[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/
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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

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

         J. Matthew Szymanski, Chief of Staff and Chief Counsel

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

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

              Rosario Palmieri, Senior Professional Staff

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                               Witnesses

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

                                Appendix

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

                                 (iii)
      


 
                  CHALLENGES TO SMALL BUSINESS GROWTH

                              ----------                              


                         MONDAY, MARCH 1, 2004

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

       STATEMENT OF RANDY GRIFFIN, CSRA BUSINESS LENDING

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

     STATEMENT OF TERRY D. ELAM, AUGUSTA TECHNICAL COLLEGE

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

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

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

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

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

  STATEMENT OF ED PRESNELL, AUGUSTA METRO CHAMBER OF COMMERCE

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

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

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

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

          STATEMENT OF HELEN BLOCKER-ADAMS, HBA GROUP

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

             STATEMENT OF JESSE HUGHES, ACCOUNTANT

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

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