    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                        SUBCOMMITTEE HEARING ON PROGRAM
                        HARMONIZATION IN RURAL AMERICA -
                         HOW THE SBA AND USDA CAN WORK
                         TOGETHER TO BETTER SERVE SMALL
                                   BUSINESSES

    =======================================================================

                 SUBCOMMITTEE ON URBAN & RURAL ENTREPRENEURSHIP
                          COMMITTEE ON SMALL BUSINESS
                     UNITED STATES HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               November 14, 2007

                                   __________

                              Serial Number 110-60

                                   __________

             Printed for the use of the Committee on Small Business

     Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                     house

                                     ______

                        U.S. GOVERNMENT PRINTING OFFICE
    39-381                      WASHINGTON : 2007
    _____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800
    Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001

                       HOUSE COMMITTEE ON SMALL BUSINESS

                    NYDIA M. VELAZQUEZ, New York, Chairwoman

    WILLIAM JEFFERSON, Louisiana         STEVE CHABOT, Ohio, Ranking Member
    HEATH SHULER, North Carolina         ROSCOE BARTLETT, Maryland
    CHARLIE GONZALEZ, Texas              SAM GRAVES, Missouri
    RICK LARSEN, Washington              TODD AKIN, Missouri
    RAUL GRIJALVA, Arizona               BILL SHUSTER, Pennsylvania
    MICHAEL MICHAUD, Maine               MARILYN MUSGRAVE, Colorado
    MELISSA BEAN, Illinois               STEVE KING, Iowa
    HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
    DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia
    GWEN MOORE, Wisconsin                LOUIE GOHMERT, Texas
    JASON ALTMIRE, Pennsylvania          DEAN HELLER, Nevada
    BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
    YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
    BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
    HANK JOHNSON, Georgia                JIM JORDAN, Ohio
    JOE SESTAK, Pennsylvania
    BRIAN HIGGINS, New York
    MAZIE HIRONO, Hawaii

                      Michael Day, Majority Staff Director

                     Adam Minehardt, Deputy Staff Director

                          Tim Slattery, Chief Counsel

                   Kevin Fitzpatrick, Minority Staff Director

                                     ______

    ?

                 SUBCOMMITTEE ON URBAN & 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

                                     ______

                                      (ii)

    ?

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page

    Shuler, Hon. Heath...............................................     1
    Fortenberry, Hon. Jeff...........................................     2

                                   WITNESSES

    Shear, William, Government Accountability Office.................     3
    Carroll, Dale, Advantage West Economic Development Group.........     5
    Ziegler, Katy, National Farmers Union............................     6
    Myhre, Michael, The Association of Small Business Development
      Centers........................................................     8
    Milobar, Leon, U.S. Small Business Administration................    10

                                    APPENDIX

    Prepared Statements:
    Shuler, Hon. Heath...............................................    23
    Fortenberry, Hon. Jeff...........................................    24
    Shear, William, Government Accountability Office.................    26
    Carroll, Dale, Advantage West Economic Development Group.........    41
    Ziegler, Katy, National Farmers Union............................    45
    Myhre, Michael, The Association of Small Business Development
      Centers........................................................    49
    Milobar, Leon, U.S. Small Business Administration................    64

                                     (iii)

                        SUBCOMMITTEE HEARING ON PROGRAM
                        HARMONIZATION IN RURAL AMERICA -
                             HOW THE SMALL BUSINESS
                         ADMINISTRATION (SBA) AND U.S.
                        DEPARTMENT OF AGRICULTURE (USDA)
                          CAN WORK TOGETHER TO BETTER
                             SERVE SMALL BUSINESSES

                                  ----------

                          Wednesday, November 14, 2007

                         U.S. House of Representatives,
                                   Committee on Small Business,
                 Subcommittee on Urban & Rural Entrepreneurship
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 10:00 a.m., in
    Room 2360 Rayburn House Office Building, Hon. Heath Shuler
    [chairman of the Subcommittee] presiding.
        Present: Representatives Shuler, Gonzalez, Ellsworth,
    Fortenberry and Davis.

                    OPENING STATEMENT OF MR. SHULER

        ChairmanShuler. I now call this hearing to order.
        Today we'll examine some of the SBA and USDA programs and
    whether there are ways to improve their services to small
    businesses in rural America.
        This Subcommittee wants to ensure that the programs of
    these agencies can be maximized to benefit the nation's nearly
    2 million farm owners and their communities. Small businesses
    are the backbone of rural America. And if we are spending
    Federal dollars to assist them, we need to get the most out of
    the taxpayer's dollar.
        With cooperation efforts both from the SBA and the USDA can
    promote greater economic development.
        As part of this effort, Mr. Fortenberry and I have led a
    bipartisan effort to ask the GAO to look at this issue. In
    June, Mr. Fortenberry, Mr. Chabot and I requested that the GAO
    review and report on a collaboration and cooperation between
    the SBA and USDA. These agencies have had success in helping
    rural economy. However, the Federal Government has not looked
    close enough to see if there are ways to improve these efforts.
        Given their similar economic development goals of these
    agencies it only makes sense to look at ways of coordination
    and efforts to help local businesses.
        The agencies have had a role in providing family farmers
    with new business alternatives. These programs at the USDA have
    mostly focused on serving our rural economics and agricultural
    industries. The SBA has also had a role in ensuring that
    businesses in the rural communities have accessed to capital as
    well as technical assistance.
        Small business development centers and women's business
    centers have played a critical role in providing advice and
    expertise to assist these business growth. With access to
    capital to these areas there are significant SBA lending that
    goes to our rural communities.
        In recent history, however, we have seen how gaps have
    existed between these agencies. One of the most discussed has
    been the access of disaster assistance program. Farmers are
    often unable to use SBA disaster loans and instead must way for
    the Federal Disaster Assistance to be declared.
        There have been also questions whether the SBA lending and
    the farm credit services are covering the complete needs of the
    rural small businesses.
        Today's hearing will allow us to examine the SBA and the
    USDA programs have worked and gain a better understanding of
    how they can better work together.
        Considering that small business dominates rural economies,
    it only makes sense. The Federal Government support through the
    SBA and the USDA to rural Americans assures opportunities and
    stability often spurring the entrepreneurial spirit.
        Today we will have the opportunity to hear from the GAO on
    the status of their report as well as hear from the
    stakeholders on the issues that the GAO should be examining.
        I appreciate all the witnesses being here today.
        And at this time I would like to recognize the Ranking
    Member Mr. Fortenberry for his opening statement.

