[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
            SBA'S MANAGEMENT OF ITS CAPITAL ACCESS PROGRAMS

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                              JUNE 6, 2012

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 112-070
              Available via the GPO Website: www.fdsys.gov


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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY. Louisiana
                   JAMIE HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND. Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                     Barry Pineles, General Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Graves, Hon. Sam.................................................     1
Velazquez, Hon. Nydia............................................     2

                               WITNESSES

The Honorable Karen Mills, Administrator, United States Small 
  Business Administration, Washington, DC........................     3

                                APPENDIX

Prepared Statements:
    The Honorable Karen Mills, Administrator, United States Small 
      Business Administration, Washington, DC....................    21
Questions for the Record:
    Questions for Administrator Mills............................    29
Answers for the Record:
    Administrator Mills Answers for the Record...................    35
Additional Materials for the Record:
    Statement by the National Association of Development 
      Companies..................................................    52


            SBA'S MANAGEMENT OF THE CAPITAL ACCESS PROGRAMS

                              ----------                              


                        WEDNESDAY, JUNE 6, 2012

                  House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:16 p.m., in Room 
2360, Rayburn House Office Building, Hon. Sam Graves (Chairman 
of the Committee) presiding.
    Present: Representatives Graves, Chabot, Mulvaney, Tipton, 
Landry, Herrera Beutler, West, Ellmers, Velazquez, Schrader, 
Critz, Clarke, Cicilline, Richmond, and Owens.
    Chairman Graves. I call the Committee to order, and today 
we welcome back to the Committee SBA Administrator Karen Mills. 
Thanks for being here, Administrator.
    Administrator Mills is well aware of the Committee's 
interests and role in making sure that SBA's financing programs 
are not only serving the needs of small businesses, but that 
they are also being managed in a way that safeguards taxpayer 
dollars.
    The Committee has held a variety of hearings that have 
highlighted both the needs of small businesses in accessing 
capital and the needs of lenders for clear and consistent 
regulatory guidance. During a time of fragile economic 
recovery, when we are looking to our small businesses to help 
create growth and jobs, how to meet the financial needs of 
these firms is of great importance.
    In fiscal year 2013, the SBA requested a 67 percent 
increase in subsidy to cover the costs of its financing 
programs, while lowering the authorization level in the 7(a) 
and 504 programs. As the SBA financing programs become more 
expensive to operate, it is vital that we look for ways to 
reduce costs to the taxpayers. This means making sure the SBA 
is effectively managing its programs in a transparent manner, 
reducing paperwork burdens, and conducting effective oversight 
of lenders.
    Today we are here to examine the procedures that SBA uses 
to manage its financial assistance programs. We will also look 
at how SBA undertakes its mission of overseeing its $90 billion 
loan portfolio and controlling costs.
    For the SBA lending programs to be effective, they must 
control not only costs, but also control risk. We look forward 
to learning more about how SBA sets policy for its financial 
assistance programs; to find out what SBA is doing to be more 
transparent to its lending partners and to the public; and how 
SBA is managing risk to the taxpayers.
    SBA must foster the partnership between agency and its 
private-sector lending partners so that the SBA lending 
programs can achieve their statutory mission of serving the 
needs of small businesses. At the same time, we understand the 
SBA needs to exercise robust and effective oversight of its 
lending partners, who are often given a great deal of 
discretion to obligate taxpayers on behalf of the SBA.
    With that, I now yield to Ranking Member Velazquez for her 
opening statement.
    Ms. Velazquez. Thank you, Mr. Chairman.
    For the past 2 years, our Nation's economy has experienced 
steady private-sector job growth. The unemployment rate, which 
peaked in October 2010 at 10 percent, has fallen by almost 2 
percentage points. But these gains have not been enough to 
overcome the high hurdle in unemployment. If there is any 
takeaway from last week's disappointing job numbers, it is that 
we still have a long road ahead of us with millions of 
Americans who are seeking work that cannot find it.
    This is why small businesses must remain front and center 
to our recovery. They remain our single greatest source of new 
jobs, but in order for entrepreneurs to play their traditional 
job-creating role, it is essential that they have access-to-
capital. It is the fuel for innovation and economic expansion 
across the spectrum of entrepreneurship.
    However, small businesses face real challenges in the 
capital markets. While lending conditions and credit standards 
have improved significantly over the past year, companies' 
balance sheets have not yet fully recovered. Recent economic 
indicators also raise doubts as to whether the flow of 
affordable credit will be sustained.
    In past recoveries the Small Business Administration's 
access-to-capital programs have been critical to providing 
small firms with a stable source of credit. While the SBA had 
some success in leveraging these programs during the worst of 
the downturn, recent policies have steered some less-than-
favorable changes. Costs in the 7(a) and 544 loan programs are 
escalating rapidly. Lending is stagnant, and small-dollar loans 
to start-ups are on the decline.
    During today's hearing I am hopeful that we will not just 
tout past successes, but instead focus on what the agency is 
doing to reverse these negative trends. These are real 
problems, and no amount of window dressing or clever marketing 
can make up for the growing gap in small business credit. 
Getting loans in the hands of would-be entrepreneurs has never 
been more important. Doing so is not just critical to reducing 
unemployment, but growing our economy for the long term.
    On that note I would like to thank Administrator Mills for 
appearing before the Committee today. I am interested in 
hearing your thoughts on how best to meet entrepreneurs' 
capital needs so that they can continue to create new jobs.
    With that, I yield back. Thank you, Mr. Chairman.
    Chairman Graves. Thank you.
    As I mentioned in my opening statement, our witness today 
is the Honorable Karen Mills, Administrator of the SBA. Ms. 
Mills has been the Administrator since 2009.
    Welcome back to the Committee. We appreciate your coming 
in.

 STATEMENT OF KAREN MILLS, ADMINISTRATOR, UNITED STATES SMALL 
                    BUSINESS ADMINISTRATION

    Ms. Mills. Thank you very much, Mr. Chairman. Chairman 
Graves, Ranking Member Velazquez, members of the Committee, 
thank you for inviting me to testify on SBA's lender oversight 
program. I have submitted my full written testimony to the 
Committee, which I ask to be made part of the hearing record.
    Our goal at the SBA is to ensure that small business owners 
and entrepreneurs across the country have access to the capital 
and help they need to grow their businesses and create jobs. 
