    [House Hearing, 108 Congress]
    [From the U.S. Government Publishing Office]

                                                       S. Hrg. 102-000 deg.

                      CHALLENGES TO SMALL BUSINESS GROWTH

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

                                 FIELD HEARING

                                   before the

                SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                     of the

                          COMMITTEE ON SMALL BUSINESS
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED EIGHTH CONGRESS

                                 SECOND SESSION

                                   __________

                         WASHINGTON, DC, MARCH 1, 2004

                                   __________

                               Serial No. 108-56

                                   __________

             Printed for the use of the Committee on Small Business

     Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                     house

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                          COMMITTEE ON SMALL BUSINESS

                     DONALD A. MANZULLO, Illinois, Chairman

    ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
    Chairman                             JUANITA MILLENDER-McDONALD,
    SUE KELLY, New York                    California
    STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
    PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
    JIM DeMINT, South Carolina           ENI FALEOMAVAEGA, American Samoa
    SAM GRAVES, Missouri                 DONNA CHRISTENSEN, Virgin Islands
    EDWARD SCHROCK, Virginia             DANNY DAVIS, Illinois
    TODD AKIN, Missouri                  GRACE NAPOLITANO, California
    SHELLEY MOORE CAPITO, West Virginia  ANIBAL ACEVEDO-VILA, Puerto Rico
    BILL SHUSTER, Pennsylvania           ED CASE, Hawaii
    MARILYN MUSGRAVE, Colorado           MADELEINE BORDALLO, Guam
    TRENT FRANKS, Arizona                DENISE MAJETTE, Georgia
    JIM GERLACH, Pennsylvania            JIM MARSHALL, Georgia
    JEB BRADLEY, New Hampshire           MICHAEL MICHAUD, Maine
    BOB BEAUPREZ, Colorado               LINDA SANCHEZ, California
    CHRIS CHOCOLA, Indiana               BRAD MILLER, North Carolina
    STEVE KING, Iowa                     [VACANCY]
    THADDEUS McCOTTER, Michigan

             J. Matthew Szymanski, Chief of Staff and Chief Counsel

                         Phil Eskeland, Policy Director

                      Michael Day, Minority Staff Director

                SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

    EDWARD SCHROCK, Virginia, Chairman   [RANKING MEMBER IS VACANT]
    ROSCOE BARTLETT, Maryland            DONNA CHRISTENSEN, Virgin Islands
    SUE KELLY, New York                  ENI F. H. FALEOMAVAEGA, American
    TRENT FRANKS, Arizona                Samoa
    JEB BRADLEY, New Hampshire           ANIBAL ACEVEDO-VILA, Puerto Rico
    STEVE KING, Iowa                     ED CASE, Hawaii
    THADDEUS McCOTTER, Michigan          DENISE MAJETTE, Georgia

                  Rosario Palmieri, Senior Professional Staff

                                      (ii)
    ?

                                C O N T E N T S

                                  ----------

                                   Witnesses

                                                                       Page
    Griffin, Mr. Randy, CSRA Business Lending........................     3
    Elam, Mr. Terry, Augusta Technical College.......................     5
    Logan, Mr. Henry H., Georgia Small Business Development Center
      Network........................................................     8
    Wilbanks, Mr. Patrick, Economic Development Institute of Georgia
      Tech and Georgia Rural Economic Development Center.............    10
    Presnell, Mr. Ed, Augusta Metro Chamber of Commerce..............    12
    Fowler, Hon. Nuby, Small Business Administration.................    14
    Blocker-Adams, Ms. Helen, HBA Group..............................    29
    Hughes, Mr. Jesse, Accountant....................................    30

                                    Appendix

    Opening statements:
        Schrock, Hon. Ed.............................................    38
    Prepared statements:
        Griffin, Mr. Randy, CSRA Business Lending....................    40
        Elam, Mr. Terry, Augusta Technical College...................    43
        Logan, Mr. Henry H., Georgia Small Business Development
          Center Network.............................................    45
        Wilbanks, Mr. Patrick, Economic Development Institute of
          Georgia Tech and Georgia Rural Economic Development Center.    50
        Presnell, Mr. Ed, Augusta Metro Chamber of Commerce..........    54
        Fowler, Hon. Nuby, Small Business Administration.............    56

                                     (iii)

                      CHALLENGES TO SMALL BUSINESS GROWTH

                                  ----------

                             MONDAY, MARCH 1, 2004

                       House of Representatives
        Subcommittee on Regulatory Reform and Oversight
                                    Committee on Small Business
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 2:40 p.m. at the
    Historic Richmond Hotel, 725 Greene Street, Augusta, Georgia,
    Hon. Ed Schrock [Chairman of the Subcommittee] presiding.
        Present: Representatives Schrock and Burns.
        Chairman Schrock. Good afternoon, everyone. My name is Ed
    Schrock, and I am the Subcommittee Chair of the Regulatory
    Reform and Oversight Committee of the Small Business Committee,
    and I am absolutely delighted to be here in Augusta today with
    my good friend Max Burns.
        I have never been to Augusta but, man, I was an architect
    major in college, and I have been going nuts here today. It is
    just absolutely magnificent, and I think we will probably get
    my wife and I to come back so I can spend some time and look
    through some of these old buildings.
        Max really wanted me to come here today just to talk to the
    folks of the 12th District about some business issues. We have
    been doing this in different parts of the country. Max Burns--I
    thought I was high energy, and I am, but I am a slacker
    compared to Max Burns who is everywhere all the time doing
    everything he can for the folks down here, and I think you
    were------.
        Chairman Schrock. And he does a great job for the folks
    down here, and I am delighted to be able to be with him today
    so we can listen to some of the issues that involve small
    businesses and the organizations that deal with small
    businesses, and what I am finding is the message is the same as
    when we were in Florida, when we were in South Carolina, my
    home state of Virginia, and of course the hearings we have had
    in Washington, D.C.
        In my role as the chairman of this committee I often hear
    from small businesses on challenges to economic growth and
    prosperity.
        Max has told me what an amazing group of entrepreneurs and
    community leaders reside in this district and, frankly, I am
    anxious to hear from many of them today.
        I want to thank Max for making this event possible.
        Small businesses in America employ more than half of all
    private sector employees, and create 60 to 80 percent of all
    net new jobs in this country. Small businesses are always the
    leaders in bringing our economy back to strong economic growth
    and job creation.
        Small businesses in this country face the same problems as
    many other businesses: High energy prices, the high cost of
    health insurance for employees, the high cost of regulatory
    compliance, and a tax code that is not always helpful to them.
    In fact, most of the time it is not helpful at all.
        It is incumbent upon Congress and the President to do
    everything in our power to remove barriers to small businesses'
    success and survival, and Max and I are working on many
    initiatives in the House of Representatives to do just that.
        We have worked on tax relief for small businesses, we have
    passed a bill to provide association health plans, and health
    savings accounts, and our committee is working to reauthorize
    the Small Business Administration in a way to make it help the
    largest number of small businesses, including manufacturers.
        I am absolutely convinced that the reason we have as many
    regulations as we do is because the bureaucrats that sit up in
    Washington, D.C. have to create regulations to justify their
    existence. Frankly, I am and sick and tired of that; I think it
    has gone on entirely too long, and hopefully these hearings
    will help generate legislation to put a stop to that sort of
    thing. But like many of the bureaucrats they are probably going
    to be there a lot longer than I am going to be in Congress, and
    they think they can outwait us. Well, they have got a surprise
    on their hands. I intend to stay, and Max intends to stay until
    we get something done about it.
        So with that, Max, let me thank you for inviting us, and I
    look forward to the witnesses' testimony, and if you do not
    mind if you can introduce them so we can get started that would
    be great.
        Mr. Burns. Thank you, Mr. Chairman. I want to add my
    welcome. I appreciate the opportunity to hold a field hearing
    here in Augusta, Georgia.
        We have the opportunity to do this periodically in
    Washington. Unfortunately, sometimes when we do it in that
    environment it is not as informative, it is not as intense and
    as detailed as we can do here in Augusta and throughout the
    district.
        Actually I will be doing two hearings this week, one here
    in Augusta, and one out in Houston on Friday on an agricultural
    issue dealing with animal identification. So when you start
    dealing with issues, the best place to learn about them is
    where the challenges lie, where they exist.
        So I want to thank the Chairman for coming to the 12th
    District to join us here today. I told him about our weather,
    and indeed it is beautiful. I told him about our food, and
    Calvin was great, Calvin Green was great in sharing his
    expertise with us------.
        Chairman Schrock. I am taking Calvin home with me.
        Mr. Burns. That is right, and I had a chance to take him by
    Enterprise Mill for a minute or two just to get a feel for the
    architecture and the history and the heritage of our community.
        And we have, we are home, and you know it, to a number of
    small businesses in our communities and in our region that
    really contribute to our local economy, and what we are going
    to talk about today is jobs. We want to talk about opportunity,
    we want to talk about the future.
        And what we asked this panel to do is to bring us your
    input, bring us your ideas, bring us your suggestions, and once
    we have an opportunity to hear from these individuals we are
    going to open up our dialogue and give any of you a chance to
    provide your input to us, and we welcome that.
        The design of the hearing is really to inform and to
    enlighten us, and as the Chairman pointed out we have some
    opportunities for improvement, we have some challenges; we have
    successes as well. So we want to celebrate the successes, but
    we want to focus on the challenges and making those better, and
    ensuring that indeed we create jobs in Augusta, and Richmond
    County, and the CSRA on both sides of the river, and ensure
    that indeed the future is bright for our community.
        I appreciate Chairman Schrock coming to the 12th District
    of Georgia.
        Chairman Schrock. Max, may I just make one more comment?
        Mr. Burns. Sure.
        Chairman Schrock. Max and I really could not serve in
    Congress if it were not for the strong support we have from our
    wives, because it takes us out of town and away from our family
    a lot, and I just want to recognize his wonderful wife Laura
    who is the back of the room.
        Mr. Burns. She slipped in.
        Chairman Schrock. About the only time she is able to see
    Max is when he is doing things like this and, Laura, we
    appreciate you being here.
        Mr. Burns. It is a challenge, but it is a great
    opportunity, and I appreciate the privilege.
        I want to start with Randy Griffin. I am going to ask Randy
    to share with us some expertise and some insights that he has.
    He is the President of CSRA Lending--what is the right word,
    Randy, lending?
        Mr. Griffin. Business lending.
        Mr. Burns. --business lending, I had to get the right
    combination of words--but the key thing that he provides to our
    community are opportunities for financial support and
    assistance, as well as other measures of small business
    support.
        So, Mr. Griffin, if you would please share with us your
    insights on small businesses and small business challenges and
    successes.