                  OPENING STATEMENT OF MR. FORTENBERRY

        Mr.Fortenberry. Thank you, Mr. Chairman. And thank you all
    for coming today and, Mr. Chairman, for your agreement to hold
    this hearing.
        We are here to talk about the harmonization of programmatic
    elements in rural America. Our Government employs a wide
    variety of tools in its efforts to improve the abilities of
    families and community to better themselves through economic
    growth and entrepreneurship. Some of these programs are
    targeted and well coordinated, but we believe that progress can
    be made in shaping the resources of the U.S. Department of
    Agriculture and the Small Business Administration to ensure
    that they work effectively well together.
        We all understand the necessity of drawing efficiency from
    each tax dollar. Part of this efficiency is ensuring that
    different Government agencies work well in tandem with each
    other. This challenge was identified in a GAO report alluded to
    by our Chairman two years, which recommended that agencies
    define and articulate common outcomes, agree upon agency roles
    and responsibilities, operate across agency boundaries as well
    as reduce cost by pooling resources.
        The USDA through its Rural Development Office and the Small
    Business Administration share the common goal of improving the
    economic opportunity for all of America. And particularly
    economic development in rural areas has been the focus of the
    USDA, and Administrator Preston to his credit has made it a
    goal of the SBA to focus on addressing the needs of underserved
    communities as well.
         Rural American certainly fits that definition. The SBA
    through its loan programs, technical assistance, Federal
    contracting serves thousands of small businesses and creates
    jobs. Rural Development, while organized differently, has a
    broad network of offices in almost every rural county in our
    country and operates a variety of grant and loan programs
    targeted at rural communities.
        While Rural Development has a wide footprint in rural
    America, the SBA maintains a limited number of offices, mostly
    in larger cities in partnerships with colleges and universities
    as well. While its effectiveness is not questioned, the SBA is
    less accessible to rural communities, particularly in large
    states such as my own, Nebraska.
        For an entrepreneur in rural Nebraska a small business
    development center or Rural Development office may be the point
    of first contact to see what resources are available for
    beginning a new venture. New businesses in rural economies
    stimulate job growth and provide needed diversification to
    communities that have been in the past reliant, perhaps, on a
    few large employers many of whom downsize or close plants.
    These entrepreneurs need to be able to utilize all the
    appropriate assistance as they begin their business. And
    officials in these officials need to be flexible in directing
    their constituents to the most productive program.
        The issue we are discussing today holds a great deal of
    promise, I believe, for entrepreneurs and rural communities.
    The ability to coordinate the programmatic elements of these
    agencies is vital to the empowerment of small businesses. And I
    also believe this effort could very well serve as a model to
    stimulate cooperation among agencies in the Federal Government
    with other similar missions.
        Thank you again, Mr. Shuler, for your leadership on this
    important issue. And I look forward to our witness' testimony
    today. And thank you all for coming.
        ChairmanShuler. Thank you, Mr. Fortenberry.
        We'll now move to testimony from the witnesses. Witnesses
    will have five minutes to deliver their statement. The yellow
    light that comes on means that you have one minute remaining
    and red means wrap it up. We're not too technical, as you can
    see.
        But our first witness is Bill Shear, Director of Financial
    Markets and Community Investments at the GAO Office. Mr. Shear
    oversees the GAO report on Collaboration and Cooperation of the
    USDA and the SBA Programs.
        Mr. Shear, welcome. And thank you for your testimony.

     STATEMENT OF WILLIAM SHEAR, DIRECTOR OF FINANCIAL MARKETS AND
                         COMMUNITY INVESTMENTS

        Mr.Shear. Thank you very much.
        Mr. Chairman, Mr. Fortenberry and Members of the
    Subcommittee, I am pleased to be here today to discuss our
    preliminary views on the potential for increased collaboration
    between SBA and USDA Rural Development offices.
        I will provide preliminary views on:
        First, mechanisms that SBA and USDA have used to facilitate
    collaboration with other Federal agencies and with each other.
        Second, the organization of SBA and Rural Development
    offices across the country, and;
        Third, the planned approach for our recently initiated
    evaluation on collaboration between SBA and Rural Development.
        In summary, first, while SBA and Rural Development are not
    currently involved at the agency-wide level in a collaborative
    working relationship, SBA and Rural Development have used a
    number of different mechanisms both formal and informal to
    collaborate with other agencies and with each other.
        For example, both agencies have used the Economy Act, a
    general statutory provision that permits Federal agencies under
    certain circumstances to enter into mutual agreements with
    other Federal agencies to purchase goods or services and take
    advantages of specialized experience or expertise.
        SBA and USDA use the Act to enter into an interagency
    agreement to create rural business investment companies to
    provide equity investments to rural small businesses. In this
    case the legislation creating this rural investment program
    recommended that Rural Development manage the program with the
    assistance of the SBA because of SBA's investment expertise and
    experience, and because the program was modeled after SBA's
    SBIC program.
        Second, both SBA and Rural Development have undergone
    restructuring that has resulted in the downsizing and greater
    centralization of each agency's field operations. Currently
    SBA's 68 field offices are still undergoing a transformation to
    more centralized structure. Rural Development has largely
    completed its transformation, but continues to have a large
    presence in rural areas through a network of hundreds of field
    offices. Rural Development's recognized presence in rural areas
    and expertise in the issues and challenges facing rural lenders
    and small businesses may make these offices appropriate
    partners to help SBA deliver services.
        Third, at your request we have recently begun a review of
    the potential for increased collaboration between SBA and Rural
    Development. In general, the major objections are to examine
    the differences and similarities between SBA and Rural
    Development programs. Any cooperation that is already taking
    place between SBA and Rural Development, and any opportunities
    for or barriers to collaboration involving the two agencies.
    And then, obviously, looking for solutions on how to address
    those potential barriers.
        It is a pleasure to be here today. I'd be happy to answer
    any questions you may have.
        [The prepared statement of Mr. Shear may be found in the
    Appendix on page 26.]

        ChairmanShuler.
        Thank you, Mr. Shear.
        Our next witness is Mr. Dale Carroll, President and CEO of
    Advantage West Economic Development Group from my District in
    Fletcher, North Carolina. Advantage West is nonprofit, public/
    private partnership to focus on marketing west North Carolina
    for business and corporation development.
        Bill, thank you for being here today. I look forward to
    your testimony.

     STATEMENT OF DALE CARROLL, PRESIDENT AND CEO, ADVANTAGE WEST
                       ECONOMIC DEVELOPMENT GROUP

        Mr.Carroll. Good morning. And thank you, Congressman Shuler
    and Ranking Member Fortenberry. We appreciate this opportunity
    very much.
        As the Congressman just mentioned, Advantage West is a
    regional economic development organization. We serve 23
    counties in western North Carolina, the mountains of North
    Carolina. We have been involved in economic development for 15
    years now. We have diversified our program of work over the
    years. Organizations like the Southern Economic Development
    Council, publications like Economic Development America have
    noted that we probably have the most diversified economic
    development program of any regional EDC in the country.
        Several months ago we implemented through our Blue Ridge
    Entrepreneurial Council Division a program called Certified
    Entrepreneurial Community. This program is patterned after a
    certified industrial site program that we implemented in the
    mid 1990s. It's a checklist, if you will. Certified
    Entrepreneurial Community is a designation that we currently
    have 12 counties in our region pursuing as well as the eastern
    band of the Cherokee Indian.
        The goal of the Certified Entrepreneurial Community Program
    is to make a local community entrepreneurial ready. It takes
    entrepreneurship and pushes it down to the grassroots level.
        Entrepreneurship is so important in our mountain economy.
    We've seen the closure of branch plants in the manufacturing
    sector. We've seen the shifts of the manufacturing base that is
    so reflective of other parts of the country in rural America.
        In our particular case we have made entrepreneurship a
    major strategy at Advantage West for the future of our region.
        We are here today to recommend to you that as you look at
    coordinating and collaborating for higher levels of
    effectiveness the programs of the SBA and the USDA, that you
    consider piloting your work with Advantage West in our 23
    county area. I'll give a quick example.
        Two of the most popular programs in economic development,
    and I would add they have been very effective in North
    Carolina, are the SBA 504 Loan Program and the USDA Business
    Industry Loan Guarantee Program. Think of it like this: With
    the new Certified Entrepreneurial Community program we have a
    mechanism in place at the local level where we are encouraging
    the communities to become more effective in working with small
    businesses and entrepreneurs. There literally is a checklist
    that they have to go through. They have to document that they
    have improved the permitting process at the community level.
    They have to list all of the capital providers that they have
    in their local area. What organizations can provide technical
    assistance as well as financial programs for startup companies.
    But the real bonus that comes out of this is that improving the
    business climate in this manner to make a community
    entrepreneur ready also makes it better for existing business
    as well.
        So what we are saying is how about the SBA 504 Loan
    Program, the USDA Business Industry Loan Guarantee Program,
    think of those being documented in a handbook and on a web site
    used by a community that achieves the designation as a
    Certified Entrepreneurial Community. And then we believe there
    will be better access to these programs at the grassroots
    level.
        Let me close by saying that USDA and SBA have an excellent
    reputation in western North Carolina. I have many years of
    experience as an economic developer in North Carolina. And we
    applaud you for what you are doing today. When you try to
    improve the effectiveness of two crucial Federal agencies like
    this, you're just striving for excellence. And that's what this
    Certified Entrepreneurial Community program is all about. So we
    applaud you for the spirit of this hearing and what you're
    trying to do.
        Thank you very much.
        [The prepared of Mr. Carroll may be found in the Appendix
    on page 41.]

