternative forms of credit products to small businesses.
Beginning in 1994 Wells Fargo bank has been the primary driver
of the California Capital Access Program or CALCAP, and we even
received recognition from the California State Treasurer's
Office for our leading role.
CALCAP provides loan insurance in the form of loan loss
reserve co-funded by the borrower, the bank and the state. The
loss reserve encourages the lender to extend credit to small
businesses that otherwise would not qualify under standard loan
underwriting. As of the end of 2001 Wells Fargo has made 1,845
loans totaling $301 million in California, 763 loans totaling
$138 million in Los Angeles to small business owners through
the CALCAP program.
Wells Fargo is similarly committed to working with the SBA
to provide financing to companies that do not meet standard
bank loan underwriting criteria. Unlike most SBA lenders who
only offer variable rate loans, Wells Fargo's SBA's programs
provide adjustable or fixed rate interest rate financing which
many small business owners prefer.
As a preferred lender in 2 of the 23 states where we have
banking operations, Wells is the leading SBA 7(a) and SBA 504
lender in many of the markets we serve. Our SBA loans have
enabled thousands of small and women-owned businesses to expand
with an average loan size of $231,500. In 2001 Wells Fargo has
funded 4,128 7(a) loans totaling $87 million in California, of
which 165 were to women and minority-owned businesses.
Likewise, Wells Fargo funded 250 7(a) loans totaling $49.5
million in Southern California with 84 loans to emerging
markets totaling $23.5 million.
Wells Fargo strives to provide access to capital and
financial solutions to small business owners through a variety
of approaches. SBA lending is one approach among others that we
have used to address the needs of small business owners. A
reduction of the funding appropriation for 7(a) loans will
limit one of these options, particularly in Southern California
which currently represents over 10 percent of the $9.9 billion
in SBA 7(a) loans made in the fiscal year ending September 30,
2001. If funding is reduced by 50 percent, the impact in
Southern California will probably reduce SBA 7(a) lending by up
to $500 million in this area.
Small business is big business to our economy and to Wells
Fargo. We would like to support an annual review of lending to
small business in this type of forum. SBA lending is a critical
component of the access to capital that we provide to small
business owners. We at Wells Fargo would like to participate
with the SBA in making this a less time consuming, more
affordable process for lenders and the small business owners so
that we can ensure that small business continues to be the
engine that drives our economy. And that is not just good
banking, that is good business.
[Ms. Anderson's statement may be found in appendix.]
Mr. Issa. Thank you.
Ms. Peterson.
STATEMENT OF REGINA GRANT-PETERSON, LONG BEACH AREA CERTIFIED
DEVELOPMENT CORPORATION
Ms. Peterson. Chairman Issa, Congresswoman Millender-
McDonald, my name is Regina Grant-Peterson. I serve as
Executive Director for the Long Beach Area Certified
Development Corporation, which is----
Ms. Millender-McDonald. Excuse me a minute, Regina. Can you
push that closer to you.
Can you hear her in the back? No, they cannot. So push it
closer to you.
Mr. Issa. If anytime you cannot hear any of the testimony
or anything that is being said, just sort of wave a hand and we
will probably catch on pretty quickly. Thank you.
Please continue.
Ms. Peterson. I will begin again.
Mr. Issa. Yes.
Ms. Peterson. Chairman Issa, Congresswoman Millender-
McDonald, my name is Regina Grant-Peterson. I serve as
Executive Director for the Long Beach Area Certified
Development Corporation, which uses the acronym CDC.
The CDC is licensed and certified by the United States
Small Business Administration as a 504 loan program. The CDC is
a direct lender under this program and a loan packager,
placement service under all other SBA programs. We also have
the designation of intermediary for SBA's prequalification loan
program in the Los Angeles and the Santa Ana district offices.
SBA basically has three programs. The 7(a) for regular
business loan loans, the 504 which is a fix asset financing
program for expanding small businesses which is also SBA's only
economic development program and then the 8(a) program for
contracting opportunities.
There is room to grow in all these programs in Los Angeles
County, even though the Los Angeles District office is the top
performer in 7(a) in the nation. There is room to grow in the
504 loan program and in providing greater access by minorities,
women and veteran owned businesses in all three programs.
In our efforts with small businesses, which are minority,
non-minority, women and veteran owned, there is a variety of
funding sources today which did not exist 15 to 20 years ago.
However, the greatest amount of financing is still being
provided by the Small Business Administration.
In addition, we have more technical assistance being made
available to area businesses than ever before. But more is
needed as long as we do not cross that sometimes fine line and
start to run their businesses.
In the quest to follow that dream of owning and operating
your own business, there is also the reality of becoming a
success, a failure or operating a business which is just
limping along. In some cases we must say no to certain requests
and refer them to other resources for education, more in depth
technical assistance and other types of financing.
Our biggest challenge is preparing minority women and
veteran owned business persons with the financing opportunities
which are available. Many persons are not aware of the types of
financing available and the requirements. Some persons need to
understand how owning collateral can be beneficial when
applying for a business loan. Some persons need credit repair
and other enhancements to make their loans requests more viable
to the many lenders who desire to provide more financing to
qualified businesses.
As businesses grow and need different types of financing,
they need to work with a business like ours which can continue
to grow with them. Many of our borrowers have already received
their second and third loans. However, very few persons know
that they can qualify for more than one SBA loan.
Another challenge which we have is to make our services
known to interested business persons and to walk them through
the processes.
In addition, we are also seeking an expansion of our SBA
territory so that we can provide services to businesses on the
same level playing field as our other partners who have county
wide territory. The Long Beach area CDC is probably the only
partial county CDC in the state of California. We only have a
third of the county for 504 loans, but no area restriction on
all other SBA programs. Yet we have not been permitted to
expand county wide because of a perception in Washington, D.C.
that Los Angeles county is well served.
When we no longer have a territory restriction of assisting
a qualified Los Angeles county business, we will be able to
assist more area businesses and assist SBA in increasing its
504 and 7(a) loan volumes.
If you can help us to ensure certain required funding
levels for both the 504 and the 7(a) loan programs, and assist
us in our expansion requests, we should all see greater
assistance and increased loan volume for small, minority and
women owned businesses in the Los Angeles County area.
I thank you for the opportunity of presenting my views
today.
[Ms. Peterson's statement may be found in appendix.]
Mr. Issa. Thank you. And thank you for being the person
closest to exactly 5 minutes. Very well done.
Please, Paul.
STATEMENT OF PAUL TAMBAKIS, HUB DIRECTOR, U.S. COMMERCIAL
SERVICE
Mr. Tambakis. You mean you are timing us? Okay.
Mr. Issa. I am timing you. You are not absolutely held to
it. If we could be close, it will leave time for follow-up
questions.
Mr. Tambakis. I will try to talk fast and hopefully
everybody will be able to understand me.
Mr. Issa. And the balance of anything you leave off will be
entered into the record.
Mr. Tambakis. Okay.
Ms. Millender-McDonald. And a hand is up back there
indicating that they cannot hear you, so----
Mr. Issa. Paul, if you will pull it just as close as can
be.
Mr. Tambakis. My name is Paul Tambakis. I am the Hub
Director for 8 offices of the U.S. and Foreign Commercial
Service here in Southern California. And my territory stretches
from as far north as Ventura County to Bakersfield and all the
way down to the Mexican border and as far east as Indio.
I wanted to thank both of you for the opportunity to give
me this opportunity to showcase the important work that the
U.S. Commercial Service does for small business of the United
States. This is especially important in light of recent events
that are having a profoundly negative impact in our economy and
are causing great hardships to America's small businesses.
WESSCO International is a real live example of difficulties
experienced by small business in today's economy. WESSCO is an
LA based supplier of amenities and other on-board/in-room
service items sold to airlines, hotels and cruise lines. In the
wake of the September 11th attacks, WESSCO encountered numerous
problems in its business operations including canceled orders,
stopped shipments, frozen inventory and delayed payments.
WESSCO recently turned to the Commercial Service for
assistance in helping them resolve a financial situation
involving a large airline customer in Latin America. This real
live example emphasizes the importance of the mission of the
U.S. Commercial Service, and I hope that my testimony today
will show what the U.S. Government, namely the U.S. Commercial
Service can do to strengthen and protect our small businesses
and in turn the very jobs that our economy depends on.
In my testimony to you I hope to accomplish three goals.
The first is to emphasize the importance of small businesses in
the United States and the amazing benefits to our economy that
can be realized by supporting small business exports.
Secondly, I want to reintroduce the U.S. Commercial Service
to the Committee members and members of the media, and public
that have joined us today and give you some insight into
exactly what we do to help the small businesses of America.
Third, I wanted to focus on what the U.S. Commercial
Service is doing for minority owned businesses in America
highlighting some of our work in California.
The facts speak for themselves about the importance of
small businesses in our economy.