Today our lending is running at above 2008 levels following a 
record year in 2011 in which we supported more than $30 billion 
in lending to over 60,000 small businesses. In addition, our 
small business investment companies also had a record year, 
putting $2.6 billion directly into the hands of more than 1,300 
high-growth businesses.
    While commercial lending has improved, we know that gaps 
remain. Small-dollar loans and loans in underserved communities 
are still not back at the levels that we need them. To solve 
this challenge, we are focused on what we call a More Doors, 
More Dollars approach. This has allowed us to open up product 
lines to qualified community development financial 
institutions, and we have streamlined and simplified loan 
processes to increase small-loan volumes. At the same time, we 
are committed to aggressively protecting taxpayer dollars and 
ensuring that our programs are cost-effective. As I have 
testified before, we take a zero tolerance stance to fraud, 
waste and abuse in all of our programs.
    Over the past 3 years, we have engaged in extensive review 
and redesign of SBA's lender oversight activities. At the core 
of this effort has been increased collaboration with our Office 
of Inspector General. One of the areas we identified early on 
is the importance of a strong oversight culture that is made 
possible through close coordination between the Office of 
Inspector General, our Office of General Counsel and key 
players across our loan programs. The results have been 
tangible.
    For example, we have worked together to close more than 80 
inspector general recommendations in the last year alone. To 
further increase the intensity of our oversight activities, we 
are incorporating best practices from our sister agencies, 
including FDIC, the Fed and the OCC, as well as private-sector 
financial institutions. We also sought out and incorporated 
feedback from SBA stakeholders, internal analysis, GAO reports, 
and advice and recommendations from members of this Committee.
    Today we are seeing the results of these efforts, including 
more robust agency enforcement. Over the past 3 years, we have 
declined to renew delegated lending authority over 300 times 
for SBA lenders where the entities did not meet SBA's loan 
standards, and we have suspended or debarred over 50 loan 
officers, loan brokers, packagers and applicants in the 7(a) 
program.
    We have also increased the activity of our Lender Oversight 
Committee, and we initiated a new Lender Supervision and 
Enforcement Task Force with the aim of originating enhanced 
supervision and enforcement actions. In addition, we are making 
significant organizational changes within our Office of Credit 
Risk Management, including the hiring of a new Director who 
brings a wealth of experience monitoring lenders, large and 
small.
    In making these enhancements we have worked closely with 
our lenders and our stakeholders to address their concerns. In 
response to their input, we have simplified and updated our 
rules for lenders and borrowers, streamlined provisions of our 
loan programs, and are providing increased transparency in our 
lender communications and requirements.
    We believe that these ongoing efforts to ensure consistency 
and clarity will further strengthen our ability to manage 
agency risks. All of these changes and enhancements flow from 
our three-pronged approach to manage risk, and I have mentioned 
this before: providing greater focus on preventing fraud or 
abuse before it happens; continual monitoring of loans in the 
SBA portfolio; and strengthening our enforcement function by 
punishing bad actors. This approach has been extremely 
successful in our efforts to root out fraud, waste and abuse in 
government contracting, and we are seeing similar results in 
lender oversight.
    Thank you again for the opportunity to testify before you 
today. I look forward to working closely with this Committee to 
build on the significant progress we have made, and I am happy 
to take your questions.
    Chairman Graves. Thank you, Administrator Mills.
    We are going to start out with Mr. West.
    Mr. West. Thank you, Mr. Chairman and Ranking Member. And, 
Administrator Mills, it is great to see you again.
    You know, that is one of the big things that I would like 
to focus on is this idea of accountability and, you know, the 
transparency and refining and streamlining of the processes, 
but also the consequences thereof. You mentioned the 50 loan 
officers, brokers and packagers that were suspended or debarred 
in fiscal year 2009. Has that increased or decreased as we look 
in the last fiscal year or so?
    Ms. Mills. It has increased significantly.
    Mr. West. Okay. And in the 347 lenders, when you look at 
this preferred lending program, do we need to get tighter as 
far as the criteria by which we are allowing people to be 
preferred lenders? Is this a program that we want to continue 
on if you have 347 that you had to--you know, did not renew 
their preferred lending status?
    Ms. Mills. We have, as I mentioned in the written remarks, 
done an extensive overhaul on how we assess our lenders, 
including looking at the criteria for their risk ratings, and 
we are using different criteria, more expanded criteria, 
including activity level, size of loan, actual changes in 
lender behavior, which turned out to be very important 
indicators, and on average we audit about 180 lenders per year. 
So we are really revising our entire risk-base reviews.
    Mr. West. And I guess the ``so what'' to it all is you 
talked about punishment, consequences. Can you give us an idea 
of the specific things that--the ramifications of not being 
renewed or being debarred by the SBA? I mean, what really is 
going to hold people's feet to the fire so that we do have the 
access to capital that is necessary for our small businesses, 
and we don't have bad actors, as you just talked about?
    Ms. Mills. We have put together a real intensive focus on 
both supervisory and enforcement actions. And we have a new 
Lender Oversight Committee and what we call our Lending 
Supervision and Enforcement Task Force, and they assess each of 
the circumstances and go through the proper procedures and 
figure out what the consequences are.
    But I think the message is clear. We have a zero tolerance 
policy for bad actors, and we are going to make sure there are 
consequences.
    Mr. West. Can we make sure that we can get that into the 
Code of Federal Regulations if those standards, criteria, 
whatever, are not there currently?
    Ms. Mills. We work with those that are there currently, and 
we now have great cooperation with our inspector general and 
the Department of Justice as well.
    Mr. West. I have to be fair in asking this. We didn't grow 
the administration to have this new agency that you are talking 
about. I mean, this was in-house or what?
    Ms. Mills. We have reorganized in-house.
    Mr. West. Then I am happy.
    Thank, Mr. Chairman. I yield back.
    Chairman Graves. Ms. Velazquez.
    Ms. Velazquez. Thank you.
    Administrator Mills, in an interview you gave to The New 
York Times in March, you stated that the gap in credit for 
small-dollar loans and loans to underserved communities was 
caused by the withdrawal of the big banks from the 7(a) 
program. You also stated that major effort is now underway to 
bring them back into the fold. Do you think this is a sound 
strategy given that these negative trends were caused in large 
part by an overreliance on a handful of large lenders to drive 
lending?
