[Senate Hearing 112-908]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-908

                 CREATING JOBS AND GROWING THE ECONOMY:
                 
   LEGISLATIVE PROPOSALS TO STRENGTHEN THE ENTREPRENEURIAL ECOSYSTEM
=======================================================================



                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                      
                          AND ENTREPRENEURSHIP
                          
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 29, 2012

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


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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
              
              
                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
Snowe, Hon. Olympia J., Ranking Member, and a U.S. Senator from 
  Maine..........................................................     6
Moran, Hon. Jerry, a U.S. Senator from Kansas....................    10

                               Witnesses
                                Panel I

Greene, Sean, Associate Administrator for Investment and Senior 
  Advisor for Innovation Policy, U.S. Small Business 
  Administration.................................................    13
Chodos, Michael, Associate Administrator for Entrepreneurial 
  Development, U.S. Small Business Administration................    21

                                Panel II

Gardiner, Scott, Executive Vice President, Granite State Economic 
  Development Corporation........................................    39
Lindfors New, Fonda, Chief Executive Officer, Quaternary Resource 
  Investigations, LLC............................................    46
Etemadi, Joshua A., Sales Manager, Construction Bonds, Inc., a 
  Division of Murray Securus, and Chair, Small and Emerging 
  Business Committee, National Association of Surety Bond 
  Producers......................................................    53
Clough, David R., State Director, Maine Chapter, National 
  Federation of Independent Business.............................    61
Furchtgott-Roth, Diana, Senior Fellow, Manhattan Institute for 
  Policy Research................................................    70
Weeks, Julie R., President and Chief Executive Officer, 
  Womenable, and Chair, Association of Women's Business Centers..    83

          Alphabetical Listing and Appendix Material Submitted

Association for Enterprise Opportunity
    Prepared statement...........................................   166
Beutler, Brian
    Talking Points Memo..........................................   162
Chodos, Michael
    Testimony....................................................    21
    Prepared statement...........................................    23
Clough, David R.
    Testimony....................................................    61
    Prepared statement...........................................    63
Etemadi, Joshua A.
    Testimony....................................................    53
    Prepared statement...........................................    55
Furchtgott-Roth, Diana
    Testimony....................................................    70
    Prepared statement...........................................    72
Gardiner, Scott
    Tesimony.....................................................    39
    Prepared statement...........................................    42
Greene, Sean
    Testimony....................................................    13
    Prepared statement...........................................    16
Landrieu, Hon. Mary L.
    Opening statement............................................     1
    Responses to post-hearing questions from:
        Sean Greene..............................................   100
        Michael Chodos...........................................   104
        Fonda Lindfors New.......................................   113
        Joshua A. Etemadi........................................   116
        David R. Clough..........................................   120
LeClair, Lawrence E.
    Letter dated December 5, 2012, transmitting response to 
      Senator Shaheen's question.................................   140
Levin, Hon. Carl
    Responses to post-hearing questions from the Small Business 
      Administration.............................................   142
Lindfors New, Fonda
    Testimony....................................................    46
    Prepared statement...........................................    48
Moran, Hon. Jerry
    Opening statement............................................    10
Mid-Tier Advocacy
    Prepared statement...........................................   172
National Women's Business Council
    Letter dated December 7, 2012, to Chair Landrieu.............   164
Snowe, Olympia J.
    Opening statement............................................     6
    Responses to post-hearing questions from:
        Sean Greene..............................................   121
        Michael Chodos...........................................   124
        Fonda Lindfors New.......................................   135
        David R. Clough..........................................   139
Weeks, Julie R.
    Testimony....................................................    83
    Prepared statement...........................................    85
Weiss, Robert F. and Laura
    Paper titled ``The Innovation Network''......................   149
Women Impacting Public Policy
    Prepared statement...........................................   176

 
                       CREATING JOBS AND GROWING

                   THE ECONOMY: LEGISLATIVE PROPOSALS

               TO STRENGTHEN THE ENTREPRENEURIAL ECOSYSTEM

                              ----------                              


                      THURSDAY, NOVEMBER 29, 2012

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
Room SR-428A, Russell Senate Office Building, Hon. Mary L. 
Landrieu, Chair of the Committee, presiding.
    Present: Senators Landrieu, Shaheen, Snowe, Risch, Rubio, 
Ayotte, and Moran.

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

    Chair Landrieu. Good morning, and I thank everyone for 
joining us for this hearing this morning at our Small Business 
Committee, Creating Jobs and Growing the Economy: Legislative 
Proposals to Strengthen our Entrepreneurial Ecosystem in the 
United States.
    I apologize for being a few minutes late. We were taking 
some, what I hope and think will be, historic photographs in 
the back with my so able and wonderful Ranking Member and our 
staff, because this is a very special meeting for Senator 
Snowe. Welcome, Senator Shaheen. Thank you for joining us.
    So I want to say good morning to everyone and I would like 
to thank our witnesses for being here. We are looking forward 
to your testimony before our Small Business Committee this 
morning.
    But before we begin to talk about what is on the agenda 
today, I want to take a point of personal privilege, and let me 
acknowledge that this is our Ranking Member, Olympia Snowe of 
Maine, who is attending her final Small Business Committee 
hearing. We did not add up how many Small Business Committee 
hearings she has attended. That would be extremely difficult. 
It has got to be over the 100s, both here, on Commerce, and in 
Finance, and she has served for literally decades here in the 
Senate, some years in the House, and as a legislator in Maine. 
So we did not even attempt, but trust me, it will be hundreds 
if not thousands of hearings.
    Let me say it has been a privilege, Senator, to lead this 
committee with you. In 2009, we made history by becoming the 
first two female lawmakers to ever be Chair and Ranking Member 
of any standing committee in Congress and we are really very 
proud of that milestone. We hope there will be many more to 
follow. But it is something that the two of us have been very 
proud of, and our close working relationship, as well. During 
the four years leading this committee together, there were many 
tough battles, but more than not, they resulted in important 
victories on behalf of small businesses in Maine, in Louisiana, 
and throughout this country.
    For nearly four decades, Senator Snowe has proved time and 
time again to be a hard working, dedicated public servant and a 
role model for men and women alike, and she has demonstrated 
time and time again the art of political compromise, a skill, I 
might say, that is required in any democratic form of 
government.
    In 1978, at the age of 31, she was elected to represent 
Maine's Second Congressional District, making her the youngest 
Republican woman ever elected to Congress. In 1994, she won her 
first Senate election and became only the second woman to 
represent Maine in the Senate, following ably in the large 
footsteps of Margaret Chase Smith. During her 18 years in the 
Senate, she has earned a reputation as an extremely 
intelligent, well informed, and able legislator who knows how 
to tackle the toughest issues and get the job done. In 2006, we 
will remember that Time Magazine named her as one of the top 
ten United States Senators, quite an accomplishment.
    Aside from the important work, Senator, that you have done 
both as Chair and Ranking Member of this committee--and your 
contribution has been enormous--you have been a leader on so 
many important national issues, from national defense, to tax 
policy, to education, to women's health, welfare reform, and 
campaign finance reform, just to name a few. But your true 
strength as a legislator comes from how hard you fought for 
your State of Maine and how you have used your experiences in 
Maine as a legislator, as a person who knows your State well, 
to extrapolate their experiences and the struggles of the small 
businesses in Maine to bring that experience to the nation.
    A great example was in 2005, when you led a successful 
fight to overturn the Pentagon's decision to close Portsmouth 
Naval Shipyard and the Defense Finance and Accounting Service 
Center in Limestone. You also fought to ensure Maine got 
Federal assistance needed after disasters of the ice storms in 
1998 and the 2006 flood that struck the Southern part of your 
State. So you are not unfamiliar with those kinds of local 
challenges and you have stepped up.
    The void left by your departure in the Senate will not be 
easily filled. American small businesses are losing a strong 
champion in the United States Senate. The people of Maine are 
losing a tireless advocate. And Congress is losing yet another 
voice of reason and moderation, a voice willing to speak to 
those on the other side of the aisle and to work for what is in 
the best interest of the American public.
    So I want to just say, Senator, what a privilege it has 
been to serve with you, how much our committee and the Senate 
is going to miss you, and we so appreciate your service to our 
nation. And can we give a standing ovation.
    [Applause.]
    Senator Snowe. Thank you.
    Chair Landrieu. And if any of the other members want to add 
just a comment now, it would be appropriate, and then we will 
go into some opening statements. Senator Moran.
    Senator Moran. Madam Chairman, thank you very much, and I 
join you in your tribute to my colleague from Maine and thank 
her for her public service, exemplary public service. I regret 
that my time in the Senate with you overlapped only two years. 
I regret that you will not be my senior colleague much longer. 
I wish you well in the next step of your life. Know that only 
care and concern will continue for the people of Maine and the 
people of this country, and thank you for being a role model 
for how the Senate can and should operate.
    Thank you, Madam Chairman.
    Chair Landrieu. Senator Shaheen.
    Senator Shaheen. Thank you, Senator Landrieu.
    I want to echo Chair Landrieu's remarks about what a 
privilege it has been to serve with you, Senator Snowe. You are 
not only a colleague, but you are a neighbor, and I know how 
much the people of Maine and the people of New Hampshire will 
miss your service here.
    As Senator Landrieu pointed out, when Portsmouth Naval 
Shipyard was under a BRAC closing announcement, you were one of 
the people who helped make sure the shipyard is still there and 
we will miss that advocacy. And for small businesses, not only 
in Maine but throughout New England, in particular, your loud 
voice here to make sure that concerns of small businesses have 
been addressed will really be missed.
    And on a personal level, I just want to say how much I 
appreciated your willingness to come over to New Hampshire to 
listen. The hearings that we did together in Maine and New 
Hampshire were really important to me and to the small 
businesses in my State. So we will all miss you and especially 
miss your ability to work with people of all ideologies here in 
the Senate and to forge a compromise. There is not enough of 
that, as has been said already. So I hope as you leave, the 
example that you have set will be one that all of us can 
follow.
    Chair Landrieu. Thank you.
    Let me go into my opening statement, and then, Senator, we 
will have a response from you.
    When I took over as Chair of this committee in January of 
2009, our country was facing the worst economic recession since 
the Great Depression. The U.S. economy had lost 818,000 jobs in 
that month alone. From September 2008 through the end of 2009, 
the Great Recession wiped out seven million American jobs. In 
the face of tightening credit markets, insufficient resources 
to assist small businesses, small businesses were struggling to 
keep their doors open, and the primary agency responsible for 
assisting them, the Small Business Administration, was itself 
struggling to keep up with the demand after laboring under 
significant budget cuts that had happened in the previous 
years.
    At the time, this committee faced the enormous challenge of 
increasing the Federal Government's capacity to assist small 
businesses and ensuring they maintain their historic role as 
key job creators and innovators, spurring our economy, and we 
had to do this without substantially adding to our nation's 
increasing debt. It was an enormous challenge, but not an 
impossible one, and one that I think that we have met through 
an aggressive legislative agenda, and we are continuing to meet 
that today.
    After passing the 2009 American Recovery and Reinvestment 
Act, in which this committee was actively involved, we continue 
with one of the most substantial pieces of small business 
legislation, the Small Business Job Act. This bill was a prime 
example of the role this committee played and continues to play 
in ensuring the future economic success of America's small 
business. This bill added billions of dollars of lending and 
investment to America's entrepreneurs and provided $12 billion 
in tax relief to small businesses from coast to coast at a time 
when they need it the most, and, of course, in conjunction with 
our Finance Committee.
    In addition, recognizing that less than one percent of 
small businesses export, this bill expanded trade and export 
opportunities to provide real and timely assistance for them to 
find new markets when the markets at home were diminishing.
    Finally, the bill increased small business access to 
Federal contracts, expanded counseling and technical assistance 
programs by partnering with hundreds of nonprofits throughout 
the country, thus leveraging our muscle without having to add 
millions of dollars to undergird that.
    Since the passage of SBJA, the Small Business 
Administration supported approximately $60 billion in lending 
over the last two years, which were two of the highest SBA 
lending years on record. It has financed almost 2,424 small 
business commercial mortgages totaling more than $2.3 billion 
in the commercial mortgage refinancing program. And I might 
say, Senator Snowe was one of the leading voices on this 
provision. This helped contribute to the highest 504 lending 
year of all time, which supported over $15 billion in lending 
to small and medium businesses.
    SBA successfully rolled out its first round of State Trade 
and Export Promotion, STEP grants, in 2011 to 47 States, four 
territories, totaling $30 million. STEP grants maximize the 
Federal-State-local resources to help small businesses export. 
In Louisiana, we received an $85,000 grant, one of the largest, 
and our Governor, of course, who is a Republican, and his team 
have praised that effort and say it is one of the most 
important grants that our State has received to help them in 
their efforts to support small businesses in Louisiana.
    The SBA has 20 new micro lenders on board to participate in 
the Intermediary Lending Program championed by Senator Levin. 
The ILP created in this bill is a three-year pilot project to 
provide direct loans to eligible nonprofit intermediaries for 
the purpose of making small business loans up to $200,000 for 
start-ups and growing small businesses. What a need there is 
for this in the country. We see it every day in small 
businesses with four or five employees that are having just a 
heck of a time getting that next $30,000 or $50,000 or $150,000 
to expand, to buy the equipment necessary to hire that next one 
or two persons. We are going to work on that.
    The U.S. Department of Treasury has approved $1.4 billion 
for State Small Business Credit Initiatives under the SSBC 
programs and under the State Small Business Credit Initiatives, 
again promoted by members of this committee. Treasury 
distributed $4.2 billion in the Small Business Lending Fund for 
community banks. We have now almost doubled, Senator Snowe, the 
number of banks using the SBA programs since a low of several 
years ago, and you have really been a leader in that effort, 
along with me.
    One of the major accomplishments, and again, this was with 
Senator Snowe's great help and support, was an eight-year--not 
two-year, not four-year, but an eight-year--reauthorization of 
the Small Business Research Innovation Program, SBIR and STTR, 
two of the most effective small business research programs in 
the nation that support our small businesses, collaborate with 
our universities, and get new, emerging ideas, technology, 
services, and goods to the marketplace.
    The SUCCESS Act, which is pending now, received 57 votes 
before we left. It paints a picture of how far we have come in 
the last several years. The results of these recommendations in 
the SUCCESS Act, which is Success Ultimately Comes from 
Capital, Contracting, Education, Strategic Partnerships, and 
Smart Regulations bill, the SUCCESS Act of 2012 received 57 
votes on July 12 as part of Senate Amendment 2521 to the Small 
Business Jobs and Tax Relief Act of 2012. Five Republicans, 
including the Ranking Member Snowe and Senator Vitter, 
supported this Act on the floor. It is pending now before the 
Senate. We want to continue to work on this to move it forward.
    I am just going to mention a few things in closing. In that 
bill, which hopefully will be under consideration, Senator, in 
whatever grand bargain there may be, it extends 100 percent 
capital gains tax relief on qualifying investment for small 
business stocks, doubles the existing deduction for start-up 
costs for entrepreneurs, temporarily reduces the S Corporation 
is required to hold its assets after converting from a C 
Corporation which effectively frees up capital for these 
businesses. It allows small businesses to carry back business 
credits, which helps them, and extend the availability of 
enhanced Section 179, all very familiar to Senator Snowe. She 
has promoted these on the Finance Committee and we have put 
them forward as the best things we can do in the tax code to 
help small businesses continue to advance.
    Let me just say, one key provision that is attached or an 
addendum, potentially, to the SUCCESS Act is Expanding Access 
to Capital for Entrepreneurial Leaders that we introduced 
earlier this year, Senator Snowe and I. The EXCEL Act would 
modify the Small Business Investment Company program to raise 
the amount of SBIC debt the Small Business Administration can 
guarantee from $3 billion to $4 billion. The President has 
called on us to do this. It would also increase from $225 
million to $350 million the amount of SBA guaranteed debt. 
Another key part of the SUCCESS Act would extend for one year a 
provision allowing small business owners to use the 504 loans, 
et cetera, et cetera.
    And in addition, the TEAM Act is pending, and the only 
thing I will say about this Act is it stands for Today's 
Entrepreneurs are America's Mentors, that entrepreneurship is 
not just about capital. It is not just about access to capital 
or loans or equity. It is also about receiving the right 
technical assistance. So the business owner may know their 
product well. They may know their service well, Senator. But 
they do not really have the knowledge or technical ability to 
move their company from an eight-person employer to 16 or to 
24, and mentorship. Now, does the government have to do that 
completely on their own? Absolutely not. But our government 
needs to be supporting the nonprofit mentors that are out 
there, and there are hundreds of thousands at universities, at 
our Small Business Entrepreneurship Centers, at the Women's 
Centers that you have championed and literally been--I mean, we 
should name that program after you, which is a good idea. You 
have championed it so strongly. But, you know, entrepreneurs 
need cash and money and they also need advice, mentorship, and 
technical assistance.
    So those are just some of the things that are pending 
before our committee today. I wanted to start with that because 
today's hearing is about the ideas that are pending, other 
ideas that members of this committee have that can continue to 
support the entrepreneurship drive that is helping to revive 
our economy today in the United States and to see what our 
committee can do to continue to pass legislation when it is in 
our jurisdiction, and if not, at least to use this committee as 
a platform to promote good ideas in hopes that other committees 
will pick up those ideas and march forward.
    So let me recognize Senator Snowe for opening remarks and 
then we will get right into the testimony this morning.

OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, RANKING MEMBER, AND 
                   A U.S. SENATOR FROM MAINE

    Senator Snowe. Well, thank you, Chair Landrieu, most of all 
for those very kind, gracious, and generous words. It is hard 
to believe that this is my final Small Business Committee 
hearing. It has certainly been a tremendous privilege to work 
with you and to have made history, as you said, as the first 
women to serve simultaneously both as Chair and Ranking Member 
of any standing committee in both the U.S. House of 
Representatives and the United States Senate.
    I have immensely enjoyed our partnership and working on 
issues. No one has been more devoted to championing small 
businesses than Chair Landrieu. And so it has been a special 
pleasure to be able to work with you and alongside you on so 
many of the critical issues facing our nation's small 
businesses. You have been an exceptional partner and I want to 
express my enormous gratitude to you for creating that 
collegiality and the collaborative environment in which we have 
been able to develop so many significant initiatives that 
benefit small businesses, certainly in my State of Maine, your 
State of Louisiana, and all across the country, because without 
small businesses, we truly cannot have a recovery.
    So I just want to let you know that I will never forget the 
opportunity to work with you and to have had this special time 
in working on these issues that have been certainly important 
to me and to my State throughout my tenure of, I hesitate to 
say, 34 years in both the House and Senate.
    And I also want to express my gratitude to the fellow 
committee members, Senator Shaheen, which we do have a special 
partnership. We are neighboring States. We share Kittery-
Portsmouth Naval Shipyard. I call it Kittery-Portsmouth Naval 
Shipyard. It is in Kittery, but that is a matter of dispute.
    [Laughter.]
    On their side. We know where it is.
    [Laughter.]
    But it has been a joy to work with Senator Shaheen because 
I know how much she cares about small businesses and has been 
totally devoted to this issue.
    And to my colleagues on the Republican side, thank you for 
giving me the opportunity to serve as both Chair and Ranking 
Member of this committee for the last decade when I assumed the 
Chairmanship from then-Senator Kit Bond from the State of 
Missouri, and I want to thank you for your kind remarks, 
Senator Moran. I have enjoyed getting to know you, as well. I 
know you are committed to small businesses and you are devoted 
to doing the things that are so important to making them the 
engine that drives this economy, and for working with you 
overall and collaborating. So I really appreciate that.
    And to Senator Rubio, it is great to have this great team 
on our side and working on these issues that matter to our 
respective States, and so I want to thank you, as well, for 
giving me this opportunity.
    And I also want to recognize two committee members who will 
no longer be serving here, as well, because they are retiring, 
Senator Brown from Massachusetts. He has been a very active 
member of this committee and was instrumental in providing the 
leadership to addressing the issue of the withholding 
requirement of three percent from government contractors that 
became law, which was certainly essential.
    And also to Senator Lieberman, with whom I have worked on 
manufacturing issues--in fact, we co-chaired the Manufacturing 
Task Force--and worked on so many issues on a bipartisan basis, 
including the Chair, I might add, because we co-chaired the 
Common Ground Coalition, as well, to build that bipartisan 
consensus that is so critical.
    As my final term draws to a close, I want to say how proud 
I am of the work that we have accomplished over the years. When 
I was Chair following Hurricane Katrina and the government's 
failure to respond to its devastation in the Gulf, and in 
particular in the Chair's home State of Louisiana, we worked 
hand in glove to reform the SBA's disaster programs and fought 
to assist the individuals and small businesses recovering.
    And in reaction to the credit crisis of 2008 and beyond, 
again, we worked mightily and vigorously to collaborate to 
enact measures that were credited for helping the SBA support 
over $30 billion in lending in 2011, which was the highest mark 
in the agency's history.
    The Small Business Jobs Act of 2010 included numerous 
measures that we worked alongside and drafted together to make 
sure that this legislation would get enacted, and including 
provisions to provide vital tax relief to small firms, 
comprehensive export provisions to assist small businesses in 
reaching foreign customers, and crucial limitations on contract 
bundling so small businesses have greater access to Federal 
contracts.
    And late last year, as the Chair mentioned, we passed 
legislation, and thanks to the leadership of the Chair, we 
authorized the Small Business Innovative Research Program and 
the STTR for an additional six years so small firms would 
continue to receive the valuable Federal research dollars for 
years to come.
    Looking back at my own service on the Small Business 
Committee, and the Chair mentioned it would be very difficult 
to add up the number of hearings that I attended in Small 
Business Committees, and I think it would be very difficult 
since I have served on the Small Business Committee since my 
very first days in the U.S. Congress starting in 1979, and, in 
fact, several of my senior staff were kind enough to inform me 
that that was before they were even born.
    [Laughter.]
    Hard to imagine that, is it not? But I cannot think of any 
higher priority than being a megaphone for the 150,000 small 
businesses in my State of Maine and, of course, the more than 
30 million small businesses nationwide.
    As we all know, small businesses are willing to take risks 
that others will not. They have their fingers on the pulse of 
their local communities. And that is one of the reasons I have 
made Main Street tours across Maine a hallmark of my tenure in 
public office. I have often said, I do not need a survey to 
understand what is going on on Main Streets and what is 
happening that they do not like in Washington. And the fact is, 
I always could understand it almost immediately when I was on 
Main Street doing those small business tours because I would 
hear exactly what was going on in a particular community.
    That is why, along with Senator Landrieu, we urged the 
President to restore the SBA Administrator to cabinet level 
status, where it rightfully belongs, and we are fortunate in 
our State of Maine to have Maine's own Karen Mills now having a 
seat at the President's cabinet table because America's prime 
job generator should have a voice at the highest levels of 
decision making. I was pleased to recommend Administrator Mills 
to head the SBA, where she has proven to be a superlative 
leader for small businesses within the administration. And I 
hope in the months ahead, the President will continue to rely 
on her wide ranging expertise and knowledge, hands-on 
knowledge, on how to create jobs, because they are desperately 
needed, as we all well know.
    In speaking of Maine, the small businesses in my home State 
have another staunch advocate who is here today, the Maine 
Director of the National Federation of Independent Businesses, 
David Clough, who has been a longstanding friend, as well. I 
think David has been head of the NFIB as long as I have been in 
the United States Congress--almost. I have had the immense 
privilege to serve with David over the years and I want to 
thank him most especially not only for testifying here today on 
the second panel, but also for his longstanding dedication and 
devotion to small businesses across the State of Maine.
    I also want to express my appreciation to the other 
panelists that will be on both the first and second panel, and 
most especially Ms. Julie Weeks, with whom I have worked for 
the last 20 years on issues that are important to women-owned 
businesses. So I want to thank her, as well, for being here.
    As these witnesses can all attest, small businesses are the 
embodiment of the American dream, and indisputably the fight 
for their well-being is integral to the future success of our 
nation. Small businesses consistently identify access to 
affordable capital among their top priorities, and this 
committee has worked unceasingly to increase SBA lending. The 
provisions Chair Landrieu and I championed in response to the 
credit card system in both 2008 and 2009 were recognized as 
increasing SBA lending across the country 90 percent, and in my 
own State of Maine, 236 percent. And the Small Business 
Innovation Research program, the Women's Business Center 
program, HUBZone program, the women's contracting program, are 
advancements that remain some of my signature accomplishments 
in this Congress in working with the Chair of this committee 
and the members of this committee.
    Finally in all of the initiatives I have undertaken as a 
legislator and as an advocate is the remarkable work of my 
staff, without whom I could not have possibly done the job on 
so many of these issues over the years. They have moved heaven 
and earth on a daily basis to make things happen for small 
businesses because they truly care about America's 
entrepreneurs as much as I do, and they are truly the best.
    So I want to thank them, behind me, which is where they 
have always been, my Staff Director, Wally Hsueh, my Deputy 
Staff Director, Matt Walker, Meredith West, Adam Reece, Scott 
McCandless, Shelley New, James Gelfand, Tara Crumb, Jake 
Triolo, and Con Efstathiou. I want to thank each and every one 
of them from the bottom of my heart for all they do----
    [Applause.]
    And also, I want to thank the Chair's staff, as well, Don 
Cravins, the Staff Director, who has been great to work with 
over the years, and Brian Van Hook and Robert Sawicki. We thank 
you very much for all the work that you have done to make it 
work here on the committee.
    And finally, I would just say, I know there are a number of 
issues that are going to be important going forward and I will 
not restate them here today. Suffice it to say that, obviously, 
in order to seek the accomplishments that are so important to 
small businesses, whether it is a regulatory reform, a tax 
reform, opening the doors for entrepreneurs that we are going 
to hear about today, what will make the most effective 
approaches to eliminating those barriers to entrepreneurship, 
and also to meeting the statutory goals under the contracting 
program within the Federal Government. There are so many issues 
out there that can make a profound difference for the health 
and well-being of small businesses. But none of these goals can 
be accomplished without compromise and without bipartisanship. 
And I truly have been gratified in serving on this committee to 
have been blessed with the ability to work across the political 
aisle with the leadership of the Chair. That has been the 
signature, frankly, of this committee. It has been a bipartisan 
committee from start to finish and I have truly appreciated 
that, because public service has to be about problem solving 
and that is what this committee has been all about.
    So I wish you all well in the future. I know you will 
continue to do extraordinary work on behalf of those that are 
going to be so instrumental for our nation's recovery.
    So, Madam Chair, thank you for this opportunity and thank 
you for the ability to work with you over the years, and to all 
the committee members, on these key issues that all of us care 
so much about.
    Chair Landrieu. Thank you, Senator Snowe, for that eloquent 
opening statement. And again, we will miss you, your voice on 
this committee. But I am sure that you will land somewhere 
where we can continue to hear that loud megaphone.
    Senator Moran wanted to make a brief opening statement, and 
I would ask the other members if you would like to say a word 
or two, we will go right into our comments.