For instance, 97 percent of U.S. businesses that export are
small and medium-sized enterprises. Exports have accounted for
30 percent of U.S. economic growth since 1989. Exports account
for 21 percent of U.S. GDP growth in 2000. Export related jobs
pay wages that are 13 to 16 percent higher than other jobs.
The U.S. Commercial Service is part of the Department of
Commerce that is solely focused on export promotion. Our
mission is to assist U.S. businesses in the exporting process
and to protect the interests of American businesses abroad.
This includes a special emphasis on minority owned companies,
women owned firms and companies in rural communities.
Incidentally, we recently in the last year opened up two
one person offices in rent-free space in rural communities
including Bakersfield and also co-located on a native American
Indian reservation in Indio, California.
We have a worldwide network of offices and trade
specialists that help small and medium sized U.S. firms realize
their export potential. Commercial Service officers are posted
in over 150 locations abroad at our embassies and at over 100
U.S. Export Assistance Centers throughout the United States to
provide one-on-one counseling for firms.
We offer export counseling, market research, matchmaking
services, advocacy towards foreign governments on behalf of
U.S. business in numerous business creation opportunities with
trade missions and trade events both in the United States and
abroad.
Just a few of the important programs we offer. There is a
wide range of services, everything from the Gold Key program
where we setup appointments for companies overseas, which you
are familiar with, Congressman, to a fairly new program called
BuyUSA, which is a new e-commerce service provided for American
businesses by the Commercial Service in conjunction with the
IBM.
This is an international electronic marketplace, a ``one-
stop'' export assistance web site that brings U.S. and
international companies together to export U.S. products and
services. There is really no web site like it in existence.
BuyUSA integrates the one-on-one export counseling of the
U.S. Commercial Service with the latest in business-to-business
technology critical for competing in today's global e-economy.
The site offers a small business the ability to find
international partners, identify sales leads and make an actual
international transaction. And this is really critical for
small businesses that have good products and services that can
not afford the time or money it takes to travel abroad.
We also have very strong partnerships with the Small
Business Administration and the Export Import Bank. And this
allows the Commercial Service to assist small businesses in
finding the working capital and finance programs they need to
begin exporting for the first time or to expand their overseas
presence.
Our work with Visual Matrix of Burbank, California is a
perfect example of this collaboration between agencies. And
this is a success story that recently crossed my desk late on
Friday, so it is not in your written testimony and I will add
it as soon as possible.
Visual Matrix is a developer and manufacturer of
professional video products that can be found in television
broadcast facilities, video production and post production in
studios worldwide. Mora Kim in our West Los Angeles office was
first introduced to the client by a referral from our Ex-Im
Bank local representative.
Mora invited the client to a seminar on the Small Business
Administration's export express loan program. As a result of
following up with contacts made at the seminar, the client
received a significant SBA export express loan close to the
maximum allowable amount under the program. The loan proceeds
have been utilized for, among other things, export promotion,
advertisements in trade journals and exhibiting at overseas
trade shows as the National Association of Broadcasters Show in
Sidney, Australia.
By working with SBA the company also received the combined
line of credit covering both preshipment and post-shipment
financing.
Our client has also worked with Ex-Im Bank and received an
Ex-Im export credit insurance policy which allows them to sell
on an open account basis to overseas customers.
As a result of participation at all these trade promotion,
coordinating counsel agency programs, Visual Matrix in the past
months reports significant sales to Australia, China, Germany,
France and the Netherlands.
I next wanted to briefly touch on the program that we have
in place focusing on minority small businesses. It is called
our Global Diversity and Women's Initiative. Additionally we
have the Rural Export Initiative that focuses on rural
community small businesses throughout the United States.
The Global Diversity and Women's Initiative is designed to
greatly increase the probability of minority and women owned
companies achieving export success. Maria Cino, our Assistant
Secretary and Director General of the U.S. Commercial Service,
continues to lead overseas trade missions abroad for minority
and women small businesses with one coming up to Southern
Europe in July, and which a strong focus will be placed on
recruiting companies from Southern California.
Also in my written testimony I have provided at least ten
examples of minority business enterprises we have assisted in
the last year to export successfully.
Also, to increase our outreach efforts to minority
enterprises, the U.S. Commercial Service is in the process of
developing promotional marketing material on our services that
will be translated into Spanish and will add other foreign
languages by next fiscal year.
In conclusion, we have made some huge inroads into
assisting the minority business community find overseas
business opportunities all across America. The key is for all
of us to continue to work together to educate companies about
the support and assistance available to small and medium size
enterprises.
We continue to work hard to make the Commercial Service
part of our elected officials resource network so that when
international trade questions arise, you will refer your
constituents to us. A good example of some of the most recent
work we have done with minority businesses was the program that
we put on yesterday in Los Angeles on the African Development
Bank. Over 100 companies attended, 90 percent of those were
minority businesses from the Los Angeles area with our keynote
speaker being Congressman Ed Royce.
The recently instituted Export Achievement Certificate will
help to recognize first time minority exporters and encourage
other companies to pursue international business opportunities.
We are all working hard to spread the word about the great
work that all of us in the local trade community do day in and
day out. Together as partners we will reach out to more
American businesses and increase the number of minority
businesses exporting profitably.
Thank you.
[Mr. Tambakis' statement may be found in appendix.]
Mr. Issa. Thank you.
Ms. Duran. Oh, and if you can share the mike.
STATEMENT OF ISABEL DURAN
Ms. Duran. Good morning.
Can you hear me?
Mr. Issa. Yes, we hear you fine.
Ms. Duran. Okay.
Mr. Issa. Everyone in the back hear okay?
Ms. Duran. Thank you, Chairman Issa and Congresswoman
Millender-McDonald. Thank you for the opportunity to hear my
humble testimony.
I am Isabel Duran, and I am the manager of the Capital
Partners Loan Program for Community Financial Resource Center.
Community Financial Resource Center was incorporated in
1992 by the Los Angeles Community Reinvestment Committee. This
is Los Angeles' first public and private partnership between
the city, financial institutions and the community.
Established as a 501c-3 nonprofit corporation, CFRC opened
its doors in March of 1993 with the express purpose of
providing financial services and counseling for residents and
businesses located in South Central Los Angeles and later
expansion to distressed communities throughout Los Angeles
county.
CFRC is a one stop of service providers. Individuals may
choose from the following types of services: Business lending
programs; business plan guidance; technical assistance services
in English and in Spanish languages; consumer and business
development workshops; home ownership preparation and
counseling; business automation technology development,
computer training; and money management counseling.
Our loan programs are in three categories. We have the
business expansion loan program from 25,000 to 250,000. It is a
flexible lending program for businesses that have sustained
operations for a minimum of three full years and are unable to
obtain adequate financing from the convention private sector.
We have the micro-loan program from 5,000 to 25,000 which
provides micro-loans to newly operated businesses with a
minimum of 2 years seeking small amounts of capital for
leasehold improvements, working capital and fixed assets.
Capital Partners loan program, 500 to 5,000. A
comprehensive program that offers loads, business training and
education, group support and networking opportunities to self
employed business owners and entrepreneurs with limited access
to working capital. Loans are offered in graduated amounts from
500 to 5,000.
Our track record is as follows: Since 1993 we have served
over 49,000 residents in the Los Angeles County area; CFRC has
invested $3.1 million in businesses located in South Los
Angeles; we have leveraged over $4 million from area banks for
co-lending loans; the average loan amount is $85,000.
CFRC and its banking partners combined have invested more
than $6 million in South Los Angeles businesses. Since 1993
CFRC has assisted in creating or expanding approximately 200
small businesses. Over 442 jobs have been created and/or saved
through our programs. We are certified California finance
lender, certified by the United States Treasury Department as a
Community Development Financial Institution, and certified
California Community Development Financial Institution.
Thank you.
[Ms. Duran's statement may be found in appendix.]
Mr. Issa. Thank you.
Was not ready for that brevity.
One announcement I would like to make is we have had some
requests for questions from the audience. If you have questions
that have come up as a result of testimony or maybe you came
with questions, if you would write them down and then would--
hold up your hand again. He has had to miss in the crowd. And
Andy whose a little less tall will come by and pick them up and
bring them up so that your questions will not fail to be
incorporated into any questions we ask.
The procedures require that this is not a public gathering
in the sense that questions from the audience be asked, but we
will incorporate them into our questions if you have any.
And while someone may be thinking of some, I just have one
quick comment and then I am going to yield to Juanita and let
her do most of the heavy lifting on the questions. And that
really is for comment from Mr. Tambakis.
I am sorry to mess up a wonderful name.
I did not receive in my own company an SBA loan, never
applied for one. But I did receive consulting from the SBA and
I did receive some low cost advertising and opportunities to
work on some of the overseas pavilions that 20 years ago were
being provided, I think still are, where you set up at some of
the trade shows. And in my case that allowed our company to go
from $7,000 in start up capital to, with me gone last year,
doing about $1.3 million, and at one time more than 50 percent
of my sales were export as a result of the U.S. Government's
making those opportunities available for me to be known in
Australia and other areas that would not otherwise, never have
done it.