    Ms. Mills. Well, Ranking Member Velazquez, you are exactly 
right that this issue was caused by the fact that we had only a 
few large lenders making loans of the small-dollar variety, and 
in the credit crunch, they went away from the market, and they 
had been using consumer credit scores, and as a result they had 
made a lot of loans that turned out not to be very good.
    Ms. Velazquez. Do you recall in previous hearings where you 
attended and you participated in that I raised the same issue?
    Ms. Mills. Yes. And you have been very, very helpful and 
consistent on this, and as a result we have been focused on a 
number of solutions. As you mentioned----
    Ms. Velazquez. What is the strategy?
    Ms. Mills. There are three pieces to the strategy. We call 
it, as I said, More Doors, More Dollars. So the first strategy 
was in the community, whether you walk through the door of the 
local community bank or the CDFI, we wanted to make sure you 
had access to an SBA guarantee. We brought 1,000 banks from the 
community bank sector back to SBA lending, and then we opened 
the doors to selected community development financial 
institutions that had good lending records to be able to make 
7(a) loan guarantees. But that was not enough.
    Ms. Velazquez. Isn't it true that most of those banks 
basically make one loan or were attracted by increased 
guarantee from the Recovery Act? Once that expires, they are 
gone. So what is your agency doing to recruit new lenders and 
support their lending efforts, particularly if they only make 
one or two loans a year?
    Ms. Mills. Once again, you are exactly right. The real bulk 
of these loans come from the large lenders, but we could not 
open up to the same procedure as we had before. So we have 
changed our process to use a different methodology called the 
Small Business Predictive Score, SBPS. It is a score used in 
lieu of the consumer credit score. We have incorporated this 
into our new processing of our Small Loan Advantage loans, 
because large lenders and regional lenders were not making 
small loans because it was too expensive for them. So we 
understood their processing issues, reduced their costs, and 
then instituted a more predictive score in order to make sure 
that the loss rates would not skyrocket.
    Ms. Velazquez. You know, in my opening statement I raised 
the issue that this economy is still fragile, and that the last 
report shows that the unemployment rate went up, and basically 
the companies that will be creating those jobs are new start-
ups. And it is just like for 2 or 3 years now, since 2008, I 
have been raising the same issue. And since the JOBS Act 
increased the maximum SBA loan to $5 million, the percentage of 
smaller loans, defined as those of $150,000 or less, declined 
from 17 percent of total lending dollars in 2009 to just 8 
percent.
    So the jobs that we need to create, those companies and 
those start-ups are not getting the credit that they need, and 
I don't see that just by creating a new pilot program or a new 
program, lending program, that is going to reduce paperwork--
SBA Express Preferred Lending Program, all of them reduced 
paperwork.
    Ms. Mills. We have launched a Small Loan Advantage Program 
June 1 with new procedures, and on day one we had 45 loans in 
the queue. This is a highly exciting product, a process 
improvement for our lending community. So we believe that this 
will be a very important augmentation for the problems that you 
just described, and we are going to continue to work on the 
start-up problem which you mentioned, which is also very, very 
important.
    Ms. Velazquez. Last year the Women's Procurement Program 
was finally put into place, and agencies began awarding 
contracts under this program in the second half of fiscal year 
2011. However, contracting officers have not been really using 
this program. In the current fiscal year, there have been 143 
actions worth $3.6 million.
    So I would just like to ask you, since we passed this 
legislation, we went to court, U.S. Women's Chamber of Commerce 
went to court, the new administration promised it will have it 
up and running, and it has taken this long, my question to you 
is can you outline the steps that SBA and you specifically are 
going to take to educate contracting officers of their ability 
to set aside to women-owned small businesses?
    Ms. Mills. Well, I am happy to get back to you with a list 
of specific events and activities. We have a continuous 
program, and I personally am very committed to our women's 
contracting role.
    As you know, this was passed by Congress in the year 2000, 
and we took it up and went through the entire process of 
getting it up and running. And we have I believe it is close--I 
am going to get you the exact number, but I think it is 8,000 
women who have self-registered in our contracting registry, and 
we now are active every day with every agency, because we have 
goals, and we are holding our agencies accountable for meeting 
those goals.
    Ms. Velazquez. Well, numbers speak volumes. $3.6 million 
have gone to women contracting awards. So all I can say is that 
women-owned businesses have been waiting for 10 long years, and 
they deserve better. Thank you.
    Chairman Graves. Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mr. Chairman.
    Administrator Mills, thank you for coming today. I applaud 
your efforts regarding the smaller loans. It is something that 
we have seen both in this hearing room, but also as we have 
traveled the country. I know that Ms. Chu and I went out to her 
district and heard exactly this, that small businesses were 
having difficulty getting access to the smaller loans, and the 
numbers that you heard the ranking member mention about the 
size of those 150,000-or-less loans dropping from, I think, 17 
percent to 8 percent is exactly what we are seeing in the real 
world. So again, on that front, I applaud you.
    I guess my question is this: Other than you talked about 
bringing in some more community banks, which I think is a 
tremendous idea, because, again, we saw the same thing which 
you have just described, which is that fewer and fewer banks 
are actually doing this. You get to a bigger bank, the small 
loans don't make any money for them, so we have to figure out a 
way to fix this.
    Beyond reaching out on this More Doors, More Dollars 
program, how are you actually physically changing the process? 
Give me specific examples of how you are making it easier for 
my local Camden community bank to make a $50,000 SBA loan?
    Ms. Mills. Well, we would be very happy to sort of walk you 
through the actual changes. We have reengineered our entire 
Small Loan Advantage, and this is what launched. Small Loan 
Advantage is actually a processing option for lenders, and it 
is under our 7(a) program, but it is designed to solve the 
problem that lenders have, which is making small loans wasn't 
affordable. They weren't making any loans because they weren't 
making any money making those loans. So we have recently 
implemented further streamlining, and the use of the Small 
Business Predictive Scores is a very important component of 
that, because it reduces the time to make the loan, and it has 
been proven much more predictive of success than consumer 
credit scores.
    Mr. Mulvaney. I understand the change on that, but if I am 
a banker, and I used to do loan closings, I dealt with bankers 
all the time, and if I am a banker, one of the things I am 
interested in is the number of forms I have to fill out and the 
number of documents that I have to process.
    Ms. Mills. Well, we are happy to take you through them. 
They are much reduced. They are much more automated.