        ChairmanShuler. Thank you, Mr. Carroll.
        Our next witness is Ms. Katy Ziegler, Vice President of
    Government Relations for the National Farmers Unions. Prior to
    joining the National Farmers Union in 2003, Ms. Ziegler worked
    on agricultural policy for Senator Tim Johnson of South Dakota.
        You'll be recognized for five minutes, and welcome.

    STATEMENT OF KATY ZIEGLER, VICE PRESIDENT GOVERNMENT RELATIONS
                     FOR THE NATIONAL FARMERS UNION

        Ms.Ziegler. Thank you, Chairman Shuler, Ranking Member
    Fortenberry for the opportunity to be here today.
        National Farmers Union is a nationwide organization that
    represents family farmers, ranchers, fishermen and rural
    residents. We are proud of our policymaking process which
    begins at the local level where those who are most impacted by
    Federal decisions make our policy.
        Our members believe that the family farmer and rancher
    owned and operated food, fiber and fuel production system is
    the most economically, socially and environmentally responsible
    and beneficial way to meet the needs of the nation. While the
    economy of rural America faces many challenges there are also a
    number of opportunities for growth and revitalization. Because
    main street businesses are an important segment of the rural
    community and generate many jobs, we recommend that Federal
    policy foster and encourage those businesses providing
    protection from encroachment from big business monopolies.
        The SBA provides an invaluable service and our members
    supports support its continuation. Unfortunately, many in rural
    America are unaware of the programs available at SBA due to a
    lack of communication and outreach to rural residents. Ample
    small business loan resources should be made available through
    the SBA to credit worthy applications, including those from
    farmers as ranchers.
        As producers diversify their income, historic and
    traditional lines of credit options are not always available or
    affordable.
        Last year NFU held numerous listening sessions throughout
    the country to hear directly from producers what they are
    looking for in Federal farm policy. The number one issue of
    concern was the lack of a permanent disaster program. Farmers
    and ranchers have no control over the weather and can face
    devastating losses when a disaster strikes. Without addressing
    this hole in the safety net, producers who suffer from those
    losses will lose profits and all too often their operations.
        According to CRS 34 ad hoc disaster packages have been
    approved since FY 1989 totaling nearly $60 billion. Each
    measure approved requires the U.S. Department of Agriculture to
    recreate the program, the implementation plan and often results
    in new guidelines and delayed sign up requirements for
    producers.
        One of our highest priorities is to make ad hoc disaster
    assistance a practice of the past and put in place a standing
    disaster program that provides producers with an assured safety
    net in the event of a natural disaster and provides USDA
    certainty, making the program more consistent, reliable and
    timely for producers.
        The advances of renewable energy in fuels from the farm are
    one of the most exciting economic opportunities across rural
    America. As this industry grows, it is vital to ensure that the
    ownership remain in those communities and in the hands of the
    local farmers. When money is generated from an ethanol or a
    biodiesel plant it makes a real difference in the lives of
    those rural citizens. All too often large corporations invest
    in rural areas, but they take the profits with them instead of
    reinvesting in the local economy.
        I would encourage this Subcommittee to work with your
    colleagues in the agricultural sector to ensure that all
    Federal incentive programs used for renewable energy
    development give a competitive advantage to farmer owned and
    locally owned projects.
        Because of the advancement of renewable energy projects and
    production we have witnessed the plywood boards coming off of
    those main street businesses instead of going on. The annual
    local economic impact of a 40 million gallon ethanol plant in
    significant. The highlights include an expanded economic base
    by $110 million, household income increasing by nearly $20
    million, about 700 permanent new jobs and an additional $1.2
    million created in new tax revenues.
        One other exciting economic opportunity for producers is
    the consumer demand for fresh source verified direct from the
    farm food. It is the fastest growing segment of the food
    business. A producer's price is based upon quality and
    freshness and, in turn, consumers receive a high quality and
    fresh product that they can trust. That is why there have an
    explosion of urban farmers markets and direct selling by
    farmers to consumers, retailers and restaurants throughout the
    country. It is why restaurants like Agraria here in town, in
    Georgetown waterfront, which is owned by Farmers Union members
    is very successful.
        This is an opportunity for USDA and the Small Business
    Administration to evaluate how each could work more closely
    together to foster the development of this movement.
        Mr. Chairman, I thank you for this opportunity and look
    forward to answering any questions.
        [The prepared statement of Ms. Ziegler may be found in the
    Appendix on page 45.]

        ChairmanShuler. Ms. Ziegler, thank you for your testimony.
        Next our witness will be Mike Myhre, the State Director of
    Minnesota Small Business Development Center. Mr. Myhre is
    testifying on behalf of the Association of Small Business
    Development Center.
        Mr. Myhre, you have five minutes for your testimony.

    STATEMENT OF MIKE MYHRE, THE STATE DIRECTOR OF MINNESOTA SMALL
      BUSINESS DEVELOPMENT CENTER ON BEHALF OF THE ASSOCIATION OF
                   SMALL BUSINESS DEVELOPMENT CENTER