           STATEMENT OF RANDY GRIFFIN, CSRA BUSINESS LENDING

        Mr. Griffin. Well, thank you, Chairman Schrock and
    Congressman Burns for holding this hearing. On behalf of our
    board of directors and all our small businesses that we work
    with in the area we appreciate this opportunity to talk to you
    about things that are going on here in eastern Georgia, and
    primarily things that the Small Business Committee has
    oversight over.
        Chairman Schrock, I am Randy Griffin, President of CSRA
    Business Lending. We are a nonprofit corporation that is
    licensed and has licensed lending agreements with the
    Department of Agriculture, the Department of Commerce, but
    primarily the agency that we have a relationship with and I
    want to talk to you about today is the U.S. Small Business
    Administration.
        Over the last five years our organization has funded 189
    projects for $87.4 million in the Augusta area, and those
    projects have created 1,352 jobs.
        Since our expertise is small business and rural loans, I
    will talk to you in those areas mainly about rural communities,
    and the first program I want to speak to you about is the SBA-
    504 program. Mr. Chairman, as you know right now there is a
    train coming down the track that the 504 program that is our
    primary lending program operates at zero cost to the federal
    taxpayers through fees that are paid on the loans, and are
    collected by the Small Business Administration. The
    reauthorization of that program has to reoccur by March the
    15th, and I am sure that is something that you are well aware
    of.
        There are really three issues. In addition to
    reauthorization being the most pressing with the 504 program,
    there are two more things that really could help our process.
    And the first one I want to give you an example. I am going to
    show you two SBA-504 loan applications.
        Congressman Burns, this is one in downtown Sylvania, your
    home town. This is recently a Mexican restaurant we did here in
    Augusta. Now, Congressman, if I take a yardstick and I put it
    on those applications, this Mexican restaurant is just a hair
    over four inches thick. Congressman Burns, the cotton gin that
    we did in Sylvania is just a hair under four inches thick.
        Now, I have my hand an SBA Low-Doc application from the
    7(a) program, in SBA's other program, that is two pages.
        Chairman Schrock. You look like a ditech.com commercial.
        Mr. Griffin. If SBA can have a low-documentation
    application for smaller loans in the 7(a) program, certainly
    they can have it in the 504 program, and prevent both myself,
    and small businesses, and banks from having to go through this
    process to obtain capital in smaller amounts.
        One other issue that is coming up that would be covered by
    House Bill H.R. 2802, the reauthorization act in the 504
    program, is the changes in definitions of rural areas.
        Now, Congressman Burns, both you and I spend a lot of time
    in Swainsboro, that is part of our territory. Swainsboro
    recently went over 20,000. When they did that in the
    eligibility for the 504 program they are no longer considered a
    rural community.
        One of the other provisions of 2802 will make Swainsboro
    automatically eligible under the rural provisions for the 504
    program without job creation.
        Chairman Schrock and Congressman Burns, I would urge you to
    contact Chairman Manzullo of the Small Business Committee and
    Speaker Hastert, and if there is any way possible we can get
    2802 to the floor for a vote prior to March 15th and get a bill
    signed by President Bush that is definitely a priority for
    America's small businesses.
        Congressman Schrock, in Norfolk in your area Tidewater
    Business Financing Corporation from the stats I saw has done
    $18.5 million, funded 16 projects. Excuse me, has funded 19
    projects in the last 16 months in the same program. So it works
    here in Augusta, and it works in your hometown.
        The second issue I want to talk about is the SBA 7(a) loan
    program. As you are aware, there have been major funding
    problems in the SBA 7(a) program. The pace of loans has far
    exceeded the amount that was appropriated by Congress both
    under the continuing resolution and proposed in the 2004
    budget. As a result of that, SBA has had to put a cap on the
    program, and as a long-term solution they are proposing to
    reduce the maximum amount of the guaranty under the 7(a)
    program from 75 percent down to 50 percent.
        We can think of several, almost close to a dozen SBA 7(a)
    loans that we have packaged in the eastern portion of the state
    of Georgia that combined have probably saved close to 1,500
    jobs where Rural Bank has done that loan, and would have only
    done it if the federal government would have stepped in in that
    troubled business and provided a 75 percent guaranty.
        I would urge you to find a way--and, Congressman Schrock, I
    know you are on the Budget Committee as well--one of the
    solutions that I think would make sense is to eliminate the
    USDA B&I program. It is a program that makes guaranties very
    similar to the 7(a) program. The program has a very high
    subsidy cost, and a very high appropriation. Those funds could
    be diverted to the 7(a) program. The programs are duplicative,
    they in essence are the same except the B&I program is larger.
        There has not been a B&I loan done in the state of Georgia
    in the last two years, even though there has been close to $14
    million allocated to it.
        The reason is if you think these applications are thick,
    you have seen nothing yet. I literally would have had to have
    brought a wheelbarrow in here to get that application in.
        In closing, Congressmen, I would hope that the 7(a) program
    as you work on that issue in the Small Business Committee that
    you find a way to get that program funded and appropriated and
    continue to have the 75 percent guaranties under the SBA 7(a)
    program.
        That concludes my comments, and I would be happy to answer
    any questions you have, or we can hold those until everyone has
    testified.
        [Mr. Griffin's statement may be found in the appendix.]
        Chairman Schrock. Thank you, Randy.
        Mr. Burns. Thank you, Mr. Griffin, we appreciate your
    input. Like you say, we will probably have a chance to have a
    dialogue discussion when we complete the prepared statements.
        I want to next introduce Mr. Elam, Dr. Terry Elam, who is
    the President of Augusta Technical College. He has done a great
    job for our community in helping prepare a capable and quality
    workforce.
        I know that one of his primary focuses is on preparing
    workers and those in our communities for the active workforce.
    Dr. Elam, if you would share with us your input.

         STATEMENT OF TERRY D. ELAM, AUGUSTA TECHNICAL COLLEGE

        Mr. Elam. Chairman Schrock and Congressman Burns: I am
    happy to be here today.
        My comments will be more on some successful things that we
    are attempting to do at the college, because the job market
    being built on small businesses of course will be the place
    that most of our graduates will go to work.
        We are under a pretty strict mandate from the State that 85
    percent of our students go to work in the field that we train
    them in, so it is very important that we have businesses to
    support those students once they graduate.
        We have always been involved in economic development, but
    we have take two new initiatives in the last four or five
    years, and we are beginning to see some success on that, and I
    of course talk about both of those in my prepared document.
        I will not need the full five minutes, but I would like to
    just talk to you about two things that we were involved in.
    Seven years ago we participated with the local government and
    other organizations to get a grant from EDA to build an
    incubator. The incubator was originally going to be run by the
    local Richmond County through a contract with another agency.
    That incubator was built next to our campus. As a matter of
    fact, our foundation sold the property to the government so
    they could build the small business incubator. It is about
    18,000 square feet.
        To be honest with you, it struggled at the first because of
    the high cost of operating the facility. Having to do all of
    that was just a costly thing for the government, and of course
    they just did not have an office that was in charge of that.
        We came in about a year and a half into the operations of
    the particular facility, and we agreed by handshake to take
    over the Richmond County Small Business Incubator. We basically
    staffed it with one person, but we kept the structure that was
    already there, the advisory board, the support group, all of
    the things that we put together in the incubator, including
    Internet connections and so forth. The incubator was about
    fifty percent full at that point.
        We cut the cost, and we then brought in one other
    organization, the Quick Start program that helps new businesses
    in Georgia, primarily large businesses, but just having them
    there was an inspiration to the folks in the incubator. We
    immediately went from five clients up to about nine, and now we
    are at eleven.
        We do have graduates of the incubator that have gone on now
    to establish their businesses off-site. Two of those were
    featured in the newspaper this past week, Double-dot-com, and
    Mental Soup. They have combined with another company to form a
    very large company in the information technology field.
        We have seen success with this, but the issue is we do not
    have enough money to build these incubators in all our
    communities, and what we would like to see is some way that the
    federal government along with the state in partnerships would
    develop strategies that we could do virtual incubators, that
    small businesses in Stillmore, Georgia could be a part of an
    incubator and have access to that information.
        They may not need the space, but they need the business
    expertise that comes from that type of partnership. So we are
    proposing that in some way we accelerate the idea of
    incubation, but with technology today you do not have to have
    the physical facility, because you could very well be part of
    that incubator that we have on a virtual sense anywhere in the
    country, anywhere in the world, but primarily we are talking
    about our country. So we think that that is one that will work.
        When we started the incubator I can tell you we were told
    how unsuccessful it would be, and we would not allow that to
    happen. We just would not accept failure as a way to do
    business.
        So we are investing about $30,000 of Augusta Tech money,
    and we will get it back. Close to thirty employees coming out
    of the building each year who are productive, and they are able
    to live and produce, and hopefully grow to the point that most
    of them will be out of the incubator within the three-year time
    limit.
        The other thing that we decided to do is that a lot of our
    students wind up in business. They have technical skills, they
    know how to go out and do things, they know how to make things,
    they know how to create, but they do not have the business
    savvy, so we have decided to start teaching entrepreneurship as
    a course to students who are currently in school, or even
    students who are coming back to school, and in that
    entrepreneurship course it is really teaching them about the
    legal environment, how to start up a business, how to do a
    business plan, how to do a plan for success, and obviously the
    legal environment that you are going to have to operate in.
    Understanding the legal environment is so important. It is not
    that we have to agree or disagree with the environment, but you
    must understand it.
        The best intentions could still lead to failure if you do
    not hit deadlines based on the legal environment, whether it is
    a state, local, or federal lay. And, by the way, federal law,
    state laws are no less cumbersome because you can still run
    into a regulatory issue that will just sidetrack your business.
        The other thing we are trying to teach these young
    entrepreneurs is that you have to put a certain amount of your
    own capital, not necessarily money, but the best way to make a
    pay check is also work in your business. Everyone cannot come
    up with a bright idea that someone else is going to do all the
    work, so we are trying to instill in these young entrepreneurs
    that you must be willing to put in some capital based on what
    you can do, and we think that these two programs will help our
    community in the successful ventures that will be started,
    because most of the jobs in the future will come from small
    businesses, small start-ups. The number that we can keep in
    business, and some will become gazelles and just grow and
    flourish. We do not know when we are going to have the next EZ-
    Go, a business that was started here and how it is huge; we do
    not know when we are going to have the next Club Car; we do not
    know when John Deere is going to start again. Because all of
    these businesses started off small.
        I do not know of any business in this country that started
    off at the size it is today. So all of our business starts are
    from small businesses. The more savvy students have, the more
    entrepreneurship spirit that they have, the better and the
    strong our community, and the better and the stronger our
    nation is going to be.
        Thank you for this opportunity.
        [Mr. Elam's statement may be found in the appendix.]
        Chairman Schrock. Thank you very much.
        Mr. Burns. Thank you, Dr. Elam. We appreciate your input.
        I want to recognize Mr. Hank Logan. Hank is the State
    Director of the Georgia Small Business Development Network,
    SBDC, and as a graduate student too many years at Georgia State
    I worked with the SBDC out of that environment and with small
    businesses in and around the Atlanta area, and I will tell you
    as a young professional with already a Master's Degree in
    business, an engineering background and a Master's Degree, it
    was a tremendous opportunity for me to work with this
    particular agency as it works with small businesses.
        So, Mr. Logan, if you would please share with us your
    input.

