[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]



 
                    JOB CREATION, COMPETITION, AND 
           SMALL BUSINESS' ROLE IN THE UNITED STATES ECONOMY

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           FEBRUARY 14, 2018

                               __________

                               
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                               
                               

            Small Business Committee Document Number 115-054
              Available via the GPO Website: www.fdsys.gov
              
              
              
              
                              _________ 

                   U.S. GOVERNMENT PUBLISHING OFFICE
                   
 26-561                   WASHINGTON : 2018                    
              
              
              
              
                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                      RALPH NORMAN, South Carolina
                           JOHN CURTIS, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                         YVETTE CLARK, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director
                     
                     
                            C O N T E N T S

                           OPENING STATEMENTS

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

                               WITNESSES

Mr. Steven H. Strongin, Head, Global Investment Research 
  Division, Goldman Sachs, New York, NY..........................     4
Mr. JR Foster, President and CEO, Robert Louis Group, Cincinnati, 
  OH.............................................................     6
Ms. Jessica Johnson-Cope, President, Johnson Security Bureau, 
  Inc., Bronx, NY................................................     7

                                APPENDIX

Prepared Statements:
    Mr. Steven H. Strongin, Head, Global Investment Research 
      Division, Goldman Sachs, New York, NY......................    25
    Mr. JR Foster, President and CEO, Robert Louis Group, 
      Cincinnati, OH.............................................   131
    Ms. Jessica Johnson-Cope, President, Johnson Security Bureau, 
      Inc., Bronx, NY............................................   133
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.


   JOB CREATION, COMPETITION, AND SMALL BUSINESS' ROLE IN THE UNITED 
                             STATES ECONOMY

                              ----------                              


                      WEDNESDAY, FEBRUARY 14, 2018

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:02 a.m., in Room 
2360, Rayburn House Office Building, Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, Radewagen, Knight, Kelly, 
Blum, Comer, Gonzalez-Colon, Fitzpatrick, Marshall, Norman, 
Curtis, Velazquez, Evans, Murphy, Lawson, Espaillat, Schneider, 
and Adams.
    Chairman CHABOT. The Committee will come back to order.
    We will now shift to a hearing on the Role of Small 
Businesses in the American Economy. And we want to thank our 
witnesses for being here today. And we will get to you very 
shortly.
    The American economy, I believe, is poised for great 
things. Significant growth is occurring across the Nation, and 
Americans, and particularly entrepreneurs, are finally, once 
again, optimistic about the future of business. In fact, the 
National Federation of Independent Optimism Index of their 
members recently reached one of the strongest readings in the 
45-year history of the survey, and it is just getting started.
    Congress and the President have worked together to end the 
oppressive regulatory burden of the past several years, and the 
proof, as they say, is in the pudding. Multinational 
corporations, like Apple and Chrysler and IBM are again 
investing heavily in American manufacturing and American jobs, 
giving the burgeoning economy an enormous boost.
    All that good news comes even before we consider the effect 
of the significant pro-growth policies of the tax cuts we 
passed at the end of last year. Again, American companies are 
stepping up and investing in their infrastructure and their 
workforce.
    Because of the tax overhaul, over $3 billion in bonuses 
have been given to employees at the largest companies, like 
AT&T, American Airlines, Fifth Third Bank, and on and on. But 
it is working for small firms, too, like the $1,000 bonuses 
given to Sheffer Corporation's 126 employees in Blue Ash, Ohio, 
next door to my district.
    But as always, we can do more. Much more. Our small 
businesses, the true engines of our economy, unfortunately, 
continue to experience a rigid lending environment. While large 
companies can turn to debt and equity markets to raise capital, 
small businesses all over the country regularly turn to 
conventional bank lending to finance their projects, and at 
times, small firms are unable to access conventional lending so 
they have nowhere to turn for the capital to grow their 
businesses and create jobs.
    Making access to capital easier for small firms has been a 
priority of this Committee since day one. Recent research 
conducted by Goldman Sachs has shown that while some areas of 
the country have experienced a falling of sorts in credit 
markets, the same cannot be said for largely urban and 
predominately rural areas of our country. For a rising tide to 
truly raise all boats, we must continue to find ways to help 
small businesses in those areas.
    We have an excellent panel of policy experts and small 
business owners to explain this new research and offer 
suggestions as to what the Federal Government can do better. 
That includes mimicking some of the successes found in Goldman 
Sachs 10,000 Small Businesses Initiative that has helped over 
7,000 small firms in all 50 states get started or expand.
    I am looking forward, as I know we all are, to this 
discussion this morning.
    And I would now like to yield to the ranking member, Ms. 
Velazquez, for her opening statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you for 
holding this timely hearing.
    Today, we will touch on one of the central issues for small 
business formation and growth, namely capital access. In recent 
years, we have seen a decline in entrepreneurship, with the low 
point arriving in 2014, when just 450,000 businesses were 
started. This reduction in business formation can be attributed 
to a number of factors, but the availability of affordable 
credit has certainly been one of the reasons.
    Lack of capital remains an ongoing problem for many 
businesses, regardless of their size or location. However, this 
issue is particularly pronounced for women and minorities, even 
though they are the fastest growing groups of entrepreneurs. We 
are potentially losing out on millions of jobs that could be 
created by these firms, and if lending shrinks due to recent 
market volatility, it will be much worse.
    That is why today's hearing is so timely, so we can learn 
about private sector initiatives that could complement our 
government efforts to grow our nation's entrepreneurial sector. 
Entrepreneurial development initiatives prove to be critical by 
providing counseling and training resources to help small 
businesses start, grow, and compete in the market.
    While the Small Business Administration and other federal 
agencies provide support in these crucial areas, private sector 
alternatives often have the capacity for filling in gaps.
    One such initiative is the 10,000 Small Businesses program, 
a public-private partnership designed to promote growth and job 
creation potential for small business owners. Efforts like this 
one are critical in helping small business owners who strive to 
grow and create meaningful impact in their communities. By 
leveraging the ability of community development, financial 
institutions, this program has reached businesses in every 
state, as well as Puerto Rico and D.C.
    CDFIs and the Treasury's CDFI Fund help small businesses 
access credit opportunities when traditional financial 
institutions fail to lend.
    With accessible rates and transparent terms, they help 
increase the likelihood of a small firm's success. In fiscal 
year 2016 alone, CDFIs made over 39,000 loans or investments 
totaling over $3.6 billion and financed more than 11,000 small 
businesses.
    This hearing gives us the opportunity to hear from business 
founders regarding their experiences in starting and running a 
business and research showing the challenges they overcame to 
become successful. Hearing your experiences and stories helps 
the committee make better decisions as we work to foster an 
environment conducive to small business growth.
    With that, I want to thank all the witnesses for their 
participation and insights. And welcome. I really appreciate 
that you are here this morning.
    I thank the chairman, and I yield back.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    And if Committee members have opening statements prepared, 
I would ask that they be submitted for the record.
    And I will take just a moment to explain our timing lights. 
The rules are very simple. You get 5 minutes and the lights 
assist you in that. The green light will be on for 4 minutes, 
and then the yellow light will come on to let you know you have 
got a minute to wrap up. And then the red light will come on 
and you are supposed to wrap up then. And we ask you to kind of 
stay within that. If you go a little long we will allow you to 
have a little extra time, but try to stay within if at all 
possible.
    And I would now like to introduce our very distinguished 
panel here this morning.
    Our first witness is Steven Strongin, head of Global 
Investment Research at Goldman Sachs. He is also a member of 
their Management Committee, Firm-wide Client and Business 
Standards Committee, and Firm-wide Reputational Risk Committee. 
Prior to joining the firm, he spent 12 years at the Federal 
Reserve Bank of Chicago, most recently, as the director of 
Monetary Policy Research. He earned his undergraduate and 
graduate degrees in Economics from the University of Chicago, 
and a graduate degree from Northwestern University's Kellogg 
School of Management. And we thank you for being here this 
morning, Mr. Strongin.
    Our second witness is J.R. Foster, President and CEO of the 
Robert Louis Group, or RLG, in America's greatest city, 
Cincinnati, Ohio. I happen to represent Cincinnati. RLG is a 
full service commercial real estate brokerage and facilities 
management firm focused on representing the real estate and 
facility needs of companies, governmental agencies, nonprofits, 
and investors. RLG's integrated services allow them to achieve 
optimum results across their clients' entire real estate 
portfolio. While headquartered in Cincinnati, they have 
additional offices in several lesser cities, like Chicago, and 
Columbus, Ohio. Just kidding. And we thank you for your time 
here this morning. They are all great cities. Not as good as 
Cincinnati, but they are great cities.
    And I would now yield to the ranking member for 
introduction of the next witness. And she comes from a pretty 
special city, too.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    It is my pleasure to introduce Ms. Jessica Johnson-Cope, 
President and Principal of Johnson Security based in the Bronx, 
New York. Johnson Security is a third-generation, family-owned 
firm, which has been recognized as one of the 5,000 fastest 
growing private companies in America for 3 years, and the 2013 
Black Enterprise Family Business of the Year. Ms. Johnson-Cope 
earned a Bachelor of Science in Industrial Engineering from 
Northwestern University, and a master's degree in Market 
Research from the University of Georgia. She is also a graduate 
of the inaugural class of the Goldman Sachs 10,000 Small 
Businesses Initiative. Thank you for joining us, and I look 
forward to your testimony. Thank you.
    Chairman CHABOT. Thank you very much.
    Mr. Strongin, you are recognized for 5 minutes.

