[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





 
         SMALL BUSINESS ADMINISTRATION: MANAGEMENT 
                           AND OUTLOOK
=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 10, 2014

                               __________



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                      Small Business Committee Document Number 113-081
                         Available via the GPO Website: www.fdsys.gov

                                __________


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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                      BLAINE LUETKEMEYER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      Lori Salley, Staff Director
                    Paul Sass Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Sam Graves..................................................     1
Hon. Nydia Velaazquez............................................     2

                                WITNESS

Hon. Maria Contreras-Sweet, Administrator, United States Small 
  Business Administration, Washington, DC........................     3

                                APPENDIX

Prepared Statement:
    Hon. Maria Contreras-Sweet, Administrator, United States 
      Small Business Administration, Washington, DC..............    22
Questions for the Record:
    Questions from Hon. Sam Graves and Responses from Hon. Maria 
      Contreras-Sweet............................................    25
    Question from Hon. Steve Chabot and Responses from Hon. Maria 
      Contreras-Sweet............................................    31
    Question from Hon. Mick Mulvaney and Response from Hon. Maria 
      Contreras-Sweet............................................    31
Additional Material for the Record:
    None.


        SMALL BUSINESS ADMINISTRATION: MANAGEMENT AND OUTLOOK

                              ----------                              


                     WEDNESDAY, SEPTEMBER 10, 2014

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Chabot, Leutkemeyer, 
Schweikert, Collins, Velaazquez, Schrader, Chu, Hahn, Meng, 
Schneider, and McLane Kuster.
    Chairman GRAVES. We will call the hearing to order. And I 
would like to welcome everybody for being here, or welcome 
everybody to the hearing room.
    Today we are going to welcome for the first time to the 
Committee the Honorable Maria Contrares-Sweet, the 24th 
administrator of the Small Business Administration. Since being 
confirmed as administrator and a member of President Obama's 
cabinet of this year, Administrator Contrares-Sweet has been 
responsible for leading the SBA in its wide array of programs. 
In addition to overseeing the Agency, including its loan 
portfolio worth more than $100 billion, the administrator is 
responsible for positioning the SBA to succeed in the years 
ahead. And with this hearing, we plan to both examine the 
current management of the Agency and develop better insight as 
to how the SBA has poised itself to tackle future challenges in 
a dynamic, economic climate.
    We all know that small businesses are the engines of our 
economy and responsible for the creation of two-thirds of all 
new jobs, and access to capital is critical to these job 
creators. In the last fiscal year, the SBA supported more than 
$29 billion in lending to small businesses, and this was led by 
the 7(a) Loan Program, which guaranteed over $17 billion in 
lending and is on pace to do so again this year.
    The SBIC program also had another record year and the 7(a) 
and 504 loan programs required less taxpayer dollars to operate 
last year than in any since the recession. While there have 
been recent successes, fundamental concerns associated with the 
SBA's management remain. As the Committee has expressed before, 
the Agency continues to create policy without the benefit of 
notice and comment rulemaking, thereby ignoring valuable input 
of those affected.
    For example, in June, an announcement of a new credit 
scoring model for loans of under $350,000 was made by an 
internal agency notice. Additionally, the Agency has a history 
of pursuing initiatives it creates on its own while ignoring 
congressional mandated activities. Contracting reforms this 
Committee debated and approved and which were signed into law 
more than two years ago have not been fully implemented, while 
resources instead have been devoted to potentially duplicative, 
unauthorized entrepreneurial development programs dreamed up by 
the Agency with little public input.
    To ensure the Agency is accountable and operating in the 
most efficient manner while reducing risk to the taxpayers, it 
is critical moving forward that the SBA works with Congress, 
complies with the law, and engages the public more effectively.
    We are very fortunate again to have the administrator here 
with us today, and we look forward to hearing her perspective 
and working with her to improve SBA and better serve small 
businesses. And I now recognize Ranking Member Velaazquez for 
her opening statement.
    Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
    This hearing is timely. While we have not yet seen the pace 
of economic growth all of us would like, America's 
entrepreneurs are creating jobs, growing, undoubtedly leading 
us back to prosperity.
    In August, small firms with fewer than 500 employees led 
job growth, adding 153,000 positions to the payrolls. At the 
same time, early August numbers for the broader economy were 
disappointing. Clearly, the outlook for both our recovery and 
the small business sector remains mixed. Small businesses do 
appear poised to ramp up investment in their operations. A 
recent survey found 51 percent of companies with less than $20 
million in revenue, plan to increase capital spending during 
the next year, an investment that will hopefully fuel further 
growth.
    Despite positive trends, obstacles remain. Access to 
capital is a perennial challenge for entrepreneurs. That 
remains the case today. Even now, lending activity has not 
returned to pre-recession levels. Commercial loans of less than 
$1 million, loans that primarily go to smaller companies, 
remain down by about 20 percent, compared with the year leading 
up to the financial crisis. At the same time that capital is 
tied, two-thirds of small companies report rising expenses in 
broadening their businesses. Fully a quarter of firms say 
rising costs are the biggest challenge, making clear the need 
to expand entrepreneurs' financing options.
    Likewise, small businesses continue seeking demand for 
their goods and services. This committee has repeatedly 
examined how small firms and other disadvantaged businesses can 
benefit with the federal government as a customer. While the 
federal government may hit its 23 percent small business 
contracting goal this year, more can always be done.
    In all these areas, the SBA performs a vital mission, and I 
just want to take this opportunity to welcome Ms. Contreras-
Sweet to the SBA. I am looking forward to working with you. SBA 
credit programs get capital into the hands of small firms by 
guaranteeing loans that banks might otherwise be unwilling to 
make. Last year, the agency supported $29 billion in loans to 
small firms. As commercial credit remains tight for small 
companies, it is critical the agency continue helping 
entrepreneurs access capital.
    Likewise, the agency has a crucial role in ensuring federal 
agencies meet their small business contracting goals. While 
hitting the 2013 government goal constituted progress, it comes 
after small businesses received nothing for many years. The 
entire federal government can and must do better. For aspiring 
entrepreneurs and early-stage businesses, the SBA is equally 
important. Studies have consistently shown that federal 
investment in these programs net a positive return for the 
taxpayers.
    I look forward to hearing how the agency will manage these 
programs in the future. The small business administration can 
provide an important boost to small companies, and when small 
businesses succeed, the broader economy does well. In that 
regard, I look forward to hearing the administrator's views on 
how the agency is currently functioning, what improvements can 
be made, and how she plans to strengthen SBA services to 
benefit America's entrepreneurs.
    Mr. Chairman, I thank you for this time, and I yield back.
    Chairman GRAVES. Okay. Testifying before us today is the 
Honorable Maria Contrares-Sweet, who is the administrator, as 
we have mentioned, of the Small Business Administration. The 
administrator oversees the Agency's loan portfolio, as well as 
small business counseling and contracting programs. 
Administrator Contreras-Sweet is a successful entrepreneur, 
business executive, and former state cabinet official, and 
prior to taking over the helm of the SBA, she founded the first 
Latino-formed commercial bank in California in more than 35 
years and focused on providing access to capital and counseling 
to small- and mid-size businesses in Los Angeles. She also 
started and ran a venture capital firm that invested in small 
businesses.
    Administrator, thank you for being here. I look forward to 
your testimony.

