[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]



 
              THE SBA BUDGET FOR FY 2016: DOES IT MEET 
              THE NEEDS OF AMERICA'S SMALL BUSINESSES?

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           FEBRUARY 25, 2015

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

                               

            Small Business Committee Document Number 114-003
              Available via the GPO Website: www.fdsys.gov
              
              
              
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                   HOUSE COMMITTEE ON SMALL BUSINESS
                   

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                        TOM RICE, South Carolina
                         CHRIS GIBSON, New York
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        CARLOS CURBELO, Florida
                          MIKE BOST, Illinois
                         CRESENT HARDY, Nevada
               NYDIA VELAAZQUEZ, New York, Ranking Member
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                       BRENDA LAWRENCE, Michigan
                       ALMA ADAMS, North Carolina
                      SETH MOULTON, Massachusetts

                   Kevin Fitzpatrick, Staff Director
            Stephen Dennis, Deputy Staff Director for Policy
            Jan Oliver, Deputy Staff Director for Operation
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Chabot................................................     1
Hon. Nydia Velaazquez............................................     2

                                WITNESS

Hon. Maria Contreras-Sweet, Administrator, United States Small 
  Business Administration, Washington, DC........................     4

                                APPENDIX

Prepared Statements:
    Hon. Maria Contreras-Sweet, Administrator, United States 
      Small Business Administration, Washington, DC..............    20
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    National Association of Federal Credit Unions (NAFCU)........    23
    U.S. Women's Chamber of Commerce (USWC)......................    24


 THE SBA BUDGET FOR FY 2016: DOES IT MEET THE NEEDS OF AMERICA'S SMALL 
                              BUSINESSES?

                              ----------                              


                      WEDNESDAY, FEBRUARY 25, 2015

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, Luetkemeyer, Hanna, Rice, 
Gibson, Brat, Hardy, Radewagen, Velaazquez, Chu, Hahn, Clarke, 
Meng, Payne and Lawrence.
    Chairman CHABOT. The Committee will come to order.
    Good afternoon, everyone. We want to thank the 
Administrator of the SBA, Maria Contreras-Sweet for joining us 
here this afternoon. I believe this is her first appearance 
this Congress--the 114th Congress. She is always a welcome 
visitor to us. And I want to particularly acknowledge and thank 
her for coming to my district a couple of weeks ago, to 
Cincinnati, and we, together, had a number of events--in an 
area called Over-the-Rhine, a number of small businesses, as 
well as credit union, and met with the Chamber and did a town 
meeting and a whole range of things. And she was obviously 
extremely knowledgeable and I think made a wonderful impression 
on the people of Cincinnati, and we thank you for coming. I 
really do.
    Today, the Committee will hear from the Administrator about 
the President's Fiscal Year 2016 budget request. Two questions 
arise. First, are the resources sufficient to help small 
business grow the middle class jobs that America needs? And 
second, are the resources allocated in an open and transparent 
manner?
    It is important to note that there are numerous other 
policies that are as critical for small businesses as those 
that will be raised today. Among those are the following: small 
businesses deserve tax reform because the current code is so 
complex, it makes their lives miserable. They need a regulatory 
regime that protects health and the environment without 
imposing outrageous costs. They need financial markets that are 
not so burdened by government oversight that access to capital 
to small businesses oftentimes is all but impossible. They need 
a simple system for exports and imports, one that does not 
require navigation of a maze-like bureaucracy.
    Now, turning to the SBA budget request, I believe that it 
is more than sufficient to meet the needs of America's 
entrepreneurs. Where I disagree with that request is in the 
priorities revealed in the request.
    For example, the SBA budget makes no mention of hiring 
additional key personnel who will help small businesses enter 
the federal contracting marketplace, a key pillar of the Small 
Business Act. The budget fails to allocate additional funds or 
explain how the Agency will update its Loan Management 
Accounting System that still utilizes 1960s computer 
technology. The budget request disturbingly fails to mention 
the absence of a chief information officer to oversee 
implementation of computer technology. The budget request makes 
no mention of resources needed to implement changes made to 
SBA's government contracting programs that have yet to be 
implemented.
    Instead, the SBA budget request is replete with its own 
initiatives and priorities. These include more funds for, among 
other things: entrepreneurial outreach programs that duplicate 
services in many instances provided by existing partners; a new 
computer system not requested by Congress, the Loan Information 
Network for Access to Credit that is intended to help small 
businesses find SBA lending partners; and Executive Direction.
    This request for more than $5 million in Executive 
Direction is particularly troubling. After more than 60 years 
of existence, Executive Direction from the SBA suddenly 
determines that a more than century-old statute, the Anti-
Deficiency Act, applies to the closing of loans without any 
explanation. Executive Direction from the Agency entails 
waiting 30 years to update the application process for small 
business investment companies and then failing to publish that 
update in the Federal Register. Executive Direction forces 
changes in cost accounting procedures for Small Business 
Development Center grantees but provides no mechanism for 
challenging that action. If these are the types of decisions 
that will result from increased Executive Direction, it 
represents very questionable use of resources in my opinion.
    The SBA must reconsider its priorities to minimize risk to 
taxpayers from a $100 billion loan portfolio while maximizing 
opportunities that ensure small businesses will prosper and 
create needed middle-class jobs. That should include a top-down 
reexamination of the Agency's procedures for creating policy.
    Ultimately, budgeting is about the bottom line for small 
businesses. For the SBA, the budget is about accountability. 
The budget request is the Agency's defense of its priorities to 
taxpayers, current small business owners, entrepreneurs, and 
Congress. If this is the Agency's defense, than it has not 
gotten that accountability right.
    And I would now yield to the ranking member, Ms. 
Velaazquez, for her opening statement.
    Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
    Our economy continues exhibiting signs of strength, and 
small businesses are vital to this resurgency. Last year, 
companies with fewer than 500 workers expanded their payrolls 
by more than two million positions. That is roughly two-thirds 
of the three million total new hires. Clearly, as with previous 
economic recoveries, our nation's small business sector will be 
instrumental to our overall progress. Given the central role 
small firms and entrepreneurs play in creating new jobs and 
furthering growth, it is critical we work to ensure small 
businesses have the tools they need to succeed. The Small 
Business Administration plays a vital role in this regard.
    Access to capital is the perennial challenge for all small 
businesses. When private capital markets are insufficient for 
small companies seeking affordable loans, the SBAs initiatives 
help fill in the gaps. Last fiscal year, the agency supported 
nearly $19 billion in lending through its 7A program alone. 
Another $4 billion in lending was made available for capital-
intensive projects through the agency's 504 initiative. In many 
instances, these were businesses that might struggle to secure 
financing elsewhere. It is vital that the SBA's capital 
programs function smoothly and continue serving as a backstop 
to private capital markets.
    For small firms to succeed, they need more than capital. 
Technical know-how and guidance on everything from how to 
develop a business plan to export products to new markets can 
make a difference between whether a business thrives or goes 
under. To help meet those needs, the SBA has a range of 
entrepreneurial development initiatives. The agency's network 
of Small Business Development Centers and Women's Business 
Development Centers are spread throughout the country, 
providing valuable counseling services to startups and growing 
companies in every region.
    Beyond capital and technical assistance, the SBA also plays 
a vital role in helping small businesses and disadvantaged 
firms secure their fair share of federal contracts. Federal 
procurement efforts are responsible for $500 billion in 
economic activity. When small firms are awarded these type of 
projects, the benefits are twofold. Taxpayers receive quality 
goods and services at fair prices, while small companies are 
able to grow, and in many cases add employees to their payroll. 
In that sense, the SBA's contracting programs are another 
element critical to our overall economic health. Given the 
myriad of ways the small business administration can be 
critical to the health of the small business sector, it is 
paramount that the agency's scarce resources be invested 
wisely.
    I look forward to hearing the administrator's views 
regarding the agency's priorities moving forward.
    With that, I thank the chairman again for holding this 
important hearing, and I want to thank the administrator for 
being here today. I yield the balance of my time.
    Chairman CHABOT. Thank you very much.
    We will now introduce our sole witness here this afternoon, 
the administrator, who took her position in April 2014 becoming 
the 24th administrator of the U.S. Small Business 
Administration, and a member of President Obama's cabinet on 
April 7, 2014. Prior to her arrival in Washington, Contreras-
Sweet founded the first Latino-formed commercial bank in 
California in more than 35 years that focused on serving small- 
and medium-sized businesses.
    We welcome you here again this afternoon, Madam 
Administrator, and we generally have a five-minute rule but we 
open it up to you to take such time as you might consume within 
reason since there is just one witness. Thank you very much for 
being here.