  OPENING STATEMENT OF HON. JERRY MORAN, A U.S. SENATOR FROM 
                             KANSAS

    Senator Moran. Madam Chairman, thank you for that courtesy. 
Several of us on this committee, including Senator Rubio, asked 
that we have a hearing on entrepreneurship. Thank you very much 
for agreeing to that. I know this is something that you care a 
great deal about. You have introduced legislation dealing with 
entrepreneurs and start-ups.
    We are actively engaged in an attempt to recognize the role 
that entrepreneurs and start-up companies play in our economy. 
History shows this is where jobs are created. Unfortunately, 
the statistics now show that that is declining. Start-ups in 
the United States are less. The number of jobs they create are 
fewer. In a global survey, the United States is no longer in 
the top two or three countries in the world in which we are 
rated to be the place to start a business. Those things are 
very disturbing. As we want to work to grow the economy, which 
really means put Americans to work, it is entrepreneurs and 
start-ups that deserve significant attention.
    In a bipartisan way, as the Senator from Maine suggested is 
the only way to get anything done around here, Senator Rubio 
and I, along with Senator Warner from Virginia and Senator 
Coons from Delaware, have introduced legislation, Start-Up Act 
2.0, that we will continue to pursue in a serious effort to 
address these issues. It comes about from academic research 
done by the Kaufman Foundation with policy recommendations 
dealing with taxes and regulations, with Federal research and 
how to commercialize that research, and perhaps most 
importantly, the issue of the global battle for talent--our 
ability to attract and retain individuals who have educated 
themselves in ways that are so advantageous to our economy, as 
well as individuals who have entrepreneurial skills and desires 
who happen to be foreign born but have the ability to create 
jobs in the United States.
    And so in this brief moment of an opening statement, we 
look forward to working with you and our colleagues across the 
Senate to make certain that we do the things necessary to grow 
the economy and put Americans to work. And there is something 
special about small business, about entrepreneurs, that makes 
America what it is. And it is that sense of independence and 
the ability to survive and struggle and succeed, and we want to 
be helpful to you and to our colleagues to see that those goals 
are met and the American Dream is lived.
    Thank you very much.
    Chair Landrieu. Thank you very much, Senator. I really 
appreciate you and Senator Rubio joining us in a longstanding 
effort to highlight the importance of entrepreneurship in our 
country. In the last two years, we have had a half-dozen 
roundtables where this room has been packed with experts from 
the Kaufman Foundation that have testified before our 
committee. I mean, I can recall at least two times, if not 
three, just recently, about some of the principles that you 
have outlined, and we have had some of the leading experts from 
universities and think tanks, from a broad variety. We have had 
some of our extraordinary partners from the banking community, 
from the regulatory. So we really appreciate your willingness 
to join that effort.
    Secondly, the bill, which we have reviewed, as you know--
unfortunately, our committee doesn't have jurisdiction over the 
majority of the issues in that bill. However, our committee can 
continue to be a platform to talk about some of the significant 
pieces in that bill, which I personally, as you know, support. 
So any opportunity we have to be able to talk about some of 
those, but immigration is under Judiciary. Your finance issues 
are under the Finance Committee. And so the things that relate 
to the Small Business Administration will be under the 
jurisdiction of this committee. But we really appreciate your 
championing that.
    Anybody else? Senator Shaheen and then Senator Rubio and 
then we will get right into our testimony.
    Senator Shaheen. I am not going to make an opening 
statement, but I just want to recognize some New Hampshire 
folks who are here: Scott Gardiner, who is from the Granite 
State Development Corporation who is going to be testifying on 
our second panel, and with him are William Donoghan [phonetic], 
who is a New Hampshire businessman and he has taken advantage 
of some of the lending programs through the SBA, and David 
Schwartz [phonetic], who has probably been working on the 504 
refinancing programs longer than anybody I know of in New 
Hampshire. We are delighted that all of you are able to join us 
today. Thanks.
    Chair Landrieu. Senator Rubio.
    Senator Rubio. Just briefly. Actually, just a comment to 
the Chair on a comment that you made. I am new here, so I know 
how much--but I have already picked up on how jealous 
committees are about their jurisdiction. I would just say, and 
I do not know what we can do about it as you went through the 
different scenarios, we will hear a lot of testimony today 
about all kinds of things that affect small businesses, but we 
cannot do anything about it in here, and these other committees 
are considering it in the vacuum of a legal issue or a big 
company issue, and yet these are critical to what we are trying 
to accomplish.
    So I know jurisdictions are a hard thing to change around 
here, but I just hope there is more of a role for us to play in 
this committee. This is the logical place for----
    Chair Landrieu. Yes. Do not take what I said as this 
committee does not have influence. We have been a major 
influence, not only passing legislation, but influencing the 
outcome of some serious legislation. But we do not write the 
tax code in this committee. We do not oversee the immigration 
laws in this committee. So we have to do that in conjunction 
with the Chairs and Ranking Members of the other committees, 
which we have done on many occasions through either legislation 
or by letters that we all sign together, sending them to the 
committees saying, your bill will not get very far unless you 
include X, Y, and Z. So this committee remains, I think, the 
largest, strongest voice for small business on the Hill and 
thank you. We are going to continue to do that.
    Senator Rubio. I guess I just was expressing the view that 
if they just let us handle all----
    Chair Landrieu. Well----
    Senator Rubio [continuing]. It might get taken care of 
before they would.
    Chair Landrieu. Why do you not bring that up with your 
leadership and see what they think about that?
    [Laughter.]
    I will let you try it with your leadership first, and then 
I will go talk to Harry Reid.
    [Laughter.]
    But anyway, let me introduce our panel this morning, and 
they are going to limit their opening statements to five 
minutes because we do have four very active members here and 
they want to ask you questions about what we are doing today, 
what is working and not working.
    First, Sean Greene is the Associate Administrator for 
Investment and Special Advisor for Innovation at the SBA. In 
his role, he is responsible for both the Small Business 
Investment Company, SBIC, program, as well as the Innovation 
Research program. He also leads the SBA's efforts on promoting 
high-growth entrepreneurship, particularly as part of the 
President's Start-Up America Initiative.
    We have Michael Chodos, Associate Administrator for the 
Office of Entrepreneurial Development. He is responsible for 
overseeing the agency's counseling, mentoring, and training 
programs, which, as you know, I think, is extremely important 
and does that with partners all over the country.
    So, again, we are focused on start-ups. We are focused on 
gazelles and fast-growing companies. But I want to say, also, 
Senator Moran, that I am very focused on lifestyle businesses 
and family businesses that do not want to be the next 
Microsoft, but they just want to feed their family, contribute 
to their community, and they have a right to be heard, as well. 
So it is a combination of promoting the fast-growth potential 
start-ups and also the lifestyle businesses, which many people, 
of course, in your State and my State, choose to be 
entrepreneurs as a lifestyle, and I think we need to honor 
that, as well. So that is what we are doing, trying to find 
that balance.
    So, I do not know, Mr. Greene, do you want to start, 
please.

     STATEMENT OF SEAN GREENE, ASSOCIATE ADMINISTRATOR FOR 
INVESTMENT AND SENIOR ADVISOR FOR INNOVATION POLICY, U.S. SMALL 
                    BUSINESS ADMINISTRATION

    Mr. Greene. Sure. Chair Landrieu, Ranking Member Snowe, 
members of the committee, I am pleased to testify before you 
today and I want to thank you for calling this hearing and for 
your strong support of not only SBA, but promoting more 
effective and creative new ways to serve entrepreneurs all 
around the country.
    So one of my primary focuses at SBA is on high-growth 
entrepreneurship, and as you know, high-growth small businesses 
create the vast majority of net new jobs in our economy. But we 
also know that they have different needs, and to address those 
needs, the administration launched the Start-Up America 
Initiative, a major initiative focusing on what we can do to 
help how we serve high-growth companies and entrepreneurship.
    Now, one of the first things that we did within Start-Up 
America was to get out and say, we have to listen to our 
customers. And so we traveled the country. We talked to over 
1,000 entrepreneurs, investors, and other stakeholders in the 
entrepreneurial ecosystem. And what we heard was these 
companies that are facing significant challenges, ranging from 
access to capital to securing the right human capital to 
support their companies. And there are many opportunities for 
the public and private sectors to work together to address 
those challenges.
    Based on the feedback that we heard, we have acted. And one 
of the primary focuses has been improving our core programs to 
support high-growth entrepreneurship, and at the heart of those 
improvements is focusing on ways that we can streamline, 
simplify, and strengthen those core programs.
    One of the programs in which we have made great strides and 
where legislative changes that this committee is both 
supporting and sponsoring will allow us to do even more is with 
the Small Business Investment Company program, the SBIC 
program. As many here today know, the SBICs are part of a 
unique program at SBA to put long-term patient investment 
capital into America's small businesses, allowing them to grow 
and to create jobs. Today, the SBIC program serves as a model 
for successful public-private partnerships, and the program, 
which has been around since 1958, is completely market-driven. 
We do not make the investment decisions. The private investment 
fund managers do.
    Today, the program is more than 300 SBA licensed funds 
which invest in a wide variety of small businesses, such as JSI 
Store Fixtures in Milo, Maine, which after receiving an 
investment from an SBIC more than doubled the number of 
employees, from 80 to 200. The company was just recognized by 
the Small Business Investor Alliance as the SBIC Portfolio 
Company of the Year.
    In fiscal year 2012, I am proud to report we have had the 
third consecutive record-breaking year for the program. And so 
for our venture program, we have reached all-time highs in the 
50-plus years of the venture program in terms of how many funds 
we license, the amount of private capital we attracted to the 
program, SBA commitments of leverage into these funds, and most 
importantly, how many investment financings go out to small 
businesses themselves. Importantly, in executing that, we took 
the average time for a new fund to come into the program from 
an average of 15 months to just over five months, and that 
streamlining was a critical part of the success they were able 
to accomplish.
    Now, we believe that two legislative changes that are 
before the committee and have been embedded into the SUCCESS 
Act, the RESTART Act, and other initiatives can help us do even 
more to help those high-growth small businesses. The first 
change is an increase in the annual authorization for the 
program from $3 billion to $4 billion. We have not hit that 
limit now, but if you look at the growth trajectory that we are 
on, we are likely to hit that soon, and getting ahead of that 
growth trajectory, we think is important.
    And then, secondly, is a change in the family of funds 
limit from $225 million to $350 million. What we see right now 
is some of our most successful funds in the program are hitting 
that cap, and we believe by changing that cap, it creates a 
great way to continue to grow the program while at the same 
time doing it at very little risk to taxpayers. Critically 
importantly, this program runs at zero subsidy and we want to 
continue that growth while maintaining its zero subsidy status.
    Now, another set of programs that is critical is the SBIR 
and STTR program, and we would like to thank the committee for 
its efforts to reauthorize the program. Since the 
reauthorization at the end of last year, we have been 
incredibly busy with the rulemaking. We are close to finishing 
that rulemaking. I am also pleased to say that we have put into 
effect two new policy directives for SBIR and STTR. In the 
prior reauthorization, it took two years to get the new policy 
directives in place. This time around, we have done it in seven 
months. So we feel good about the program, but there is still a 
lot more work to do in implementing the reauthorization at the 
participating agencies, but we are staying on top of it and we 
are committed to working with you and keeping you informed of 
our progress.
    In addition to these two programs, though, SBA----
    Chair Landrieu. In one minute, if you would.
    Mr. Greene [continuing]. Looks to continue its role as 
advocate for small business and entrepreneurs across the 
Federal Government. The administration has instituted a 
Presidential Innovation Fellows Program to bring entrepreneurs 
from the private sector into the government to help develop--to 
address key problems with more innovative solutions. And I know 
the committee is looking at legislation to address similar 
kinds of issues.
    We have also been working with other agency partners on 
everything, on ideas around immigration, to supporting 
accelerators and mentorship programs all around the country. So 
that advocacy role, working with agency partners, are 
critically important, as well.
    And so in conclusion, Chair Landrieu, I once shared with 
you my favorite definition of entrepreneur, which is someone 
who does more than anyone thought possible with less than what 
everyone thought necessary. And so as a former entrepreneur in 
the private sector, it is this entrepreneurial spirit that we 
are bringing to SBA, to generate more entrepreneurial 
approaches and to continue to do more than anyone thinks 
possible in service of our nation's entrepreneurs.
    So we look forward to working with you to implement those 
kind of actions and thank you for taking the time and I look 
forward to questions.
    [The prepared statement of Mr. Greene follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. Thank you, Sean. Your leadership has really 
been visible and you have made a market change and we really 
appreciate that.
    Mr. Chodos.