    STATEMENT OF HENRY H. LOGAN, GEORGIA SMALL BUSINESS DEVELOPMENT
               CENTER NETWORK, THE UNIVERSITY OF GEORGIA

        Mr. Logan. Chairman Schrock, Congressman Burns:
        Thank you very much for asking my participation in this
    very important hearing today. It has been my pleasure to be
    with the University of Georgia SBDC Network for fourteen years
    now, and I have become quite a disciple. I think it is quite
    interesting, I did not realize it until today, Congressman
    Burns, but 25 percent of our nineteen offices are located
    within the 12th District.
        Mr. Burns. That is good.
        Mr. Logan. We are really pleased.
        Mr. Burns. That is because 40 or 50 percent of all
    education in the state of Georgia is in the 12th District.
        Mr. Logan. As you know, our program is a partnership with
    the Small Business Administration and nine universities and
    colleges throughout the state, and through this network we
    provide business consulting and continuing education
    opportunities to all Georgia entrepreneurs.
        Chairman Schrock mentioned some of the important statistics
    about small business, and we hear those quoted on a daily
    basis. One of the more interesting statistics I believe I have
    ever heard is that at any given point in time 6.2 individuals
    out of 100 over the age of 18 is in the process of starting a
    business venture. That is quite amazing when you figure that
    you have 500,000 businesses started every year that actually
    come to fruition.
        Now, I feel like, and have thought for years that by
    working with the thousands of businesses--5,431 to be exact--
    during the year we are positioned to get a clear perspective on
    the challenges and special issues that face small businesses
    and must be overcome on a daily basis.
        We do both formal and informal needs assessments so we can
    keep a pulse on the business community to develop our
    consulting tools and our training programs to be a direct
    response to the greatest need.
        Now, over my years with the SBDC the most frequently-stated
    obstacle to small business owners and aspiring entrepreneurs is
    their need of access to capital. Obviously Randy's testimony
    talking about the working capital loans, I think it is without
    question a big issue. I think there is also an indisputable
    fact, though, that most small business owners do not have the
    knowledge and experience that is needed to prepare loan
    document requests, certainly not as we see in front of us here.
        Now, I would say further that most small business owners do
    not even have the experience or knowledge that gives them a
    reasonable chance to succeed in their venture. I think that
    probably equal to the problem of a lack of access to capital is
    the lack of ability to manage and even do the necessary
    paperwork to obtain that capital.
        As a matter of relaying this message I would like to share
    a client story which I always found very interesting. It
    happened just this past--well, actually within the past eight
    months. Mr. Tim Moore was the owner of American Equipment
    Services. He was a military reservist, and he was called to
    active duty and eventually deployed to Iraq. Now, initially Tim
    laid off his two employees, he canceled his business property
    lease agreement, and he employed his business manager, his
    bookkeeper, to fill out the necessary paperwork to apply for a
    military reservist's economic injury disaster loan. The SBA
    rejected the loan due to incomplete and inconsistent
    information.
        While Tim was serving in Iraq, his wife Vicki was referred
    to the Valdosta State University SBDC for assistance in
    preparing another loan package. With the assistance of the SBDC
    consultant Scott Manley, Tim and Vicki were eventually awarded
    the MREIDL loan that hopefully will tide the business over
    until Tim can return from active duty.
        Now, the interesting aspect of the Morris case was during
    the course of their counseling session it became obvious that
    they had no idea that they were keeping inadequate financial
    records over the life of their business, which was
    approximately four and a half years. They had no idea that the
    financial statements they were receiving from their bookkeeper
    were totally inadequate and very problematic in this case.
        After working with Scott Manley for approximately three
    months they did receive a loan, but they also hired a more
    professional bookkeeper. And I will tell you today that Tim and
    Vicki probably would not be able to fill out a loan package
    like this, but they would at least be able to talk to a loan
    officer with some reasonable certainty about the facts of their
    business.
        And the other thing is they might not be able to prepare
    any kind of sophisticated financial statements, but they
    certainly have a good basis of understanding now of what they
    are getting, and they do not just routinely file them away
    without looking at them. So we feel like that in the truest
    sense that the assistance that they received from the SBDC was
    probably equally valuable to the loan.
        Now, I will go on to say today, and it will come to
    nobody's surprise, the MBAs, the people graduating with MBAs
    are not starting businesses. As Dr. Elam said, it is the
    electricians, it is the information technology consultants, it
    is the veterinarians, it is the music teachers, and these
    people have excellent technical skills, but they do not have
    the first beginning of the basic knowledge that they are going
    to need to create that business and make it successful.
        Just a comment. The Georgia SBDC Network, it has been a
    real pleasure for me to be with them. We are proud of the
    service that we have given to our state and the entrepreneurs
    in our state.
        We know we are successful because every year we do an
    impact analysis on our consulting, and every year we are able
    to show that the incremental tax revenues generated by our
    clients are over and above those of the average Georgia
    business. As a matter of fact, it far exceeds the budget for
    the Georgia SBDC Network.
        Thus, the federal and state governments are earning a
    positive return on the investment that Georgia SBDC Network
    gains.
        Only through the continued support of Congress would the
    SBA and the SBDC be empowered to assist small businesses to
    bring innovations to the world market and jobs to our citizens.
        And, Congressman Burns, Chairman Schrock, I appreciate the
    support you have given in the past, and look forward to
    answering any questions you have.
        [Mr. Logan's statement may be found in the appendix.]
        Chairman Schrock. Thank you very much.
        Mr. Burns. Thank you, Mr. Logan, I appreciate it. And I
    commented to Hank earlier, it is very effective when he
    provides me information from the SBDC that is specific to the
    12th District of Georgia, and I appreciate that, because it
    helps me visualize, quote, readily what SBDC has done in our
    environment.
        Let us shift a bit. Along the same lines I appreciate
    Patrick Wilbanks being with us here today. He is with the
    Georgia Tech Economic Development Institute. In partnership
    with SBDC and in partnership with a number of other support
    organizations and consulting organizations they help our small
    businesses being successful.
        I believe that Mr. Wilbanks is going to share with us how
    we are focusing on technology and technology-based
    entrepreneurship, the types of things that we are working hard
    to do in Georgia to create jobs in the high-tech environment.
    So, Mr. Wilbanks, share with us your input.

         STATEMENT OF PATRICK WILBANKS, GEORGIA TECH ECONOMIC
     DEVELOPMENT INSTITUTE AND GEORGIA RURAL ECONOMIC DEVELOPMENT
                                 CENTER

        Mr. Wilbanks. Chairman Schrock and Congressman Burns, on
    behalf of Georgia Tech's Economic Development Institute and the
    Georgia Rural Economic Development Center, I appreciate this
    opportunity to testify today regarding the opportunities to
    improve small business growth in Georgia as well as the nation.
        Entrepreneurs and small business growth are vital to
    growing Georgia's economy. Small businesses with less than
    twenty employees generated 61 percent of all small business
    growth over the last four years, creating 50,000 jobs in
    Georgia. These businesses represent 85 percent of all Georgia
    firms.
        Unfortunately, rural communities in Georgia have a
    difficult task in growing technology-focused entrepreneurs due
    to lack of resources, vision, and exposure to technology and
    innovation. In fact, over 75 percent of Georgia's mostly-rural
    Tier 1 and Tier 2 counties experienced declining, flat, or only
    single-digit growth of small businesses with fewer than 20
    employees for 1999 to 2003.
        Other Georgia statistics represent a need for improvement
    in our climate for technology-focused small businesses. Patent
    applications are below national averages in Georgia, and rural
    entrepreneurs in Georgia lag national averages in research and
    development commercialization.
        Georgia Tech has a long history of helping to grow
    Georgia's technology-focused entrepreneurs and small businesses
    through several organizations. Our Economic Development
    Institute, EDI, which is a member of the Manufacturing and
    Extension Partnership, a national organization, the Advanced
    Technology Development Center incubators, ATDC, Georgia Tech
    Research Institute, and ENet which is a new branch which
    provides entrepreneur development assistance not to
    entrepreneurs, but to the communities within.
        Georgia Tech EDI has been involved in assisting many small
    businesses in the 12th Congressional District, including recent
    clients Jebco, Incorporated, Career Personnel, Jenkins Comfort
    Systems, and Storm Shelter Electronics Corporation.
        To get their innovations to market, technology-focused
    entrepreneurs need a wide variety of management and technical
    resources and assistance that are seldom available in rural
    communities. In 2001 EDI partnered with East Georgia College's
    Georgia Rural Economic Development Center, GREDC, in an
    innovative effort to foster entrepreneur development in rural
    Georgia. The GREDC and EDI program has helped 110 entrepreneurs
    and small firms start and grow businesses in a 21-county region
    of rural Georgia that have created more than 430 jobs.
        Currently Georgia Tech and the Georgia Department of
    Economic Development are proposing to replicate the success of
    this rural program in other areas of Georgia, rural Georgia, to
    improve the entrepreneur and small business climate by
    providing the technology resources needed to grow innovative
    businesses.
        The first component of this proposal is Georgia Tech ENet
    that works with the rural communities and the Georgia
    Department of Economic Development will educate and assist
    rural communities in enhancing entrepreneur development
    activities.
        The second component is Innovation Centers located in
    Georgia's smaller cities outside of Atlanta will identify
    leading problems in industry and develop innovative solutions
    through research and development.
        And the third component of this is Georgia Tech EDI's
    Business Start-Up Facilitators which will provide on-site
    management and technical assistance and mentoring to
    technology-focused entrepreneurs and small businesses with
    fewer than 20 employees in rural Georgia's Tier 1 and Tier 2
    counties. The goal will be to commercialize these innovative
    solutions into new products and services.
        These efforts by Georgia Tech and the Georgia Department of
    Economic Development will leverage many state and federal
    resources, as well as complement Hank's existing Small Business
    Development Center network. These combined resources will
    provide more specialized management and technical assistance to
    entrepreneurs and start-ups to foster innovative businesses in
    rural Georgia.
        In addition, there are some other opportunities to improve
    Georgia small business climate and grow entrepreneurs. We need
    to upgrade the SBA program to better assist entrepreneurs and
    businesses. The 7(a) loan program needs to be increased to the
    $2 million level to include a $1 million guaranty, or adjust
    the 504 program to allow debt refinancing.
        Also, the unscheduled shut-downs of the 7(a) loan programs
    needs to be prevented. There is a lot of good, legitimate
    business opportunities that are not able to be financed through
    SBA because of these issues.
        We need to continue tax relief to small business to spur
    economic development. The Jobs and Growth Tax Relief
    Reconciliation Act of 2003 is an effective federal initiative
    to encourage small businesses to purchase new, more efficient
    equipment to become competitive, especially in our global
    marketplace today where manufacturing is having a tough time
    competing.
        We need to expand youth apprenticeship programs, or youth
    entrepreneurship programs such as REAL, Rural Entrepreneurship
    Action Learning, in Georgia. We need to continue to expand
    programs to assist and support our growing number of immigrants
    and minority entrepreneurs. The Second Annual Regional Minority
    Enterprise Conference and Expo held here in Augusta last week
    exemplifies efforts to assist minority and nonminority business
    development by regional, state, and federal agencies. Georgia
    Tech EDI just recently opened the Georgia Minority Business
    Development Center funded by the Department of Commerce's
    Minority Business Development Agency.
        Small businesses are the heart and soul of our economy.
    They generate jobs and revenue, and manifest the American
    traditions of innovation, self-reliance, and a pioneering
    spirit. But entrepreneurs and small business owners do not have
    access to all the resources they need to grow. It has been our
    experience that selected tax incentives and loan opportunities,
    low-cost technical assistance, and sometimes simply the right
    information at the right time can determine whether these small
    businesses thrive or not.
        Thanks a lot.
        [Mr. Wilbanks' statement may be found in the appendix.]
        Chairman Schrock. Thank you very much.
        Mr. Burns. Thank you, Mr. Wilbanks. I appreciate your
    input.
        We are going to now ask Mr. Ed Presnell, the President of
    the Augusta Chamber of Commerce, an individual who works with
    literally hundreds of small businesses in our community to
    share with us his input and his insights into the opportunities
    as well as the challenges that we face here in the CSRA. Mr.
    Presnell.