   STATEMENTS OF STEVEN H. STRONGIN, HEAD, GLOBAL INVESTMENT 
RESEARCH DIVISION, GOLDMAN SACHS; JR FOSTER, PRESIDENT AND CEO, 
ROBERT LOUIS GROUP CINCINNATI; JESSICA JOHNSON-COPE, PRESIDENT, 
                 JOHNSON SECURITY BUREAU, INC.

                STATEMENT OF STEVEN H. STRONGIN

    Mr. STRONGIN. Thank you, Chairman Chabot, and Ranking 
Member Velazquez. It is a pleasure to be here and to get a 
chance to talk about small businesses.
    You very aptly summarized what I think is the core economic 
issue we face in small businesses, which has been slow growth 
and access to credit. When you look at the data, it is stark. 
Given the most recent data we have, for the first time in 
modern times, in fact, before we had data, small businesses 
today are actually in smaller numbers than they were at the 
beginning of the recession. So we have actually not had a net 
increase in small businesses over this time period.
    This coincides with the 10,000 Small Businesses Summit. We 
use that as an opportunity to talk to the small businesses, to 
better understand what the challenges were, and to try to 
construct what would be a practical way of addressing those 
issues.
    In the process of doing that, I think there are two broad 
issues which I think this Committee is in position to think 
about addressing. The first is the sheer volume of rules and 
regulations faced by small businesses. When you are a large 
business, you have large groups of people who figure out what 
the rules are, who track them down, and help you comply with 
them. When you are a small business that falls to the CEO. That 
is an enormous challenge that in many cases has changed growth 
plans, has changed the ability to expand into new regions, has 
changed the actual business models of these firms.
    When you talk to small businesses, and we did at length and 
surveyed them, the number one request you hear from them is 
essentially a central registry of what all the rules and 
regulations are that they need to deal with, whether it be 
state or local. I think it would also probably end up being the 
greatest database of red tape in the history of mankind. But I 
think it would actually help people run their businesses in a 
much more coherent way.
    The second thing that comes out of that, and I will come a 
little bit quickly to the causes of this, is a more centralized 
way of meeting certification standards and examinations. One of 
the things I think that Congress has done well over the last 20 
or 30 years as the regulatory burdens have increased, is they 
have sought to exempt small businesses. But one of the problems 
is, when you actually talk to small business, is those 
exemptions have not worked, and in some cases have actually 
added to the burdens.
    And the reason for that comes in two flavors. The first is 
what I would call indirect regulation. If you want to deal with 
a large corporation, they become responsible for making sure 
that their contractors meet all the rules. So instead of a 
small business having to get certified once for money 
laundering, Foreign Corrupt Practices Act, discrimination, 
small business statutes, they end up having to certify with 
every single one of their customers that they meet the 
standards necessary for that customer, which turn out to be the 
same for everyone because it is the same Federal rules that are 
being required to be met. So the exemption turns what would 
have been one form into 50 or 100 forms that are essentially 
identical and all need to be processed. Right? And so what 
requires essentially is a more central repository of meeting 
those requirements and that serving as the exemption or safe 
harbors for their customers when they hire them that they do 
not become responsible for every bit of their behavior. That 
indirect regulation has ended up being a major issues for these 
firms, sometimes in ways that are almost impossible to 
overcome.
    The other broad category is what I would call accidental 
regulation. Both the ranking member and the chairman brought up 
quite correctly that access to capital is a key issue. Our 
survey, for example, indicated that for the 10,000 Small 
Businesses, if you could double the amount of financing they 
had they would increase employment by 30 percent. The economic 
consequence of that is incredible, particularly when you think 
about the fact that half of employment in the United States is 
in small businesses.
    Why do they not have that access to capital? What are the 
issues in access to capital? And I think this is where the 
conversation often becomes confused. The reality of small 
businesses is that most of the lending, 70 percent in the case 
of 10,000 Small Businesses, is based on FICO scores, which 
essentially means it is consumer credit, not business credit. 
And so that as we think about new business credit programs we 
miss 70 percent of the issue, particularly when you are 
thinking about startups, which both the chairman and ranking 
member brought up. That almost inevitably has to do with 
mortgages, second mortgages, credit cards, personal lending, 
not with special lending programs.
    So as we think about the regulatory burdens, right, a lot 
of them come out of the consumer programs and not out of the 
business programs, and so it takes a much broader look at the 
issues to understand what the real hurdles are to running a 
small business, founding a small business, and growing a small 
business today. As you will hear from the business owners 
themselves, the amount of creativity needed to find financing 
means they are looking at every possible channel. And when you 
look at actual credit channels, what that means in essence is 
that the consumer channels and the small business channels and 
small lending channels pick up the dominant amount of that 
financing because they are the big sources of funds.
    And so as we think about really addressing the issues, it 
is centralizing and simplifying the processes, and it is 
actually understanding which credit channels they use and 
addressing those that I think would provide the most impact and 
provide the most relief and the greatest growth in small 
business.
    Thank you very much.
    Chairman CHABOT. Thank you very much.
    Mr. Foster, you are recognized for 5 minutes.