   STATEMENT OF MICHAEL CHODOS, ASSOCIATE ADMINISTRATOR FOR 
ENTREPRENEURIAL DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Chodos. Chair Landrieu, Ranking Member Snowe, and 
members of the committee, thank you for the opportunity to 
testify here today before the committee.
    Before I start, I know that both Sean and I would like to 
say how much Administrator Mills would like to echo all of the 
comments that were made here this morning about the long and 
tireless and extremely important service and to express 
gratitude for all the service that Ranking Member Snowe has 
provided over these many years in this committee and on behalf 
of small business. So thank you on Administrator Mills's behalf 
as we start today.
    We at the SBA, of course, generally support your strong 
support of the agency, as well as your continued leadership on 
all the issues impacting America's small businesses.
    SBA's entrepreneurial development programs, of which I am 
in charge, and all of our partners, are deeply embedded in 
local and regional economic development ecosystems across 
America. We support over one million clients annually as they 
start and grow their small businesses. We have more than 14,000 
business counselors, mentors, and trainers available through 
over 1,000 Small Business Development Centers, 106 Women's 
Business Centers, and over 350 SCORE chapters. Since 2009, we 
have also provided intensive entrepreneurship training to over 
1,300 small businesses in 27 cities across America through our 
groundbreaking e200/Emerging Leaders Program. This past year 
alone, the clients we assisted started almost 16,000 new 
businesses and accessed over $4 billion in new capital.
    But we and our partners do not just support innovation. We 
practice it. That is why for this past year we have made 
collaboration and coordination a key goal and objective across 
all our resource partner and cluster networks. In addition, in 
direct coordination with our resource partners, we are working 
on better ways to measure and report out comparative 
performance metrics across the entire network. We believe that 
transparency leads to ongoing self-reflection, innovation, and 
improvement, and we look forward to great progress on this 
front in the coming year.
    In addition to in-person training and counseling, the SBA 
continues to expand its online engagement with small business. 
Since 2009, more than 2.5 million people have accessed the 
courses, assessments, and tools available on SBA.gov on topics 
as diverse as business planning, market and competitive 
analysis, use of social media, and navigating the Federal 
contracting landscape.
    One of SBA's top priorities is making sure tools are in 
place for helping small businesses receive Federal contracts. 
We strongly support permanently increasing the size of the SBA 
surety bond guarantee from $2 million to $5 million, as has 
been called for by this committee in various pieces of 
legislation.
    Another important change which is part of the SUCCESS Act 
and the RESTART Act is the women-owned contracting provision, 
which would remove caps on contract awards under the Women-
Owned Small Business Program. We believe this will allow more 
Federal contracts to flow to women-owned small businesses.
    Over the past four years, SBA has developed new 
partnerships and programs that expand the agency's reach to 
more small business owners in more communities across the 
country. For example, we know that veterans over-index in 
entrepreneurship. So, working with the Departments of Defense, 
Veterans Affairs, and Labor, we recently launched Boots to 
Business in pilot locations at selected military facilities 
across the country. When fully rolled out, Boots to Business 
will provide an introduction to the opportunities and realities 
of small business ownership and entrepreneurship as an optional 
track for the 250,000 service members transitioning each year 
through TAP.
    In addition, we are working with AARP to train and counsel 
more than 100,000 encore entrepreneurs this coming year on 
opportunities to use their experience and skills to start and 
grow businesses. We are also working with the Department of 
Labor to pilot Start Young, an entrepreneurship training 
program for young people at 13 Job Corps sites across the 
country. And we have engaged with Historically Black Colleges 
and Universities and other minority-serving institutions to 
help traditionally underserved young entrepreneurs access life-
long entrepreneurship training and support in our network.
    Increasing small business exports is a major focus of the 
SBA, and thanks to the exporting provisions of the Small 
Business Jobs Act of 2010, the agency has had new resources and 
tools to put towards this priority. We are working with 
agencies across the administration to build on our recent 
successes in this area and look forward to continuing to work 
with the committee on these efforts.
    Finally, our Regional Innovation Clusters drive economic 
growth by connecting small business innovators with targeted 
technical support in our network as well as investment and 
funding partners in procurement and supply chain opportunities.
    I have reviewed the SUCCESS Act, the TEAM UP Act, the 
RESTART Act, and the other pieces of legislation that are 
before this committee. We share a common commitment to 
providing small businesses with the tools they need to start, 
grow, and create jobs. Our resource partner and clusters 
network has an extraordinarily diverse range of experts in 
every part of the small business ecosystem and we look forward 
to working together in order to support them.
    Of course, I am happy to answer any questions.
    [The prepared statement of Mr. Chodos follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. Thank you very much.
    Senator Risch has joined us. Welcome, Senator, and thank 
you for your active support of the work of this committee.
    Let me begin by asking both of you this question, and we 
will do a five-minute round. We realize that government cannot 
do it all, and I have been a very big supporter of partnerships 
with nonprofits and the private sector to accomplish goals. Can 
you both take 30 seconds or 45 seconds and be very specific 
about how this small agency, which is only $1 billion--I mean, 
it is dwarfed by Education, Health, Defense, Commerce, et 
cetera--how you are leveraging partnerships either with banks, 
governments, nonprofits, et cetera, and why you think that is 
so important, and how successful are we in leveraging the power 
of others, because we obviously are not a big enough agency to 
do this all alone.
    Let me start with you, Mr. Greene.
    Mr. Greene. Sure, and let me talk about that on the capital 
side and then on the broader side. On the capital side, again, 
I think the SBIC program is the embodiment of a smart----
    Chair Landrieu. Speak closer into your microphone, if you 
would.
    Mr. Greene. I am sorry. The SBIC program is the embodiment 
of a smart public-private partnership in which we say we are 
not going to make the investment decisions. Let us let 
investment professionals do that. The incentive, the economic 
incentives are aligned to do that. And we have had a 
significant focus on not only attracting more high-quality fund 
managers into the program, but reaching out to the investors 
who invest in those funds and increasing transparency and 
information about the program to make them want to come to the 
program, as well. So on the capital side, that is critically 
important.
    But it is also critically important on the broader side, as 
well. So one of the primary focuses that we have had on 
supporting mentorship, et cetera, is in and around something 
that we call accelerators, and these are organizations that 
come in many shapes and sizes that are all over the country, 
and they are doing great work, not only to help more companies 
start, but to accelerate the growth of those companies.
    And as one example, I would point to people like Idea 
Village in Louisiana, who are not just helping companies one at 
a time, but are doing great work to say, how do we strengthen 
the entrepreneurial ecosystem in Louisiana? And there are 
examples of that literally in every State of the country.
    And so what we have to be doing is saying, how can we help 
accelerate these accelerators? And we are looking at a range of 
different things to do that. We feel good about the progress, 
but there is much more work to do.
    Chair Landrieu. Thank you.
    Mr. Chodos.
    Mr. Chodos. Chair Landrieu, thank you for the question. I 
think there are two things that we would like to focus on as 
part of the ways in which the agency leverages taxpayer dollars 
in order to engage and support with small business.
    First and foremost, all of our key, core grant partnerships 
with our SCORE network, with our Small Business Development 
Centers, and with our Women's Business Centers involve match 
requirements that create at the very foundation a partnership 
between the Federal Government, research institutions, and 
local resources, including foundations and local contributors, 
in order to make a connected-based approach to supporting small 
business.
    But in addition, we work with partners in all of our 
outreach and mentoring activities. I mentioned our recent 
partnership with AARP in order to support encore entrepreneurs 
all over the country. Our cluster networks all across the 
country act as convening and networking entities to bring 
together small business innovators with local commercial and 
supply chain opportunities, along with the local investment 
community, as well as large defense contractors or other prime 
contractors in order to knit together the different pieces of 
the economic community.
    We believe economic development and small business support 
is a ground game. It requires us to work one business at a time 
with all of the pieces they need to succeed. That is what we do 
and what we build into the program right from the very----
    Chair Landrieu. Thank you very much.
    Let me ask you about the 504 program, because this is a 
very important program that has expired. There are literally 
seven pieces of legislation, at least, that have the extension 
of this 504 provision. In 2011, through this program, we 
leveraged $4.8 billion in capital. In 2012, it was $6.7 
billion. What are the consequences, in your mind, Mr. Greene, 
of not extending the benefits of this program? I mean, what 
will happen to the commercial refinancing, I guess, sector in 
this country for small business?
    Mr. Greene. So, Senator Landrieu, we agreed this was a 
critically important program. In 2012, we get $2.2 billion for 
the 504 refi. Over 2,700 small businesses benefitted from this. 
So we know there is strong demand from small businesses as well 
as from CECs as intermediaries looking for this product.
    So the administration is taking a hard look to evaluate 
whether to support this specific proposal. Critically important 
will be maintaining the zero subsidy nature of the program and 
making it--continuing to make it an attractive vehicle, both 
for the small businesses and the lenders. Of course, if 
Congress decides to reauthorize, we will be there to make sure 
that we efficiently and effectively implement the changes that 
you legislate.
    Chair Landrieu. Okay, and I want to underscore this. It is 
a little point of contention. I realize that it would be ideal 
to run every program at absolutely no cost to the government. I 
mean, that would be ideal if we could figure out ways and we 
continue to press that agenda. But a modest subsidy or a 
planned-for moderate subsidy is still quite valuable if it is 
leveraging billions of dollars that are otherwise completely 
unavailable to small businesses in the conventional lending 
that is either going on or not going on in this country.
    So while philosophically people argue for zero-subsidy 
programs, I urge our committee members to be open to weigh the 
benefits of the subsidy that is being provided for the benefit 
that is occurring. And, obviously, it needs to be a large net 
benefit.
    Senator Snowe.
    Senator Snowe. Thank you, and I want to thank both of you 
today for the contributions you are making to these vital 
programs because I think start-ups, obviously, are crucial to 
generating economic growth in this country and we are reliant 
on those starting new firms.
    What do you think, when entrepreneurs are thinking about 
starting a new firm, what are the issues that are the most 
significant in making those decisions, in your estimation?
    Mr. Chodos. Thank you, Senator Snowe. I speak to small 
businesses all the time and they talk a lot about the things 
that they are concerned about when they start their businesses. 
I think, first and foremost, every small business wants to know 
where are they going to get the money to pay for the first few 
months of payroll, the first set of equipment and machinery, 
and the first set of inventory or raw materials. So access to 
capital in the early stages of the business is always top of 
mind.
    But I also speak to small businesses all the time who come 
into business with a particular area of expertise. For example, 
they know manufacturing. They are a mechanic. They know how to 
do something in terms of marketing or consulting or that sort 
of thing. But they need help learning about the other parts of 
business with which they are not familiar. They do not know how 
to read a financial statement. They do not know how to put 
together a balance sheet.
    What I find is that businesses say, we need the kind of 
help that we need to answer the questions we do not yet know 
how to answer and we want it to be available in our communities 
or available online so that it is straightforward and 
accessible. That is what I hear regularly.
    Senator Snowe. And do you find that the existing programs--
and I think that what the Chair is discussing about sort of 
formalizing a mentorship program, because I think that is 
crucial--would be beneficial at the very outset?
    Mr. Chodos. Yes. Let me say this--oh, I am sorry.
    Senator Snowe. No, go ahead.
    Mr. Chodos. Yes. We find that our mentors act--really, at 
the end of the day, there are those questions that small 
businesses know that they have when they start, and almost as 
important are all the things they do not yet know they do not 
know about what they need to learn in order to start and grow 
their businesses. Having a mentor, whether it is in a high-
growth business or whether it is in a Main Street business, is 
critical to not making the mistakes that somebody else has 
already made so that you can actually deploy your resources to 
creating that next job or getting that next product out the 
door. We find that mentorship, once accessed by a small 
business, becomes a critical pillar of their success.
    Senator Snowe. And given the current uncertainty with 
respect to both taxes and regulations and the overall 
environment and what is going to happen regarding the fiscal 
cliff and going forward, to what degree is that suppressing 
entrepreneurship at this point?
    Mr. Chodos. Well, Administrator Mills and the President met 
with small businesses just a couple of days ago at the White 
House and heard, I think, one message again and again and 
again, that small businesses want certainty, they want to know 
what the situation is going to be, they want to make sure that 
their customers are going to have money to spend on their 
products and services, and they want to have resolution.
    Senator Snowe. Do you think it is possible to draw a line, 
the cutoff on $250,000? I know it is much debated, in terms of 
what effects it has on small businesses, where we could draw 
that line, whether it is on an income tax return and deducting 
small business income, because, as you know, the preponderance 
of small businesses file individual tax returns, or through a 
dollar figure. But I do think that that happens to be a major 
issue that we have to address, as well, to make sure that we do 
not create unintended consequences.
    Mr. Chodos. Well, I do know that the level at which any 
particular terms of a deal might be reached are under very, 
very focused discussion at the moment, and I do know that the 
small businesses with whom we speak simply say that, at this 
point, what they are most interested in is the spirit of 
compromise and of problem solving and of resolution that has 
really been the hallmark of this committee and that is so 
important in order for them to work well with their customers 
and to plan for the future.
    Senator Snowe. One of the programs, and the President, I 
think, referred to it last year in his State of the Union 
Address, was the Early Stage Innovation Fund under the SBIC. 
Exactly where does that stand today and how effective has that 
been, because I do think it is a great approach in helping 
early-stage companies to get established.
    Mr. Greene. So we launched this program last year. When we 
saw the data--not only do we hear from small business about the 
difficulty of raising early patient capital, but the numbers 
spoke for themselves, where venture capital as a whole has 
decreased significantly, particularly at the early stages, and 
there was a massive unequal distribution of where that capital 
goes so that 70 percent of early-stage financings only happened 
in three States. On the other hand, all the data shows that 
there are companies with high-growth potential all across the 
country, not just located in those three States.
    So we need to make some regulatory changes within the SBIC 
program to launch that. We executed that last year. We 
identified a process by which the funds would apply. We had 
over 30 funds applying and we gave green light letters to six 
funds who are now completing their private capital raised and 
will come back to us.
    So we are off to a good start. We expect to license about 
four to five funds per year over a five-year period. So we are 
off to a good start.
    Senator Snowe. Thank you.
    Chair Landrieu. Thank you.
    Senator Shaheen.
    Senator Shaheen. Thank you. Thank you both for your 
testimony and for being here today and for all the work that 
the SBA is doing. Ninety-five percent of New Hampshire workers 
work for what the SBA technically calls a small business. So, 
obviously, your work and the importance of small businesses are 
significant in New Hampshire.
    One of the things that I did was to ask some of the folks 
in New Hampshire who work with small businesses what questions 
they would like to see asked at the hearing today, and this one 
comes from someone who has an incubator, but I would think she 
could also be described as an accelerator, as well. And she 
points out that one of the components of the SUCCESS Act is a 
provision to require SBA to coordinate and make consistent data 
collection and outcome metrics for entrepreneurial development. 
She is concerned that the metrics change from year to year, 
which makes sense, but how are the metrics formulated and are 
they truly given a chance to work before they change? Are we 
picking the right metrics? And then are we putting the 
resources behind them and really giving them a chance to work 
before we make changes in them? And I do not know which one of 
you would like to answer that.
    Mr. Chodos. Perhaps I can, Senator. In our department, in 
the Office of Entrepreneurial Development, we maintain the core 
database and surveying systems for all of our entrepreneurial 
activities across the country. So we have our EDMIS system, 
which is essentially the Entrepreneurial Development, 
Management, and Information System, as well as an ongoing 
annual survey of the recipients of the counseling services 
across our network in order to identify the outputs from our 
program, the demographics of those who access our program, and, 
essentially, the outcomes they achieve by virtue of having 
access to our program.
    I will say that the question of making sure that we measure 
the right things, that we measure them consistently, and that 
we report out promptly and effectively is--it has always been 
our goal, but it is an opportunity, I think, constantly, for 
improvement. We are very focused in the Office of 
Entrepreneurial Development and across the agency at having a 
performance metrics analysis framework in our core programs, 
the WBCs, the SBDCs, and SCORE, as well as in our cluster 
network, and as well across our other programs, which is 
consistent and which actually measures those things that the 
agency, that Congress, and that our stakeholders care most 
about.
    So we have implemented this year two things. First of all, 
we have listened to our resource partners. We have listened to 
stakeholders across the country. And we are currently engaged 
in an upgrade of the EDMIS system in order to make it more 
effective, more reliable, and more accessible for those who use 
it, and we are talking to all of our resource partners to find 
out what is the right way in order to collate and actually 
align all of the different measures we use, because everybody 
here knows that different people come to Congress on a regular 
basis, and to us, and say, I have my set of metrics, and 
somebody else has their set of metrics, and you never really 
get a sense of how they all compare to each other.
    We think it is critically important--it is both an 
obligation and it is an opportunity--to be able to actually 
compare and cross-correlate and actually coordinate and align 
everybody's metrics, so we ask the same questions and find out 
how we are all doing compared to each other and against those 
goals we think are most important.
    Senator Shaheen. Thank you.
    Mr. Greene, you talked about the work to streamline 
programs and make them more effective. One of the provisions in 
the SUCCESS Act improves small business access by reducing 
paperwork and red tape. And again, this is a question from New 
Hampshire. The concern is that we should reduce paperwork for 
all kinds of small business contracting opportunities, grants, 
et cetera, and simplify the process based on the size of the 
grant or the award so that we are not asking for the same 
amount of paperwork for something that is going to offer 
$20,000 versus something that is going to offer $200,000. So 
can you talk about what the effort is there to look at that 
difference and see how to address that?
    Mr. Greene. Absolutely. So, first of all, on the 
streamlining, I think it is critically important, back to the 
measurement point, that we measure and so that we look at turn-
around times, et cetera.
    Secondly, it is important that we be transparent and we 
publish the information about how we perform so that everyone 