        Mr.Myhre. Thank you. Chairman Shuler, Ranking Member
    Fortenberry, on behalf of the SBDC and the roughly 5,000
    dedicated men and women who are part of the America's SBDC
    network and hundreds of thousands of entrepreneurs and small
    business owners they serve each year, I would like to thank you
    and the members of this Subcommittee for inviting me here
    today.
        Mr. Chairman, in my testimony today I will seek to focus my
    remarks on how SBDCs can build upon its current capabilities
    and expertise of its national delivery network. I will seek to
    point out where SBDCs can be leverage by USDA loan and
    technical assistant programs. I will cite some specific
    instances where SBDCs have been successful in comparable work.
    The intent of my effort will be to demonstrate how Congress and
    Federal agencies, including USDA and others, can reduce the
    proliferation of duplicative programs and better utilize SBDC
    partnership program by providing direct support to enhance its
    capacity to serve rural areas.
        First, one of the most serious and historical facing rural
    entrepreneurs and small business owners is equitable access to
    adequate capital for business establishment or expansion of an
    existing business. To help fill this gap both USDA and SBA
    provide for national assistance through loan and loan guarantee
    programs. USDA facilities its Business and Industry Guaranteed
    Loan Program and SBA has its 7[a] loan guarantee and 504 loan
    program.
        SBDCs provide rural small business entrepreneurs with
    access to these and other capital resources by building and
    maintaining relationships with various lending resources
    allowing rural small business entrepreneurs the ability to
    access and leverage multiple resources to finance a single
    business venture.
        In Minnesota an average SBDC loan deal consists of three
    and sometimes up to six or seven different sources of capital
    to complete a successful deal. The fact is that USDA loans have
    among the highest default rates of any Government loan program.
    I believe the historical high default rates are a attribute to
    the lack of loan recipients not receiving critical financial
    and cash flow management education and consulting. In Minnesota
    lenders consistently say and indicate that clients who have a
    loan deal prepared by their local SBDC professional and
    continue to work with that professional are significantly less
    likely to default on their business loan and more likely to pay
    off their loan before maturity. This is an area where ASBDC
    believes America's SBDC network could collaborate with USDA by
    being its technical and educational resource partner.
        We believe USDA, SBA, ASBDC should work together to develop
    a memorandum of understanding or other workable funding
    arrangement whereby SBDCs would be formally recognized by USDA
    as a financial training provider for those USDA loan
    recipients.
         Furthermore, ASBDC believes that if USDA collaborates and
    supports SBDC financial and management training and
    professional business consulting, USDA loan delinquencies and
    default rates can be substantially reduced by that segment
    served.
        We also have no doubt that SBDC financial and management
    training and ongoing long term business consulting can greatly
    enhance the likelihood of long term sustainable and financial
    success.
        SBDC networks from coast to coast have considerable
    experience and have been recognized for their contributions
    working with small businesses including rural and agra
    businesses impacted by disaster. In light of recent fires,
    hurricanes, floods, drought and disasters like the 35W Bridge
    collapse in Minnesota, Congress and the public are justifiably
    interested in the effectiveness of Federal disaster assistance
    programs, particularly Federal disaster loan programs. In many
    disasters cooperation and collaboration between the USDA, SBA,
    SBDCs can be extremely important to the going concern of
    businesses in the survival of small towns following a disaster.
    The fact is in a disaster Federal response agencies lack the
    necessary manpower, and more importantly, the expertise to
    assist hundreds if not thousands and in some instances tens of
    thousands of small business owners in need of assistance.
        One of the most effective ways that SBDCs can assist small
    business owners after a disaster is help them successfully
    complete applications for disaster loans, a process which can
    add additional frustration and anger to an already tragic
    circumstance. If leveraged with appropriate USDA resources for
    enhanced capacity, ASBDC believes that America's SBDC network
    effectively use its existing national wide structure and
    expertise to help farmers, ranchers and small businesses in
    rural communities apply for USDA disaster assistance.
        We believe that with ASBDC assistance we can significantly
    improve the ability of producers, small businesses in rural
    communities to survive, recover and flourish following a
    disaster.
        In conclusion, one quarter of Americans live in rural
    areas. Subsequently 20 percent of all businesses are located in
    rural America. Conversely, individual state SBDC network
    appropriate anywhere to 50 to 90 percent of their resources to
    serving rural communities. In Minnesota we appropriate 80
    percent of our total resources to produce 70 percent of our
    deliverables in federally defined rural communities. This
    demonstrates a clear commitment by SBDCs to serve rural
    communities and that SBDCs have an existing and established
    infrastructure to serve rural America.
        USDA Rural Development's mission is to increase economic
    opportunity and improve quality of life for rural residents. If
    USDA wants to effectively enhance jobs, economic growth in the
    quality of life in rural America, we should be looking to build
    funding opportunities for partnerships and collaboration
    between USDA and America's SBDC network.
        I thank the Subcommittee for this opportunity. And we'd be
    happy to take any questions.
        [The prepared statement of Mr. Myhre may be found in the
    Appendix on page 49.]

        ChairmanShuler. Thank you.
        I'd like to recognize Ranking Member Mr. Fortenberry for
    introduction of our last witness.
        Mr.Fortenberry. Thank you, Mr. Chairman.
        It's my privilege to introduce Mr. Leon Milobar. He is a
    Nebraska native and he currently serves as the Small Business
    Administration's District Director back home. Welcome, sir.
        Previously he served as the Small Business Administration's
    District Director in Portland, Oregon, and was also an
    Associate State Director for the Nebraska Business Development
    Center.
        Mr. Milobar, welcome and we look forward to your testimony.

    STATEMENT OF LEON MILOBAR, NEBRASKA DISTRICT OFFICE, U.S. SMALL
                        BUSINESS ADMINISTRATION

        Mr.Milobar. Thank you.
        Good morning, Chairman Shuler, Ranking Member Fortenberry
    and members of the Committee. Thank you for the opportunity to
    speak with you today regarding United States Small Business
    Administration programs that support rural small business
    owners and entrepreneurs.
        Small businesses account for two-thirds of our rural jobs
    and comprise more than 90 percent of all rural establishments.
    Under Administrator Preston's leadership the agency has a
    renewed focus on ensuring that its products and services and
    accessible to entrepreneurs in the nation's most underserved
    markets, including the rural small businesses.
        I'm Leon Milobar, and I am the District Director of United
    States Small Business Administration, Nebraska. Prior to
    serving as District Director in Nebraska I served as the
    District Director in Portland, Oregon. And prior to that, I
    served as Associate State Director for the Nebraska Business
    Development Center.
        As an Associate State Director for Nebraska Business
    Development Center I was responsible for the management and
    technical assistance that small businesses received throughout
    Nebraska. This included SBA Small Business Developments Centers
    and the manufacturing subcontract extension program through the
    Nebraska Department of Economic Development, and U.S. Commerce
    Department and the Procurement Technical Assistance Center.
        In 2005 while serving as District Director in Oregon the
    local SBA office met with U.S. Department of Agriculture Rural
    Development and the Oregon Economic and Community Development
    Department in a collaborative effort to provide lender training
    on various Federal and state government loan guarantee
    programs.
        From 2005 to 2006 approximately 12 training sessions were
    held throughout Oregon and the sessions were attended by over
    400 bankers. This collaborative effort resulted in additional
    loan activity and exposure for the agencies involved with the
    rural community. The Portland District Office realized a 30
    percent increase in loan volume over the past fiscal year, an
    increase we believe our collaboration with USDA contributed to.
        During my brief time in Nebraska District Office we have
    implemented the same basic initiative. I personally visited
    with the state Economic Development Department and the USDA
    Rural Development shortly after my arrival in Nebraska. In
    meeting with USDA Rural Development I produced the materials
    and an initiative design that was used in Oregon to spur
    interest in a USDA/SBA collaboration in Nebraska. The interest
    level from USDA was considerable, and we began working on the
    program roll out that very day.
        Currently the initiative is only a test phase in Nebraska,
    but we've had very good attendance by bank loan officers in the
    state. There have been two programs which have been held, one
    in Omaha and the other in Kearny, Nebraska. The attendance from
    these two events was impressive. Approximately 90 bankers and
    economic development professionals attended.
        This joint training program serves as an important tool
    because it is used to educate and reacquaint loan officers with
    government guaranteed loan programs. There is a significant
    amount of loan officer turnover and many of the loan programs
    change. So this lender training is crucial for all parties
    involved.
        At the end of the event we discuss the technical resources
    that are available throughout the state for the benefit of
    small businesses. These include all the business assistance
    programs that SBA provides, as well as additional resources
    that loan officers can use in putting a loan package together.
        In Nebraska, this includes 7 SCORE chapters, 7 Small
    Business Development subcenters and a women's business center
    with 7 regional locations which are supported by funding
    through SBA.
        SBA has a good reach in terms of technical assistance with
    the Small Business Development Centers, SCORE and women's
    business centers throughout the state. In Nebraska, SBA has a
    fairly large footprint in terms of lenders. We have agreements
    with approximately 350 banks throughout the state.
        SBA's fully committed to serving our nation's underserved
    markets, including our rural community. In September of this
    year SBA announced a new loan processing initiative designed to
    spur economic growth in rural communities by encouraging rural
    lenders, including community banks and credit unions, to
    finance small businesses and entrepreneurs with SBA resources.
    Rural Lender Advantage is part of a broader SBA goal to
    increase access to capital in regions that face unique
    challenges due to factors including population loss and high
    unemployment rates. This streamlined process is part of SBA's
    7[a] loan program and encourages small rural lenders to partner
    with SBA by requiring less paper and offering services on line.
        This process is intended to increase SBA's market
    penetration in rural areas. It is being tested in Colorado,
    Montana, South Dakota, North Dakota, Utah and Wyoming. The
    agency expects there will be 3,000 to 4,000 loans made in the
    first year of implementation. We are excited about the
    introduction of this new service and anticipate great results.
        American's rural communities is essential to the nation's
    economy, and SBA is committed to encourage entrepreneurs and
    furthering job growth in rural regions.
        This concludes my testimony. And I look forward to
    answering any questions you may have. Thank you very much.
        [The prepared Statement of Mr. Milobar may be found in the
    Appendix on page 64.]

