[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE MARKUP ON LEGISLATION
AFFECTING SBA'S TRADE AND MICROLOAN
PROGRAMS: H.R. 2992 AND H.R. 3020
=======================================================================
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JULY 19, 2007
__________
Serial Number 110-37
__________
Printed for the use of the Committee on Small Business
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
HEATH SHULER, North Carolina STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona TODD AKIN, Missouri
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas STEVE KING, Iowa
DAN LIPINSKI, Illinois JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa DEAN HELLER, Nevada
YVETTE CLARKE, New York DAVID DAVIS, Tennessee
BRAD ELLSWORTH, Indiana MARY FALLIN, Oklahoma
HANK JOHNSON, Georgia VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania JIM JORDAN, Ohio
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Kevin Fitzpatrick, Minority Staff Director
______
STANDING SUBCOMMITTEES
Subcommittee on Finance and Tax
MELISSA BEAN, Illinois, Chairwoman
RAUL GRIJALVA, Arizona DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana STEVE KING, Iowa
HANK JOHNSON, Georgia VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania JIM JORDAN, Ohio
______
Subcommittee on Contracting and Technology
BRUCE BRALEY, IOWA, Chairman
HENRY CUELLAR, Texas DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania TODD AKIN, Missouri
MARY FALLIN, Oklahoma
.........................................................
(ii)
?
Subcommittee on Regulations, Health Care and Trade
CHARLES GONZALEZ, Texas, Chairman
RICK LARSEN, Washington LYNN WESTMORELAND, Georgia,
DAN LIPINSKI, Illinois Ranking
MELISSA BEAN, Illinois BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
JIM JORDAN, Ohio
______
Subcommittee on Urban and Rural Entrepreneurship
HEATH SHULER, North Carolina, Chairman
RICK LARSEN, Washington JEFF FORTENBERRY, Nebraska,
MICHAEL MICHAUD, Maine Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana DEAN HELLER, Nevada
HANK JOHNSON, Georgia DAVID DAVIS, Tennessee
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, PENNSYLVANIA, Chairman
CHARLIE GONZALEZ, Texas LOUIE GOHMERT, Texas, Ranking
RAUL GRIJALVA, Arizona LYNN WESTMORELAND, Georgia
(iii)
?
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Chabot, Hon. Steve............................................... 2
Sestak, Hon. Joe................................................. 4
APPENDIX
Prepared Statements:
Velazquez, Hon. Nydia M.......................................... 9
Chabot, Hon. Steve............................................... 11
(v)
FULL COMMITTEE MARKUP ON LEGISLATION
AFFECTING SBA TRADE AND MICROLOAN
PROGRAMS: H.R. 2992 AND H.R. 3020
----------
Thursday, July 19, 2007
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:03 a.m., inRoom
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
[Chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Shuler, Gonzalez,
Larsen, Michaud, Cuellar, Lipinski, Altmire, Braley, Clarke,
Johnson, Sestak, Chabot, Bartlett, Akin, Davis, Fallin,
Buchanan, and Jordan.
OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ
Chairwoman Velazquez. Good morning, everyone. I call this
session to order. And let me just say that the first order of
business this morning was supposed to be voting on a resolution
to issue a subpoena to the Veterans Affairs Department. But as
of 5 minutes ago, we are in possession of a letter confirming
the attendance of Robert Henke, Assistant Secretary for
Management of the Department of Veterans Affairs, as a witness
for the Committee's hearing on August 2nd, 2007. And I would
like to thank Ranking Member Chabot and his staff, because I
know that you were in conversation with the Department of
Veterans Affairs. With that, I am pleased to call this
morning's markup to order. Today's markup addresses some very
important issues for small firms, SBA's International Trade
programs and its Microloan Program. These programs have proved
themselves to be beneficial for small businesses. International
trade is a key part of our economic future and competition in
the global marketplace will only increase in the years to come.
Small businesses that generate and develop new products have
shown that they can lead the way in building entire industries,
if they are provided with basic assistance at the start.
