[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
WOMEN'S ENTREPRENEURSHIP: SUCCESSES AND CHALLENGES
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC, MAY 12, 2004
__________
Serial No. 108-64
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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COMMITTEE ON SMALL BUSINESS
DONALD A. MANZULLO, Illinois, Chairman
ROSCOE BARTLETT, Maryland, Vice NYDIA VELAZQUEZ, New York
Chairman JUANITA MILLENDER-McDONALD,
SUE KELLY, New York California
STEVE CHABOT, Ohio TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina ENI FALEOMAVAEGA, American Samoa
SAM GRAVES, Missouri DONNA CHRISTENSEN, Virgin Islands
EDWARD SCHROCK, Virginia DANNY DAVIS, Illinois
TODD AKIN, Missouri GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana BRAD MILLER, North Carolina
STEVE KING, Iowa [VACANCY]
THADDEUS McCOTTER, Michigan
J. Matthew Szymanski, Chief of Staff
Phil Eskeland, Policy Director
Michael Day, Minority Staff Director
(ii)
C O N T E N T S
----------
Witnesses
Page
Sabelhaus, Hon. Melanie, Deputy Administrator, U.S. Small
Business Administration........................................ 3
Pike, Ms. Judy, President, Production Tool & Supply.............. 6
Byron, Ms. Norma Powell, President, The Ashlawn Group, L.L.C..... 8
Welch, Ms. Maria, CEO, Respira Medical........................... 10
Mosier, Ms. Cheryl on behalf of Ann Belus, Cable Pipe and Leak
Detection...................................................... 12
Hilliard, Ms. Isabelle, RN., NHA, Old Dominion Home Health
Services....................................................... 14
Williams, Ms. Terry, President, U.S. Women's Chamber of Commerce. 15
Appendix
Opening statements:
Manzullo, Hon. Donald A...................................... 28
Velazquez, Hon. Nydia........................................ 32
Prepared statements:
Sabelhaus, Hon. Melanie, Deputy Administrator, U.S. Small
Business Administration.................................... 34
Pike, Ms. Judy, President, Production Tool & Supply.......... 41
Byron, Ms. Norma Powell, President, The Ashlawn Group, L.L.C. 46
Welch, Ms. Maria, CEO, Respira Medical....................... 51
Mosier, Ms. Cheryl on behalf of Ann Belus, Cable Pipe and
Leak Detection............................................. 56
Hilliard, Ms. Isabelle, RN., NHA, Old Dominion Home Health
Services................................................... 62
Williams, Ms. Terry, President, U.S. Women's Chamber of
Commerce................................................... 67
(iii)
WOMEN'S ENTREPRENEURSHIP: SUCCESSES AND CHALLENGES
----------
THURSDAY, MAY 12, 2004
House of Representatives,
Committee on Small Business
Washington, D.C.
The Committee met, pursuant to call, at 2:05 p.m., Room
2360, Rayburn House Office Building, Hon. Donald A. Manzullo
presiding.
Present: Representatives Manzullo, Velazquez, Akin,
Millender-McDonald, Napolitano.
Chairman Manzullo. Good afternoon and welcome to this
hearing of the Small Business Committee on Women's
Entrepreneurship: Successes and Challenges. Women-owned
businesses are a dynamic and thriving force in the U.S.
economy. In fact, there has never been a better time for women
to be in business. That is a nice line that you put in there,
pretty good. Thank you.
Women own 40 percent of all small businesses. Furthermore,
women-owned businesses are growing at twice the rate of all
other businesses. America's 9.1 million women-owned businesses
employ 27.5 million people and contribute $3.6 trillion to the
economy. Business ownership has been one of the most effective
means of improving women's economic well being. Women's
participation in business ownership at all levels is climbing,
showing an increasing presence in the U.S. economy, yet women
still face many obstacles and challenges. Access to credit,
access to affordable quality health care for themselves and
their employees, procurement opportunities, regulations and
taxes.
We look forward to the testimony of all the witnesses here
this afternoon to learn more about their perspective. And I now
turn to my colleague, the ranking member, Congresswoman
Velazquez, for her opening statement.
[Chairman Manzullo's statement may be found in the
appendix.]
Ms. Velazquez. Thank you, Mr. Chairman. Throughout the past
decade, women-owned businesses have flourished in the United
States. Since 1997, women-owned firms have grown at nearly
twice the rate of all businesses and growth in employment by
women-owned businesses has been even more dramatic, 24 percent
versus 12 percent for all other firms. It is quite obvious that
women entrepreneurs are an increasingly important sector of our
economy and their contributions are priceless. Nearly half of
all privately owned businesses today are owned 50 percent or
more by women, totalling 10.6 million enterprises.
As these women entrepreneurs experience overwhelming growth
and expansion, it is unfortunate the Bush administration
policies failed their firms. The failure of this administration
to provide access to health care, capital and the federal
marketplace strongly impact women-owned business, since their
firms tend to be smaller. These are the same businesses capable
of putting us out of the current economic downturn and,
unfortunately, these administration policies are not creating
conditions conducive to enabling these women-owned firms to do
so.
For example, the SBA has several programs geared toward
assisting women entrepreneurs in starting and growing their
businesses. The programs that target entrepreneurial
development have been either flat funded or cut in President
Bush's latest budget proposal.
Another challenge facing women business owners is the lack
of access to the federal marketplace. The Women's Procurement
Program, which was actually signed into law in 2000 would have
allowed federal agencies to lessen competition for contracts by
restricting a portion for women-owned businesses. Sadly, it was
never implemented by SBA.
Therefore, in 2001, women-owned businesses lost more than
$5.5 billion in federal contracting opportunities and an
addition of $4.9 billion in 2002. These are opportunities that
women-owned firms cannot afford to lose. Another major barrier
for women entrepreneurs is a lack of access to capital. Access
to affordable capital determines their chance of survival among
their competitors and without it, women-owned firms can be
devastated. That is why the SBA loan programs are a vital tool
for women business owners, enabling them to gain access to
capital.
Last year, these loan programs provided $20 billion to our
nation's entrepreneurs, accounting for 40 percent of all long-
term small business lending. Yet, the Bush administration
proposed to eliminate funding for several of these initiatives
including two distinct funding sources for women entrepreneurs,
the 7(a) and Micro Loan programs. This is a huge loss of the
funds provided by the Micro Loan programs that were targeted
towards these women business owners. There is no getting around
the harsh truth, that our country's women business owners are
facing an uphill battle. Despite their tremendous economic
growth and strength over the past ten years, this
administration continues to fail them by passing policies that
do little, if anything, to provide the relief they deserve.
If we want women entrepreneurs to thrive and to create the
jobs our economy needs right now, then we must ensure they can
overcome these challenges. Our nation's women entrepreneurs are
among the fastest growing economic sectors today and we must
recognize how the Bush administration policies are negatively
affecting their growth and ability.
As we acknowledge the accomplishments and growth of women-
owned businesses, we must work to guarantee they are successful
and strong. The vitality of our economy depends on it. Thank
you, Mr. Chairman.
[Ranking Member Velazquez's statement may be found in the
appendix.]
Chairman Manzullo. Thank you. The light here gives you five
minutes to give your testimony. Deputy Administrator Sabelhaus,
we'll give you seven minutes. I think you have a little bit
longer there because of the details you have to go into. But
Deputy Administrator Sabelhaus came out to our district about a
year and a half ago and she made sure that she came into the
district so she could be there on a Monday, because she wanted
to stop at Manzullo's Famous Foods on a Sunday evening. I think
about five of you came in and we had a pretty wild time there
at the restaurant. That is the family restaurant.
Ms. Sabelhaus. Fabulous food.
Chairman Manzullo. They specialize in fish on Friday night,
lasagna on Saturday night. And it was growing up in the
restaurant business where I really learned who ran the Ma and
Pa operation. My dad did the general repairs and Ma did the
ordering, paid the bills, did the hiring, did the firing. She
ran the restaurant and it was a very delightful opportunity in
my life to grow up in that business and to see that take place.
So Melanie, we really look forward to your testimony and the
written testimonies that you have submitted will all be made
part of the record. You are not bound to follow them. This is a
very conversational type of atmosphere and let us have some fun
this afternoon and discover the great things that are going on
with women entrepreneurs in America.
STATEMENT OF MELANIE SABELHAUS, U.S. SMALL BUSINESS
ADMINISTRATION
Ms. Sabelhaus. Thank you. Chairman Manzullo, Ranking Member
Velazquez and Members of the Committee, I appreciate the
opportunity to testify today before you and discuss both the
successes and the challenges of being a women in small business
in this marketplace.