        ChairmanShuler. Thank you, Mr. Milobar.
        I appreciate all of your testimony.
        Mr. Shear, I understand that the Office of the Rural
    Business Investment Program obviously is no longer in
    existence. But were you able to create any cooperation between
    the two agencies through this particular program? Was there any
    relationship between the USDA and Small Business
    Administration?
        Mr.Shear. Based on the work that we've begun, it seems like
    our relationship had been developing, as was called for by the
    legislation creating the program. There were some difficulties
    identifying investment companies, there was a settling at one
    investment company and there was the rescission of the funding.
    But it appears to us, we were told basically by SBA and USDA
    that a collaborative relationship was at least developing.
        We know that there was a fairly extensive process for
    creating regulations and rules that would help to govern the
    program. So there seemed to be some collaboration there, and
    we'll be following up on that.
        ChairmanShuler. When the SBA and the USDA went through
    their reorganization or reforming--you know, obviously we've
    gone through the SBA quite extensively in this Committee. When
    they went that through reprogramming was there any
    collaboration between the two agencies based on because they're
    in some instances starting over in a lot of areas, was there
    any collaboration talked about? Here's what we'd like to do and
    here's what we're going to do? But any information that you
    have so far on your research?
        Mr.Shear. At the agency wide level in that so far our
    interactions have been with SBA headquarters. I was very glad
    to hear of some of the efforts going on, let's say, in Nebraska
    and what had occurred in Oregon. But at the agency level where
    we have really begun this work, there isn't evidence that there
    were collaborative working relationships. In fact, it seemed
    like these MOUs that went back a great number of years that no
    longer are being used and there hasn't been the creation, at
    least at the agency wide level, of anything since. So that's
    kind of like preliminary of what it looks like to us at this
    time.
        ChairmanShuler. And I realize, you know, it's only been a
    very short time period you've been able to do the research. And
    I thank you for the report, the preliminary report that we
    have. And we look forward to, hopefully, hearing the testimony
    after the report is completed and final.
        Mr. Carroll, you know do you find that certain businesses
    would be better off utilizing both the USDA and the SBA
    technical assistance and lending program as opposed to being
    just pushed to one or the other?
        Mr.Carroll. I think there could be an up side from the
    collaboration that you're exploring in this hearing today. And,
    again, if I go back to my earlier remarks, what we're trying to
    do through the Certified Entrepreneurial Community program is
    to make the resources more readily available at the grassroots
    level. And so it is in fact not just the loan programs, the
    portfolio programs, but it is the technical assistance and the
    coaching that's so important. And we think that as a community
    meets the rigorous standards and guidelines to accomplish the
    CEC designation, that it is going to be incumbent on them at
    the local level to have USDA staff, SBA staff, their technical
    assistance and their programs more readily available to the
    entrepreneurs in those given communities as well as the
    existing enterprises.
        So, yes, we're encouraging that collaboration and we think
    we have a platform. Maybe there could be a little test
    marketing could be done through the 12 counties and the Eastern
    band of the Cherokee Indian that we are currently working with.
        ChairmanShuler. In the follow up, when a business comes in
    to you and your staff and you're helping direct loan programs,
    specifically the SBA or the USDA, how do you help direct them?
    From your experience how do you feel that a particular business
    is better off with SBA or the USDA?
        Mr.Carroll. Well, the best thing we know to do in a
    situation is to work with a group called the Technology
    Commercialization Center. I'll summarize it very quickly by
    saying it's a program that grew out of an effort at Oak Ridge
    National Labs and in the Knoxville area. We have now brought
    that to western North Carolina. Bob Wilson and Todd Fisher are
    two very experienced business people that are excellent in
    evaluating business plans. They help startup companies develop
    execution plans. And it's through that high level of technical
    assistance and their experience, and the fact that the TCC, the
    Technology Commercialization Center is an extension of our
    Advantage West staff, that we are confident we can get people
    to the right place.
        What we're advocating here today is that we have to
    multiple our efforts. And where TCC is currently based in the
    central part of the region in Asheville where the Advantage
    West offices are close by, through the CEC program, the
    Certified Entrepreneurial Community program we could push it
    out across all 23 counties, starting with the 12 counties that
    are currently involved in the CEC program.
        ChairmanShuler. Mr. Ziegler, can you explain to the
    Subcommittee why the permanent disaster program may be
    necessary for agricultural producers?
        Ms.Ziegler. Absolutely. I would remind the Committee
    earlier this year Congress passed an ad hoc disaster package,
    and that included losses that happened in 2005, 2006 and 2007.
    And that required a significant amount of political will in
    order to get that package approved. And it puts producers in an
    unfortunate position of hoping that if they are a stuck by a
    disaster, that their neighbor is struck by a disaster so that
    political will builds to pass that disaster package.
        So for three years of disaster USDA just recently announced
    sign up for that program so producers can go into their local
    USDA offices and prove their losses and receive some assistance
    through that package.
        So if you had a loss in 2005, today is nearly the end of
    2007. That's a long period of time to wait for assistance if
    you sustain some significant losses. Having a standing and a
    permanent disaster program would eliminate the political will
    or the political requirement to pass a disaster package, and
    that's the number one reason that we have pushed so hard is to
    have that certainly there for producers when a disaster would
    hit.
        ChairmanShuler. Why do you think there's been so much
    resistance of the program?
        Ms.Ziegler. Well, disaster happen locally. And
    unfortunately given the budget situation here in Congress,
    there is not a lot of money flowing freely. And when a disaster
    happens locally some folks who aren't impacted by those
    disasters aren't as willing to be as helpful as we would like
    them to be.
        ChairmanShuler. Thank you.
        Mr. Myhre, from your vantage point can you tell us what
    lending instrument that farmers are asking for when they come
    into your center. What's the one that's most asked for?
        Mr.Myhre. When farmers come into? Probably more than
    anything, probably the SBA 7[a] loan program. It's been my
    experience and my knowledge for the business side of that
    producer.
        My experiences as it relates to USDA loan programs in the
    state of Minnesota has not been very extensive.
        ChairmanShuler. What discrepancies are you seeing between
    the two? Why is it more readily available for USDA type loans
    as opposed to SBA?
        Mr.Myhre. Well, in all honesty I think it was communicated
    earlier by Ms. Ziegler, is its knowledge or recognition of
    producers or farmers of the SBDC being a resource for them to
    assist them with their business and t help them in their loan
    packaging deals. So in all honesty, they don't make up a very
    large segment or sector of business client for the SBDC
    network.
        ChairmanShuler. Mr. Milobar, have you received requests and
    inquiries from farmers who wish to start an agricultural
    related business, and how does the USDA benefit? How does it
    fit into this equation?
        Mr.Milobar. Each agency has their own financing programs.
    One of the nice things that I enjoy a very good relationship
    with the business and industry people at the USDA. And in the
    event that I do not think that it fits us, our program, our
    agency, I will call or have the Director of the USDA Rural
    Development, I will have them call.
        I've had previous instances when I was in Oregon an
    individual in a rural part of the state asked me, it was a
    referral from Senator Smith. And we basically, all the agencies
    stepped forward, SBA, USDA and the Oregon Community and
    Economic Development Department because there's a variety of
    things that we could each provide, but they were looking for
    the best possible deal in terms of how fast they could get the
    money, the cost of money and overall terms.
        So when we get requests, we realize that sometimes we just
    have to go ahead and make that phone call so that the
    individual, it fits the client.
        ChairmanShuler. Besides a senator asking for the request,
    how often does it happen just from your own judgment standpoint
    in conducting day-to-day business?
        Mr.Milobar. I have not tracked. I could not tell you. We
    get quite a few calls from the financial institutions who are
    calling us. We probably get maybe one or two calls a week and
    there are certain types of ag related businesses that we do and
    can finance.
        ChairmanShuler. How do you feel like the coordinated effort
    is between the SBA and the USDA?
        Mr.Milobar. As I described in my testimony, I've walked
    across the street. I know some of these individuals personally.
    That's how we typically have done business in Nebraska. So I
    had a relationship when I was with the SBDC program with the
    USDA Rural Development in a number of other programs. And also
    with the Department of Economic Development. This was one of
    those things for me to be able to do my job properly, you know,
    it's necessary for me to go ahead and reach out to other
    organizations and agencies to go ahead and get it done
    properly.
        ChairmanShuler. Do you feel that Nebraska is just an
    exception to the rule or do you feel that there's a
    corroborated effort throughout all of the states?
        Mr.Milobar. First of all, it depends on leadership and what
    is happening. You know I can address what I see in Nebraska and
    some of my some close colleagues that I've worked with in the
    region. And we've done a very good job of trying corroborate