can know, both to hold ourselves accountable and also so that 
small businesses can have predictability when they know that 
they are interacting with us.
    Now, more specifically on the issue of one size does not 
fit all, you know, that is a critical component that we are 
looking in many, many different areas. But one specific place 
that we are looking at this is on the contracting side. So I 
mentioned earlier a Presidential Innovation Fellows effort to 
bring entrepreneurs into the Federal Government to tackle tough 
problems. This is a tough problem, to say, how do you 
customize.
    And so a specific project that SBA is leading is an effort 
we are calling RFP-EZ, and the notion is just like 1040-EZ, is 
a simpler form for taxes----
    Senator Shaheen. Terrific. Love it.
    Mr. Greene. Let us do the same thing for government 
contracting. And we are starting small. We are going to do it 
as a pilot. We are going to focus on information technology, 
where costs have come down by 10X in the private sector but not 
necessarily on the government side. But by reducing the 
transaction costs of doing business with the government, we 
think that we can bring more innovative technology companies 
into Federal procurement, lower costs for taxpayers, and, by 
the way, get more dollars to the companies who create jobs, not 
just on their balance sheet, but on their P&L.
    Senator Shaheen. Well, I hope, Madam Chair, that we can 
maybe get more----
    Chair Landrieu. Detail.
    Senator Shaheen [continuing]. Detail, yes, expansion on 
this proposal for the committee. Thank you.
    Chair Landrieu. Well, thank you. We will. And Senator 
Shaheen, you have been a real advocate for efficiency, 
streamlining, transparency, and let us continue to work on it. 
But that is very good, promising news for that launch of that 
pilot.
    Senator Moran.
    Senator Moran. Madam Chair, thank you.
    I appreciate your testimony. It has generally been focused 
on SBA programs and I appreciate their value. I want to take 
the soapbox opportunity that we have described for our 
committee and for the SBA to advocate on behalf of businesses, 
entrepreneurs, start-ups, and indicate, first of all, I think 
there are, as I indicated briefly in my opening comments, there 
are some troubling trends in regard to start-ups and 
entrepreneurship in the United States. Our economy obviously 
has slowed down. There are fewer entrepreneurs starting 
businesses. And those new businesses are hiring fewer workers.
    The number of new businesses started in the United States 
has declined every year since 2006. In 2010, there were 
approximately 394,000 new businesses started in our country, 
and we are glad for that, but that is the lowest number of 
start-up businesses per year since 1977. These new businesses 
created more than 2.3 million jobs in 2010, but that is the 
third fewest number of jobs created by new businesses in more 
than 30 years.
    Secondly, there are external indicators showing that the 
United States is becoming less friendly to entrepreneurs. The 
World Bank has an annual report called ``Doing Business.'' It 
ranked the United States as the fourth easiest place in the 
world to start a business in 2007, but four years later, we 
dropped to 13th in that measure and we remained there again 
this year.
    Since starting on this--paying attention to this 
entrepreneurial start-up issue, one of the things that stands 
out to me--I have only been a member of the United States 
Senate for a little less than two years now, but in that two 
years, seven other countries have adopted legislation, things 
that we have not done, pursuing entrepreneurial start-up 
policies that create greater opportunities in those countries.
    Chile stands out as an example of where they are doing many 
things to increase the opportunities for businesses to start up 
in their country. They have an initiative called Start-Up Chile 
that provides entrepreneurs with capital to develop their 
business, free office space, and temporary visas. These 
incentives are attracting entrepreneurs from around the world 
to Chile, including from the United States, and that is the 
part I wanted to emphasize. And, in fact, 20 percent of the 
grant recipients, or the recipients of those incentives, came 
from the United States. So one-fifth of the businesses that 
received those incentives were U.S. businesses.
    There is this global battle for start-ups, for 
entrepreneurship, and we are falling behind. The United States 
is falling behind. And if we lose entrepreneurs, we lose the 
jobs they create.
    I remember being in California talking to a business who 
was waiting on the decision on an H-1B visa for 68 potential 
new employees at their company. They did not make it in the 
competition. At the appropriate time, they were unable to get 
the visas. So the story to me was, we hired those folks anyway, 
but we hired them in Canada. And so 68 jobs lost because we 
have a visa program that did not work, does not work. And while 
68 jobs is a significant loss, what troubles me even more is my 
guess is that some of those 68 people hired in Canada will 
start the next entrepreneurial business that may result in 
significant job creation that could have been in the United 
States but will now occur in another country.
    And so I want to use the megaphone of the committee and of 
the SBA to highlight the immediacy, the need to act more 
quickly than this Congress and this administration are doing. 
We have a lot to lose, and we are going to work our way through 
legislative proposals, but we also ought to recognize that we 
do not have much time, that every day, every week, every year 
that goes by, others are moving in a direction that we are not.
    Of the provisions in Start-Up Act 2.0, some deal with the 
regulatory environment, some deal with the tax code, as I said, 
some deal with the ability to take Federal dollars used in 
research and more rapidly commercialize that research. The most 
contentious or controversial deals with visas for STEM, 
foreign-born, U.S.-educated individuals with talents and 
intellect that we, in my view, desperately need. It deals with 
entrepreneurs staying in the United States.
    And I know that the House today is taking up a STEM jobs 
bill. The President yesterday at the White House indicated that 
that bill, they supported, but would not sign the bill because 
it is not all-encompassing.
    I just want to highlight that we do not have--if Congress's 
history is any indication of how long it takes to get 
immigration completed in a comprehensive form, we are going to 
be at a much greater disadvantage if we cannot--and here is my 
concern, if you can help when Administrator Mills talks to the 
White House and as I talk to my colleagues. I am concerned that 
there is a growing approach to this issue of STEM and 
entrepreneurial visas. I think 80-plus percent of my colleagues 
agree with the provisions of our legislation. We have to be 
careful that we do not take the approach that says, if we 
cannot do everything, we cannot do anything. This perhaps is 
more of a message to my colleagues, but it is certainly a 
message, I think, that is valuable for the White House based 
upon the President or the White House's statement yesterday in 
regard to legislation pending today in the House of 
Representatives.
    My time has expired. I did not realize that I was on my 
soapbox as long as I was, but I would appreciate any advocacy 
for the immediacy of solving, addressing the issues that we 
face and to make sure that entrepreneurial skills and talent, 
as well as the environment in which they operate, is changed 
now, not sometime down the road.
    Thank you, Chair.
    Chair Landrieu. Thank you, and I will take a moment to 
respond to that. I would simply say, yes, we cannot wait to do 
everything while we fail to do some things right before us. But 
we also cannot just continue to do the easy things on 
immigration without doing the hard things, because in a 
democracy, you need the leverage to get the whole thing done. 
So we do not have to get into that argument now, but that is 
the resistance that you are feeling, and there is some 
resistance because we cannot just keep doing the easy things 
until we get some of the tougher things done that really affect 
the economy.
    And let me just add this, too, Senator Moran. To this 
morning, in terms of growth rate, the real domestic product 
rose this morning announced at 2.7 percent in the third 
quarter, which is the highest since the end of last year, and 
went over projections. It was projected to be, I think--it rose 
by 1.3 percent in the second quarter of this year, two percent 
in the first. They are going to uptick it to 2.8. They had 
estimated it, I think, to be two.
    So I realize that there are still some challenges, but as I 
stated in my opening remarks, we have lost seven million jobs 
in America, and because most of the jobs are with small 
business, you are right. We have lost a lot of small business 
jobs and we need to continue to work to improve that.
    Senator Rubio.
    Senator Rubio. Thank you. One of the things I enjoy about 
being on this committee and talking about small business is 
that I think it is really the cornerstone of middle class, and 
middle class is what distinguishes us from the world. Every 
country has rich people. Unfortunately, every country has poor 
people. But what has really distinguished America and one of 
the things that makes us exceptional is this vibrant, broad-
based middle class, of which I think small business is such a 
critical part of it.
    So a couple things I wanted to talk about that I have 
heard. In fact, as we were here--I do not know how they are 
watching us, maybe on C-SPAN or on the Internet--but a small 
business in South Florida texted me a question in real time. 
Here are two things they wanted me to mention.
    The first is, and I think some of it was referenced, Mr. 
Greene, in your opening comments--you wrote something about 
attracting the right human capital. There is this real concern 
that even if we have an economy that is creating a lot of small 
business and the jobs, if people do not have the skills to do 
those jobs, it is for naught. So what can we do, or what are we 
thinking about in terms of bridging that, for example, 
partnerships between our education system and our small 
businesses and our business community in general to ensure that 
we are equipping people with the skills they need for the new 
21st century middle class jobs. You know, one of the things 
that I think we made a mistake in this country of doing, and I 
know some States are getting it right now, is we stigmatized 
career education and vocational education, and I think 
community colleges can play a tremendous part in turning the 
corner on that.
    So that is something that I hope you will address, in terms 
of what you are hearing from small businesses with regards to 
that, to the skills gap, in essence. You know, some people are 
saying there are jobs out there that cannot be filled because 
we do not have people with the skills to do them. What can we 
do to close that gap quicker?
    Mr. Greene. So, a number of points, and if I may respond to 
both Senators in my comments. I think, first of all, in terms 
of the passion for start-ups and doing everything that we can 
to help entrepreneurship, I clearly share the passion of the 
committee members.
    I do want to suggest, Senator Landrieu, that to the 
question of high-growth entrepreneurs versus lifestyle 
entrepreneurs, in the economic environment we are in, it is not 
either/or. We need to do everything that we can to help all 
kinds of entrepreneurs. And it may be the case that different 
policies are needed to serve these different kinds of 
entrepreneurs, but we need an ``all of the above'' approach.
    I think, secondly, similar to the comments that you talked 
about in terms of jurisdiction of different committees, it is 
critically important for us that many of the issues that we are 
talking about are not necessarily SBA issues, but that we have 
to be advocates in working with all the other agencies, whether 
it is USCIS or Labor or whatever the case may be, and that has 
to be a fundamental part of our role, and that is something 
that we take very, very seriously.
    On the specific issue of talent, we hear this over and over 
again from entrepreneurs, that this is critically important, 
both on the immigration side as well as on the skills side. And 
I think, critically importantly, while on the immigration side, 
legislative change is critical, and the President has obviously 
supported changes in high-skilled immigration as part of 
overall comprehensive immigration reform, but also there are 
things that we can do administratively.
    So one example of that is a little-known program called the 
OPT program that allows for graduates, Ph.D. graduates in STEM 
fields to stay after they get their Ph.D. for an additional 
year and a half. Well, what we found was the number of fields 
that were included in that program were limited. So we more 
than doubled the number of fields to include things like 
computer science, nanotechnology, math, to allow more people to 
stay. Now, it is a step. It is not the broad. But we need to be 
doing that on the urgency.
    Now, more broadly on skills, again, a critical issue, and 
we are seeing similar data to say there is massive mismatch. So 
a fundamental commitment to doing more on STEM education, at a 
minimum, is something incredibly important, something that the 
administration is focused on.
    And the one last point I would make on STEM is let us add 
an ``E'' to STEM. Let us talk about entrepreneurship education 
as part of something we more fundamentally need to change.
    Senator Rubio. And just the specific case that I am talking 
about is this is actually the epitome of a small business. It 
is a guy who used to work at a body shop who went out and 
opened his own body shop and he cannot find guys and gals that 
know how to do the work and he cannot afford to train them. So 
he has got to hire people with the skills to do that, but he 
does not have people who are trained to do it, and he cannot 
afford to train them, and there is nowhere for him to send them 
to be trained.
    So I am not saying you have the answer. I know it is a 
difficult thing we have got to accomplish. But I think that is 
one of the things we have to really concentrate on, is why are 
we not graduating kids from high school with an industry 
certification in a field, in a career? And we have got to 
figure out a way, what role the Federal Government can play in 
incentivizing that, because there are a lot of small businesses 
out there, and these are not poor-paying jobs. I mean, a BMW 
technician in South Florida, 18-year-old who graduated high 
school with that skill, is making in the mid-$30,000s to start, 
at 18, and can increase from there as they get more 
certifications. These are middle-class jobs.
    So I hope we will have a conversation about that component 
of it, because I am hearing a lot of that.
    Chair Landrieu. Thank you.
    Senator Risch.
    Senator Risch. Thank you, Madam Chair.
    First of all, let me thank Senator Snowe for her service to 
this committee and to America, which we sincerely appreciate.
    Gentlemen, I doubt there is any argument amongst Americans 
or Congress or anyone else that small business is certainly one 
of the cornerstones of the American economy. It does not get 
the play that it should get. When the CEO of a large 
corporation stands up and says something, it gets a lot of 
play. When a CEO of a small business who arguably is as 
important says something, it does not get the play, and that is 
very unfortunate. But I think most people understand how 
important it is.
    Once you drill down and you understand small business and 
how important it is, then the next item you look at is, well, 
what is it that makes small business work? And I think that, 
again, most everyone would agree that it is capital. If you do 
not have capital, you cannot operate a small business. You 
cannot go forward. It is the limiting factor, in my experience, 
in almost all small businesses as they try to expand, as they 
to operate their businesses.
    Well, today, as you know, there is a great debate going on 
here in Washington, D.C., over tax structure, and people who 
have an open mind on this are interested in facts. They want 
information. The question I have for you is, being advocates 
for small business, have you--has someone at the Small Business 
Administration sat down, taken the President's proposal, and 
determined exactly how much cash, how much capital that that 
proposal will extract from the small businesses in America? Has 
anybody done that?
    Mr. Greene. We are working with the White House on the 
broader range of implications for small business as part of tax 
reform. As you suggest, it is critically important and there 
are many individual components embedded in much of the 
legislation that this committee has endorsed in the broader, 
but we are working hand-in-hand to understand the implications 
of any changes on small businesses.
    Senator Risch. Well, with all due respect, that is not good 
enough. I am looking for some numbers. We are constantly told 
that if the President's proposal is enacted, it will greatly 
hurt a lot of small businesses in America, and I would like to 
know how many. I would like to know how much. I would like to 
know--so that people know when they are voting on this what 
kind of capital are they taking out of the hands of small 
businesses and placing in the hands of, in my judgment, 
probably the least effective entity in America, namely the 
Federal Government. People need to know this. I mean, this is 
money that creates jobs. It is--people whip around the rich 
people in this country, but the fact is, that is money that is 
going to employ middle-class Americans and we need to know how 
much. We need to know what the effect is going to be. And we 
need to know what the snowball effect of that is, how taking 
that money out of the hands of small businesses is going to 
affect us as we go down the road.
    So I hope you will take that question for the record. I 
hope you will get back to me on that. And I think that it will 
be important as people make a decision as to whether they 
should vote for this proposal or perhaps use it as they 
negotiate forward to get us out of this horrible mess that we 
are in.
    Thank you, Madam Chairman.
    Chair Landrieu. Thank you, and maybe this will help, and I 
am going to submit this for the record--to you, Senator, and 
for the record of this committee. Prior to the Bush tax cuts 
that were put into effect, the average annual small business 
job growth was 2.3 percent. After the Bush tax cuts, it was 1.0 
percent. Now, there could be a different view of the material--
a different analysis of the material that I am going to present 
for the committee, and I am looking at it for the first time, 
but I want to submit that.
    Also, the research that has been done by Tax Policy Center, 
U.S. Treasury Department, Center for Budget Priorities, and 
Congressional Research Service all have concluded that less 
than three percent of small businesses are even subject to the 
top two marginal tax rates. Now, that is not answering your 
whole question, because you have got capital gains, you have 
got dividends that are being debated, you have some other 
potential, I guess, benefits in the tax code that may no longer 
be there that could affect small business, but let us build a 
record on that because I think it is a very important question 
that the Senator has raised, and I would like to submit that 
for the record, but let us continue to get that information out 
as we debate this important subject.
    Senator Risch. Madam Chairman, I am told that Treasury has 
said that at least eight percent of small businesses are 
subject to the two tax rates that we are arguing about----
    Chair Landrieu. Okay. Well----
    Senator Risch [continuing] And that these businesses earn 
72 percent of all small business income and pay 82 percent of 
the income taxes paid by small business.
    Chair Landrieu. I am going to ask the staff to reconcile 
these so that we can have one set of facts that actually----
    Senator Risch. I think that is----
    Chair Landrieu [continuing]. That we can really get to the 
nub of this, because I think this is a very important issue 
before the Congress right now. So I am going to ask both staffs 
to get together and report back to us on what they have found.
    All right. Thank you all so very much. We are going to have 
to go to the second panel now.
    [Pause.]
    We have got a large second panel, so I am going to go ahead 
and get started as people are taking their places and just 
introduce everyone briefly and ask you all to limit your 
comments to four--three-and-a-half to four minutes.
    Mr. Scott Gardiner is Executive Vice President of Granite 
State Economic Development Corporation, a regionally certified 
development company serving New Hampshire, Massachusetts, 
Maine, and Vermont.
    Fonda Lindfors New is founder and Chief Executive Officer 
of QRI, an LLC which is a multi-faceted environmental 
consulting company based in Baton Rouge, Louisiana, that 
specializes in geophysical assessments, drilling, and 
remediation. She is a successful small business entrepreneur.
    Joshua Etemadi, Chairman of the Small and Emerging 
Contractor Committee through the National Association of Surety 
Bond Producers, serves on the Government Relations and 
Automation and Technology Committee. He is going to be 
testifying about his firsthand knowledge of the contracting 
surety bond situation.
    Senator Snowe has invited Mr. David Clough, Maine State 
Director for the National Federation of Independent Businesses, 
that will have a lot of comments about some of the issues we 
have discussed.
    Diana Furchtgott-Roth is a Senior Fellow at the Manhattan 
Institute for Policy Research in New York. From 2003 to 2005, 
she was Chief Economist at the Department of Labor. She brings 
a tremendous amount of expertise and leadership to this issue.
    And lastly, we have Julie Weeks, President and CEO of 
Womenable, a nonprofit social enterprise that works to enable 
women entrepreneurship worldwide. She is Executive Director of 
the National Women's Business Council and has testified before 
our committee on several occasions. Welcome back, Julie.
    Let us start with you, Scott, if we could, Mr. Gardiner. 
Thank you for being with us. And let us set it at four minutes, 
please, because we really do want to get through everybody's 
comments and get to our questions.