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

    Ms. CONTRERAS-SWEET. Thank you. Thank you again for that 
generous introduction, Chairman Chabot. And, of course, to 
Ranking Member Velaazquez and the distinguished members of the 
Committee. Thank you for this opportunity to testify about 
SBA's FY 2016 budget.
    Chairman, congratulations. It is nice to see you come back 
to your Committee. Your leadership and your record on 
bipartisanship and your commitment to the small businesses is a 
great tribute to our country. Thank you for that.
    I know there are many new faces on the committee, and I 
have already had some productive conversations with some of 
you, and I look forward to visiting with all of you and your 
districts in the months ahead.
    Entrepreneurs, I agree, Ms. Velaazquez, are the backbone of 
our economy. They exude confidence. They exude courage and 
character. The programs in this budget have one thing in 
common: they seek to maximize opportunities for small business 
owners to create jobs and contribute their talents to our 
economy.
    That is the Agency's mission, and that is why I am here. To 
accomplish this goal, we must continue our work to modernize 
the SBA, so that we are accessible and relevant to the business 
community in the 21st century.
    To that end, I want to share with you an important 
achievement in this document before you. Our Fiscal Year 2016 
budget proposal contains a zero subsidy request for our core 
capital programs. Those would be the 7(a), the 504 and the 
Small Business Investment Company (SBIC) programs. We are proud 
of this achievement and the fiscal responsibility that it 
represents.
    I am an entrepreneur and a former community banker. I take 
my fiduciary responsibility seriously, and this budget 
represents my commitment to be a good steward of taxpayer 
dollars. For Fiscal Year 2016, the SBA requests $860 million. 
In time of tight budgets, the SBA is doing more with less. 
SBA's zero subsidy achievement means that this proposed budget 
comes in three percent below our current budget.
    The SBA is making good loans, and we project we will cover 
any loan losses through fees in Fiscal Year 2016. We have 
achieved this despite waving fees on small-dollar loans. This 
fee relief helped us increase lending to minority-owned 
businesses by 23 percent last year, so we propose continuing it 
in Fiscal Year 2016.
    I have completed 10 months on the job now. And thanks to 
the bipartisan support we have enjoyed from this Committee, we 
have made some important progress together. Together, we met 
our 23 percent small business goal contracting goal for the 
first time in eight years. We supported nearly $29 billion in 
lending last year, which created or sustained nearly 600,000 
jobs. In the same period, our resource partners counseled 1.2 
million entrepreneurs. Our SBIC funds increased their 
investments by 60 percent and provided $5.5 billion in patient 
capital to promising small firms. We expanded our Boots to 
Business program to train more than 15,000 service members at 
165 military installations worldwide.
    In his State of the Union address, the President spoke 
about our economic recovery and job growth. I will tell you 
something you already know: It is our small businesses that are 
leading this economic comeback.
    This budget requests an increase in our 7(a) lending 
authorization to meet the growing demand for SBA capital. Last 
year, Congress raised our 7(a) authorization level as we 
approached our lending cap, resulting in an all-time lending 
record of $19.2 billion in approvals. This year, we are asking 
for our highest authorization level yet of $21 billion.
    This budget also seeks full funding for our resource 
partners. The loan counseling provided by our Small Business 
Development Centers, our SCORE partners, the Women's Business 
Centers and the Veterans Business Outreach Centers helps 
entrepreneurs across America start, grow, or reinvigorate their 
businesses.
    Partnering with them is one of the smartest investments we 
can make.
    This budget seeks a modest $950,000 increase for veterans 
outreach programs. We propose to offer SBA's Boots to Business 
entrepreneurial training program to the National Guard, the 
Reserve component members, and additional military 
installations. We are asking to offer our Boots to Business 
Reboot program to veterans who have already transitioned out.
    And we are proposing to continue the fee reductions on 
loans to veterans, so we can serve these heroes as well as they 
have served us.
    We are also asking to expand SBA's microloan program level 
by
    40 percent to increase the ability of microlenders to 
capitalize startups and provide technical assistance. We are
    Convinced this expansion would fill a real need for more 
small-dollar loans in the current commercial market. It will 
help underserved and rural businesses turn a profit and create 
more jobs.
    This budget also seeks to improve our customer service. As 
a former community banker, I understand that the best way to 
make SBA more effective is to make our products and processes 
easier, quicker, and more cost-effective. This budget structure 
accomplishes this critical goal by migrating more of our 
services online, where more and more banking is taking place 
today.
    This April, we will roll out our highly anticipated SBA One 
system. This is the automation of the entire 7(a) loan 
application. It is going to significantly cut the cost and time 
of our application process. We recently demonstrated this new 
service to our bankers, and the feedback has been 
overwhelmingly positive.
    Last year, I rolled out my modernization plan to fashion a 
21st century SBA that stands for smart, bold and accessible. 
Smart means implementing systems that harness technology to 
deliver capital more effectively. Bold means opening new 
markets for small business owners both at home and abroad. And 
accessible means making our services available to all, 
including women, veterans, rural entrepreneurs, seniors, and 
the disadvantaged.
    As the ranking member indicated, more than two million of 
the three million jobs generated last year were created by 
small businesses. This budget would help us build on this 
momentum. It would give us the resources we need to perform our 
core mission and help more small businesses innovate, launch, 
hire, and grow.
    Again, many thanks to the members of this Committee and to 
our very committed staff at the SBA across the country.
    Thank you, Mr. Chairman.
    Chairman CHABOT. Thank you very much for your testimony, 
Madam Administrator, and I will recognize myself for five 
minutes.
    My first question, as you know, I had introduced 
legislation last Congress to help small businesses, the 
investment companies, SBICs. What is the SBA doing to make that 
application process more open, transparent, and less complex?
    Ms. CONTRERAS-SWEET. First of all, let me compliment you on 
sponsoring, or I should say sort of being the patron of the 
Family of Funds program. We are really looking forward to 
having that tool, so I want to thank you right at the front end 
for that leadership. We think it is an important tool for job 
creation. The fact that we have a cap. I know if you have 
success fund or another it prohibits you from going on to the 
next, so I just wanted to thank you for that foremost.
    But, you know, on the SBICs, we have been at zero subsidy 
now for about 11 years, and I have to tell you that that 
program has seasoned executives that really vet these 
applications, and as a result, I think we are having that kind 
of success. If you are hearing that the process is arduous, I 
would be more interested in learning more about that because it 
is, you know, the government obviously guaranteeing investments 
that are higher risk, and so we just wanted to make sure that 
we are doing our complete due diligence and maintaining the 
kind of confidence that you have in us.
    Chairman CHABOT. Thank you.
    I will have my staff follow up with your staff on the 
particulars because I only have five minutes. So I do not want 
to take up all the time on that.
    Ms. CONTRERAS-SWEET. Sure. Thank you.
    Chairman CHABOT. The SBA uses private sector partners to 
provide capital, as you know, to small businesses. These 
programs have specific missions. What procedures does the SBA 
have to ensure that small business investment companies, 7(a) 
lenders, certified development companies, and microloan 
intermediaries are complying with their statutory mission?