   STATEMENT OF MARIA CONTRERAS-SWEET, ADMINISTRATOR, UNITED 
              STATES SMALL BUSINESS ADMINISTRATION

    Ms. CONTRERAS-SWEET. Thank you so much, Chairman Graves, 
and to you, Ranking Member Velaazquez. I am delighted to be 
with you and with all of the members of this wonderful 
Committee. Thank you for the opportunity to address you today.
    Since being confirmed, I have taken time to sit with many 
of you, and I have come to know that you not only share my 
passion to promote entrepreneurship, but have been actively 
engaged in supporting our nation's small businesses. I am 
grateful to you.
    In my engagement with the chairman and ranking member, I 
have seen firsthand the bipartisan commitment of this 
Committee, working together to help small businesses. At the 
SBA, our team remains focused on our core mission of 
facilitating access to capital, counseling, contracts, and 
disaster assistance. When meeting with our lenders, clients and 
borrowers, I understand their concerns because I have been in 
their shoes as an entrepreneur, five years as California's 
chief bank regulator, and in starting a community bank. This 
guides my belief that SBA can help more businesses create jobs.
    I have also learned the significant work that happens in 
this Committee and the importance of working with you to make 
our programs better and the Agency run more effectively. SBA's 
capital is infusing dollars into local markets and improving 
our American economy. Small businesses inject capital into the 
economy more quickly as they cover payroll, buy equipment, and 
acquire local real estate. This is good, so we can stamp more 
often ``invented, grown, and made in the USA.''
    In the 21st century, the SBA must be as innovative as the 
businesses we serve. I want SBA to mean ``Smart, Bold, and 
Accessible.'' Implementing smart systems so our agency keeps 
pace with the technological advances that change how Americans 
conduct their business. Championing bold initiatives to open 
new business channels for entrepreneurs within the federal 
government, corporate supply chains, and international 
commerce. And making our services more accessible to small 
business owners, regardless of their gender, race, age, or 
neighborhood.
    From my conversations with Chairman Graves, and many of 
you, we see that the prevailing challenge SBA faces is that our 
loan documentation is too complex and labor intensive, forcing 
banks to hire specialized staff, contract it out, or worse, 
walk away from loans. We cannot afford to lose these partners 
and turn job creators away. To combat this, we have launched a 
predictive business credit scoring model the SBA has been 
developing for more than a decade, combining an entrepreneur's 
personal and business credit scores. This new scoring model is 
now available to all of our lending partners for loans of 
$350,000 or less, making it easier and less time-consuming for 
banks to do business with us and for entrepreneurs to do 
business with them.
    Strong stewardship of our flagship 7(a) program has allowed 
us to keep fees at zero on loans less than $150,000, and we 
continue to operate it at zero subsidy. The 504 program is 
moving closer to zero subsidy. Next year, we will roll out SBA-
1, an interactive, user-friendly platform. It will automate the 
uploading of documents and generation of forms, and allow for 
electronic signatures. On each 7(a) loan, the SBA will say 
banks' hours of processing time and money. The combination of 
predictive credit scoring and SBA-1 will incent more banks to 
partner with us to promote underserved lending, generating more 
loans and igniting more economic activity.
    Being bold means opening new markets, both here and abroad. 
Over the next decade, new markets around the world are going to 
open up, but only 1 percent of small businesses are selling to 
them. We are focused on ensuring small businesses have the 
financing they need to engage internationally.
    I am pleased to announce that for the first time in eight 
years the federal government met the 23 percent goal of federal 
contracting to small businesses in FY13. This was an important 
achievement, but lamentably, we fell short of our women-owned 
contracting goal. We must do more to meet it.
    The face of entrepreneurship is changing in America. Being 
an accessible SBA is key. More of those faces today belong to 
women, to Latinos, to African-Americans, Asian-Americans, 
Native Americans, our veterans, and our seniors. To this end, 
in addition to promoting small dollar loans, we are focused on 
building referral networks with micro lenders so new businesses 
can get startup capital.
    At the SBA, our team is working to find creative ways to 
put micro capital into the hands of emerging entrepreneurs. 
While this has been a priority from Ms. Velaazquez, we have all 
seen too many entrepreneurs with great ideas and products 
default because of poor financial planning. We look forward to 
working with her, all of you, and our national network of 
partners to increase technical assistance to small businesses. 
Our guarantees allow lenders to make loans they otherwise would 
not.
    The SBA fills market gaps. Every dollar we inject into the 
economy is capital that would have potentially stayed on the 
sidelines. I thank you for all your bipartisan commitment to 
small businesses. Mr. Chairman, I am delighted to take your 
questions.
    Chairman GRAVES. All right. We will start with Mr. Chabot.
    Mr. CHABOT. Thank you very much, Mr. Chairman. We are 
honored to have you here this afternoon, Madam Administrator. 
And thank you for taking the time to speak with me over the 
phone last week. I know that you had an opportunity to learn 
about The Brandery in Cincinnati, which is one of the startup 
accelerators. It has been quite successful around the country, 
and the accelerator fund.
    Looking at the most recent metrix for the SBA's Capital 
Access Programs, it is clear that the SBIC program is an 
important one, and I think the SBIC program fills a critical 
gap in the market caused by the financial crisis, and to some 
extent, by the burdens on lenders under Dodd-Frank. But many 
successful SBICs have hit the family of funds limit, and there 
are many more funds that will hit it if they raise another 
fund. In other words, if they try to support more small 
businesses. So we should encourage investments in small 
businesses, not limit it.
    The administration has previously been supportive of 
raising this limit. Does the administration still support 
raising the family of funds limit, and will you work with us to 
help pass an increase?
    Ms. CONTRERAS-SWEET. Thank you, Mr. Chabot, for that 
question.
    I think the SBA sees a very interesting tool. Just thinking 
and harkening back to my banking days, I can share with you 
that sometimes we do not always have enough to collateralize a 
loan, and so I find that the notion of providing mezzanine 
capital, patient capital, is really key, and I am delighted 
that this program is blooming and more and more are hearing 
about the program.
    I just received another application for a SBIC yesterday, 
in fact, so I am pleased to tell you that out of this office, 
this Office of Innovation and Investment, we were able to shape 
the growth accelerators to which you just referenced. And I am 
pleased to tell you that through that program we are incubating 
the incubators, because it is important to connect with those 
who wanted just some seed capital to get started. I call it 
sort of angel financing without taking an equity position. So 
overall, I find that this program is very complemented to the 
other suite of programs that we have at the SBA, and I am 
supportive of it. I have been watching that ceiling, and I can 
share with you that at least so far I have not seen a challenge 
with it, but others have come to me, and I would be delighted 
to come back and work with you to support the ceiling of that 
opportunity.
    Mr. CHABOT. Yes. We would like to follow up with you and 
work with you on the family of funds issue. Thank you.
    Let me ask you this. All of our financial institutions play 
a role in small business capital formation, and credit unions 
are no exception. I happened to speak before the credit union 
folks who were in town this week, this morning for a while. In 
fact, they experienced a 12 percent growth in small business 
loans from last year. Is the SBA trying to collaborate more 
with credit unions, and if so, could you elaborate on any of 
those efforts?
    Ms. CONTRERAS-SWEET. Thank you again. I have to tell you 
that I think credit union are quite special. I think they can 
play a very important role considering that they complement the 
for-profit community of the private lenders which I was a part 
of, but I find that their model is quite interesting. And so as 
soon as I took office, I reached out to the chairman of the 
regulatory body, Debbie Matts, to engage and to discuss what 
role--what is the proper role of our credit unions. I was 
delighted to see their interest in wanting to engage, and I am 
pleased to share with you that just recently we are now in the 
throes of actually penning an agreement where we can work more 
collaboratively and collegially.
    I was just in San Diego meeting with our AARP organization, 
which is also a marvelous organization. And so the three of us 
are looking to form a troika, if you will. I think credit 
unions can play a special role, particularly with respect to 
micro lending, and that is the target that we are looking at.
    Mr. CHABOT. Thank you.
    Ms. CONTRERAS-SWEET. And it would not affect their business 
cap, and so I think that it works and it would be complementary 
to what they are doing already. Thank you.
    Mr. CHABOT. Thank you.
    I have got about a minute, so let me just ask you this. You 
had mentioned that you are interested in gauging 
internationally, meaning trade, I am sure. Do you know if the 
president is going to expend any political capital anytime in 
the near future to push some of his allies in the House on TPA, 
the Trade Promotion Authority, and therefore put us on the road 
to TPP in the Pacific area, or TTIP in Europe, because 
international trade is absolutely critical, the economy, and it 
is kind of a heavy lift, and we have not really seen much 
effort there by the administration at this point. Not you, but 
your boss.
    Ms. CONTRERAS-SWEET. Thank you. Thank you for that.
    I have to tell you that as we see that in the next 10 years 
we are going to see about a billion new consumers in the middle 
class join the ranks of the middle class, and so it is 
important that we keep a keen eye on the international 
opportunity. Right now, 95 percent of the world's consumers are 
outside of the U.S., and only 1 percent of small businesses are 
partaking of that opportunity. So I think it is important for 
us to look at ways in which we help the small business adapt 
and grow into international strategies.
    So to that end, you know that we have the STEP program that 
we use. We have, of course, our USEAC centers where we provide 
services throughout the country. We work collegially with 
Congress, with the Ex-Im Bank, with all the others, and the 
president has indicated that he supports TPP and asked us to 
get behind it as well. I cannot tell you particularly exactly 
his strategy, but I can tell you that he stands ready to do 
what he can to encourage small businesses to partake of the 
enormous international opportunity.
    Mr. CHABOT. Thank you very much.
    Chairman GRAVES. Ms. Velaazquez?
    Ms. VELAAZQUEZ. Thank you, Mr. Chairman. And welcome again, 
Ms. Contreras-Sweet.
    Ms. CONTRERAS-SWEET. Thank you.
    Ms. VELAAZQUEZ. You mentioned, and I mentioned in my 
opening statement, that access to capital is still a challenge 
