[Senate Hearing 112-487]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 112-487
 
 A SPOTLIGHT ON SMALL BUSINESS INVESTMENT COMPANIES AND THEIR ROLE IN 

                     THE ENTREPRENEURSHIP ECOSYSTEM

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


                               ROUNDTABLE

                               BEFORE THE

            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 22, 2012

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


         Available via the World Wide Web: http://www.fdsys.gov




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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                      ONE HUNDRED TWELFTH CONGRESS

                              ----------                              
                   MARY L. LANDRIEU, Louisiana, Chair
                OLYMPIA J. SNOWE, Maine, Ranking Member
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
TOM HARKIN, Iowa                     JAMES E. RISCH, Idaho
JOHN F. KERRY, Massachusetts         MARCO RUBIO, Florida
JOSEPH I. LIEBERMAN, Connecticut     RAND PAUL, Kentucky
MARIA CANTWELL, Washington           KELLY AYOTTE, New Hampshire
MARK L. PRYOR, Arkansas              MICHAEL B. ENZI, Wyoming
BENJAMIN L. CARDIN, Maryland         SCOTT P. BROWN, Massachusetts
JEANNE SHAHEEN, New Hampshire        JERRY MORAN, Kansas
KAY R. HAGAN, North Carolina
  Donald R. Cravins, Jr., Democratic Staff Director and Chief Counsel
              Wallace K. Hsueh, Republican Staff Director
                   David Gillers, Democratic Counsel
         Jelena McWilliams, Republican Assistant Chief Counsel


                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
Moran, Hon. Jerry, a U.S. Senator from Kansas....................   103

                               Witnesses

McWilliams, Jelena, Republican Assistant Chief Counsel, Small 
  Business Committee.............................................     3
Wides, Barry, Deputy Comptroller for Community Affairs, Office of 
  the Comptroller of the Currency................................     4
Girard, Rick, Co-founder and Chief Executive Officer, Girard 
  Environmental Services.........................................     4
Kolln, Thies, Partner, AAVIN Private Equity......................     4
Kopfinger, Carl, Senior Vice President, Community Capital Group, 
  Venture Capital and Mezzanine Investment Division, TD Bank.....     5
Penberthy, Dan, Chief Financial Officer and Executive Vice 
  President, RAND Capital Corporation............................     5
Haskins, Harry, Deputy Associate Administrator for Investment, 
  U.S. Small Business Administration.............................     5
Bates, Roger, President, MEP R&H Supply, Inc.....................     6
Foster, Vincent, Chairman of the Board and Chief Executive 
  Officer, Main Street Capital Corporation.......................     6
Goodman, James, President, Gemini Investors......................     6
Henriquez, Manuel, Chairman and Chief Executive Officer, Hercules 
  Technology Growth Capital......................................     6
Rafalovich, Tim, Vice President, Community Lending and 
  Investment, Wells Fargo Bank...................................     6
Rothstein, Charles, General Partner, Michigan Growth Capital 
  Partners.......................................................     7
Palmer, Brett, Small Business Investor Alliance..................    14
Gillers, David, Democratic Counsel, Small Business Committee.....    15
Sackett, Don, Senior Vice President and Business Manager, Olympus 
  Innov-X........................................................    17

          Alphabetical Listing and Appendix Material Submitted

Bates, Roger
    Testimony....................................................     6
    Letter.......................................................   110
Foster, Vince
    Testimony....................................................     6
    Prepared statement...........................................   112
Gillers, David
    Tesimony.....................................................    15
Girard, Rick
    Testimony....................................................     4
Goodman, James
    Testimony....................................................     6
    Article: Small-Cap Private Equity............................   116
    Written comments.............................................   121
Haskins, Harry
    Testimony....................................................     5
Henriquez, Manuel
    Testimony....................................................     6
    Prepared statement...........................................   123
Kolln, Thies
    Testimony....................................................     4
Kopfinger, Carl
    Testimony....................................................     5
    Prepared statement...........................................   137
Landrieu, Hon. Mary L.
    Testimony....................................................     1
McWilliams, Jelena
    Testimony....................................................     3
Moran, Hon. Jerry
    Testimony....................................................   103
Neale, Thomas Matthews
    Prepared statement...........................................   156
Palmer, Brett
    Testimony....................................................    14
Penberthy, Dan
    Testimony....................................................     5
    Prepared statement...........................................   139
Rafalovich, Tim
    Testimony....................................................     6
    Prepared statement...........................................   142
Rothstein, Charles
    Testimony....................................................     7
    Prepared statement...........................................   145
Rowe, C. E. ``Tee''
    Prepared statement...........................................   151
Sackett, Don
    Testimony....................................................    17
    Prepared statement...........................................   149
U.S. Small Business Administration
    News Release.................................................   159
Wides, Barry
    Testimony....................................................     4
    Small Business Investment Companies: An Investment Option for 
      Banks......................................................    24


 A SPOTLIGHT ON SMALL BUSINESS INVESTMENT COMPANIES AND THEIR ROLE IN 

                     THE ENTREPRENEURSHIP ECOSYSTEM

                              ----------                              


                        THURSDAY, MARCH 22, 2012

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met in a roundtable discussion, pursuant to 
notice, at 10:09 a.m., in Room SD-428A, Russell Senate Office 
Building, Hon. Mary L. Landrieu, Chair of the Committee, 
presiding.
    Present: Senators Landrieu and Moran.
    Staff Also Present: Jelena McWilliams, Kevin Wheeler, and 
David Gillers.

 OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S. 
                     SENATOR FROM LOUISIANA