                    STATEMENT OF J.R. FOSTER

    Mr. FOSTER. Mr. Chairman, members of the Committee, thank 
you for the opportunity to testify today.
    This is a big moment for my family and myself. My parents 
have been married 56 years and counting. They never graduated 
past the tenth grade in high school. My father spent 46 years 
working in a transmission plant in Cincinnati, Ohio for General 
Motors in a small town called Norwood. From his backbreaking 
work that he was able to put forth at General Motors, he sent 
me to Cincinnati Country Day High School, a college prep high 
school, as well as DePaul University in Greencastle, Indiana.
    As a first generation college graduate and growing up in a 
blue collar neighborhood in Cincinnati on the west side of 
Cincinnati, I know a little bit about hard work and overcoming 
the odds. They say that to who much is given, much is required, 
and I am honored to be here.
    My name is J.R. Foster, and I am the CEO and founding 
member of Robert Louis Capital and Robert Louis Group based in 
Cincinnati, Ohio. Of the thousands of commercial real estate 
brokerage and investment banking firms in the country, I am a 
rarity among the bunch. My company is one of the only minority-
owned and minority-certified commercial real estate brokerage, 
facility management, and access to capital firms in the 
country.
    Our approach is twofold. We help corporations, government 
agencies, and nonprofits with their real estate brokerage and 
facility management needs, and we do so in a way that also can 
help them secure minority spend goals. Secondly, we are leading 
the charge, actually leading the charge in helping small 
business owners gain access to capital. Last year alone we 
helped over 300 businesses secure $345 million in capital 
ranging from SBA loans to conventional and alternative debt.
    I am here today because I am one of the recent graduates of 
the Goldman Sachs 10,000 Small Businesses program, and I am 
proud to represent my fellow alumni, the program, and the small 
business owners who share my same story. I personally knew I 
had the drive and the determination to start my own company so 
I did so. When I was 31 years old, my best friend, now business 
partner and I, left two well-paying jobs on Wall Street to 
start our own company. What I did not realize is all the 
hurdles that come with being a small business owner, and a 
minority-business owner at that. You take a leap of faith 
without knowing the underlying pitfalls that derail, frustrate, 
and leave some of the best minds in America for broke. By our 
second year in business, I found myself lost in a sea of 
managing employees; customers; contractors; payroll; marketing, 
which I know nothing about; and the like.
    I needed something more than my corporate career had taught 
me. By chance, I was introduced to the Goldman Sachs 10,000 
Small Businesses program which we affectionately call 10KSB. 
After a year of great coursework, excellent classroom 
engagement, and a dialogue with over 100-plus small business 
owners, my cohort, I was able to start excelling at areas where 
I fell short. I also discovered that our local Chamber of 
Commerce in Cincinnati and other minority organizations like 
the Urban League and African-American Chamber were also great 
in helping build capacity of small business owners.
    After graduating the program, over the past three years, we 
have increased our employee count. We were able to secure 
additional financing for growth, and our revenue has gone from 
$250,000 in 2014 to well over $2 million at the end of 2017, 
basically doubling year after year.
    What I ask of the chairman and the Committee is to help 
level the playing field for small business owners, and minority 
business owners at that. Having spent the last two days of the 
10KSB Summit here in D.C., I have continued to hear access to 
capital on the minds of my fellow alumni. Far too often, 
business owners are scraping together funds using high-interest 
credit cards and also taking on private capital partners that 
ultimately put them in the golden handcuffs. Even with SBA 
lending, having already tarnished their credit, overleveraged 
themselves with debt, they quickly become unable to qualify for 
government-backed loans, and I see this every day because we 
are on the frontlines of helping clients secure capital. So I 
ask that you consider helping a business like mine create a 
credit-friendly, national lending platform and ecosystem that 
business owners can have a centralized place to secure capital 
and where banks compete for their business.
    Thank you for your time today. It has been a pleasure 
speaking with you, and I am honored to be here.
    Chairman CHABOT. Thank you very much. Appreciate your 
testimony.
    Ms. Johnson-Cope, you are recognized for 5 minutes.