for a great number of entrepreneurs. And one of the sectors in 
our economy that is facing serious issues in accessing capital 
are women entrepreneurs. When the Small Business Jobs Act was 
passed in 2010, we were told that we needed larger loans to 
help spur the economy. However, lending volume to women-owned 
firms actually decreased in that time. More shockingly, larger 
loans seem to have disproportionately benefited male-led firms. 
The gap in average loan size reached almost 50 percent in 2011 
and remains above 35 percent today. How can we tell women 
entrepreneurs that the SBA is there for them when such large 
discrepancies exist, and what do you intend to do about it?
    Ms. CONTRERAS-SWEET. Thank you for asking me a question 
that is very important to me personally, and I started a 
financial institution because I care deeply about making sure 
that all people have access to capital in a very consultative 
and respectful fashion.
    So, to that end, on day one, when I inquired about what the 
opportunities were, I have learned as a banker that there is no 
one silver bullet for any target market. We have to make sure 
that we have a continuum of capital available so that as we 
grow, that the SBA can continue to be there, bearing in mind 
that the SBA is not there to compete with the private capital 
markets; we are only there to fill the market gaps.
    And so in that regard, we have, I would say, a triple, 
quadruple prong strategy. First, it is the way we consult our 
women. We have Women Business Centers throughout the country 
that are helping them understand how to build a sold, strategic 
plan. You all know that you gave us an important tool then in 
terms of once they have a plan, they need to get work. You gave 
us an important tool, and that is you said to us a 5 percent 
goal on contracting. We are working on that. We have not 
reached that goal, but I think we have an opportunity to do 
more.
    One of the first things I did as soon as I took office, my 
initial first trip, was to launch a ChallengeHER event to help 
the word get out and also to promote more matchmaking 
opportunities. But with respect to capital, all of our efforts 
have been to make sure that all of the stream of capital is 
available to everybody in that regard. And I can tell you that 
so many bankers always say that they want to get the bigger 
loans out, and we have to make sure that we are pushing forward 
on the small dollar loan.
    So you probably have heard, I know that you have been 
support of the fact that we have zeroed out fees on loans under 
$150,000. We are getting the word out through our micro lending 
program about that, and we are looking at technical assistance, 
which I know is so vital. And then, of course, the system that 
we just recently put in place around the predictive scoring 
will help community banks get more loans out to women as well.
    Ms. VELAAZQUEZ. Administrator, I would like to hear at 
least one or two specific steps that you intend to take in 
order to make sure that when you come to us and ask to increase 
the cap, that you can put more money out there. That we benefit 
a sector that is growing, because we know that women-owned 
businesses are growing faster than any other group within the 
economy. But yet, they are facing problems in accessing 
capital. So I would like to hear that you are going to revise, 
look, the 7(a) program, the mission of it when it was created 
was to put money into the hands of able and credit worthy 
entrepreneurs that for whatever reason had problems accessing 
capital through traditional banks and traditional lending 
institutions. So I would just like for you to go back and 
review the data and see what specific steps you will take.
    Now I would like to ask you about Super Storm Sandy, 
because this is close to home. It happened in New York and the 
Tri-State area. Right after Katrina, we revamped the disaster 
program, and we provided tools that gave the flexibility for 
SBA to act quickly and swiftly and provide a system that 
homeowners and small business needed in a timely manner so that 
we could save those businesses that were impacted by any 
disaster, any natural disaster.
    Here we are. The OIG is going to come out with a report on 
the response of the disaster loan program for Sandy, but what 
we know is that once again, the disaster program has been 
exposed, and it shows the shortcomings as long processing times 
averaged 46 days for small businesses. The budget shows that 
SBA has requested $186.9 million for disaster administration 
next year.
    In what ways will this funding be used to reduce processing 
delays so that businesses and homeowners can get funds more 
quickly?
    Ms. CONTRERAS-SWEET. Thank you again, Congressman, for that 
question as well.
    Let me just say to you that I cannot speak with great 
specificity about what happened in the past, but what I can 
tell you is that when we heard about the disaster in the State 
of Washington, I flew out there immediately to meet with all 
the people in the Oso, Darrington, and Arlington communities, 
and I can share with you that within 24 hours of hearing that 
the disaster was declared, our people were on the beat. And 
within a few days, money was out the door. And so I think that 
our systems continue to be refined and continue to be evolve, 
and will be strengthened over time. I am now on it, and I am 
delighted to tell you that I think we are making great 
progress.
    Moreover, I just spent yesterday with those who process our 
loans to find ways in which we can develop organizational 
systems, to make sure that we are processing them more 
efficiently, and form a more informed basis.
    Ms. VELAAZQUEZ. Well, I would like for you to come back to 
the committee or send us an answer to my question because we 
provided specific areas that you needed to improve, and to 
execute those that were continued within the disaster program 
legislation that we passed. And some of those tools that were 
included were not used, and I would like to know that, in fact, 
you have implemented them so that the next time you are ready 
to answer and provide the assistance that those businesses 
need.
    About Washington, I do not know. I hear you, but the 
numbers will tell us whether or not you were able to provide 
the loans that those businesses needed, because in New York, 
many of those businesses are not in the system today. Studies 
show that when a disaster loan strikes, it will take--if you do 
not provide a response, if you do not provide the system that 
they need within the four weeks after a disaster, the 
probability of those businesses not succeeding and getting back 
on track are very, very high. So after Katrina, now Sandy, I 
hope, and I pray that we will not face any other natural 
disaster. But we cannot fool ourselves. We know that it will 
happen again, and we want to make sure that you have everything 
you need to have in place so that the administration is able to 
provide the system--that we promised, that this government 
promised.
    Ms. CONTRERAS-SWEET. I just wanted to add, Ms. Velaazquez, 
that my mother-in-law experienced Northridge earthquake, and I 
have experienced the riots of Los Angeles. And I want to tell 
you that disasters are very important to me. I have met with 
our district offices. I have gone to the sites, and I track our 
numbers every day. And I am working with our department 
directly to assure that every one of our programs is well 
executed and on-time, and on-target budget-wise.
    So I thank you for your concern to this topic. I want to 
assure you that we are on it. Thank you.
    Chairman GRAVES. Mr. Luetkemeyer.
    Mr. LUETKEMEYER. Madam Administrator, I will take a moment 
to follow up on a letter that I sent to you, me and my 
colleagues as well, to the Agency several months ago. The 
letter addressed changes to the SOP 50-10F, which states we 
still have some concerns about with the overall policy, but I 
have heard some assurances from SBA that the policy is 
currently being amended. I am pleased to know that. What I am 
following up on today is how the changes came to be, which is 
without any public input.
    According to the regulations, it is required to obtain 
comment from the public on its rules, and given that fact, many 
of the standard operating procedures governing the loan 
programs are actually rules under the guise of standard 
operating procedures. What actions are you taking to ensure 
that the public can offer comment on changes to SBA standard 
operating procedures?
    Ms. CONTRERAS-SWEET. Thank you again for that question. We 
are examining all ways in which the public can engage the SBA 
while using the usual governmental procedures as well as we are 
deploying smart systems to make sure that people can 
communicate with us in the current ways of technology today. 
And so, for example, we are now launching more initiatives 
around connecting through the social networks. Our people are 
getting out in the field more. We are directing them to get out 
and to do front-end conversations so that we can be proactive 
in the community. And I want to ensure you that----
    Mr. LUETKEMEYER. Let me interrupt just a second here.
    Are you advertising this so people who have concerns about 
it, people who will be in the process of utilizing these 
services can find this opportunity for themselves? Or is it 
just stuck on a computer site somewhere and you have got to go 
digging, digging, digging before you can find it?
    Ms. CONTRERAS-SWEET. Thank you for that comment.
    No, the Agency has been very proactive in connecting. We 
have so many outlets to engage the outlet. One, we meet 
regularly with the NAGGL partners, our government guarantee 
lending partners. We meet with people through our Women 
Business Centers, through our SCORE partners, through our 
Veterans Business Outreach Centers. Our regional administrators 
are out in the field. Our district directors are out in the 
field, and our key program lead, regularly hold comment 
opportunities for those who are affected by any of our 
programs, to be able to provide feedback and input.
    Mr. LUETKEMEYER. Well, the concern is that it did not 
happen properly on this situation that we tried to address with 
the letter, and you are assuring me that that is not going to 
happen again.
    Ms. CONTRERAS-SWEET. That is correct, sir.
    Mr. LUETKEMEYER. Following up, in your statement you say 
that on each 7(a) loan, SBA-1 will save banks hours of 
processing time and money. Do you have a study to show how many 
hours it is going to save?
    Ms. CONTRERAS-SWEET. I can share with you, Mr. Chairman, 
that--excuse me, Mr. Congressman--that as a banker, I can tell 
you that first and foremost what we have to do as a banker is 
accept these loan documents through a fax machine, and we 
communicate with our client through a fax machine. And so when 
you consider the smart technology that is available today, it 
is important to sort of blow up the fax machines and allow the 
SBA to be current with----
    Mr. LUETKEMEYER. Madam Administrator----
    Ms. CONTRERAS-SWEET. Yes?
    Mr. LUETKEMEYER. As a banker, I am telling you, asking you, 
where is the information to back up what you said? I deal in 
facts. This is a statement that should have facts, studies, 
something backing up. I am asking you have you got a study that 
shows how many hours you are going to save. Yes or no, do you 
have a study?
    Ms. CONTRERAS-SWEET. Mr. Chairman, we do have an 
understanding. We have a very clear understanding that when you 
cut out paperwork and extra visits----
    Mr. LUETKEMEYER. So in other words, you do not have----
    Ms. CONTRERAS-SWEET. And then what you do is when you 
launch a pilot, then you track the metrics and then we will be 
able to come back and report to you.
    Mr. LUETKEMEYER. So we have not tracked the metrics yet?