I want to thank my fellow panelists right from the very
beginning on their incredible commitment to women in business
and for being here today. I feel the energy, I feel the
enthusiasm in this room and I know I am with very good friends
here. I want to especially recognize from Maria Welch from
WIPP. We are fellow members of WIPP and also the Women's
Initiative. I want to congratulate her on her recent
recognition as being one of Maryland's top 100 women. I am
proud of you, Maria.
Chairman Manzullo and Congressman Akin, by the time this
panel is through with our testimony, you are going to all want
to be women entrepreneurs, so just get ready.
[Laughter.]
Ms. Sabelhaus. I am very proud to serve as the Deputy
Administrator of the U.S. Small Business Administration. it is
a once in a lifetime opportunity to be a strong advocate for
our nation's small businesses. I feel it is absolutely the best
job in government. I am passionate about the success of
entrepreneurs and especially women entrepreneurs, the economic
powerhouse of the 21st Century.
I know how important it can be for an entrepreneur to have
just one person stand behind them, encourage them, support them
and make sure that they back them up. I know this because after
being turned down six times for a loan as an entrepreneur, I
started my own business and I did take it public in 1997. I did
not know about the SBA and I do not want that to happen to
another small business in America. This kind of real world
experience shared by President Bust and Administrator Barreto
has shaped the economic philosophy of this administration.
Those of us who know what it is like to meet a payroll, those
of us who know what it is like to meet a health insurance
premium bring a unique perspective to the federal government.
We know how hard small business people work, the risk they take
and how good it feels to be an entrepreneur and your own boss.
I agree with the President when he says, when it comes to
entrepreneurship and job creation, it is becoming a women's
world. You bet it is. The numbers prove it. It is 10.6 million
entrepreneur women, women again owning up to 40 percent of all
U.S. businesses and generating up to $3.6 trillion in revenue.
That is larger than the GDP of Germany. Almost 100,000 women-
owned businesses in America have $1 million more in revenue.
Twenty-four million people walk in every morning and look at
that smiling woman's face. Women are the purchasing officers of
America. We are buying for ourselves, we are buying for our
families and we are buying for our companies. We manage 83
percent of the household income and, gentlemen, we are going to
inherit 85 to 95 percent of the nation's wealth and I will tell
you why. We live seven years longer than you do.
[Laughter.]
So there are five million more of us. With this comes a
great deal of responsibility. We are responsible for purchasing
81 percent of all goods and services in the United States and
it cannot all be shoes, although the women here would probably
debate that.
The point is, we are impacting our country like never
before. We are in an unprecedented position of power. The way
we think, ladies, the way we behave affects the way America
does business. What was once seen as a glass ceiling is now the
executive board room of most of the most successful companies
in the country. Carly Fiorna of HP, Meg Whitman of eBay are
role models and they are also partners with the SBA. But the
real economic powerhouse sits here today on this panel, is in
this room. It is the 10.6 million women business owners of
America.
The President believes that small business is the engine
that fuels the economy. I say that we are the heart and soul of
America. This is why the President has a small business agenda
at the centerpiece of his domestic policy. The President's jobs
and growth package, which I know has the support of numerous
members on this Committee, accomplished the most important
thing government can do for small business and that is let
these hard working Americans keep more of their own money so
they can earn that money, pay their bills, invest in their
business and hire people.
To these men and women, income tax cuts means more money
and that is what is important. It is all about jobs, jobs,
jobs. Along with it, we quadrupled the deduction for business
expenses to $100,000. This allows them to invest in their
businesses, in their futures. In fact, 79 percent of the $12.4
billion in tax relief will go to small business owners. This is
real impact of tax relief. This is job creation and the
investment in our economy.
The latest job figures last Friday showed that these
policies have created 280,000 new jobs. That is more than 1.1
million jobs in the last eight months. However, this
administration recognizes that there are other hurdles that we
need to face, such as the high cost of health care, the high
cost of health insurance, the common sense tort reform, the
ability to compete in the expanding global market. This
administration is taking a proactive approach to addressing
these issues. We are all about delivering results. Small
businesses are telling us we must eliminate burdensome
regulations, cut the red tape and get government out of the
way.
Over the last three years, SBA's Office of Advocacy has
saved small businesses over $31 billion in needless red tape.
Now that is what I call results. Small business wants their
fair share of that $250 billion government pie and the women at
this table want the whole pie, the do not want a piece of it.
Under Hector Barreto's leadership, the SBA has launched a
very innovative program to insure that small businesses receive
their fair share. It is called business matchmaking. It has
given the small businesses in America a chance to meet with the
federal, state, and local government officials, as well as the
private sector. What this means is results. It means contracts,
it means dollars, it means jobs. I am proud to say that the
seven matchmaking events have had 4,000 small business people
participating and nearly half of them were women. And what we
did is we took this program outside the Beltway. We have been
all over the United States and it translated into 16,000 one on
one meetings between small businesses and potential buyers.
One individual said to me, Melanie, on a scale of one to
ten, business matchmaking is a 15. I was very proud to report
that.
Last year we celebrated our 50th anniversary. It is scary
that I am older than the agency, but I do not look it, do I,
Mr. Manzullo? Do I look older than the agency? I may at this
point.
Chairman Manzullo. I think you were born in 1972, or
something like that.
Ms. Sabelhaus. Thank you very much. But last year we
celebrated our 50th celebration and it was a banner year. We
were up 30 percent in our lending, 74,000 loans, over $14
billion. But what does that mean? That means jobs. Over 500,000
jobs were created or retained.
Loans to every sector in the marketplace increased, double
digits. African Americans, Hispanics, Asians, Native Americans
and women. Our work is far from finished, believe me. There is
still a lot of work to do and there are many entrepreneurs that
want to start businesses. They need access to capital, they
need technical training and we are here to help. That is where
the SBA comes in.
Women last year had increased by 37 percent for fiscal year
2003. In fact, SBA guaranteed 14,378 loans----
Chairman Manzullo. How are you doing on time, Melanie?
Ms. Sabelhaus [continuing] I am almost ready to end.
Chairman Manzullo. Good, otherwise I would end you.
Ms. Sabelhaus. Okay, let me just end quickly by saying that
on top of this, this is important and I would like to address
it. In the last three years, the percentage of federal prime
contract dollars awarded to women has risen. Last year we saw
$9.7 billion. We are up one billion dollars. We know we have a
lot of work ahead of us, but we are progressing.
So I am proud to represent this administration. I also want
you to know I am glad you gave me this opportunity to highlight
this administration's successes and I want to thank you very
much, all of you, for your dedication and determination. I
certainly look forward to this panel's testimony and I am
available for any questions.
[Ms. Sabelhaus' statement may be found in the appendix.]
Chairman Manzullo. Thank you very much for that excellent
testimony. Our next witness is Judy Pike. Judy is from
Rockford. Judy's husband and my brother were in the Reserve
together and were cooks and somebody has got to do the cooking.
My brother went in there right after high school and he has
been involved in the restaurant business ever since. Judy, we
look forward to your testimony. If you could pull the mike up
to you closer.
Ms. Pike. Sure.
Chairman Manzullo. You do not all have to be as animated as
Melanie. I just want you to be yourselves, okay?
STATEMENT OF JUDITH E. PIKE, PRODUCTION TOOL & SUPPLY, WOMEN OF
TODAY'S MANUFACTURING
Ms. Pike. Good afternoon, Mr. Chairman. My name is Judy
Pike and I am from Rockford, Illinois. The name of my company
is Production Tool & Supply.
Chairman Manzullo. Judy, could you pull the mike a little
bit closer there? Thank you.
Ms. Pike. Sure. The name of my company is Production Tool &
Supply and until December 31, 2003, I also had another company
called Acme Grinding. Both of the companies are in the
manufacturing related business. Acme Grinding is a small job
shop which does secondary services for the fastener industry
and Production Tool & Supply is an industrial distributor. They
are a supplier of abrasives, fluids, cutting tools, carbide
cutting tools to the metal working industry in our area.
My late husband, John Pike, owned both of these companies.
I had the honor of working with John for 29 years until his
death in 1996. Since then, I have been the president and owner
of both companies.
Even though I had worked in the business for many years,
upon John's death, there was a period of time when we, as a
company, had to prove we were able to provide the services our
customers expected. There was the occasional let me talk to
someone who knows something and I would rather talk to one of
the guys comments. But for the most part, everyone we dealt
with was gracious and helpful. The employees at both Production
Tool and Acme had always been our biggest asset. Together we
weathered the storm and grew both companies until the economic
downturn in 2001.
