[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
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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
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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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