               STATEMENT OF JESSICA JOHNSON-COPE

    Ms. JOHNSON-COPE. Mr. Chairman and members of the 
Committee, thank you for your time today. I am reminded of the 
days when I walked the halls of this building as a 
congressional page.
    I am Jessica Johnson-Cope, president and CEO of Johnson 
Security Bureau based in the Bronx, New York. I am also the 
vice president of the Soap Box located in Brooklyn, New York.
    Johnson Security provides professional security guard and 
armored car services. Since 1962, three generations of my 
family have helped to protect the people, places, and valuable 
property around New York City. My grandparents left their home 
in the segregated South in search of opportunity. To them and 
many others, small business ownership represented those 
opportunities, the chance to live the American Dream, and to 
provide for their family.
    I am the beneficiary of their vision and their hard work. 
For the past 10 years, I have led Johnson Security. Shortly 
after I took over the business due to the untimely passing of 
my father, I applied to the Goldman Sachs 10,000 Small 
Businesses program with hopes of keeping our doors open long 
enough to celebrate our 50th anniversary. Even though I had 
watched my father and grandmother make significant business 
milestones, I did not feel like I was efficiently equipped to 
help Johnson Security reach its full potential. 10,000 Small 
Businesses provided me with the tools I needed--executive 
business education, networking and peer learning opportunities 
with my peers in the program, business advisory services, and 
preparation to obtain financing.
    Since completing the program, Johnson Security has created 
over 150 jobs. We have access to capital. We have done business 
with at least seven other program alumni. Additionally, we are 
preparing for the next phase of innovation and job creation.
    Based on the success of Johnson Security and using lessons 
from 10,000 Small Businesses, my husband and I started a second 
business, the Soap Box, where we are able to live out his 
family's entrepreneurial vision. The Soap Box provides premium 
laundry services in the Bedford-Stuyvesant neighborhood where 
we live. The Soap Box not only allows us to save our clients 
time, it allows us to employ seven people and to transform our 
community while collaborating with other small businesses. Our 
work comes with its challenges though as we try to navigate 
burdensome regulations. Nonetheless, we are determined to 
continue to grow.
    The impact of the 10,000 Small Businesses program is 
evidenced not only in the impact that I have shared with you 
but also in the outcome that the 2,200-plus program alumni who 
have gathered here in D.C. have witnessed in addition to the 
research that Steve just presented.
    My peers and I face many challenges as we grow our 
business. The current business environment makes it 
increasingly difficult to businesses like ours to survive, let 
alone to grow. One challenge is finding capable talent. In 
addition to leading my family business, I serve on a New York 
State Workforce Investment Board. In this capacity, I hear 
about candidates who lack the technical skills that we need as 
our industries advance. Additionally, I hear of the number of 
people coming into the workforce without key skills that 
include communication and critical thinking skills, basic soft 
skills. I know of countless small business owners who would 
welcome workforce development investment from the government. 
By providing small businesses with better information on, and 
access to WIOA initiatives, you can better make a significant 
difference in addressing some of the workforce disadvantages 
small businesses like ours face
    Another challenge is in obtaining capital, as you have 
heard. It can be even more difficult for minorities and women-
owned businesses. Johnson Security received financing and we 
have been able to use that money to grow. You can ensure that 
the Nation's businesses can effectively utilize the SBA 
programs that are intended to help businesses like ours.
    Federal contracting is yet one additional area where you 
can remove some of the barriers to small business success. 
Johnson Security has leveraged many of the small business 
Federal business programs to become a contractor. However, we 
know of many agencies that have fallen short of their 
subcontracting goals. You can put stronger accountability 
measures in place to ensure that more contracts are awarded to 
our Nation's qualified small businesses.
    In closing, the Goldman Sachs 10,000 Small Businesses 
program has been instrumental in the growth not only of Johnson 
Security Bureau, but the Soap Box, and over 6,700 companies 
across this Nation. I encourage you to promote the program to 
viable firms in our districts and to watch and see the impact 
that that will have on our economy. I also implore you to 
consider making changes to some of the regulations that are 
hindering small business growth.
    Mr. Chairman, I thank you for your time and attention this 
morning. I look forward to the work this Committee will do to 
continue to help make our Nation's small businesses big.
    Chairman CHABOT. Thank you very much. Appreciate it.
    And I recognize myself for 5 minutes to begin the 
questioning. And I will begin with you, Mr. Strongin.
    On a macroeconomic level, have we been doing the right 
things over the past year with eliminating some of the 
regulatory burdens and lowering taxes as was done recently in 
the tax bill? Would you expect to see positive trends in small 
business formation in the near future? And how long does it 
take to have those incentives reach the person wanting to start 
a business?
    Mr. STRONGIN. I think there are two aspects to that. It is 
certainly the right direction. I think when you look at the 
sheer volume of rules, one of the small business owners used 
the phrase, ``the death of 1,000 cuts.''
    Chairman CHABOT. Would you mind pulling the mic a little 
closer? We have got some competition at the door.
    Mr. STRONGIN. No problem. One of the small business owners 
used the phrase, ``the death of 1,000 cuts.'' And I am afraid, 
you know, when you cut that by 10 percent, it is still not that 
pleasant. And so I think as you think about really changing the 
burden, you actually have to think about things like safe 
harbors and common certifications that will cut through 
hundreds, if not thousands of rules in one step, rather than, 
you know, surgically removing bits and pieces. And so I think 
that broadly it will help.
    I also think that when you look at the consumer and 
financing side, that the changes there have actually so far 
been quite modest. You know, there is certainly intent, whether 
it be with the Fed or the CFIB to change the rules, but when 
you look at the academic work, it has been very clear that 
small business lending and consumer lending and particularly 
startup financing has been one of the areas in which the 
regulators have put the greatest burden on capital standards, 
and particularly, and I think this is something that gets 
missed, when you look at business formation in low-income and 
rural areas where FICO scores tend to be low, those burdens are 
extraordinarily high. And so I really do think it will be 
important to look very carefully at the lending standards that 
were developed post-financial crisis to give them a greater 
friendliness to lending for the purposes of small business 
startups and small business operations.
    Chairman CHABOT. Okay. Thank you very much.
    And could you, I will just follow up with a question, do 
you have an opinion relative to, say, Dodd-Frank, what effect 
that has had on access to capital with small businesses across 
the country?
    Mr. STRONGIN. One of the difficulties in analyzing Dodd-
Frank is that when it generates--I think the current count is 
23,000 pages at the Federal Register--that it becomes a little 
difficult to separate out one item from the next.
    Chairman CHABOT. Yeah.
    Mr. STRONGIN. The way we have approached this question is 
looking at the cumulative impact. And when you look at the 
cumulative impact, we are roughly 700,000 small businesses 
short of where you would have been under pre-financial crisis 
rules. That is a great number of small businesses. So that 
financial burden looks quite high. When you look also at what I 
would call the leap phase of small businesses, when they go 
from small to not small, that has equally been hit in the 
numbers. And the number of public companies has been falling 
because those are the two places where it is the greatest leap 
of faith in the process. And when you create a system that is 
anti-risk, it is the moments of that leap of faith that are, of 
course, going to get hit the worst.
    Chairman CHABOT. Okay. Thank you very much.
    Mr. Foster and Ms. Johnson-Cope, I will ask you both, if 
you could, could you tell us how the 10,000 Small Businesses 
program has directly impacted you all, and do you think this is 
something that could be replicated in other parts of the 
country?
    Mr. FOSTER. For myself and for our firm, it has helped 
tremendously. I mean, the Goldman Sachs 10,000 Small Businesses 
program has allowed us to leverage my alumni that are in the 
room. Right? As a small business, you do not really have the 
opportunity to go out and start a board of directors. And so 
being able to leverage the folks that are in my cohort who have 
like-minded experiences that I have gone through, it is more of 
a sounding board of folks that have reached those same kind of 
hurdles and trying to get over those hurdles. So for us, we 
have been able to leverage that community that Goldman Sachs 
provides, as well as I think the program should be replicated 