With the multinationals leaving our country to manufacture
outside, in the next three years the manufacturing climate in
Rockford declined and many of the companies we did business
with closed or left the state. We tried our best to keep the
business operating. We worked two years and trimmed schedules
of 32 hours a week. My family wanted me out while there was
still something to salvage, but when you have worked with
people for 34 years, you owe some loyalty to your employees.
I could not see closing. What were these people going to
do? There were no manufacturing jobs in Rockford. I had an
employee willing to give up his medical insurance so if people
left, we could keep the business open a little longer. Health
care for small business is in major crisis. But in December,
2003, after months of declining sales and cutting employees'
hours and seeing no relief in the future, I decided to sell the
manufacturing part of our businesses, which was Acme. If I had
been 45, I would have gone to the bank and tried refinancing to
keep the business going, but that was not an option. At 64, my
financial future was at risk.
As a woman business owner, I have not run into the
obstacles that some women seem to have been running into. I
believe my situation has been different. My business was in
place and I didn't have to go to anyone for help, so I thought.
Maybe I should have.
In the latest figures I could find on women owned
businesses, only two to three percent of them are in the
manufacturing industry, but I believe these numbers are on the
rise. I know in Rockford there are several companies that are
owned and run by women. With a couple of women I have talked
to, the most challenging part of their business was not so much
being a woman, but being in the manufacturing industry. The
banks are not real kind to the manufacturing world in Rockford,
Illinois.
After one of the women said that she had gone to an agency
and asked just for a loan, but they never even returned her
call, after the move was complete, she did it all on her own
and she called the person at the agency and thanked them for
nothing. And we wonder is it being a woman or in the
manufacturing industry?
In our area, we really are trying to mentor and assist
other women who are interested in getting into the
manufacturing world. We have taken up the challenge of getting
women involved in our industry. In the last year and a half,
Melba Bradberry from S&B Jig Grinding, Teresa Beach-Shelow with
Superior Joining Technologies and myself have incorporated a
not-for-profit organization called Women of Today's
Manufacturing. It is an educational organization dedicated to
serve the manufacturing in our area. We have now grown to 75
members.
Teresa had an idea of having a camp for kids to introduce
them to manufacturing in Rockford. We held our first
Manufacturing Camp last summer. We signed up ten boys and girls
and took them through a week of introduction to our industry.
They are boys and girls that are in the eighth, ninth and tenth
grade. It was a hands on week of learning how to operate
various machines and software programs. They generated prints
on their computers and they actually made their own little
hammer to take home at the end of the session.
They toured local manufacturing plants and by the end of
the week they were excited to see things that had been made in
Rockford and to be aware of their surroundings around them. The
group has established our scholarship program through the
community foundation and we are giving out our first
scholarships this month, $500 each, and both boys are going
into the engineering industry.
We have to mentor. With nothing but discouraging news in
the media----
Chairman Manzullo. How are you doing on time, there, Judy?
Ms. Pike [continuing] Oh, geez, I am sorry.
Chairman Manzullo. That is all right, just finish your
thought. That is okay.
Ms. Pike. Okay, what we have done in our area is Teresa
Beach-Shelow has started another location called Manufacturers
Alliance of Rock River Valley, just to deal with the federal
government. You cannot, as a small business owner, deal with
the federal government. So they have started this group to deal
with the Lockheed Martin, the Defense Department and
Caterpillar.
In the business world of today, we have been asked to be
more productive, more cost efficient and in most cases, to
reinvent ourselves. Hopefully in Rockford, Illinois, we are
giving it our best shot and our best effort. Thank you for your
time today.
[Ms. Pike's statement may be found in the appendix.]
Chairman Manzullo. Thank you. Our next witness is speaking
on behalf of Women Impacting Public Policy and Norma Powell
Byron, we look forward to your testimony. Byron is the nearest,
biggest town to where my farm is. I do not know if you are
aware of that.
STATEMENT OF NORMA POWELL BYRON, THE ASHLAWN GROUP, LLC, WOMEN
IMPACTING PUBLIC POLICY
Ms. Byron. Where is your farm?
Chairman Manzullo. It is near Egan, Lightsville and Myrtle.
Ms. Byron. Oh, great.
Chairman Manzullo. You do not know where that is either, do
you?
Ms. Byron. I have no idea where that is.
Chairman Manzullo. Yes, we raise beef cattle about 25 miles
south and west of where Judy lives.
Ms. Byron. Oh, great. I have been to Rockford. I know where
that is.
Chairman Manzullo. Good. We look forward to your testimony.
That will not count towards your time. Go ahead, please.
Ms. Byron. Good afternoon. Mr. Chairman and Members of the
Committee, I am Norma Byron, President of the Ashlawn Group,
located in Alexandria, Virginia. I am appreciative you are
holding this hearing and its focus on women's entrepreneurship.
I am testifying on behalf of Women Impacting Public Policy and
the National Association of Women Business Owners.
My entrance into the world of entrepreneurship came about
in a sudden and unconventional way. After spending over 20
years in the munitions industry for small and large companies,
I was thrust into running a munitions company when my boss died
in a small plane crash in the Shenandoah Valley. He had no will
and no succession plan, so it was up to me to keep the company
running and fulfill its contractual obligations. Since his
family did not have any interest in continuing the business in
the long term, they suggested to me that I start my own company
and take the existing customers with me and that is how Ashlawn
Group was born.
Mr. Chairman, the Ashlawn Group is really one of a kind.
There are no other women-owned businesses in this country who
design munitions for weapons systems. Thanks to the program
managers and contracting officers at the Department of Army's
Picatinny Army Arsenal facility, we are slowly but surely
building this business to expand its customer base to other
services and government agencies. If Picatinny had not been
willing to work with us, my business surely would have failed.
So while you hear horror stories of small businesses who
contract with the DoD, you should also hear stories such as
mine that are positive. Since my first contract with Picatinny,
my company's annual contracts doubled after the first year and
have continued to hold steady since then. Our newest initiative
is our fuel cell for munitions programs. We are capable of
reducing a fuel cell to a D size battery and even smaller for
weapons usage. This is critical, because it has been shown that
standard batteries for weapons are not holding up as needed in
Iraq. We have asked Congress for funding in FY 2005. If we
secure the necessary funds, we will be able to produce these
cells within 24 months. In doing so, we will create much needed
manufacturing jobs in this country and insuring our weapons
work. They are the first manufacturing jobs in fuel cells in
America.
Now let me address the challenges we face going forward.
First we have applied for and hope to be awarded 8(a) status.
Mr. Chairman, this is absolutely critical to our success in the
government contracting arena. Clearly, we are not capable of
competing in an open competition with large munitions companies
with enormous resources. Without 8(a) status, we lose the
ability to grow at a rate necessary to compete effectively.
Second, small businesses like mine are at the mercy of
federal contracting policy decisions which can be disastrous
for them. Contract bundling continues to create barriers for
small business. Small business must win each order separately
on a case by case basis, while their large counterparts can win
large bundle contracts. This places small government
contractors at an immediate disadvantage in seeking contracts
with the government.
I know this Committee has been vigilant in its review of
federal contracting policy and fought for changes important to
small business, such as contract bundling.
Third, the enforcement of Federal Acquisition Regulations
and increased scrutiny of subcontracting plans is a key
component of whether businesses such as mine will be able to be
successful. Unless the secretary of each agency places a high
priority on enforcement and attainment of small business goals,
nothing will change. By increasing small business
participation, we are in many cases asking contracting officers
to do things differently. If contracting officers and program
managers are not held to their small business goals and if
contracting is largely left in the hands of the primes without
the proper oversight, small business might well continue to
struggle to get its fair share of federal contracts.
Another issue for small business is payment in a timely
fashion. As you are aware, cash flow is at the heart of any
business. My experience has been difficult working with the
contracting officials to allow for critically needed advance
payments or partial payments for work in progress. Of course,
the difficulty of collecting payments for work completed
becomes even more difficult in a subcontracting relationship.
The other challenge for women in small business is access
to capital. The perception that you can only get an SBA loan if
you do not need one is still the perception among women
business owners and that one needs to change. As women who own
businesses mature and move to the next level of growth, access
to capital is a critical component. Thankfully, we no longer
have to take our husbands with us to get a loan, but from my
personal experience, the amount of loan offered to a woman-
owned business in a financial institution can still differ
significantly from one given to a male counterpart. I encourage
your Committee to continue its good work in ensuring that the
SBA loan programs remain intact and percentages loaned to
women-owned businesses increase. Thank you for giving me the
opportunity to testify and tell my story. I am happy to answer
any questions.