    Ms. CONTRERAS-SWEET. We do a couple of things. Well, 
several things, but one of the things that I am installing 
recently that I think you will be pleased to know is in 
banking, as you generously mentioned, when I was back in Los 
Angeles, I founded a community business bank. And one of the 
things that we always enjoyed was having a sense of 
predictability. No one wants too much government regulation, 
but at least when you know what it is and you understand why it 
exists in terms of banking, for example, it is really important 
to be able to anticipate what is going to happen. So I felt 
that in terms of our regulation, for example, as you mentioned, 
in CDCs, our regulation, or rather our oversight I should say 
was not as clear to people when we went in to examine it. There 
was a standard process through which we regulated or examined 
these partners. And so we are installing a new program that we 
call PARRiS. And it will do just that, sir. It will make sure 
that we have a standard, anticipated, confident program that 
people can plan to, manage to, so that when we get there, we 
all talk in the same language.
    Chairman CHABOT. Thank you.
    I had a meeting, along with a couple other members of this 
Committee with--and one who is on Ways and Means and was not a 
member of this Committee, but with a number of small businesses 
from around the country. There were eight, exactly, and some 
groups, and we discussed a number of issues. We met for about 
an hour. And one of the issues, not surprisingly, these were 
small businesses that are actually engaged in trade, 
international trade for the most part. I think seven of the 
eight were. And as you know, trade is critical to our economy. 
Ninety-six percent of the consumers around this globe are 
located outside the boundaries of the United States, and 
unfortunately, one to two percent of small businesses are 
engaged in international trade, and that is despite the 
Internet and access that was unheard of years ago.
    But one of the principal topics that they wanted to talk 
about--there were a number. They talked about Ex-Im Bank and 
other things, but we talked about the importance of, first of 
all, TPA (Trade Promotion Authority), which used to be called 
Fast Track years ago which no president has had in a while. But 
we have got to do that first. And then TPP is hopefully 
something that would not be too far down the road from there, 
the Trans-Pacific Partnership. And then T-TIP with Europe.
    So my question for you, Madam Administrator, would be I 
know and understand from others that the President has really 
stepped up his game in working on both sides of the aisle. He 
really only needs to work one side of the aisle; we are working 
the other side of the aisle. But it is going to take--this will 
truly have to be bipartisan to get this done. So could you 
comment on what the Administration is thinking relative to 
moving TPA, TPP, T-TIP?
    Ms. CONTRERAS-SWEET. I admire your interest, and I am 
grateful for your interest in the globalized economy because I 
think whether we want to be a part of it or not, it is upon us. 
When you light up your website, you are already there.
    And so first, if I may go to the specific and then go to 
the general, let me just say that specifically at the SBA, when 
I mentioned in my opening address about the smart, bold, and 
the accessible, the bold really meant about--was speaking to 
the market making. I do think that we have to help small 
businesses engage and protect them. Not protectionist but 
rather guide them through the international marketplace. And so 
to that extent, you know that we have USIACs that we deploy. We 
have products that help. We have really strong products that 
have a 90 percent guarantee. Lamentably, it is just not a well-
known product and so that is one place where we can work 
together.
    But then to your general point about the administration, 
clearly, the president has made this a top priority of his. He 
understands that if we do not set some rules of engagement, 
China will set them for us. And so in that regard, I know the 
president has asked all of us at Cabinet to make this a top 
priority. And so I have been traveling across the country to 
try to engage the conversation, have people give us feedback 
about what that could look like. I have been meeting directly 
with Mike Froman, my cabinet colleague about an SME chapter and 
what that should include. We are taking valid input across the 
country from people, and it is informing our process. But to 
the extent that we get TPA and TPP, we think that that will set 
a great foundational framework for T-TIP.
    Chairman CHABOT. Thank you very much. My time has expired. 
But to the extent that I can, please let me urge you to do 
everything within your power to emphasize to the Administration 
the importance of passing these trade pieces of legislation are 
to small businesses across the country, and you and I in our 
different capacities I think should do everything we can to do 
that. So thank you very much. I appreciate it.
    And I now recognize the gentlelady from New York, the 
ranking member of the Committee, Ms. Velaazquez.
    Ms. VELAAZQUEZ. Thank you, Mr. Chairman. And welcome, 
Administrator Contreras-Sweet.
    You know, one of the biggest challenges that we face in our 
country is the income inequality, the widening gap. For few, 
the economy is doing extremely well, but for a big majority 
they are not. And so one of the programs that we have within 
the Small Business Administration is the PRIME program that 
serves to help very low income entrepreneurs. However, the 
program is slated for termination by your agency. And instead, 
the SBA chooses to target the most wealthy business owners 
through programs like Emerging Leaders, which require almost 
half a million dollars in annual revenues to gain entry. So I 
would like to ask you, of the new pilot programs, the new 
initiatives that you are proposing this year, which one of them 
is designed specifically for very low income entrepreneurs, 
like PRIME?
    Ms. CONTRERAS-SWEET. Yes. Let me just say that, first of 
all, you know how simpatico I am to your disposition about the 
underserved. It is something that I feel that I have been 
trying at least to emulate your work and to do it in my own 
little way in Los Angeles in my bank that was stood up just to 
serve the underserved. So you know that that is where I come 
from. When you are an immigrant, as I am, and you navigate, you 
know, any assistance along the way is something that is very 
well received.
    Ms. VELAAZQUEZ. But it is not only immigrants.
    Ms. CONTRERAS-SWEET. No, I know.
    Ms. VELAAZQUEZ. Very low income could be rural America.
    Ms. CONTRERAS-SWEET. Yes. So I just wanted to say I hope 
that you noticed that we did amp up the technical assistance 
component under the microloan assistance program to accommodate 
that. It is why in large measure we zeroed out fees on the 
loans under $150,000.
    Ms. VELAAZQUEZ. I understand. My question to you is on the 
new programs and initiatives, if there are any being designed, 
tailored, to help very low income entrepreneurs. You have 
Emerging Leaders and other programs, and you are going to tell 
me that maybe, you know, the Microloan program could fill that 
gap, but I can tell you that the SBDCs offer training as well 
as Emerging Leaders does. So if we are going to say that it is 
duplicative, well, the Emerging Leaders Program might not 
require the type of technical assistance that low income 
entrepreneurs need.
    Ms. CONTRERAS-SWEET. Right. The way I--and again, only from 
my experience as a banker and then as a business person trying 
to start two businesses, I felt that there were three things 
that we needed to do to help this target community that you are 
identifying. And one is to provide them counseling. We launched 
a program also--and you know, again, I am reluctant to call it 
a program because I think it is a segmentation, but it is 
called My Brother's Keeper, and it speaks to focus on clearly 
the underserved. And so we are working with community colleges. 
We are working with churches. And we are going across the 
country. In fact, it is a program that we are launching very 
imminently. And again, I am reluctant to use the word 
``program,'' but this initiative, this effort very soon to 
target that very population.
    And then the second thing is that I have just been working 
with the credit unions of late to make sure that they make 
those $50,000 loans and under more available, and so we have 
entered into a partnership with them.