So, I want to thank you for being here today, Paul. And I
think that is part of the reason that I sought to be on the
Committee on Small Business. And I think it is also one of the
reasons that, as Juanita said, it is a very bipartisan
committee. It is one of the few committees in the Congress
where it is us on the Committee against the ill-informed the
rest of the Congress sometimes.
So, again, I want to thank the panel for being here and
helping us at least produce some additional information for the
body of Congress as a whole.
And with that, I would yield to the ranking member----
Mr. Tambakis. May I make a quick comment on that?
Mr. Issa. Please.
Mr. Tambakis. Yes, we still are in the business of helping
companies to participate in overseas trade shows and other
overseas missions, but we are also seeing recently an influx of
businesses coming from overseas to our shows here in the United
States and delegations coming from many different countries.
Last week, in fact, we hosted a delegation from Vietnam and
China in Orange County.
So what we are doing, and particular as an assistance to
the small businesses, is being able to offer them briefings and
appointment setting at local events right here in the United
States.
Mr. Issa. Excellent. Thank you.
Ms. Millender-McDonald. Thank you so much, Mr. Chairman.
As you know, in the House when there are congressional
hearings like this, the majority has to be in the forefront.
And I think Darrell for allowing me to kind of be in the
forefront here in my own district and raising questions on
issues that are critical to us.
Before I say this, there is a critical issue. The restrooms
are outside; women to the right, men to the left right outside
in the corridor.
And I have asked for coffee and tea to be brought in
because it is rather cool here, and you might want to do that
in between panels.
You have also packets that were given to you that would
contain mostly all of the testimony which is really the case of
our having the field hearings and other pertinent information
in those packets. So if you have not gotten your red folder,
there is one outside for you.
Paul, you have raised a question that is so important to my
constituents. Because as e-commerce comes into further
awareness, small businesses are very nervous about this
concept. Because a lot of them really do not understand the
concept. Secondarily, they do not feel that they are equipped
to do e-commerce or even exports. With that said, how much of
an outreach, and I will be asking all of you this because I
have taken notes and I need to ask, with all of this money that
is flowing here this panel is the one for access to capital; we
need to know how we can reach you? What is your outreach
efforts? Where are you? We do not want you just in Orange
County, want you just in Ventura County, we want you in LA
County and we want you in the South Bay.
South Bay is going to be the engine that drives, sorry to
say this, sir, but will be the engine that drives the economy
in California and bring it up.
Mr. Issa. We will follow along.
Ms. Millender-McDonald. With the ports after the dredging
and all of that.
So, Paul, if you can just tell the constituents and the
fine business people who have come here, how does one access
this information? And what degree should business deem itself
viable to go into exporting?
And your whole notion on the minority concentration, the
Global Diversity and Women's Initiatives, we need to know about
that. Where are you? Where can we access you? Where can we find
you and how can you come here in this region to give us the
information that is critically needed as you recruit Southern
California small businesses for international business?
Mr. Tambakis. Okay. I think I got most of that.
First of all, for clarification, in the two years that I
have been in this position before being the Director for Orange
County, I have really focused on under served communities. And,
hence, the opening of the two additional offices out in the
rural community, but as well we have an office in downtown Los
Angeles and we also have another office in West Los Angeles.
Ms. Millender-McDonald. Could we get an address for the one
in downtown Los Angeles?
Mr. Tambakis. Yes. It is on Olympic, but I can provide that
for you. And also you can go to our basic web site. It is
buyUSA.gov. And you can click on offices and get access to all
the Southern California offices. It has a map and you can click
on the office that you want and it will lead you there. It will
lead you to trade specialists who will talk with you one-on-one
whether or not the companies comes in the office or we are
frequently going out 90 percent of the time meeting at the
company's location.
Ms. Millender-McDonald. Now, Paul, if a small business does
not have, regretfully to say, computer hookups or that type of
thing, they are really just starting out but they do find that
international trade is something that they want to do, what can
they do? Because what you are saying might be a little more
advanced in some of the smaller businesses and maybe we need to
define what businesses are you looking for in terms of the
global trade?
Mr. Tambakis. We are as far as the Global Diversity
Initiative, we targeted about 135 minority businesses this year
to work with under this program. And the basic criteria is a
company that has been in business for one year; that has a
marketing plan; that whose products are at least 51 percent
U.S. manufactured. We also work with service companies as well
including the travel and tourism industry to help bring in
inbound visitors into the United States.
And also the program is ideal for the small minority
business because education is a big component of it where we
are setting up teleconferences, we are doing a lot of hand
holding, we are taking the companies to local domestic trade
shows; doing everything to get them to a level of export
readiness with our goal of getting them into their first
overseas market within 12 months.
Ms. Millender-McDonald. Could the teleconferencing be at
places like on campus at colleges if, in fact, small businesses
do not have the wherewithal for teleconferencing? Because I
have done teleconferencing at Cal State Dominguez Hills on
other issues. A lot of this, and I am not downplaying any of
the small business, but a lot of this stuff is Greek to some
people in terms of how do they access the teleconferencing, how
do they contact you or you contact them, or just what can be
done. Because we recognize that this region will be kicked in
with international trade big time and small businesses must
play a part in that, but how can they do that?
Mr. Tambakis. I think Maria Cino is correct when she says
that the Commercial Service is the best kept secret in
government, and we are trying to change that. We are trying to
work with you to help get the word out.
We are asking you to communicate to your constituents
through newsletters, through any sort of regular communication
that you have with them to tell them about the services that we
have to offer. And then any referrals that come from your
office, we will definitely follow up with the companies.
Also, I just wanted to mention that we have webcasts
available by going on to the commercial service web site.
And also usatrade.gov is another source for information on
trade resources of the U.S. Government.
And these are great programs. They work. If companies come
to us, we are going to spend time with them, we are going to
access their level of export readiness, see if they are viable
for the Global Diversity Initiative, and also there is other
partner organizations that we work with in the community such
as the Center for International Trade Development and the Small
Business Development Centers that are very useful in providing
education to these companies. And the SCORE Executives, retired
executives.
Ms. Millender-McDonald. So, Paul, I am going to try to get
to all of them. Can you tell me, send information to me so that
I can get it out to the people here in the audience and others
where and what can, and how can and when can you and I get
together so you may know small business folks in trying to
reach the level of Global Diversity Initiative that you are
talking about?
Mr. Tambakis. We would love to sit down with you and
workout a strategy for----
Ms. Millender-McDonald. Bring the people together again.
Mr. Tambakis. Exactly.
Ms. Millender-McDonald. This is just one of many.
Mr. Tambakis. Whether it is a program we want to do
together; it is very common that we do that with our
congressional representatives.
Ms. Millender-McDonald. Okay. Fine. Thank you.
Isabel, if I can just quickly ask you, you have given about
$1 million in loans and leveraged about 4 million. And you have
reached about 49,000 residents. However, in talking with some
of my small businesses they think $5,000 and $25,000 is just
nothing in terms of expanding their businesses or even try to
survive. What can you tell them in your micro-loan, although
you are a micro-loan program so I guess this is more geared for
persons who have home business or what? You know, $5,000 and
$25,000 just does not cut the mustard.
Ms. Duran. That is a really good question and I am always
asked that when I do the orientations about our $500 loan; what
can you do? And we try to give them a little bit of hope that
you can use $500 to do research on the business you are going
to start, you can start creating your marketing materials and
look for clients. And as you pay back the $500, you can
graduate up to $1,000 and $2,000.
Most of them are home based businesses or they partner with
other business owners in a coop type of a shop. But as they
graduate up to $5,000, we are requiring more documentation,
more information, more financial information that they have
already been trained when they were at 500, 1,000, 2,000.
Ms. Millender-McDonald. You know, I am thinking about Lulu
Desserts, because Lulu started in her home.
Ms. Duran. Right.
Ms. Millender-McDonald. And that is now a million dollar
business. We can not shy away from the small numbers that we
are talking about, but the whole notion of just looking at
5,000 or 25,000 it has to be kind of geared for then the home
based business, more or less?
Ms. Duran. Well you could look at the small shoe repair
business. You know, they can buy a tiny little office or a
little space for $500 a month or $1,000 a month, or they share
that space with a beauty salon.
Ms. Millender-McDonald. Now anyone who wants to contact you
for this type of loan, where can we find you? I know where to
find you, but there are a lot of folks who need to know where
to find you.
Ms. Duran. Right. Right. Our web site is www.cfrc.net, but
our telephone number is 323-233-1900. And we have a toll free
number. I think it is 866-222-CFRC or 2372.
Ms. Millender-McDonald. And you are geared, more or less,
for the home based businesses or those who need to have some
few improvements?
Ms. Duran. I specialize in people who are starting small
business or who are wanting to start a small business. Our loan
program incorporates a lot of training. So we tell people if
you stay with our program for at least a year and a half, you
can become bankable.