[Ms. Byron's statement may be found in the appendix.]
Chairman Manzullo. Thank you. We might get a series of four
votes that could take an hour somewhere between two and three
o'clock so I want to get through the testimony in chief here,
so if you could keep your remarks to the five minutes, that
would help out.
Our next witness is Maria Welch, CEO of Respira Medical,
Inc. and we look forward to your testimony.
STATEMENT OF MARIA WELCH, RESPIRA MEDICAL, BALTIMORE HISPANIC
CHAMBER OF COMMERCE
Ms. Welch. Thank you. Mr. Chairman and Members of the
Committee, good afternoon. My name is Y. Maria Welch. I am
appearing before you today as a national founding partner of
Women Impacting Public Policy and a member of the Baltimore
Hispanic Chamber of Commerce. I am the CEO of Respira Medical,
a respiratory and home medical equipment company located in
Baltimore, Maryland. Here is my story.
Three years ago, I applied to Women Entrepreneurs of
Baltimore, WEB, an SBA-funded women's business center, which is
also funded by the SBA Prime Program. Prior to entering the WEB
program, I experienced difficulties including domestic
violence, resulting in my becoming homeless. Prior to becoming
homeless, my father, Miguel Better, was dying of chronic
obstructive pulmonary disease, COPD. He was a career iron
worker and was exposed to environmental hazards, such as
asbestos, causing his COPD. COPD is a horrible disease which
prevents ones lungs from expanding and contracting and results
in a long, slow and painful death. The toll of this disease on
a patient and caregivers is enormous. As a result of assisting
in the care for my father, I realized the difference in
services patients received from caring, qualified respiratory
therapists as opposed to home medical equipment companies who
provide only mediocre services.
Faced with the dual challenge of supporting my family and
finding meaningful work, I decided to go into the home health
respiratory business so I could help people like my father and
caregivers like my mother enjoy a much higher quality of life
during the precious time they had remaining with us.
When I applied to the WEB program, I expected to learn how
to write a business plan and open a business. At that time, I
was dealing with a lot of issues which affected my self-
confidence and self-esteem. Not only did I learn how to write a
great business plan and open my business, I also received
immense support, encouragement, resources and tools to overcome
my lack of self-confidence and to build my self-esteem.
I am happy to report that in just three years, I employ 24
individuals and have cared for over 4,500 patients throughout a
broad geographical area. We have grossed over $1.4 million this
past year and have been honored with numerous awards, including
the Small Business Administration Outstanding Woman
Entrepreneur.
I can assure you that none of this would have been possible
without the highly effective and comprehensive program of WEB.
There are no other programs that provide the in-depth and
comprehensive training that WEB provides. The Senate recently
passed S.2267 and I urge the House to agree to its passage. It
is vitally important to the existing women business centers to
be able to continue their much needed services. Fifty-three
centers are in jeopardy of losing their funding as of July 1,
2004 if this legislation is not passed.
Now that I have addressed my successes, let me address some
of the challenges that lie ahead for Respira Medical. An
element of the new Medicare law contains a component of the law
that can close the doors of Respira forever. The new law
requires national competitive bidding for durable medical
equipment, which can include oxygen related equipment that
Respira Medical provides to its patients. While well
intentioned to promote competition among providers and thereby
lower prices, I believe it will have unintentional consequences
for patients and small businesses. The consequence to small
businesses is that service to patients such as my small company
can provide will be lost in the frenzy to provide the lowest
cost equipment. Patients will not only lose services but will
also lose consumer choice.
Respira Medical serves many individuals in isolated
locations. We do not pick and choose whom we serve based on the
amount of reimbursement for services. We fear that national
competitive bidding rules will be set up to favor large, well
capitalized providers and jeopardize small companies like mine.
We fear patient choice will be limited to a few large companies
and, in the end, the patient will lose.
As is the case in many industries, it is a mistake to
assume that size and capitalization assure appropriate, timely
or legitimate services. After overcoming so many obstacles to
be successful, I fear that the government will undo these
efforts by imposing an insurmountable obstacle, a federal
regulation which is not within my power to change.
Currently, the Centers for Medicare and Medicaid Services
are in the process of putting together an advisory Committee to
determine the direction of this new requirement. We urge this
Committee to protect the interest of small business as the CMS
begins this process and develops its advisory Committee. At
Respira Medical, we consider it a privilege to care for a
patient. They have chosen us to provide their care. The secret
to our success is that we do the basics very well. I hope my
competition hears that loud and clear.
Mr. Chairman and Members of the Committee, thank you for
giving me the opportunity to speak today and I am happy to
answer any questions.
[Ms. Welch's statement may be found in the appendix.]
Chairman Manzullo. Thank you very much. Our next witness is
Cheryl, is it Mosier?
Ms. Mosier. Yes.
Chairman Manzullo. Pinch-hitting for her mom, Ann Belus,
who is ill, is that correct?
Ms. Mosier. Yes, she is.
Chairman Manzullo. Cheryl, thank you for coming out on such
very short notice, speaking on behalf of the Plumbing, Heating,
Cooling Contractors of America and we look forward to your
testimony.
STATEMENT OF CHERYL MOSIER, FOR ANN BELUS, PRESIDENT OF CABLE
PIPE AND LEAK DETECTION AND PLUMBING, HEATING, COOLING
CONTRACTORS OF AMERICA
Ms. Mosier. Okay, thank you, Chairman Manzullo, Ranking
Member Velazquez, Members of the Small Business Committee
Members and other distinguished guests. First, let me offer
that it is a thrill for me to be considered as an entrepreneur
and it is indeed a privilege to be serving on a panel with
other women that, in your view, have tremendous entrepreneurial
spirit. Mr. Chairman, I applaud your Committee's scheduling of
a hearing on this topic. It is a most gratifying experience for
me to be here representing my company, Cable Pipe and Leak
Detection, in Spring Valley, California and for the association
of which I am a member, the Plumbing, Heating, Cooling
Contractors National Association.
My entrepreneurial vision began in 1976 when my husband,
John, was employed as a journeyman plumber for a major
contractor. At the time, I was employed as an administrative
assistant for a civil engineer. We had comfortable incomes but
had higher aspirations, both of us keeping alert for new
business opportunities. In John's line of work, he came across
the need for a specific, specialized type of work related to
plumbing. In Southern California, most of our homes are built
on slabs, with the plumbing installed under the foundation. If
a problem in the piping, such as leaks or stoppages develop,
there was no alternative but to dig and keep digging until the
problem was found. He thought there had to be an easier way.
Since his job was more financially lucrative than mine and
we had four children under 12 years old to support, we decided
he would keep his job and I would do the footwork to see if a
business of this type would work. I would like to add at this
point that even though my mom was starting her business, she
always had time for us. She never missed any of our sporting
events and was always there whenever we needed her and she
still is to this day.
I spent days researching manufacturers' directories at the
library to see if there were instruments being made that could
be used to trace underground pipes. The vision for my company
would be to specialize in tracing underground plumbing and
pinpointing leaks in those lines. We leveraged ourselves to the
maximum by taking out a second mortgage on our home and went
out to purchase the equipment and a truck. We settled on taking
small steps and went out and hired our first employee, a
technician, and trained him on how to use the equipment. Our
vision was forming--little did I know at the time that I was
well on my way to becoming a successful entrepreneur.
The first two years were extremely difficult to keep my
company alive, but I would not give up. I operated in the red
but never gave up as I literally pounded the pavement, went
door to door visiting anyone that I thought could benefit from
my services. I tried all types of advertising, newspaper ads,
radio and flyers, but found that word of mouth from satisfied
customers worked the best. I established a foundation of sound
business practices and committed to my customers a quality
product. Eventually my company started to grow.
I never felt that being a woman in a predominantly male-
oriented line of work was any disadvantage. I studied hard and
learned quickly all the aspects of the plumbing trade so that I
could converse with any contractor on an equal basis. When I
approached a potential customer, I knew my facts and promised
great service.
My small company continued to grow until it reached the
point where my husband could quit his job and come work for me.
I continued to run the business from all aspects while he
worked as a technician. Perhaps the biggest issue affecting my
company today is the high cost of health care. It has always
been a priority for me to offer my employees the best in health
care insurance. The exorbitant increases in my health care
premiums are forcing me to consider whether can continue to
provide this benefit to my employees.