    Chair Landrieu. Good morning, everyone, and welcome to our 
roundtable on SBICs. We have looked forward to this morning now 
for weeks as we set the agenda for this year, and I thank all 
of you. I understand there were some travel situations with fog 
or weather and I think we are missing one or two of our 
invitees. But I welcome you to this roundtable.
    The difference, of course, is that this is not as formal as 
a hearing. We really want there to be a good bit of exchange 
over the next hour-and-a-half, potentially two hours, of this 
hearing, and I thank you all for making yourselves available.
    I apologize for being a few minutes late. I had to add a 
meeting to my schedule this morning that we did not anticipate, 
and it went a little bit longer than anticipated.
    I am going to begin with a short opening statement to set 
the tone for this roundtable, and then we will go through some 
instructions about how a roundtable usually works.
    We have had over a dozen roundtables since I have been 
Chair. We find them to be extremely helpful in really 
understanding how programs work or how they do not work or what 
we can do to improve them, and it is all about this Committee's 
effort to be as helpful and supportive as possible to 
entrepreneurs in our country in a full range of ways, 
particularly giving them access to capital, which is the 
purpose of the SBICs.
    Let me again thank you for joining us this morning. We will 
explore opportunities and policy options to build on the 
success of SBIC programs and increasing access to capital for 
small businesses and entrepreneurs. We have assembled here 
today experts representing investors, small business investment 
companies, small business owners, officials from the Department 
of the Treasury, and the SBA.
    Today's discussion is the second in a series of three 
roundtables we are holding to discuss start-ups and high growth 
entrepreneurship. Our next roundtable on entrepreneurial 
ecosystems will be April 18th. We are bringing together a wide 
variety of experts, academics, policy experts, and state and 
local leaders who are leading the way in creating stronger 
entrepreneurial ecosystems in their cities, in their regions, 
and in our country.
    Ultimately through these discussions, we will identify 
specific ideas and recommendations to be included in a 
comprehensive piece of legislation that we hope to move through 
Congress and that the President can sign.
    As you all are well-aware, the Investment Company Act of 
1958, or maybe you are not aware of this, which was signed into 
law by President Eisenhower, established the Small Business 
Investment Company Program. Not only was the bill signed by 
President Eisenhower, it was co-sponsored by a very illustrious 
group of Senators, including Lyndon Baines Johnson and Senator 
William Fulbright.
    It was also the subject of a hearing in 1958 by the Senate 
Banking Committee's Subcommittee on Small Business. During the 
hearing, the Subcommittee Chairman Joseph S. Clark said the 
legislation is, `` . . . necessary to increase the availability 
of long-term credit and equity capital for small businesses.'' 
He also said the Committee that approved the bill has pretty 
nearly the entire spectrum of opinion throughout the country 
with respect to the need for Federal assistance.
    Under the SBIC program, the SBA licenses, regulates, and 
helps provide funds for privately owned and operated venture 
capital investment firms. SBICs are licensed and regulated by 
the SBA. They use their own private money plus money borrowed 
with an SBA guarantee. Typically they will borrow two dollars 
for every one dollar of private capital.
    Since 1958, SBICs have invested $76 billion to over 100,000 
small businesses. We have funded Apple, FedEx, Calloway Golf, 
Jenny Craig, and Outback Steakhouse, to name just a few. I want 
to mention two very successful SBICs that are joining us here 
today. One is Main Street Capital, from Houston, Texas. Will 
you all raise your hand?
    They received the honor of SBIC of the Year in 2010. One of 
their recent small business investments, Gulf Manufacturing in 
Humble, Texas, is an industrial manufacturing company 
distributing across the country. Main Street Capital has 
invested over $500 million in more than 90 small businesses. 
Their companies employ more than 12,000 employees. So we are 
very interested in hearing more from you all today. We 
appreciate you all coming.
    Gemini Investors, where are you sitting? Right next to 
them? Great. You were recognized as the SBIC of the Year in 
2009. One of your recent investments was in a company named 
Center Rock in Berlin, Pennsylvania. Center Rock is the company 
that designed the drill bit that saved the Chilean miners, and 
the President recognized that in his State of the Union last 
year. We are very grateful for you all being present today.
    Last month, Ranking Member Snowe and I introduced a bill to 
make, in our view, improvements and modifications to this 
program. Our bill raises the statutory cap, as the President 
has recommended, from $3 billion to $4 billion. The cap was 
last increased in 2003. It is time to raise it.
    It also increases the amount of leverage by SBIC licensees 
under common control from $225 million to $350 million, called 
the Family of Funds. These provisions were also included in the 
President's original Start Up America.
    Unfortunately, they were dropped by the House when they 
passed the deregulation bill, which they sent over to us which 
we are debating on the floor today. It is a deregulation bill, 
not a capital bill, and one of the most significant provisions 
was dropped by the House and we are going to try to see what we 
can do to recover it.
    For the past week, the Senate has been debating this bill 
called the Jobs Bill, which is really a deregulation bill. It 
extends new opportunities, but also some concerns about 
companies going directly to the Internet and borrowing the 
capital they need or soliciting investors through the Internet 
called crowd funding, which is a very exciting but potentially 
dangerous enterprise without the right safeguards, and that 
debate is happening on the Senate floor, actually as I speak.
    I have made it clear there were several problems with the 
bill that came over from the House. I will not go into them all 
right now because that is not the subject of this Committee. 
But needless to say, I believe that SBICs have been an 
important component of the work of the SBA, of the work of our 
Federal Government.
    I would like to see if there are any reasons why it cannot 
be expanded beyond the $4 billion authorization. I am not sure 
there is any rhyme or reason why we have been at that level for 
all these years. I would be very interested in any of your 
feelings about that.
    I also want to say that as Chair of this Committee, I am 
really, really focused on the quality of our programming as 
opposed to the quantity of our programming. I am very 
interested to find out who is responsible for evaluating the 
SBICs and how we eliminate the low-performing, ineffective 
SBICs and how we strengthen the stronger ones, and et cetera, 
et cetera. I have a lot of other questions. So that is my 
opening.
    I want to recognize David Gillers and Kevin Wheeler who are 
my two senior staffers, and on the Snowe staff, if you would--
--
    Ms. McWilliams. Jelena McWilliams. I spoke with some of 
you, and Matt Walker as well. Thank you for coming.
    Chair Landrieu. So we are going to start, Barry, with you 
and if you could just introduce yourself briefly and give a 
one-minute little glimpse as to why you are here and what your 
role is. I know that we familiarized ourselves generally with 
who you are. Then we will begin by opening up with questions.
    When you want to speak, you can put your name card up like 
this. That way I will know to recognize you, and we will go 
around and keep it open and flexible. If I am not asking the 
right questions, please feel free to ask them yourself, 
starting with Barry.
    Mr. Wides. Good morning, Madam Chair.
    Chair Landrieu. You have got to press your talk button. You 
just press the button which lights up and you have to speak 
right into your microphone.
    Mr. Wides. Okay. Good morning, Madam Chair, and thanks for 
the invitation. My name is Barry Wides, and I am the Deputy 
Comptroller for Community Affairs at the Office of the 
Comptroller of the Currency. We are the Federal agency within 
the Department of Treasury that supervises national banks and 
Federal thrifts.
    Our role within Community Affairs is to encourage national 
bank and Federal thrift investments in small business finance. 
We have recently been involved in outreach to banks across the 
country to make them aware of the opportunities to invest in 
small business finance through the SBIC program. We have been 
holding seminars and national teleconferences on this subject 
and making them aware of the fact that they can earn Community 
Reinvestment Act credit for investing in SBICs.
    We will be putting out a paper soon that is sort of a how-
to guide for investing in SBICs. We are working very closely 
with Harry Haskins at the SBA, as well as Carl Kopfinger who is 
with one of the national banks that we supervise to make sure 
that we make this understandable and help banks understand that 
there are ways to invest safely and earn a good return in 
SBICs.
    Chair Landrieu. Thank you. Rick.
    Mr. Girard. Thank you for inviting me. My name is Rick 
Girard. My brother and I own Girard Environmental Services out 
of Orlando, Florida. We are a commercial landscaping company. 
Last year our revenue was around $20 million and currently we 
are ranked number 57 in the country as far as landscaping 
companies go.
    We are one of the largest family-owned companies in central 
Florida. We are one of the largest, probably one of the top 
five largest landscaping companies in the State of Florida. So 
we are a big small company.
    Chair Landrieu. And you got your funding through one of the 
SBICs?
    Mr. Girard. Yes, ma'am. The SBIC played a very extremely--
an extremely important role in my company because in 2008, 
2009, and 2010, our company actually grew. I opened five 
offices in Florida in 2009 and 2010 as we were entering into 
the recession. I added 100 jobs throughout the state. A lot of 
people did not necessarily agree with my method, but that is 
what entrepreneurs do. Entrepreneurs take risks. And looking 
back, there is not really much I would change.
    But the SBIC played an extremely important role where the 
banks would not. So the SBIC played a very important role.
    Chair Landrieu. Wonderful. Thank you, Rick. Thies.
    Mr. Kolln. Good morning. Thanks for having me here. I am 
Thies Kolln. I am with AAVIN Equity Partners. We are in Cedar 
Rapids, Iowa. My partners and I have been running private 
equity funds there based in Cedar Rapids for--actually one of 
the my partners started with the fund that started in 1959. So 
we have been with the SBIC program since the beginning. We have 
run multiple SBICs as well as non-SBICs and have been with the 
program for a long time.
    Chair Landrieu. Thank you. Your insights will be very 
helpful. We appreciate you being here. Carl.
    Mr. Kopfinger. Yes, good morning, Senator, and thank you 
for inviting me to participate today. I am Carl Kopfinger. I am 
a Senior Vice President with TD Bank. I am based in 
Philadelphia, Pennsylvania. I head up our investing in SBICs. 
We have more than 60 SBICs under management right now, and we 
continued to invest during the down-turn. So we like the 
program very much.
    Chair Landrieu. Thank you. Dan.
    Mr. Penberthy. Good morning. I am Dan Penberthy. I am the 
CFO and Executive Vice President of RAND Capital Corporation. I 
am here to tell you all what you can do with just $15 million. 
RAND is a BDC. We are publicly traded since 1971. We are a 
founding member of NASDAQ and we also own a wholly-owned 
subsidiary, RAND SBIC. I am also the current President of the 
Upstate Venture Association of New York.
    We operate in Buffalo, New York, an under-served and 
economically depressed part of New York State. During the past 