Ms. Millender-McDonald. Okay. For Regina, you spoke about
the 7(a), 8(a), 504. I am sure most of the people here
understand the differences between those programs. Is there
anyone who needs further explanation of those programs out
there? I do not think so, because you are small business
people.
But you spoke about you are unable to expand due to
perceptions in Washington. What are those perceptions
Ms. Peterson. First of all, we have always had support from
our friends at the local SBA office in Glendale. But the
problem has always been at the central office level.
The bar is constantly being raised or the last standard
that was imposed is that as long as the area is making one loan
per 100,000 population that the area is well served. But if you
take the same standard and look at what is being accomplished
up and down the state of California in the northern area and
then just south of us in the Santa Ana district office as well
as the San Diego district offices, those offices have a much
higher 504 loan volume than Los Angeles County does when Los
Angeles County's population greatly exceeds all of those areas.
Ms. Millender-McDonald. So what can we do then to alleviate
this problem that you have?
Ms. Peterson. I need to have the persons making the
decision at the national level to take another look at Los
Angeles County. In my view, Los Angeles County is probably one
of the last or greatest under served areas in the nation.
The reasons that we had problems in '65 and '92, some of
those same problems still exist today. If we were to have
another problem, we would undergo the same types of problems
that we had before.
Ms. Millender-McDonald. So can you then send me a letter
outlining all of those concerns so that I can pass them on to
Alberto and pass them on to Bruce, and pass them on to folks
back in Washington and see what we can do?
Ms. Peterson. I would be happy to.
Ms. Millender-McDonald. Yes?
Mr. Issa. If I could just ask if it also includes, if one
per 100,000 is a very low bar, give us your suggestions of
where you think the goal should be? Should it be one in 50,000,
one in 20,000, one in 10,000? Because I think that also would
help us in understanding just how far we are away from where
supporting entrepreneurism we should be.
Ms. Peterson. Okay. Thank you.
Ms. Millender-McDonald. Lastly, few people know you said
that they can qualify for such loans. What is your outreach on
this? How can you make them further aware of the loans?
Now, most people can not do loans because they do not have
the money and the wherewithal to pay it back. What they want
are grants. And so while you specialize in just loans, no
grants----
Ms. Peterson. Yes. SBA specializes in loans, and that is
our focus is to be a partner with the SBA.
Ms. Millender-McDonald. Well, you know, we have been trying
to beat up on the Small Business Chairman and all to make more
grants and less loans. And so we need to beat up on them back
there, too.
Mr. Issa. We will surround him when we get back.
Ms. Millender-McDonald. I know that is right. We will now
that they know Bruce is here at the helm.
Colleen, you mentioned----
Ms. Peterson. Congresswoman, before you go to the next
person, may I please interrupt?
Ms. Millender-McDonald. Yes.
Ms. Peterson. May I have an opportunity to let your
constituents know how they may contact us?
Ms. Millender-McDonald. Oh, please. Please. I did not ask
for that. Yes.
Ms. Peterson. We are located in downtown Long Beach at 11
Golden Shore, Suite 630, and that is just a half block south of
Ocean Boulevard.
They can also phone us at area code 562-983-7450. Our web
site address is www.longbeachareacdc.com. Our email address is
[email protected].
For business persons, they are welcome to walk in to visit
us anytime between 8:00 and 5:00 Monday through Friday.
Ms. Millender-McDonald. Okay.
Ms. Peterson. If it is more convenient for them to continue
operating their businesses, then we will be happy to come and
visit them.
Ms. Millender-McDonald. Okay. Thank you so much.
Colleen, you said something that is very critical and you
said it critical ``Less time, more affordable funding for
businesses.''
Ms. Anderson. The process, yes.
Ms. Millender-McDonald. We need to know what you mean by
that and what is done to give us less time, more affordable
answers or the wherewithal.
And secondly, less paperwork. I think people do not want to
get bogged down in a lot of application and paperwork.
And we also want to know about your committee that meets
monthly to look at how under served communities can be served.
Who is on that committee from this area? You spoke about all of
those great folks we know in the Los Angeles area. We need to
have someone down here looking into our interests.
And you have loans of $26 billion in small businesses
commitments in what? FY 2002? FY 2003?
Ms. Anderson. That is what on the books today.
Ms. Millender-McDonald. That is what is on the books today?
Ms. Anderson. Be total commitments.
Ms. Millender-McDonald. And you have a $16 billion
commitment. To whom are you going to commit that, be committed
to, whereabouts?
Again, your outreach. We do not know about that down here.
For some reason we get missed down here. Folks think that we
are wealthy do not need it, but we need it down here like every
other small business. Help us out.
Ms. Anderson. Okay. Hold on then, I am trying to write all
this down. Okay.
First, the comment on the time and cost of the SBA 7(a).
Currently, and this is not to be critical this is just, you
know, we are a 150 year old institution so we have learned from
our experience. And today when you talk about 7(a) program
applying for a loan, it is in their own documentation states
that the average time to complete the paperwork is 12 hours,
and it is about a 30 page process.
Is it not, Alberto?
Mr. Alvarado. It is what?
Ms. Anderson. Thirty pages?
Mr. Alvarado. No, I do not think it is quite that long.
Ms. Anderson. I think it is close. And the point is that
when you are targeting the really small companies, and a lot of
the 7(a) customers or borrowers are start ups or companies
that, you know, small companies that do not qualify for other
conventional lending, often times these are one or two people
shops. And, you know, you are HR, you are marketing, you are
sales, you are bookkeeping, you are accounting, you are ops,
you are everything. And to be able to invest that much time in
the process probably causes a lot of companies or business
owners not to apply.
I also think some of the guarantee fees for the smaller
companies may cause some companies not to be able to apply. And
I think the example is a $250,000 loan request, I think the
guarantee fees are like $3,750. And our point is not to be
critical, because we are very good partners with the SBA----
Ms. Millender-McDonald. Now wait a minute. You say for
$250,000 loan you have to a $3,000 assessment fee?
Ms. Anderson. I think the guarantee fee is $3,750. Yes.
Ms. Millender-McDonald. Heavens to Mergatrode.
Ms. Anderson. And, again, I don't want to be critical.
These are our partners. But my point is is that we have learned
a lot in starting out and doing very conventional underwriting
and then streamlining our processes where, for example, under
$100,000 ours, I believe, it is still one page document that
you can do through the mail, you know, fax, over the Internet
and in person.
So the comment was to say we would very much like to take
our 150 years of experience and partner with the SBA and other
lenders to see if we can not, not at any incremental risk to
the program, but streamline the process so that the SBA, the
private sector lenders and the borrowers and potential
borrowers would be more likely to apply and be able to afford.
Ms. Millender-McDonald. Do you ever have just an access to
capital workshop?
Ms. Anderson. Sure.
Ms. Millender-McDonald. When can you do one of those in
this region? Whenever we ask.
Ms. Anderson. Anytime you want me to.
Ms. Millender-McDonald. Okay. Fine. So tomorrow--no.
Ms. Anderson. We might probably shock you, but we would be
here.
Mr. Issa. I think the question is, do you have the room all
day?
Ms. Anderson. That is right, it will take all day to do
that.
Mr. Issa. No, no. I just thought that immediately following
the panel at noon, we would just go right into one of your
opportunities right here. We already have everything set up.
Ms. Anderson. We would be delighted to do it.
Ms. Millender-McDonald. Well, we certainly do need to know,
though, rather swiftly and do want to encourage all of you to
have conferences right here in this great conference centers
and conference centers in Long Beach and other parts of the
37th. People need to see you and people need to see you up
close. They see you too far away and you do not seem to be a
tangible item. So we have got to make sure that happens.
Quickly to Alberto. Alberto, now you know you and I have
been friends through the last Administration and even before.
Again, your outreach, you have this money flowing in both the
Congressman's district and my district, a combination of about
$39.5 million. Who knows about it? What kind of out reach have
you given here so that my people will know about it, the people
of the 37th?
Mr. Alvarado. First, let me introduce to you my staff----
Ms. Millender-McDonald. Got to get the mike.
Mr. Alvarado. Sorry. Our management team and staff, stand
up for a second.
Ms. Millender-McDonald. My God.
Mr. Alvarado. Now, all of these fine men and women have
money with them. Do not take no for an answer. Close the doors,
do not let them leave. So they are here, as they often are,
available today.
Our web site, sba.gov, is really an award winning web site
where people can access some very, very good information.
We have two handouts today. One is a magazine format, all
of you need to pick one of these up. It has phone numbers,
information on local centers that have SBA information.
We also have this handout here. ``You Could Be Next,'' the
number of businesses that have received assistance in your
district, Congresswoman with the phone numbers to our staff and
marketing specialists.
Let me give you my phone number: 818-552-3201. We have
money available.
So, we are working continuously with the organizations,
with your staff to bring our staff to the community to work
with the local organizations. Our marketing is clearly very,
very important.