and produced across the country.
    Chairman CHABOT. Thank you very much.
    Ms. Johnson-Cope?
    Ms. JOHNSON-COPE. As a graduate of the inaugural class in 
New York City, we had the opportunity not just to build 
relationships with the community college partner, LaGuardia 
Community College, with the other program participants, but 
also with members of the administration at Goldman Sachs and 
members of the city administration in New York City. So the 
program represented the best of public-private partnership. And 
instead of giving us a golden ticket, it gave us the 
opportunity to learn how to navigate corporate, private sector 
business opportunities for us to grow, as well as how to take 
advantage of some of the publicly available resources. So just 
bringing better attention to what resources were available to 
us, that has helped tremendously, and then the relationships 
have really put us over the top.
    Chairman CHABOT. Thank you very much. My time is expired. 
The ranking member is recognized for 5 minutes.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Mr. Strongin, in your written testimony you touch on the 
geographic concentration of capital. Besides location 
preferences, there is a tendency for banks and venture 
capitalists to invest more in male-owned than female-owned 
businesses. Minority-owned firms fare just as poorly. In your 
experience, what impediments are there for minorities and women 
to gain access to capital?
    Mr. STRONGIN. This goes back to what I was talking about 
when I was talking with the chairman about anti-risk. It is not 
that women or poor communities are sort of worse risk 
inherently, but they typically have less equity in their homes 
and they typically have----
    Ms. VELAZQUEZ. I am not referring to poor communities. I am 
referring to minority business owners who might be doing quite 
well, even medium size, yet the data showed that access to 
capital is more difficult to come by than white male owned.
    Mr. STRONGIN. I did understand the question.
    One of the issues you run, and this is equally true of 
rural lending, is that when you look at the way the risk 
calculations are done, you take account of both where you do 
business, how you do business, and the assets held by the 
business. And so what you get is a reflection of the asset 
concentration that mirrors the business problem you just 
raised. Is it the groups who have the greatest asset 
calculations because of their personal assets typically have an 
easier time getting funding? You also have an issue that those 
people who are doing business in well diversified richer 
communities have an easier time getting credit because they are 
less risk. All right. And so one of the things, and this goes 
to the heart of whenever you talk about entrepreneurship, if 
you do not embrace risk, you end up disenfranchising large 
groups of people who want to make that leap.
    Ms. VELAZQUEZ. Okay. Thank you.
    Mr. Foster, I would like to hear your take on that 
question.
    Mr. FOSTER. We represent or have 170 banks that we work 
with across the country and it is interesting to see the type 
of companies that come to our table looking for access to 
capital. And those that come to us that are minority, women-
owned, LGBT, veteran-owned businesses, and mostly the minority 
and women-owned set, find challenge the greatest challenge 
because I think banks provide a higher scrutiny on them than 
their majority counterparts. And we see it across the board, 
whether it is credit score, FICO, whether it is P&L and balance 
sheets. I think they have less access to some of the best 
minds, CPA firms, legal counsel, which hinders them when they 
actually are putting their package together for lending. And so 
what we have tried to do is create a level playing field so 
that we provide that expertise when they cannot afford to.
    Ms. VELAZQUEZ. Thank you.
    The U.S. inflation grew over 2 percent in January, making 
it more likely that the Federal Reserve will raise interest 
rates quickly this year. This in turn will make the cost of 
capital more expensive for small businesses. What impact will 
this have on women and minority borrowers who continue to 
struggle getting loans?
    I am sorry but----
    Mr. STRONGIN. No, it is quite all right.
    Ms. VELAZQUEZ. Am I becoming; right?
    Mr. STRONGIN. No, I mean, this goes to how you think about 
growth from the deepest level. Whenever you talk about any 
issue related to social mobility, the faster the economy grows, 
the more impact you will have on disadvantaged communities. And 
so the strength of the recovery will be very important for the 
positive. Equally, and this I think is the point, the increase 
in interest rates acts as a counterbalance there because it 
makes it harder for those who do not already have that capital 
to get it. And so it is going to work both ways. The business 
opportunity is going to rise. The ability to exploit it is 
going to go down.
    Ms. VELAZQUEZ. Ms. Johnson, please, can you talk to us 
about the workforce disadvantages that small businesses like 
yours face compared to larger counterparts?
    Ms. JOHNSON-COPE. So I mentioned potentially greater access 
to and information on the WIOA initiatives. What I have seen 
serving on the New York State Workforce Investment Board is 
that typically, the WIOA programs are focused toward the large 
corporations and small businesses do not even know they exist. 
And when the grant and funding opportunities are presented, you 
have to have a massive program and someone who specializes in 
writing grants and writing proposals, and as a small business 
owner, typically we do not have that personnel. We do not have 
the resources to go after those opportunities, and the large 
corporations do not welcome us to be a part of their proposals 
to take advantage of those initiatives. And so if we cannot 
even get people who can provide good customer service skills, 
we cannot look at people who have good computer skills or 
additional skills that are needed as we try to compete not only 
as small businesses but as we compete as a Nation.
    Chairman CHABOT. The ranking member's time has expired.
    Ms. VELAZQUEZ. Thank you.
    Chairman CHABOT. Thank you.
    Ms. VELAZQUEZ. Thank you.
    Chairman CHABOT. The gentlelady from American Samoa, Ms. 
Radewagen, who is the chairman of the Subcommittee on Health 
and Technology is recognized for 5 minutes.
    Mrs. RADEWAGEN. Talofa. Good morning. Thank you, Mr. 
Chairman, and the ranking member for holding this hearing 
today, and thank all of you for testifying today. I represent 
the territory of American Samoa, a little jewel of the Pacific.
    Small businesses are a little different at home. Almost 
every family has one. In fact, 99 percent of our businesses in 
American Samoa are small businesses. So there is growing 
produce or livestock that they sell at the market. These small 
businesses are our community, our family.
    This leads me to my first question. Both Ms. Johnson-Cope 
and Mr. Foster, can you talk a little bit about how your 
companies are helping to invigorate your communities, and how 
successful small firms can have a ripple effect on the 
surrounding areas in a symbiotic relationship? American Samoa, 
our only source of higher education is our local community 
college, and Ms. Johnson-Cope, I see as part of your experience 
with the 10,000 Small Businesses program, you mentioned a 
community college partner, LaGuardia Community College. Would 
you say that the college was offering courses to their students 
that would make it easier for you to make that student your 
next employee? Is the curriculum beneficial for employers? Are 
they producing graduates with enough skills, or are you finding 
that you still have to invest resources into training? I am 
interested in seeing what I can bring back to my own community 
college to help develop small businesses in American Samoa.
    Ms. JOHNSON-COPE. So through the relationship with the 
Goldman Sachs 10,000 Small Businesses program, I have had the 
opportunity to work with Dr. Gail Mellow, the president at 
LaGuardia Community College. And we have had very extensive 
discussions on how their curricula could better demonstrate 
what employers like Johnson Security need in terms of workforce 
development in terms of skills and talent. And so to that end, 
we are looking at creating a special security initiative to 
help better prepare some of my employees, as well as other 
students that come through the college. The challenge is for 
the community college environment there are so many other 
issues at hand. Everyone is expected to go to college. There is 
a negative perception for people who go through community 
colleges, and many community colleges, there may not be as 
strong a link to the corporate world, the small business world, 
and so the relationships and the curriculum do not match up on 
a one-to-one basis. But through 10,000 Small Businesses, we are 
having the opportunity to have those discussions and shape the 
curriculum that will make a difference. And we do see a ripple 
effect in our community. So as an example, my business is 
located in the same neighborhood where I grew up. So I have to 
be accountable to my neighbors and the people that remember me 
as a child, and I can see the difference that we make in that 
we are putting people to work. We are taking them out of the 
homeless shelters. We are taking them off of the public funding 
rosters and it is making a difference. We cannot do it for 
everyone, and we cannot do it without the help of leaders like 
yourself.
    Mrs. RADEWAGEN. Mr. Foster?
    Mr. FOSTER. So our experience is twofold. We have the 
fortunate nature of being on the access to capital side, so we 