ten years, we have taken our $15 million, we have invested in 
30 portfolio companies via 83 separate financing transactions. 
These 30 companies right now represent over 1,711 jobs. We have 
increased job growth by over 500 jobs over the past ten years. 
We have also increased total revenues in these same companies 
by over $200 million. We have had an impact through the SBIC 
program. Some of our companies include MidAmerica Brick, an 
abandoned plant in the economically-depressed town of Senator 
Kit Bonds which is now the leading producer of bricks in 
Missouri.
    Synacor, founded by an--an Internet start-up founded by 
students at the University of Buffalo has increased their 
employment by 15 times and the revenues by 60 times since our 
investment in 2002. They completed an IPO just 30 days ago.
    Gemcor builds machinery in Buffalo that puts rivets into 
airplanes. Gemcor has doubled its employment, doubled its 
revenues, and it is shipping its aircraft machinery worldwide. 
Every Boeing airplane ever made and in flight has been touched 
by a Gemcor machine.
    Chair Landrieu. Okay. And save all the rest of the 
testimony----
    Mr. Penberthy. Thank you.
    Chair Landrieu. This is just a brief introduction. Harry.
    Mr. Haskins. Good morning and thank you, Chair Landrieu, 
for having me here. We appreciate your leadership on issues 
involving the SBIC program. We have worked closely with your 
staff and they have been tremendous.
    The program has enjoyed a lot of success and positive news 
over the past couple of years. We have reduced processing time 
significantly across the board and essentially doubling our 
productivity. We are building upon the success of the SBIC 
platform to expand access to capital in the more under-served 
markets via our impact fund initiative and early stage.
    Chair Landrieu. Okay. And hold a minute because these are 
just introductions. We are going to get back to you for your 
opening. Go ahead, Roger.
    Mr. Bates. Good morning, thank you. My name is Roger Bates. 
I am a partner at Mangrove Equity Partners in Tampa, Florida, 
and for the last three years have been serving as the President 
of one of our portfolio companies, MEP R&H Supply, which is 
headquartered in Broussard, Louisiana.
    Chair Landrieu. Oh, wonderful. Thank you. Vincent.
    Mr. Foster. Thank you, Senator, for holding this event. I 
am honored to be here today. I am Vince Foster, CEO of Main 
Street Capital. We operate out of a single location in Houston, 
Texas. We are publicly traded on the New York Stock Exchange. 
We first entered the program ten years ago in 2002 with a 
single license. We received a second license in '06, began to 
outgrow the program, and converted to a publicly-traded BDC in 
order to stay in the program and continue to grow. So I am 
interested in how we can keep better players in the program.
    Chair Landrieu. Great. James.
    Mr. Goodman. I am Jim Goodman from Gemini Investors in 
Wellesley, Mass. and thank you for allowing me to be here and 
speak. We are currently investing our fifth SBIC fund. We 
entered the program in 1995. We have invested in 93 companies 
since that point and we have put a little under $400 million to 
work.
    In the last eight years, our companies have created almost 
10,000 jobs and also created a number of small businesses 
themselves, in particular our franchising companies. So I would 
like to be able to talk about all those things today.
    Chair Landrieu. Manuel.
    Mr. Henriquez. Good morning, Madam Chair. Thank you for 
having me participate in this roundtable and for letting me 
provide some overview on the benefits of the SBIC program. 
Similar to Main Street Capital, when I started Hercules, I 
looked at the SBIC program as an integral part of launching 
Hercules and getting capital and getting access.
    I am one of the unique players on this panel who invests 
almost exclusively in the venture industry, and work with pre-8 
revenue companies that are significant job creators and 
innovators of American jobs and technology in this country.
    I am proud to say under the SBIC program, we have two 
licensees. We have over $225 million under the SBA program and 
we have now been able to use that capital to invest in $750 
million in 95 technology and life sciences companies since the 
founding of Hercules. And I am very proud and a very strong 
supporter of the SBIC program that made a difference in our 
company when we started. So thank you for having us here.
    Chair Landrieu. Tim.
    Mr. Rafalovich. Yes, good morning. My name is Tim 
Rafalovich, and I manage the alternative assets for Wells 
Fargo, which includes our SBIC investments. Carl and I have the 
unique kind of privilege of being able to be speaking from the 
investment standpoint. We invest in SBICs. SBICs then have 
general managers, many of which are here today, who invest then 
in the companies, of which two are here.
    So if the program wants to be expanded, it needs to take 
place top down, which is through the investors and their 
incentives to invest in SBICs. I have all sorts of statistics 
on companies that we have invested in and how they have grown 
that we can maybe talk about in the future, one that went from 
63 employees to 1,167 just in a short period of time.
    But one of the things I want to make clear as well is, a 
lot of people might think because Wells Fargo is the largest 
lender on the small business end of things, having deployed 
about $14 billion in capital last year, that there might be a 
little bit of a conflict of interest here. We do not believe 
that there is a conflict at all. This is a win-win because many 
of the SBIC investments made are investments that would have 
never been made by a major bank.
    And so, what happens is that the banks then will not fund 
these smaller companies because there is a little bit too much 
risk. SBICs do, but then Wells Fargo can come in a little later 
and be able to refinance these. It is a good win-win and that 
is why we believe in this program.
    Chair Landrieu. Nicely put. Charles.
    Mr. Rothstein. Good morning and thank you for including me 
as well. I am Charlie Rothstein, a founder of Beringea, which 
is Michigan's largest venture capital firm. We are also 
managers of the Michigan Growth Capital Partners funds, one of 
which is an SBIC. It is our second SBIC, so we, too, have had a 
long relationship with the Small Business Administration. The 
current SBIC was licensed last year as part of the Impact 
Investment Initiative and it totals $130 million.
    Chair Landrieu. Thank you so much. Let us start with Harry, 
if we could, and go ahead, Harry. You manage this program 
through the Small Business Administration, and for those that 
are viewing and watching and will be reading the outcome, why 
do you not go ahead and give us your opening comments, and then 
we will open it up for general questions.
    Mr. Haskins. Thank you. And rather than repeating some of 
what I said, I will just continue to go on. We want to build 
upon the success of the SBIC platform----
    Chair Landrieu. And can you speak more closely into your 
mic? It is a little awkward, but you have to lean forward.
    Mr. Haskins. We want to build upon the success of the SBIC 
platform, and we have expanded it to include a couple of new 
initiatives, the Impact Fund Initiative and the Early Stage 
Initiative. However, we believe increasing the authorization 
level in the Family of Funds limit will have a positive impact 
on the availability of capital for small businesses and can be 
managed at minimal risk and no cost to the taxpayer.
    We look forward to continuing our work with the Committee 
to build upon the success of the program and to contribute to a 
positive economic climate for small businesses.
    Chair Landrieu. And explain how it is minimum risk from 
your vantage point and no cost to the taxpayer.
    Mr. Haskins. Well, the program currently operates under a 
zero subsidy where the fees associated with the program cover 
the cost associated with it.
    Chair Landrieu. And has it been that way since its 
inception?
    Mr. Haskins. No. Up until around 2000, I believe, we 
actually worked under appropriated funds where we had to 
receive an appropriation and the amount of money we could 
guarantee was limited by that appropriation. But the success of 
the program and, more importantly, the success of the SBICs has 
enabled us to move to a zero subsidy basis.
    Chair Landrieu. Well, let me ask you this. Why do you think 
then the President only recommended extending it from $3 
billion to $4 billion? I mean, if it is low risk and no cost to 
the taxpayer, why can we not go up higher than that?
    Mr. Haskins. Well, our current authorization level has been 
sufficient to support the growth of the program. Historically, 
up to around 2009, we averaged about $700 million in authorized 
commitments. We doubled that in 2010 and then increased it 
again in 2011 to about $1.8 billion.
    So we think the existing authorization was sufficient. The 
increase to four should give us sufficient capacity over the 
next few years to support the growth of the program. Obviously 
it is worth revisiting if growth continues at its current pace 
to see if it needs to be raised beyond that.
    Chair Landrieu. Okay. I would like to talk about that later 
on. Let me begin with some questions. Why do we need SBICs in 
the spectrum of venture capital? I know this is a simple 
question, but I would appreciate if one of you would just take 
it and explain why this is important, because I think there is 
a lot of confusion out there about venture capital and when 
they come in and when they do not come in and where there is a 
need for them. So, Vincent, we will start with you and then I 
will go to Manuel.
    Mr. Foster. Thank you. I think the reason we really need 
SBICs is pretty simple, and that is, to continue on an earlier 
point that was made, the best way to think about SBICs is they 
begin where the banks end and they end when private equity or 
regular institutional venture capital funds begin. There is a 
huge void in between someone that is commercially bankable as a 
small business and someone that is private equity or venture 
capital eligible, and that is really the gap that we fill.
    Another way to think about it is we provide cash flow-based 
financing and cash flow-based capital, equity capital, debt 
capital to small businesses which is literally not available. 
Commercial banks will routinely, for larger companies, loan a 
multiple of their cash flow and financing and that is how they 
operate.
    Small businesses have to borrow against their assets, their 
inventory, and guarantee it.
    Chair Landrieu. It is very difficult, including their 
house?
    Mr. Foster. Right.
    Chair Landrieu. Their life insurance?
    Mr. Foster. Everything.
    Chair Landrieu. And their pension funds and their 
children's college education. And this Chairman has had about 
enough of that.
    Mr. Foster. And the nice thing about the SBIC program, even 
more than the 504 or 7(a) is personal guarantees are not 
required and they are virtually unknown, as far as my 
experience.
    Chair Landrieu. And I just want to stress this point, 
because the smarter I get on it, and I have got a long way to 
go, but this country can never unleash the potential of people 
who have little financial strength, but great character and 
extraordinary intelligence and a tremendous amount of nerve, if 
we do not find a way around the fact that you cannot get 
capital from anybody unless you already have wealth. Do we 
understand the problem here?
    That is why I am going to stay on this. That is why this is 
very interesting to me. Contrary to what the Chamber of 
Commerce says, there are many, many, many businesses out there, 
like this business right here, Rick, who can grow, who can show 
how they can grow, but they do not want to pledge their house, 
and maybe you have, or your home or your children's future to 
go to a bank. Banks are only lending under certain 
circumstances.
    If we do not open up other opportunities like this, I do 
not know how we grow ourselves out of this recession that we 
are in or really tap the strength of America. So I really 