      STATEMENT OF ED PRESNELL, AUGUSTA METRO CHAMBER OF COMMERCE

        Mr. Presnell. Thank you.
        I would like to take the opportunity to thank the Chairman,
    Congressman Burns, and the others on the Committee on Small
    Business for taking the opportunity to be in Augusta today and
    explore our needs as we try to grow our community.
        I am Ed Presnell, and I am President of the Augusta Metro
    Chamber of Commerce. Our Chamber is made up of over 1,800
    members, most of which are small businesses. Each one of our
    members faces the challenges of an increasingly competitive and
    turbulent marketplace. I marvel at the ingenuity and
    resourcefulness of our small businesses as they turn their
    dreams into reality.
        We are all aware that launching a small business is a risky
    activity and that the failure rate sometimes is high. But those
    that do succeed and grow are the backbone of our economy , and
    the greatest producer of new jobs in our community. That is why
    the Augusta Metro Chamber of Commerce has focused on providing
    services to small businesses, as well as assuring that our
    community is a business-friendly environment. I know your
    Committee shares the same goals.
        Small businesspeople often start with little more than a
    vision. Many obstacles stand between them and even starting a
    business. The greatest of these obstacles of course is money.
    Everyone has at one time had an idea for a business. Most of
    these pass quickly from mind as the reality of what it takes to
    start a business ultimately sets in. Even with the many
    financing options today, funding a new small business remains a
    challenge.
        Many individuals pass through our Chamber looking for
    assistance in starting up a business. We often refer them to
    many of the people that you have already heard from. The
    questions, however, are usually the same. How do I get funding
    for my business? and What are the rules and regulations that I
    must follow?
        Traditional lending sources often shy away from the risk
    involved in starting a small business. That is why it is so
    important that government support programs targeted towards
    small business are continued. Secondly, regulation of
    businesses from the federal level to the local level needs to
    be simplified and centralized. Small business owners often lack
    the experience with government and its maze of procedures,
    therefore eliminating extraneous regulations and centralizing
    their administration is important to facilitating new
    businesses.
        Once a business is established there are new challenges.
    These include finding and keeping quality employees. Businesses
    of all sizes face the challenge of finding the proper mix of
    skills and education to meet their needs, but small businesses
    often face an extra challenge offering a pay and benefit
    package that allows them to attract quality employees and
    retain them.
        Health care is an increasingly important part of our lives.
    As costs rise for care, and insurance costs rise along with
    them, the small business owners and their employees are often
    left on the outside looking in. Premiums for quality insurance
    are beyond the reach of most small businesses. Owners find
    themselves placing their future at risk so as to keep their
    business growing, and employees find themselves forced to look
    for employment where they are able to get better benefits.
    Programs that allow for increased options for small businesses
    in obtaining health care should be pursued.
        Retirement is the second benefit often associated with
    employment that is difficult for small businesses to provide.
    The costs and administrative hurdles of providing savings for
    the future often make this needed consideration far too
    optional for small business. As Chairman Alan Greenspan
    indicated in his comments last week, our country faces a
    growing crisis regarding retirement savings. I am afraid those
    involved in small business might be especially vulnerable.
    Small-business-oriented retirement savings plans should be
    considered.
        Small business is the strength of the American economy.
    Every megacorporation at one point was a small business, and
    tomorrow's will be as well. Small business does not outsource
    its employees to foreign countries or command expensive
    incentives to expand in a community. Small business simply
    needs an environment ripe for growth. In order to secure the
    future of small business in our country, and therefore secure
    our economy of the future, we need to make sure that we
    encourage small business development by removing roadblocks to
    success.
        In closing, I would like to thank the Committee for taking
    the time to come to Augusta. On behalf of the membership of the
    Augusta Metro Chamber of Commerce and all small businesses in
    our community, thank you for the work you do to improve
    opportunities for business, and please continue to look for new
    ways that we can make small business more competitive in
    today's marketplace.
        [Mr. Presnell's statement may be found in the appendix.]
        Chairman Schrock. Thank you.
        Mr. Burns. Thank you, Mr. Presnell. I appreciate it.
        We are delighted to have with us also today Ms. Nuby
    Fowler. Thank you for joining us. I know travel is always a
    challenge. There is a reality that we all face as we move
    around, and you have a very large region, and I know that you
    have the entire Southeast.
        Let me introduce Ms. Fowler. She is the Regional
    Administrator for Region IV for the U.S. Small Business
    Administration, responsible for delivering SBA programs in
    Alabama, Florida, Georgia, Kentucky, Mississippi, North
    Carolina, South Carolina, and Tennessee.
        We are delighted that she was able to join us here today in
    Augusta, Georgia, so that we could share, and I think the great
    thing is she has had an opportunity to hear from many of you
    who work with her agency as we do, and I think it is very
    important for us to recognize that we are partners, we are
    partners in creating jobs, we are partners in sustaining our
    economy, and the more we work effectively together the better
    that partnership will become. A tremendous history in banking
    and development work with the Chamber has had a very, very
    special focus on minority business development--African-
    American, Hispanic, Asian-American, and certainly women in
    business, and we are delighted that she could join us today.
    So, Ms. Fowler, if you would please share with us your input.