My company firmly supports Association Health Plans and I
am pleased to learn that both Chairman Manzullo and Ranking
Member Velazquez support this legislation with Representative
Velazquez taking a leadership role in sponsoring this
legislation.
I understand that this week being labeled covering the
insured, so it is a thrill for me to be here in town while such
an important issue is generating headlines. One would think
that with small business providing nearly 70 percent of the
economic growth in the country, it seems only fair that we
should be able to obtain affordable health care such as that
offered by large companies.
In many ways, health care is a job issue. I would like to
employ more technicians to meet the growing needs of my
company, but I am somewhat reluctant to do so until we can
hopefully control these ever increasing health care costs.
In summation, having my own business has indeed been
extremely satisfying for me. There have been tough times, good
years and bad, problems encountered along the way, but I feel
that I have provided a valuable service to society and provided
a good working environment for all my employees. I now look
forward to my retirement and letting my children take over the
business operations. Perhaps now would be a good time to put in
my plea for Congress to do away with the death tax, once and
for all. I am fortunate to be in this industry and I truly
value the services I provide, including health, comfort and
safety to citizens across the country. Thank you, Mr. Chairman,
for the opportunity to allow me to share the story of my dream
come true.
[Ms. Belus's statement may be found in the appendix.]
Chairman Manzullo. Well, thank you very much. Our next
witness is Isabelle Hilliard, President and Chief Executive
Officer of Old Dominion Home Health Services. We look forward
to your testimony.
STATEMENT OF ISABELLE HILLIARD, OLD DOMINION HOME HEALTH
SERVICES, U.S. CHAMBER OF COMMERCE
Ms. Hilliard. Thank you, Chairman Manzullo, Ranking Member
Velazquez and members of the Committee. I am Isabelle Hilliard,
President and CEO of Old Dominion Home Health Services, a small
business headquartered in Richmond, Virginia with another
center located in Petersburg, Virginia. Our firm currently
employs 125 individuals dedicated to providing highest quality
home care services to clients in their homes.
My businesses offer a myriad of health care services,
including free home care evaluation, medical skill nursing,
Medicaid home health, Medicaid personal care, technology
assisted waivered, respite care, sitters, live in and companion
services, as well as physical, occupational, speech and
respiratory services. My business includes a durable medical
supply and equipment company and an adult day care center.
I also come to you as a member of the U.S. Chamber of
Commerce's Small Business Council. I am deeply honored to speak
to you today on issues that are very important to me. I cannot
help but think of the millions of women-owned businesses that
share similar concerns and challenges as I have in the years of
my being in business.
Succeeding as a women-owned business, small business, are
not much different than the hurdles presented to all small
businesses, though at times they are exaggerated by my gender.
Access to capital or the lack of it, the deluge of government
regulation and paperwork, navigating through a complicated
regulatory process and the ability to attract and keep
qualified personnel serve to headline my difficulties in
business over the years.
I would like to make the following recommendations to
Congress that would not only help my industry but would also
help other business owners like myself start, run and expand
our businesses.
First, this Committee and the House of Representatives
should pass S.2267, the Business Centers Sustainability
Recovery Act of 2004. This bill would enable the Small Business
Administration to reprogram currently appropriated funds and
tap into a pool of funding normally reserved for initial grants
to newly-established Women Business Centers. WBCs have been
successful in providing assistance to women in all walks of
life, including women who once received public assistance and
are now operating businesses and creating jobs. Congress must
appropriate enough funds to provide a consistent and
predictable SBA 7(a) loan program. The SBA 7(a) program and the
504 guaranteed loan programs play a vital role in alternative
sources for capital when funding through conventional methods
is not available, especially for women business owners.
Third, the Senate must follow the lead of the House and
pass association health plan legislation. Access to affordable,
high quality health care coverage for small business owners and
their employees must be improved, without adding new mandates
that require specific coverage.
Chairman Manzullo. Isabelle, could I interrupt you there?
If I could go on to Terry to get her testimony in before we
have to run off for some bells, would you mind if I do that?
Ms. Hilliard. I do not mind at all.
Chairman Manzullo. Then we will come right back and to the
question time, okay?
Ms. Williams. Talk to me in the future------.
Chairman Manzullo. Terry, go ahead. I am sorry about these
bells, but we will make sure everybody gets enough time.
STATEMENT OF TERRY WILLIAMS, U.S. WOMEN'S CHAMBER OF COMMERCE
Ms. Williams. Chairman Manzullo, Ranking Member Velazquez,
Members of the Committee, thank you for the opportunity to
appear before you today. My name is Terry Williams and I am
President of the U.S. Women's Chamber of Commerce, representing
the over 10 million women business owners of America.
We are pleased to know the Committee on Small Business is
looking at the successes and challenges of women in business
because, frankly, we need your assistance. The growth of women-
owned businesses in the U.S. over the last decade has become
one of the great business headlines of our time. Driven by
individuality and independence, necessity and practicality,
women by the thousands have abandoned the safety net of
employment for the new frontier of entrepreneurism. With this
feminine entrepreneurial expedition came headline stories and
the growth and successes of women in business.
Corporations lined up to fund reports and send press
releases to generate headlines about women in business and
political leaders held women's summits and gatherings to
celebrate the successes of women.
Unfortunately, the financial realities for women business
owners are not really so bright. Even though privately held
majority, 51 percent or more women-owned businesses make up
nearly 30 percent of all privately held firms in the U.S.,
between fiscal year 1998 and 2003, there was a 7.5 percent
decrease in the average value of loans made to women-owned
businesses. The share of dollars lent to women-owned businesses
increased from an already low of 13.2 percent in 1998 to only
14.3 percent in 2003, while the share of the number of loans
and equity investments decreased from 23 percent to 20 percent
over the same period.
Women-owned businesses struggle continually to reach
through the federal procurement market, reaching the artificial
five percent nickel ceiling. The 2001 U.S. Small Business
Administration Office of Advocacy Women in Business reports
98,870 women-owned firms or 1.8 percent had receipts of more
than $1 million, compared to five percent of the market whole.
So women-owned businesses are much smaller than the market
whole.
The struggle women-owned businesses are facing as they
strive to reach strong levels of revenues is hindered by their
ability to compete for larger market share. The majority of
women-owned firms in the U.S. generate $1.19 trillion in sales
and employ 9.8 million people nationwide. This sounds
wonderful, but when the receipts of women-owned businesses are
compared to the market whole, we gain a clearer perspective of
the constraints women face. A representative sampling of the
top metropolitan areas reveals that while there are a
significant number of women-owned businesses, their receipts
remain small.
For example, the D.C., Maryland, Virginia, West Virginia
metro statistical area. In that area, women own 32.3 percent of
all firms but their annual receipts are only 10 percent, so
they are one third of the size of the market whole.
In Detroit, you can see the numbers are about the same.
Detroit, Atlanta, Georgia, they are all in the 30 percent
range, while their businesses generate less than ten percent of
the receipts.
The question we ask today is, while celebrating the
successes of women in business, why is not the President,
Congress and the Small Business Administration addressing the
clear, competitive issues that our new pioneering women
business owners are facing? Women owned businesses receive
fewer and smaller SBA loans. Women owned businesses receive far
fewer and smaller government procurement contracts. In an
unconscionable lack of support for women-owned businesses, the
SBA has failed to implement the Women's Procurement Program
that was established in 2000. And this Committee has not acted
to intercede on our behalf.
I have grown successful businesses and I can attest that
without access to markets, capital and technical expertise,
businesses flounder. Our dynamic, committed women business
owners need you to support them. In this time of focus on job
stability, job growth, stability and fostering in competitive
America, it is incomprehensible that we are not doing
everything within our power to foster and develop this new
wealth of entrepreneurial talent.
To date,much has been promised and very little delivered.
Modest tax cuts really do very little to help very small
businesses.
Chairman Manzullo. I am going to have to stop you there. We
are going to come back. It could be 45, 50 minutes. When we
come back, Terry, I will let you finish and then Isabelle, I am
going to go back to you, okay. I am not forgetting about you, I
just wanted to get everybody in before we go down for what
appears to be about four votes. So hopefully, about 45 minutes.
Yes, and we will be back.
Oh, no, you do not have to stay seated. If anybody has to
catch a plane, feel free to go, okay. I mean, if you are not
here, we will understand you are on an airplane. We will be
back.
Ms. Williams. Thank you.
[Whereupon, a short recess was taken.]