appreciate, Vincent, you saying that. Manuel, do you have 
anything else you want to add?
    Mr. Henriquez. Madam Chair, I can speak to you as a first-
hand experience as an entrepreneur, and not to bring up my 
heritage as a minority, when I started the company, Hercules, I 
could not get bank financing. I could not get any bank to give 
me capital.
    I basically risked everything I had and approached the SBIC 
as a lender of choice to be, frankly, the foundation of the 
capital that we had to go out and fund and invest in 
entrepreneur innovative companies that have gone on to create 
hundreds and hundreds of jobs, thousands of jobs in California, 
in Massachusetts, and in various regions of the Southeast.
    So unlike most gentlemen on this panel here, we invest in 
companies that do not have revenues. We invest in companies 
that cannot get any bank financing. And if it were not for the 
SBA program, the SBIC program that we rely upon as a source of 
financing, a lot of this American innovation they refer to and 
a lot of these dreams----
    Chair Landrieu. Go nowhere.
    Mr. Henriquez [continuing]. Of companies would never ever 
come to fruition. And I am proud to say that through our 
organization, we have well-known names that have received 
capital through us such as Annie's Foods, the simple bunny 
rabbit company that you can buy at Whole Foods.
    Chair Landrieu. Love that, love that.
    Mr. Henriquez. I am proud to say we have another company in 
the drug discovery area that focuses on improving the quality 
of life of cancer victims and they are making new biologics for 
cancer drugs, which we all know from the FDA process, are very 
scarce and hard to get ahold of.
    We have companies in our portfolio that are dedicated to 
clean energy, as the Bright Source technology, for example, 
that does solar panels, and create new ways of generating 
energy in the market. And then we have social media companies, 
high profile names such as Box.Net, which is cloud computing, 
which is growing exponentially a number of employees that they 
are hiring and creating jobs.
    So the SBIC program is an integral part of our capital 
structure and a program that I would like to see, to your 
point, expanded beyond the $4 billion that is out there, and 
frankly, I would love to be able to see even to go beyond the 
$350 million, because I can tell you, Madam Chair, that we 
could put that money to work and we could put that money to 
create jobs in this country for many, many more great ideas 
that entrepreneurs have like Rick and others out there.
    Chair Landrieu. Thank you. Charlie.
    Mr. Rothstein. Well, sure, I was just going to add onto the 
last couple of comments that----
    Chair Landrieu. You have to press your button. I am sorry.
    Mr. Rothstein. That is okay. I was just going to the last--
--
    Chair Landrieu. Very complicated for very smart folks.
    Mr. Rothstein. And now it is not. It really is not that 
complicated. I was just going to add onto the last couple of 
comments. We are clearly talking about debt financing and debt 
works for companies that have predictable cash flow, but there 
really is also a shortage of pure equity capital.
    The venture capital industry has shrunken by some 40 
percent over the last handful of years, and entrepreneurs are 
starved for that kind of capital as well. Equity, unlike debt, 
equity, you know, it allows companies to take greater risks 
than does debt because there really is not any ticking time 
bomb to it. It does not need to be repaid immediately. It 
allows a company to be a bit more long-term in the way that it 
thinks toward R&D and even the introduction of new products.
    So that is something that we should work to address. The 
institutional market that used to support venture capital firms 
that were out raising funds is decreasing. Those institutions 
are looking elsewhere. They are backing buy-out funds and other 
types of alternative investment vehicles. So either maybe 
within SBA or maybe outside of SBA we can come up with new 
solutions.
    Chair Landrieu. Charlie, do you know why that is shrinking? 
Is it just the nature of the recession? Does anybody have an 
idea about why the venture capital is shrinking? Because I know 
that is why this bill flew over from the House, because there 
is a real need. But I am not sure we are correcting it the 
right way.
    This crowd funding idea and the response, I think, if I am 
reading this correctly, to use the Internet in a way that was 
not legal to raise venture capital funds for businesses, which 
sounds great and is very--it could be game-changing.
    The problem is, if you do not have the right safeguards and 
regulations, it could also, in my view, open up a whole pathway 
of fraud that we have not even begun to even think about. But 
is that what you are saying?
    Mr. Rothstein. First of all, I do agree that the kind of 
crowd funding issue is something that brings on significant 
risks that, you know, we need to make sure that it is properly 
structured so that people are not tricked into investing into 
things that sound good over the Internet.
    But I think, and many other members of the roundtable have 
opinions on this, but one of the problems has been the lack of 
access that the venture capital community has been able to 
generate. There has not been an ability to get a company 
public. The IPO bill is addressing that and lifting the 
regulations that some of the smaller companies will face in 
going public. I think that is a positive.
    There has been--in the institutional market, many times, it 
is a bit of flocking toward areas that seem hot. So whether it 
would be the small buy-outs or hedge funds or whatever it might 
be, that is where people were running and they have run away 
from venture capital and it really has caused a dilemma within 
the market. You could speak to, I am sure, all of us who 
realize how hard it is to raise just a pure----
    Chair Landrieu. Roger and then Thies.
    Mr. Bates. To add to what these gentlemen have said, I 
think one of the things that is important to understand about 
the SBIC's place in the capital structure between the 
commercial banking and equity is that they represent what I 
like to call patient money. They think more like equity, even 
though it is debt, and all companies will be challenged from 
time to time. And where your commercial banks do not have a lot 
of tolerance for those challenging times, these SBICs can 
really make a difference in helping the companies get through 
those and then back on the path to growth.
    Chair Landrieu. And in defense of banks, which I do not 
always defend, but in this case, they tell me constantly that 
it is the regulators breathing down their necks, looking at the 
loans on their portfolio, and while they might personally like 
to be more patient, the regulators are not allowing them to be. 
So I want you to know, we hear that a great deal. Thies.
    Mr. Kolln. I think to address the question of kind of the 
capital and sort of venture capital and that, I think one of 
the things we have seen, and what is important about the SBIC 
program is, it is focused on small businesses, so the 
businesses we have to invest in are small businesses and small 
funds.
    What we have seen in general in the capital markets is kind 
of increasing concentration of capital. And what that brings 
about is the investors are big fund-to-funds, big pension 
funds. They cannot invest in small funds very easily because 
they have minimum amounts that they want to put into a fund.
    Chair Landrieu. Like, for instance, what are the usual 
minimums? They have to invest like $200 million or $100 
million, $50 million?
    Mr. Kolln. Well, yeah, $50 million.
    Chair Landrieu. $50 million.
    Mr. Kolln. If they have to invest $50 million, they need to 
be investing that in a $500 million fund and a $500 million 
fund, you know, has a number of principals. They are going to 
invest in 20 companies. They are going to have to invest $25 
million in each company.
    Chair Landrieu. And that is more than Rick needs.
    Mr. Kolln. Exactly. And it is the small businesses that 
need 1, 2, 3, 5, $10 million maybe of capital that then have--
that then suffer because they are at the end of that waterfall 
because the big institutions need to invest in big funds which 
need to invest in big companies.
    And that is where the SBIC program does a great service, 
because the smaller funds can invest in the smaller companies 
and provide capital to those companies that need 2 or $5 
million of capital.
    Chair Landrieu. And, Jim, I am going to get you and then 
Manuel, but are we limited, Harry, in the SBIC program for what 
a company can borrow?
    Mr. Haskins. A single fund can borrow up to $150 million in 
leverage.
    Chair Landrieu. But borrower, a borrower to that fund, can 
they invest in----
    Mr. Haskins. An SBIC has an over-line limit, so essentially 
10 percent of its capital base can be invested in a single 
company.
    Chair Landrieu. So that would be $15 million as your top 
line from 150? Is that correct?
    Mr. Haskins. Well, if the fund size is $150 million of 
leverage, saying $75 million private capital, that would be a 
$225 million fund size, so they could invest $22.5 million in a 
single company.
    Chair Landrieu. Go ahead, Jim.
    Mr. Goodman. I just wanted to address the question that you 
started out with which is why is there a lack of funding now. 
You addressed specifically venture capital, but I would make it 
even more broadly private equity.
    I first got into the private equity business in the late 
1980s in Boston, and the three or four leading firms back then 
were doing deals where they were investing $5 million into $10 
or $20 million sized companies. And those leading firms have 
all been very successful and their funds now are 3, 5, $10 
billion. And the smallest check they will write is a few 
hundred million dollars.
    Private equity, as a whole, has mushroomed dramatically. 
Our fund is less than $200 million in total commitments, 
including SBA's money. That now represents the bottom 5 percent 
of the entire private equity world. So a $200 million fund, 
which was a good-sized fund 20 years ago, that space has 
largely been vacated, and the industry has exploded.
    But your $10 million revenue company, like some of the ones 
that we have invested in that I have identified, if they are 
providing cooking oil equipment or they are a restaurant 
franchise, that is not venture capital and it is no longer 
where the bulk of private equity is.
    So what this program does is it supplements and it fills a 
void that was left by the migration of private equity firms 
into much, much larger deals.
    Chair Landrieu. That is the best explanation I have heard. 
Thank you very much. I now think I understand better our 
challenge. Manuel.
    Mr. Henriquez. Living and breathing in the venture capital 
ecosystem on a daily basis, which is what we do, and I myself 
started in the venture industry back in 1987, the industry has 
changed dramatically. It was first brought on with dramatic 
change as now the infamous dot-com bubble blowup that we all 
well know and understand in 2000, which was precipitated by a 
second blowup that has not been written a lot about is the June 
of 2000, which is the telecom blowup that occurred.
    And then the market proceeded to go through an inordinate 
amount of changes, including, of course, the now infamous Enron 
and WorldCom changes on stocks and what have you. Despite some 
of the comments said earlier, the venture industry is nowhere 
near what it was in its historical levels by any stretch of the 
imagination, peaking out around $98 billion in 2000.
    Last year alone, the venture industry, according to Dow 
Jones Venture Source, our leading source of information, they 
did $33 billion of activities in investment last year to over 
3,200 companies itself. I am proud to say that we help fill a 
lot of that void by providing $630 million of capital to 
venture stage companies that would otherwise not be able to 
gain access to capital from a bank that exists today.
    So we help these companies dramatically gain access to 
capital because the venture industry is, in fact, or has shrunk 