Ms. Millender-McDonald. And I think that is the operative
word, ``our bringing you'' or the statement ``our bringing you
to them'' on a more frequent basis. We need to just have these
things through the Federal Register, and all of those other
things. You just tend to think small businesses are going to
access that Federal Register when really we need to bring you
out here so that they can touch you, feel you and talk with
you. And that is what we are going to do.
I have three questions quickly, Mr. Chairman.
One is I am thankful for the government's involvement with
business development. I believe if government can do it, than
businesses can do it better. Question: Have you given thought
to the value of public/private partnerships as a mean of
developing the California small business community?
Example, a mentorship program where major corporations
would lend assistance to small business on all levels from
start up to sustained growth.
Any of you, well those of you who can.
Mr. Alvarado. Well, let me say, Congresswoman, that is a
tremendous idea. We surely employ that concept. In reaching out
to communities, for example, we will often ask Wells Fargo and
other institutions to come and sponsor events in the community.
We also work with our organizations and successful businesses
whether they are from our contracts program or loan recipients
to mentor other firms. So we utilize that synergy of the
public/private partnerships quite a bit. And that really is a
way of maximizing some of the limitations in our budgets so
that we can reach out.
Ms. Millender-McDonald. So we do have that type of public/
private partnership that we need to bring in here. This is
another workshop that we need to do and bring in here along
with Paul, so that together we can have that type of synergy
going.
And so the next question is a question by Alfonso C. Webb.
Now, Alfonso did not have any problems letting you know what
his question is. Global Internet trade course teacher at King
Drew Magna School in my district of Watts.
The World Business Exchange Network and the International
Trade Association has developed a global Internet trade course
for students that have been implemented in several high schools
and elementary schools throughout California. What can
organizations such as these do to increase the cooperation
between local manufacturers, politicians and educational
institutions for the purpose of preparing our youth to make a
smooth school to career transition? Do any of you have any of
those programs for this type of need?
Mr. Tambakis. I think that we should give him an
opportunity to be involved in our seminar that we are planning
together.
Ms. Millender-McDonald. Okay. So----
Mr. Tambakis. And that sounds like a gentleman Reggie
Robbie that I have before here in the Los Angeles area who also
has similar programs. I think it is excellent to get the youth
involved in understanding international trade and, you know,
transitioning them up the career ladder.
And I do want to mention that for those students that do
make it to the university level, we have some great entrantship
programs available at the Commercial Service office's locally
where the students come in and work basically on a volunteer
basis, but they earn college credit. And it is an excellent
vehicle to----
Ms. Millender-McDonald. I need to get that information
right away, because we have really the CAMS program on the
campus of Dominguez Hills, these students, 98 percent of them
go to the ivy league schools. Also the Charles Drew Magnet
School for math and science; these kids are our brightest and
best. I want to get that internship information.
The last question: Will any money or is there any money
currently to assist business owners in continuing their
education at universities, junior colleges or trade schools?
Are there any loans or grants for this specific reason?
I believe that we would agree that growing as a business
person is just as important as expanding the business itself.
Thank you. And this is Danny Bayone. Promote this.
Mr. Alvarado. We have an Executive Education Program, for
our 8(a) firms, our procurement firms. It's in my written
testimony, Pacific Harness in Lynwood, one of your firms, was
selected last year for example for the Executive Education
Program at Clark Atlanta University. And that is a program that
we make available, continuing education. We find that,
obviously, management is a very, very significant issue for a
lot of our small businesses who maybe very good technicians but
often lack in management type skills.
Ms. Millender-McDonald. But you know what, Alberto? And
that is great, because you talked about one of the HBCUs, and
that is critically needed. But we need to have something that's
closer here that we can utilize.
And once you do one business, it appears to me, and I guess
it gets back to what Regina was saying, you think that is the
top of it all when we need several of these programs and
several businesses coming into play so that we can then expand
this whole notion of entrepreneurialship, creating wealth, if
you will, to the extent of wealth. But you must put this
information in the hands of more people in California, in this
region.
South Bay has been neglected. I can see that with an
assessment that I have done. Because people just think that we
have made it. No, we have not. We need the same type of
programs that you have, the same type of support that we do
right here in this region as in all other regions.
Mr. Alvarado. Let me just state, and I think that is very
valid, and we are going to pursue that. Through our SBDC
program we also provide a lot of direct technical assistance.
Many of those programs done in conjunction with local
universities, Southwest Community College, for example. And we
find that that's another very, very vital source of direct
training to our businesses.
Ms. Millender-McDonald. And Southwest Community College is
a great college. I know its President. But we also have great
colleges such as Compton College, Harbor College, Long Beach
City College. We have got to come further into this region and
promote it. Because you know what? This is the engine that is
going to kick it up for California.
Thank you so much, Mr. Chairman.
Mr. Issa. Juanita, I know you could see me posed at the
mike.
Ms. Millender-McDonald. I know.
Mr. Issa. I want to thank the panel for this in depth
discussion. I think you have enlightened us a great deal. And,
hopefully, as you are thinking back on what you have said here
today, more things will come to mind. Please feel free to
include them in correspondence.
I am going to ask in closing both panels, but this panel
right now, I have one pet project. And I do not think that a
Chairman should use pet projects at a time like this to ask in
depth questions, but I have had a couple of companies within my
own Congressional District who have bid for what I call
``beltway bandit jobs,'' jobs which, they are small businesses,
they bid for them and they somehow come up just a little short
even though they are priced the same amount because either they
(a) do not have the experience, which is a way of saying you
are not the existing inside the beltway known entity.
Especially a lot of these are consulting, although some are
product. Or (2) it would be more expensive to go all the way
out here versus a closer to the source type contract.
As each of you deal with companies, at anytime now or in
the future, I would appreciate it if you run into similar
situations in which, when dealing with the government, somehow
a company is disadvantaged because they are small and they can
not get unbundled, the contract, or because they're determined
not to have the experience even though their product or service
may be equal, and lastly any kind of a hint of a geographic
skew toward the sourcing agency's point. Because in this day
and age I am a believer that at least within the continent of
the United States we should not assume that geographic distance
should make any difference at all, other than shipping cost, in
our ability to look for sources. And as a Californian, I am
acutely aware, as is Juanita, of how far we are from
Washington, D.C.
So as those occur now or in the future, I would appreciate
it if you would just drop my office a line and we will follow
up wherever the person is, even if they are not a constituent.
Because this is I think on an ongoing basis this Committee
needs to dedicate itself to making sure it no longer happens in
government procurement.
And with that, I want to thank you all for your
participation.
Ms. Millender-McDonald. Thank you so much.
Mr. Issa. And as Congresswoman Millender-McDonald has said,
the coffee has arrived. We are going to take the fastest break
you can imagine to get the next panel up, but if you want to
get your coffee while we are getting them up, we would
appreciate it.
[Recess.]
Mr. Issa. If we can get started now.
And since you all sat patiently through the earlier
session, you kind of know we are going to do this informally.
We are going to be a little quicker in the second session, but
I want to make sure we get all your testimony in and then an
opportunity for a little bit of questioning, which means we
will run late, but we will be as quick as we can. And I would
only ask that you understand that our lateness is causing you
to rush you a little bit, but trust me, we will make sure that
no one fails to get their word out.
I'll try to introduce because there has been a lot of
changes here. But Rolina Brown is the Regional Director of the
Small Business Development Center.
Mr. Phil Borden is the Women's Enterprise Development
Corporation. You are the Executive Director.
And then flipping this around, Pat Unangst is Workforce
Investment Network, and you are the ED there. Executive
Director.
And last, and not least, is Phyllis Venable. And Phyllis is
not titled. What do you do there? I am sorry. You are a
wonderful substitution. We are glad to have you. What do you
do? You are the--pull the mike closer. Here is a chance to toot
your own horn.
STATEMENT OF PHYLLIS MOORE VENABLE, BUSINESS DEVELOPMENT
OFFICER, CITY OF LONG BEACH, REPRESENTING THE CITY AND SMALL
BUSINESS COUNCIL, CHAMBER OF COMMERCE
Ms. Venable. Okay. I'm the Business Development Officer for
the City of Long Beach, and I am representing the city and the
Small Business Council, Chamber, today.
Mr. Issa. Excellent. So there is an outreach from public/
private right now just as we asked for in the last session.
And since we are doing the panel in reverse, back and forth
order, Phyllis why don't we start with you and we will go this
way.
It is for a little bit.
Ms. Venable. My name is Phyllis Moore Venable and I am the
Business Development Officer for the City of Long Beach. I am
representing the city today and the Chamber of Commerce.
And recognizing that this is a technical assistance panel,
I do want to start out by saying in my experience the most
pressing problem facing small businesses today, whether they be
minority businesses or disadvantaged businesses or women owned
businesses is the access to capital. And I have to say that a
business can be technically tight in every single way, but if
they cannot get the money to do the things that they need to
do, then they still have not arrived.
So I would like to address in my testimony some of the ways
that I feel that government can impact on this problem in a
positive way, this access to capital problem.