    Ms. CONTRERAS-SWEET. We have not launched the program yet.
    Mr. LUETKEMEYER. So you do not know how much you are going 
to save yet?
    Ms. CONTRERAS-SWEET. We will track the metrics.
    Mr. LUETKEMEYER. It may cost more hours.
    Ms. CONTRERAS-SWEET. Mr. Congressman, I have not seen a 
program that when you take out steps and steps and take out a 
lot of paperwork, that it ends up costing more. I just have not 
seen that in my experience.
    Mr. LUETKEMEYER. Madam Administrator, you are talking with 
somebody who was with the government here. We deal with this 
every day. Every day our constituents of inundated with more 
regulations, more work. You take off two regulations, you put 
on five. It happens all the time. And here you are telling us 
this is a wonderful program. I hope it works. All I am asking 
for is documentation that can prove what you just said. And you 
cannot do it.
    Please do not come to this Committee and make statements if 
you cannot back them up. That is my point. And it is a pretty 
simple request here. It is made on page two, the bottom of two 
here. I see my time is up.
    Ms. CONTRERAS-SWEET. As an experienced banker, I can assure 
you it is going to take--it is going to take some savings, and 
it will be more efficient. And I will be delighted to buy you 
lunch if that does not happen, Mr. Congressman.
    Mr. LUETKEMEYER. Madam Administrator, as a fellow banker, I 
can tell you this stuff causes he headaches, heartburn, and 
costs me lots of money because it takes lots and lots of time 
of my people in my business to adjudicate and work with.
    Thank you, Mr. Chairman. I yield back.
    Ms. CONTRERAS-SWEET. I am hearing great enthusiasm from our 
banking partners. Thank you so much for your support.
    Chairman GRAVES. Ms. Chu?
    Ms. CHU. Administrator Contreras-Sweet, welcome.
    Ms. CONTRERAS-SWEET. Thank you.
    Ms. CHU. I have questions about the SBA 7(a) Guaranty Loan 
Program and the 504 Loan Program. I know they both fill 
critical needs in the market for small businesses that cannot 
access traditional lending sources. It is important that these 
loans reach underserved communities and the small business 
owners that need them the most. So my question has to do with 
whether the program is reaching its intended target. Can you 
tell me about the lending demographics of the 7(a) loan 
portfolios of the lenders, such as the types of loans being 
administered and what types of communities have been receiving 
the loans for the past two years?
    Ms. CONTRERAS-SWEET. Thank you for that question. I am 
pleased to say that what we are learning in the loans under 
$150,000 are dramatically up. We are seeing that the women 
loans are up, the African-American loans are up over 100 
percent. I believe the women loans were up 35 percent. Every 
single target population has gone up since we have zeroed out 
fees on the 7(a) loan on the community advantage loan. So we 
need to continue to push that because I think that that is 
where so much of our diversity is looking for capital at the 
lower end just to start their business and to grow it, but we 
need to also continue to provide the continued continuum of 
capital so that is they grow and scale up. They also have the 
alternative products available to them.
    Ms. CHU. And can you submit for the record information on 
whether any of the top 7(a) lenders have internal loan policies 
that restrict who gets a 7(a) loan? For example, do any of 
these lenders not make loans under a specific size or only make 
loans available to certain industries?
    Ms. CONTRERAS-SWEET. I cannot speak for every financial 
institution, but clearly different programs, different banks 
have different programs. We are encouraging all of our banking 
partners to partake more and more of the SBA, and that is part 
of the work that I have underway. I am also expanding, as I 
mentioned earlier, that I think it is also important to 
continue to engage the credit unions, and I also think that it 
is important that as we think about the continuum of capital, 
that we also study and examine what role the SBA can play, if 
any, in helping direct also those seeking to have more access 
to capital to the alternative financing channels.
    I was interested, for example, yesterday you probably heard 
that the Apple Company just launched a pay program, Apple Pay. 
And so all of those, when you see that Square launched a 
lending program, when you see that Amazon launched a lending 
program. So all of these have to be studied so that we 
understand how the SBA plays in that community to make sure 
that we are complementary to what is taking place in America.
    Ms. CHU. And so we could get information such as that?
    Ms. CONTRERAS-SWEET. We would be delighted to look into 
what we can offer you, and we would be delighted to reach out 
to our financial partners to see what we can get you. That is 
important data, and we track it internally, and I would be 
delighted to see what we can share with you just honoring the 
Privacy Act and all the other things that we have to honor, but 
I am delighted to share with you the data that we are tracking.
    Ms. CHU. Very good.
    The SBA 504 Loan Refinancing Program helped many small 
business owners survive the recession and go on to create more 
jobs and bolster the economy. However, the program expired in 
2012. In the last year of the program, over 2,400 small 
businesses benefitted from refinancing over $2.2 billion. I 
introduced H.R. 1240, the Commercial Real Estate and Economic 
Development Act (CREED), which would help reauthorize this 
program. At a time when our economy is still recovering, do you 
think extending the SBA's 504 Loan Refinancing Program would be 
beneficial to small business owners?
    Ms. CONTRERAS-SWEET. I had some knowledge of when it was 
first launched the first time, the first go-around, and I can 
share with you that I thought that it was not left exactly, you 
know, in a coherent way at least to us in Los Angeles, and so 
it took a little while for it to take hold and to get started, 
but once it did I thought it was an important tool, and I would 
be supportive of a 504 Refi continuance, and I think, in fact, 
we are hoping that everything will go well and you will see it 
in our budget soon.
    Ms. CHU. Very good.
    Ms. CONTRERAS-SWEET. Thank you.
    Ms. CHU. You referred a little bit earlier about the goal 
for women-owned businesses, and I was glad to join you at the 
ChallengeHER event in Los Angeles to help women-owned 
businesses get contracts with the federal government. And 
congratulations on getting the 23 percent contracting goal for 
small business met this year. However, the contracting goal for 
women-owned business is 5 percent, and yet, women only got 4.3 
percent of all federal contracts. And that means that they 
missed out on $2 billion worth of federal contracts. What can 
we do to finally get to the 5 percent?
    Ms. CONTRERAS-SWEET. You are right to hone in on that 
challenge. Women represent half of our population, and it was 
not, you know, the old days where we always had, you know, an 
alternative as to whether we worked or not. So many of us now 
are the sole providers for our families, so this is a very 
important body of work, and I can share with you that we will 
continue to reach out through all of the channels that the SBA 
has. Again, through the vast network of Small Business 
Development Centers to the Women Business Centers. But it is 
also important that we have an extra tool at every buying 
activity. When you are there at the ground at the actual buying 
activity and that buying officer has an important tool that he 
has for other HUBZone and for our vets, and that is sole-source 
authority, we are seeking sole-source authority for women as 
well so that they can be at the same level and be parity with 
other disadvantaged groups. And I have also tasked the SBA with 
expediting the way in which we conduct the study to find if 
women are found to be underserved in more of the NICs codes 
because we think that if that study proves to be that they are 
underrepresented in other categories, then that is another tool 
that the SBA and its officers can use in the field.
    Ms. CHU. Thank you. I yield back.
    Chairman GRAVES. Mr. Schweikert?
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    Madam Administrator, and forgive me because I am harkening 
back to I think one of my very first hearings sitting on this 
Committee a couple years ago on the discussion of the adoption 
of technology for loan management, for loan servicing, for 
participating lenders' application process. Was it not supposed 
to come online two years ago? Some of that moving from a 
proprietary system to sort of more of an open source system? I 
mean, where are you at right now technology-wise? And why a 
couple years behind.
    Ms. CONTRERAS-SWEET. Yeah. Thank you so much, sir, for that 
question.
    Technology is key in executing what we do when the SBA is 
interacting with financial institutions that all are deploying 
some of the smartest systems America has. You recall when--at 
least when I was growing up--I can speak for myself--you would 
go into a bank to actually deposit your check so that you can--
--
    Mr. SCHWEIKERT. I have been involved in the technology side 
of collections, so more just let us do technology talk instead 
of policy talk.
    Ms. CONTRERAS-SWEET. That is what I was referring to.
    So in terms of policy, I can share with you----
    Mr. SCHWEIKERT. Why the two-year delay.
    Ms. CONTRERAS-SWEET. So I can share with you that we feel 
that technology can help us in many ways be efficient and 
effective. With respect to the question that you asked----
    Mr. SCHWEIKERT. I am desperately trying not to be rude. I 
understand that is the same discussion we had a couple of years 
ago. Why the two-year delay in what was supposed to be the 
rollout?
    Ms. CONTRERAS-SWEET. Of the seven tranches of work, they 
have now been all completed, but what I wanted to share with 
you, sir, is that at least in my view, as I see it, it is 
important that we continue to evolve technology. So I would 
hope that the SBA never sees that their work in technology is 
complete.
    Mr. SCHWEIKERT. Okay. So a quick checklist. So loan 
servicing and management is now no longer on a proprietary 
system but on a system that all participating lenders have 
trackability authority through the web; right?
    Ms. CONTRERAS-SWEET. All of the seven subprograms under the 
LMAS have now all been completed.
    Mr. SCHWEIKERT. And so if I am my community bank or credit 
union, I can now do my loan applications and my filings all 
through the web now?
    Ms. CONTRERAS-SWEET. As soon as we complete the SBA-1, 
which will be in Q2, then we will be able to, as I was 
outlining earlier, we will be able to do everything online with 
respect to the seven----
    Mr. SCHWEIKERT. And the two-year delay on that is just, 
what is it, technical issues? Contracting issues? Security 
issues? Any idea what drove that?
    Ms. CONTRERAS-SWEET. I can tell you that at this point they 
are all complete, and I can tell you that technology is an 
ongoing opportunity for us to continue to be efficient.
    Mr. SCHWEIKERT. And technology will always be an ongoing 
opportunity. The two-year delay was because of what?
    Ms. CONTRERAS-SWEET. Mr. Congressman, what I can tell you 
is that we will continue to evolve it, and I hope that 
technology is never a completed project.
    Mr. SCHWEIKERT. If you have one of your staffers here who 
actually speaks technology, I would love a response actually to 
that question to be helpful.
    There is a conceptual enlightenment because I think this is 
a great opportunity particularly for minority and underserved 
populations and everything out there, and even another article 