To a limited degree, SBA's trade initiatives have helped,
but more needs to be done. Another equally important role for
the SBA is to provide direction and resources for those who are
looking to start and grow their firms. In cases where there is
reason to believe an entrepreneur could succeed, but lacks the
credit history or training, the Microloan Program has found a
way to turn these aspiring business owners into employers. To
accomplish these missions, the Agency has specific programs
that have been successful, but they have not been modernized to
keep up with the new economic challenges.
With that in mind, we are marking up two bills that address
some small, but frustrating barriers that have prevented small
businesses from fully utilizing these SBA programs. By doing
so, we will give entrepreneurs the tools they need to succeed,
without unduly burdening taxpayers. The bills we consider today
increase the capacity of the SBA to provide specific, useful
solutions to small businesses that want to start up or have
become sophisticated enough that they want to compete overseas.
What these bills have in common is that they both address the
need to update the SBA's programs, many of which have helped
build a solid foundation for our future economic security.
The changes we will make will help small firms overcome the
current challenges that their businesses face. Again, I want to
give credit to all my colleagues on both sides of the aisle for
working together to address these issues. Small businesses
deserve our effort to listen their problems and remove
barriers. Such cooperation is good for all of us, because it is
these businesses that are the most innovative, that create new
jobs and produce half our income. And they deserve our best
efforts. The progress we have made in addressing the needs of
small businesses and in moving a significant number of bills
introduced by both sides of the aisle is a testament to the
Committee's hard work and cooperation. These firms continue to
broadly support our work and do so again today. I would like to
specifically thank our ranking member, Mr. Chabot and his staff
for the Microloan Amendments and Modernization Act that he
introduced, and which I strongly support.
Also, thanks to Mr. Sestak, our vice chairman, who, with
Mr. Hall from New York, has introduced The SBA Trade Programs
Act of 2007. But as significant as the work we have done to
date is, there is still more to do. I look forward to our
continuing collaboration to do what best serves our Nation's
small businesses.
Chairwoman Velazquez. I would now like to yield to Ranking
Member Chabot for his opening remarks.
OPENING STATEMENT OF MR. CHABOT
Mr. Chabot. Thank you very much, Madam Chair, and thank you
for holding this markup. As I mentioned previously, this
Committee had not carefully reexamined the Small Business
Administration's Microloan and international trade programs in
some time. Ensuring that America's exporters and smallest
businesses have the resources that they need from the SBA
constitutes a critical function of this Committee. And I would
like to thank you for holding this markup and much of the work
that was done in making this possible.
Mr. Chabot. So thank you for that. The first bill, as you
mentioned, that we will be marking up here today, let me get
that straight, my notes straight here, is H.R. 2992. The bill
recognizes the need for the SBA to increase its focus on the
vital role that small businesses are playing to reduce
America's trade deficit. There is no doubt that small
businesses, especially manufacturers and providers of services,
are often overlooked when it comes to the development and
implementation of trade policy.
By requiring the SBA to expand its trade outreach
initiatives, H.R. 2992 will assist America's small businesses
to increase their competitiveness in the global economy. I also
understand that the chairwoman has an amendment in the nature
of a substitute to this bill that I fully support, because it
ensures that the administrator is properly coordinating
activities with other agencies that have trade
responsibilities, and avoids even the possibility of running
afoul of our obligation under international trade agreements. I
would like to thank you in your efforts to work in a bipartisan
manner, as I mentioned before.
And the second bill, which had previously been the first
bill, but we reversed the order, the second bill that we are
considering today is H.R. 3020, the Microloan Amendments and
Modernization Act. A number of us introduced this bill, myself,
along with the Chair and Representatives Clarke and Cuellar and
Lipinski, to make the Microloan Program more efficient. Given
the testimony that the Committee had heard, the Microloan
Program certainly represents value for the money. The Microloan
Program is a far more cost-effective mechanism, in my view, for
producing jobs than, for example, building roads at taxpayer
expense in the Tongas National Forest. Although modest in size,
the bill accomplishes a great deal for the Microloan borrowers
and intermediaries, the institutions that provide the loans and
technical assistance. Microlenders exist mainly because normal
commercial lending institutions do not provide access to credit
for those who are highly credit risky.