You know, small businesses had a tremendous impact on life
in Southern California in a most profound way. Sixty percent of
all businesses in Los Angeles County are classified small
businesses, but what they deliver in terms of economic impact
is no small business. They are vital to our economy. Small
businesses often provide people with their first jobs. They
lead the way in on-the-job training opportunities for workforce
development. They generate big taxes. And making small business
healthy should be at the top of our economic development list.
Of course, now, we have a lot of businesses that are in
trouble. We had severe economic downturns in 1990s and now we
are faced with the recent economic issues related to the
terrorism of September 11, 2001.
On top of this the recent trend in bank mergers has created
a very conservative lending market almost exclusively for
businesses with strong equity contributions and long histories
of positive cash flow. These conditions definitely do not favor
small businesses, many of which are credit worthy but cannot
meet the strict lending criteria of commercial banks,
notwithstanding the fact, mind you, that such businesses on the
average last longer, collectively employ more people and repay
bank loans faster.
And women owned businesses are especially hard hit. Women
entrepreneurs earn about three-quarters as much as male
entrepreneurs and their businesses tend to be smaller. They
lack then in the accumulation of assets and have special
difficulty in getting equity financing.
What can we do about this? I have put together a seven
point plan which I feel are things that government can do to
begin the journey towards recognizing this severely undervalued
resource, small businesses.
Number one, we need to improve and coordinate alternate
financing resources for small businesses. We need to
aggressively seek and procure funding of public and nonprofit
lenders who can create favorable lending environments for small
businesses.
Two, we need to toughen CRA and fair lending and other
lending requirements. We need to put more pressure on merging
banks to force them to commit to lending programs for credit-
worthy small businesses.
Three, we need to raise the profile of smaller community
lenders. These banks are more likely to respond to local market
conditions to cultivate closer relationship with customers.
They utilize credit scoring less and personal banking more. And
they need help in accessing their local markets and improving
marketing and outreach.
Four, we need to strengthen private micro-enterprise
programs. And as much as I loved my private enterprise program
that we operate in the city of Long Beach, it takes too long to
get money out the door and we encumbered by a lot of
regulations and red tape. We need to put this more in the
private market.
One, two, three, four, five. We need to increase support
for training and technical assistance. Small business persons
are most likely to use these resources. The training and the
counseling will help to bridge the gap between where they are
now and where they need to become, which is ultimately more
bankable.
We need modal youth entrepreneurial training programs. We
need to concentrate these programs less on creating businesses
and more on teaching life skills, instilling confidence and
esteem in our youth so that when they become adults, they will
perhaps become entrepreneurs as well.
And lastly, we need encourage more small business
gatekeepers in our financial institutions. We need more people,
more women, more minorities who understand the plight of small
businesses and can help bring about the changes necessary to
create a sensitive lending environment.
Let me just end by saying that the growth in small business
activity has to be accompanied by a growth in sophistication,
in management ability, in training and in access. We need to
positively demonstrate how big impacts can follow from taking
significant small little steps that give them the opportunity
for many small entities.
Thank you for the opportunity to testify.
[Ms. Venable's statement may be found in appendix.]
Mr. Issa. Thank you.
Our next panelist is Patricia Unangst.
STATEMENT OF PATRICIA D. UNANGST, EXECUTIVE DIRECTOR, WORKFORCE
INVESTMENT NETWORK
Ms. Unangst. Thank you for inviting me today. My name is
Patricia Unangst, I'm the Executive Director of the Carson/
Lomita/Torrance----
Ms. Millender-Mcdonald. Excuse me. Can you hear in back?
Can you bring it closer.
Ms. Operator in the booth, can you raise it a little bit,
the volume.
Ms. Unangst. I am the Executive Director of the Carson/
Lomita/Torrance Workforce Investment Network Board, formerly
known as the Private Industry Council. We operate programs as a
public/private partnership with business and local elected
officials.
In fact, Congresswoman McDonald served as a City of Carson
City Council policy board member in our initial public/private
partnership back in the early '80s, and in fact appointed our
incoming chair, Richard Cook, who is here in the audience
today. And we are very grateful for that appointment.
He, by the way, is a small business person. Our current
chair is a small business person. So we have strong emphasis on
getting small business together with the training
opportunities. And I am glad Phyllis talked about training,
because that is of course the core competency of what we do.
I wanted to mention, and I had this on the back table, but
one of the other speakers today is the Small Business
Development Center Regional folks, and we opened in the city of
Carson right next door to this facility a Small Business
Resource Center so that small businesses can have access five
days a week including Thursday nights to a series of resources,
as well as online resources necessary to make their businesses
successful.
We operate three WorkSource Centers. WorkSource is a new
name. You will be seeing this in and around the LA area. I do
not know if it will make it down to Orange County unless the
buses run through there. But WorkSource Centers are the new
name for the one-stop career centers, and it is in partnership
with the city and county of LA.
One of the issues facing small businesses, of course, is
the definition. When you go on the SBA web site there is about
77 definitions of small business. And in looking at that
virtually everybody can qualify. But locally we had some
statistics from the state employment service and it indicated
that 92.9 percent of the businesses in our service area employ
less than 50 people. 69.4 percent have less than ten.
Furthermore, the U.S. Census says that countywide in Los
Angeles four out of ten of LA county small companies are
minority owned.
So the impacts are great. They drive our local economy and
create the majority of jobs, as Phyllis just said.
The Workforce Investment Boards are your vehicle, Congress'
vehicle to put the public/private partnership together;
education, business, labor, so on, to strength the role of
business and guiding our local job training programs. The Board
has a business majority. We have 34 members, 20 of which are
business. So it's greater than 50 percent, half of those are
small business.
We are working on the branding concept so that people can
find us. One of the things you know in government programs is
we often speak governmentese, and in doing so we often do not
communicate with the customers we are very much trying to
serve.
Recently the eight Los Angeles area Workforce Boards along
with the County Department of Social Services and the state Job
Service joined together to create this branding of the
WorkSource Center in a marketing campaign. It will be going on
between now and the end of May.
We need to speak the language the business. We need to
create one-stop-shopping. Small business in particular cannot
afford to go from place to place to look for resources. They
need a place they can go.
We established a job developers network in the South Bay
which actually includes parts of Long Beach and up through the
LA airport area that has over 20 agencies that meet on a
regular basis so that only one time a business members needs to
have a call. And only one time they have to build a
relationship, but then they have access to the services of 20
agencies, 20 plus.
The key to success of this network is building the
relationships amongst the individuals and building that trust.
If they do not trust, they do not share information and things
do not happen.
We also conduct a lot of business roundtables and industry
cluster sessions. Just recently last week we had two small
aerospace suppliers in our offices talking to a variety of
these folks that are job developers about the needs of the
aerospace industry. We are also going to do communications and
transportation industry. We are hoping to add petrochemical
because it is so large in our jurisdiction.
Our Board remains active in various business organizations.
We are a partner in the South Bay Economic Development
Partnership. We are on several Chamber boards. And we play a
lead role in the Regional Business Assistance Network which is
part of the Los Angeles Economic Development Corporation. We're
members of PHRA, the Human Resource Association, etcetera.
Probably one of the biggest needs of small business is that
of recruiting and retaining qualified workers. This is where we
can play the most pivotal role. Those workers are important to
the success of the business.
Small businesses do not have human resource departments.
They need assistance with dealing with hiring needs, labor laws
and training. A single bad hiring decision has a proportionally
greater impact on a small business than a large business.
We can assist with screening applicants, providing the
resources, providing the place to do the interviews. What do
not seem widely known is that that resource is available to
small and large business. The large businesses seem to be able
to find us, but we can provide that service.
It was spoken about earlier, and Phyllis reiterated it,
access to capital the number one issue followed by the
qualified workers. As you have heard, it is increasingly more
difficult to access.
One of the suggestions we wanted to make is particularly in
the area of cultural awareness many of the entrepreneurs in the
South Bay area are not native born. They need materials and
folks in the institutions that speak their native languages.
They need to be able to communicate with them, not just in the
language of business, but in their own tongue. Banks needs to
look at materials that outreach that audience in the light of
the ever changing marketplace.
We have had good relationships recently, Community
Financial Resource Center. They conduct regular business
workshops since January of 2001 at our Harbor WorkSource Center
every third Thursday of the month. They are designed to help
businesses run more smoothly. They also run computer workshops.
I will talk about that in a few minutes.
WiN Business Services also works with Wells Fargo Bank. We
have put on a workshop with a local employment lawyer on
growing your own business along with the bank, and we are going
to add an insurance company for the next session on taking your
business to the next level.
We create a lot of our outreach efforts through business
visitations.
Mr. Issa. I am going to have to ask you to sort of wrap up
and then we will get to Q&A.
Ms. Venable. Okay.
Mr. Issa. And as I said to the first panel, your entire
written statements plus anything you choose to summarize or to
supplement for the next five days will be incorporated into the
official report. Thank you.