from two days ago that one of the earlier executives of Google 
and others are moving into crowd-based funding, crowd-source 
lending. It is almost a peer-to-peer type lending, particularly 
I know our ranking member here has always had an interesting 
sort of the micro lending world, and many of us have had--how 
bureaucratic, you know, if you have ever done an SBA loan from 
walking in the door and been handed the paperwork----
    Ms. CONTRERAS-SWEET. Yeah, it takes your breath away.
    Mr. SCHWEIKERT. How does the world change for the SBA when 
I have dozens of peer-to-peer lendings out there now who are 
doing almost a direct loan environment? Does the SBA--have you 
looked at the technology? Remember you were just talking 
about----
    Ms. CONTRERAS-SWEET. Sure.
    Mr. SCHWEIKERT.--the future and what is happening around 
us, and the cost of those funds seems to be coming in very 
competitive.
    Ms. CONTRERAS-SWEET. Indeed.
    Mr. SCHWEIKERT. As to the lack of staff and bureaucracy and 
their technological way of doing credit modeling. Has that 
changed the world of access to capital?
    Ms. CONTRERAS-SWEET. I think it does. I absolutely think 
that these are all very encouraging developments. When I met 
with Accion, Kiva Zip, Cabbage, PayPal, Square, all of these I 
think are wonderful developments, and I think it is important 
for the SBA to examine, as I was referencing earlier, that we 
examine what proper role we have in understanding which ones 
are working effectively. Again, track their performance 
accountability, and then be able to properly counsel small 
businesses so they can navigate through those strategies.
    Mr. SCHWEIKERT. Would there ever become a time if certain 
categories had very egalitarian access to capital because--I am 
actually, I have a couple apps now where you can actually, on 
Crowd Source, loans for your small business right off your 
phone--that the SBA would say this market now is appropriately 
served. Our needy populations are receiving; that the SBA will 
come here to Congress and say, ``Job well done. The market 
found a way to serve this. We are now going to go someplace 
else.''
    Ms. CONTRERAS-SWEET. I think your question is a really 
important one, and that is why as soon as I arrived at SBA I 
launched the ``Smart, Bold, and Accessible'' initiative, 
because I think it is important for Congress to allow us to be 
flexible, to allow us to evolve, to make sure that we are 
addressing the emerging technological advances, not just to 
provide access to capital but for counseling. We have 
international opportunities that we can also use technology 
for, and so I think that these will all present new 
opportunities for the SBA.
    Mr. SCHWEIKERT. And forgive me, Mr. Chairman, for going 
over the time. It is an area of personal interest.
    Thank you, Madam Administrator.
    Chairman GRAVES. Ms. Hahn?
    Ms. HAHN. Thank you, Mr. Chairman, Ranking Member.
    Thank you, Madam Administrator Contreras-Sweet for being 
here today. I am very pleased that you are in this position. I 
think that you come to this position at a great time. We are 
coming out of the recession. Small businesses are becoming 
successful. They are growing. You and I both grew up in Los 
Angeles, and I know you were in Los Angeles just recently 
talking about some of your initiatives. And a lot of my 
questions have been asked, but I did want to, just a couple of 
things, one was just to hear you talk a little bit more about 
what we can do to reach out to our women-owned and minority 
businesses. I know before the recession, women-owned small 
businesses were receiving 40 percent of the SBA loans. Now they 
are receiving just 16 percent. African-American entrepreneurs 
have gone from receiving 11 percent of the SBA loans to just 
2.3 percent. So I do not like that trend, so I would love to 
hear--I do think some of the changes that you have 
implemented--not charging the fees for the loans, is going to 
be valuable, and I know you have already seen an impact from 
that. I am wondering if enough changes have been made or are 
there other things that we should look at changing? And then I 
meet with small businesses all the time. It is one of the 
things that I do.
    And by the way, you have some great folks on the ground in 
Los Angeles. Victor Parker is a star, and he has worked with me 
on every roundtable I have had. We have done stuff with the 
Port of Los Angeles, connecting our small businesses with the 
international trade industry, and he is terrific.
    The other complaint that I get from a lot of my small 
businesses, particularly some of the new startups, not really 
clear on how they can access small business resources. They are 
not really sure what the SBA is or does. How do they access 
them? Is there a better way that we can outreach to our small 
businesses, particularly the new ones? And what is available? 
Because listening to you, there is a ton of stuff that is 
available and innovative and creative that you are really going 
to be implementing, and how do we get that word out to the 
businesses? So two things, women, minority-owned businesses, 
and then could we do a better job of outreach?
    Ms. CONTRERAS-SWEET. Thank you. And it is good to see you 
again, too. Thank you for your support while we were in Los 
Angeles.
    I can share with you that one of the things, and I think it 
addresses also the earlier question, and that is how do we 
evolve as an organization to meet the challenges of today's 
economy? And so to that end, that is why I launched the 
``Smart, Bold, and Accessible'' initiative. We are examining 
the ways in which we can modernize the Agency to make sure that 
we are current and relevant in today's technological pace. And 
so in that regard, we are examining all the smart systems that 
are currently out there in the private marketplace and to 
understand how we can complement those systems in SBA. Who are 
they reaching effectively and who are they not, and where 
should we be to make sure that we are filling that gap. So that 
is an important role.
    In that regard, Madam Congresswoman, what we did is 
launched a program that we call VERA VSIP, which is where we 
offer those who have served the SBA so well, so eloquently, and 
have helped to create two out of three new jobs that we are 
finding in America, but some of them are saying it is time for 
me to return and spend more time with my family. And so in that 
regard, we are offering some of our employees early retirement. 
What that will allow us to do is to reexamine how we deploy our 
personnel to more effectively and strategically respond to 
today's and tomorrow's challenges. So that is one. How we align 
our----
    Ms. HAHN. You better not redeploy Victor Parker.
    Ms. CONTRERAS-SWEET. Well, and to that point, I have 
traveled now the country and meeting with our district offices, 
and in each district I hear a story about how special our 
district offices are, so I am delighted that you had that kind 
of experience.
    The second thing that I wanted to say is for our women, 
Native-American, African-Americans, Latinos, and women--excuse 
me, and Asian-Americans, we need to make sure that we are 
accessible to all, and that is why the SB, and the A stands for 
accessible. And so again, how do we use technology? How do we 
outreach to these communities? How do we make sure that our 
products are being responsive? Setting our fees at zero for 
loans under $150,000 will help and go a long way. Tracking and 
meeting regularly with the financial institutions, both the 
private and the public sector, the credit unions who have now 
again we have reached out to them and they have accepted the 
challenge of doing more of the small dollar loans, and by that, 
Ms. Congresswoman, I am speaking to the loans under $50,000, 
which is where many women who just want to start their business 
want to be. And so I am focused on the three initiatives--
access to capital through every channel that is available to 
the SBA. I am committed to making sure that through our vast 
network, national network of Small Business Development Centers 
and all of the other partners; that we are reaching out to 
women to talk to them about the strategies, to make sure that 
they have a proper plan in place for their optimal success. And 
the third piece of it is just in general to make sure that we 
are getting contracting opportunities to women in three 
avenues. First, with the federal government. The U.S. is the 
largest procurer in the world. We want to make sure that we 
meet the goal of 5 percent with women. Second, we want to make 
sure that we are working to make sure that more women benefit 
from the private sector supply chain. To that end, the 
president announced a 15-day pay period. So in 15 days, the 
federal government pays small businesses. For me, having been 
in a small business, and having a large corporation hold me up 
for 90 days, I will tell you, 15 day is sweet music to me. That 
was an important tool. And so we are challenging the private 
sector in their supply chain to follow our lead. And the third 
is how we help small businesses partake of the largest growing 
market, and that is outside of the U.S.
    Ms. HAHN. Thank you.
    I yield back.
    Chairman GRAVES. Ms. Meng?
    Ms. MENG. Thank you, Chairman Graves and Ranking Member 
Velaazquez. And I, too, want to congratulate you, Madam 
Administrator, and thank you for the tremendous job that you 
have been doing, and especially in terms of outreach since day 
one.
    A few months ago, we had a field hearing with our 
Subcommittee with Chairman Richard Hanna of the Subcommittee 
and our Ranking Member Nydia Velaazquez in our district in New 
York, and talked a lot about the issues that a lot of minority- 
and women-owned businesses face in terms of accessing capital 
and lack of outreach. And I do want to thank the SBA members of 
your team for coming to our district recently to explain the 
new lending program to a lot of our local community banks, 
especially the banks that serve minorities. So I just want to 
emphasize that whatever we can do here in Congress to continue 
to spread the word and help with outreach I think will continue 
to be very important.
    My question is actually about veterans. I know that the SBA 
has a Boots to Business pilot program that so far has relied 
heavily on Internet-based video instruction, and I just wanted 
to know have you found that to be effective? And what is the 
rationale for relying on online training modules as opposed to 
maybe person-to-person?
    Ms. CONTRERAS-SWEET. Thank you. I think that is an 
important question. I cannot tell you how proud I am to know 
that the SBA is connected with those who are defending our 
freedoms and upholding our values. And so it is important that 
the SBA continue to refine and continue to expand the Boots-to-
Business Program. It is largely electronic because we are in 
all the world installations, and so this works so that first I 
think while people are still in-service, they are trying to 
examine what they are going to do next, and many times their 
first--and appropriately so, their first thought is how do I 
just get home and be with my family again.
    And so you want to just begin to give them some exposure so 
the first is, you know, a couple hour video and then an eight-
hour program, and then we finally launch into the fuller 
program. And so it is an important, you know, it is important 
to allow them to ease into the thought, to explore 
entrepreneurship, but once they are back at home and back in 
their communities, then we have the full panoply of programs 
that the SBA offers. Our VBOC centers, the Veterans Business 
Outreach Centers, the SBCDs, our SCORE partners are out there, 
and the SCORE partners often go to your place of business to 
give you personal advice. And so I would hope that once they 