    and try to go ahead and deliver services since we are, you know
    in my particular region, we're all rural so to speak.
        ChairmanShuler. I'd like to recognize Ranking Member Mr.
    Fortenberry for his questions.
        Mr.Fortenberry. Thank you, Mr. Chairman.
        I'm just going to walk down the panel right quick and make
    some comments and ask some questions and you all can come back
    to them because I have some comments and questions.
        Mr. Chair, I hope this has been helpful to you today in
    hearing about some of the innovation that's taking place on the
    ground without the formalization or codification into law or
    regulation. And perhaps that can become an important part of
    the GAO study and report, unpacking some of the initiatives
    that are occurring here to enhance in a more refined or
    formalized way the collaboration which we're looking for. So I
    hope this has been helpful to you as well.
        Mr.Shear. Did you want me to respond now or go--
        Mr.Fortenberry. Go ahead, Mr. Shear.
        Mr.Shear. Okay. It is very useful for us. In fact, it
    starts with some information that we have asked for and it is
    kind of trickling in from the agencies Washington of trying to
    see what is going on out in the field. And I will just mention
    one report that we are actually issuing and publicly releasing
    on Friday that looks at women's business centers and
    coordination with small business development centers and the
    SCORE chapter.
        And here what we are looking for is we know that there are
    certain things that these resource partners do. We know that
    there is certain things that go on in maybe a less formal
    basis, kind of out across the country. And what we are looking
    for in that case, which I think is relevant here, is to what
    degree can SBA and Rural Development as agencies use to try to
    kind of bring those practices that are efficient, that can
    improve services and how to create a structure where they can
    be rolled out more across the country.
        Mr.Fortenberry. Thank you.
        Mr. Carroll, I am very impressed with your testimony and
    appreciate your initiatives on behalf of the people of western
    North Carolina. Who funds Advantage West? And how many counties
    are involved when you get the Certified Entrepreneurial
    Community designation, is that a city, is that a county? And
    then if you could just briefly walk through the checklist again
    of key criteria in which a community meets that certification?
        Mr.Carroll. Advantage West is a public/private partnership.
    We receive a state grant in aid. We also receive support
    through charitable foundations that are focused on economic
    development and improving the economic well being of our
    communities. Private contributions are made to Advantage West
    and we've also managed a number of Federal grant projects for
    our 23 county area.
        The Certified Entrepreneurial Community program checklist,
    the key criteria involved in it is better access to capital for
    entrepreneurs and startup enterprises. Again, improving the
    business climate at the same time for existing companies.
        There is a component focused on community engagement.
    Community engagement is not only to reach the general public at
    the adult level, but it's also to drive down entrepreneurial
    training and concepts in the school systems with the
    communities that are involved.
        There is a telecom broadband component for the Certified
    Entrepreneurial Community program. We've made great strides in
    our region with middle mile telecom broadband infrastructure.
    CEC communities following the checklist are required to develop
    a plan and pursue funding for last mile deployment. Keep in
    mind most of our region is very rural.
        And then the other thing that I mentioned earlier in my
    testimony is that we are sincere and earnest about trying to
    improve the permitting process for small business people at the
    local level. There has to be a one stop shop of some form or
    shape documented and implemented for a community to receive the
    CEC designation.
        Mr.Fortenberry. When you refer to community, you refer to
    small town, city or county or all the above?
        Mr.Carroll. Yes, sir. And in response to your other
    question, the CEC designation could be a municipality. For
    example, we're in discussions right now with the town of Black
    Mountain, which is a small town outside of Asheville. It also
    can be at the country level. And, again, we have 12 counties
    region wide that are participating in the program.
         As I mentioned earlier, it also can be a hybrid. In our
    case, the eastern band of the Cherokee Indian, their Qualla
    boundary, as Congressman Shuler knows, touches into several
    countries. It crosses some county boundaries.
        Mr.Fortenberry. So your criteria is basically four fold:
    It's access to capital; education, technical assistance
    particularly as it takes the form of broadband access, and;
    reducing governmental regulatory barriers?
        Mr.Carroll. And the only thing I would add to that is the
    citizen engagement plan, including reaching young people in the
    school systems.
        Mr.Fortenberry. That's what I meant by education, but yes.
        Thank you very much.
        Ms. Ziegler, thank you for your testimony as well. By the
    way, I'm on the House Agriculture Committee and I offered an
    amendment that I think would be pleasing to you as establishing
    a preference in USDA value added grant program for small and
    medium sized farmers to address the very issue you talked about
    in terms of ownership at the lowest possible economic level to
    ensure there's vibrancy in rural communities and not too much
    of a concentration of the land and wealth and productive means,
    inputs in the hands of a few which are then exported out of the
    community generally. So I appreciate that.
        The other comment I wanted to make regarding local foods, I
    think you're exactly right. In terms of rural entrepreneurship
    this is an undertaking that can provide tremendous benefits
    both in terms of added value to farmers as well as the social
    impacts of the reconnection of the farm to the family, and then
    improve nutritional outcomes. So I think you are dead on there.
    And we actually hosted a conference with the University of
    Nebraska this past August to bring together all of the
    participants in this seminal growing, I won't call it industry,
    but movement if you will. And I think you are right on there to
    begin to expose, unpack, teach, educate our country about the
    potential opportunities there. So thank you.
        Mr. Myhre, you had mentioned regarding the association, are
    you finding some resistance to being called upon more
    aggressively by either USDA or SBA in terms of providing that
    technical level of assistance or is it simply just a process by
    which we continue to develop the good relationships that we are
    hearing across the panel here?
        Mr.Myhre. On the macro level, yes. On the micro level
    within individual centers with local USDA staff personnel, you
    do find some really good and outstanding relationships. But
    creating those relationships on the state level or even the
    national level I think, you know, we have encountered certain
    barriers.
        Mr.Fortenberry. What would be the reasons for that, or is
    the association not yet positioned to coordinate aggressively
    with SBA/USDA? Is it simply the development of this has not yet
    just come to pass? I mean, is it just presenting opportunities
    here or are there legal, regulatory impediments to better
    coordinated resources?
        Mr.Myhre. Well, the association and its board members
    actually just convened and put together its strategic plan for
    the next five years. And as part of that plan, it is in working
    with other federal agencies who do compliment what it is that
    the SBDC national network does. So we'll be looking at other
    opportunities and how we can further collaborate with the USDA
    and working with Congressman Peterson's office to assure that
    SBDCs are then recognized within the next Farm Bill
    reauthorization.
        So we do have certain strategies to certainly do that.
        And we've also through the leadership of SBA and its
    economic development office and leadership of the association
    have sat down with OMB, who has basically encouraged or
    strongly encouraged SBA to support SBDCs working with other
    Federal agencies.
        Mr.Fortenberry. Thank you.
        Mr. Milobar, welcome again. And appreciate your testimony.
        I was very encouraged by the initiative you have
    undertaken, but very saddened by the fact that they are not in
    the First District of Nebraska. So I invite you to do what
    you've done in Omaha and Kearny and Lincoln, South Sioux City,
    Auburn or anywhere else we can duplicate this. I am very
    impressed by the outcome of what you talked about. And I think
    you hit on the right point as well as you, Mr. Myhre, about
    leadership being a key in how we duplicate what is happening on
    a micro level perhaps to a macros level, whether that takes the
    formalization of a codification in law or some new spirit of
    collaboration is less formal; I don't know. But I think your
    initiative in Nebraska, particularly, is one that could or
    should be duplicated nationwide or can serve as a model or
    prototype, particularly given the outcome that you suggested of
    30 percent advancement in the number of applications in a very
    short period of time. And that is what we would really like to
    see. So thank you for doing that.
        Is there any opportunity that you can to formalize what
    you've done on an informal basis so that it can be shared with
    the rest of the nation in terms of other SBA Administrators and
    USDA Rural Development personnel?
        Mr.Milobar. First of all, we are coming to Lincoln.
    Probably be sometime early this winter. As you know, winter is
    coming to Nebraska very shortly and we have to pick and choose
    where we are going to go ahead and deliver programs so we do
    not get snowed in.
        But regarding the program, we do share best practices. I
    know in Region 10, which is Alaska, Oregon, Washington and
    Idaho, they have looked at these practices that we have had.
    And as a matter of fact, with the congressional--I should say
    with the boundaries for the Portland District office, we have
    already gone into the state of Washington to deliver this
    exactly same program.
        To date in the last two years, they have had 760 lenders
    that they have touched. USDA asked very shortly after I had
    left Portland to go ahead and go into another state.
        So the word is spreading. It is a best practice. It is one