are very much engaged with local community organizations that 
are helping put folks back to work. So one of the organizations 
that we work closely with is the Joseph House in Cincinnati, 
which is an institution that helps veterans that are coming 
back into the workforce either find employment and/or start 
their own company. And so on the side of starting their own 
company, we are helping them put forth access to capital. We 
are at least helping them with programs to get access to 
capital ready.
    On the flip side, the other side of the coin, we have one 
of the largest minority-owned facility management companies in 
Cincinnati, and of the 120 contract workers that we have, more 
than half of our folks are from the workforce development 
startup communities. So you have those that we are putting back 
to work, whether they are out of the prison system or out of a 
veteran situation. So it gives us the ability to kind of give 
back to the community in that way through workforce 
development.
    Mrs. RADEWAGEN. Thank you.
    Mr. Strongin, I just wanted to mention that with regard to 
at least microfinance business loans, out in our neck of the 
woods they tend to favor women because they find that the women 
are the ones who pay their debts and the men tend to allow 
their loans to go into arrears. I just thought I would throw 
that in.
    Thank you, Mr. Chairman. I yield back.
    Mr. STRONGIN. We have another program called 10,000 Women 
that has used that globally quite well.
    Mrs. RADEWAGEN. Cool. Thank you, Mr. Chairman. I yield 
back.
    Chairman CHABOT. Thank you very much. The gentlelady's time 
is expired.
    The gentleman from Pennsylvania, Mr. Evans, who is the 
ranking member of the Subcommittee on Economic Growth, Tax, and 
Capital Access is recognized for 5 minutes.
    Mr. EVANS. Thank you, Mr. Chairman.
    Mr. Strongin, I want to have you respond to something Mr. 
Foster said, and the phrase he used is ``credit friendly 
lending ecosystem.'' So in your mind, I am interested in you 
telling me what do you think is a credit friendly lending 
ecosystem? What do you think that is from your perspective? 
Because on your page 17 you have ``putting the cost of new bank 
regulations in economic context,'' as well as I heard the 
chairman ask the question about Dodd-Frank. So I am trying to 
understand in your mind what you think that means.
    Mr. STRONGIN. It is actually a great phrase because I think 
one of the real problems in the way the financial system has 
evolved is it is friendlier to some activities than others. And 
so in the case of small businesses, inventory financing is 
okay. Asset purchases is tough but doable. But true growth 
funding is virtually impossible.
    Mr. EVANS. And I heard you yesterday say at this 
roundtable, you raised the question around the tax policy. 
Yesterday, do you recall when you raised a question around, 
well, we make decisions about tax policy. We just passed a tax 
bill and the impression I got from you yesterday was you raised 
some questions about what we did with that tax bill and 
decisions we made. Do you recall that conversation yesterday?
    Mr. STRONGIN. I do.
    Mr. EVANS. Okay. So can you speak to a tax bill that was 
pushed through this process, how exactly does that in a 
specific way help in terms of small businesses?
    Mr. STRONGIN. I want to start with a bit of information 
that Jessica normally actually provides about the way they have 
community impact. When you talk to the small businesses, one of 
the things you hear over and over again is the incredible work 
they do in taking people who are otherwise not ready for the 
workforce, investing time and effort into those people, and 
creating people who are truly productive members of our society 
and have much better lives. The tax code, as it is currently 
structured, provides no tax benefits for that investment at 
all. It does not recognize it because it is not a structured 
investment in the way that a bank thinks of an investment. It 
is the sweat and time of the business owner themselves, and 
that is not recognized as investment.
    On the other hand, if you buy a machine to replace that 
person, that is recognized by the tax code as an investment. 
That is not a particular attack on the last tax bill; that is 
an attack on the last 40 tax bills, that we do not recognize 
the fact that the time and effort and sweat of these business 
leaders to create a better workforce and to strengthen our 
communities is not recognized as the investment it really is.
    Mr. EVANS. Okay. I understand that. And understand, I have 
only been here for 13 months. So that is the only bill that I 
dealt with. So you talk about the 40 tax bills. What I am 
trying to do is figure out a way that nexus. How do we, in a 
very specific way, move the needle? When you talked about the 
disconnect on economic growth and small businesses and large 
businesses, so I am trying to understand something. And second, 
let me piggyback real quick, CDFIs. I think the conversation 
came up about CDFIs. Goldman Sachs put up like 200 and what, 50 
million or something CDFIs. You chose to use that mechanism 
versus the financial aspect of going to banks. Talk a little 
bit about that.
    Mr. STRONGIN. This goes to the ecosystem question that you 
raised, is that you need different types of financing at 
different moments in a firm's lifetime. The startup tends to be 
very mortgage, credit card, personal asset intensive. When they 
are healthier and larger, it tends to be more the sort of 
standard bank lending to small businesses. When you need to put 
that leap to an investment, when you are going to grow a 
business from 30 employees to 200 employees, that is when these 
special lending programs become very important, like the CDFIs. 
They have been in special cases very successful, but broadly, 
they have never been large enough to make a broad scale 
macroeconomic difference. To certain businesses they have been 
very, very important and very helpful. And from the standpoint 
of our own experience with it, we have had people who have been 
helped. Interestingly enough, they were not the people we set 
out to help. The actually people in the 10,000 Small Businesses 
program actually have not used our CDFI to a great extent. Some 
have, but it turned out that a different group of small 
business owners came in and used it.
    And that goes to your ecosystem. You really need healthy 
lending and access to capital along the entire lifespan of 
these firms, and that tends to be different answers at 
different points in their lifespan.
    Mr. EVANS. I yield.
    Chairman CHABOT. Thank you very much. The gentleman's time 
has expired.
    The gentleman from Iowa, Mr. Blum, who is the chairman of 
the Subcommittee on Agriculture, Energy, and Trade, is 
recognized for 5 minutes.
    Mr. BLUM. Thank you, Chairman Chabot. Thank you to our 
panelists for being here today.
    I am a small business owner myself, and I represent 
northeastern Iowa. And as I tour my district of 20 counties, 
the biggest issue that small businesses have in my district is 
finding employees. And I have talked to Secretary Mnuchin about 
this. I have talked to Speaker Ryan about this. I believe the 
tax reform we just passed could lead to 4 percent economic 
growth sustained over the next 10 years, certainly 3-1/2 
percent. But I think a couple things could hold us back and I 
would just like to get your thoughts on these. The biggest 
thing is finding employees. And what comes to my mind is some 
sane immigration policy, and also, a sane welfare reform 
policy. So I would love to hear your thoughts. I do not want 
this to get political but finding employees is a challenge. And 
just deliver your thoughts on where do we look for employees? 
Is the government helping or hurting in that aspect of it?
    Mr. STRONGIN. So the representative would like me to talk 
about immigration and welfare without being political?
    Mr. BLUM. That is a challenge, is it not?
    Mr. STRONGIN. That will be an interesting challenge.
    Mr. BLUM. Point well taken.
    Mr. STRONGIN. You are quite right. Immigration, and if you 
talk to business leaders broadly, particularly corporate CEOs, 
they will talk about immigration and flexible immigration and 
skill-based immigration as one of their top priorities. Because 
when you are trying to grow a firm, very typically there will 
be specific skillsets you are missing, and the ability to get 
the best people for those specific skills is very important.
    When you go to less skilled labor, immigration also plays a 
role. So does the educational system. So do the incentives to 
work. One of the things that I think is very important, and my 
panelists can talk to this better, is the fact that we do not 
recognize how small businesses actually create workers and 
train workers, and the way that interacts with the minimum wage 
among other roles is an issue. Small businesses get no training 
credits. They receive no training credits from when they take 
someone who has not graduated high school, who potentially has 
been incarcerated, who has potentially been unemployed because 
of structural dislocations from a factory in a rural town, and 
they train that person. They give them new skills, and they 
employ them. That process is completely unrecognized by the 
system today. And the notion that we would then potentially 
create some significant grant form so they could qualify goes 
right back into the red tape issue.
    And so I think a true appreciation of the role these 
businesses play will in some part help you with that workforce 
problem because that is how you create it.
    Mr. BLUM. That is a good point. I would like to hear from 
the other panelists as well.
    Mr. FOSTER. Our biggest challenge on the facility 