Chairman Manzullo. Call the hearing back to order. Sorry
about that. We were in the midst of testimony with Terry
Williams and then we want to finish with Isabelle Hilliard.
Deputy Administrator Sabelhaus has to leave at 4:15, is
that your calendar there?
Ms. Sabelhaus. Sorry.
Chairman Manzullo. Let me do this. Let me defer to you, Ms.
Velazquez, for some questions, because I know you have some of
Ms. Sabelhaus.
Ms. Velazquez. I have a lot.
Chairman Manzullo. Okay, we will give you ten minutes
there, then at 4:15 I will excuse you. Then we will come back
to you ladies and finish your testimony.
Ms. Velazquez?
Ms. Velazquez. Thank you. And thank you all for being here.
It is great to have all these success stories and for my part
and I know the Chairman, we are committed to make sure that SBA
provides the tools that you need in order to grow and expand.
Ms. Sabelhaus, you know, listening to your testimony and
listening to the rest of the witnesses here, I feel like I am
in two different hearings. On the one hand, they are talking to
us about all the needs of women-owned businesses and the
commitment that we need to have in providing the tools that
they need for succeeding.
In your testimony and, you know, you are sitting here, you
are representing the administration. I know that you are a
charming lady, but these are issues that are important to me
and to women-owned businesses in this country. In your
testimony, you gave the impression that the SBA is meeting
capital needs of women entrepreneurs more than ever. However,
the average size of the 7(a) loan program, loans to women
businesses has declined from 185,000 to 133,000. This is
largely due to SBA's single focus on increasing the number of
loans that it is making, while not calling for a corresponding
increase in funding.
As a result, women entrepreneurs must look to other, more
costly sources of capital to compensate for this shortfall.
What is SBA doing to insure that it fully meets the needs of
women entrepreneurs, rather than just talking about the number
of loans that it is making?
Ms. Sabelhaus. Thank you very much for your question and I
will respond by saying, I listen, as I do every week,
Congresswoman, as I go out into the field and talk to women
about what is on their mind and what do they need.
Ms. Velazquez. Can you answer the question?
Ms. Sabelhaus. Yes, I will. I will answer the question,
absolutely. I will just say this to you. This is my focus,
Hector and myself, this is what we are driving, is that we can
have more access to capital for women entrepreneurs. I will say
that the numbers truly speak for themselves and I think that is
important to note. Last year, our lending was up 30 percent to
women.
Now you mention the fact that loans are lower. The market
drives. The women here in this room are driving what they need
as far as access. What I am proud to say is what small business
owners are saying, they do not need a $250,000 loan. When we
came into office, both Hector and I, that was the average size
of a 7(a) loan. We brought that loan size down to $190,000.
Ms. Velazquez. Ms. Williams, how do you feel about that, in
terms of evidence that you have in front of you and anecdotal
experience? Is this is what we hear from women entrepreneurs,
that they need less money, not a larger amount of money? That
it is okay that we cut the 7(a) loan from 1.5 to 750 and
reinstate it because of all the publicity that was generated?
Ms. Williams. Thank you, Congresswoman, for the question.
Actually, our statistics show that women-owned businesses
continue to be about a third of the size of the market whole,
which means they cannot compete. And to compete, you need
money. You need the same sort of money that the whole market
has and that means getting the same size loan. Thank you.
Ms. Velazquez. Thank you.
Ms. Sabelhaus. Can I respond to that?
Ms. Velazquez. I have too many questions. Currently through
the 7(a) program, SBA guarantees--I asked a question.
Chairman Manzullo. No, I understand, but she wanted to make
a response. We can give you a couple more minutes. Just let her
respond to this.
Ms. Sabelhaus. I was just going to say that women are
starting businesses and they are smaller businesses, so they
require less as far as a loan size is concerned. That is what I
am hearing. I am hearing small businesses say that the lower
loan size is what is very important. And that is why they want
access to $35,000 or less loans and that is why the average
size, which I think I am very happy to say, is about $190,000.
Ms. Velazquez. That is exactly why you zero out the micro
enterprise----
Ms. Sabelhaus. No.
Ms. Velazquez [continuing] What you are telling me right
here, right now, less amount of money, not more. And so what is
the micro loan program? What is it?
Ms. Sabelhaus. Okay, the micro loan program----
Ms. Velazquez [continuing] It is okay.
Ms. Sabelhaus. Do you want me to answer that or not?
Ms. Velazquez. No.
Ms. Sabelhaus. Okay.
Ms. Velazquez. Through the 7(a) program, SBA guarantees up
to 85 percent of a loan. If the maximum guarantee is revised to
be 50 percent as SBA proposes, what effect will this have on
the availability of capital to women entrepreneurs?
Ms. Sabelhaus. With the zero subsidy, which is very
important, we are going to be able to offer $12.5 billion in
our FY 2005 budget. What this means is there is no cap. We will
never cap, we will not close it. We will not have to go for
appropriations, we will not have to operate under a CR. We will
have, at no cost to the taxpayer, $12.5 billion worth of
lending, which means we can go up to 90,000 loans, which means
women are included in that and that----
Ms. Velazquez. Okay, I get it. Have you been listening to
the banks? Did you hear what they are saying?
Ms. Sabelhaus [continuing] Yes.
Ms. Velazquez. What does it do in terms of not using
taxpayers' money if the banks will not be willing to lend? You
know and I know that the biggest problem that small businesses
have is accessing capital through conventional loans with
commercial banks. That unless we have a guarantee like the
7(a), we are not going to have those loans.
So do not tell me that if we reduce the guarantee from 85
to 50, that small businesses will be able to access capital
through the 7(a) loan program.
Ms. Sabelhaus. What is interesting is that right now, we
did come up with a compromise which, I thank you very much, we
felt was a very good solution to this plan. And that was, of
course, that we were able to offer $3 billion more in the loan
appropriation so that we can have a $12.5 billion loan program.
But the point I was----
Ms. Velazquez. Are you willing to support extending that to
them next year?
Ms. Sabelhaus [continuing] Our most popular program--we
want to go to zero subsidy and then we have the program. We
have the $12.5 billion. That is what is key, that is what is
important. We do not have to beg for appropriations. We have
the money to lend to these women at this table and all the
women entrepreneurs.
Ms. Velazquez. You know that we reach a compromise because
you knew that you would not be able to get the reauthorization
passed under suspension, because I would have opposed it. We
cannot come here with a great rhetoric while the numbers do not
match it.
Ms. Williams, as you know, the administration has proposed
to eliminate funding for the micro loan program, with the
understanding that such low income entrepreneurs can be readily
served through other avenues. The micro loan program is the
only SBA access to capital program where nearly 50 percent of
its funds find their way to women entrepreneurs.
Given this reality, how do you believe this cut will affect
women entrepreneurs?
Ms. Williams. We believe this cut, and our members believe
this cut would be highly detrimental to the growth of women in
business. We don't just need women entering businesses, we need
women able to access the funds that they need to get to the
next level.
These small loans also come also with technical assistance
and other things that are really an intricate part of the micro
loan program and we need not to remove these from the
opportunities for women.
Ms. Velazquez. Melanie, most, if not all borrowers
obtaining funds through the micro loan program have been turned
down by conventional lenders, including those that make 7(a)
loans. With this in mind, is it not a bit disingenuous to
suggest that the typical micro loan borrower, with a credit
score well below what banks will accept, can be served through
the 7(a) program?
Ms. Sabelhaus. I would like to say to you that when I look
at our numbers last year, I think it is important to note that
we did 23,000 7(a) loans that were under $35,000. We did 2,400
loans, micro loans, that were under $35,000. So what you are
looking at is a program which is 7(a), which is ten times,
which means we are getting the program out to the women. We are
reaching out to them and in addition to that, I think it is
important to note that when we work for a flagship program,
which is the 7(a) SBA express, it is a 50 percent guarantee and
the banks are willing. It is the most popular program we have.
Forty-seven percent of all the loans that we did with women
were through the 7(a) SBA express.
Ms. Velazquez. That is only five minutes----
Chairman Manzullo. I gave you ten minutes. I want to
conclude this hearing hopefully within a short period of time,
but I want to go to Terry to have you finish your testimony and
then to Isabelle to have you finish your testimony.
Ms. Velazquez [continuing] Well, I will come back.
Ms. Williams. Thank you, Chairman.
Chairman Manzullo. Thank you. I am sorry for the disruption
with the bells, but this is our constitutional obligation----
Ms. Velazquez. Chairman, I have a question to you.
Chairman Manzullo [continuing] Well, let them finish their
testimony.