       STATEMENT OF NUBY FOWLER, REGION IV, U.S. SMALL BUSINESS
                             ADMINISTRATION

        Ms. Fowler. Thank you. And let me apologize for my
    tardiness. I am so sorry. And if you are wondering where my
    accent is from, it is a little more Southern than some of
    yours. I was born in Colombia, South America.
        Mr. Burns.  Not South Carolina.
        Ms. Fowler. Not South Carolina.
        Good afternoon, Mr. Chairman, Congressman Burns, and
    distinguished guests. I would like to thank you for the
    opportunity to be here to speak on behalf of an organization
    that truly is at the bottom of my heart, has always been at the
    bottom of my heart because I have been an advocate for small
    businesses for a long, long time. I owned a small business
    myself once. However, it was a lot of work. It is easier to
    work for someone else and get the pay check every fifteen days.
    So I know how hard they work, and I know that they need us.
        At the SBA we have completed one of our most important
    years ever. The SBA has continued to drive to simplify and
    improve the federal government's role in providing capital and
    technical assistance to America's small business entrepreneurs.
    The diversity and success of companies supported by the SBA has
    been a major factor in the current economic recovery. We are
    proud of that success. At the same time, though, we must keep a
    watchful eye on the taxpayers' stake in these programs. As much
    as we have achieved in the past, we have a chance to improve on
    our record.
        As the President has emphasized, we can ease the
    unnecessary burdens on U.S. companies placed by higher taxes,
    mediation costs, worker compensation and unemployment issues,
    skyrocketing health care costs, tax preparation costs, high
    energy prices. In doing so, we can give our small companies a
    better chance to grow and create new jobs. What is more, if we
    can encourage private risk-taking, then we can give
    entrepreneurs the boost they need to find partners, networks,
    customers, and access to capital. Encouraging private risk-
    taking and investments is one of the missions of the SBA.
        President Bush understands the vital role that America's
    small businesses play in creating opportunities. Last March he
    announced his Small Business Agenda to reduce regulations and
    taxes, and to expand opportunities for small businesses.
        He also recognizes that following times of economic
    downturn small businesses are the ones that play a leading role
    in bringing our economy back. They are the ones that generate
    the majority of the jobs. They actually generate two-thirds of
    the jobs created in our country. The President's plan for
    economic growth and job creation, along with the Small Business
    Agenda, has been successful in creating an environment in which
    entrepreneurship can flourish.
        As you may be aware, SBA is submitting its Fiscal Year 2005
    budget request on February 2nd. Actually we did that already.
    This budget will ensure continuity in SBA's program for
    America's small businesses, while reducing SBA's cost to the
    taxpayers by approximately $120 million. Through improved
    management and program reforms, SBA will better serve America's
    small businesses by reaching into communities where our
    programs have had little market penetration. This includes
    rural areas where SBA district and branch offices are often
    located several hours away from communities in need.
        The most recognizable service SBA provides small businesses
    is financial assistance. Last year a record number of small
    businesses turned to the U.S. Small Business Administration for
    credit assistance, producing a 29 percent increase in the total
    number of loans that the agency backed in Fiscal Year 2003,
    including a sharp jump in the number of loans to women,
    minorities, and veterans. The overall increase in loan
    approvals under the SBA's three major loan programs came to
    29.8 percent, reflecting an increase from 59,563 loans in
    Fiscal Year 2002 to 76,465 loans in Fiscal Year 2003.
        These loans demonstrate our commitment to meeting the
    unique financing needs of small businesses everywhere, and the
    impressive increase we have posted for the past year validates
    our approach to making smaller loans more readily available to
    the real job creation engine of our economy. By focusing on
    smaller average loan size, we are leveraging our resources to
    assist more small businesses and create more jobs. Based on
    statements from our borrowers, our financial backing helped the
    small businesses of America create or retain more than 526,000
    jobs during Fiscal Year 2003.
        Ironically, our success in promoting these programs
    actually hurt us earlier this year, as SBA was forced to
    suspend its operations of our 7(a) loan program for a short
    time. The unprecedented demand and a series of short-term
    continuing resolutions caused the program to run out of budget
    authority under the last continuing resolution. SBA reopened
    the program as quickly as it could, though we did place some
    restrictions on the program to keep it running until a more
    permanent solution can be reached. Let me assure you, Mr.
    Chairman, that SBA did not, nor does it want to permanently
    close down this crucial program.
        In our Fiscal Year 2005 budget SBA has requested a 30
    percent increase for this program to $12.5 billion in lending
    authority. In addition, SBA is submitting legislation that is a
    long-term solution for the 7(a) program, and it will have
    immediate benefits. Our proposal will put approximately $3
    billion in additional loans into the economy, and help more
    small businesses and create more jobs. I urge your support for
    this proposal.
        This legislative proposal will allow the agency to guaranty
    more loans, create more jobs, and provide stability to the 7(a)
    program. SBA is listening to its lending partners. They
    overwhelmingly agree that consistency in the program is the
    first priority. SBA's proposal builds on the success of the
    SBAExpress loan program by simplifying the process and reducing
    the regulatory compliance burden to small businesses and
    lenders. The government and private sector will be equal
    partners in program risk, which will potentially lead to a
    long-term reduction in fees.
        SBA has requested $4.5 billion in lending authority through
    its 504 program with no subsidy cost to the taxpayers. The 504
    program which was established to increase small businesses'
    access to real estate and other long-term fixed financing has
    always had job creation as a program goal. SBA has taken steps
    to increase small businesses' access to 504 loans by
    encouraging competition and strengthening the process. In 2003
    this program's total financing accounted for almost $8 billion
    in projects.
        The Small Business Investment Cooperation program also
    provides much-needed capital to entrepreneurs. With an average
    investment size of about $600,000, SBICs currently provide over
    58 percent of all venture capital financing by actual number--
    that is 8 percent of all financing dollars--and 64 percent of
    all seed financing dollars.
        SBA is moving forward with the design and implementation of
    the new Rural Business Investment Company program, in
    cooperation with the Department of Agriculture, which will
    expand access to venture capital for non-farm rural businesses.
    In Fiscal Year 2003 SBICs reported investing $871 million--35
    percent of all financing dollars--in 588 different small
    businesses located in non-metropolitan areas. The program does
    not have a rural definition. And of those investments, $420
    million was invested in 404 small businesses in low-income,
    non-metropolitan areas, supporting rural communities throughout
    the country. We expect these levels of investments to remain
    about the same this fiscal year. All together we think that is
    real stimulus, going to rural markets and other struggling
    communities across America.
        During the course of SBA's Microloan Program's 12-year
    history, the private sector lending community has recognized
    that micro-borrowers are creditworthy, and that they represent
    substantial future growth opportunities. As a result, private
    sector lenders are far more willing to lend to very small and
    start-up businesses, and are able to offer more competitive
    interest rates than SBA's Microloan intermediaries. SBA should
    not be competing with private sector lenders interested in
    developing this market, and has not requested funds funding for
    this program in Fiscal Year 2005. The well-established 7(a)
    program provides an adequate incentive to lenders that feel
    that risk mitigation is required to make smaller loans. In
    Fiscal Year 2003 the 7(a) program made over 23,000 loans under
    $35,000, while the Microloan program only made 2,442 loans in
    the same period.
        The President's Management Agenda requires SBA to continue
    striving for the most effective and efficient means of serving
    our nation's small businesses. In doing so, SBA believes it can
    provide the full range of technical assistance needed by
    America's small business entrepreneurs more efficiently through
    our core infrastructure of Women's Business Centers, Veterans'
    Business Outreach Centers, SCORE chapters, Small Business
    Development Centers, and our network of field offices. With
    over 1,500 locations nationwide, SBA and these resource
    partners are in a position to deliver the technical assistance
    small businesses require. SBA will continue to make more of its
    resources available to hard-to-reach communities by moving
    materials online and stationing permanent SBA employees in
    rural communities. Examples of these include SBA's
    establishment of post-of-duty, or what we call now alternative
    work sites, in rural Maine and two hard-to-reach towns in
    Alaska. And we are planning that for 70 districts nationwide.
    Each district approximately will have about two to three
    alternative work sites, and I am happy to say that Augusta is
    under consideration because of the demographics and all the
    elements that are coming into play to make this decision.
        We believe we can help more small businesses by utilizing
    our core programs that have a nationwide infrastructure and can
    reach more customers more effectively. Some of SBA's technical
    assistance programs did not receive funding in Fiscal Year
    2003, yet SBA continued to provide small businesses with the
    assistance they needed. It is often said that access to
    information is the key to small business success.
        SBA will continue the implementation of our transformation
    efforts. I have spoken with many of you personally about the
    importance of transformation to SBA's future success. These
    efforts are crucial to the agency's continued relevance in its
    second half century.
        The administrator has testified that SBA needed to change
    the way it delivers its services to its customers, America's
    small businesses. In recent years, SBA's program delivery has
    changed so dramatically that SBA now works principally through
    its lending and other program partners to provide products and
    services to small businesses. SBA is now realigning is
    resources, including personnel, with this changed business
    practice using many of the private sector's best practices.
    Through transformation, SBA is shifting field office efforts
    from administrative functions to more direct relationships with
    customers and resource partners. SBA's field offices are using
    outreach, marketing, and customer and resource partner
    relationship management to ensure that they know and meet small
    business's needs.
        All of us at SBA are quite proud of the agency's legacy of
    achievement. Many businesses with household names today
    received SBA assistance in their formative stages. Who knows
    which of tomorrow's industry leaders are today receiving their
    7(a) loans, or their government contracting opportunities, or
    their counseling through SBA's programs and services.
        However, we at SBA cannot rest on our laurels. The agency
    must continue to keep up with, and ahead of changes in the
    marketplace.
        We are committed to doing all we can to make sure these
    entrepreneurs receive all the assistance the agency and its
    employees can provide. But SBA cannot do this alone. We will
    continue to work together with you, our Congressional partners,
    and all of our resource partners to ensure that SBA continues
    to assist small businesses into its next half century.
        Thank you very, very much for the opportunity to testify
    here today, and I would be happy to answer any questions
    provided I have the answers. If I do not have the answers, I
    will get back to you.
        [Ms. Fowler's statement may be found in the appendix.)
        Chairman Schrock. Thank you very much, Ms. Fowler. And than
    you all for testifying. It was fascinating to hear where you
    all were coming from and the differing ways things are
    perceived from the organizations you work with.
        Is Tom Gaines here by any chance? Did he come in? We did
    not know if he had slipped in and we did not see him.
        I am going to focus on--one question has to do with SBA,
    and one is what people like Ed Schrock and Max Burns can do to
    help.
        What experience have you had with the SBA? Do you think
    they are being responsive to the people you represent, and are
    they helping them in trying to do away with some of the
    unnecessary regulations and burdensome paperwork that they have
    to do? I would be curious to know. We have a very good
    relationship with Tom Sullivan in Washington, we work very
    closely with him, and I think we need to get out in the field
    and ask that same question to make sure they are doing
    everything they can, because that is their intent I can assure
    you. I would be curious to get your spin on that, and maybe Ms.
    Fowler can respond to some of that if it needs responding to.
        Mr. Griffin. Right now, Congressman, the SBA is going
    through a centralization in their underwriting processes. Where
    right now they process loans in each state location, their 76
    district offices, they are consolidating. Our loan processing
    for example, we go to Sacramento, California in the next twelve
    months, but at the rate they are doing that and the way they
    are doing it, it should speed the process up with some of the
    centralized forms that you are using. But like any agency, SBA
    is doing some things good, and they are doing some things not
    so good.
        And in terms of the burden of the paperwork, I have been at
    this sixteen years now, and I would venture to say that the
    paperwork process has grown by about 20 percent.
        What they do, typically what happens with SBA is the
    paperwork really is not the responsibility of the borrower, it
    ends up being the responsibility of the lender, or the
    community partner that they are working with.
        There is a need to form some kind of task force to
    streamline these loan processes. I think they have focused on
    it on the 7(a) side, and have done a terrific job. Some of
    their other programs, they are in the process of doing that
    right now. So they are doing a lot of good things. But for the
    program I work in, 504 it could be better than it is now.
        Chairman Schrock. Ms. Fowler, before you came in, Randy
    Griffin brought his son Seth's wheelbarrow in with a bunch of
    paperwork here, these are loan applications from two different
    loans, and when you look at that some poor business trying to
    start a business--I would give up after the first three or four
    pages, and I think that is the problem, we have got to narrow
    that down. In the 7(a) program for instance, what is it, one
    sheet?
        Mr. Griffin. Well, 7(a) has gone to a Low-Doc, the Low-Doc
    application. That is one of the things they are looking to do
    on the 504 program that I think is very progressive. It is
    something that is proposed right now in the administration's
    plans, so it is something we need to move forward with for
    sure.
        Chairman Schrock. Ms. Fowler.
        Ms. Fowler. Let me address that. Thank you. I am a banker,
    and I am used to seeing those files on credenzas all over the
    office.
        The Low-Doc, it is a terrific program. However, we now have
    the SBAExpress. I do not know if your bank does the SBAExpress.
        Mr. Griffin. Well, we are the SBDC, so we do 504 loans, so
    what they are doing------.
        Ms. Fowler. Well, let me go back to the 504, because you
    are right, that has quite a bit of forms, but remember there is
    an awful lot of information that needs to be gathered. It is
    not the same to lend $35,000 with one sheet of paper versus a
    million dollars for a real estate transaction. So there is
    going to be more paperwork with a 504 loan. However, having
    said that, I am sure that we could streamline it so that you do
    not have to carry two of those folders with you.
        Let me address the 7(a)--there are other bankers here--the
    Express program. The banks are supposed to use their own forms,
    their own processes, and their own closing systems to provide
    these loans. And we have quite a few major banks that are doing
    that. As a matter of fact, Bank of America became number one
    last year in SBAExpress precisely because they like that. So we
    have streamlined the Express program.
        Furthermore, because there are many community banks in
    rural areas, the non-metropolitan areas have smaller banks they
    are not used to this incredible amount of information, also
    they do not have the technical expertise, nor can they afford
    it, so SBAExpress could help them because they can use their
    own forms, processes, and closing.
        The one thing that they were not able to do at one point
    was join that program because they did not meet the criteria.
    Truly it was a little too high. So we are working on
    eliminating certain parameters so that these smaller community
    banks can participate in Express lending.
        Chairman Schrock. I think you will have to admit if you
    look at those two packets of stuff there that is just
    overwhelming. Somebody trying to start a new business is under
    enough stress as it is, without having to go through that.
        Ms. Fowler. Sure.
        Mr. Burns. If the Chairman will yield for a moment, Ms.
    Fowler, does the SBAExpress, would it cover both Section 7(a)
    and 504?
        Ms. Fowler. No. Right now it is just the 7(a).
        Mr. Burns. Just the 7(a).
        Ms. Fowler. Yes.
        Mr. Burns. Are there plans to potentially address the 504
    challenge like you may have addressed the 7(a)?
        Ms. Fowler. Yes, there is. Just between us, yes, there is.
    We are doing that.
        Chairman Schrock. What is the time line on that?
        Mr. Griffin. The bill, 2802, Mr. Chairman, stipulates that
    within twelve months that the SBA will establish a Low-Doc
    program for the 504 program.
        Chairman Schrock. It would certainly help you.
        Mr. Griffin. It certainly would help.
        Chairman Schrock. Anyone else? Mr. Burns.
        Mr. Burns. Thank you, Mr. Chairman. I want to touch base on
    two or three things, and then maybe have several of you give me
    your input on those issues.
        The first thing let us talk a bit about is in the area of
    entrepreneurship, and incubators, and training. I have heard
    from Dr. Elam and Mr. Wilbanks about the fact that perhaps we
    are not focusing enough in our educational environment at both
    the secondary level and at the tertiary level in making young
    people aware of opportunities associated with owning their own
    business and starting their own business.
        What efforts do you see in our region that might help us
    alleviate the problem of awareness and opportunity. Dr. Elam.
        Mr. Elam. Junior Achievement locally has taken a major step
    forward in helping young people, especially in high school,
    with entrepreneurship, and really a refocused effort.
        I think that a lot of what we do we could do it jointly
    with the high school programs while the student is still in
    high school. I think it is something you have to ingrain into
    young people, and you can do it in educational context about a
    lot of activities on campus, by having material that just
    promotes the idea of business ownership.
        I mean we learned it home from our parents because they
    gave us an allowance. I mean the first entrepreneurship that I
    ever dealt with was simple. You got 25 cents this week, and you
    had to manage that money so you would have some Saturday.
        Randy is looking at me like ``How old are you?''
        Chairman Schrock. Randy is young enough when he was going
    to get an allowance they gave him a car.
        Mr. Elam. Right.
        [Laughter.]
        Mr. Elam. So young people are not having to manage because
    of the excess that we have in many of our communities. Paper
    routes are adult functions now.
        Chairman Schrock. They sure are.
        Mr. Elam. I mean so many of the things that we learned to
    do--working at a service station, all those things are gone,
    and because of technology it has to be taught. This is
    something that we used to get informally through relatives and
    through other folks who had businesses.
        So we have to have that instruction incorporated into high
    school, but I think even at the post-secondary level, because
    just because you are a great physician does not make you a
    great businessperson. Just because you are a great electrician
    surely does not mean you know how to run a business, and you
    can lose two or three businesses and all of your credit in the
    process of trying to do that. So I think it is important that
    we take--we have made a commitment, and we would like to see
    some of the small businesses locally who apply for loans be
    mandated that you have to take certain courses to prove that
    you are really serious about this. You know, if there was a
    course that you had to take through whatever organization
    before you could get that final approval I think people would
    do that. You know, colleges have had to do that with student
    loans because of abuse.
        We would not be against that kind of challenge of having to
    provide that type of training for businesses who are looking
    to--and that is a regulation, but that is one that I think
    could add value and cut down on failure.
        Mr. Burns. Mr. Wilbanks.
        Mr. Wilbanks. I would suggest that young entrepreneurship
    programs become not optional for schools to provide, but be
    part of the regular curriculum just like math, or science, or
    any other course.
        We see that this is where the jobs are coming from, it is
    where the innovative ideas are coming from. It has to start,
    and so many of our school systems see these other optional
    programs coming to them as more work, or they get lost in the
    shuffle, but if we make entrepreneurship in our school systems
    talking at the post-secondary and secondary levels, high
    schools across the board, part of the curriculum, part of the
    process, that this is something new that has got to be
    incorporated, and our educators have got to understand is
    important that there are opportunities for people to create
    businesses, not just work for big factories, and that is going
    to be more and more in the future.
        The REAL program, the Rural Entrepreneurship Action
    Learning, has a very well-structured improvement program that
    works especially, and seeks out programs in rural areas, and
    the National Foundation for Teaching Entrepreneurship has the
    resources available, and I think there should be collaboration
    with the educational system and these groups to develop some
    type of curriculum and structure to start it in elementary
    school and grow it throughout high school, and then people will
    have the option when they graduate.
        Mr. Burns. Anyone else?
        Mr. Logan. Just reflecting on what you mentioned about
    youngsters and how we could approach this and encourage
    entrepreneurship, if we probably polled everybody in this room
    statistics would say that probably five out of six of us would
    say we had our first job at a small business.
        I found it interesting of the eight original Democratic
    candidates for President, seven of them had stated that they
    had their first job in a small business. Now, whether that is
    true or not I do not know, but it sure is politically correct
    to say you started out in a small business.
        But it would occur to me that there has been a lot of mixed
    reviews on entrepreneur curriculum in high schools and others.
    It certainly should be offered as an elective. It would seem to
    me if we encouraged small businesses, there was some type of
    incentive for them to hire younger employees, to hire student
    workers, I think a lot of policy decisions made over the last
    ten or fifteen years has gone contrary to encouraging them to
    hire younger employees, and I think that is where they will
    really get the OJT and the mentoring to want to become an
    entrepreneur and own a business.
        Mr. Burns. Do the regulations inhibit these young people's
    involvement?
        Mr. Logan. I think some of the rulings on minimum wage,
    some of the things about maybe school participation and all--
    not the federal regulations totally--that limited their ability
    to work in any business, plus the fact the emphasis on larger
    businesses in rural communities, the Wal-Marts of the world and
    other, I do not think they are as inclined to hire younger
    workers as the smaller ones.
        Mr. Burns. Thank you. Ms. Fowler
        Ms. Fowler. I just wanted to make an observation. When I
    was coming in I think I heard the issue that MBAs are not
    starting small businesses. There is a phenomenon in metro
    Atlanta, and that is the African-Americans consider Atlanta
    sort of a mecca for entrepreneurship, and a lot of the people
    that came to see me at the bank or at the Chamber were African-
    Americans looking for ways to start a business. They had an
    idea, and the reasoning behind that was that they have such a
    tough time in corporate America they were not going to waste
    their time there, they were going to start their own
    businesses. And I think that has continued, because our
    African-American loans just in Georgia increased by 78 percent.
        Mr. Burns. Do you see that among the Hispanic community as
    well?
        Ms. Fowler. Regretfully, no. In our Hispanic community--May
    I address that issue at this point?
        Mr. Burns. Please.
        Ms. Fowler. In our Hispanic community we do have people
    that have been mainstreamed, like myself--I have lived here 42
    years, and our children are Americans--but then the most
    visible ones are the ones that are out either working on
    construction, or landscaping, and the mind-set is that most of
    them, or most of us are non-monolithic, and we are not. There
    are many that are coming from other countries, but they do not
    have the language, so that precludes them from doing anything
    other than work for someone else in a menial job.
        But there is a lot of entrepreneurship in the middle class
    of many South Americans that are coming in, but that is
    minimum, that the majority are the ones that are uneducated
    that do stay here and do not become mainstreamed because their
    mind-set is that they are going to go back home, which they
    never do, so------.
        Mr. Burns. And just following up on that, how would you
    evaluate the female-owned businesses, the women-owned
    businesses, as far as their opportunities and growth, are you
    seeing positive responses in that environment?
        Ms. Fowler. Unbelievable. Our statistics say that women are
    starting businesses at a higher record number than men.
    Furthermore, they stay in business longer.
        Mr. Burns. So they are surviving?
        Ms. Fowler. Yes, they are.
        Mr. Burns. Anything you might attribute that observation
    to?
        Ms. Fowler. Well, I have met a lot of women through
    conferences, and being a woman myself. I do believe they have
    certain values, certain core values, and certain skills that
    they try to develop to make sure that they succeed, and they
    are very good planners, organizers. They do not do things by
    the seat of the pants, they are very thoughtful, and they are
    hard-working individuals, I am sorry to say.
        Chairman Schrock. Are these single women, single mothers?
        Ms. Fowler. They are all across the board, all types. I
    mean I have met retired women that have started a business,
    something at home like a famous recipe of theirs that everybody
    says they ought to bottle it like Newman, and they go ahead and
    do it.
        Mr. Burns. To come back to a couple of comments made by Mr.
    Logan, in your testimony you pointed out that there are hotbeds
    of entrepreneurship, and you identified Atlanta, and
    interestingly Savannah and Albany. Why would you classify those
    as hotbeds? Anything that we could say that would create a
    hotbed in Augusta, or Athens, or Columbus, or Macon, or other
    regions? Talk about hotbeds.
        Mr. Logan. Well, the Atlanta area is no mystery to anybody,
    it is a good place to do business, a lot of business support
    activities, lending institutions, all kinds of export
    assistance, everything is located around a fifty-mile radius of
    Atlanta. There is no question why that is.
        Albany, I am somewhat surprised at that, and they really
    gave no reason. But I would have to say it is probably
    leadership. Albany has had a tough time over the past I guess
    ten or twelve years. Plants have closed, they have had to work
    real hard, and it is almost like--I saw one time about
    businesses. Businesses that tend to survive for long, long term
    are not the ones that hit a level and do real good for a long
    time, but they are the ones that do real good, and they will
    have a crisis, and they will have to respond, and then they
    will do real good. So those are the businesses that will really
    survive and prosper.
        I think maybe Albany is the same way. They have had to
    develop a leadership, they have had to be innovative, they have
    had to just to call on all their resources, and I think that
    probably more than anything is the leadership is what is the
    reason.
        But there are certain characteristics in communities I
    think that make them attractive to entrepreneurs. Now, I heard
    Dr. Eric Paiges who is a relatively renown entrepreneur
    consultant say that in Georgia--I asked him, I said ``What do
    you consider rural Georgia?'', and he said everything outside
    of Atlanta.
        And I think what Eric was trying to tell us there is there
    is a lot of common elements, whether it be Augusta, Savannah,
    Macon, and Albany, and from my observation there is not a lot
    of difference between the larger communities in Georgia. I wish
    I could answer that, but I do not know exactly what all he has
    done. They are making some inroads in correcting their economic
    problems.
        Mr. Burns. Any other panel members that might talk about a
    hotbed? Mr. Presnell.
        Mr. Presnell. Thank you. As I listen to my colleagues I
    hear--I am reminded of several things, so I will have to put a
    commercial in for Augusta if I may--but we have several
    business districts that are what I would classify as hotbeds
    for opportunity for small business growth. We are in the middle
    of one, the downtown central business district which goes from
    the river up through the Lane Walker Business District. The
    Lane Walker Business District is perfectly ripe for
    gentrification, and renaissance in business in the African-
    American community, and we are real excited about the
    opportunities there.
        If you go just a block down to Broad Street you will see
    small business renaissance of giant proportions up and down
    Broad Street.
        And then in our South Augusta community we have a
    tremendous opportunity because of the--number one, because of
    the presence of Fort Gordon which is an attraction to that
    area, and we also have a lot of gateways in South Augusta, and
    it serves as a conduit between Burke County and Jefferson
    County and so forth to get into the Augusta community, and you
    have got just a vast area of opportunity for small business
    expansion and growth right here.
        I was pleased to hear Mr. Elam refer to the Junior
    Achievement program. That program is alive, well, and kicking
    in Augusta, and they do a fine job, and I would also tell you
    that Mr. Elam does a fabulous job in making his campus
    available to programs such as the Contractors College which he
    has referred to in his comments that is a joint effort between
    the Augusta Metro Chamber of Commerce and Turner Construction
    Company using Augusta Tech facilities. We are in our second
    session of that now, and I guess we will have probably another
    25 or 30 business entrepreneurs that are going through a very
    intense session of training if you will for small business
    development. That could be expanded instantly if there were
    enough awareness there. It has been very successful, and the
    community at large is serving as the faculty, the business
    community is actually mentoring through professional service
    sharing to the students, a novel opportunity to enhance small
    businesses.
        Mr. Burns. Thank you. Mr. Wilbanks.
        Mr. Wilbanks. Yes. I would like to comment now that I think
    as far as hotbeds, hotbeds could be formed by working with
    especially rural communities and helping them understand that
    there is more to economic development besides just industrial
    recruitment, waiting for that industry to come to town, we so
    easily overlook our local entrepreneurs and successes in our
    communities, and forget that they started out as entrepreneurs.
        And having support structure and understanding how to help
    and support entrepreneurs in our rural communities is something
    that our ENet Program is now working with the Georgia
    Department of Economic Development--used to be Industry and
    Trade--to educate our rural communities, and any community
    across the state in what infrastructure and support structures
    they need to encourage entrepreneur development in these
    communities.
        If you look at communities that have done well, those
    economic development folks, those chambers and development
    authorities understand the importance of entrepreneurs in their
    community, and have recognized that, and are working towards
    that, and they have a dual strategy for economic development,
    not just recruiting industry, but also trying to grow their
    own.
        Chairman Schrock. Yes, Mr. Wilbanks, and your testimony is
    something that really hit me when I was on the plane last
    night. Jenkins Comfort Systems, you said they were creating,
    they did something with a thermal cooling vest system which
    protects users from dehydration, hypothermia, and temperature-
    related stress. It is that kind of thing I would think our men
    and women in Afghanistan and Iraq could use. Are you marketing
    that to the folks in Washington, or how do you go about doing
    that?
        Mr. Wilbanks. We connected this entrepreneur to another
    company that is in Vidalia, Georgia, Savannah Luggage Works,
    that is making all of the vests for our soldiers in Iraq, and
    he has a new design that he is meeting with them this week
    concerning an insulated barrier underneath the vest that could
    help cool them, or warm them, and we will be supporting them in
    any way we can to make sure that that collaboration occurs.
        Chairman Schrock. It is wonderful to read this if they are
    doing this if nobody is picking up on it, but obviously they
    are.
        Mr. Presnell, you say you have all these hot areas in this
    area, but are you going outside the area trying to bring people
    in, I mean around the state and around the country, or are you
    just depending on local people to do that?
        Mr. Presnell. Oh, yes, sir, we are constantly recruiting.
    As a matter of fact, during--we are building up now to the
    Master's Golf Tournament week here, and we will have companies
    from all over the country come in here that will recruit for
    small businesses as well as retail, life sciences, and on up
    into the industrial side with their service, so we have a good
    cross-section.
        Our real estate, our commercial real estate developers are
    constantly recruiting folks.
        We have an agency in downtown Augusta, the Main Street
    Augusta Group, that works very hard at recruiting business
    activities to their area, to that area, to that business
    district.
        And so you have got a combined effort of external and
    internal forces, but it is all driven from the inside out. You
    know, we have to let the people across the country and the
    world know that we are here.
        Chairman Schrock. And your new airport facility is not
    going to hurt.
        Mr. Presnell. Oh, no.
        Mr. Burns. I brought the Chairman in through the airport
    last night about eleven o'clock, and we pointed out, Chairman
    Johnson, that this was a project that we are focusing on in
    this community to provide that economic stimulus that we think
    is really going to help.
        If I might ask one more question----
        Chairman Schrock. Please.
        Mr. Burns [continuing] And maybe Mr. Logan and Ms. Fowler
    can make sure we are straight on this, and probably also Mr.
    Griffin.
        In your testimony, Ms. Fowler, you pointed out that if we
    expand the SBA's efforts that we could create 500,000 new jobs
    based on 22,000 additional loans.
        Now, that would suggest--is that based on the support of HR
    2802? You know, my real question is the estimated impact of
    these changes would be 500,000 jobs. I am all for 500,000 jobs,
    and I just want to make sure I am clear about how is the best
    way to achieve that objective.
        Ms. Fowler. Create or retain? 526,000?
        Mr. Burns. I am referring to Mr. Logan's testimony.
        Chairman Schrock. The testimony says 500,000 new jobs.
        Mr. Burns. The estimated impact of these proposed changes
    is 22,000 additional loans, and 500,000 new jobs, and I think
    that is for Fiscal Year 2005.
        Mr. Logan. And that information, Congressman Burns, came
    from the SBA's fact sheet that they put out about their
    budget--let me see if I have it------.
        Mr. Burns. Okay. So again it does quote SBAExpress, it does
    create, it does suggest that we need to expand the SBA 7(a)
    loan program, add 3 billion to the program, create a cap of 2
    million, and again that is what I want to do is I want to
    generate some synergy here, and I think that goes back to Mr.
    Griffin's point that says, and I believe that most of this
    would suggest that HR 2802 is the linchpin legislation.
        Mr. Griffin. Well, I would say, Congressman, HR 2802 is
    sort of an immediate impact to SBA's Number Two loan program
    which is a 504.
        Mr. Burns. The 504.
        Mr. Griffin. To give you an example, in the state of
    Georgia last year there probably about 200 504 loans done,
    maybe 250, and probably about 1,200 to 1,500 7(a) loans done in
    the state of Georgia.
        Mr. Logan. The SBA released data February the 10th, said by
    expanding the SBAExpress loan program which allows lenders to
    apply for 7(a) loans using their own forms and processing
    instead of the lengthy and burdensome government forms, the
    entire 7(a) program would move to a lower guaranty rate of 50
    percent. This reform would allow the agency to increase lending
    authority by over 30 percent. Based on Fiscal Year 2003
    numbers, that increase could have resulted in more than 22,000
    additional loans to American entrepreneurs. If enacted for
    Fiscal Year 2004, the lower guaranty rate and increased number
    of loans could provide capital to create as many as 500,000 new
    jobs.
        Mr. Burns. But we have a discrepancy about this 50 percent
    loan rate guaranty. Is that a fair statement, Ms. Fowler?
        Ms. Fowler. Yes. The SBA is proposing this to equalize the
    partnership between the private sector and the SBA, or the
    taxpayer actually. And I think that is a bone of contention for
    that.
        Mr. Burns. I believe the current level is at 75 percent?
        Ms. Fowler. 75 percent.
        Mr. Griffin. The problem, Congressman Burns and Chairman
    Schrock, is the OMB subsidy calculation on the 7(a) program is
    greatly, greatly flawed. They are saying that the subsidy rate
    on the 7(a) program currently through OMB is 1.06. In a
    nutshell, that means it costs $1.06 for every $100 in loans
    that the government guaranties through SBA 7(a).
        The problem is when you look back those programs have
    returned collected fees from banks and from small businesses in
    the amount of $1.2 billion over the last twelve years. So there
    is clearly a flaw in the subsidy model.
        Until the subsidy model is corrected through OMB, through
    the budget process, I do not see how the administration in this
    proposal knows what the 7(a) program cots.
        Mr. Burns. Mr. Chairman, does the CBO make estimates as
    well? I need to ask a question.
        Chairman Schrock. No.
        Mr. Burns. No?
        Mr. Griffin. Common sense, though, Congressman Burns, if I
    have a program that has returned 1.2 billion--and that is not
    budget, that is cash--that is collected cash from small
    businesses, and it is an unfair tax on small businesses. It is
    intentionally overstating the cost of the programs. It is not
    SBA's problem other than their connection to OMB, but it is
    clearly overstated. The facts are 1.2 billion, they have not
    disputed that. It is an unfair tax on small businesses. They
    are overcharging their guaranty fees on these loans, and now
    the proposal is that they are going to zero out the subsidy
    rate by collecting more fees. Why do you need to collect more
    fees when you have already returned 1.2 billion to the
    Treasury?
        Ms. Fowler. My understanding is to the contrary, that it
    will reduce the fees. We do not want to increase the fees
    because the small businesses pay for it, and that would be a
    tax on them.
        The issue actually is that banks are definitely doing the
    lending, and they do it at a 75 percent guaranty. The banks are
    not hurting. If they went to a 50 percent guaranty, they would
    still do the loans. Whether they do it or they do not--if they
    do not do it, they do not get anything, but if they do it on a
    50 percent guaranty they will sill make those loans.
        Now let me just express that I had a lenders' round table
    in Columbia, South Carolina, Wednesday. I did need to have that
    input before I went to Washington to be prepared for this
    meeting, and the feedback I got from them of course they are
    all against the 50 percent guaranty. They say they will not
    make the smaller loans, they will not take start-ups, they will
    not do that.
        And these banker were the presidents of the bank, it was
    not the lender itself. I met with the presidents of the banks;
    that is what I needed to hear from. And Bank of America came
    out and said ``You know, we are making these loans, and this
    Community Express is the answer'' because you use your own
    paper--and I know he is a 504, so there is a difference here--
    but the fee increase would hurt the small businesses if we go
    that route versus the 50 percent guaranty.
        Mr. Logan. Let me just make a comment also about that. You
    know, the reality in our state, and probably lots of others,
    there is no such thing as a business start-up loan. There is no
    loan, no business assets, there are no working capital loans.
    The 7(a) loan program is very important. Particularly if you go
    to rural areas in Georgia we have small banks, they are mostly
    very limited asset base, they are not prone to make any kind of
    unordinary or inordinary risk.
        Mr. Burns. Do they make ag loans?
        Mr. Logan. They make ag loans on ag businesses.
        Chairman Schrock. That is a pretty tough risk.