One way to improve that is to have borrowers' histories
pass along to the credit bureaus. Although I don't wish to
offer an amendment at this time, I think it may be useful to
consider, as the bill moves forward, to designate an
intermediary in each Federal region to handle the transmission
of payment history to the credit bureaus. The bill also enables
the intermediaries to determine the length of credit that will
be made available to the borrowers. Given the expertise of the
intermediaries, it makes abundant sense for the determinations
on the length of loans to rest with the intermediaries and
borrowers.
I would emphasize that this change has no impact on the
loan obligations of the intermediaries to the SBA, so the
change involves no risk to the Federal Treasury. H.R. 3020 also
raises the level of the average loan size in an intermediary's
portfolio from $7,500 to $10,000. This level has not been
changed since 1992, and an adjustment is I believe appropriate
to take into account inflation in the intervening 15 years. The
SBA rightly focuses on the number of small businesses that
receive help from its entrepreneurial training partners.
However, ensuring that only those individuals with the right
aptitude start small business is as important as the provision
of technical assistance to businesses that have been in
existence for years. The bill recognizes the importance of this
training, and increases the amount of pre-loan training that
intermediaries may provide. H.R. 3020 also provides for an
increase in the amount of technical assistance training that
intermediaries can contract for from other sources. As the
Committee heard in testimony from Professor Servin of the New
School University, this will enable intermediaries to focus on
those services that they are best able to perform. Finally, the
Committee heard from two different witnesses that the cap on
interest rates should be removed. We also heard that a rise in
interest rates will enable intermediaries to recoup more of
their costs, thereby reducing the amount of funds that they
must raise from other sources.
I would ask the chairwoman to work with me, as the bill
moves through the legislative process, to ensure that
intermediaries have maximum flexibility to operate their loan
programs with the elimination of the interest rate cap. And I
know that the chairwoman again will be introducing an amendment
in the nature of a substitute on this bill that simply adds the
statutory authorization for the PRIME program to the Small
Business Act, and solely within the jurisdiction of the
Committee. I fully support this amendment of the Chair's as
well in the nature of a substitute, and I urge my colleagues to
support both these bills. And I yield back the balance of my
time.
Chairwoman Velazquez. Thank you. And I will take that as an
opening remark and explanation of your bill. Okay. So are there
any other members that wish to be recognized for the purpose of
opening remarks? Well, the first order of business is to
consider the SBA Trade Programs Act of 2007, H.R. 2992. Before
recognizing the sponsor of this legislation, Mr. Sestak, let me
commend him and the other sponsor, Mr. Hall of New York, for
their timely bill. To overcome small exporter obstacles, this
proposal increases trade finance resources and the size of
international trade loans through the enactment of the Trade
Adjustment Assistance Program, businesses dislocated due to
globalization will be better able to draw on assistance that
will help ensure their competitiveness.
As trade policies are negotiated and implemented, the
legislation requires the agency to work with Federal and
international organizations to represent small business
interests. Finally, it requires an annual trade strategy,
outlining the agency's efforts to boost small businesses'
shares in both domestic and foreign markets. By enacting this
bill, the SBA will be more prepared to assist the business
community in the international marketplace. And definitely with
this bill, the small business community, and mainly small
business exporters and importers, will have a voice at the
table. So with that, I urge support of this legislation, and I
recognize Mr. Sestak for a statement on explanation of H.R.
2992.
OPENING STATEMENT OF MR. SESTAK
Mr. Sestak. Thank you, Madam Chair. I appreciate your help,
and Ranking Member Chabot. I appreciate the opportunity to
speak about The SBA Trade Programs Act of 2007, and am proud to
join my colleague, Mr. Hall, as an original cosponsor. This
recent May, I actually held an economic summit in my district.
It was the second of three. The third will be next Monday with
you, Madam Chair. It was done in partnership with the U.S.