STATEMENT OF SCOTT GARDINER, EXECUTIVE VICE PRESIDENT, GRANITE 
             STATE ECONOMIC DEVELOPMENT CORPORATION

    Mr. Gardiner. Thank you, Madam Chair, Ranking Member, 
Senator Shaheen, and members of the Small Business Committee. 
Thank you for inviting me here today to provide my testimony 
regarding the SBA 504 program and specifically the SBA 504 
refinancing program on small business companies.
    My name is Scott Gardiner. I have been involved with the 
SBA 504 loan program since 1988. Over the last 24 years, I have 
been active in the management, marketing, loan structuring, and 
credit underwriting. I am the Executive Vice President of 
Granite State Economic Development Corporation, established in 
1982, doing business in New Hampshire, Vermont, Maine, and 
Massachusetts. We are the leading 504 lender in the region and 
currently we are the number four CDC in the country.
    In February 2001, under the Small Business Jobs Act of 
2010, the SBA implemented a temporary program allowing small 
businesses to refinance eligible fixed assets in its 504 
program. Additional fees were charged to the borrower to cover 
the cost of this refinancing program, and as a result, no 
subsidy to the 504 program was needed. SBA continued to perform 
the full review of the loan applications in Sacramento in the 
Loan Processing Center.
    A key feature of this new program was that it did not 
require an expansion of the business in order to qualify. 
Borrowers were able to refinance up to 90 percent of the 
current appraised property value and use the funds to pay off 
business-related debt or other eligible business expenses. In 
today's reality of more stringent banking regulations, many 
performing loans continue to be declined for financing. This is 
not because these borrowers are missing payments or need a 
bailout. It is simply caused by the drop in commercial real 
estate values and the negative impact that drop has had on the 
banks' policies.
    In the end, the availability to offer the 504 loan program 
to these performing borrowers was often the only option 
available to these businesses. The SBA 504 refinancing program 
created a unique and time-driven opportunity to refinance 
owner-occupied commercial real estate and capital requirement 
with long-term fixed-rate financing.
    The SBA began accepting applications in February of 2011. 
The initial utilization of this program was relatively 
insignificant nationwide given the restrictive regulations that 
were initially set forth by the SBA. As a result, only 307 SBA 
504 refinance loans totaling $255 million were made nationwide 
during the first year of this program, and that is offset 
against an appropriation of $7.5 billion, and $7.5 billion for 
each year. So there was $15 billion allocated, and in the first 
year, only $255 million was used.
    Finally, in October of 2011, SBA expanded the program 
parameters. However, to a large extent, the modifications set 
forth in late October of 2011 were not fully integrated into 
the small business lending community for several months. 
Granite State's firsthand experience required the CDCs and the 
SBA to essentially remarket the program to overcome the initial 
restrictive guidelines from program launch in February. 
Activity started to pick up in March of 2012, and through 
September 2012, nearly 2,700 small businesses have taken 
advantage of this refinancing opportunity by taking out $2.5 
billion. On an annualized basis, during the months of August 
and September 2012 nationwide, 504 refinancing accounted for 
approximately 30 percent of the total 504 loan volume.
    With the end of the program in September of 2012, there 
were close to 400 loan applications that were left in the queue 
at the SBA in Sacramento, representing over $400 million. These 
are loans that were submitted and just because the program 
ended were not approved.
    Chair Landrieu. Scott, I really want to ask you to try to 
speak up a little bit. This is very important testimony to get 
in, and I have got my staff here and Senator Snowe's staff. We 
are all ears. Are you testifying that the 504 commercial 
refinancing program was operated in such a way that it was too 
restrictive and virtually unusable to the businesses that you 
serve? Is that what your testimony is?
    Mr. Gardiner. Yes. I believe----
    Chair Landrieu. Okay. Why do you not try to say that in 
your own words----
    Mr. Gardiner. Based on my experience----
    Chair Landrieu [continuing]. And speak into the microphone, 
please.
    Mr. Gardiner. Based on our CDC's experience and my 
experience, when the program was launched, it was--in February, 
the restrictions were just too tight and very----
    Chair Landrieu. Were they ever loosened to your 
satisfaction?
    Mr. Gardiner. Yes. They were loosened, finally loosened in 
October. There were a couple rounds of----
    Chair Landrieu. Okay. And then the program expired when?
    Mr. Gardiner. In September.
    Chair Landrieu. The following September?
    Mr. Gardiner. The following September.
    Chair Landrieu. So for the year that the rules got sort of 
in order, it worked, in your opinion, fairly well?
    Mr. Gardiner. Well, yes, but it took--the program was 
launched and we spoke to many small businesses that were 
inquiring, the small business community, and we had to say no 
so many times that I think the community, the small business 
lending community, just kind of turned the program off.
    Chair Landrieu. Okay. Well, would you suggest that if we 
try to do that again, we lengthen out the authorization period 
so it is not so short and use the new modified rules? Is that 
what you are testifying?
    Mr. Gardiner. Yes. Under the new modified rules, it works 
very well.
    Chair Landrieu. And that could be a four- or five-year 
extension if we could find the offset, because all of these 
extensions require an offset. But I really want to know this 
from the small business community because it is going to 
determine how hard I will fight for this or not, because there 
are about 100 other things that are pushing against the amount 
of money that we have. And so I am urging you all to speak with 
one voice on this. If this program is something that can work 
under certain circumstances, then we want to know what those 
circumstances are and not use the little money that we are 
going to be given to advocate for a program that is not having 
an impact, okay.
    So please visit with my staff after this, Scott, and give 
them--David Gillers is here.
    [The prepared statement of Mr. Gardiner follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. All right.
    Fonda.

   STATEMENT OF FONDA LINDFORS NEW, CHIEF EXECUTIVE OFFICER, 
            QUATERNARY RESOURCE INVESTIGATIONS, LLC

    Ms. Lindfors New. Thank you, Chair Landrieu, Ranking Member 
Snowe, and members of the committee. My name is Fonda Lindfors 
New from Baton Rouge, Louisiana. I am the founder and CEO of 
QRI. My testimony today will focus on the legislative proposals 
currently before the Senate, including the SUCCESS and TEAM 
Acts.
    I was born in Charleston, South Carolina, and graduated 
from the College of Charleston in 1981 with a B.S. in Geology. 
Upon graduation, I moved to Louisiana and worked at the 
Louisiana Geological Survey as a geologist from 1981 to 1986. 
While working in the coastal zone for LGS, I noticed thousands 
of oilfield production pits that needed to be remediated and 
closed. Thus, QRI began in 1986 to assist in the restoration 
process of coastal Louisiana by bringing oil field legacy sites 
into compliance.
    Over the past 27 years, QRI has grown through hard work and 
dedication of a staff that now produces annual sales of over $8 
million, has completed over 4,500 projects, and provides 
services in six divisions. This geologist learned very quickly 
that my geologic education did not teach me about capital, 
contracting, how to administrate a business, strategic 
partnerships, and how State and Federal laws impacted my 
business, thus, many challenges were faced in the early years.
    I will say that the on-the-job training that QRI required 
vastly improved my prayer life in the early years. However, I 
would not recommend, ``Oh, God, oh, God, please help me be a 
better business person,'' as any business woman's only plan to 
improve her administrative skills.
    The three biggest challenges QRI has faced over the last 27 
years are capital, entering the Federal market, and winning 
Federal contracts, which to date we have won 77 Federal 
contracts in the last four years. We have provided specific 
examples of how QRI has overcome those challenges as a woman-
owned business in our written testimony.
    One of the ways we overcame the challenges was to 
participate and attend every course offered by the SBA in our 
area. One of those courses, Emerging Leaders, or e200, required 
six months of efforts and continues to benefit the growth of 
QRI. I first became aware of e200 in an e-mail from Jo Ann 
Lawrence of the SBA. I contacted her to get additional details 
on the program and she assured me that the class would be well 
worth the vast amount of time it takes to take this course.
    She was correct. e200 was an excellent course that I 
attended from April to October 2011. The e200 curriculum was 
well thought out and included written resources that my upper 
management at QRI still uses, such as the Strategic Growth 
Action Plan. The instructor, Sherif Ebrahim, was an excellent 
teacher who pushed me to success in this course. The SGAP was 
so detailed that it was instrumental in increasing our bank 
accounts receivable line by 32 percent. At the request of our 
major banker, an updated SGAP was prepared and submitted in 
June of 2012 to once again successfully increase our AR line by 
another 24 percent.
    The difference between e200 and other private sector 
offerings that I attended is that the course was real world and 
not just a class where you learn terms to take a test and then 
you forget it. The e200 course allowed me to develop a valuable 
set of tools that are repeatedly used by my upper management.
    Today, Sherif Ebrahim continues to be a resource to me and 
my company. If I would have had the benefit of a program like 
e200 in my early years of QRI, my challenges would have still 
occurred, but I would have achieved success more quickly. As a 
result of our participation in the 8(a) program and courses 
such as e200, QRI's revenue and access to capital increased by 
over 50 percent from 2010 to 2011 and staffing increased by 22 
percent.
    QRI is extremely interested in changes to the EDWOSB 
program, also. In addition to removing the contract award price 
limits, removing the economically disadvantaged requirement, 
and adding sole source contract vehicles, QRI would like to ask 
the committee to consider adding a formal mentor-protege 
program.
    As the Chairwoman and other Senators have stated today, 
entrepreneurs are the backbone of our economy. With just a 
little investment from the Federal Government, small business 
owners are given the tools to thrive, and in doing so provide 
jobs that turn around neighborhoods. This bill is essential to 
many small businesses, economic future including QRI.
    I would like to thank the committee on behalf of QRI and 
small businesses for their attention to these important matters 
and their support for entrepreneurs. I would also like to thank 
the committee for their continued endeavors to make sure 
outstanding SBA employees, such as Jo Ann Lawrence, and e200 
contractors, like Sherif Ebrahim, are funded and able to 
continue to assist companies such as QRI.
    I am happy to answer any questions on these issues and 
serve as a resource to this committee. Thank you.
    [The prepared statement of Ms. Lindfors New follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. Thank you, Fonda, for that excellent 
testimony. We appreciate the specificity in which you 
identified some of the programs that have been helpful to you.
    Joshua.

  STATEMENT OF JOSHUA A. ETEMADI, SALES MANAGER, CONSTRUCTION 
BONDS, INC., A DIVISION OF MURRAY SECURUS, AND CHAIR, SMALL AND 
  EMERGING BUSINESS COMMITTEE, NATIONAL ASSOCIATION OF SURETY 
                         BOND PRODUCERS

    Mr. Etemadi. Chair Landrieu, Ranking Member Snowe, members 
of the committee, thanks for the opportunity to speak to you 
this morning. My name is Joshua Etemadi and I am a licensed 
bond producer with Construction Bonds, Inc., a division of 
Murray Securus, and I am testifying on behalf of the National 
Association of Surety Bond Producers, which is a national trade 
association that employs companies that hire people like 
myself.
    I have personally focused my career, albeit it kind of 
short, on assisting small and emerging construction firms to 
get surety credit through the SBA Bond Guarantee Program and 
also through the standard surety market. And if I have more 
time during the question period, I would be happy to share some 
case studies where I was able to use the SBA bond program to 
help contractors get bonds and are now very successful 
businesses.
    My testimony this morning will highlight the importance of 
the SBA Bond Guarantee Program and your efforts to enhance its 
reach. The NASBP extends its appreciation to the committee for 
recognizing and for taking action in the SUCCESS Act that the 
current contract limit of the SBA Bond Guarantee Program is 
insufficient and that it fails to comport with the realities of 
the current procurement environment for contractors seeking 
award of public construction contracts, especially Federal 
contracts.
    Now, the SBA Bond Guarantee Program was created to ensure 
that small and emerging contractors, which for various reasons 
cannot get standard surety credit, can get access to surety 
credit, and the program will provide guarantees anywhere from 
70 to 90 percent to surety companies as an enticement to extend 
surety credit to these firms. Now, the contractor and the 
surety company pay fees to access the program and the current 
contract limit is $2 million.
    In recent years, the SBA has undertaken tremendous 
administrative efforts to improve the functioning of the 
program, for example, streamlining its application process, 
reduction in paperwork, implementing a fast track application 
for bonds up to $250,000, quickly responding to claims, and 
expanding the program's reach to include design-build 
contracts. The SBA has also expanded its marketing efforts to 
bond producers and surety companies throughout the country and 
we applaud the SBA for taking these positive measures which 
could be magnified through statutory program enhancements.
    Now, recently, Congress recognized that the contract limit 
of the program should be increased to aid these businesses that 
are trying to get bonded contracts. Under the American Recovery 
and Reinvestment Act, Congress increased the contract limit 
from $2 million to $5 million, and up to $10 million in certain 
circumstances. They also vested discretion in the program 
administrator to determine the program's liabilities. We 
supported these important and needed enhancements, but 
unfortunately, they expired in September of 2010.
    Now, by increasing the contract limit back to $5 million, 
the SUCCESS Act would restore these enhancements, but only in 
part. We continue to support increasing the contract limit of 
the Surety Bond Guarantee Program, but we believe that a higher 
contract limit of $6.5 million would allow the program to serve 
more small businesses. The NASBP also believes that the program 
administrator must be vested with statutory discretion to 
determine program liability to attract more surety company 
participation.
    Beyond increasing the contract limit, investing the 
administrator with discretion, we believe additional 
enhancements to the program are necessary to improve its 
effectiveness in providing assistance to small contractors and 
we request consideration of the following additional 
enhancements.
    One, raising the guarantees that are offered by the surety 
companies to a uniform level of 90 percent.
    Reducing the fees charged to businesses to access the 
program. Now, this could be done on a short-term basis to help 
small businesses with the current economic climate.
    And then support the current SBA efforts to establish a 
system of internal coordination between the Bond Guarantee 
Program and other SBA departments, like the Loan Guarantee 
Program and the Business Assistance Programs. And those 
recommendations are detailed more in my written testimony.
    The NASBP appreciates the opportunity to address you on the 
importance of enhancements to this program and I hope my 
testimony proves beneficial to your deliberations regarding the 
SUCCESS Act. I welcome any questions that you may have for me.
    [The prepared statement of Mr. Etemadi follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. Thank you, Joshua, and please give us some 
additional information about how the SBA works with Governors 
and local governments and other organizations that are trying 
to provide the same kind of surety bond expansion so we can see 
if we are coordinated across the country, if you can provide 
some testimony later about that----
    Mr. Etemadi. Sure.
    Chair Landrieu. Okay.
    David.