        Mr. Logan. It is, but those are mostly character-type loans
    I would think.
        Mr. Burns. True.
        Mr. Logan. But on the small loans as Nuby just said, if you
    reduce that to 50 percent it is going to have an incredible
    effect on the smaller communities, because those are the ones
    that really depend on the guaranties.
        Mr. Wilbanks. Let me make one suggestion in that we are
    talking about the smaller loans as Hank just mentioned, and
    what if we had a 75 percent guaranty on loans up to a quarter
    of a million dollars, and any loans above that a 50 percent.
    That would be a compromise, but what that would allow is--and I
    pointed out the statistics on start-ups that had 20 or less
    than 20 employees. Most likely those businesses could have been
    started up with less than a quarter of a million dollars, so
    they would achieve the benefit of the higher guaranty rate, and
    we know that is where more of the job creation and businesses
    are coming from.
        The loans over 250,000--and, Randy, you guys may add to
    this--I think when you get to that level there are more
    partners that can be reached for, whether it be investors, more
    banks, venture capitalists, development authorities come into
    play and can help support it, state programs such as One
    Georgia or EIP. So once they get over 250,000 they are other
    partners that could come in and share, and maybe 50 percent is
    more practical, but for those under 250,000 it is going to be
    tough for those banks to feel comfortable doing a 50 percent
    guaranty.
        Chairman Schrock. Could you live with something like that,
    and would the bankers agree?
        Mr. Griffin. Well, right now the guaranty for a loan under
    150,000 is 85 percent.
        Mr. Burns. Under 150. Would that change under this new
    proposal?
        Mr. Griffin. Yes. And so I definitely agree, and I think
    that is what we have heard from banks that we have been in
    meetings with, and from the rural bankers, and from our board
    members is that they are hoping that the compromise is exactly
    something similar to what he pointed out that on the smaller
    loans that a higher guaranty will be in place.
        Chairman Schrock. Would the bankers agree?
        Ms. Fowler. Mr. Wilbanks, I wanted to address it. Will you
    forward that information to me? I am going to give you my card.
    I am gathering information to send to our congressional
    legislative affairs office in Washington, they wanted me to do
    that, and so if you give me that information I will forward
    that to them.
        Mr. Wilbanks. And I am not sure where the line is drawn.
    There probably needs to be some research done on the number of
    loans and the loan amounts. But if there has to be some
    reduction in the guaranty, what would ultimately result in the
    most job creation is if we could keep it where we are and
    reduce the fees at the same time.
        Ms. Fowler. Well, if you send that to me, I will forward
    it, because the legislative proposal is going to be worked on.
        Chairman Schrock. I would like very much to have that as
    well.
        Ms. Fowler. You would like to have that?
        Chairman Schrock. Yes, if you can----
        Mr. Burns. Chairman Schrock is on the committee----
        Chairman Schrock [continuing] Yeah. I would love to have
    that.
        Mr. Burns [continuing] And he is in a position to review
    the legislation that is submitted, and then if necessary make
    amendments, changes to reconcile that, if possible.
        Chairman Schrock. Let me change horses in the stream here.
    There are some folks sitting in the audience, and we would like
    to give you all the opportunity to make comments or ask
    questions, hopefully as it relates--I know when two congressmen
    open a microphone up to people we leave ourselves wide open for
    a lot of questions. We did that this morning, and it was quite
    interesting, but I wonder if you had any comments as it related
    to this particular small business regulation. If you do, please
    feel fee to stand up to the microphone and identify yourself,
    who you are with, and ask the question.
        We have got them all intimidated.
        Mr. Burns. We welcome your input.