itself, but these companies still have a capital need to 
continue to accelerate their growth. They are unable to bridge 
that gap in capital they need with commercial banks.
    We come in as an SBIC, take on that risk of financing those 
pre-revenue companies in order to get the additional capital 
they need to get their products and services out to the market 
and eventually lead to quite dramatic job creation out there. 
We help fill that crossing that chasm.
    Chair Landrieu. Jim, do you want to say anything else? Put 
your card down if you all--okay. Does anybody want to add 
anything to this line of questioning? And then we are going to 
go to our next question, which will be going completely off to 
another point.
    For those of you who do specifically look at companies, how 
do you choose the companies to invest in? Where do you troll or 
patrol or look out to find the companies? Do they come to you? 
What mechanisms do those of you that are looking for smart 
investments utilize--just go through that process a little bit 
with us. Go ahead.
    Mr. Foster. The main source, we call it deal flow, for lack 
of a better word. The main source of deal flow that we see is 
the local and regional investment banks. A lot of times, if you 
think about it, the customers might have small businesses and 
the investment banking organization might be managing the 
income off the business.
    Because of estate planning needs and everything else, the 
owner of the small business, at some point, probably needs to 
sell or get liquidity for his estate taxes. They might go to 
the investment bank and say, Do you have a solution? Is there 
someone we can talk to that might invest in our business that 
might--you know, I know a buyer, but he or she cannot get the 
financing.
    So a lot of times, it is the regional investment banks, 
local investment banks. The independent business brokers are a 
huge source of deals. The accounting firms who do the estate 
planning, the local accounting firms. The commercial banks will 
often call us because someone comes in for a loan, if you do 
not fit in that exact box, if you are one inch outside the box, 
they cannot do anything, sometimes they will refer transactions 
to us. And a lot of times it is word of mouth.
    Chair Landrieu. Dan.
    Mr. Penberthy. We look at transactions which are very 
young, companies which would have typically $200,000 to a 
million dollars in revenue. These are companies that will not 
be talking with investment bankers, will not be--may not even 
have a CPA firm involved. I often go in and talk to the 
universities and talk about the value of a network. Networking 
is the way that these transactions get done.
    NASBIC itself does a great job. Now the Small Business 
Investor Alliance (SBIA) does a great job, but it is sponsoring 
networking events amongst ourselves. In the upstate New York 
region, as I mentioned, I am the President of the Upstate 
Venture Capital Association. We hold networking events across 
the State from Buffalo down to Newburgh, New York, just outside 
New York City, encouraging entrepreneurs to come forward with 
their ideas.
    At these events, we bring in funding providers to help make 
introductions. Just yesterday, I held an event in Buffalo where 
two companies stood up and made ten-minute presentations to 
prospective fund-raisers. This is done every other month in 
Buffalo, New York.
    And it is all about the network, having entrepreneurs get 
out there and meet people, and often, it takes multiple visits 
in order to get financing done for these people. We will see a 
deal two, three, and four times, and ultimately, we will help 
them finance their business.
    Chair Landrieu. Thies.
    Mr. Kolln. Yes. I guess I will pretty much echo what Vince 
said. There are a number of sources from which we get deals. A 
lot of it is networking based. A lot of it is advisors to the 
businesses, whether they are bankers or investment bankers or 
attorneys or accountants who are advising the businesses. And 
some of it is--and a lot of it is networking. So a lot of the 
deals tend to be done kind of regionally.
    Chair Landrieu. Now, if it is in the SBA's interest, which 
is one of the missions of this small--and we are hoping to make 
it an even more active agency, would it be beneficial to have 
some funding at the agency level to encourage, host, and 
partner with these networking opportunities, or do you all have 
enough either time or resources to do that on your own?
    I understand there is a Small Business Investor Alliance. 
Who represents that here? Do you all--and you can speak up. Do 
you all do networking? Is that what you all do?
    Mr. Palmer. [Off microphone] We do network marketing with 
the funds themselves and with some banks and others, but not 
the entrepreneurs directly. Actually we are working on some 
software that might be able to do more of that network 
filtering.
    Chair Landrieu. And would you identify yourself, Brett?
    Mr. Palmer. Brett Palmer from the Small Business Investor 
Alliance.
    Chair Landrieu. Okay. Manuel, anything you want to add to 
this?
    Mr. Henriquez. The answer is that the SBIC program is not 
well-known by many entrepreneurs. They are still--it is 
fearful. It is a Government agency. They do not know how to on-
ramp it, how to approach it. A lot of our deal flow comes from 
crazy ideas of entrepreneurs who want to create new 
technologies or new solutions out there. A lot of them could be 
just professors, could be engineers. They do not know how to go 
around starting a company or formulate a company.
    I think it would be incredibly useful if the SBA were to 
provide forums by which to help entrepreneurs learn how to 
create a company, learn how to get proper guidance on 
formulating a company, and how to get a company off the ground.
    There is an incredible amount of American ingenuity out 
there that just needs a little bit of help getting itself 
structured a little bit and learning how to on-ramp onto 
speaking with financial sponsors out there. That in itself 
would help create more jobs and create more confidence in the 
marketplace.
    So the SBA staff would really be incredibly beneficial by 
helping these individuals learn how to gain access to this 
capital. And on the West Coast, there is a lack of SBIC capital 
out there to help, and also in many parts of the Northwest as 
well. We are seeing a huge demand of capital that just cannot 
find a place to look--to get capital in the marketplace today. 
So that would be a huge helpful thing to have out there.
    Chair Landrieu. Do we actually have a map of where the 
SBICs are headquartered? Can we put that up somewhere? And, 
Harry, will you speak to the issue of what the SBA is doing to 
get out the idea to entrepreneurs and to others? Let us just 
look at this map for a minute. This is the distribution by 
state. I guess the darker have the more SBICs, so New York 
would be leading with--what is that--46?
    You know, the sad thing is that there are lots of light-
colored states, including my own, which have fewer SBICs. And 
again, it is not so much the quantity, but the quality of the 
SBICs. What I am going to ask the staff to do is do another map 
with the top--how many do we have in the country?
    Mr. Gillers. 292.
    Chair Landrieu. 292? I am going to ask you all to do the 
top 50 or the top one-third, I guess, of that and see where 
they are operating to give us an idea where the more successful 
ones are operating and where the gaps are.
    Harry, what are you all doing about this to try to get this 
accessible, physically, in many other places? Now, we also have 
the Internet, which is a powerful tool of communication, so you 
do not always have to be physically located with the 
communications that we have today. But could you comment on 
that?
    Mr. Haskins. Yes. First I would just like to say something 
real quickly regarding the comment made about education of 
entrepreneurs. SBA does have a whole office dedicated to that, 
Entrepreneur Development, and through its SCORE and SBDC 
programs and other assorted programs.
    Chair Landrieu. But SCORE has not been expanded in how 
long? Has it been authorized, at what level, for how long? Who 
knows that?
    Ms. Wheeler. For at least the last two years.
    Chair Landrieu. But what is it? It is a $7 million 
investment that the Federal Government has made, $7 million, $7 
million, that is it for the whole country. And that is the best 
known mentorship program. We have attempted to get it raised, 
and I have been blocked. Unfortunately, there is not enough 
minority support right now for the expansion of SCORE or 
something like it.
    But $7 million, they have been at that level for, I do not 
know, 30 years. Go ahead.
    Mr. Haskins. But we do recognize the need for that kind of 
education. With respect to the map, we have been focusing a lot 
of our efforts on a couple points. One is obviously trying to 
attract qualified management teams to the program, with a 
particular focus on some of the under-served populations, 
minorities and women, and we have had a fair amount of success 
with that recently, more than doubling the number of 
applications from those particular populations over the recent 
past.
    Also, we have been making the large outreach efforts to 
limited partners, which are the source of capital for the 
program independent of SBA, trying to attract banks and others 
such as TD and Wells to the program so that there is a source 
of capital for a qualified manager so that we can expand in 
various areas throughout the country.
    We do what we can, in a sense, to try and make the program 
known as widely as we can by attending numerous conferences and 
events that are attended by people who have an interest in this 
space, and hopefully we can expand in a number of other areas 
that are under-served.
    Chair Landrieu. I am going to get Dan, to you, in just a 
minute, but does anybody at this roundtable, knowing what you 
know about the success of this program, have any ideas for 
Harry about where he could look for experienced minority 
entrepreneurs, particularly African-American, Hispanic, or 
Asian?
    Would business schools at Harvard, Stanford, or other well-
known schools, young people coming out but with the 
prerequisite degrees, be interested in starting some kind of 
fund like this? Or do you need to have real world experience 
for a couple of years, maybe before you start them? Do any of 
you all have any ideas for the Small Business Administration 
about where we could get some more diversity into this program? 
Go ahead, Thies.
    Mr. Kolln. Well, I do not know that I have an answer to it, 
but this is very much a kind of mentorship industry where you 
learn by doing. I think it would be high risk to take even 
bright, well-qualified students right out of business school 
who have never managed a fund and focus on that.
    So I think the question is, is growing the base with 
experienced managers and----
    Chair Landrieu. And mentoring some of the younger----
    Mr. Kolln [continuing]. And mentoring. It is really a 
mentoring kind of model and it always has been because, you 
know, we are very small organizations. I mean, we have five 
full-time investment professionals and I think that is probably 
bigger than a number of SBICs out there. And I think, you know, 
if there were ten or a dozen, that would be a very large fund.
    Chair Landrieu. Tim.
    Mr. Rafalovich. We invest in a fund called Central Valley 
Fund. That fund is in Central Valley in California. Most of 
those fund managers do speak Spanish and they have--a majority 
of their companies that they invest in are all minority-owned. 
So some of it has to do with location and expertise around the 
fund managers.
    Chair Landrieu. Manuel.
    Mr. Henriquez. Clearly, with my last name and my name, I am 
a minority. I am a Hispanic, of Latin background. I have to 
echo. It is an apprenticeship program and I may say something 
here that people may find a little bit offensive. You have to 
lose money to learn how to make money. And you need to be with 
an institution that is going to go through that apprenticeship 
process for you to get developed as an asset manager, as a 