    And then third, the technology to make the system more 
efficient.
    Ms. VELAAZQUEZ. So we have two new programs, Emerging 
Leaders and ScaleUp America. Both of them provide training for 
very successful businesses. I have a concern, I have a problem 
with that picture because here we are creating new pilot 
programs to assist businesses that really do not need it. If 
you are a small business that has revenue of $500,000 and have 
been in existence for three years, you are already up and 
running. How can we fill the gap of those small businesses that 
are struggling? It goes to the core mission of what the Small 
Business Administration should be doing.
    I just want to share with you that I will be fighting to 
make sure that the PRIME program gets funded.
    Ms. CONTRERAS-SWEET. Just, if this is any consolation, I 
hope that you also noticed that we amped up by a million 
dollars for the Women Business Centers, which are wholly 
dedicated to underserved communities as well in addition to My 
Brother's Keeper.
    Ms. VELAAZQUEZ. I would like to talk to you about the 
SBICs.
    Chairman CHABOT. The gentlelady's time has expired. Would 
you like an additional minute or so?
    Ms. VELAAZQUEZ. Yes, please.
    Chairman CHABOT. Okay. The gentlelady is recognized for an 
additional minute.
    Ms. VELAAZQUEZ. Let me call your attention to the fact that 
the agency is claiming you achieved the 23 percent contracting 
goal, and I am very happy about that. But then I cannot 
reconcile that with the inspector general report that says that 
one billion dollars of small business contracting actions were 
awarded to big firms, ineligible firms. How do you reconcile 
that? My point is, you must have better mechanisms and 
oversight to make sure that those contracting actions go to 
those who thy were intended for in the first place, small 
businesses. And one billion dollars going to big firms and then 
being counted as small firms is just not right.
    Chairman CHABOT. The ranking member's time is expired but 
you can answer the question.
    Ms. CONTRERAS-SWEET. Well, just let me say, I could not 
agree with her more than when we have a program that is focused 
on small business, that is what we want to do, and so just to 
say that the SBA has committed several programs put in place to 
make sure that this is not taking place. We have disbarred more 
people, three times more at the rate since we took office than 
in the prior 10 years. So I want you to know we are on it. We 
are adding more personnel. We are conducting more anomaly 
reports, and just every tool available to us is being deployed.
    Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
    Chairman CHABOT. The gentlelady's time is expired.
    The gentleman from Nevada, Mr. Hardy, who is the chairman 
of the Subcommittee on Investigations, Oversight, and 
Regulations is recognized for five minutes.
    Mr. HARDY. Thank you, Mr. Chairman.
    You know, I am a small business owner myself, or was, and I 
was out in the district this last week, and my district is 
District 4, which hosts Nellis Air Force Base. We probably have 
the largest veteran population in my district of any place in 
Nevada. With that being said, the SBA claims that the Veterans 
Business Opportunity Centers are underfunded; however, SBA 
makes no requests for increase of funding for that program, but 
instead requests an increase of around $5 million for Executive 
Direction. If these centers are underfunded, then why not 
request Executive Direction allocation for those funds to the 
Veterans Business Opportunity?
    Ms. CONTRERAS-SWEET. Sir, I have to go back and check on 
the number, because we are asking full funding for all of our 
partners to continue the programs that we are doing, and we are 
asking for an amplification, an expansion on the reboot 
program. And so we are asking for more funding for the 
veterans' programs, so I have to review what number you are 
referring to because we want to relaunch the Reboot program 
which is for those who already transitioned out. So my 
understanding is that our request is an increase. So I will 
have to look to see.
    Mr. HARDY. According to the report, I looked at it, there 
were some questions about whether that was what was actually 
happening. So we can get with each other after.
    Ms. CONTRERAS-SWEET. I would be delighted, sir. Thank you. 
Of course.
    Mr. HARDY. The other thing is the inspector general 
question. Why does the SBA require the Office of Inspector 
General to clear all the proposed final rules, and can you 
speak of how the role of the inspector general works with SBA?
    Ms. CONTRERAS-SWEET. We have, you know, I try to visit with 
the inspector general on a monthly basis and to have a 
proactive--I always think it is better to prevent than to 
detect. It is sort of my Japanese training. When I was in 
corporate, you know, the private sector, it is not about 
detection, it is about prevention. So to the extent that I can 
meet with the inspector general in advance of promulgating 
something to get the feedback, then I think it helps us to be 
more efficient to not have to get caught up in messy quagmires 
at the end of the process.
    Mr. HARDY. Okay. If you could, could you explain to me how 
the SBA works with veterans on getting access and moving 
forward to access those funds? And the question I also have is 
it expresses that the program is at about $350,000. Is that 
sufficient for small businesses? Because it seemed like a 
pretty low number to me.
    Ms. CONTRERAS-SWEET. Thank you for allowing me the 
opportunity to clarify that point. What we are saying is that 
up to $350,000, we have zeroed out fees, but they can take 
loans up to $5 million. It is just the fee structure. So we are 
waiving fees for veterans on loans up to $350,000. That is the 
point on that; not that we are limiting to that size of loan. 
So that is the clarification on that SCORE.
    I am sorry, and your other question was?
    Mr. HARDY. It was about the process about how a veteran 
actually utilizes their benefit to be able to get part of the 
SBA.
    Ms. CONTRERAS-SWEET. So the program is really quite dynamic 
and interesting. It is part of the federal TAP program, the 
Transitioning Assistance Program. So we go into the 
installations globally around the world and we introduce them 
first to a couple hour video. And if they are interested in 
entrepreneurship, then we put them into an eight-hour--excuse 
me, into a two-day program where we actually have in-person 
training about entrepreneurship. And then if they are 
interested in that, then they go into the complete program that 
is a very extensive program where they actually develop a 
business plan so that when they come out they are ready to 
start their business. So there is no languishing when they are 
out in the community and trying to navigate through a labyrinth 
of what are they going to do with their lives after they have 
served us. So that is the counseling portion. And then they can 
go to a Veterans Business Outreach Center where they can get 
counseling for contracting opportunities where we have set-
asides for veterans. And then as I said, our fee structure for 
veterans is very favorable. So the entire longitudinal track 
for veterans I think is a strong one, and we are seeing 
enormous success from that. And the success rate of veterans 
who are starting businesses is outstanding. It is their 
discipline, their rigor, and so we are experiencing strong 
success there.
    Mr. HARDY. One last question. Through this process, is 
there specific things that the SBA looks at and how somebody is 
qualified for a certain business or get involved in it? Do they 
have to have any real world experience in that industry that 
they are trying to get into, a small business? How do you 
qualify individuals? Is there an education factor or criteria 
that you have to meet?
    Ms. CONTRERAS-SWEET. You know, we do not think it is our 
place to say to somebody that they are qualified for a business 
or not. And I will give you an example.
    Since you have been asking me about veterans, I was in 
Denver, and I met Sheilagh. And Sheilagh was a Fine Arts major 
as a captain--I believe she was a captain--lieutenant, excuse 
me. And anyway, the point, she was a Fine Arts major, but she 
was in this intelligence unit where they trained our Blackhawk 
helicopter pilots. And she always wanted to fix the training, 
but yet her family brought her home, her daughter needed her at 
home. Long story short, she ended up hiring some engineers and 
came to the SBA, and so we provided her counseling to build her 