Ms. Velazquez. Well, she is going to leave at 4:15.
Chairman Manzullo. That is correct.
Ms. Velazquez. Okay, so I want to ask a question, not a
question to her. I have other questions and I will be
submitting those questions to you, for you to send the
responses in writing.
Ms. Sabelhaus. And I will do that.
Chairman Manzullo. How much time would you like to respond
after you receive?
Ms. Sabelhaus. What would be appropriate?
Ms. Velazquez. Three days?
Ms. Sabelhaus. Three days? That would be fine.
Chairman Manzullo. Terry?
Ms. Williams. Thank you, sir.
Chairman Manzullo. Deputy Administrator, you have to leave
at 4:15. You are excused.
Ms. Sabelhaus. Thank you very much.
Chairman Manzullo. Thank you for participating. If anybody
else has to catch an airplane, please, you know, do not miss a
plane because of us. Go ahead, Terry.
Ms. Williams. Thank you very much. I was just----
Chairman Manzullo. Where were we? Okay.
Ms. Williams [continuing] I was just getting to delivering
on the promise.
[Discussion held off the record.]
Chairman Manzullo. That would be fine, thank you.
Ms. Williams. Thank you, sir. Today, much has been promised
to women-owned businesses and very little delivered. A modest
tax cut does little to promote the growth of a very small
business. The attempt to eliminate micro lending and adding
more purloin costs to other loan programs does not help women
in business.
Cutting back the budget of important Small Business
Administration programs does not help. Eroding the number of
procurement center representatives does not help. Cutting the
funding for Women's Business Centers does not help. Not
implementing the Women's Procurement Program does not help.
Failure to provide affordable health care does not help.
Congress has not adequately served women-owned businesses.
We strongly need real assistance with access to quality
affordable health care so women business owners can secure and
retain quality workers and remain competitive. Tax relief that
truly supports the small business marketplace, access to the
government marketplace with more realistic goals that are on
par with the number of women-owned businesses rather than a
portion of a portion of an already too small pie. We need a
truly competitive marketplace that fosters competitiveness at
all levels of contracting.
Access to capital that is representative of our numbers and
growing influence in the marketplace, reductions in the
regulatory compliance work to relieve small businesses of
wasted time and money so they can focus on growing and
sustaining their businesses.
More than anything, this dynamic market needs you to step
up to the plate and truly embrace women-owned businesses for
all that they can mean to the financial prosperity of our
country.
Mr. Chairman, we greatly appreciate your desire to hear of
the successes and challenges of women in business. We hope that
you and the Members of this Committee will finally help us take
these successes to the next level. We hope you will move beyond
handshakes and headlines to concrete action that will fully
maximize the growth opportunities of women-owned businesses
throughout the U.S. Help us complete the great entrepreneurial
expedition and bring women-owned businesses to maturity and
full contributing partners to a robust and flourishing U.S.
economy.
On behalf of the over 10 million women business owners in
the United States, thank you for considering our challenges
along with our successes.
[Ms. Williams' statement may be found in the appendix.]
Chairman Manzullo. Thank you. That had to be the longest
testimony, yours and Isabelle's stretched over a period of
time.
Isabelle, we look forward to your concluding your
testimony. Do you know where you left off?
Ms. Hilliard. Yes, sir, I do.
Chairman Manzullo. Why do you not go ahead? Again, thank
you for patience. Please go ahead.
Ms. Hilliard. I was at number three. The Senate must follow
the lead of the House and pass the association health plan
legislation. Access to affordable, high quality health care
coverage for small business owners and their employees must be
improved without adding new mandates that require specific
coverage.
Four, Congress must pass medical malpractice reform.
Excessive litigation and high medical malpractice rates have
added to employers' health care costs, reduced access to
quality medical care--especially in the rural areas--and
prompted unnecessary tests by physicians that further drive up
health care costs.
Five, federal agencies must reduce excessive federal
paperwork burdens. One complete example of an agency where
regulation and paperwork has limited my ability to hire people
and expand my business is the Centers for Medicare & Medicaid
Services. I have found many of the forms by CMS to be
duplicative, excessive and unnecessarily time consuming.
Six, over the last three years, Congress has passed and the
President has signed into law tax reforms that have reduced
marginal income tax rates, eliminated the death tax and
increased small business expensing. These reforms must be
permanent, thus freeing women business owners like myself to
make investment decisions based on tax laws that are consistent
and predictable from year to year.
Again, I want to thank the Chairman and Ranking Member for
allowing me to testify at this hearing.
[Ms. Hilliard's statement may be found in the appendix.]
Chairman Manzullo. Well, thank you. I have some questions
here. Let me start first of all with you, Isabelle. Has your
company, and you have what, 125 employees?
Ms. Hilliard. Yes.
Chairman Manzullo. Are you the sole owner of it?
Ms. Hilliard. Yes, sir.
Chairman Manzullo. Have you had occasion to take advantage
of any of the new tax breaks with regard to purchase of
equipment or is yours more of a service?
Ms. Hilliard. No, sir, I am a service company.
Chairman Manzullo. Okay.
Ms. Hilliard. I provide service to clients and I have a
medical supply equipment company that also, we purchase
wheelchairs, walkers, canes and those type of supplies,
hospital beds and equipments, and those are services.
Chairman Manzullo. Okay. In your testimony, you mentioned
about, I think it was the last paragraph, that Congress had
passed and the President signed tax reforms that reduced
marginal income tax rates, limited the death tax and increased
small business expensing. To anybody here, what is the
significance of eliminating the death tax? What impact does it
have on any of your businesses?
Ms. Hilliard. Well, I think it will help the business grow
and expand. I think it will continue to keep employees. And if
any employees in our business, we should lose employees, we
will be able to work with those employees and their family
members. I think that is what is relating to us as far as the
death tax.
I think it helps my company, as well as everybody else's
company, grow and expand itself.
Chairman Manzullo. I would venture to state that everybody
here is having a horrible experience of the increasing and
escalating cost of health care. How do any of you feel about
the relationship between the medical malpractice premiums for
physicians and the high cost of insurance? Does anybody want to
comment on that? Norma?
Ms. Byron. Well, it is hard for us to say, I think. I mean,
unless you are in the health care industry. Maybe they would
know. It is sort of invisible to us. We do not know why they
are going up, but those things, they are not within our control
to change our behavior in any way to affect that. I am sure it
has certainly an impact, but it is not something that we see.
Chairman Manzullo. That is something that you cannot
quantify because you cannot draw the distinction on it?
Ms. Byron. That is right.
Ms. Williams. And, Chairman, one of the large challenges is
really just even the scale of small businesses and their access
to health care. We really do not have the ability to have scale
in terms of purchasing health care for our businesses.
Chairman Manzullo. Well, that is what association health
plans will do, right.
Ms. Williams. It will really make a difference with that.
Chairman Manzullo. And that has been bottled up in the
Senate, by the Democrats.
Ms. Williams. We hope that this will pass.
Chairman Manzullo. Right, well, we appreciate that, even
though Ms. Velazquez and I both are in favor of the association
health plans, but it has been an issue that has really
stagnated in the Senate and it has hurt us tremendously.
Ms. Napolitano?
Ms. Napolitano. Thank you, Mr. Chairman. I apologize, I had
other commitments and somebody twisted my arm to make sure that
I got here. Being a micro small business owner myself, I have
had the opportunity to ask questions of some of my women-owned
business in my area, and I have part of the Los Angeles area,
which as you well know, is very diverse.
What I am finding out is that women are having a hard time
convincing banks and other lending institutions to loan money
to them, because, number one, they are women. Number two, they
are small. And number three, they do not want to handle a small
loan that is going to cost them in time and money the same as
it would a large loan.
What say you to that? How do you feel that we need to put
pressure on the banks, whether through the FDIC, which they
have been here before us before, this Committee, where we have
applied pressure to them and said, look, if you want the
protection of the federal government, you need to work with
small business.
Now the other thing that I am finding out is that credit
unions are beginning to get involved in small micro and small
business loans, with the blessing of SBA to a certain point.
That, to me, is going to be a boon for women, because those are
local vendors, local owners, local business people that know
the community.
I would like to hear from you how we can expand this to
include other women entrepreneurs that will help our economy
rather than hinder that ability, not only to get started, but
develop products that will be able to employ and provide the
jobs that we so desperately need in this country. Any one of
you?