portfolio manager, and that takes time; that you just do not 
learn that out of the box.
    I learned that, thank God, with my career at Bank of Boston 
where I cut my teeth, which happens to be originally the number 
two licensed SBIC in the country, I had the privilege to work 
for. But it is an apprenticeship model.
    It is very difficult to reach out to minorities. You have 
to give the minorities the opportunity to lose money and that 
is a very hard thing to do, especially in an economy that has 
been contracting over the years. There are programs. There are 
outreach programs for minorities that you can actually tap, but 
that is something that should happen, but it is very, very hard 
to do.
    Chair Landrieu. Carl.
    Mr. Kopfinger. Sure. Just to address what Harry had to say, 
the program has attracted a number of women-owned, as well as 
minority-owned, applicants applying to the SBIC program. For 
example, Bob Johnson from BET Networks is sponsoring a group 
and bringing in a team from the Carlyle Group.
    In addition to that, there is another fund, Pharos, out of 
Texas. Kneeland Youngblood, who is on the board of Starwood 
Hotels and Burger King and some other large organizations, 
including a large hospital chain, is also bringing together a 
team of minority individuals to run his fund.
    And as it relates to women-owned fund managers, there has 
been a lot of disruption in the marketplace where you had 
American Capital, which imploded, and a couple of other funds, 
and some of the women that were part of that group have also 
spun out and spawned their own funds.
    So I think the answer is that a lot of the folks who have 
the experience are now starting to mentor the junior folks to 
come in and start some of these funds. And I think we need to 
see more of that.
    Chair Landrieu. And, Don, thank you for joining us. I know 
you had a weather delay, but why do you not briefly introduce 
yourself, take a minute or so, and then you can take a minute 
to explain why the SBIC program is important to your business.
    Mr. Sackett. Okay. Thank you very much. I started my 
company in 2001, myself and one other gentleman. We are a 
Boston-area company. And we took SBIC funding in early 2004, 
actually from the gentleman sitting to my left, and it was--we 
thought it was just a very good program. Like one of the 
gentlemen said earlier, for a small business that had a few 
million dollars in revenue, private equity really was not an 
option.
    Venture capital, the traditional form, was not a great 
option because it was just too expensive. We would have to give 
up so much ownership. So we went with the SBIC route and it was 
a very good success. We had about 20 employees at the time of 
the investment in 2004. We sold the company in 2010. We had 
about 180 employees at that time. We had grown our revenue from 
a couple of million dollars to about $55 or $60 million.
    Chair Landrieu. And what is your company, Don?
    Mr. Sackett. It was called Innov-X Systems and we made 
scientific instrumentation, portable instrumentation, and we 
manufactured it in Massachusetts. And I think one of the things 
we are most proud of was 70 percent of our products were sold 
overseas. So we were manufacturing in Massachusetts and we were 
selling to China.
    Chair Landrieu. That is great. That is terrific. I hope you 
are getting ready to start another company.
    Mr. Sackett. Well, that is why I am having lunch with this 
guy.
    Chair Landrieu. Good. So you and Dan will be having a 
special lunch today.
    Mr. Penberthy. I have got dibs on Don.
    Chair Landrieu. All right. Anybody else? Vincent.
    Mr. Foster. If you think about outside the SBIC world, how 
mentorship really happens, most individuals get trained, like 
the Bank of Boston example, through a larger organization. To 
the point that Thies made, you know, if the average SBIC fund 
only has five people, what are the chances that you train 
someone and they are--whether they are minority or not--whether 
or not they go out and start their own firm?
    So this is kind of a segue into something I feel strongly 
about. We had this cap on the size of the program at $225 
million of Government financing, which is great, but because it 
is made available on a two-to-one basis, that means once you 
have more than $112.5 million in private capital, which is the 
cushion for the program which is why the program does not lose 
money, it makes money, you are not optimizing your capital. You 
are starting to be less and less benefitted by the Government 
leverage.
    So there is an effective cap on the program of $112.5 
million of capital after which the management teams stagnate, 
go someplace else. We have lost a lot of them through the years 
and they have gone on to have great careers, household name 
private equity firms who started out in the program.
    So if we could increase the size of the program for the 
better managers, you are going to have larger organizations, 
more training, more people spinning off starting their own 
firms. I have got 30 people now. I am big enough where, you 
know, some of my guys will spin off and start their own firms, 
but it was not until I got to 25 or 30 where that was, you 
know, we really had more formal training and we could really do 
that.
    So I think, you know, we know who the better performing 
SBICs are. It is not going to cost any money. Let us create 
larger organizations rather than keep the thing capped. It does 
not really make a lot of sense.
    Chair Landrieu. Maybe we could have a stage one, stage two, 
or stage three where you earn your way up through those stages, 
or something like that. Manuel, you wanted to speak about that? 
And then I will get to Rick. But, Harry, I am going to ask you 
for a response from SBA about making some of these changes that 
might really significantly help and reward those that are the 
most successful and help keep this moving forward. Manuel, go 
ahead.
    Mr. Henriquez. I absolutely echo the need to increase the 
funding levels, whether it is the 350 with keeping the leverage 
going up to 300, which would be beneficial, but if you really 
want my opinion on helping the program expand and create the 
next bench of future managers, it would be nice to be able to 
cede to your point on staging of capital, that maybe some of 
our own individuals that we have been--an apprentice within 
organizations start spinning out.
    They are not viewed by the SBA, for example, as an 
affiliate and get wrapped up into the total licensing available 
capital. It would be nice to be able to see that a young 
manager spinning off from an SBIC----
    Chair Landrieu. Could be their own fund.
    Mr. Henriquez [continuing]. Could be their own fund. And 
yes, you are right. Maybe they start off with only $75 million 
of leverage, but that way you have at least training wheels, if 
you will----
    Chair Landrieu. Exactly.
    Mr. Henriquez [continuing] On a manager and getting out. 
But sometimes under the program, that related manager, if some 
of that equity capital is helping them get started, could be 
viewed as an affiliate of ours, which means it detracts from 
our availability of capital. And I think that does a disservice 
to spawning new talent.
    Chair Landrieu. Does not make any sense whatsoever. Harry.
    Mr. Haskins. First, we do support an increase in the Family 
of Funds limit to allow people like----
    Chair Landrieu. But what about the affiliate rule?
    Mr. Haskins. We have an awful lot of funds that are formed 
by partners that have left or younger partners that have left 
an existing fund and started their own. They are only an 
affiliate if, in fact, Manny was also to be part of the new 
fund. So if it is actually a new fund with new managers, even 
though they spun out from an existing fund, they generally are 
not going to be constrained by the affiliation issue.
    Chair Landrieu. Okay. So they have got to be able to stand 
on their own to be a real fund. They cannot be set up and then 
have to ask you, Manny, for advice every day. It has got to be 
fish or fowl, in other words, if we could figure that out.
    But I understand the benefit, because getting back to the 
mentorship, that is exactly what you are hoping to do, is some 
of the more successful SBIC funds are training some of the best 
people in the world to be able to help Rick and Don take their 
businesses to where they have taken their businesses. And you 
want to encourage them to start their own kind of funds and 
help the program grow more organically than just Federal 
constraints.
    I mean, if there is some way we could design this program 
for the modern age, not the 1950s when it was created, but for 
the 2012 which we are in, with the whole world that has changed 
since then and really give our entrepreneurs in America access 
to the capital they need to grow is, I think, what we are 
trying to focus on.
    Tim, let me get you and then, Rick, you have had your card 
up. Let me get Rick. You have had your card up the longest.
    Mr. Girard. I just want to say that there is a lack of 
knowledge. A lot of people do not know the SBIC even exists. I 
was looking for solutions to my problems for two years before 
it was even brought up to me. When people need money, when 
entrepreneurs need money--and most of them are smaller 
companies, and I think it was a good question that you raised.
    I have heard a lot about the caps and, you know, the upper 
limits, but I do not know if I really heard a good answer on 
what are the lower limits, because there are a lot of small 
companies out there that need money and they do not know about 
the SBIC program. And where do small companies go for money? 
They go to the bank and the bank says, Sorry, I cannot help 
you.
    But nobody ever guides them and then leads them to the 
SBIC. So I am just--just a suggestion. Is there any kind of 
partnerships that should exist between the SBIC funds and the 
banks? Because you guys are limited with resources, it sounds 
like. You know, you have a few employees. A dozen employees is 
a lot. But the banks are everywhere. So maybe there is a 
partnership there that you could exploit.
    Chair Landrieu. And, Rick, when you first approached a bank 
at some point in the early part of your company--and we have 
been joined by Senator Moran. Rick runs one of the most 
successful landscaping companies in Florida and one of the 
largest in the country. Correct, family raised?
    Mr. Girard. Yes, ma'am.
    Chair Landrieu. He could not get the money he needed from a 
bank. SBICs have helped their company. What was the amount of 
money, if you do not mind sharing, that you were trying to get 
from a bank that you could not get? At some point you had to go 
to the SBIC.
    Mr. Girard. Well, in this transaction, this was a $3 
million transaction, which, you know, is not a small 
transaction. I am not sure if that answers your question.
    Chair Landrieu. But you could not get it from a bank----
    Mr. Girard. No.
    Chair Landrieu [continuing]. And you had to find it from 
the SBIC?
    Mr. Girard. No, ma'am. And as a matter of fact, the bank--
you know, I had a bank. I was a performing loan. You know, my 
company was growing. We missed our loan covenants. The bank 
turned it over to a work-out officer and, once you are on that 
list, you do not ever leave that list. So I was left with--the 
only choice I had was to go out and find refinancing.
    Chair Landrieu. It has come to my attention, shockingly, I 
guess I should have known this, but my background is not as a 
banker, but I was told recently that you could be a 40-year-old 
entrepreneur and have failed to pay one or two months on time 
of a student loan that you took out when you were 19 and be 
disqualified from a loan today. Is that your experience or does 
anybody want to comment? Do you know if that is true? Wells 
Fargo, what would your bank say? Go ahead. Do you know if that 
is kind of what the regulators are telling you?
    Mr. Rafalovich. Did I all of a sudden start sweating? Is my 
legal counsel here? Generally, I would say that might be an 
extreme, but there certainly are restrictions that, you know, 
credit is very important. We are a credit-driven culture. 