are back in their community that they can partake in the full 
panoply of offerings that the SBA community has in the 
communities.
    Ms. MENG. Thank you. I yield back.
    Ms. CONTRERAS-SWEET. I should just add one more that I am 
also really proud of because, you know, I know that you also 
care about women, and so marketing is becoming increasingly 
digitized, you know, where you have to make it more and more 
personal. And so we learn from our women armed forces folk that 
they are very interested in having their own program. And so we 
launched a specialized training that we call VWISE, Veterans 
Women Inspiring the Spirit of Entrepreneurship. And I was in 
New York to help launch that program, and there was just such a 
great dynamic to see that taking place. That program was done 
in partnership with Syracuse University, which also has more 
services there available for them.
    Chairman GRAVES. Ms. Velaazquez?
    Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
    Administrator, in the Small Business Goaling Report 
released by your agency for the last fiscal year, it shows that 
the overall small business goal of 23 percent was finally 
achieved. And some of the members made reference to that. But 
when you look at the list that is included in your report, I 
would like to ask if you are aware that Northrup Grumman, 
Raytheon, and Chevron have been included as small business 
contracts by some of the agencies. I do not know how. I do not 
know when they became small businesses, but I am asking you, 
were you aware that agencies were taking credit toward their 
small business contracting goal by the fact that they included 
contracts that were given to larger companies?
    Ms. CONTRERAS-SWEET. Yes, Madam Ranking Member.
    In reviewing the list, I had a similar question, and when I 
took a deep dive to understand what the answer was to that 
important question, what I learned is that we have a rule in 
place that says that once you get in a contract with 
government, that you are given five years. And so if a large 
company acquires a small business, then it is grandfathered in 
for a number of years. And so that is one of the instances that 
we identified.
    But I can assure you, and the really important thing is 
that the SBA has disbarred more companies in the last four 
years than has happened in the last 10 years combined. So I 
want to assure you that the program is working and that we are 
delighted that we have met the goal and that now small 
businesses are getting their fair share.
    Ms. VELAAZQUEZ. So will you make a commitment with this 
committee that you are going to go back and assess and review 
every contract that was given to these companies so that you 
can assure us that they are not in violation of the contracting 
goals to small businesses and the numbers are not being cooked 
by some of the agencies?
    Ms. CONTRERAS-SWEET. I can share with you that the 
community has strong policing activities.
    Ms. VELAAZQUEZ. No, you do not, or maybe now, but 
administrator, let us be clear, the GAO conducted an 
investigation, and we held a hearing when that report was 
released. And what it showed is that many contracts that were 
intended to go to small businesses were given to large 
companies, and that is in violation. So I just want to make 
sure that we do not ask the GAO to go and do another 
investigation and it is going to show again that the proper 
oversight within the agency is not in place, and therefore, 
this kind of situation happens again. That is all I am asking 
you. Because at the end, those small business contractors that 
are playing by the rules are the ones losing out.
    Ms. CONTRERAS-SWEET. I can share with you that I am keenly 
committed to making sure that small businesses get their fair 
share. The president asked me to do three things: run an 
effective SBA, be a voice for small businesses, and help take 
them to the next level. In that regard, we want to make sure 
that they get the 23 percent that they deserve, and I consider 
that, by the way, a floor, not a ceiling. And so in that 
regard, we are amping up. We are challenging more. I can tell 
you that our people are motivated and they come in and they 
tell me about, you know, what they are doing out there to make 
sure that they are speaking up and fighting for small 
businesses. We pass hundreds of thousands of contracts, and so 
generally, the system is working, and I am proud to say that 
our team is on it. There are good cops on the beat. And the 
policing mechanisms that we have in place are working. And as I 
said, we have disbarred more abusers in the last four years, 
and the penalties are stiff, and we will continue to convey the 
message that we are going to have a zero-tolerance policy.
    Ms. VELAAZQUEZ. Thank you.
    Chairman GRAVES. Mr. Collins?
    Mr. COLLINS. Thank you, Mr. Chairman.
    Thank you for coming in today. I guess my question is 
whenever I hear about a new program like SBA-1, on the one hand 
that is good news. The only concern would be in the past--we 
will use the word ``past''--the GAO and the SBA's inspector 
general both have, on occasion, found some problems with the 
SBA's management of information technology. So now as we are 
looking at a new program, can you share with us some of your 
thoughts on how you are going to make sure that is integrated, 
is seamless, works well, and motherhood and apple pie?
    Ms. CONTRERAS-SWEET. Thank you so much, Mr. Collins.
    Again, I think technology can be a very important tool for 
us, and that is why I launched at the Agency an initiative that 
I call ``Smart, Bold, and Accessible,'' which really refers--
the underpinning really is how we modernize the SBA, and so I 
think technology investments can be key in helping us become 
more efficient and effective throughout the system. SBA-1 will 
be complementary and the good news is that it is adding 
functionality from an existing contract that we already have, 
and so we are able to continue to manage all of our programs to 
make sure that they are seamless, and I am delighted to say 
that I look forward to coming back and sharing with you how 
effective the SBA-1 will become. We think that it is going to 
increase lending in our 7(a), our core lending product, and 
allow more people to get these loans that otherwise would be 
sitting on the sidelines.
    Mr. COLLINS. So did part of this come from the lenders or 
from the borrowers where they would say another vehicle like 
this could be useful? Is this, you know, if I am a small 
business, am I going to go to SBA-1 to initially apply for a 
loan, or is it something that I am going to apply to my lender 
and he is going to use SBA-1?
    Ms. CONTRERAS-SWEET. Thank you for that clarifying 
question. It is a platform that we are setting up for our 
lending partners, and so we process our loans through our 
lending partners. So what the client will see is just a much 
cleaner interface and more important, they will be able to do 
e-consent. So many times when you are an entrepreneur and you 
are fighting, you are the CMO and you are the CFO and the CFO 
and the CEO; you do not always have time to go into the 
financial institution. So now this will be able to all be done 
online and we will have the e-signatures, the e-verify that you 
see on other products in the commercial space, and so they will 
have a seamless interaction with their financial institution, 
and that institution will do the same with us through this 
platform.
    Mr. COLLINS. So would the borrower initiate his loan 
request through SBA1, the borrower?
    Ms. CONTRERAS-SWEET. No, I am sorry. I apologize if I did 
not clarify. It will still be the bank that will initiate the 
loan, but they will now be able to interact with their borrower 
on line, and the lender will also be able to interact with the 
SBA now online.
    Mr. COLLINS. So it generates out of the lender, but the 
small business can be using it as well as the portal of 
information?
    Ms. CONTRERAS-SWEET. Yes. Financial institutions already 
have largely the e-consent in these tools. The challenge has 
been that SBA has not been able to interact with the 
institution online. And now this will facilitate that 
intermediary role that the bank relies upon. They will now be 
able to also be online. So most financial institutions have 
already had this technology. Now the SBA is catching up.
    Mr. COLLINS. Well, I am glad to hear you are aware of what 
we would be asking, which is about how it actually rolls out, 
and I am confident you will be reporting back very good 
results. Thank you very much.
    Ms. CONTRERAS-SWEET. I look forward to it, sir.
    Mr. COLLINS. I yield back, Mr. Chairman.
    Chairman GRAVES. I just have one quick request. Back in 
March, we sent a letter to the SBA. We were asking for about 
145 separate requests on information concerning the process by 
which the SBA reviews franchise agreements, and at that time 
the Agency said that they needed to address some concerns or 
some issues that they had raised in the letter, and so I agreed 
to delay that, the compliance with that. And so that was about 
six months. I am just curious when we can expect some answers 
or some revisions.
    Ms. CONTRERAS-SWEET. Thank you again for that question, Mr. 
Chairman.
    The franchising opportunities are vast and complex. And I 
can tell you that at first blush, I think the notion of a plug-
and-play company is really attractive. You know, for small 
businesses, when we go out to launch a business, first you have 
to think about how you are going to lay out your plan, how you 
are going to brand it, how you are going to create a niche 
market, how you build barriers to entry, how you attract 
customers, your marketing initiatives. And so when you 
contemplate a franchise, it is really a wonderful tool that you 
can come in with a branded name, you can come in with an 
institution that already has addressed the branding question 
and has mentoring in place. So these are very attractive 
programs for the small business person. So I am very interested 
in this. I have met with the association to understand where 
they are headed and reviewed with our general counsel and our 
capital access and our partners to understand exactly what the 
opportunities are. And I can share with you that we are 
clarifying these more and more. We are staffing it up because I 
think this is an important alternative, and we will be sure to 
get you those answers that you asked in the letter that we 
reviewed. Thank you.
    Chairman GRAVES. Soon, I hope.
    Ms. CONTRERAS-SWEET. Yes, of course, sir.
    Chairman GRAVES. Any other questions?
    With that, we are honored to have you testify before the 
hearing, and we look forward to--I think the whole Committee 
looks forward to working with you in the future on issues, 
obviously, that you are facing, and we feel that the country is 
facing when it comes to small businesses.
    And with that, I would ask unanimous consent that all 
members have five legislative days to submit statements and 
supporting materials for the record. And without objection----
    Ms. CONTRERAS-SWEET. Mr. Chairman, if I may, I do not know 
if I will have another opportunity to come before you again, 
and so I just wanted to publicly acknowledge your leadership 
and thank you so much for your stalwart effort in leading the 
Small Business Committee. You know small businesses are 
creating so much of the economic activity in this country, and 
your leadership is well recognized and appreciated. Thank you 
so much, sir.
    Chairman GRAVES. Thank you very much. I appreciate that. 
And this is my second to last hearing. There will be one more.
    With that, this hearing is adjourned. Thanks.
    [Whereupon, at 2:12 p.m., the Committee was adjourned.]
                            A P P E N D I X