management side is workforce because of the folks that we 
employ. The folks that are pushing brooms and turning wrenches 
often do not come from the background of college graduates and 
whatnot. And so as you mention, our biggest challenge is we are 
pulling direct capital from our company to train those folks, 
right, and not getting a strong return as it relates to the 
contract with our client. So what we are having to do is really 
do grassroots training. Create facilities and create training. 
And what we have done in Cincinnati is we have partnered with 
other like-minded business owners who also are going through 
the same thing that we are going through. We partnered with a 
general contracting company in Cincinnati and we are putting 
their folks and our folks through the same rigorous training 
but also pulling from the same candidates. So we can also flex 
workers from their contracts to our contracts to make sure that 
we are providing the right sort of customer and client first 
attention to the contract.
    Ms. JOHNSON-COPE. What I have noticed is that there are 
people who are sitting on the sidelines who are not in the job 
market even though the statistics show that employment levels 
are improving. And I guess that is a good place to have a 
conversation with small business owners, with the people who 
are sitting on the fringes and not working, and understand 
where is the disconnect that makes them not want to work. I 
have seen young people who have turned down job opportunities 
because they are waiting for that $15 an hour job because of 
the promise of a higher minimum wage. At the same time, they 
are currently not working, they do not have a good set of 
skills, and not willing to get those skills, but they have the 
promise of a higher minimum wage. And so it is important to 
have a discussion not only with the business owners but with 
the elected officials, those people that are sitting on the 
fringe. And then also understanding where are we going as a 
Nation in terms of our jobs so that we can make sure that we 
can invest in the skills that people need because if you had 
thought back 10, 20 years ago, we were not thinking that people 
would be largely using the Internet and that robots would be 
replacing people, so we need to be thinking forward about what 
jobs are going to come and then engage the people who are not 
working to figure out how to put them to work.
    Mr. BLUM. Thank you very much. And I yield back the time I 
do not have.
    Chairman CHABOT. The gentleman yields back.
    The gentleman from Florida, Mr. Lawson, who is the ranking 
member of the Subcommittee on Health and Technology is 
recognized for 5 minutes.
    Mr. LAWSON. Thank you, Mr. Chairman, and welcome to the 
Committee.
    I was just sitting here listening to a great deal of what 
you all were stating, and I have been in business for the past 
36 years, and when I first went in I was in the insurance 
business. And over the years in dealing with attorneys, 
doctors' offices, and everybody else, when you are in 
interviews and stuff like that it was always about access to 
capital. So some 40 years later the same issue is surfacing 
about access to capital. And since the downturn in the economy 
since 2008, the same things happens now with small businesses. 
And then you are seeing some increases in small businesses 
except for African-American businesses. Can you tell me, 
because it has been an issue for a long time, what is it going 
to take in your opinion to increase the growth when access to 
capital to African-American businesses so they can hire in some 
of these disadvantaged communities, what you talked about, Mr. 
Strongin, before, because that is where it needs to increase so 
you can actually put people to work and at the same time help 
improve the economy.
    And the last thing I want all you all to address, and I 
always ask this in the Committee, what can this Committee do to 
really help small businesses? You know, when you talk about 
Dodd-Frank, 7,000 pages of information that people have to go 
through, what can we do? And I am going to try to cut it short 
because I would like to hear from all of you all about how can 
we increase it?
    Mr. STRONGIN. When you talk to the small business owners 
themselves, and they will do this far better than I, starting a 
small business is an act of faith in yourself and in the 
economy. And the lending and access to capital around that is 
inherently going to be a fairly risky process. And if you look 
at the history of that process, it has always been sort of 
personal lending, savings, family help. That is not really 
going to change. We are not going to create a program where we 
are going to give everyone one chance at a small business. It 
is about the small business owners' faith in themselves and 
allowing them to take that chance.
    What happened post-crisis is we developed a belief that 
people were no longer capable of making that decision for 
themselves. We began to leave that decision to the banks, that 
the banks were supposed to prevent people from taking bad 
risks. That act of faith is often a bad risk. The statistics on 
success in starting a small business are frightening. It is all 
the more credit and more amazing when you see people do it and 
succeed or do it a second time or a third time and succeed. And 
that really does require an attitude toward risk that is 
different. And it is something we have done in the past. If you 
look at the financial crisis in the 1980s, the number one goal 
of financial policy in the 1980s was to maintain credit to 
those businesses, and they succeeded and you had small business 
growth. That was not without a price. The S&L crisis was the 
bill for that policy but it maintained a level of 
entrepreneurship. It created an amazing number of small 
business jobs. And it allowed that entrepreneurial spirit to 
go. But it was very much an ideological embracing of risk. This 
time we have decided that risk itself is a problem. That is the 
access we have to develop these decisions on, and that is the 
act of faith that drives entrepreneurship and growth, not a 
program.
    Mr. LAWSON. Mr. Foster?
    Mr. FOSTER. From my standpoint, it starts earlier than 
that. I think it starts with access to education. I think it 
starts with access to opportunity. And then you get to access 
to capital. Because I think in our community, the black 
communities, African-American communities and minority 
communities as a whole, we do not get a lot of opportunity to 
experience being a business owner, seeing our families, our 
father, our mother being a business owner. Right? And so first, 
you need to start at the education level and what does it mean 
inside of our school systems to run a business? Can we get 
programs to help youngsters understand what it means to run a 
business? And then once that, you have the opportunity and the 
mindset, and then you can start putting in programs like Access 
to Capital at an early age. So that is my thought. And then 
from there it starts to grow throughout the lineage of minority 
and African-American households.
    Mr. LAWSON. Mr. Chairman, I yield back.
    Chairman CHABOT. Thank you very much. The gentleman yields 
back.
    And the gentlelady from Puerto Rico, Ms. Jenniffer 
Gonzalez-Colon, who has unfortunately had to experience when a 
hurricane comes through and wipes out a great deal of the 
infrastructure and the challenge that that is is recognized for 
5 minutes.
    Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And thank you 
for your leadership, allowing us, and the small businesses in 
Puerto Rico to recover with the measures that are so important 
to do so. So this kind of hearing, it is important to us. And I 
will first of all say thank you to the Goldman Sachs 10,000 
Small Business program. We actually got 10 or more people from 
Puerto Rico into your program. Actually, one of them is here 
today, Iris Vincent, from Primary Corp in Puerto Rico. And we 
feel very proud about her. She is an entrepreneur, small 
business woman that has been awarded actually by her leadership 
on the island and by the Small Business Administration. And 
actually, that will be my first question.
    Do you think the territories, and we are not just talking 
about Puerto Rico. We are talking about the U.S. Virgin 
Islands, American Samoa, Guam, Northern Marianas, and even, of 
course, you do not count Washington, D.C., as a territory, but 
do those territories have different challenges in terms of 
accessing those kinds of loans and investments to make that 
first effort to establish a firm?
    Mr. STRONGIN. They do. One of the aspects of the modern set 
of rules is that almost any area that faces special challenges, 
right, whether it be rural farming communities or territories 
where the risk profile is higher, faces difficulties in getting 
credit from the centralized banks. The way we now score banks 
on their lending practices and the way we view discrimination 
means that any area that is higher risk creates legal 
challenges for the bank if they lend into it.
    When I was at the Federal Reserve was the period where we 
phased in CRA, which had exactly the opposite intent. Right? It 
was about getting credit into those communities. The way we now 
score banks, we make that provision of credit sort of 
regulatorily dangerous because bad performance, higher rates to 
different areas all create potential legal problems.
    Ms. GONZALEZ-COLON. What can this Committee do to help 
those territories to access that?
    Mr. STRONGIN. So I think that from the standpoint of the 
way the regulation of banks is set, it really has to be about 
more the actual risk allowing the lending to be more about the 
borrower and less about the borrower group. I do not want to 