Something like that where you have 20 years, you know, 
typically that falls--after seven years it falls off your 
credit report anyway.
    But it is true and somewhat to the point that bankers do 
not do a great job at knowing a whole lot about this program. I 
can say that in my discussions, we invest in a lot of SBICs and 
even our bank does not know that this option exists for a lot 
of people. So I think that that would make a big impact if more 
banks had the ability to say, Here is a group of SBICs. It does 
not fit us. It would be a good opportunity to give them a call.
    Chair Landrieu. Jim and then Tim.
    Mr. Goodman. Well, I think actually the way the SBIC 
program works, or at least a lot of us here, is with regard to 
the banks, it is really a case of one plus one equals three. 
The bank does not want to come in and just deal with the 
entrepreneur that maybe does not have his financial statements 
in order, is not willing, necessarily, or able to give a 
personal guarantee. But when my firm or Vince's firm or others 
like it come in and put a couple million dollars underneath the 
bank, then we actually get a multiplication of what is 
available to the small company.
    So we view banks as our senior partner, if you will, in 
helping to capitalize and make companies like Rick's 
successful. It is not either a bank or an SBIC, but it is 
working together. The SBIC provides the junior, more risky 
capital, but the act of doing that gets the bank comfortable 
and creates that much more availability for the company.
    Chair Landrieu. And creates, in the long run, if things 
work out, a great customer for the bank that they can make a 
lot of money off of that particular business. That is exactly 
the business that I think banks are supposed to be in, correct?
    Mr. Goodman. Amen.
    Chair Landrieu. Don, did you want something?
    Mr. Sackett. My comment was that was exactly our 
experience, what Mr. Goodman says. When we took our SBIC 
funding, we got a bank line of credit on top of that that we 
could not have gotten had it not been for the SBIC line, for 
the exact reasons. The SBIC required a certain amount of 
financial due diligence and financial reporting and statements 
that were not there before that.
    Chair Landrieu. And repeat for Senator Moran, if you do not 
mind, how successful your business was. You were making medical 
devices? Go ahead and tell him.
    Mr. Sackett. It was scientific instrumentation that we 
developed and manufactured in Massachusetts.
    Chair Landrieu. And selling to?
    Mr. Sackett. All over the world, mostly Asia. Seventy 
percent of our sales were offshore. Half of those sales were to 
Southeast Asia, mostly China.
    Chair Landrieu. Very exciting. Rick.
    Mr. Girard. I just wanted to add, I echo exactly what he 
said. I would not have been able to obtain senior lending or to 
be bankable without the SBIC funds coming into play. But, you 
know, the bank is not the one who suggested it. The bank is not 
the one who found it. I had to pay a lot of money to an 
investment banker, sophisticated money investment banker, who 
understood what the SBIC--even understood what it was before 
they could even actually make an impact to get my company 
bankable.
    And for a $20 million company, you know, one of the largest 
in Florida, what we do in our industry, you know, there is no 
reason that a company like us should not be bankable.
    Chair Landrieu. I do not know if anybody here is 
representing community banks in the audience? If not, Harry, 
what are you doing or what is the SBA doing to inform? We have 
about 7,000 banks, I think roughly, in the country and we are 
really pressing--I am pressing and I think I am joined by other 
members of this Committee--for the SBA to be better partners or 
the banks to be better partners with the SBA in all of our 
programs. We have 504 lending programs, et cetera, et cetera.
    What is the SBA doing today, now that you are a Cabinet 
level position, which we are very happy that the President has 
asked Karen Mills to be part of the Cabinet. What are you doing 
with the community banks that are part of the SBA family to get 
them to better understand SBICs?
    Mr. Haskins. Well, with respect to the SBIC program, we 
work with the bank regulators such as Barry and we have worked 
with FDIC and others to make our presence known at various 
events.
    Chair Landrieu. In what specific ways? Do you know? Is that 
what you or your office does?
    Mr. Haskins. For example, I was in Denver a couple months 
ago to appear at an FDIC conference, which was attended by 
mostly community banks interested in investing in--potentially 
investing in the SBIC program. And we have done other events 
like that as well.
    Chair Landrieu. Do we know how many new banks--let us just 
say roughly last year, and if you do not know, you could submit 
it--decided to take specific action to know about SBICs and ask 
for some sort of special briefing or something like that? How 
many new banks came into the program? I do not know how to ask 
the specific question. Do you know what I am trying to get? Not 
that you just share information with, but that respond to you 
in some formal or official way they would like to be part of 
it. About how many community banks do that?
    Mr. Haskins. I do not think we have a good answer for that. 
I would say the primary contact with the banking industry has 
been through the fund managers as opposed to SBA directly, and 
we sort of backstop them saying, Listen, we are here and 
willing to assist you in any efforts you have to educate your 
potential investors. And as I said, we are willing to deal with 
them one on one or as a group.
    We have a number of SBICs that work with community banks 
very closely. For example, in Texas, there is an SBIC that is 
formed entirely around community banks. We have a number of 
SBICs in other States that have significant community bank 
participation in their fund. And we work with them and tell 
them, We are more than willing to meet with them individually, 
talk to them over the phone, appear at events to educate them 
as to the program. But I cannot give you a good answer as to 
how effective we are in that.
    Chair Landrieu. And, Treasury, what are you all----
    Mr. Wides. Yes. The Comptroller of the Currency actually 
has been out participating in some of these outreach events 
that Harry just mentioned. We held about 40 or 50 sessions last 
year with the Federal Reserve and the FDIC where we bring 
community bankers in to locations, like Harry mentioned and 
Denver was one, and educate them about the SBIC, the 7(a), the 
504 program.
    The OCC has held tele-seminars for our banks with SBA for 
about the last four or five years on some of these topics, 
7(a), 504, and then last month on the SBIC program that Carl 
actually participated on. I will be happy to provide a copy of 
this for the record----
    Chair Landrieu. Thank you. Without objection.
    [The information follows:]
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    Mr. Wides [continuing]. Of this presentation that we 
delivered. We had about 700 bankers on the line at the 
Comptroller of the Currency. Walsh and I were at the 
Independent Community Banker's conference last week in 
Nashville. There were 2,200 community bankers there.
    I did a presentation on the SBIC program, had good interest 
from the community bankers, all of whom were saying the same 
things that you are hearing around the Committee table today, 
that they view the SBIC program as a way to bring in new 
customers and to help grow their banking business. And I think 
it is just a matter of getting the word out.
    We at the OCC will be putting out a how-to guide for banks 
to invest in SBICs later this spring, and, you know, we 
continue to hold these seminars for banks, letting them know 
that they can get Community Reinvestment Act credit for 
investing in SBICs, so that hopefully is an incentive out there 
that banks see as being in their interest as well as, of 
course, the fact that they really can make money on investing 
in these funds and grow their businesses through developing 
relationships with the small businesses that are financed.
    Chair Landrieu. Thank you. Carl, you wanted to say 
something?
    Mr. Kopfinger. Right. So I think Barry covered a lot of 
what I was going to say. I was going to mention that we did 
participate in a webinar for many of the banks, national banks 
or super regional banks, community banks that wanted to learn 
more about the SBIC program. I was going to mention that Barry 
is working on a white paper, and I am working with him on the 
white paper, that will be distributed to the banking community.
    Chair Landrieu. Well, one of the big picture--and I will 
get to you, Vincent, in a minute. We are going to try to wrap 
up in about ten minutes. You know, I understand that it is in 
the private sector's interest to make money as fast as they 
can, as much as they can, and that is what a lot of people are 
motivated by. I have no problem with it.
    But I have learned, as the Chair of this Committee, that 
there is great value and actually great strength in small 
businesses that are just businesses that feed one family. But 
that is a major contribution to make.
    Although there are lots of people running around the 
Capitol that want to promote the Gazelles and the big 
businesses that they can spin off and everybody makes a lot of 
money and maybe they sell the company internationally, and I am 
all for that, in America, we have to honor the tradition of 
small businesses that only want two restaurants, but they feed 
15 families for 30 years. There is nothing wrong with that.
    I think that our country has, because of the concentration 
of capital, the rush to make as much money as you can and, you 
know, ``die with all the toys,'' kind of attitude that we have 
gotten away from just the basics of trying to get money out to 
people who want to be their own boss, who have something to 
contribute, who do not want to travel all over the world, they 
just want to live in their neighborhood, raise their kids, go 
to church, have a happy life. Is there anything wrong with 
this?
    This is why I so believe in community banks and getting 
money to Main Street, so that this can be America. There seems 
to be a cutting off of that kind of opportunity, and the only 
way you get it is to, like I said, Senator Moran, you either 
have to put your house at risk, your children's college fund at 
risk, all the money that you own at risk to get money to start 
a business, and all you want to do is feed your family and a 
couple of your neighbors.
    This is a big problem right now. I am determined to find a 
way through this maze of all the fancy financing to figure out 
a way to get back to that, because our main streets are thirsty 
and dying because they cannot get the money they need.
    So I think SBICs are one way. If we can help you all to be 
even better at what you do, it may not be the only way to do 
that. But with all due respect to these big funds and these big 
billion-dollar, $5 billion, $10 billion IPOs and Facebook and 
Google and everything, there are just a lot of people I 
represent who just want to run a restaurant.
    I met a young lady the other day. She runs five ice cream 
stores. And you know what? She is real happy. She said, 
``Senator, that is all I ever wanted to do, run my own 
business. I have got five stores. I will be happy if I can do 
that for the rest of my life.'' There is nothing wrong with 
that.
    Does anybody else want to say anything? Go ahead, Vincent.
    Mr. Foster. I have kind of a simple suggestion, and I think 
Harry does a fantastic job.
    Chair Landrieu. You have got to turn your microphone on, 
please.
    Mr. Foster. I think Harry does a fantastic job with the 
resources he has, but if you go to SBA.gov, try to find the 
SBIC program. It is really hard.
    Chair Landrieu. I will go. If I cannot find it, Harry, you 
are going to hear from me.
    Mr. Foster. Well, it is really hard to find.
    Mr. Haskins. If you do find it, would you tell me?
    [Laughter.]
    Chair Landrieu. Where it is.
    Mr. Foster. When you think about the lenders out there, the 