              STATEMENT OF HELEN BLOCKER-ADAMS, HBA GROUP

        Ms. Blocker-Adams. Congressman Burns, this is really--I am
    Helen Blocker-Adams with the HBA Group, an entrepreneurial firm
    here in Augusta, 13 years old. And, by the way, Congressman
    Burns spoke at that regional minority conference that Patrick
    mentioned in his remarks.
        Hotbeds, the latest issue of ``Fortune Small Business,''
    the February magazine, that addresses that hotbeds question
    that you asked about, and the different characteristics, and it
    did say that Atlanta is number one.
        Some of the comments they made of what helped it become the
    number one hotbed, access to resources dealing with small
    business and entrepreneurship, leadership, mentors, the
    availability and access to mentors for small business owners,
    and networking activities. Those were four that I can remember
    from the article that I thought might be helpful for you, and
    it is an excellent article, but it is the February issue of
    ``Fortune Small Business.''
        Chairman Schrock. Let me ask you a question. This hotbed
    thing is kind of interesting.
        In the state I represent, Virginia, there are a lot of
    hotbed things in northern Virginia. Everybody thinks if it does
    not go to Fairfax County in northern Virginia it is not worth
    anything. But, frankly, where I live Virginia Beach is a far
    better quality of life, and I think should draw people there.
        I think, frankly, living in Augusta is better than living
    in Atlanta----
        Mr. Burns. Amen.
        Chairman Schrock [continuing] From what I have seen. What
    is the disconnect? Why cannot we get people to understand that
    and move to Augusta, and move to Virginia Beach.
        Ms. Blocker-Adams. I do not know, but we are working real
    hard to make that happen, and I think I heard somebody say they
    can answer that behind me, who is also an entrepreneur.
        Chairman Schrock. Everybody up here grabbed their
    microphones, so they have all got answers too, I think.
        Ms. Blocker-Adams. I am going to let this gentleman come up
    and make a response to that if you do not mind.
        Chairman Schrock. Sure.

                 STATEMENT OF JESSE HUGHES, ACCOUNTANT

        Mr. Hughes. My name is Jesse Hughes, I am an accountant
    here locally. I can address that. I moved to Georgia fifteen
    years ago. I am originally from upstate Buffalo, New York, and
    when I go back to Buffalo and tell them I am living and working
    in Georgia, quite naturally they assume I live and work in
    Atlanta.
        The reason I look at for not being in Atlanta it is a lot
    more competition than necessary. A lot of people feel that
    Atlanta is a hotbed because more entrepreneurs are starting
    there, preferably African-Americans. There are a lot of
    opportunities to work and grow. You have got African-Americans
    in the legislature, you have got an African-American in the
    governor--not the governor's, but the mayor's mansion, so that
    allows everyone to look at Atlanta as being more expedient than
    Augusta is, looking at Augusta being a lot more slower. But
    opportunity in Augusta is plentiful.
        I want to touch bases on Mr. Elam, and I forgot which
    gentleman from the Small Business Development Center. Education
    is probably the most important thing, and I am going to stress
    that because I probably have about 1,500 clients, I deal with a
    lot of entrepreneurs. I mentioned the Small Business
    Development Center because there is someone over here named
    Heather Woods that I was speaking with tremendously last week,
    and I am mentioning the Small Business Development because I am
    a speaker for the Internal Revenue that actually puts on the
    seminars for small business development.
        I put on a seminar in Rome, Georgia, and Atlanta, Georgia,
    and supposedly in Augusta that did not work out this week, but
    we are looking to reschedule. In talking to the people, their
    biggest problem is education. You go back to it, they are
    excellent electricians, they are excellent carpenters as long
    as you put a hammer and a nail and wood in front of them, but
    when you give them dollars that becomes a problem, and they
    cannot succeed, they cannot go forward because all they have to
    offer to their business is their expertise in that area.
    Education is a hotbed.
        You go back talking about teaching them in the early
    classes. My two children, I have got an 11-year-old and a 12-
    year-old, they work in my office. They have got three years
    experience, and they have probably got a lot more knowledge
    than a lot of individuals in business today, so that is a
    stickler with me because again we are looking to open up an
    entrepreneur school for children, and that is where we are
    going to start with the children and work our way up.
        I put on a lot of seminars for ongoing businesses, and I
    keep stressing the same thing, the biggest problem is
    education. We sit here talking about giving them SBA loans and
    the various things. What good is it if you do not educate them
    on what to do with the money, and then you complain when we get
    it and go buy a Cadillac. But no one told us what to do with
    the money. We borrowed the money, we put some of it in our
    business, and we use it for other things that we have not been
    educated on.
        You know, I am where I am today because of my education. I
    have been in business 15 years. I have got a two-year degree,
    and I can guarantee anyone in here would never know that I had
    a two-year degree. I am an Enrolled Agent with the Internal
    Revenue, I am an Accredited Business Accountant. I went off and
    got my education.
        My business is thriving under radar, a lot of people is not
    aware of that, because I took the stuff to get the education. I
    wanted to become a leader first instead of a boss. I learned to
    learn and deal with people, I learned how to market my
    business. I went and got experience telemarketing because as a
    businessman I am going to be on the phone constantly. But those
    are information that I spread to entrepreneurs.
        And I differ a little bit with Mr. Elam as far as putting
    it in schools, because I feel a lot of our entrepreneurs need
    to be taught by entrepreneurs, because I learned a lot in
    school, but in my fifteen years in business nothing in school
    that I learned that is being used in my business today, none of
    it. The school teach you academics, but it is a lot more behind
    that, and we want to be able to--I have got nothing against
    education, I push that because I use the word knowledge,
    because education is not for everybody, and we have to
    understand that. Everybody cannot go to school and sit around
    and listen to a teacher, so you have go to get your knowledge,
    be it in a seminar or whatever it takes in order to be able to
    get that.
        Chairman Schrock. I hope you do not mean K through 12, I
    hope you agree you have to have that.