plan out and then we guided her so that she could get certified 
and actually apply for an SBIR grant that she was able to take 
to commercialization. And now she has a multi-million dollar 
business, and she is creating jobs and building a very 
important supply chain. So it is not to us to decide what they 
want to do or that their major matches. If we feel that they 
have the passion and the wherewithal, they build a business 
plan and we help them navigate through it. And if they are 
successful, more power to them.
    Chairman CHABOT. The gentleman's time is expired.
    There are votes on the floor. We will go through one more 
five-minute round of questions here; then we will go over and 
vote. Now, there are three votes and there is a motion to 
recommit, so it probably pushes us up to around 4:00, I think, 
before we are able to come back for votes.
    Ms. CONTRERAS-SWEET. Okay.
    Chairman CHABOT. So I think we do have other members on 
both sides that want to ask questions. So if you are able to 
come back, I know that you had a 4 o'clock time, but if you are 
able to modify that, and just let our staff know what the 
status is, I would appreciate it.
    Ms. CONTRERAS-SWEET. All right. Thank you.
    Chairman CHABOT. The gentlelady from California, Ms. Chu, 
is recognized for five minutes.
    Ms. CHU. Okay. Administrator Contreras-Sweet, I am struck 
by how much initiative the SBA has taken to address the 
critical problems that small businesses are facing in this 
nation, and I would like you to tell us about how three of 
these initiatives work. I know these are pilot programs that 
have been approved by Congress via the Appropriations bill.
    The first one I would like you tell us more about is the 
Boots to Business program, and I know that veterans returning 
home after serving our country face so many struggles of just 
finding employment and have unavoidable difficulties of 
resuming life as a civilian. I once had a veteran working in my 
office who told me that when he deactivated from the military, 
all he received was a list of benefits that were recited to 
him, and yet he really needed employment alternatives. And yet, 
the Boots to Business program is designed to help veterans 
before they get deactivated so they will not feel so lost.
    And then there is a whole other area, and that is the young 
entrepreneurs and the high-tech innovators who are not the 
typical types to join the Chamber of Commerce, and oftentimes 
the last place they would look for assistance is the federal 
government. How has the SBA worked to change that mindset and 
tap into the young, entrepreneurial energy we see exuding from 
places like the Silicon Valley through the Growth Accelerator 
Fund?
    And finally, I know that there are places around this 
country with high unemployment and economic stagnation that 
could become the next Silicon Valley if here were the right 
partnerships that took place between universities, government, 
and business. How does the Clusters initiative address this 
kind of issue?
    Ms. CONTRERAS-SWEET. Thank you, Congresswoman.
    Let me just say that the Boots to Business program is, as I 
was outlining to Mr. Hardy, is a program that has been 
exceedingly well received. In fact, recently, I was at a 
cabinet meeting with several of my counterparts who were so 
interested. They wanted to know how to get this program. But 
essentially, the Defense Department came to us and said that 
while they are preparing--the men and women in uniform are 
preparing to transition out into civilian life, that many of 
them wonder about what their future is going to be and do not 
have a sense of direction. And so one of those options can be 
entrepreneurship. As I was outlining, we introduced them, a 
very cursory, quick introduction, and then if it peaks their 
interest, then we take them through a series of other processes 
to eventually help them complete a business plan that we think 
is viable, realistic, that we can help guide them through. And 
then when they get out into civilian life working through the 
VBOCs or SBDCs or the other programs, they can get the 
counseling that they need to continue to start and grow their 
business, access capital, and then eventually contracts.
    With respect to the young entrepreneurs, there are so many 
ways in which we think that we need to engage the young 
entrepreneurs, so we have a millennials program. And again, 
these are segmentations. I call them just different channels; 
they are not programs but merely segmentation in our strategy. 
It is still counseling, and it is still the same kind of 
effort, just different lines of effort in a new target, but 
those programs have been well received by our millennials and 
we are directing them now to these growth accelerators.
    We thought that we would try to understand what was taking 
place in this new phenomenon. Some people call them incubators, 
and we put out an invitation to compete for prizes of $50,000, 
and we had $2.5 million that you awarded to us for that purpose 
that was appropriated. And essentially, we had 823 
applications. And so it was really nice to have several 
positive outcomes as a result of this competition. First, we 
were able to introduce the growth accelerators to each other so 
that they could meet and learn best practices. Second, we 
brought them in so they could learn more about federal 
resources available to them. And then number three, we now have 
an ongoing communication, another outreach where we can 
continue to promote the SBA services in their communities. And 
last, to your last question, the Cluster. You and I are both 
from California, and we know and we appreciate and respect the 
Silicon Valley model and what it has done for the world in many 
ways. Not just the job creation, but the innovation and the 
many full contributions to health, to sciences, to so much of 
society. And so we see that there are some underserved 
communities that can use a little oomph, if you will. That is a 
technical term. And essentially, what we try to do is pilot a 
program that would test how these work. And I have to tell you 
that it is always nice when you see that P3s can happen, I 
believe in public-private partnerships. And so when a large 
financial institution came forward, seeing the results of these 
programs and is now duplicating our efforts, it holds promise, 
and eventually it could be that we either sunset this program 
and allow the marketplace to take hold, but we are really 
heartened by its success to date.
    Chairman CHABOT. Thank you very much. The gentlelady's time 
is expired.
    The Committee is going to head over to vote now. Mr. Rice, 
you will be next if you should choose to come back.
    Mr. RICE. I will.
    Chairman CHABOT. Excellent. So we will be back hopefully in 
a half hour approximately, or perhaps shorter than that. But if 
there is no further business, we are in recess for as long as 
it takes to get done with the votes.
    Ms. CONTRERAS-SWEET. Thank you.
    [Recess]
    Chairman CHABOT. The Committee will come back to order. And 
we will now yield to the gentlelady from New York, Ms. Clarke, 
for five minutes. And we want to once again thank the 
Administrator for being so understanding and so gracious and 
not just running out. So we appreciate very much you sticking 
around. Thank you.
    Ms. CLARKE. And thank you, Mr. Chairman, and thank our 
ranking member, and echo our Chairman's sentiments to our 
administrator. Thank you for indulging us today and for sharing 
your testimony with us today.
    Advances in technology continue to impact the needs of 
small businesses and entrepreneurs. Small businesses face the 
need to adapt to new technological environments quicker than 
ever before. I am pleased to hear that one of your focal points 
is the modernization of the SBA, and I support your efforts to 
implement your new online programs.
    My question, Madam Administrator, is would you discuss in 
more detail the new technological tools that the SBA plans to 
implement, particularly how these tools may reach out to 
economically and socially disadvantaged citizens that may 
benefit from the many opportunities afforded by the SBA?
    Ms. CONTRERAS-SWEET. Thank you again for that question. Let 
me just say that technology allows us to do quite a bit, and 
one of those is the goal that you just framed. When we think 
about access, just my experience bank-wise, if I said to a 
relationship manager, ``You have a goal of $10 million,'' they 
would try to go out and get two $5 million loans to make their 
bogey. And so when you have--and so the challenge is about 