 STATEMENT OF DAVID R. CLOUGH, STATE DIRECTOR, MAINE CHAPTER, 
          NATIONAL FEDERATION OF INDEPENDENT BUSINESS

    Mr. Clough. Good morning, Chair Landrieu, Ranking Member 
Snowe, members of the committee. My name is David Clough and I 
am very pleased to be here to testify on behalf of NFIB, the 
nation's leading small business advocacy group. It has a 
typical member of eight to ten employees and about $500,000 in 
sales, almost the size of this committee a few moments ago.
    I would like to recognize the Chair and Ranking Member 
Snowe and their teamwork that they have showed over the years 
and recently in the tax extenders bill and working on behalf of 
small business owners across the country. It is very valuable.
    I also want to use this opportunity to underscore the 
tremendous contributions Senator Snowe has made to the State of 
Maine and to small business owners. It is with great sorrow 
that we heard last February that she had decided not to run for 
reelection, and also I can say that the legacy that she is 
leaving is one that is going to be hard to duplicate, in our 
eyes. But her accomplishments will be ones that have lasting 
effects for many years to come, so we do take comfort in 
knowing that and hope that when she leaves, she does not get 
out of her role as advocating for small business.
    I would like to also comment that one of the things that is 
of concern to small business owners, and what we are seeing, 
actually, policy leaders in the State of Maine and elsewhere, 
recovery from this Great Recession. Several years ago, the 
Economic Forecasting Commission of the State forecast that 
Maine would recover the jobs lost in the Great Recession in 
about five years. A few months later, they said it would take 
about seven years. The most recent forecast that came out 
earlier this month said it will take until 2017 to get back to 
the employment level that existed in 2007. That is not very 
encouraging for those who have lost their jobs, and it is not 
very encouraging for those who have graduated from colleges, 
community colleges and high school who are looking for jobs, 
and I will get back to that in a moment.
    One of the things that NFIB is learning from its members is 
there is a tremendous amount of uncertainty out there, and the 
uncertainty could be classified as uncertainty about economic 
trends and conditions. Is there a reliable enough trend going 
on that they can make business plans, they can go to a bank, 
they can make investment decisions? They have uncertainty about 
costs and things like the fiscal cliff, what decisions are made 
by Congress on that, decisions on Section 179 expensing, estate 
tax, the top marginal rate, and so forth. And then uncertainty 
about the Affordable Care Act and what effect that will have on 
employment costs to businesses and new hires.
    And then there is an emerging uncertainty, too, that is not 
receiving a lot of attention that has been mentioned this 
morning. That is uncertainty whether a trained workforce will 
be available for the jobs that the businesses have, and I have 
heard manufacturers, for example, say they cannot find the 
people for the jobs that they have. They would happily--and it 
is not just in Maine. They cannot find them anywhere, for 
example, in New England or the Northeast United States. And it 
is not because of the Maine winters that they cannot find them. 
It is because they just do not have the skilled workforce.
    I would mention, though, that those are realities we have 
to deal with. One reality that is also important to recognize 
is the spirit of free enterprise and entrepreneurs. They are 
the people who will get the job done any way they possibly can, 
do more than expected with less than anybody thought was 
necessary, which I thought was a wonderful description of that 
kind of determination. They are the little engine that could. 
And one of the things that is terrific about them is they will 
do things that they did not even think were possible, but they 
figured that, somehow, some way, they will find a way to do 
that.
    NFIB looks forward to working with the committee and 
working with other groups to accomplish what this country 
needs, and that is more jobs. My last comment is, if every 
small business could create just one new job, we would not have 
an unemployment problem. Thank you.
    [The prepared statement of Mr. Clough follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. Thank you. I say that constantly, and thank 
you for repeating it here.
    Diana.

 STATEMENT OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW, MANHATTAN 
                 INSTITUTE FOR POLICY RESEARCH

    Ms. Furchtgott-Roth. Chair Landrieu, Ranking Member Snowe, 
Senator Shaheen, thank you so much for inviting me here to 
testify today. And Senator Snowe, thank you so much for all 
your years of service and all the wonderful things you have 
done in this committee and also outside.
    Thanks also for holding this hearing today. This is really 
a vitally important issue. So the programs we have talked about 
today, the SBA programs, reach millions of entrepreneurs, but 
there are many more whom these programs do not reach. That is 
why it is important to look at the whole regulatory and tax 
structure of what entrepreneurs are facing.
    So if you are an entrepreneur today--and I am married to 
one entrepreneur, I am the mother of another entrepreneur--you 
do not know what your tax rate is going to be in a month. If 
you are at the bottom, you do not know if it is going to be ten 
percent or 15 percent. If it is at the top, you do not know if 
it is going to be 35 percent or 42 percent, including the 
phase-outs of the deductions and personal exemptions. About 48 
percent of small businesses pay tax at the 35 percent rate, 
according to calculations from Internal Revenue Service data. 
If you are an entrepreneur, you do not know if the small 
business tax exemption, if the estate tax exemption is going to 
drop to $1 million and the tax rate rise to 55 percent, as is 
due on January 1. That means if you die the first month of 
January or before Congress has finished and sorted this out, 
your heirs might have to sell the business in order to pay the 
estate taxes. This is just a terrible situation to be with.
    It is not just the uncertainty of the fiscal cliff that is 
a problem, but the new health care act has real effects on 
small business and entrepreneurs because it takes effect as 
businesses move from 49 to 50 workers. And, Chair, you 
presented evidence before showing that a smaller number of jobs 
had been created by business. Well, the Affordable Care Act 
discourages business from creating jobs. If you move from 49 to 
50 workers and you do not have the right kind of health 
insurance, you have to pay penalties of $40,000 a year. Move to 
51 workers, it is $42,000 a year in penalties. And that 
encourages businesses to keep employment below the 49--at 49 or 
below. You can, of course, solve this problem if you are an 
entrepreneur by laying off your full-time workers and hiring 
part-time workers, but that is not good for employees of small 
business. It is not good for the small business owners, who 
would, of course, prefer to have more experienced employees 
working for them.
    Another cloud of uncertainty lies over energy regulations. 
We all know the great American energy revolution caused by 
hydrofracturing. We look at North Dakota, three percent 
unemployment rate. Hydrofracturing, our new natural gas 
supplies, we have 200 years of an inexpensive fuel. But guess 
what. The Environmental Protection Agency and the Energy 
Department have rules in the wings they are going to be rolling 
out over the next few months that might stem that supply of 
natural gas. We do not know what those regulations are. And if 
you are a small business, maybe you are in the petrochemical 
area, maybe you are doing some subcontracting from one of these 
large companies, these regulations can just wreck your 
business. Plus, it would raise your energy costs. So that is 
another big source of uncertainty.
    I would really like to echo what previous panelists said 
about the need for immigration reform. There are innovators, 
entrepreneurs, all over the world who want nothing more but to 
come to America, and the Start-Up Act and the Kerry-Lugar bill 
would allow them to come for a five-year period and then get a 
green card if they managed to create jobs for native-born 
Americans. And I would underscore the importance of immigration 
reform, being an immigrant myself.
    Thanks very much, and I would be glad to answer any 
questions.
    [The prepared statement of Ms. Furchtgott-Roth follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. Thank you for that excellent testimony.
    Julie.

  STATEMENT OF JULIE R. WEEKS, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, WOMENABLE, AND CHAIR, ASSOCIATION OF WOMEN'S BUSINESS 
                            CENTERS