Ms. Venable. Okay. I just want to say something on access
to technology. This is an area that small businesses often are
most disadvantageous in. They do not have in-house technical
advisors, they do not have IT departments. One of the things
that both CFRC and ourselves do is we offer free classes in
computer and in more advanced classes, as well as access to the
regular classes at colleges and so on.
We want to provide small business with advice. They are the
backbone of our economy, but the challenges they face are
daunting. Working together as partners, local organizations and
federal agencies can help provide businesses with information
and resources to succeed.
Thank you for this opportunity.
[Ms. Unangst's statement may be found in appendix.]
Mr. Issa. Thank you.
Please, Phil.
STATEMENT OF PHIL BORDEN, EXECUTIVE DIRECTOR, WOMEN'S
ENTERPRISE DEVELOPMENT CORPORATION
Mr. Borden. It was initially not my intention to talk about
my organization, but let me give the one minute speech about
it.
Since 1991 Women's Enterprise Development Corporation has
been a feature of the Southern California landscape. We have
touched the lives of 18,000 clients. We have helped start 1700
businesses, generating an enormous impact on the tax base and
on the employment of Southern California. If we set aside the
large businesses that we have started and focus on our bread
and butter, which is very small businesses, they contribute
about $10 million a year to the tax base each year, and we grow
that by about a million dollars a year.
Eighty-two percent of our clients are people of color and
ethnicity, 75 percent are women. We teach in five languages. So
we address some of the problems that Pat has talked about. We
teach in English, Spanish, Khmer, Chinese and Korean, and we
are in the process of adding Vietnamese and Armenian. That
question of addressing minorities in their language and recent
immigrants in their own language is very critical to us.
Sixty-five percent of our money comes from federal
contracts of one sort or another, and we have four SBA
contracts. I will not bore you with them, but I was
particularly alarmed when Congressman Millender-McDonald talked
about the cancellation of the BusinessLinc program. That is a
mentoring program. We have 2200 people signed up and we are
teaching them technology and them how to deal directly with
large companies through supply chain management software and
software that has been developed under this program. To have
that canceled before a year is out is a tragedy because there
will be no chance to access the virtues and vices of the
program.
Now to my testimony. My written testimony is a detailed
argument for addressing the following policy issues: The need
for improved methods of communication between potential users
and suppliers of technical assistance and the need for
streamlining the funding and bettering the reporting processes
for government technical assistance projects.
I have heard a lot about access to capital. Phyllis and I
certainly have been on the same page, and I thank her for
giving the statistics. Although getting money is never easy,
the problem for small business often is where to find it, how
to get it and most important, how to use it well. Knowledge and
experience together with money are what capitalize a business.
With a loan in hand but no technical assistance when they
need it, small and minority owned businesses simply spend
themselves into penury at a faster clip.
In the written statement I surveyed the massive complexity
of types and delivery methods of technical assistance and
furnished a list of technical service providers in the LA area,
more or less off the top of my head. After excluding all by the
most narrowly defined types using government dollars, I reached
60 and simply stopped. Technical assistance is a big industry.
This morning I would like to focus on two key problems that
plague the technical service industry and the clients it seeks
to serve.
Number one, the welter of government sponsored programs is
wildly confusing from WMBEs in need. And number two, the
funding priorities and reporting requirements of government
agencies cripple providers who are seeking to help the WMBEs.
In making my list I began with the Women's Business Center
Program sponsored by SBA, WEDC runs two in the area. Depending
on how you define Southern California, the state and SBA also
fund 14 SBDCs, the Department of Commerce adds five, MBDCs the
city of Los Angeles four major programs on at least 20 sites.
Two county programs add six sites, two programs network other
business technical service providers on at least 7 sites, and
on and on. I have not counted workforce, or housing, or faith
based technical assistance programs, or those sponsored by BIDs
or the area's 91 chambers or the Economic Development
Departments at 83 cities in the county. They would add another
300 or so entries. And if we include Internet based services,
it increases ten fold again.
Each of these has a geographic base, though most can
operate outside of it. No two government agencies use the same
geographic definitions, no two government agencies use the same
definitions of small business. How can a client seeking help
find the right technical assistance for her or his business
needs?
The answer is that often they can't. The system of
competing jurisdictions and programs, and shrinking and
uncertain funding like BusinessLinc create information
overload, competition among entities that should be
collaborating; and confusion, distraction and inaccessibility
for those who need the services.
The other part of the difficulty is that small businesses
lack the time and personnel to attend multiple meetings,
workshops, seminars and so forth of uncertain business value.
In the written statement I propose more local and direct
delivery of service referrals routed through local elected
officials' offices. This approach addresses some of the
outreach issues. I suggest a model for doing so and the
training needed plus the benefits for the sponsoring office.
Local business people think locally, because that is how
and where they do business and because local thinking and
action fits their sense of time. They call their elected
representatives at every level for help. If city council,
supervisorial, and/or state and federal legislative offices
were to take on a leadership role in attracting such calls,
then directing the callers to the right place, a great deal of
confusion could be eliminated. And I'd be glad to talk about
that in detail.
[Mr. Borden's statement may be found in appendix.]
Mr. Issa. Thank you.
And we appreciate that the remainder of your testimony be
placed in the record, and we hope that we can follow up in
detail during the Q&A.
Ms. Brown, please?
STATEMENT OF ROLINA BROWN, REGIONAL DIRECTOR, SMALL BUSINESS
DEVELOPMENT CENTER
Ms. Brown. Good afternoon. First of all, welcome back,
welcome home.
I am Rolina Brown, and I am the Assistant State Director
for the California Small Business Development Center Program
also known as the SBDC Program. And I am honored to represented
the Small Business Development Center Program Network. We
believe that we are the nation's largest consulting and
training group.
I am pleased to have opportunity to appear to discuss
problems facing Southern California small business owners and
their needs in the current economy. I was especially pleased
that your invitation seeks to understand the challenges of
minority owned firms, especially in light of the recent
economic downturn. As you are already aware, minority owned
firms are the fastest growing segment of business owners in the
nation. Minority owned firms are surpassing the growth rates of
U.S. businesses growing at a rate sometimes six times the
growth rate of all other firms.
The SBDC Network is broad band service delivery network
designed to make a significant strategic investment in building
and enhancing local communities. I am pleased to say that we
are partners with each of the representatives here.
The California SBDC's mission to provide quality management
and technical assistance to existing and potential small
businesses resulting in the success of the entrepreneur,
sustainable economic growth and prosperity for all
Californians.
We accomplish our missions by providing direct customer
focused services. We maintain a highly dedicated flexible,
diverse and enthusiastic professional and experienced staff.
And we act as a catalyst for a sustainable economic development
by responding to local needs.
I am the representative for Santa Ana and the Los Angeles
SBA districts. We build collaborative partnerships and we and
we leverage resources through fundings through our match
program.
By virtue of the size, obviously the significant part of
the California SBDC program delivery system is here in Southern
California. Of course, naturally it is my opinion that the SBDC
Network leads the nation in finance innovation and there is no
doubt, as Mr. Alvarado has testified, that the SBDC Network in
Los Angeles leads the nation in access to capital.
After having said that, I am also keenly aware of the
challenges that small business owners face in accessing capital
and the challenge that they face in who to approach and where
to go for necessary capital to just get their business started.
In our findings and our evaluation and research I find that
the barriers to the growth of California small businesses, and
in particular minority owned businesses, is access to capital,
business assistance and support such as strategic planning and
marketing, effective utilization of technology, access to
markets outside of their traditional areas and participation in
social and business networks. Given that small businesses
heavily rely on credit to facilitate the growth, the California
SBDC Network has taken a leading role to create a bridge
between the small owners and access to capital. Here in Los
Angeles in particular we have a wonderful track record of
helping small businesses. We've created an innovative program
called the Rover Program which is widely respected around the
nation. This program is dedicated to sending experienced
business developers to address the needs of small businesses to
their place of business.
Access to capital remains, however, the number one problem
in the region for most minorities, and in particular African-
American businesses especially when it's related to race and
other ethnic groups. The Rover program has increased capital to
all minority owned businesses and African-Americans. However,
in a partnership with the University of Southern California,
the Southern California region partnered with the Harvard
Business School and the Competitive Inner City initiative to
take a closer look at minority owned businesses and to develop
an action plan to deal with the issues of limited equity
capital, asset pledges, uncertain earning streams and other
barriers to minority credit accessibility.
The initiative will also deliver specialized assistance to
help smaller businesses gain the capital that they need to
establish and grow their business, and to overcome the
challenges that face minorities and women owned businesses in
the inner city. The project will host a capital access team.
This team will not only provide technical assistance to small
businesses, but they will also educate banks and communities to
help them understand the credit needs of an availability of
capital to small businesses.
The Southern California SBDC program will employ a new
finance technology system which is designed to speed the
process for loan applications by tracking the loan flow of
documentation, business assistance and loan review. This data
should help us understand the system better, and to understand
the credit activities and the impacts on small businesses.