finding--you know, I would say, ``No, I want you to put out, 
you know, 10 $500,000 loans or even smaller.'' And so then it 
was about how much foot traffic could we get into the bank? How 
do we identify them? It is just as much work to underwrite a 
small loan as it is to do a larger loan. So what technology 
allows us to do is, number one, through LINC, it allows us to 
create that kind of foot traffic.
    Just during our break today, we just met with the Women's 
Business Center who outlined to us that in just one week she 
was able to get incredible foot traffic through the LINC 
program that is a dating match program where people who are 
looking for loans get real-time responses from banks, and they 
are allowed to make a match. And then they get a date, if you 
will, and so it allows you to connect with the banker much more 
quickly. So it is foot traffic, if you will, in very real time. 
So that allows more people to get in and to be heard by banks.
    Number two, it allows then the relationship manager to get 
a whole bunch of more people; that he does not have to go out 
and scout. So it is more efficient for community banks.
    The next level is this what we call a liquid FICO score, 
and that is a second initiative that we put in place. And that 
allows us to expedite the way in which we underwrite and the 
global cash flows and the debt service coverage considerations 
that we do in our underwriting systems. This allows us to do 
that for the community bank that heretofore did not want to do 
SBA loans because they were so cumbersome. So thank you for 
asking the question because we think that this is going to be 
an important advancement to allow banks to do more of our SBA 
loans. And clearly, there is strong evidence that when we 
compare our SBA loans to the general market conventional loans, 
there are so many more minorities that benefit from SBA loans.
    And the third, and the one that we think is going to be the 
most transformative, is SBA One. And that is going to come 
online in a couple of months, and that is going to completely 
transform the way we interact with our lending partners. And 
so, again, we think that our loans will become more attractive 
to banks and make them more available to our targeted 
disadvantaged communities, particularly our small business 
communities, and therefore, we think positive outcomes will 
ensue. Thank you.
    Ms. CLARKE. That sounds like a real game changer, Madam 
Administrator. I am looking forward to seeing the results of 
the online rollout, and just how people really adhere to the 
usage of it because, you know, you were probably dealing with 
some areas that are more fluent in the use of online services 
versus others that are sort of getting up to speed on it. So I 
am looking forward to that.
    Just sort of very quickly, the SCORE association has been a 
great resource for small businesses, particularly in my 
district in Brooklyn. Can you express to us what plans, if any, 
you have to expand and grow the collaboration between SBA and 
SCORE chapters? How would you sort of rate the relationship as 
it stands today?
    Ms. CONTRERAS-SWEET. SCORE is one of the most impressive 
organizations in America. When you think that these are 
seasoned executives who have already had success and they come 
back and volunteer their services to help replicate their 
stories, I think that is an admirable story.
    I was recently visiting with them at their 50th 
anniversary, and it was really quite impressive to see the 
generosity of these men and women who come before. To your 
earlier question, I know that they are also working to address 
more diversity in their outreach, and that is something that we 
are working to support. And so that is another important thing. 
But just generally speaking, we are asking for full funding for 
SCORE because we think they are important partners, and to the 
extent that they can continue to recruit volunteers, I think 
their programs will clearly grow and the counseling will grow 
and we will be able to create more jobs. So we are very 
heartened by the work of SCORE, and we consider them top 
partners, if you will. They are priority partners with us, and 
I have enjoyed visiting with them. And many of them are co-
located in the SBA offices. So we have a very intimate 
relationship.
    Ms. CLARKE. Thank you, Mr. Chairman, for your indulgence. I 
yield back. Thank you, Madam Administrator.
    Chairman CHABOT. The gentlelady's time is expired.
    If the administrator can stay a few more minutes, I have 
got a few more questions, and Nydia has a couple questions.
    Ms. VELAAZQUEZ. I do not have any more questions.
    Chairman CHABOT. Oh, you do not? Okay.
    Well, I will ask just a couple quick ones.
    Ms. CONTRERAS-SWEET. Sure, sir.
    Chairman CHABOT. You have been at the SBA for not quite a 
year, I guess April of last year. What is the most significant 
challenge in managing the agency that you have found since you 
have been there?
    Ms. CONTRERAS-SWEET. You and I sort of discussed this 
briefly, and that is that unfortunately, our products are seen 
as cumbersome. And so I think that people see the SBA as their 
grandfather's SBA, and that is what we are really working hard. 
The arc of our work, sir, is to make certain that we are 
responding to the technological advances and the way people 
take in information. And so I think that overall that will be 
the arc of our work, is the way we take the SBA and bring it 
into the 21st century.
    When you think about the technology that we need to use and 
need to become familiar with to make sure that we are helping 
small businesses navigate through the technology that they can 
deploy and will be encountering in their work. So that is one 
part of the modernization effort.
    The other is that our population used to compete. Our 
target market--one florist competed against another florist 
across the street, and now they find themselves as you 
identified, in a global marketplace. So the marketplace is 
different. We need to make sure that we are modernizing the way 
we think about market making. And I heard you address markets, 
and I think that is a salient point that we need to address as 
well and I think are doing nicely with those initiatives that I 
discussed that we are putting in place.
    And the third is that the population is dramatically 
changing, so we need to address whether we have cultural 
competency as the ranking member mentioned. We need to make 
sure that we are responding to how many--I was going to use the 
word ``seniors,'' but let us just call them ``encore 
entrepreneurs.'' I tell my husband that the 60-year-olds are 
now the new 40s. Our population is changing, and so we need to 
make sure that we have products that respond to the dynamic 
changing demographics for our seniors, for our vets as we 
mentioned, the millennials who now want to start more 
businesses than ever. And so all in all, I would say the arc of 
the work is the modernization agenda.
    Chairman CHABOT. Thank you. You mentioned kind of the 
perception among folks of the challenge that it is to go 
through and get loans, for example, through the SBA. We had 
eight, those businesses I mentioned this morning, that were 
principally in international trade. That is why we met. And I 
asked them how many of you have ever gotten loans through the 
SBA or attempted to, and three of the eight had attempted, but 
ultimately, either did not go through with the process or were 
rejected. I think the limits were not conducive to what they 
were trying to do and they just thought the paperwork was kind 
of daunting and they just sort of dropped out. So those were 
folks that we had not prompted. I was not sure what they would 
say, but just so you know, you do not necessarily have to 
respond, but that is what they told me.
    One other, my final thing that I would want you to respond 
to if you could, the Judiciary Committee passed the Regulatory 
Flexibility Act that we have passed in previous congresses a 
couple of weeks ago, and it is a small business bill to some 
degree, so I was the principal sponsor, but it did not actually 
go through this Committee because we wanted to go ahead and get 
it to the floor. We had already been through this Committee in 
past congresses. Anyway, in general, the Regulatory Flexibility 
Improvements Act--because it was improvements. But the 
Improvements Act does a couple of things. But the principal 
thing that it does is require that when federal agencies are 
considering new rules or regulations, they have to get input 