Ms. Williams. I can speak personally from the lending side
for business that I had on my own. SBA was wonderful to work
with. We were one of the businesses that qualified for the very
high level of backing from SBA and the banks really did not
care. And the SBA in our region had very little ability to
really coax those folks to really support the program. What we
were told was that these programs were costly to the bank, that
our loans were very expensive for them and that it was really
nothing of importance for them.
I believe that there needs to be a stronger tie to the SBA
and the ability to get those banks to loan. Also, I think any
time that we can put in the hands of folks that are much closer
to our community the ability to do that lending, that we are
going to have a better response.
So the ability to get into associations, those sort of
things to do the lending and to some of the SBICs, these sorts
of lending institutions that might be run by women, would be
wonderful for the marketplace.
Ms. Welch. If I may something on a personal note, I think
unfortunately many of us women entrepreneurs, a lot of times we
actually start our businesses out of need and such in my case.
And I was in a divorce where my credit was affected negatively
and that was a long time ago, over ten years ago, and to this
day, I am still suffering from that. Although my credit history
now is wonderful, but the banks look at me very badly. And if
were not for my husband, who helps me with his credit, that is
how we are able to do some of the funding. But on my own, I
should be able to, and that is one of the issues I think many
of us women face.
Ms. Byron. I have a situation. I went to a seminar where
one of the leading financial institutions in the metropolitan
area mentioned that virtually any business could come up and
get a $50,000 loan, but when I went to go apply for one, they
would only give me $25,000. And they said they went to SBA and
that somehow or another, I did not qualify.
There is nothing wrong with my credit, but I just did not
qualify. So I do not know what the problems are, but I know
that there are some and I have them.
[Laughter.]
Ms. Pike. One of the things I found after my husband died,
we went through some transition, but what I used was his
financial officer and I have maintained him over the last eight
years. And so I used him as a front man and, you know, he went
to the bank and he did the stuff and did the preliminaries.
Then when it came down to really talking to them, you know,
then I sort of would come into the picture.
But I used that as sort of like to keep myself involved.
Ms. Napolitano. You were able to have somebody front for
you. How about the dozens, thousands of women who cannot?
Ms. Pike. Absolutely.
Ms. Napolitano. And why are we not in SBA creating a
program that is going to help these women who have the need?
They have the ability, we have shown it over and over again,
but yet we cannot get the funding to an agency. They were here
saying, oh, no, we have enough money, remember that? Oh, yes,
we have enough money for the programs. What happens? They start
cutting the programs.
Well, ladies, you need to stand up on your hind legs and
start talking to these people and telling all the women
business owners and your customers and your providers to put
the pressure on Washington. Because without you, this economy
is going to go down the tubes. Because women work harder and
they maintain longer and they have the staying power that it
takes to be successful.
I am very upset because this continues to be a problem.
What was it, last year, they came up and asked for $8 million
for the women-owned SBDCs. Eight million for the whole United
States, ladies. And I am saying, well, that should be ten times
that. They were asking for three, three more, and that was not
this budget year, I think it was the last budget.
I mean, it is the way you are treated, the way women--they
are not given the recognition of being the backbone of a lot of
our economy. And you are the fastest growing segment. Why is it
that we have to fight and plead and beg for every cent?
So my response to you is, help. Thank you, Mr. Chair.
Chairman Manzullo. Let me, if I could just take a minute or
so here. I was raised in small business and my heart is in
small business. And this Congress has done a remarkable job on
helping out the small business people. We will go through just
a very short list here. When the tax cuts went through, that
increased the bonus depreciation from 30 percent to 50 percent.
Increase small business expensing from $25,000 to $100,000. And
I have talked to a lot of guys with machine shops in Rockford
and because of this provision whereby they could get back their
money within one year of buying new machinery, as opposed to
over a period of years, this helped them acquire the machinery
they needed in a very short period of time, without having to
wait years and years to depreciate it. A lot of shops have
struggled and some have not made it in Rockford, but many of
the guys that did make it appreciate the fact that Congress
stepped up and did that.
This death tax is extremely important. There is a figure
out there that says something like I think it is 40 percent of
small machinery, small manufacturing facilities do not get
passed down to the children. The figure is staggering because
of the tremendous cost of capital that is involved. You know, a
father who is a lawyer can pass down his practice as it were to
his son who is a lawyer at a very little cost, if any at all,
because those are paper transactions. And services have a very
difficult time being evaluated for estate tax purposes.
But when we decided to get rid of that death tax, because
it was killing the restaurant industry, it was killing the
people with machinery and it was also killing the farmers back
home. I remember one time when I was practicing law, when I had
to tell the family that they had to sell one of their farms
just to pay the death taxes. We got rid of that or at least
moved down the road towards doing that.
We got involved with the health savings accounts. I mean,
any number of things that we have done. There is a difference
in philosophy. Programs are good. If you have a program, you
should fund it, otherwise you should not have it at all. That
is the angst that we see here and I join in that.
Personally, I would rather see small business people have
access to capital with the ability to make their own decisions
on where they are going to go. I mean, you can only have so
many programs after awhile. I think the SBA should concentrate
on, for example, making the 7(a) the best program there is,
make it open for everybody, keep it at 85 percent and not have
to come back here year after year after year. If the flagship
program, which is the 7(a) were made so that each year was not
subject to an appropriation, then it would be more predictable,
more open for people and Congresswoman Velazquez and I would
not have to, as it happens every year, have to get into a tango
with the Administration to get them to write the check in order
to fund it.
So not everything is perfect. And we just try our best, I
guess, based upon our philosophies. But, Terry, I am not going
to let you leave here until you tell these people what you did
prior to becoming President of the Women's Chamber of Commerce.
Ms. Williams. There is a big change.
Chairman Manzullo. There is. I want you to tell them.
Ms. Williams. Well, you are very kind, but then I am going
to squeeze in a response to you.
Chairman Manzullo. I am responding to you, Terry. All
right, go ahead.
Ms. Williams. I appreciate your opportunity to speak.
Chairman Manzullo. Go ahead.
Ms. Williams. I was a conductor. So I----
Chairman Manzullo. Well, not a train conductor, but an----
--.
Ms. Williams [continuing] Orchestra conductor. No, not a
train conductor, an orchestra conductor, it is true. So I am
used to like making things happen, so hopefully I can make some
things happen today.
One of the things I would really lies to articulate to you,
sir, I understand your commitment to small business. You would
not be the Chair of this Committee if you were not.
Something to really understand about women in business, you
talk about, for instance, equipment, size of equipment,
manufacturing. There are about two percent of all women-owned
businesses that are manufacturers, so we are talking about two
percent. About 50 percent are service oriented businesses that
do not have equipment. So it is really, really a challenge to
us.
And you talk about size and getting cuts and things. Now
take the businesses you were talking about and make them a
third of the size that you are used to seeing. That is a women-
owned business. You know if there are a third of the businesses
in the marketplace only getting ten percent of the revenues,
then they are a third of the size of the market.
And when we talk about just sort of standardizing loan
programs, one of the challenges that we have in the market
right now is that there is micro, small, medium, large. There
is a breadth of businesses in the marketplace and if we
standardize a program, then we need to make sure we are
servicing the whole breadth of the market with that one
program. That is why we fight so hard to make sure that there
are niches of programs that serve the marketplace and serve
women. Thank you.
Chairman Manzullo. Well, the micro loan program was
abandoned because of the high rate of default on it. It became
an issue of safety and solvency. It is not abolished yet, but
that is one of the reasons why----
Ms. Velazquez. Can I correct the record, Mr. Chairman? The
micro loan program has a lower default record than the 7(a)
loan program, so that is not the reason.
Chairman Manzullo [continuing] Well, we would disagree on
that point. But one thing we agree on is that you ladies have
been tremendous witnesses. You have traveled from long
distances. You know, the purposes of these hearings is many-
fold. We have to draft legislation that deals with lots and
lots of issues and oftentimes when we are sitting there trying
to figure out where to go in policy, we make our decisions
based upon the testimony that we hear here in Washington, the
things we see in our congressional districts. The beauty of a
congressional hearing is the fact that we have an opportunity,
normally within about an hour and a half, to hear testimonies
from people all over the country. Different backgrounds,
different situations, and that is what we heard today. I cannot
tell you how much I appreciate your coming here this afternoon,
traveling to Washington. What we are going to do, as I said
before, the record will accept your complete statement and as
soon as we get a bound volume--I do not know how long it will
take--of the testimony, we will make sure that we send it to
each of you. Again, thank you for coming and this hearing is
adjourned.
[Whereupon, at 4:38 p.m., the Committee was adjourned.]
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