                   U.S. Small Business Administration


                         Washington, D.C. 20416


                              TESTIMONY of


                         MARIA CONTRERAS-SWEET


           Administrator, U.S. Small Business Administration


                   House Committee on Small Business


          Small Business Administration: Management & Outlook


                           September 10, 2014


    Chairman Graves, Ranking Member Velazquez and distinguished 
members of this committee, thank you for this opportunity. 
Since being confirmed I have taken time to sit with many of 
you, and I know the members of this committee not only share my 
passion to promote entrepreneurship but have been actively 
engaged in supporting our nation's small businesses. In my 
meetings with the Chairman and Ranking Member I have seen 
firsthand the bipartisan commitment of this committee, working 
together to help small businesses.

    I look forward to continuing this work to help these job 
creators in our economy realize their potential and put 
Americans back to work. At the SBA we remain focused on our 
core mission of facilitating access to capital, counseling, 
contracts, and disaster assistance.

    When meeting with our lenders, clients, and borrowers I 
understand their concerns because I have been in their shoes as 
an entrepreneur, five years as California's chief bank 
regulator, and then starting a community bank. This guides my 
belief that the SBA can help more businesses create jobs. I 
have also learned the significant work that happens in this 
Committee, and the importance of working with you to make our 
programs better and the agency more efficient.

    SBA's capital is infusing dollars into local markets and 
improving our economy. Small businesses inject capital into the 
economy more quickly as they cover payroll, buy equipment, and 
acquire local real estate. This is good for Made in America, 
Grown in America, and Invented in America.

    In the 21st century, the SBA must be as innovative as the 
small businesses we serve. I want SBA to represent Smart, Bold 
and Accessible. This means we're implementing smart systems, so 
our agency keeps pace with technological advances that change 
how Americans conduct their business. Championing bold 
initiatives to open new business channels for entrepreneurs 
within the federal government, corporate supply chains, and 
international commerce. And making our services accessible to 
small business owners, regardless of their gender, race, age, 
or neighborhood.

    From my first conversations with Chairman Graves and many 
of you, we see the prevailing challenge SBA faces is that our 
loan documentation is complex and labor-intensive, forcing 
banks to hire specialized staff, contract it out, or walk away 
from the loans.

    We cannot afford to lose these partners and turn job 
creators away. To combat this we launched a predictive business 
credit scoring model the SBA has been developing for more than 
a decade--combining an entrepreneur's personal and business 
credit scores. This new scoring model is now available to ALL 
of our lending partners for loans of $350,000 or less. Making 
it easier and less time-consuming for banks to do business with 
us--and for entrepreneurs to do business with them.

    Strong stewardship of our flagship 7a program has allowed 
us to keep fees at zero on loans less than $150,000 and 
continue to operate at zero subsidy and we move closer to zero 
subsidy with the 504 program.

    Next year we will roll out SBA One an interactive user-
friendly platform. It will automate the uploading of documents 
and generation of forms, and allow for electronic signatures. 
On each 7A loan SBA One will save banks hours of processing 
time and money. The combination of predictive credit scoring 
and SBA One will incent more banks to partner with us to 
promote underserved lending, generating more loans and igniting 
economic activity.

    Being bold means opening new markets--both here and abroad. 
Over the next decade new markets around the world are going to 
open up, but only 1 percent of small businesses are selling to 
them. We're focused on ensuring small businesses have the 
financing they need to engage internationally.

    I'm pleased to announce for the first time in eight years--
the federal government met the 23 percent goal of federal 
contracting to small businesses in FY13. This was an important 
achievement, but we fell short of our women-owned business goal 
and must do more to meet that goal.

    The accessible component of the new SBA is close to my 
heart, as the face of entrepreneurship is changing in America. 
More of those faces today belong to women, Latinos, African-
Americans, Asian Americans, Native Americans, veterans and 
seniors. In addition to promoting smaller-dollar loans, we are 
focusing on building referral networks with microlenders so new 
businesses can get the start-up capital. At the SBA our team is 
working to find new and creative ways to put micro capital into 
the hands of entrepreneurs. Ranking Member Velazquez and I have 
seen too many entrepreneurs with great ideas and products 
default because of poor financial planning. We look forward to 
working with her and all of you to increase technical 
assistance to small businesses.

    Our guarantees allow lenders to make loans they otherwise 
would not. We fill market gaps. Every dollar we inject into the 
economy is capital that could potentially stay on the 
sidelines.

    Again, I want to thank all of you for your bipartisan 
commitment to small businesses, and how welcoming you and the 
entire small business community has been to me.

    With that Mr. Chairman, I would be happy to take your 
questions.
                        Questions for the Record


                          Chairman Sam Graves


    Question 1

    According to SBA officials, the agency was to migrate its 
loan management accounting system from a proprietary system by 
January 1, 2012. When can we expect the SBA to complete this 
first step in modernizing its loan management accounting 
system?

    Response: All of the originally planned LMAS Incremental 
Improvement Projects (IIPs) were successfully completed; 
however, there has been some additional follow-up required by 
OIG and Independent Verification and Validation (IV&V) 
guidance.

    Additionally, SBA initiated a project to migrate the non-
proprietary code to production in a new consolidated data 
center and complete the shutdown of the proprietary system. The 
following items have been completed:

           Migration of user interfaces off of 
        proprietary COBOL to a web environment. No lending 
        partners or SBA personnel handle any loan transactions 
        via a COBOL system.

           Migration of loan management accounting 
        system code from a proprietary system environment to a 
        generic platform and software in June 2013.

           Awarding of contracts for hosting facilities 
        and hardware to support Production Operations of the 
        generic loan management accounting system.

    All of this modernization occurred during record-breaking 
loan production years and without any material weaknesses in 
SBA's Financial Audit.

    Status of the original LMAS Incremental Improvement 
Projects from SBA's OIG's report on September 30, 2014:
[GRAPHIC] [TIFF OMITTED] T9675.001

    Question 2

    In determining the priorities for the agency, where do you 
put implementation of directives from Congress signed into law 
by the President in comparison to initiatives developed by SBA 
personnel?

    Response: SBA's core mission is to aid, counsel, assist and 
protect the interests of small business in America. Through the 
Small Business Act, Small Business Investment Act and other 
acts, there are statutorily mandated programs that the agency 
is responsible for implementing to carry out its mission. SBA 
also has statutory authority to establish and manage other 
initiatives to assist small business, including underserved 
communities and businesses. The SBA handles all of its programs 
with equal priority in management and oversight. We effectively 
execute on these programs daily and report their results 
annually to Congress.

    Question 3

    The SBA waives the upfront fee for loans under $150,000. 
Under what legal authority does the SBA waive the upfront fee 
since the statute provides that the ``Administration shall 
collect a guarantee fee''?

    Response: Section 7(a)(18) of the Small Business Act, 15 
U.S.C. 636(a)(18) provides the authority for the fee relief. 
This section of the statute sets a ceiling on the guarantee fee 
but no floor, which means SBA has some discretion in 
determining how low, including zero, that fee can be as long as 
it does not exceed the amount stated in 7(a)(18)(A).

    Question 4

    As you know, the Anti-Deficiency Act prohibits federal 
employees from agreeing to arrangements that exceed 
appropriated funds. Some SBA loans, secured by property, 
include covenants that may create undefined liabilities in the 
future for the government and thus might violate the Anti-
Deficiency Act. What actions is the SBA taking to resolve these 
concerns?

    Response: Open-ended indemnification clauses in real estate 
title documents applicable to 504 project real estate 
collateral may create a violation of the Anti-Deficiency Act 
(ADA) if SBA were to take title to the property (during a 
foreclosure action). Certified Development Company (CDC) 
closing counsel and SBA District Counsel currently review real 
estate title documents prior to closing and identify such 
clauses. When identified, the CDC works to obtain a waiver of 
the clause as applicable to SBA, which ensures Agency 
compliance with ADA requirements.