from small businesses and determine what the impact will be, 
both direct and indirect. That is one of the differences 
between the existing and the old bill, or the old legislation, 
is that it would include indirect impacts on small businesses. 
And so it passed, passed the House. It was bipartisan. I forget 
exactly how many democratic votes we got on the floor. It was, 
I think, 29 or 30 or something like that, virtually all the 
republicans. And the President shortly after that--it has not 
gone through the Senate yet--but issued, and we have seen a 
fair number of these coming out recently, a veto threat which I 
was--I cannot say surprised, but did not particularly--was not 
happy about it. Do you have anything about that at this point 
that you might want to shed any light, or if you would like to 
come back at a later--get back to me in the future after you 
have had more of an opportunity to find out the 
Administration's position, I would be happy to wait till then, 
but I will leave it open to you at this point.
    Ms. CONTRERAS-SWEET. Thank you. But if I may just go back a 
step to your earlier comment. I wanted to assure you, I wanted 
to leave you with this assurance because I noted that you 
referenced in your opening comments about the LMAS system, our 
Loan Management Accounting System. And I just wanted to give 
you the wonderful news. I stated it in September when I was 
here, but maybe I just need to punctuate it or state it with 
the fine out, our LMAS system project, the mainframe, we have 
migrated off the mainframe. We are on longer working--we have 
done that work and it is a completed project. And it is the 
basis for which we were able to launch the LINC and the SBA 
One. So I wanted to give you that assurance that that project 
is now behind us and we are moving forward in a system that is 
now compatible with other systems. And so we are no longer in a 
proprietary system that was asked about in September and to 
which you eluded in your opening remarks.
    But as it relates to regulatory, I have not read the 
specifics of the legislation, and so I am happy to go back and 
review the specifics. But generally speaking, I believe in 
smart regulation. I do not believe in overregulation. I believe 
in smart regulation. As a banker, I did not appreciate the 
regulation that I had to navigate through to start my bank and 
certainly to operate the bank. But I understood that some were 
appropriate for consumer protection. And so it is trying to 
find that right balance. I have not heard that the president 
indicated that he would veto. I have heard that some of his 
staff said that they might advise him to veto it, but I have 
not heard that he has actually made a final decision on that. 
So I would be delighted to get back to you once I learn more 
about what the administration's position is.
    Chairman CHABOT. I appreciate that very much.
    And I will now yield to the gentleman from New Jersey, Mr. 
Payne, for five minutes.
    Mr. PAYNE. Thank you, Mr. Chair. I am looking forward to 
serving with you on this Committee and us working together to 
improve the circumstances for our constituents as it relates to 
small business. And to the ranking member, who has been a 
consummate proponent for small businesses across the country.
    And Ms. Contreras-Sweet, welcome.
    Ms. CONTRERAS-SWEET. Thank you.
    Mr. PAYNE. First, let me say that I have been very 
impressed with the work that you have done in the short time 
that you were here under the circumstances you found yourself 
and have been able to move SBA in the right direction. We know 
there is definitely a lot more work to do, but your hands-on 
leadership bodes well for small businesses and entrepreneurs 
across this country.
    And I was delighted to have you in my district for an SBA 
small business seminar along with Senator Booker, I believe had 
it, and I was able to join. And also, the attention that your 
office has shown to me and my constituents, and I appreciate 
that.
    Let me say that, you know, as you know, Hurricane Sandy 
heavily impacted New Jersey, and the Government Accountability 
Office found that the SBA took well above the goal of 21 days 
to process disaster relief applications. I see in the budget 
there is a request for another $159 million for major disasters 
and $28 million for other disasters. Can you tell the Committee 
what additional improvements SBA intends to make to ensure 
better response in the future? And we know that was not under 
your initial purview, but moving forward, how do you see that?
    Ms. CONTRERAS-SWEET. I have to share with you that since I 
am from Los Angeles, I experienced the Northridge earthquake 
and was on the Rebuild Los Angeles Board after we had the South 
Central Los Angeles riots. And so I have been through 
situations where we really needed SBA and FEMA and others to 
come in to give us support, so this was something that was very 
important to me. And as soon as I took office, this was the 
first office that I sat down to review. So we started just from 
my experiences things that I felt needed to be done and the 
initiative of the good men and women who are trying to evolve 
at the department, we have done several things.
    First, what we found in the response rates and the 
timeframe that it took to respond to the requests, the loan 
requests, it was because there was one queue. So what we did is 
we have now double-tracked the queue to have one for businesses 
and one for mortgage recovery. So we now have experts in each 
queue and they are able to process them a little faster.
    Another was that we took them manually. We went in and we 
gave them the paperwork and they completed it manually. We have 
now gone from 36 percent that came online to now 82 percent 
that are coming online, so that is allowing us to be more 
efficient.
    Our third initiative is that when people needed help, the 
limit, the cap limit of the unsecured limit was set at $14,000, 
and we have now raised it to $25,000. And another one is that 
when we see that there is some strong credit and so we really 
do not have to take a lot of time underwriting and 
understanding what their financials are, we put them now in an 
even more rapid line. So these are the kinds of initiatives 
that we have put in place very recently. I know we can do more.
    I recently met with FEMA to understand what their role is 
and how we can complement each other a little more effectively, 
and so just know that the work is ongoing.
    Mr. PAYNE. Okay. We appreciate that.
    One of the SBA's objectives is to provide timely and 
instructive and useful information through digital and in-
person outreach efforts. With the rollout of the SBA One and 
LINC programs, how do you plan to handle the pushback from our 
constituents who have more trust in in-person lending, and how 
will you gauge the success of this program?
    I can tell you that this is not obviate or supplant the 
process and that there should still be some engagement in the 
process. For example, the date with the lender, you can come in 
and visit with the lender, and in most cases you still have to 
go in and interact with the lender. But this is not a mandatory 
program. This is an opt-in. You choose to be on this program. 
So, you know, for example, my mother is never going to go 
online. She still wants to gauge and be personally addressed. 
And so this does not affect that system whatsoever. It is just 
an added program. It is another layer of programming. So I do 
not see that that would--I do not think that would supplant the 
personal engagement that needs to take place. At the end of the 
day, particularly community banks, what we do, at least I did 
in my bank is I would always consider character as well. And so 
it is important to get to know the person and to develop the 
relationship and have a sense of their trustworthiness, credit 
worthiness.
    Mr. PAYNE. Thank you.
    Chairman CHABOT. The gentleman's time is expired.
    Madam Administrator, we want to thank you very much for 
your testimony here this afternoon. We are sorry that because 
of votes you ended up having to stay beyond the time that you 
had originally allotted, and we appreciate you doing that.
    And I would ask unanimous consent that members have five 
legislative days to submit statements and supporting materials 
for the record. And if there is no further business to come 
before the Committee, we are adjourned. Thank you.
    Ms. CONTRERAS-SWEET. Thank you very much. Thank you.
    [Whereupon, at 4:25 p.m., the Committee was adjourned.]
                            A P P E N D I X