Export Assistance Center in Philadelphia. The day's program was
actually aimed at providing business owners more information at
the Federal, the State and the local level with the services
and resources that are available to them. In particular,
however, we focused on how to help local small businesses
export their products to foreign markets, as well as to how
firms interested in expanding their businesses might obtain
better trade financing. I was taken by the number of small
business owners that were interested in expanding their
business in overseas for two reasons. One, we have lost 607
small businesses in the last 3 years in my district, and so
they are looking for opportunities. And second, it is probably
no surprise to others here, but 97 percent of all exporters are
small business. And they have contributed greatly to the growth
of exports. And I would like to do the same for my district and
throughout the Nation, to have it be enhanced even more. There
is a lot of promise in the economic impact of trade among these
small businesses. I want to give just one example in my
hometown. With the help of the Philadelphia Export Assistance
Center, Nielsen-Kellerman, a small business that designs and
manufactures waterproof electronics for use in the rowing
industry worked with trade specialists to expand globally, and
since 2001 has actually signed nine dealer agreements in
Germany, and successfully sold its products throughout the
world, from Southeast Asia to Central America and the Middle
East. The firm continues to use the Export Assistance Center
for business counseling and guidance to further expand.
However, I saw and heard during my district's economic
summit that small exporters, small business exporters also face
numerous challenges that were already laid out well, such as
higher transaction costs. And they assumed greater risk than
larger exporters and experienced burdensome custom requirements
which limit their access to these foreign markets and actually
impede small firms from maximizing their full potential. That
is why I am a strong supporter, and ask everyone here to also
be one, of The SBA Trade Programs Act of 2007. I believe that
this bill will help, among many other myriad of programs to
enhance the global competitiveness of American small business
exporters. The legislation not only addresses the need to focus
on assisting in overseas trading by calling for an annual trade
strategy to increase exports, but it also enhances the level of
export assistance by increasing access to capital, which at
times is all small businesses really want, and establishing
programs for trade adjustment assistance to help small firms
adjust to the ever-changing dynamic global conditions and
demands we see every day.
Therefore, I believe that this Trade Act, the SBA Trade
Act, is a comprehensive legislation that is critical to the
economic security of our Nation and its future. And I urge
everyone, all of my colleagues to support it. Thank you, Madam
Chair.
Chairwoman Velazquez. Are there any other members that wish
to be recognized on the SBA Trade Programs Act of 2007? The
Committee now moves to consideration of the bill, H.R. 2992.
The clerk will report the title of the bill.
The Clerk. H.R. 2992, a bill to amend the Small Business
Act to improve trade programs, and for other purposes.
Chairwoman Velazquez. I ask unanimous consent that the
Chairwoman's amendment in the nature of a substitute for H.R.
2992 be adopted, and that it be used as the base text for
purposes of any further amendments. Hearing no objection to the
request, the request is agreed to, and the amendment in the
nature of the substitute is adopted and will serve as the base
text during our consideration of other amendments. I ask
unanimous consent that the bill in its entirety be open for
amendments at this time. Does any member seek recognition for
the purpose of offering an amendment?
Mr. Larsen. Madam Chairwoman, I have an amendment at the
desk.
Chairwoman Velazquez. I recognize the gentleman from
Washington.
Mr. Larsen. As the amendment is distributed, if it is
distributed, I first want to thank you for holding the markup
on this bill, and thank Mr. Sestak and Mr. Hall for their
efforts in putting this together. This legislation takes a
strong step in developing an increased role in the SBA's Office
of International Trade. I want to thank you for including a
provision in the manager's amendment as well that gives
direction to OIT to develop a specific strategy to increase
small business export opportunities to the Asia-Pacific region.
In 2006, 60 percent of U.S. exports went to countries that are
part of the Asia-Pacific Economic Cooperation forum, or APEC.
That number is growing. Japan, China, South Korea and Singapore
currently rank in the top 10 of countries that we export to. I
don't believe that any overseas country presents more of a long
term export opportunity for small businesses than China. With
1.3 billion people and rapidly growing middle class, we need to
help our small businesses get their foot in the door of this
market.
China, certainly, has its foot in our door. Now with
regards to the amendment itself, I appreciate the opportunity
to present this amendment. And after speaking briefly on it, I
will ask for unanimous consent to withdraw the amendment.
Chairwoman Velazquez. Without objection, the amendment is
withdrawn.