        Mr. Hughes. Oh, yes. What I am stating is, you know, we
    push education. Everybody is not education oriented, everybody
    cannot learn through the education system.
        Mr. Burns. There are different options for all of us to
    achieve a degree of skills and expertise. It could be in a
    professional school, it could be in an apprenticeship program,
    it could be in a formal college or university environment, it
    could be any number of things.
        I want to just respond. We had lunch with Calvin Greene in
    Hot Foods by Calvin. Let me tell you what, that is an amazing
    success story where we have an individual who lost his job, and
    three weeks later started a business, and has not looked back,
    now employs 25 people, provides his employees with health care,
    and with 401(k)s and IRAs, and you know the interesting thing
    is he has been extremely successful in his quest for a small
    business, his business, and he can take just as you said--and
    we talked about this at lunch today--he can take others and
    basically mentor them and show them how to be successful, maybe
    not--they should not necessarily adopt his dream, but they
    should identify their dream. But many of the skills he has
    learned are transferrable, and I think you are correct. Mr.
    Elam and I discussed this, and I have discussed it with other
    folks, you know here are opportunities--you are an example--who
    can go and help others understand how to be successful, and
    like you say the pitfalls, the challenges.
        Chairman Schrock. It was worth coming here today just to
    meet Calvin. When they said we were going to go to Hot Food by
    Calvin, all right. When I saw his picture on the billboard 20
    feet high, huh, this guy has really made it and, boy, when you
    meet him he is upbeat, he knows what he is doing. That is the
    kind of guy you need to get out in the community talking to
    people and teaching them how to do it. I do not believe in
    cloning, but if I did I would want to clone Calvin to go
    everywhere. He is the role model for business in America, he
    really is.
        Did you want to comment, Dr. Elam?
        Mr. Elam. And I agree education is far more than classroom.
        Chairman Schrock. It is.
        Mr. Elam. And I would just like to give a personal note.
    Augusta probably has the largest percentage of African-American
    electrical contractors of any city that I know. There is
    probably 15 businesses in this community that are owned by
    African-Americans who are electricians. And the reason I can
    say that, because in 1955 there were none, there was not one
    master electrician in this community. My uncle was the first.
    He trained another uncle who trained 15 who now run businesses.
    That is entrepreneurship at its best.
        Education plays a role, but also working with people who
    are successful is just as great a role. I mean going to school
    is fine, but you have to have success.
        I started my first business when I was fifteen years old, I
    made $30 for working six hours. You do the math, that was a lot
    of years ago. I was fifteen years old, 1965. I thought I was
    rich. I then became an electrician.
        Chairman Schrock. And then you got rich.
        [Laughter.]
        Mr. Elam. And then I decided I did not like crawling under
    houses.
        [Laughter.]
        Mr. Elam. The point I am making is that one person can
    plant that seed that can impact a tremendous number of people
    in one area. I saw that, I have seen it my whole life.
        We do not know the area, we do not know what the niche is
    going to be. It could be a Calvin developing six more Calvins.
    As a matter of fact, if you go back and look at it, Calvin
    comes from another restaurant that has produced several
    restaurants in this community. That is entrepreneurship at its
    best. Entrepreneurship at its best is seeing an auto dealer
    like the Hodges Group that came out of another dealership in
    Charleston and came here, and now there are four or five
    dealerships under that umbrella.
        So we have great examples of great entrepreneurship. When
    you marry academic training with hands-on experience your
    success level is increased. You do it the opposite; you cannot
    do it all in the classroom, and you cannot do it all just
    practically.
        Chairman Schrock. The classroom is great, but there is
    nothing like OJT, on-the-job training, it has got to be there.
        Mr. Elam. And you have to incorporate OJT into practical
    training. That is why we are a technical college, that is why
    we are not the university.
        Mr. Burns. Just a comment. When I was visiting Augusta a
    year and a half or two years ago, one of the things we were
    looking at was what is the one thing that we can do in this
    community to improve the opportunities for job growth and
    development, especially in the biotech community we have not
    really addressed biotech that is such a major portion of our
    community and our economy here in the CSRA, the comment was
    improved air service. And because of the access issue, the
    issue of being able to get the right folks in and out of this
    community to participate in high-tech industry, to participate
    in that development, and I want to commend the Augusta Airport
    Commission for their efforts in improving air service, but I
    also want to commend them for their efforts in ensuring
    minority business participation in the development of that
    entity.
        We are going to invest some number of millions of dollars
    over the next several years, and it is extremely important that
    as those dollars are spent that they stay in this community,
    that they stay with small businesses here, that they stay with
    minority businesses here, and they circulate in our community,
    and they create a stimulus for the future master electricians,
    and the future master carpenters, and plumbers, and brick
    masons, and general contractors, and whatever the opportunities
    may be, but the point is we utilize that as a mechanism for
    stimulating the local small business growth.
        Chairman Schrock. Let me ask one final question to all of
    you, and then I will let Congressman Burns wrap up.
        When your congressman and I go back to Washington, what can
    we do, what do you think is the best thing we can do to help
    the business climate for small businesses getting off their
    backs? Is it regulation, or what is it? What do you think we
    need to do to get this thing turned around so that small
    businesses can not only be established, but can flourish and
    grow and not have to worry about all kinds of burdensome
    government regulations?
        He and I cannot do anything about the state level or the
    local level, but we certainly can at the federal level, and I
    have a feeling that may be the biggest problem, and if it is we
    need to know that.
        Mr. Elam. In the educational area from the side of the
    retraining of workers, making sure that those programs are able
    to focus on those kinds of activities that will allow those
    people to take advantage of these opportunities, and I say that
    to make sure that there are no restrictions out there for free-
    flowing ideas of entrepreneurship for someone who wants to
    participate in a retraining program because they have lost
    their job. It does not do any good to retrain someone in an
    area that the job is not coming back.
        I mean if you are in the textile business all those
    associated jobs are going to leave, the problem is to create
    that new economy in the community, so making sure that there
    are no artificial barriers out there to make sure that people
    have to leave their communities to go elsewhere to look for
    work because there are just no opportunities available in the
    local business climate.
        Mr. Griffin. First of all, thank you all for having this
    event, thank you for inviting us.
        I think as far as SBA paperwork is concerned, and that is
    my area of expertise, it seems to me like a lot of forms that
    are in the process where you certify to something and you
    acknowledge something, that they can combine eight or nine
    forms into one.
        Chairman Schrock. Where you answer the same thing over and
    over again; is that what it is?
        Mr. Griffin. You are certifying that you won't use lead-
    based paint, you are certifying that you will comply with
    certain job employment, and carrying workers' compensation
    insurance, and things that you certify to in the application.
        It seems like there are certain forms that are stand-alone
    forms that they could consolidate them and combine all that
    onto one form. I think that would help our process in the
    banking community under 7(a) and under 504 more than anything
    else.
        Mr. Logan. I guess from the SBDC's perspective the number
    one issue that I would ask, and I want to emphasize that we
    have had an excellent relationship with our district SBA
    office, but there appears to be from a national perspective
    more and more emphasis put on body count----
        Chairman Schrock. What?
        Mr. Logan [continuing] By contact meeting, the number of
    people you meet.
        I have in my tenure with the SBDC tried to emphasize that
    we are not a business assistance entitlement program, we want
    to help those that have potential that have done the basis to
    get their businesses off the ground. Many times our greatest
    successes come in more rural areas of the state, less urbanized
    areas. We cannot get the number of contacts and just the number
    of face time with individuals and really be effective. We would
    like to see it for a minimum of seven to eight hours per client
    on an average so it will be effective. So that is one of the
    things that I would really like to emphasize when it comes to
    technical assistance is let us help the ones that are willing
    to help themselves, that are prepared to start their own
    business and not just to try to greet and meet everybody and do
    more of a handshaking session.
        Mr. Wilbanks. I think improvements to the SBA program that
    have been mentioned, youth entrepreneurship, incorporating that
    some way into our educational system, and continuing support of
    the Manufacturing Extension Partnership that allows Georgia
    Tech and folks like us to provide technical assistance that
    cannot be found in other agencies and resources available to
    entrepreneurs and small business, whether in Atlanta or if they
    are in a rural community somewhere.
        Mr. Presnell. I also thank you for the opportunity. As you
    go back and contemplate what your recommendations would be
    consider two or three sources of entrepreneurship originations.
        One of course the youth, and then you have your folks
    coming out of technical school or colleges that are going to be
    trying to start new businesses, and now we are at the end I
    believe of the last downturn in the economy. You have got quite
    a few displaced older folks who are rather than perhaps going
    back to work for a corporation, they may be starting their own
    businesses.
        Intertwined with all of that I think we need to be very
    sensitive to the need for family security in terms of
    retirement benefits and health care packages. Those two things
    go back to the security of not only the businessperson
    themselves, but also the employees they are going to hire, and
    the stability of a business is centered around how they can
    reduce their turnover rate. And it is easier for them not to
    have to worry about that if they have benefits that will
    attract good, sound employees to help them grow their business.
        Ms. Fowler. Thank you so much for the opportunity to be
    here.
        I just would like to address the issue of the legislative
    proposal, and all I want is for people to realize that this is
    a starting point. If we did not do anything we probably would
    collapse, frankly.
        Right now our credibility is very shaken in the field, our
    partners are concerned--and I am talking about lending partners
    and technical assistance partners--because of all the issues
    that we have had to contend with in the prior year, and
    consider this as a starting point and all the feedback that
    comes from this type of forums and the information that we are
    going to be sending to our people at headquarters to start the
    dialogue, but something needs to be done, and the best way that
    we knew how to do it was following our administration's agenda
    because we do not want to increase the fees to the small
    businesses. That is a tax to them. That is the bottom line.
        So we need to work it out where we are on equal partnership
    with our lenders to be able to provide what the small
    businesses need, access to capital.
        Thank you.
        Chairman Schrock. Mr. Burns.
        Mr. Burns. I just want to add my thanks to the panel, and
    to the participants. I know it has been a long afternoon, it
    has been a productive afternoon. I will tell you that if we do
    this in D.C. we cannot get this kind of dialogue, we cannot
    focus on this issue with the intensity we have been able to do
    this afternoon, and I want to thank you for your input, and I
    want to thank you for your time.
        I want to thank the Chairman for his willingness to come to
    Augusta, to come to the 12th District, to listen to our input
    and our opportunities, and then to take it back and to provide
    results, results that will create the jobs in this community
    and around our state, and around our nation, and it is going to
    be because of your willingness to share your knowledge and
    expertise. Thank you.
        Again I am delighted that Chairman Schrock would join us
    here in Augusta and have an opportunity to talk about the real
    segment of our economy that is going to create the vast
    majority of the future of America, and I want to say thank you.
        Chairman Schrock. Thank you.
        Let me say one more thing. We did not do this, and I did
    not come here just because I did not have anything to do on
    Monday. I came here because this is deadly serious and because
    Max wanted me to come here and, believe me, we are not going to
    have this hearing and have everybody think it was a great
    hearing, we are going to do something about it.
        I am fed up--I got into this elected arena at the State
    Senate level in Virginia and at the Congressional level because
    I was fed up with the government bureaucracies ruining this
    country, and with some of the horrible regulations that they
    have imposed on business, and everybody for that matter, and if
    we get enough people in Richmond and in Washington to take on
    that mantra and try to do something about it, something could
    be done. We have a very passionate chairman of the full
    committee, Don Manzullo from Illinois--I do not know if you
    know him or not--but he is just dogged about this, and he is
    not going to let go until people give in.
        Trying to get the federal agencies in downtown Washington
    to respond to even members of Congress is next to impossible. I
    am tired of that. We are the elected people, we have a right to
    ask questions and expect results from these people, and we do
    not get it. They ignore us, they treat us like we do not belong
    there, and that is going to stop, and I think more and more
    classes of congressional people that come in--Max's class is
    unbelievable--I came in with the 107th, he came in with the
    108th--the 108th is not going to put up with this. We are not
    either, because we are the new guys on the block, we have had
    to live it out there, and we have go to do something about it.
        So I can assure you with the staff we have and the things
    we hope we can accomplish--unfortunately Rome was not built in
    a day--I am very impatient, I am the worst Type A personality
    in the world, I want it done now, because when I see a wrong I
    want it done now, but, guys, it just does not work that way in
    Washington, it really does not.
        But we are going to keep at it, and I think the more we
    hammer, the more we have these hearings, the more we bug the
    agencies and pick on them, and pick on them, and pick on them
    they are finally going to say for God's sake let us just get it
    done and get it over with.
        I had a very bad reputation with one of the agencies in the
    State Capitol of Virginia in Richmond, so bad that one time
    when I called I heard the lady say before she stuck me on hold
    ``Oh, my God, it is him again,'' but that was a good thing.
    They knew when I called that I was not going to let go until we
    got things done, and we had good results. And we have to do
    that in Washington, and the more of us that do it the better,
    and I am going to continue to do it, and I know Max Burns will,
    and we just ask you to bear with us.
        I know everybody says that all the time, but it takes a
    while, and we are going to do it.
        I really thank you for coming here and sharing with us
    today. I really appreciate the time you took, and I have
    thoroughly enjoyed being here, and if I can look for an excuse
    to come back again I will.
        Again thank you very much, and this hearing is adjourned.
        [Whereupon, at 4:45 p.m. the subcommittee meeting was
    concluded.]
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