We believe that the outcome of this initiative will help us
frame the debate on how we can all provide new age solutions to
small business and, in particular, minority owned businesses.
We also believe that the combination of these programs can help
Southern California small businesses access capital and secure
the resources that they need.
We're very proud of our relationship with the SBA, and in
particular with our SBA district office in Los Angeles who is
the holder of two prestigious awards and the nation's leader in
loans.
We are also particularly proud that the Santa Ana SBA
district hosts the nation's only venture capital technical
assistance center. The Tech Coast SBDC is located in Irvine and
provides resources to support early stage and start up
businesses. The Tech Coast SBDC produces an annual funding
directory and resource guide that is considered a source for
emerging growth companies and advisers.
We also have a Diamond Venture Forum, and we have multiple
access to capital venues in Santa Ana, and weekly access to
capital activities in Los Angeles County.
We understand the challenges that we have heard today about
access and outreach, and we have come up with a strategy to
create community based relationships by establishing branch
offices. And I noticed Cook Snew happens to be here from API
and is also one of our branch office locations.
We also have a relationship with Women's Inc. We are
establishing a new cultural arts and entertainment SBDC program
which will focus on an industry that is often overlooked.
This has just brought a few of the activities that the
California SBDC program, and in particular the Southern
California SBDC program are doing to deal with the issues of
small business development, technical assistance and access.
I want to call to your attention as I conclude, the vast
size of the counties that we serve in Southern California. And
if you take Los Angeles County and you take Orange County, you
will be looking at the largest concentration of minority owned
businesses, yet we have eight SBDC centers hosted to provide
the services. And while our partnerships are leverage and we
have community based relationships, we have to become more
innovative in the ways that we approach these businesses. It is
for that reason that we have established a toll free line, 1-
866-You Ask SBDC as a central point of contact for small
business owners seeking not only the assistance of the SBDC
program, but technical assistance in Southern California.
And during Small Business Week we will launch a new portal
askSBDC.com. AskSBDC.com will not only provide technical
assistance and online training, but chat rooms and forums for
small business. We are particularly happy that the askSBDC.com
will have a digital commerce solution which will allow small
business owners to create webpages, have e-mails, shopping
charts online at reduced or virtually no cost. Most minority
small businesses have Internet access, however few have active
sites that allow them to transact businesses on line.
In closing, I would like to give you an idea of the impact
that the Southern California SBDC program had on its districts
in the last year. Eight of the SBDCs contributed to the
creation of 676 jobs. $31,367 in sales. $24,414 in financing of
which $20 million was SBA financing.
The California SBDC program is a whole, we operate as a
network, created 3,778 jobs, retained 5,295 and increased sales
by $115 million.
Mr. Issa. Ms. Brown.
Ms. Brown. Yes.
Mr. Issa. I am afraid I am going to have to ask you to put
the remainder into your written statement. It will be retained
for the record.
Ms. Brown. Thank you.
[Ms. Brown's statement may be found in appendix.]
Mr. Issa. Thank you.
Well, first of all, I want to thank you again for all
coming. And as I did with the first panel, I want to limit my
comments since the Congresswoman's district is here and I am a
visitor, and I appreciate the opportunity to be in this
district, but I think a lot of the issues are very much germane
to this area and I want to concentrate the time on her
questions.
The two things I want to do before yielding, first of all,
is to ask all of you as I asked the first panel, if you come in
contact with access to government contracts being denied either
because of bundling, prohibitively large for your companies
even though they have the ability to perform some significant
portion of the contract, or what I earlier described as the
beltway mentality of ``Gee, we have a company that has already
done it and they are much closer to Washington, DC.'' For all
of us as Californians I think we need to point up those
examples as they occur. Some people in the audience had already
brought me some of those during the break, so hopefully we will
continue to accumulate that and that will be the subject of
another hearing and, hopefully, some efforts in Washington.
And the lastly, Mr. Borden, I wanted to thank you. Your
testimony went out of its way to describe something that I
think is very important, and that is the inability to manage
limited capital that most start up companies have. Having been
a micro-business, if $7,000 is micro and 20 years ago I guess
it was bigger than it is today, but it is still small. I
recognized that in those days one mistake could kill my
business. Well, a little bit of luck and sound capital
management was the difference between success and failure. And
so I appreciate not only your statements, but also the fact
that you participate in trying to train start up companies to
understand that access to capital is important, but then it
takes a lot more capital if you misuse it. And there is not
enough capital for any company. To use a current example, Enron
had an incredible amount of capital but if one misuses capital,
there is not enough money in the whole world and in the piggy
bank in Washington to support mismanagement at any level. So, I
want to thank you for pointing that out.
And with that, I will yield to the gentlelady from the 37th
Congressional District.
Ms. Millender-McDonald. Both of us from California. I tell
you, it has been a remarkable day with you being here with us
in the 37th. Thank you so much. You are welcome at anytime. Not
too often, though.
Mr. Issa. No.
Ms. Millender-McDonald. Just kidding. Just kidding. He's my
friend.
Mr. Issa. You can come to Camp Pendleton.
Ms. Millender-McDonald. Oh, that's right. Absolutely.
Let me acknowledge some representatives here representing
some of our colleagues.
Bobbie Blanks is the field director for Congresswoman
Maxine Waters, who is here. Thank you so much for being here.
Mr. Issa. Just stand up.
Ms. Millender-McDonald. And thank the Congresswoman for
allowing you to come here today.
Lanny Saunders, the administrative assistant to
Congresswoman Diane Watson. Please stand, Lanny, so that we can
see you. Tell the Congresswoman as well thank you.
We have mayor pro tem of the city of Gardenia, Steve
Bradford who was here, perhaps stepped out for a--oh, there he
is. Very good. Thank you, Steve, for being here.
Mr. Basil Kimbre, the Vice President of Compton Unified
School District perhaps may be out there in the foyer.
And Eric Lee who is the chief executive officer to Lynwood
Chamber of Commerce. If he is not here, they are all outside.
I see my dear friend sweet Alice who has come in from the
Watts area, Parents of Watts. It is good to see you here.
I think you have all touched on it; knowledge, experience,
capital all elements of a thriving small business. I cannot say
enough for Pat Unangst when she said there are 77 definitions
of small business. We are also grappling with that in
Washington and we need to revisit that issue.
One-stop-shopping or development centers are critical to
small businesses. They cannot hop around and try to find the
resources and knowledge and all of that that we have.
I am happy to say that Bruce Thompson is still the head of
our SBA is still in the audience with us, as well as Alberto
Alvarado who is our Executive Director or Director. I might be
giving some titles, but that is okay. I will talk with the
President and make sure all of this happens. But, anyway----
Mr. Issa. Between the two of you you certainly are the
``go-to's'' for the state, and we appreciate you being here
today.
Ms. Millender-McDonald. And I think with Rolina Brown, all
of you are still here. You have heard the expert witnesses talk
about the need and the needs of small businesses, so we won't
belabor that any longer. I would just like to chitchat with all
of you so that we can make things happen for small businesses.
Rolina, you are talking about all the time teams, and LA
teams and LA County. You did not say anything about Long Beach,
Carson, other places. We have got to talk to you about that.
Ms. Brown. Well, no, no, no.
Ms. Millender-McDonald. Got to come to South Bay.
Ms. Brown. You are heavily represented in South Bay.
Ms. Millender-McDonald. Then you must tell me where you
are.
Ms. Brown. Actually Jim Treat is here and I will allow Jim
to respond.
Ms. Millender-McDonald. Okay. Jim, we are going to have to
talk with you. We are actually in Carson and Long Beach?
Ms. Brown. Right.
Ms. Millender-McDonald. Well, okay, fine. Pat is one of
yours.
Ms. Brown. Right.
Ms. Millender-McDonald. Okay. Fine. Well, Pat changed names
and so she changed a lot of other things going on, but to the
betterment, I might add.
Let me just say thank you.
The time was to be from 10:00 to 12:00. This great man has
overstayed the time because he has other things in his district
that he must attend to. We are here only for a week, a week and
a half and we are trying to cover the waterfront.
And so I just wanted to say thank you to all of you. I will
be in touch with you getting to know you better as we continue
to move workshops in this area and in the district to enhance
small businesses.
Again, thank you to the staff from Washington who has come
in. Now you know the tremendous task we have of flying in every
weekend. You should appreciate us more.
Thank you to my district office staff. They were tremendous
in getting such a great crowd out today.
And with that, I will yield back to the chairman to close
it out.
Mr. Issa. Thank you.
And one last request. If the members from the government
side of SBA would please stand for a moment if you are still
here. We still have them.
For all of you in the business community, we have this hall
for another hour. If you want to get them before they go out
the door, I would ask that you give them your card or get their
card. Because this is also a networking opportunity.
And with that, this hearing is adjourned. Thank you.
[Whereupon, at 12:25 p.m., the subcommittee adjourned
subject to the call of the Chair.]
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