    Mr. Mulvaney. Do you think it is more accessible now to 
community banks than it was a year ago?
    Ms. Mills. Absolutely. We have changed this format so that 
it is open to all lenders, not just our preferred lenders, and 
we have a streamlined option. Lenders have the option of using 
their own notes, for instance, instead of using SBA notes, so 
that reduces the amount of paperwork.
    Mr. Mulvaney. Is what you just described part and parcel of 
that program that went in on June 1st, or is that a different 
program?
    Ms. Mills. No, this is part of that June 1st revision.
    Mr. Mulvaney. Well, good. I encourage you to continue to do 
that, because, like I said, what we have seen in the real world 
is that for small businesses, these things have dried up.
    I have got a couple very quick questions to follow up on 
what Colonel West had asked about, which is the 50 loan 
officers, brokers, packagers that were suspended or disbarred; 
the 347 lenders that you took off of--you did not renew their 
preferred status. I recognize that that is 400 different 
circumstances, but do you see any general trends in the reasons 
why you are taking those actions? What are you seeing out in 
the field amongst the loan officers, for example? Are there 
general things that are happening that says, wait a second, 
this is one of the things we need to--reasons to get rid of 
these folks?
    Ms. Mills. Well, that is a very good question, and I think 
once again I would like to get back with you on the details. 
But we know now that we have a whole series of indicators, and 
we are incorporating those learnings. We know, for instance, 
lender behavior is a very important indicator. When loans start 
to go up very, very fast, it is an important time to look at a 
lender and dig deeper and perhaps do a more risk-based audit. 
So we are using those criteria, and we can show you what they 
are.
    Mr. Mulvaney. Great. Thank you.
    And then finally, last question on the budget, and I 
apologize for being the budget person. The budget this year did 
not request an extension of the commercial refinancing program 
in 504. Why was that?
    Ms. Mills. Well, the commercial refinancing program in 504 
has, in fact, been quite a successful program in the last year, 
and it has allowed small businesses to refinance mortgages and 
use some of that capital as working capital, which has allowed 
them to grow and create some jobs. It does expire at the end. 
It is not authorized to go forward. But I will point out that 
it has picked up steam, and there is a lot of people out there 
who like it.
    Mr. Mulvaney. I yield back the balance. Thank you, Mr. 
Chairman.
    Chairman Graves. Mr. Schrader.
    Mr. Schrader. Thank you, Mr. Chairman.
    Well, it was a popular program. Why is it not being 
requested to be reauthorized, though? I guess that is the 
question, following up on the Representative's point, because 
it is tough for small businesses to get access except through 
that creative program you developed.
    Ms. Mills. Right. Well, this is a very good question, and 
it is something that has come up before Congress in a number of 
ways and a number of times and has not yet been reauthorized.
    Mr. Schrader. So you wouldn't be adverse to us suggesting 
it be reauthorized, I guess is where we are going with that.
    Ms. Mills. It certainly has a lot of success right now in 
the marketplace.
    Mr. Schrader. I want to congratulate you on some of the 
great work on the delinquency stuff. Since the new sheriff, if 
I may refer to you that way, is in town, the delinquency rates 
for 504 and 7(a) have gone down very dramatically, and it looks 
like the attention on getting good-quality loans out there is 
being met. So I appreciate that access.
    How about what is the situation for capital? At the end of 
each cycle, it seems like SBA, even Rural Development, for that 
matter, the capital gets drawn up quickly and inability to make 
loans because of insufficient capital. Where are we right with 
SBA in terms of capital so that you can make the loans you want 
to make?
    Ms. Mills. We have room in our authorization to make all 
the loans, large, small, medium-sized, that we need to make.
    Mr. Schrader. Good, good, good.
    And then historically we have had problems with our HUBZone 
programs and some of our veterans programs where certain 
unscrupulous people take advantage of them, and you, I know, 
have had your attention on them. Can you comment a little bit 
as of recently here, this month, how we are doing in terms of 
curbing some of the ne'er-do-wells and their taking advantage 
of programs they shouldn't have access to?
    Ms. Mills. Well, as I said, we have a zero tolerance policy 
for fraud, waste and abuse, and we began our effort with our 
government contracting programs and with particular regard to 
HUBZone. We have three pieces of that, which is up-front 
certification, ongoing monitoring, and going after bad actors.
    In HUBZone in particular we completely redid the up-front 
certification and now have a streamlined, effective process for 
HUBZone certification. So we are working very hard. We are 
always improving processes. But that major hurdle that we have 
has been successfully moved forward.
    Mr. Schrader. We haven't had a GAO report since then, I 
guess, to establish how well it is doing, I guess, at this 
point in time, but you feel confident you would survive much 
better than we have in the past an a result of the changes you 
made?
    Ms. Mills. Yes. We take an ongoing look, and we do not take 
our eye off the ball on those government contracting problems.
    Mr. Schrader. One of the other issues that comes up a lot, 
and I don't know how much control you have over it, is that 
with some of the minority women contracting issues, some of 
these firms develop to become firms to take advantage of that 
program, and the real small businessmen and women don't 
actually get these contracts at the end of the day. They go out 
to larger firms that purport to subcontract this out. A lot of 
times it is out of State, small businesses. Is that something 
the agency is focused on at all?
    Ms. Mills. We are absolutely focused on making sure that 
the program benefits go to those who are qualified to receive 
it and for whom it is intended.
    Mr. Schrader. Excellent. Excellent. Good. Good.
    And then again following up on some of the questions that 
have been asked, does SBA have particular improvements in some 
of the timelines you alluded to, you know, timelines as far as 
getting a loan application to resolution; the difficulty 
sometimes of getting these loans, the paperwork notices we 
heard over the last 2 or 3 years? Are you tracking that sort of 
data, getting it done quicker, better?
    Ms. Mills. Yes. We absolutely track our turnaround times, 
and they range in the 10- to 20-day turnarounds. And we have 
made significant improvements over time, and we have a 
dashboard where we know where it is weekly.
    Mr. Schrader. That is an improvement. What was it when you 
came in, if I may ask?
    Ms. Mills. Oh, it was significantly longer.
    Mr. Schrader. That data would be good. I think you should 
use that data to talk about some of the turnarounds that have 
occurred since you have taken office.
    I appreciate your attention on all the--you know, quite 
frankly, the agency had been, in my opinion, in some disarray 
and not well funded, not well appreciated, and as has been 
pointed out, there is still a big lack of capital for really 
smaller businesses.