    of those things in rural areas that we see that it does work
    and increases our numbers.
        This co-marketing is very, very important. There are
    advantages to both of our programs. And the lenders are a very
    important contact when that entrepreneur, that business owner
    comes in looking for financing.
        Mr.Fortenberry. Do you think it would be necessary for
    Congress again to codify that best practice in some way,
    encourage it in another way that we may not have thought of
    yet?
        Mr.Milobar. It was one of the things, as I said, this
    initiative I have tried--I may tell you something tomorrow or
    next month and we find another initiative that is that much
    better, and it is an evolving process.
        I will tell you, the first year in Oregon we had 400
    lenders, the second year we had only 350 attend.
        One of the other things that I see with the age of the
    commercial loan officers, that they are half my age and I am
    somewhat concerned. I am constantly retraining these lenders.
    So what I do today, you know, may be quite different tomorrow.
        Mr.Fortenberry. Well, I think you have struck on a key
    idea, just in terms of sharing information about best
    practices. And, Mr. Shear, I know you are listening intently.
    And I think that would be a good one to potentially unpack as
    we look at new initiatives to more formalize this collaboration
    that is currently at a macro level.
        So thank you, Mr. Chairman.
        ChairmanShuler. I would like to follow up with the other
    question. We had the Administrator in some months ago. And we
    had talked about sustainable renewable energies when it comes
    to with the SBA and how they have been able to put a program.
    And that, some due to reorganization, they had really not
    gotten to the point where they are talking about the ethanol
    plants or the biodiesel plants, how that is impacted in SBA.
    Has anyone from the USDA had a relationship with, whether it be
    a biodiesel, ethanol plant for sustainable renewable energies
    and having to be able to get those types of loans? Has anyone
    had any relationship with any business that had a difficulty
    because of the SBA not truly having that organization quite
    complete yet?
        Ms.Ziegler. I believe that some of our members take
    advantage of the value added grant program which is
    administered by USDA and the section 9006, which is included in
    the Farm Bill. Those are two programs geared towards renewable
    energy that are administered by the Department of Agriculture.
    And I do not know that is because of an absence of SBA being--
    or having a role in that industry or that area, but they are
    two programs that I know producers do use and take advantage of
    for renewable energy projects.
        ChairmanShuler. It only seems that if we look at some of
    our smaller businesses, smaller producer that the ethanol, the
    biodiesel producing as alternative energies certainly in my
    area, I mean sometimes in our mountains we have what we call
    vertical water culture. It is hard to plant things up on the
    side of the mountains, but we have been producing Blue Ridge
    biodiesels as a perfect example. They have been able to produce
    working with our local farmers, be able to produce the
    vegetables that they are utilizing in their biodiesel plant.
        You know, Mr. Shear, I think maybe that is a look at an
    ongoing business that seems to me there is a substantial area
    of growth that we can start this collaboration between the USDA
    and our SBA to be able to work together. We can have the
    funding and, you know, truly change the dynamics of our energy
    policy. Because it is going to start with our small businesses.
    I mean, we can wait on the large corporations as long as we
    want to, but it really starts with the small businesses and the
    entrepreneurship and the spirit which they have and willing to
    make a difference and make it a change. So that may be one area
    that we can actually truly plug in to say that here is an area
    that we have not thought about. SBA is just now putting
    together some of their programs that they had the testimony
    some months ago. Maybe it will put that collaborative
    coordination together.
        Mr. Shear?
        Mr.Shear. And I thank you for the suggestion. Because we
    are looking for certain opportunities that would kind of let us
    look at what are the possibilities that might be out there
    where collaboration could lead to a better outcome. And I think
    it might be consistent with some of the SBA's initiatives in
    reaching out to underserved markets.
        ChairmanShuler. Ms. Ziegler, the farm credit limits typical
    is limited to on the farm lending. Should the SBA be prepared
    to assist farmers who wish to engage off the farm business
    interests?
        Ms.Ziegler. I think absolutely. As I mentioned earlier,
    producers are diversifying their income sources and we have
    producers that are wanting to start a grass feed business, who
    want to sell soy wax candles or who have a tractor repair
    company that they start to supplement their income. And some of
    those types of projects are not always traditional or have
    traditional or historic types of lending. And I think that it
    is important to have as many options as possible for investment
    and potential credit sources throughout rural America.
        ChairmanShuler. Mr. Milobar, obviously we talked about
    sustainable renewable energies. Would it be appropriate through
    the SBA program to promote different renewable energy types, I
    mean once that's in place and have you had any conversation
    with the Administration about renewable energies?
        Mr.Milobar. No, I haven't. That has not come up on the
    District level, and that I would have to go ahead and get back
    to you on.
        ChairmanShuler. Well, no one has come in the office and
    talked about renewable energies outside of in the farming area?
        Mr.Milobar. Not that I can recall. Not in the last six
    months that I can recall.
        Mr.Myhre. I can comment on that, Mr. Chair.
        In Minnesota we have had both producers who have come to
    the SBDC seeking to have a small business to help supplement
    their family income, and we have worked with many of those
    types of businesses very successfully.
        As it relates to SBA funding and their 504 loan program, we
    have certainly had a lot of alternative bioenergy biodiesel
    plants come to the SBDC seeking both USDA grants and helping
    them research and begin those facilities, and then utilizing
    504 for the actual facility purchases themselves.
        ChairmanShuler. Terrific.
        Yes, sir?
        Mr.Fortenberry. Let me follow up on that line as well.
        One of the largest wholesale structural changes that is
    happening in rural communities is the advent of agricultural
    energy production, the wedding of agriculture and energy policy
    is potentially very beneficial in meeting multiple objectives.
        First of all, diversifying our energy portfolio clearly in
    our country.
        Secondly, with clean renewable resources meeting
    environmental stewardship goals, and;
        Third is increasing income for farmers.
        So as this continues to unfold, as this trend becomes more
    aggressively emerging, particularly given the market
    opportunities that are there but also some of the underwriting
    that should we have a Farm Bill shortly is going to occur with
    new initiatives in this area as we develop even newer means of
    means of biomass and cellulosic materials, it is going to
    create the potential for a lot of different spin-off activities
    as it related to that.
        This is a market change in rural America. And so I think
    the line of questioning actually suggests something to you all
    to be into as you do your normalize outreach in terms of market
    stimulation or thinking through market opportunities where you
    could potentially better serve. That one is tremendous.
        I can give you a very small example. I have a chiropractor
    entrepreneur who wants to begin to build his back support
    mechanism through a corn based--it is not plastics, but corn
    based material versus having it shipped overseas to
    manufacturers using traditional hydrocarbon. And so the
    opportunity there, again as we look at the diversification of
    uses of traditional grain stocks, is going to be extraordinary
    for our rural communities.
        And I could tell you story after story about what we are
    doing. Mr. Milobar, I am sure you know in Nebraska in terms of
    trying to position the state to lead this renaissance of
    rural--the beginning of the renewal resource, renewable energy
    market that leads the way in our country.
        But it is one of those wholesale structural changes coming
    that is in rural America currently. It is also going to have a
    lot of spin off effects that will be potentially--that your
    programs will be potentially called upon to help and fund.
        ChairmanShuler. Any more questions?
        I think today we have really made a really good stop for
    the GAO to finish their report, to continue. You know, it is
    one thing to look at it on the Washington level of how the two
    industries, agencies can work together. But it is even more
    important to recognize how on the ground level, how, what the
    impact the USDA and the SBA have been able to work together in
    some ways and in ways that there is void, and that we need to
    fill that gap to make sure that rural America has the
    resources, has the capital.
        And I want to commend all of you for your comments today,
    your testimony. And certainly Mr. Fortenberry for his true
    leadership to bringing this to the Committee's attention and
    truly putting forth the effort of getting this hearing being
    heard today. His leadership has been very strong.
        And as you can probably tell, that this is a very
    bipartisan Committee, both our Subcommittee, obviously, and the
    Committee as a whole. Very bipartisan and we truly want to
    provide for economic development in the rural communities to
    ensure that the small business have the advantages. Because
    that is the backbone behind our economy in America. And we
    truly create and covet that spirit of entrepreneurship.
        So I want to commend all of you.
        I look forward to seeing the report. And I hope that the
    GAO will take the testimony today and continue to look on the
    ground level where the impact is truly needed most in so many
    different ways.
        I ask unanimous consent that the members have five days to
    submit statements and supporting materials to this record.
    Without objection, so ordered.
        This hearing is now adjourned. Thank you all.
        [Whereupon, at 11:10 a.m. the Subcommittee was adjourned.]

