[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


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                   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.]

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