    So I hope--one question on that I guess, I have got time. 
You are doing well, I am doing well. What about rural lending? 
That is another issue that we are concerned about. It seems to 
have fallen off a tad, and obviously I want to make sure that 
rural America responds, too.
    Ms. Mills. I was just in West Virginia. Next week is our 
first anniversary of some of the things we announced for rural 
America. We are very focused on making sure that we have an 
inclusive strategy for entrepreneurs all across the country; 
that it is not just on two coasts, even though we like the 
coasts, because we see there are tremendous innovative 
entrepreneurs, even very technical entrepreneurs, in all kinds 
of rural areas, and they don't have as much access and 
opportunity.
    So we have cultivated regional banks, community banks, 
credit unions and other lenders to make sure that they are 
using these new products, and we are also focused on it in our 
SBIC, where we did special focus on rural small business 
investment companies.
    Mr. Schrader. Thank you very much. I yield back.
    Chairman Graves. Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    I actually only have--you know, I have taken in everything 
that is being talked about, and I have a couple questions that 
are a little bit more specific, and I was hoping to get your 
comments on them. Obviously you can't speak to a specific case, 
but I wanted to share kind of some feedback with you.
    I had a printer in the largest county in my district who 
was working with a lender to apply for a SBA loan, and he 
said--this was at a town meeting. He raised his hand and said, 
it is very frustrating and time consuming, so obviously we 
wanted to know a little bit more about it.
    So this is what happened. The local bank took the 
application and then came back to him and said that the SBA 
asked for more documentation, which he provided. He jumped 
through those hoops. In the meantime, the bank gave him a line 
of credit while they were kind of going through this process, 
and which obviously later termed out at a very high interest 
rate. He later found out that the bank never presented his 
application to the SBA. And I was very, very curious about how 
much leeway these banks get in picking and choosing what loan 
applications they pass on to the SBA and what you are doing to 
improve oversight in instances like this, where someone thinks 
they are in good faith doing--and the printer is still 
operating today. It is not like it was some fly-by-night 
operation, right? It was a good-standing business in the 
community and still is.
    Is this common to hear something like this?
    Ms. Mills. Well, first of all, I appreciate your having 
brought this to our attention. You know, it is what we do every 
day to follow up on small businesses that need access and 
opportunity, whether it is to loans, or contract, or counseling 
or other help. So we are always happy to have our people go see 
what we can do to help them.
    In this particular case, to answer your general question, 
we have a public-private partnership between the Federal 
Government and banks, and that makes for a very cost-effective 
program. So banks are supposed to make all the loans that they 
can without the SBA's help, because if the market will provide 
credit, then why should the taxpayer subsidize that?
    But there are lots of instances, as we know, that small 
businesses don't meet the credit standard, but they are still 
good, and the bank would like to make the loan, they just need 
a little help. That is where they come to the SBA for an SBA 
guarantee. So it would need to meet the criteria that the bank 
could not make this without the SBA's help.
    If the bank--the other thing I would say to your small 
business is when you are preparing for a loan, you should come 
to one of our SBA small business development centers and get a 
mentor and a counselor to help you work through your business 
plan and your bank package. It tends to make for a more 
creditworthy conversation when you get to the bank, and they 
can help direct you to a bank that is interested in that 
particular industry.
    Ms. Herrera Beutler. Well, and that makes sense. However, 
if you are using the bank or banks as your partners, and they 
are kind of an entry point, so to speak--and I get it, you 
know, if you can make a loan in the private sector, go for it, 
right? That is mostly what we want. But this is during the 
credit crunch when small business lending, SBA was really the 
only game in town. So here this borrower thought he was dealing 
with the SBA and jumped through the hoops to comply with what 
he thought was SBA paperwork. It seems somewhat disingenuous 
for a lender to then say, yes, yes, we are hoping to get there, 
hoping to get there, and you will just do the loan through us, 
and it is a high interest rate, and SBA isn't involved.
    Is there some sort of a regulatory guidance? I mean, I 
understand that you guys are overseeing the loans that you have 
made, but at what point is someone paying attention to the 
partners and making sure the partners are following SBA policy? 
Does that make sense?
    Ms. Mills. Well, we pay tremendous attention to the 
partners and make sure they follow SBA policy. And the banks in 
this situation, we would be happy to follow up with you 
further, but I want to assure you that there are strict SBA 
policies, and one of which is that they need to make a 
determination that it is a credit--it is an SBA situation.
    Ms. Herrera Beutler. So do they let the potential 
perspective borrower know at some point, yeah, you came here 
for a SBA loan, you are filling out SBA paperwork, but this is 
going to be a conventional loan through a bank? I mean, is 
there any kind of a requirement that they up front say, okay, 
you are not going--it is not going to be SBA credit, we are 
going to kind of walk you through this process?
    Ms. Mills. I would be happy to get back to you with the 
specifics on the guidelines on that specific communication. We 
can get back to you.
    Ms. Herrera Beutler. Well, not only just this case though. 
I mean, in general do they have to at some point say, hey, you 
are dealing with us, the bank, not us, the SBA partner? Do you 
require that?
    Ms. Mills. I am happy to go through the specific guidelines 
to answer that question, but in general, yes, the bank does 
say, this is a loan from us; or the bank says, this is a loan 
from SBA. And the paperwork would reflect it is a loan from the 
bank or a loan from the SBA.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    Chairman Graves. Mr. Owens.
    Mr. Owens. Thank you, Mr. Chairman.
    Thank you for coming to testify today, Administrator Mills.
    We have had a lot of conversation and questions about 
credit availability, and you just described in response to a 
question the fact that primarily you want the banks to do the 
lending; secondarily, you want a form of guarantee program; 
thirdly, you would have a direct loan from the SBA. Would that 
be a fair ranking of those?
    Ms. Mills. No, sir. Let me clarify.
    First, the marketplace provides 90 percent of the lending 
to small business. The role of the government guarantee is to 
provide additional access and opportunity when the bank won't 
make that loan. We do not have a direct lending program except 
in our disaster loan operations.
    Mr. Owens. Okay. Now, there does come a point, and we did 
hit that in 2008 through 2010, where the SBA has to make a 
decision about a guarantee as to the creditworthiness of the 
borrower, and in many instances what occurred during that 
period was that creditworthiness would not meet your standards, 
and therefore the guarantee was not issued. Would that be a 
fair statement?