    Since indemnification clause waiver(s) cannot always be 
obtained, SBA has established a procedure that ensures 
compliance with legal requirements while reducing closing 
delays. The procedure provides that if a waiver cannot be 
obtained, those projects will be tracked for further 
consideration after debenture purchase.
    We understand a legislative solution might be created to 
better address the issue.

    Question 5
    Given the fact that the federal government has not met 
statutory goals for providing small businesses with 
subcontracting opportunities, should not the SBA reallocate 
some resources from its own entrepreneurial development 
initiatives to the hiring and training of commercial marketing 
representatives?

    Response: In FY14, SBA conducted approximately 1,300 
subcontracting plan compliance or orientation reviews of large 
prime contractors. These reviews encourage large prime 
contractors to use small business subcontractors. In FY13, the 
federal government achieved 34% in subcontracting awards of its 
36% goal, which was an improvement over FY12's 33.6% 
achievement. The subcontracting achievements for FY14 will be 
released with SBA's annual scorecard later in FY15. We believe 
our entrepreneurial development initiatives play an essential 
role in helping small businesses grow and create jobs. These 
efforts include a wide range of assistance services including 
contracting. Additional resources for CMRs and PCRs is one path 
to providing opportunity for more coverage, and SBA has 
requested and supported that in past budgets.

    Question 6

    Do you think that the SBA budget for FY 2015, which 
requested $39 million for new entrepreneurial development 
initiatives but only $5.8 million for lender oversight of a 
loan portfolio in excess of $100 billion, constitutes an 
appropriate allocation of agency resources?

    Response: SBA's FY 2015 Congressional Budget Justification 
(CBJ) request for the Office of Credit Risk Management (OCRM) 
is $13,992,000 (Table 3, p. 18). This amount does not include 
salaries and benefits for the employees who perform the 
oversight function. The $5,827,000 amount you reference is 
listed as ``Lender Oversight--7(a) Loans'' along with a 
$1,825,000 amount listed as ``Lender Oversight--504 Loans'' 
(for a total of $7,652,000) in the FY 2015 CBJ, Table 10, p. 
26. Table 10 reflects an allocation of the costs of SBA 
programs based on a cost allocation study conducted in FY 2013. 
The FY 2013 study did not fully allocate all of the lender 
oversight costs, such as contracts, to the oversight program. 
Some of the costs were allocated to the Office of Capital 
Access. This resulted in the discrepancy between the Table 3 
and the Table 10 amounts. In FY 2014, SBA revised the cost 
allocation survey to fully reflect the OCRM costs under Lender 
Oversight. Those revised figures will appear in the FY 2016 CBJ 
tables.

    Question 7

    To follow up on the concerns of my colleagues, since the 
answer was not provided during the hearing, do you have a study 
to show how many hours the proposed SBA One would save? 
Additionally, as required under federal statue and OMB 
guidance, can you provide the business case analysis for that 
project?

    Response: There was a BCAA conducted for SBAOne when the 
idea was first developed and the report demonstrated there 
would be significant financial savings as a result of its 
implementation. The BCAA is attached.

    Question 8

    How many staff are working solely on SBIC issues?

    Response: 69 full-time employees and 1 part-time employee 
who is retiring in November 2014 are working solely on SBIC 
program issues.

    Question 9

    How many are working solely on issues other than SBICs 
(please identify both the issues and the titles of the staff)?

    Response: 5 full-time employees are working on solely SBIR/
STTR program issues. The titles are:

          (1) Assistant Administrator, Office of Innovation 
        Technology
          (2) Technology Policy Analyst
          (3) Program Analyst
          (4) Program Analyst
          (5) Entrepreneur in Resident/Consultant.

    Question 10

    How many are working on both SBIC and other issues (please 
provide an estimate of resource allocation to each)?

    Response: 6 full-time employees work on SBIC, SBIR/STTR, 
and Innovation programs. The titles and estimated allocation 
for FY 2014 are:

          (1) Associate Administrator - 40% SBIC, 40% SBIR/
        STTR, 20% Other (e.g. Innovation);
          (2) Deputy Associate Administrator - 40% SBIC, 40% 
        SBIR/STTR, 20% Other (e.g. Innovation);
          (3) Special Advisor - 30% SBIC, 30% SBIR/STTR, 40% 
        Other (e.g. Innovation);
          (4) Business Operations Officer - 70% SBIC, 20% SBIR/
        STTR, 10% Other (e.g. Innovation);
          (5) Program Analyst - 80% SBIC, 20% SBIR/STTR
          (6) Program Assistant - 80% SBIC, 20% SBIR/STTR

    Question 11

    What is the travel budget allocated to the Director of 
Program Development for minority outreach, women's outreach, 
veteran's outreach, and outreach to underserved and low income 
areas?

    Response: THe FY2014 travel budget for the Office of 
Innovation and Investment was $225,000. Of this amount, $11,000 
was spent by the Program Development team in FY 2014 to do 
outreach for minority, women's, veterans' and underserved and 
low income areas. The Associate Administrator and the Deputy 
Administrator also engage in outreach to these communities at 
various meetings and conferences. Therefore, the amount spent 
on travel related to such outreach is actually greater than 
$11,000.

    Question 12

    Concerning the travel history and travel expenditures for 
the Associate Administrator for the Office of Investment and 
Innovation, please identify which travel expenditures were 
solely in support and oversight of the SBIC program and which 
were for the support of other programs. Please identify the 
other programs and the related amounts.

    Response: The Associate Administrator promotes all of the 
programs managed by the Office Innovation and Investment at 
meetings and conferences. During FY 2014, $18,000 of the OII 
travel budget was spent for his travel discussing and 
supporting the SBIC, SBIR/STTR and Innovation programs.

    Question 13

    Regarding the travel history and travel expenditures for 
the Deputy Associate Administrator for the Office of Investment 
and Innovation, please identify which travel expenditures were 
solely in support and oversight of the SBIC program and which 
were for the support of other programs. Please identify the 
other programs and how much time and money was spent supporting 
them.

    Response: During FY 2014, $11,000 was spent for the Deputy 
Associate Administrator's travel discussing and supporting the 
SBIC, SBIR/STTR and Innovation programs. There is no sub 
allocation in the travel budget by program or initiative.

    Question 14

    Please explain the SBA's view as to why the licensing 
process has significantly slowed down and why the number of new 
funds entering the SBIC licensing process has significantly 
diminished.

    Response: The licensing process has not slowed down. The 
average processing time is 7 months which is generally 
consistent with the prior years' time. The licensing process 
depends on many factors. One of the major driving factors, 
which is controlled by the applicant and not SBA, is the amount 
of time it takes the applicant to provide all of the final 
legal, partnerships, and other core documents to the SBA. Since 
we do not ``stop the clock'' while waiting for documentation 
from an applicant, that lag time is reflected in the estimated 
7 months processing time. Thirty new SBICs were approved and 
licensed in FY 2014. This is also consistent with the prior 
year's approvals.

    Question 15

    Given that the licensing Standard Operating Procedure was 
last updated in the 1980's and this Committee was promised over 
a year ago that this would be updated, when will the licensing 
procedure be updated?

    Response: The new licensing SOP was updated and made 
effective on August 6, 2014.

    Question 16

    The SBA issued a proposed rule on SBIC investments in 2013 
and received only one comment letter from industry. Why is it 
taking so long to issue the final rule and when will the final 
rule be issued?

    Response: The final rule was published in the Federal 
Register on October 21, 2014. The 2013 proposed rule was 
related to expanding passive investment exceptions in the SBIC 
regulations. Though there was only one comment letter, it 
identified several areas where SBICs could benefit from further 
expansions for passive investment structures. In addition, the 
letter identified the use of passive investment structures in 
ways not intended by the proposed rule. SBA took time to 
carefully consider the expansions suggested by the commenter 
and also to consider any associated increase to program credit 
risk.

    --------------------

                        Question for the Record


                        Rep. Steve Chabot (OH-5)


    Question 1

    The Administration has previously been supportive of 
raising this limit. Does the Administration still support 
raising the family of funds limit? And will you work with me to 
help pass an increase?

    Response: The SBA is supportive of the family of funds 
increase legislation which would increase the amount of 
leverage by licensees under common control from $225 million to 
$350 million. The family of fund increase, with the increase in 
SBIC's authority to $4 billion, will well position the Agency 
to ensure that high-growth small businesses across the country 
have access to the capital they need to build their companies, 
drive innovation and help grow the economy.

                        Question for the Record


                       Rep. Mick Mulvaney (SC-5)


    Question 1

    Last Congress, I sponsored the Subcontracting Transparency 
and Reliability Act, which was passed out of this Committee and 
included in the final version of the FY13 NDAA. This language 
made it easier to crack down on deceptive large businesses 
hiding behind small businesses, and simultaneously made it 
easier for small businesses to team with other small businesses 
to compete for federal contracts. Unfortunately, these changes 
have not been implemented. I understand that during a 
subcommittee hearing in July, we received testimony from small 
businesses about how the failure of SBA to act means that they 
are losing money and contracts. When is SBA going to act?

    Response: The proposed rule is currently in the interagency 
review stage of the rulemaking process and will be published 
for public comment in the near future.

                                 [all]