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    Chairman Chabot, Ranking Member Velazquez, and 
distinguished members of the Committee, thank you for this 
opportunity to testify about SBA's FY 2016 budget. Chairman 
Chabot, welcome back to the leadership of this committee. Your 
track record and bipartisan commitment is an asset to this 
country's small businesses.

    I see a number of new faces on the committee. I've already 
had productive conversations with many of you. I look forward 
to working with all of you and visiting your districts in the 
months ahead.

    Entrepreneurs are the backbone of our economy. They exude 
courage and character. The programs in this budget request have 
one thing in common: They seek to maximize opportunities for 
small business owners to create jobs and contribute their 
talents to our economy.

    That's the agency's mission, and that's why I'm here. To 
accomplish this goal, we must continue our work to modernize 
the SBA, so we're accessible and relevant to the business 
community in the 21st century.

    To that end, I want to share an important achievement in 
this document. Our FY16 budget proposal contains a zero subsidy 
request for our core capital programs--7(a), 504 and the Small 
Business Investment Company (SBIC) program. We are proud of 
this achievement and the fiscal responsibility it represents.

    I'm an entrepreneur and a former community banker. I take 
my fiduciary responsibility very seriously, and this budget 
represents my commitment to be a good steward of taxpayer 
dollars. For FY16, the SBA requests $860 million. In this time 
of tight budgets, the SBA is doing more with less. SBA's zero 
subsidy achievement means this proposed budget comes in three 
percent below our current budget.

    The SBA is making good loans, and we project we will cover 
any loan losses through fees in FY16. We've achieved this 
despite waving fees on small-dollar loans. This fee relief 
helped us increase lending to minority-owned businesses by 23 
percent last year, so we propose continuing it in FY16.

    I've been on the job now for nearly a year. Thanks to the 
bipartisan support we've enjoyed from this committee, we've 
made some important progress together.

    Together, we met our 23 percent small business goal 
contracting goal for the first time in eight years. We 
supported nearly $29 billion in lending last year, which 
created or sustained nearly 600,000 jobs. In the same period, 
our resource partners counseled 1.2 million entrepreneurs. Our 
SBIC funds increased their investments by 60 percent and 
provided $5.5 billion in patient capital to promising small 
firms. And we expanded our Boots to Business program to train 
more than 15,000 service members at 165 military installations 
worldwide.

    In his State of the Union address, the President spoke 
about our economic recovery and job growth. I'll tell you 
something you already know: It's our small businesses that are 
leading this economy back.

    This budget requests an increase in our 7(a) lending 
authorization to meet the growing demand for SBA capital. Last 
year, Congress raised our 7(a) authorization level as we 
approached our lending cap, resulting in an all-time record of 
$19.2 billion in approvals. This year, we're asking for our 
highest authorization level yet of $21 billion.

    This budget also seeks full funding for our resource 
partners. The loan counseling provided by our Small Business 
Development Centers, SCORE partners, Women's Business Centers 
and Veterans Business Outreach Centers helps entrepreneurs 
across America start, grow or reinvigorate their businesses. 
Partnering with them is one of the smartest investments we can 
make.

    This budget seeks a modest $950,000 increase for veterans 
outreach programs. We propose expanding SBA's Boots to Business 
entrepreneurial training program to the National Guard, Reserve 
component members, and additional military installations. We're 
asking to broaden our Boots to Business Reboot program that 
serves veterans who've already transitioned out. And we're 
proposing to continue the fee reductions on loans to veterans, 
so we can serve these heroes as well as they've served us.

    We're also asking to expand SBA's microloan program level 
by 40 percent to increase the ability of microlenders to 
capitalize startups and provide technical assistance. We are 
convinced this expansion would fill a real need for more small-
dollar loans in the current commercial market. It will help 
underserved and rural businesses turn a profit and create more 
jobs.

    This budget also seeks to improve our customer service. As 
a former community banker, I understand that the best way to 
make SBA more effective is to make our products and processes 
easier, quicker, and more cost-effective. This budget seeks 
funding to accomplish this critical goal by migrating more of 
our services online, where most banking takes place today.

    This April, we'll roll out our highly anticipated SBA One 
system. This is the automation of the entire 7a loan 
application. It's going to significantly cut the time and cost 
of our application process. We recently demonstrated this new 
service to bankers, and the feedback has been overwhelmingly 
positive.

    Last year, I laid out my modernization plan to fashion a 
21st century SBA that stands for Smart, Bold and Accessible. 
Smart means implementing systems that harness technology to 
deliver capital more effectively. Bold means opening new 
markets for small business owners both at home and abroad. 
Accessible means making our services available to all, 
including women, veterans, rural entrepreneurs, seniors and the 
disadvantaged.

    I'd like to close by expressing my thanks members of this 
committee and to our committed SBA staff across this country. 
More than 2 million of the 3 million jobs generated last year, 
we're created by small businesses. This budget would help us 
build on this momentum. It would give us the resources we need 
to perform our core mission and help more small businesses 
across the country innovate, launch, hire, and grow.
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