    Ms. Mills. Well, we have a process where a bank will make a 
decision about whether they want to make a loan or whether they 
want to make a loan with an SBA guarantee. In certain cases 
that authority is delegated to lenders to make that decision, 
and in other cases where we have not granted delegated 
authority, it comes to our processing centers for credit 
review.
    Mr. Owens. And there are times, obviously, when you make a 
determination that the borrower is not creditworthy.
    Ms. Mills. That would be correct.
    Mr. Owens. And that accounts for some of the declinations 
in the loan process; in other words, they were declined a loan 
because they were not creditworthy?
    Ms. Mills. Correct.
    Mr. Owens. You also talked a little bit about this 
predictive score, and I would like to hear a little bit more 
about that, exactly how you operate it and what the source of 
that analytic is.
    Ms. Mills. So the Small Business Predictive Score has been 
around a long time. It is used throughout industry, and, in 
fact, we have had it for quite a bit of time analyzing our 
portfolio. But on the front end of the portfolio, the standard 
had been for many banks in 2005, 2006, 2007 to use consumer 
credit scores as a cutoff. We have a lot of legacy defaults 
from our 2005, 2006, 2007 portfolio. In fact, that is a 
substantial part of our subsidy cost.
    When we looked going forward, we have begun to make a new 
analysis of our credit thresholds as part of this entire look 
at credit risk management, and what we have found through 
extensive analysis is that this commercially available, widely 
used industry standard product, the Small Business Predictive 
Score, is a much better predictor than the consumer credit 
score. So we have now begun to incorporate it even more 
significantly in the front end of the credit process.
    Mr. Owens. And that analytic you indicated is an industry 
standard. I am assuming you mean the commercial lending 
industry?
    Ms. Mills. Correct.
    Mr. Owens. So you are taking something from the private 
sector and incorporating it into your analytics in making your 
decisions?
    Ms. Mills. Right. But this is something that we have had 
access to and is part of our system, and we have been using it 
more on the back end than on the front end.
    Mr. Owens. Thank you. I have no further questions.
    Chairman Graves. Mr. Landry.
    Mr. Landry. Thank you, Mr. Chairman.
    Administrator Mills, I wanted to ask you a question about a 
correspondence that I sent to you back in October of last year 
concerning HUBZones, and it is just a kind of basic question, 
because I sent the letter to you all, and the response I got 
did really not suffice. It didn't answer the question.
    Could you tell me what the current status of the HUBZone 
program following that recalibration is? I mean, I had three 
parishes or counties in the district that were removed from the 
HUBZone, but the calibration was being done at a time when the 
Deepwater Horizon incident was affecting our economy. And my 
question to you all, which has not been answered, is whether or 
not the economic--if you all used the economic data or looked 
towards the effects of the government-imposed moratorium on my 
district, and specifically those comments, because they are on 
the gulf, if that impact was used when recalibrating their 
position?
    Ms. Mills. Well, number one, I want to tell you straight 
out that we will go back and take your original letter and any 
additional thoughts or questions or clarifications that you 
would like and spend the time to make sure that you have a full 
answer.
    Mr. Landry. Thank you.
    Ms. Mills. We want to make sure that we spend that time and 
have you be satisfied with the response.
    The HUBZone program is right now designated by census data 
as to what is a HUBZone, and we had some new data, so we have 
new HUBZones and new maps. And we want to make sure--we will 
follow up with you after this meeting to make sure that we 
understand specifically how that affected your counties that 
you mentioned.
    Mr. Landry. Right. And that is the only question that was 
left unanswered was just the fact that when you took the census 
data prior to the Deepwater Horizon incident, we were 
experiencing an economic upturn; however, the administration 
created an economic downturn due to the moratorium. So I just 
thought that it would be fair to calculate that amount in 
there, and I just would ask that you all take a look at that to 
see if there is anything we could do to determine whether or 
not that data would put them back into the HUBZone status.
    Ms. Mills. Yes. We would be happy to.
    Mr. Landry. Thank you, Mr. Chairman. I yield back.
    Chairman Graves. Mr. Critz.
    Mr. Critz. Thank you, Mr. Chairman.
    Thanks, Administrator Mills, for being here. It is good to 
see you again, and our walk through Vandergrift was very nice. 
We got a lot of good feedback from that.
    My first question is I had a field hearing in Pittsburgh 
earlier in the year in April, and it was about small businesses 
engaging in international trade, and many of them discussed the 
critical role that credit and capital play for companies 
operating in foreign markets, but they don't know that the SBA 
is a viable option.
    My concern is that district offices are cut to the bone, 
and I am wondering how the agency can better market itself so 
that exporters are made aware of SBA's trade financing 
programs. And what brought this to light is that I guess in the 
past year, nearly three times as many export loans have been 
made by the Ex-Im Bank than through SBA to small businesses. So 
I am curious why the SBA is lagging behind, and what do we need 
to do to market it?
    Ms. Mills. Well, first of all, you are exactly right that 
there is tremendous opportunity in export. And I am happy to 
get you the exact statistics on it, but I assure you there has 
been tremendous growth in the SBA export loan program this 
year, actually record growth, and also in our export 
counseling.
    But I want to point you to our STEP grants, which are the 
vehicle that we have been given by Congress to get even more 
impact in a State-by-State basis. This is $30 million a year, 
funded for 2 years, to give competitive grants to State export 
offices to work explicitly on small business exporting. And 
this ensures that our district offices, the State offices and 
any other players are acting in a coordinated fashion on the 
ground so that we make the best use of the buck.
    Mr. Critz. Well, good. Good. Thank you.
    The second question is just over a year ago, SBA 
implemented a Small Loan Advantage pilot program, which 
delegated authority to current SBA lenders to make loans based 
on basically the two-page application. In the past, efforts to 
reduce paperwork and delegate authority have led to dramatic 
increases in default rates. What safeguards are in place to 
ensure that this new effort does not facilitate poor 
underwriting decisions or ultimately increase the cost of the 
7(a) program?
    Ms. Mills. As I was mentioning earlier, the Small Loan 
Advantage 2.0 is a processing option for lenders under our 7(a) 
program, and it has been recently improved and streamlined 
further and opened to nondelegated lenders. And that went into 
effect June 1 with very strong response from the lenders. The 
safeguard that you described is the use of the Small Business 
Predictive Index at the front end of that new processing.