    Ms. Weeks. Thank you, Chair Landrieu, Ranking Member Snowe, 
Senator Shaheen, for inviting me to be here with you today. I 
am representing not only myself as a woman business owner, but 
the 8.3 million women-owned businesses that are sitting behind 
me in the room, out in the world doing business, and I have, as 
Senator Snowe recognized at the beginning--thank you very 
much--been working in the vineyards of women's enterprise 
development for quite a long time.
    We know from analyzing census data, conducting research, 
that women-owned firms continue to grow in number at rates one-
and-a-half times the national average. We have been saying all 
along in this hearing this morning, bemoaning the lack of small 
business job growth. Well, the only small businesses really in 
any great number creating jobs these days are women business 
owners. Other privately-held companies are not creating jobs 
and not generating revenue. Women-owned businesses are.
    I would suggest that part of the reason for that is the big 
bang of women's entrepreneurship that happened back in 1988, 
the Women's Business Ownership Act. We are coming up--next year 
will be the 25th anniversary of the Women's Business Ownership 
Act, so it is very important to not only look at what the 
progress has happened since then, but to look at the major 
underpinnings of that Act and see, how can we make them better 
going forward.
    The four main tenets of that Act was extending the Equal 
Credit Opportunity Act of 1974 to include business credit. Up 
until that Act--Senator Snowe remembers this well--women 
business owners could not get business credit in their own 
name. It told the Census Bureau, please start counting all 
women-owned businesses, including C Corporations. It 
established the National Women's Business Council, which gave 
women entrepreneurs a voice. And it established the 
demonstration project, which has grown into the 106 Women's 
Business Centers today. I would suggest that those four areas 
are continuing to be important.
    Another key area, though, that is of great importance is 
access to markets. As some folks may realize, or remember back 
to 1988, there was a provision in the introductory bill of H.R. 
5050 that included a Women-Owned Small Business Procurement 
Program. It was removed to ensure passage of the Women's 
Business Ownership Act of 1988 and it was only--the five 
percent procurement goal was only put in the mid-1990s. The 
Women-Owned Small Business Program, as we all know, took a long 
time between passage and implementation, and we need more teeth 
to that Act.
    I would suggest--I have three specific recommendations for 
consideration for this committee, the first one of which is to 
eliminate that monetary limit on the women-owned small business 
contracts tool and to allow agency purchasing to be reserving 
procurements specifically for women-owned small businesses. 
Once women-owned businesses get into procurement, the playing 
field, we have seen in research, is relatively level, but 
getting in is the challenge.
    Secondly, Women's Business Centers is a very critical, 
important program. Senator Landrieu, I love your idea of naming 
it the Olympia Snowe Women's Business Center Program. I think, 
personally, that would be a marvelous idea. But I believe--we 
have been talking this morning and the folks from the SBA said 
that they are going to be harmonizing and analyzing the 
outcomes of SBA's Entrepreneurship Development Programs in 
commonality, but I would suggest that if we are looking at the 
only point of comparison between the three programs of SCORE, 
SBDC, and Women's Business Centers, which is one-on-one 
counseling, we are missing the majority of the activities that 
Women's Business Centers perform. They not only provide one-on-
one counseling, but training, mentoring programs, peer 
mentoring, incubator programs, access to capital, either 
directly or loan packaging. We are not capturing the full value 
of the Women's Business Center Program.
    And, finally, I would recommend that we maintain analysis 
and research and information on women- and men-owned 
businesses. A survey of small business owners of the Census 
Bureau has also been under the knife. I realize that is not 
under the purview of your committee specifically, but I do know 
that in the Women's Business Ownership Act, you directed the 
Census Bureau to start counting all women-owned businesses. I 
have a couple of ideas of some additional analysis that the 
census could perform to better understand the growth continuum 
of women- and men-owned businesses that is included in my 
written testimony.
    And I guess, finally, even though I am running a tad over, 
if I am the last person to testify at a hearing, a Small 
Business Committee hearing, being co-chaired by Ranking Member 
Snowe, I want to, on behalf of all women business owners all 
around the country, thank you. Thank you very much for your 
service.
    [The prepared statement of Ms. Weeks follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Chair Landrieu. Thank you, Julie.
    We are going to have to bring this committee to an end in 
about 12 minutes, so we are going to each take four minutes for 
questions, and thank you all for your excellent testimony. So 
if your answers can be very brief.
    David, let me start with you. It is quite a conundrum that 
you have testified, and it is true, that we have lost many 
businesses in the United States through this great recession, 
and you testified in Maine your experiences with NFIB. But on 
the other hand, you said that when business owners go to hire, 
there is a lack of human capital. What is NFIB's position on 
training, or does NFIB have a position on investments in 
training for human capital that is already here in the country? 
We have heard about immigration, people coming in with skills 
from other countries and getting the Ph.D. or the Master's 
degree here. But what about people that are here in the country 
that need Ph.D.s and Master's degrees? What is NFIB's position 
on those investments?
    Mr. Clough. I do not have a detailed answer for you, Chair 
Landrieu, on that. I will get an answer to you after this 
hearing. It is something that they are beginning to recognize, 
they are spotting in their periodic surveys of problems and 
priorities. And what it is is it is the skills, that people 
have the skills that are needed in the workplace. It is 
something that they are hearing about, we are hearing about, 
and it is even showing up--I think McKinsey did a report on the 
global shortage of skilled workforce. So it is not just the 
United States. It is other developed countries.
    Chair Landrieu. Well, I would really look forward to that 
and really urge the NFIB to come with some strong suggestions 
about whatever methods, approaches, investments to develop the 
skill set of Americans that are already here as well as people 
seeking to become citizens of our country.
    Diana, let me ask you this. When you talk about--and we 
struggled with this when we did this health care bill, believe 
me. It was a topic of much discussion, about where to set the 
requirement for businesses to maintain health insurance for 
their employees. And as you know, I fought very hard to move 
that limit up from 25, which was originally proposed, to 50. 
And we recognize the challenges of that. But on the other hand, 
to have a system of health care that is a public-private 
partnership, where individuals have to take responsibility, 
where businesses have to assume some responsibility, and 
government has to assume some responsibility, how would you 
craft the ramp effect, if you would?
    We are not going to repeal the Affordable Care Act. It will 
not be repealed. So in implementing it, how would you suggest 
that the ramp effect between the 49th and the 50th or the 50th 
and 51st employees--do you have any suggestions about how to 
make that less of a barrier to hiring or a more able way for 
small businesses through the subsidies, maybe, to help them to 
provide that health insurance that is important for their 
workers?
    Ms. Furchtgott-Roth. I would say that the government should 
not require businesses of any size to provide health insurance. 
We should allow individuals to choose the health insurance they 
want, just as they choose auto insurance and home insurance. We 
never hear someone say, oh, my goodness, I am losing my job. I 
am not going to be able to drive because I do not have auto 
insurance because they purchase it outside from the employer. 
That is what we need to do in this case. We also need to have a 
wider variety of plans available on the exchanges, not just the 
qualified benefit plan. People need more choice----
    Chair Landrieu. Well, I could not agree with you more. I 
could not agree with you more. And there was a bill that I 
actually supported that would have done just that. But I will 
be honest with you. It was too far of a reach for the Congress 
to move from a system traditionally of employer-sponsored 
health care, with many of our largest employers already 
sponsoring health care, to move to a complete private 
individual model. So what Congress did was try to find a 
balance between preserving the best of the employer-sponsored 
plans but allowing that individual freedom of choice through 
exchanges that, ironically, some of the more conservative 
Governors in our country were refusing to set up, exactly what 
you said, to give individuals the freedom to get their 
insurance not attached to their employment.
    Ms. Furchtgott-Roth. Right.
    Chair Landrieu. So this is a real conundrum. My time is 
finished----
    Ms. Furchtgott-Roth. If you look at Congressman Price's 
Empower Patients First Act, that would allow individuals to 
bring to their employer some kind of refundable tax credit. The 
employer would then purchase the insurance for them at whatever 
plan they choose. Then when the employee leaves for another 
job, he does not have to switch plans. The new employer can 
move the subsidy, if the employer has a subsidy, to the same 
plan, kind of like with a 401(k) plan where you can just roll 
it over and you do not have to liquidate it.
    Chair Landrieu. Well, we are going to continue to work on 
this.
    Senator Snowe.
    Senator Snowe. Thank you. I will be a fast talker. And I 
want to thank all of you for your very impressive testimony.
    David, let me start with you. I am going to ask one 
question of the panel. Given the current situation regarding 
the fiscal cliff and the much debated issue about whether or 
not you can draw and delineate a line regarding a small 
business exemption regarding the top tax rates, David, do you 
think it is possible--and it is an important issue because 50 
percent of all income above the $250,000 is attributable to 
pass-through income--do you think we can draw that line, and 
how?
    Mr. Clough. I am going to beg off on the how. I will just 
mention on drawing the line, the NFIB has been considering 
that. I will let them get back to you and the committee with a 
more specific answer. They have done a study. They are aware of 
the Ernst and Young study, for example, that suggested there 
could be very significant job losses over the long run, 
depending on where the line is drawn. And also, I think, the 
Congressional Budget Office showed in the short run that there 
could be some significant job losses. The exact place, based on 
what I hear, is going to vary in some respects on the business, 
as well, and what stage of development the business is in.
    Senator Snowe. Julie, do you want to add anything? And I 
hope I am here for the 50th anniversary of the Women's Business 
Centers, someplace in the world.
    Ms. Weeks. Whatever happens, you are going to have to be 
there. We will definitely invite you.
    I am supposed to answer a fiscal-related question, too?
    Senator Snowe. Yes.
    Ms. Weeks. Well, I think that given that the only growth 
that has been happening has been happening with women's 
entrepreneurship, continuing to support a non-one-size-fits-all 
but a targeted approach is certainly key. I think that the 
uncertainty over what is happening here in Washington is the 
most critical element to all small business owners, male or 
female, with how are they going to grow their business.
    So I guess my primary reaction and advice is just please do 
something. The churning and the lack of activity is causing 
perhaps more grief and lack of growth than having a problem--or 
putting a solution out that not everybody agrees with. I think 
it is just critically important. If we do not get our act 
together here in Washington before the end of the Congress, it 
is really going to be a horrible situation for all small 
businesses--and large businesses, too.
    Senator Snowe. Ms. Furchtgott-Roth.
    Ms. Furchtgott-Roth. Yes. We can see that tax rates have 
consequences. We can see how, right now, companies are rushing 
to pay out dividends before January 1 because they think the 
tax on dividends is going from 15 percent to 44 percent. There 
will be other consequences of raising the tax rate for small 
businesses. They will make fewer investments. More of them will 
go offshore. They will cut back on job creation. And it is 
extremely important. As President Obama said in 2010--in 2010, 
he said--in December--it is not time to raise the tax rates 
because of the current economic situation. Well, economic 
growth is slower than it was in 2010 and we need to make sure 
that we do not kill the goose that lays the golden eggs.
    Senator Snowe. Thank you.
    Mr. Etemadi.
    Mr. Etemadi. Well, I do not know if I have a response to 
that regarding the fiscal cliff, so I will just pass.
    Ms. Lindfors New. What we have done at QRI, because of the 
uncertainties up here, is we have focused our business 
development, and again, this was in our SGAP plan, on issues 
that are going to have to be addressed no matter what. One of 
those issues is the infrastructure of the Mississippi River 
levee. We have done multiple projects where we are installing 
relief wells on the levees. They are either going to get 
installed or the levees are going to fail. Congress is not 
going to let that happen and they are going to have to put in 
emergency funds to do that.
    The other work that we are very focused on is coastal 
restoration, obviously, being from Louisiana. We were very 
involved in the Hurricane Katrina recovery. Our small company 
is working for the Coast Guard. We are doing the biological 
assessment for the BP Deep Water Oil Horizon job. We are 
installing flood gates in Rockefeller Refuge for the State of 
Louisiana.
    So we are focusing on work that is going to have to happen 
over the next several years, and by then, with our great 
leadership that we have--thank you, Chair Landrieu, and I am 
really saddened about you retiring, Senator Snowe. I mean, you 
have been incredible----
    Senator Snowe. Thank you.
    Ms. Lindfors New [continuing]. For women-owned small 
businesses, and small businesses in general. Surely, over the 
next couple of years, you all are going to have all this 
straight, because if I know if I can take my small business--
talking about a fiscal cliff, we faced our own fiscal cliff and 
we figured out how to get around it. You all can figure out how 
to get around it, too.
    Senator Snowe. We could not agree with you more.
    Chair Landrieu. Fonda, we could not agree with you more. 
The two of us talk all the time. If we could just write the 
bills and pass them, we could fix it and it would get done. 
Unfortunately, we have got a big Congress to run into. But the 
two of us kind of see things very similarly, trust me. But go 
ahead, and I am sorry. And we have to--can we move on to----
    Senator Snowe. Yes.
    Chair Landrieu. Okay. Can we get to Senator Shaheen, and we 
have been joined by Senator Ayotte.
    Senator Shaheen. Again, thank you all very much for your 
testimony. We appreciate it. And I think the point you make 
about certainty is a very important one, and certainly I 
believe that we are going to get this done. It may be messy, 
but it is going to get done, and what I hope all of you will do 
is encourage the businesses that you work with and your own 
businesses to urge Congress to act. You do not have to tell us 
how to act, but just say, get it done, because it is very 
important.
    Scott, I want to go back. Chair Landrieu picked right up on 
what you were saying about the restrictions on the 504 refi 
program. It is something that we talked about as that program 
was ramping up and we tried to weigh in in a way to address 
some of your concerns. But I wonder if you could elaborate just 
a little more on the changes that were made to make the program 
more effective and whether you think it is now working 
adequately and what you see in your region, which includes New 
Hampshire and much of New England, in terms of the interest 
that would be out there amongst small businesses if the program 
continued.
    Chair Landrieu. And, Scott, before you answer, let me turn 
the gavel, I think appropriately, to Senator Snowe for her to 
close out this meeting. I have got to leave for a pre-scheduled 
event, and I am very, very sorry. But I am going to turn the 
gavel over. She definitely knows how to use it----
    [Laughter.]
    And she will finish this meeting, hopefully in the next ten 
minutes, because I know members have to leave, including 
Senator Shaheen. But thank you so much.
    Mr. Gardiner. Thank you. Let me say this. The program is 
working very well right now. The changes made in October of 
2011 really have a good handle on the program and the needs of 
the small business. And the changes that took place were the 
SBA opening the program up to allow many more businesses to 
access the program by taking the debt that they had on the real 
estate and not limiting it to a two-year--that the debt had to 
be maturing within two years. So that was one of the primary 
repositionings that the SBA took.
    But the program is working very well, I think as evidenced 
by the existing applications at the SBA. Over approximately 400 
applications are sitting there waiting to be approved. Those 
affect jobs in New Hampshire, Maine, Louisiana. All the States 
across the country have applications in there. So there is a 
strong demand for this program.
    And one point I would like to make on jobs. These are 
businesses that are existing businesses. They have gone through 
the recession. They have had to lay off staff, I am sure, to 
maintain business. And now they are operating very lean. When 
the economy turns around, these businesses that we are 
assisting by reducing their cash flow, freeing up cash, they 
will be able to use that to create more jobs. When they start 
growing, they are going to immediately start hiring new staff. 
So I think that is an important point.
    Senator Shaheen. A very good point, so that this is a real 
opportunity to create jobs if we can extend the program.
    Mr. Gardiner. Yes.
    Senator Shaheen. Mr. Etemadi, you talked about wanting to 
see the increase on the surety bond guarantee go from $5 
million to $6.5 million. Do you have any data or any analysis 
that shows what that might be able to do in terms of job 
creation and the businesses that that might help if we were 
able to increase it?
    Mr. Etemadi. Well, I can tell you that the average small 
business contract by the Department of Defense was $5.9 
million, and so having it increased to $6.5 million would be 
beneficial to small businesses trying to access that program. 
And on top of that, the----
    Senator Shaheen. And do you have any numbers, any estimates 
that you all have about how many businesses would be affected 
if that increase happened?
    Mr. Etemadi. I would have to check on that, but----
    Senator Shaheen. If you could, that would be information 
that I think would be very helpful to the committee.
    Mr. Etemadi. Sure.
    Senator Shaheen. Thank you very much. Thank you.
    Senator Snowe [presiding]. Yes, and thank you.
    And now I would like to recognize the other colleague from 
neighboring New Hampshire, Senator Ayotte.
    Senator Ayotte. Thank you very much, Chairman Snowe, and I 
also want to thank my colleague from New Hampshire, Senator 
Shaheen. I appreciate all the witnesses being here today, and 
you obviously have discussed very important issues that impact 
small businesses, which in our State, of course, is the heart 
and soul of our economy. And I will echo what has already been 
said here, that we hope to resolve the issues that are 
impacting the fiscal cliff and we need to do it in a way that 
does not hurt economic growth, because with the fiscal state of 
the country and $16 trillion in debt, we not only need to deal 
with the drivers of our debt, but also grow our economy if we 
are going to recover. So I know the issues that you discussed 
and I appreciate your testimony on those issues.
    I wanted to also thank Mr. Gardiner for being here today. I 
know that this panel appreciates your input and your expertise 
on the proposed 504 refinance extension and I want to thank you 
for the overall important work that you do with businesses in 
New Hampshire. So I just have--and I know that we are going to 
meet later to discuss those and I look forward to that meeting.
    I have a couple of questions related overall to that 
program. Number one would be we know that the refinance program 
expired on September 27, as I understand it, and that in New 
Hampshire, the Granite State provided ten of the 504 refinance 
loans for about $9.4 million. You also noted that there were 
396 refinance applications, or you said, roughly, just a minute 
ago, about 400 applications, and there is strong demand for the 
program, with an aggregate value of over $424 million that are 
left in the queue, so to speak.
    Mr. Gardiner. Correct.
    Senator Ayotte. Can you give me an estimate? If we were, 
for example, to approve the program for another year, how many 
are in the queue for New Hampshire? How many do you think would 
be eligible for approval in New Hampshire? I am just trying to 
get a sense of our own State.
    Mr. Gardiner. I think for New Hampshire, we see the volume 
representing approximately 30 percent of the overall 504 
volume. So it is a little bit hard to judge, but I would guess, 
easily, 25 to 30 loans that could be approved.
    Senator Ayotte. Estimating.
    Mr. Gardiner. Estimating. In New Hampshire.
    Senator Ayotte. Okay.
    Mr. Gardiner. Yes, in the next 12 months.
    Senator Ayotte. And this may have been addressed earlier, 
and if it was, I certainly apologize for that, but one of the 
key justifications for the program itself, and I believe you 
touched on this in your testimony, was originally contained 
within the Jobs Act of 2010, was really what we saw as a drop 
in the commercial real estate market. Really, commercial real 
estate prices at that time were dropping. And today, we have 
seen, thankfully, some improvement in that market. And 
according to estimates, the prices have been rising, and 
fortunately, some of the vacancy rates are falling, showing 
some rebound.
    And my question, compared to where we were when we were 
looking at extending this program in 2010 under the Jobs Act 
when we established it--so one question I think is an important 
question to address is if the commercial real estate market is 
improving, why should we extend the program? And I think that 
is, obviously, a fundamental question when we have a lot of 
other competing interests and we want to make sure that we 
address programs that are most effective, and I do not doubt 
the effectiveness in New Hampshire, but I thought that was a 
very important issue for you to address.
    Mr. Gardiner. A large part of it is the decline in the 
commercial real estate market, but another issue is just the 
bank--the commercial banks out there have changed their 
policies because of the recession, I think, and the downturn. 
They have tightened up their credit policies. They are not--
even though there may be equity in real estate and the equity 
may be improving, the banks have not come around to lending as 
they did in the past. So I think this program helps the banks 
to leverage the real estate to allow those businesses to use 
that equity so that they can restructure their debt. So you are 
basically taking short-term debt that may be used for term 
loans, short-term equipment financing, and allowing the bank to 
restructure it, use the equity in the real estate and turn it 
into long-term debt. So you are immediately improving the cash 
flow of the business. And these are strong businesses. They 
have been proven. One of the criteria is that these businesses 
have never missed a payment in the last two years. So we are 
not talking about risky businesses that we are just trying to 
bail out.
    So the commercial real estate market or the commercial real 
estate values, although it is climbing, I think it has got a 
long way to go before the banks are able to restructure and 
help the businesses like this refinance program can.
    Senator Ayotte. I see my time is up. I know we will have a 
chance to spend more time together in the afternoon. I 
certainly appreciate everyone on the panel. This is a very 
important time for our economy and making sure that we have the 
best climate for small businesses, in particular, to thrive and 
grow. So I thank you all.
    Senator Snowe. Thank you, Senator Ayotte.
    Again, I want to thank each and every one of you for being 
here today, for submitting your testimony on how to approach 
these critical issues confronting small businesses and the role 
that each of you play in your respective arenas. And also, I 
thank you for your patience, for waiting until you had the 
opportunity to testify.
    Again, I want to reiterate how crucial it is that these 
decisions that we are going to be making, as you well know, in 
the remaining weeks of this legislative session could really 
determine the outcome for the future of our country, all the 
issues surrounding the fiscal cliff, and most notably how it is 
going to affect the entities of small businesses that we depend 
upon to create those jobs.
    I noted that there had been a letter submitted by so many 
small business organizations to the Congressional leadership 
regarding these issues and representing millions of pass-
through business entities, as they say, employing tens of 
millions of workers, urging Congress to pursue comprehensive 
tax reform and entitlement reform to reduce our long-term debt. 
The point here is making sure that we do not create adverse 
consequences to those that you represent and are a part of, and 
that is the job creators. I mean, it is absolutely an 
imperative for the future. Hopefully, those lines can be drawn, 
because I think it is going to be--otherwise, it will have 
profound impact on the future of this economic recovery.
    You know, it happens to be the worst recovery in the 
history of this country. I am stunned by the numbers that you 
mentioned, David, regarding Maine, for example, and having to 
defer and delay the years by which we are going to return to 
the pre-recession levels of 2007 for employment. I mean, it is 
stunning now it is 2017.
    And so the more we hesitate and delay and defer and 
obfuscate, the more this lingering uncertainty is going to cast 
a shadow over our ability as a country to create those jobs 
that people desperately need and certainly deserve, not to 
mention, as you have raised here today, is what are the jobs 
for the future, and that is another major issue. And we can 
never get to those questions because we are still dealing with 
the ultimate economic issues for far too long.
    So I know we can do it. Hopefully, there will be that 
bipartisanship that is the final ingredient that can make it 
possible. So I thank you again for being here today.

    The hearing is adjourned.
    [Whereupon, at 12:30 p.m., the committee was adjourned.]
    
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