Mr. Larsen. If I may speak on it first.
Chairwoman Velazquez. Sure.
Mr. Larsen. Thanks. Nice try, though. This amendment is for
grants for Chinese business education programs. So building on
a theme I touched on, this amendment would create a Chinese
business education grant program run by the SBA. My intention
is to find ways outside the traditional box of the SBA to
increase opportunities for small business owners. My amendment
would authorize a grant program under the SBA to help graduate,
undergraduate, and community colleges to set up to China market
courses. These courses would be designed to teach students and
professionals how to do business in the Chinese economy.
This would provide more opportunities for local
entrepreneurs to take a course on the Chinese market, and give
future small business owners the learning environment to
understand the technical process for making small business
exports work in China.
I believe the SBA is uniquely suited to distribute the
grants, as they understand what types of curriculum would be on
the right track and what types of curriculum would not be on
the right track. So with that, Madam Chair, I appreciate the
opportunity to offer the amendment, but I do ask unanimous
consent to withdraw the amendment.
Chairwoman Velazquez. Without objection.
Mr. Larsen. Thank you very much. And with that I yield back
the balance of my time.
Chairwoman Velazquez. Thank you. I want to thank the
gentleman for raising this important matter and with working
with the Committee on this issue. Increasing exports to the
Asia-Pacific regions of the world is essential to reducing our
nation's trade deficit. And SBA can play an important role in
assisting small firms gain access to this emerging market. And
I believe that the language you crafted and that we added to
the legislation will strengthen this effort. So I look forward
to working with the gentleman on this issue, and I thank you
for your work. And I now ask if there is any other member who
wished to be recognized for the purpose of offering an
amendment? Seeing no further amendments, the question is on
passing and reporting the bill H.R. 2992 as amended. All those
in favor say aye. Aye. All those opposed say, no. The ayes have
it, and H.R. 2992 as amended is adopted and ordered reported.
So now we are going to move to H.R. 3020, The Microloan
Amendment and Organization Act, introduced by the Committee's
Ranking Member, Mr. Chabot. And he explained basically the
bill. If you want to add some other comments.
Mr. Chabot. Yeah. If the gentlelady would yield, I think we
pretty much in-depth explained in our opening what it was, so I
think it would be superfluous.
Chairwoman Velazquez. There is one issue I would like to
mention, and that is I will be offering an amendment in the
nature of a substitute that will add into the bill the transfer
of the PRIME program into the Small Business Act. The PRIME
program has been administered by the SBA since its inception,
and it is best for our oversight purposes that it be placed in
the Small Business Act.
Chairwoman Velazquez. Mr. Chabot has agreed to this
amendment, and the Financial Services Committee has agreed to
this transfer. Again, I commend Mr. Chabot for this bill, and I
strongly urge support of this legislation. Are there any other
members that wish to be recognized? The Committee now moves to
the consideration of the bill, H.R. 3020. The clerk will report
the title of the bill.
The Clerk. H.R. 3020, a bill to amend the Small Business
Act to improve the Microloan Program, and for other purposes.
Chairwoman Velazquez. I ask unanimous consent that the
Chairwoman's amendment in the nature of a substitute for H.R.
3020 be adopted, and that it be used as a base text for
purposes of any further amendments. Without objection. Hearing
no objection, the request is agreed to, and the amendment in
the nature of a substitute is adopted and will serve as the
base text during our consideration of other amendments. I ask
unanimous consent that the bill in its entirety be opened for
amendments at this time. Does any member seek recognition for
the purpose of offering an amendment? Seeing no further
amendments, the question is on passing and reporting the bill,
H.R. 3020, as amended. All those in favor say eye. Aye. All
those opposed say no. Aye. The ayes have it, and H.R. 3020 as
amended is adopted and ordered reported. I ask unanimous
consent that the Committee's authorized to correct sections,
numbers punctuation, and cross-references, and to make other
necessary technical and conforming corrections on the bills
considered today. Without objection, so ordered. This markup is
adjourned. Thank you.
[Whereupon, at 10:25 a.m., the Committee was adjourned.]
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