[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

                              ----------                              

                           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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