    Mr. Critz. Okay. Thank you.
    Well, the Committee is well aware of the economic slowdown 
or what the impact of the economic slowdown had on SBA's 
lending portfolio, and we worked hard to provide SBA tools to 
bring lending volume back to preslowdown levels. I also think 
it is important that you have to walk that line between 
providing small businesses capital while protecting the 
taxpayers' money.
    Can you tell us the current state of that portfolio, and 
can you describe also the creditworthiness of SBA's lending 
portfolio?
    Ms. Mills. Yes. If you look at my written testimony, on 
page 5 there are two graphs that describe the state of the 
current portfolio. In terms of delinquencies and purchase 
rates, they peaked in the final quarter of fiscal year 2010, 
and they have been steadily declining since, and they are at 
about the prerecession levels at the moment.
    The second graph is the Small Business Predictive Scores 
over time, which is an indicator of the creditworthiness of the 
portfolio, which, as you can see, is improving.
    Mr. Critz. Well, very good. Thank you very much. I yield 
back.
    Chairman Graves. I have a question that is kind of outside, 
I guess, the SBA's portfolio. But we are hearing from banks, 
from a lot of banks, that they are having a hard time lending 
to small businesses because of the scrutiny by the regulators 
when it comes to small business loans.
    Just out of curiosity, in your position on the Cabinet, can 
you use that? Because we can't seem to have any influence 
whatsoever over the regulators, and they don't want to hear 
from us, and it doesn't make any difference anyway. I mean, 
advocating for small business certainly, advocating for--you 
know, we have got to use a little bit of common sense here, and 
that scrutiny is really having some issues out there. At least 
the banks are telling us that. So can you use that position to 
push the Fed along a little?
    Ms. Mills. Thank you, Congressman Graves.
    We have seen exactly the same concern, and I have, in fact, 
had conversations with regulators on a consistent basis, 
because it is a real issue if the guidelines that are given out 
by the regulators are not interpreted in a clear and precise 
way all the way down into the regions, and that creates 
uncertainty at the banks as to how a loan would be classified, 
and that makes them not willing to make the loan. And this is a 
matter, as you describe, of constant concern, and I take it as 
part of my job to continually have this conversation with the 
regulators.
    Chairman Graves. That is good, because advocacy is 
obviously one of the--is an important part. It is outside your 
portfolio, but it is obviously very important.
    Mr. Richmond.
    Mr. Richmond. Thank you, Mr. Chairman and Ranking Member, 
and thank you, Administrator Mills, for coming in.
    I guess I will start where the chairman just left off. It 
just so happens I was visited by some of my constituents today 
who we normally don't view as small business owners. But I had 
a meeting with my homebuilders, and they were talking about the 
crunch that they have accessing capital in order to build 
homes. And one of the things they mentioned was that before the 
regulations and some other things, that if they had a signed 
purchase agreement from a person, the person was already 
prequalified for the mortgage, that they could take that and 
almost use that as security to get a loan. And they said in 
those instances they didn't have--to their knowledge in the 
room, and I guess there was about 15 to 20 homebuilders--that 
in their recollection they could only remember one or two that 
didn't go right.
    So I told them that I would pose that question to you: Is 
there something that the SBA can do specifically for 
homebuilders, or if there are any programs that you know of 
right now that they qualify for that they may not be paying 
attention to?
    Ms. Mills. Well, my father-in-law was a homebuilder, and I 
know exactly the situation that you are describing. What we 
will do is come back to you with a specific thought and 
recommendation on which SBA loan program or activity or banking 
relationship might be the most appropriate to pursue.
    Mr. Richmond. This question shifts away, but it goes back 
more to the New Markets Tax Credit Program and our CDFIs, 
which, in my opinion, are working very well, especially in our 
inner cities and low-income communities. And I guess this 
question would be whether there is a way or if you have someone 
looking at ways to facilitate the 7(a) lending program with the 
CDFI program for low-income communities. That way they can 
benefit both from the tax credit and the 7(a) program.
    Ms. Mills. Well, thank you, Congressman.
    As you know, over a year ago we implemented a program 
called Community Advantage, which allows selected CDFIs which 
have a good track record in managing loans to have access to 
the 7(a) loan guarantees. So that would be the primary vehicle 
that we use to engage CDFIs, which we think are really 
important new partners for us.
    Mr. Richmond. One of the ideas that came from someone in my 
district was that if you all contemplated allowing CDEs to 
participate in the Community Express loans, and that way the 
CDFIs would be able to attract more small businesses investing 
into the New Markets Tax Credit Program.
    Ms. Mills. I would be happy to get back to you on that.
    Mr. Richmond. Okay.
    Administrator Mills, I don't have any specific additional 
questions for you. Do you have anything that--I will give you 
my last minute and a half if there is something that you just 
want to volunteer something that came up that you want to 
address.
    Ms. Mills. Thank you, Congressman.
    Mr. Richmond. With that I will yield back, Mr. Chairman. 
Thank you.
    Chairman Graves. Mr. Cicilline.
    Mr. Cicilline. Thank you, Mr. Chairman and Ranking Member, 
and welcome, Administrator Mills. It is good to have you back 
before the Committee, and thank you for your visit to my home 
State. The small businesses in Rhode Island enjoyed having you 
there, and it was a great opportunity to talk about the work of 
the SBA, and I thank you for doing that.
    What I wanted to ask you about briefly is the SBIR program, 
which my State has had considerable success with. In 
preparation for this hearing, I reached out to the individuals 
in my regional SBA office, as well as folks in the knowledge 
economy that is growing in Rhode Island in the research and 
development community. And what I heard from so many of them 
was that this program is successful, it is vital, it has led to 
a lot of innovative companies conducting business in our State, 
but that we just don't have enough participation.
    And one of the things that I proposed during our 
reauthorization was the FAST program, really which I think was 
the successful way to do outreach to encourage participation in 
the SBIR program by providing grants to organizations that do 
that. And I know we didn't include it in the authorization, and 
I am wondering sort of what strategies that you are developing 
to really broaden the reach of SBIR, which is such a good model 
and such a successful program.
    But while I am very proud we have had more than 290 awards 
and more than $100 million in grant funding in Rhode Island, 
which has been great under the SBIR and STTR, I think there are 
39 States ahead of us, so it seems to me there is a lot of 
untapped opportunity. But without the FAST program, are there 
other ways that you are thinking about or that we can support 
broader outreach for this program?