younger people, they use the Internet a lot more than we do. 
That is the first thing they do. They can find SBA.gov, but 
from there--so we really need to spend a little bit of money 
having a modern website. That is the first thing a lot of our 
companies do, is update their website to attract more 
customers. I think we can do the same thing.
    Chair Landrieu. All right. That is going to be one of our 
first recommendations to the SBA and then to Treasury.
    Senator, did you want to add anything? We are very happy 
that you joined us and why do you not say----
    Senator Moran. No, Chairman, I just would thank you. I 
think these roundtable discussions are often of greater value 
than the hearings we host much more frequently.
    Chair Landrieu. Yes, they are.
    Senator Moran. I apologize for the schedule being such that 
I only have been here for the last 15 or 20 minutes, but I 
wanted to get a flavor for what was being said. We certainly 
want to make certain that we do the things that allow capital 
to be available so people can pursue the American dream. 
Everybody has a different American dream and we want each to be 
able to pursue their own.
    I am so delighted to hear at least what I was able to hear 
this morning and look forward to working with you on this and 
other issues.
    Chair Landrieu. Thank you. And I think, Vincent, while the 
Senator is here, just again, one of the great points about the 
program is no cost to the taxpayer and limited risk. If you 
would just go over that again?
    Mr. Foster. Sure.
    Chair Landrieu. And you are the SBIC of this year, right?
    Mr. Foster. Last year.
    Chair Landrieu. Last year.
    Mr. Foster. I do not think they have announced this year 
yet. It is during Small Business Week.
    Chair Landrieu. He was the best one last year in the 
country.
    Mr. Foster. So the way the program works is you take the 
top end of the program. If you have more than one license, 
which several of us do, you can get $225 million of long-term 
Government-guaranteed financing at essentially the Government's 
cost to capital, but it is on a two-to-one basis to your 
private capital.
    So for me to get $225 million guaranteed from Harry, I have 
to go raise $112.5 million. That is the way due diligence is 
performed to protect you because people are not going to give 
me $112.5 million if they do not think I know what I am doing. 
And their $112.5 million is on the hook first if we have 
defaults with respect to how we deploy that $337.5 million.
    And the--what else did you want me to cover?
    Chair Landrieu. That was it.
    Mr. Foster. And so, in effect, what we do with the money--
--
    Chair Landrieu. The risk and the cost.
    Mr. Foster [continuing]. Is we start where the banks stop 
and we stop where private equity and traditional venture 
capital begin. So we are in that much needed void in between.
    Senator Moran. Thank you.
    Chair Landrieu. Jim, and then we are going to wrap up with 
you. Go ahead.
    Mr. Goodman. Well, just specifically to the point of what, 
if any, is the risk to the taxpayer, we have raised and managed 
five SBIC funds. The first three, which are now fully mature 
and have been sold off, generated more than $40 million of 
profit to SBA under the Participating Securities Program.
    But every one of our funds has paid back more than we have 
borrowed. So we are a net generator of cash and profit to the 
program. Obviously, we hope that continues, but I think it is 
important to understand that if the program is well-managed, as 
it has been, and it uses its discretion in licensing new 
applicants, it can continue to exist at no cost to the 
taxpayer.
    I think that is a really important point here, is that a 
well-run program, as Harry and his team have been able to do, 
can generate some valuable capital, create jobs, and do so at 
no cost to the taxpayer. We have been just one example of that.
    Chair Landrieu. Dan and then Manuel and then we will end 
with Treasury.
    Mr. Penberthy. I will tell you real simply why it is at 
zero cost to the taxpayer. RAND Capital borrowed $10 million, 
just $10 million from the SBA through the SBIC program. We paid 
interest on that at 6 percent, now above-market interest. We 
have paid you back $9.1 million. So for roughly $900,000 net 
risk to you at this time, we have created 500 jobs, created 
$200 million in growth and revenue.
    In 2011 alone, the employees of our portfolio companies 
paid $7 million in Federal withholding taxes. We have created 
jobs, created wealth at zero cost to the taxpayer. That is the 
success of the SBIC. That is why it is important.
    Chair Landrieu. Manuel and then we will end with Treasury.
    Mr. Henriquez. Madam Chair, I want to go back to a point 
you raised earlier, how do we get Middle America, Main Street 
America the capital that it needs to have that young 
professional run her five ice cream stores. Free thinking as 
this forum you want it to be, suggestions I would tender to you 
would be the following.
    I think that historically, SBA had a program that had about 
$25 million that was allocated to distressed economic regions. 
If you want to really induce companies that invest in America, 
you need to empower the equity to be that first lost capital 
that Vince referred to earlier. What I would suggest, Madam, to 
consider is that you want to encourage that equity capital to 
come in and start the small SBICs, call it $25 million SBIC, 
but they receive three or four times leverage on that capital 
in order to allow that small entrepreneur to get a $100,000 
loan or a $500,000 loan.
    By having that equity capital be able to be leveraged a 
little higher, but keep the fund at a smaller size from the 
SBA, you actually may see smaller amounts of capital.
    Instead of the billion dollars you are referring to, you 
can go into that Main Street America through an economic 
development program that way, which I think if historically the 
SBA had a similar program on economic distressed areas, and I 
do not think it has been well-capitalized or well-used because 
there is no equity capital that wants to go into that small, 
you know, distressed economic region.
    So you need to create an inducement to have that capital 
flow in there, and I think that you will see Main Street 
America start getting that small amount of capital that it is 
looking for.
    Chair Landrieu. And, particularly, if you could partner 
with some of our more entrepreneurial mayors in this country 
that are trying to build their main streets, even in rural 
America, as well as in some of the more urban settings that 
have had effective economic development programs, that could be 
an interesting partnership as well. Okay. Dan, last word.
    Mr. Penberthy. RAND is willing to go out to those rural and 
distressed areas. We went to Mexico, Missouri, and are building 
bricks; started up a defunct brick plant there. We are down in 
Waycross, Georgia, making boats. We are going to these severely 
distressed areas making very small investments in companies, 
and that is the importance of small funds to the program.
    Chair Landrieu. Okay. Barry.
    Mr. Wides. A couple of points. Yeah, we have been out 
talking to community bankers about the SBIC program. A couple 
points of feedback which I have shared recently with the SBA, 
but I will share with you as well.
    I think that there is an interest in using the Internet, 
maybe the SBIC's website, to find funds that are currently 
soliciting investors, and I would just encourage both--
encourage the SBA to see if there is a way that they could make 
more prominent on their website funds that are soliciting 
capital now. And then we can send banks that are looking to 
participate to their website.
    The other point that I have made to the SBA is that they 
might consider posting fund performance so that banks can see 
which Family of Funds have been the most successful. And I 
think, you know, having the data and the information available 
to the banks on fund performance, in terms of where they want 
to place their capital, might be helpful. And we have gotten 
that feedback from banks.
    And just last point. In terms of your question about the 
smaller business, the mom-and-pop business that you were 
referring to a moment ago, the State Small Business Credit 
Initiative is just getting up and going. The OCC has been out 
meeting with the State agencies that are running those 
programs, encouraging banks to participate. Many of them run 
loss shares so that banks can take greater risk in those 
programs and make the kinds of loans that we have been hearing 
about that banks have been shying away from.
    And then also, many of the very small loans, the micro 
enterprise loans, are made by Community Development Financial 
Institutions. CDFIs are certified by the Treasury Department, 
receive money through the CDFI fund, and a lot of banks are 
partnering with those CDFIs to provide them subordinated 
capital debt so that they can go out and leverage the grants 
that they get from SBA and the Ag Department and the Treasury, 
which is then used to make the really small business loans to 
those entrepreneurs in the low-income communities.
    So we are out there trying to get banks more involved, but 
I agree, it is a huge challenge.
    Chair Landrieu. Okay. I am going to try to wrap up, but I 
do not want to cut anyone off. Harry, do you want to say 
anything?
    Mr. Haskins. Just a couple comments. One is, as to the 
information that Barry is referring to, we are looking into the 
possibility of making that information more available in a way 
that respects the confidentiality of the providers of the 
information.
    The second point is, we do not want to get entirely away 
from our roots, in a sense. We do have a requirement. Congress 
has seen fit to impose a requirement that 25 percent of all 
investments by SBICs be in smaller enterprises as opposed to 
just small business. So we try to make sure that the lower end 
of the economic scale is being addressed as well.
    Chair Landrieu. And what do we define as smaller 
enterprise?
    Mr. Haskins. It is essentially one-third the size of a 
small business. So instead of $6 million in after-tax net 
income and $18 million net worth, it is $2 million in average 
after-tax income for the prior two years and $6 million in net 
worth.
    Chair Landrieu. Carl, anything else?
    Mr. Kopfinger. I just want to expand on something that 
Barry said. To the extent that some of the funds are out there 
looking to solicit community banks for fund-raising, that would 
be a great tool for me because we are a very active investor 
and I get a lot of phone calls.
    We are only investing within our footprint, which is from 
Maine to Florida, so at least I would love to be able to have a 
website to which I can refer them; if they are interested in 
investing in the SBICs, then they can go to that website.
    One other point that I would like to make that I had not 
heard mentioned at all, too, is not only about the job 
creation, but also with job creation comes tax revenues.
    Chair Landrieu. Yes.
    Mr. Kopfinger. Revenue taxes, payroll taxes, and with the 
direct cutback in Federal allocations, this is a great way for 
states to get additional revenue.
    Chair Landrieu. Well, thank you all so much. This has been 
very, very, very interesting, very helpful. I think we got a 
tremendous amount of good information on the record. The record 
of this hearing will stay open for two weeks, so anything else 
you want to submit in writing, if there are other individuals 
that want to submit a statement through you, we would like for 
you to sign for it when it comes to the record. But if there is 
a colleague of yours or another person that has strong 
interest, maybe a professor from a think tank or university 
that has written about this you would like to submit, but under 
your name, please do.
    I really thank you all for coming. We are going to 
hopefully put a major bill together and try to get it down to 
the Congress sometime in the next month or two. Thank you so 
much. Meeting adjourned.
    [Whereupon, at 11:36 a.m., the roundtable was adjourned.]
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