        [GRAPHIC] [TIFF OMITTED] T9381.001

        [GRAPHIC] [TIFF OMITTED] T9381.002

        [GRAPHIC] [TIFF OMITTED] T9381.003

        [GRAPHIC] [TIFF OMITTED] T9381.004

        [GRAPHIC] [TIFF OMITTED] T9381.005

        [GRAPHIC] [TIFF OMITTED] T9381.006

        [GRAPHIC] [TIFF OMITTED] T9381.007

        [GRAPHIC] [TIFF OMITTED] T9381.008

        [GRAPHIC] [TIFF OMITTED] T9381.009

        [GRAPHIC] [TIFF OMITTED] T9381.010

        [GRAPHIC] [TIFF OMITTED] T9381.011

        [GRAPHIC] [TIFF OMITTED] T9381.012

        [GRAPHIC] [TIFF OMITTED] T9381.013

        [GRAPHIC] [TIFF OMITTED] T9381.014

        [GRAPHIC] [TIFF OMITTED] T9381.015

        [GRAPHIC] [TIFF OMITTED] T9381.016

        [GRAPHIC] [TIFF OMITTED] T9381.017

        [GRAPHIC] [TIFF OMITTED] T9381.018

        [GRAPHIC] [TIFF OMITTED] T9381.023

        [GRAPHIC] [TIFF OMITTED] T9381.024

        [GRAPHIC] [TIFF OMITTED] T9381.025

        [GRAPHIC] [TIFF OMITTED] T9381.026

        [GRAPHIC] [TIFF OMITTED] T9381.019

        [GRAPHIC] [TIFF OMITTED] T9381.020

        [GRAPHIC] [TIFF OMITTED] T9381.021

        [GRAPHIC] [TIFF OMITTED] T9381.022

        [GRAPHIC] [TIFF OMITTED] T9381.027

        [GRAPHIC] [TIFF OMITTED] T9381.028

        [GRAPHIC] [TIFF OMITTED] T9381.029

        [GRAPHIC] [TIFF OMITTED] T9381.030

        [GRAPHIC] [TIFF OMITTED] T9381.031

        [GRAPHIC] [TIFF OMITTED] T9381.032

        [GRAPHIC] [TIFF OMITTED] T9381.033

        [GRAPHIC] [TIFF OMITTED] T9381.034

        [GRAPHIC] [TIFF OMITTED] T9381.035

        [GRAPHIC] [TIFF OMITTED] T9381.036

        [GRAPHIC] [TIFF OMITTED] T9381.037

        [GRAPHIC] [TIFF OMITTED] T9381.038

        [GRAPHIC] [TIFF OMITTED] T9381.039

        [GRAPHIC] [TIFF OMITTED] T9381.040

        [GRAPHIC] [TIFF OMITTED] T9381.041

        [GRAPHIC] [TIFF OMITTED] T9381.042

        [GRAPHIC] [TIFF OMITTED] T9381.043

        [GRAPHIC] [TIFF OMITTED] T9381.044