    Ms. Mills. Well, first of all, I want to thank this 
Committee and Congress for the reauthorization of SBIR and STTR 
and for your commitment to it. We are working very hard on 
SBIR, and one of the things that I want to point out is that we 
have consolidated all SBIR solicitations, which used to be on 
11 different agency Websites, into 1 Website, SBIR.gov, and 
educating all of our various arms and counselors and partners 
to make sure that they mention and inform people about SBIR so 
that we have a broader network.
    With regard to FAST, my understanding is that although it 
was not extended the reauthorization package, Congress could 
extend it through appropriations as they have done in past 
years.
    Mr. Cicilline. And I take it you would recommend that we do 
that?
    Ms. Mills. Well, as I said, it is a very--the SBIR is a 
very important program. We are working very hard to make sure 
that in every aspect of Small Business Development Centers and 
our counselors, district offices and advisers that we 
incorporate knowledge about SBIR in our conversations with 
small businesses.
    Mr. Cicilline. Thank you. And I just have one other area. 
You said this in the beginning of your testimony. I arrived a 
little bit late, and I apologize, and I am happy to get some 
information after the hearing. But would you just talk a little 
bit about the Service-Disabled Veteran-Owned small business 
program and the status of that? This is an issue of 
considerable concern, I know, to many Members of Congress in 
ensuring that we are doing everything we can for service-
disabled veterans, and this program obviously is designed 
specifically for that.
    Ms. Mills. Yes. We have a number of programs for service-
disabled veterans, including our contracting program which you 
are referring to. But we also have some really extraordinary 
counseling, advice and veterans entrepreneurship education 
programs, some of which are particular to service-disabled 
veterans. So those are critical as well, and we can make sure 
you have more information on those.
    Mr. Cicilline. Thank you.
    I yield back, Mr. Chairman.
    Chairman Graves. Ms. Clarke.
    Ms. Clarke. Thank you very much, Mr. Chairman. I thank you, 
Ranking Member. And I join my colleagues in welcoming 
Administrator Mills back to our Committee.
    Administrator Mills, while I understand the concerns of my 
colleagues, I echo a lot of what has been said here today. I 
would like to switch gears slightly.
    As we have discussed previously, MWBE small businesses face 
an uphill climb in the best of times. While our economy is 
still recovering, and we all understand that events outside of 
the United States' control, including the cooling of emerging 
economies, the eurozone crisis, which are currently 
contributing factors, the most recent economic data is anything 
but encouraging.
    That being said, if we find ourselves in a situation where 
capital access finds itself even more constrained than it is 
currently, what is the SBA prepared to do with regards to 
perhaps a greater need amongst the small business community and 
especially within the minority small business community?
    Ms. Mills. Well, Congresswoman, we have had a lot of this 
conversation, because you, like many members of this Committee, 
have been concerned about this for some time. And, as you know, 
we share this concern, because although lending overall came 
back strong to the SBA, it did not come back strongly for 
small-dollar loans in underserved communities.
    So 2 years ago now, we began a series of activities that, 
as I mentioned, we call More Doors, More Dollars, and they 
include the bringing in of CDFIs, the bringing in of faith-
based institutions. And they include something else, which is 
an outreach program we did called the White House Urban 
Economic Forums. And my colleague and deputy, Marie Johns, and 
I have been--she has been particularly active traveling the 
country and in many, many cities dealing with over 2,500 in-
person participants, 800 mentoring relationships facilitated, 
23,000 on-line viewers, directly trying to reach and access 
this women- and minority-owned business community so that we 
can find a way to connect them to what they need, which can be 
contracts, it can be loans, it can be help and advice, so that 
they can grow their businesses.
    We have an inclusive view of entrepreneurship, and we need 
to be working to make sure all our entrepreneurs have access 
and opportunity.
    Ms. Clarke. Well, let me ask a second question of you. We 
have discussed the fact that some SBA programs haven't lived up 
to their charter, and while I applaud the SBA's willingness to 
address the shortcomings of certain programs, what processes 
are the--is SBA putting in place to ensure that future newly 
configured programs are living up to their charters and don't 
require the overhaul that Community Express did, for instance?
    Ms. Mills. Well, we are very actively monitoring and 
assessing and working on continuous improvement of all of our 
programs.
    Ms. Clarke. Well, I would have no doubt that you will keep 
your finger on the pulse of these new ventures.
    I want to also echo the sentiments of Congressman Schrader 
about the HUBZones and the usage of women- and minority-owned 
businesses to get the contracts, and then the discarding of 
those companies when the contracts are awarded. That seems to 
be a very hard nut to crack on many levels, but I hope that 
vigilance is used to address this.
    And perhaps there needs to be some examples made of some of 
these companies that have been doing this so that, you know, in 
the future others won't see this as a means of accessing the 
contracting opportunities that are supposed to be partnerships, 
quite frankly. And I think that this could be a gateway for 
more employment in communities that are having a hard time 
coming back, because now you are, you know, opening up the 
landscape a little bit more for opportunities that didn't exist 
previously.
    Ms. Mills. Well, let me repeat that on HUBZone, and really 
on all of our contracting and lending operations, we have 
intensified our supervisory and our enforcement activities, and 
we have a zero tolerance policy for bad actors.
    Ms. Clarke. Very well. Thank you.
    I yield back, Mr. Chairman.
    Chairman Graves. Ms. Velazquez.
    Ms. Velazquez. I don't have further questions.
    Chairman Graves. Before we finish up, I want to echo Mr. 
Schrader's concerns with the rural loans or the decrease in 
rural loans and the outreach there, and would push for a little 
bit of outreach out there, because they are just as important 
in the rural areas as anywhere.
    But I would like to again thank you for coming in today and 
for being here to discuss, obviously, this very important issue 
of capital access for small businesses. We know on this 
Committee that they are going to lead us out of the economic 
downturn and into the economic recovery, and we want to 
continue, obviously, to be very vigilant in overseeing the 
programs that you administrate.
    With that, I would ask unanimous consent that Members have 
5 legislative days to submit statements and supporting 
materials for the record. Without objection, so ordered.
    [The information follows:]
    Chairman Graves. With that, the hearing is adjourned. 
Thanks again.
    [Whereupon, at 3:22 p.m., the Committee was adjourned.]

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