suggest that banks are perfect in any stretch of the 
imagination.
    Ms. GONZALEZ-COLON. No.
    Mr. STRONGIN. When it comes to the way they embrace each 
and every community, but when you set up the rules to enforce 
very precise treatment, inevitably those rules will be highly 
discriminatory against some communities and in favor of others. 
And the way the current rules are set up, it actually hurts the 
communities most in need of help, the ones with very specific 
economic structures, right, where they tend to get bad weather. 
Farming communities because of similar weather issues are very 
high-risk areas, and so they tend to have the greatest problems 
getting credit.
    Ms. GONZALEZ-COLON. Can you and all the witnesses provide a 
list for the Committee of those recommendations that you 
understand will help us out, because my time is almost set to 
expire and I want to make another question. You can submit that 
to the chairman.
    But I am very impressed about the testimonies regarding Mr. 
Foster and Ms. Johnson regarding how your businesses grew, grew 
your revenues, created more jobs, expanded your operation. You 
accessed financing. So for me it is important to know what 
skills do that program, the 10,000 Goldman Sachs program, 
actually help to improve and develop? What are those skills 
that are mostly needed that makes a difference between that 
kind of program and others?
    Ms. JOHNSON-COPE. The first skill I would say is 
confidence, because it is one thing for me to do business with 
business in my community that are small just like I am. To have 
to make a case to a firm like Goldman Sachs and to large 
corporations as to why they should do business with me, it gave 
me an air of confidence that prepared me to go into other 
corporations and to ready my business and ready my team to 
provide our services on a grander scale and to show people in 
our community that we were able to go beyond what we had 
previously seen as our limit. So confidence is that first 
skill.
    Another skill would be just in financial management. To 
look at dollars and add a zero to the level and volume of 
contracts we had previously done. It opened our eyes to bigger 
opportunities. And so it allowed us to walk into more contracts 
and to prepare to create those jobs that our community needed. 
So confidence and financial management.
    Chairman CHABOT. The gentlelady's time has expired.
    The gentlelady from North Carolina, Ms. Adams, who is the 
ranking member of the Subcommittee on Investigations, 
Oversight, and Regulations is recognized for 5 minutes.
    Ms. ADAMS. Thank you, Mr. Chairman. Thank you, Ranking 
Member Velazquez, for hosting today, and to all of the 
witnesses, thank you very much for your testimony.
    Mr. Strongin, HBCUs are well suited to foster 
entrepreneurship and start-up business growth due to access to 
high caliber human capital, our students and professors, while 
also providing a support structure to establish new ventures. I 
was delighted to see that Goldman Sachs is recognizing the 
untapped potential of HBCU institutions and is partnering with 
at least one HBCU. Last year, the Goldman Sachs 10,000 
partnered with Morgan State, and so I have a couple of 
questions for you. First of all, if you could expand on 
Goldman's partnership with Morgan, what is Morgan's role in the 
partnership, and do you have future plans to partner with other 
HBCUs?
    Mr. STRONGIN. The last part of that is easier for me to 
describe than the first.
    Ms. ADAMS. Okay.
    Mr. STRONGIN. The answer to that is yes. We are looking to 
expand the program broadly. This year we set up a national 
cohort that would allow us to bring people from across all 50 
states and even where we did not have a partner. We continue to 
search out partners, particularly in areas where the benefit 
would be greatest and where we can stretch into the black 
community, into the Hispanic community. Also, into the rural 
communities. One of the things the research has shown very 
strongly is that small businesses are incredibly important for 
creating resilience in communities and very important for 
renewal of communities. Much better than a single factory from 
a large corporation. And so in our own view of creating a 
healthy economic environment, creating a good ecosystem for 
small business we think is the single greatest thing we can do 
to improve community resilience particularly in those 
communities that have been hardest hit. And that can either be 
a geographic community, or an ethnic community, or a territory. 
It really has to do with dealing with the major economic forces 
we face today of technological disruption, globalization, the 
issues in urban communities, the issues in rural communities we 
face, that when you are trying to fix those issues, that 
expanding outreach, particularly across those communities that 
need that help, this is the best place to do it. And so it is 
why the program was formed in the first place, and it is why we 
are attempting to expand it. And it is why we brought everyone 
together at the summit, to communicate that to Congress, right, 
so they can understand why we think this is part of the answer.
    Ms. ADAMS. Yeah, well, you are certainly very visible 
today, and I want to commend you on your program and those nice 
scarfs that the folks are wearing. Wonderful. Wonderful. I see 
Joyce Brayboy, and I want to thank you for being here. And all 
of the folks from Goldman Sachs. I had an opportunity to visit 
the headquarters up in New York a few months back.
    Diverse business owners add to the supply chain in valuable 
ways, and research shows that companies that embrace diversity 
are more profitable than companies that do not. So does Goldman 
Sachs's 10,000 Small Businesses program teach businesses how to 
navigate other companies, supply diversity programs, and how 
does this program serve as a feeder into that chain?
    Mr. STRONGIN. It certainly does. I mean, the graduates can 
speak to than better than I can. I will note before I pass it 
to them, because they will do it better than me----
    Ms. ADAMS. We have got 1 minute.
    Mr. STRONGIN.--is that part of the proposal is I think that 
is also something you can help with, which is by making the 
certifications more common and more simple, it will make it 
much easier for those businesses to succeed.
    Ms. ADAMS. Okay.
    Mr. FOSTER. Yeah, I will add just a quick comment to that. 
I think Goldman Sachs, and just the program as a part, has done 
a great job at helping us navigate negotiating, contracts, 
compliance, risk, things that come along with a small business 
that we necessarily do not see on a day-to-day basis because 
our heads are down and our eyes are on our business, but 
Goldman Sachs kind of allows us to think of our business in a 
different way.
    Ms. JOHNSON-COPE. I would like to add, my grandmother was a 
graduate of Fayetteville State University.
    Ms. ADAMS. All right.
    Ms. JOHNSON-COPE. And a lifelong supporter of HBCUs. And as 
a result of graduating from the Goldman Sachs 10,000 Small 
Businesses, I got an opportunity to do business with a large 
corporation that now asks who else are you doing business with 
as a result of working with us? So they want to see that the Me 
Too effect works in a positive way. If you can do business with 
a corporation like a Goldman Sachs, that you are actually going 
to leverage that opportunity to get experience in other 
corporations, because if it is working, then other companies 
want to take advantage of that.
    Ms. ADAMS. Right. Thank you. I tip my hat and shout out to 
all the HBCUs, and especially those in North Carolina. We have 
more. Nothing could be finer than to be in North Carolina at an 
HBCU.
    Thank you, Mr. Chairman. I yield back.
    Chairman CHABOT. Thank you very much. The gentlelady's time 
is expired.
    The gentleman from Illinois, who I believe will be our last 
questioner today, Mr. Schneider, who is the ranking member of 
the Subcommittee on Agriculture, Energy, and Trade, is 
recognized for 5 minutes.
    Mr. SCHNEIDER. Thank you, Chairman, and Ranking Member for 
having this Committee. I want to thank the witnesses for 
joining us today and sharing your experiences.
    I am a huge fan of the 10,000 Small Businesses. I had a 
chance to work with it in Chicago. I know many alumni. I know 
what you do, and I am just grateful for all of that.
    As my predecessor speaker talked about colleges, I am going 
to do my one little pitch and take that prerogative. As an 
industrial engineering graduate of Northwestern University, it 
is good to have you here and see your success, but also as a 
graduate of Kellogg, to have two Northwestern people here is 
remarkable. But I also have to give credit to the purple tie 
since even though you did not go to Northwestern, we have got 
the trifecta.
    This is an important program, and Ms. Johnson-Cope, I want 
to start with you because your story caught my attention. Third 
generation business?
    Ms. JOHNSON-COPE. Yes, that is correct.
    Mr. SCHNEIDER. So you went to school. You studied 
engineering. Did you know when you went to college that you 
would come back and work in this business?
    Ms. JOHNSON-COPE. When I went to college, I knew I wanted 
to be a boss, but I did not think that I would come back to run 
the family's business. And what I find, in a lot of second and 
third generation potential business owners, the invitation is 
not there to come and help run the business because we see 
business differently than the previous generations have. And so 
one of the recommendations I have made to SBA Administrator 
McMahon is to maybe look at how we can recreate SCORE to engage 
younger people and encourage them to go into entrepreneurial 
ventures, particularly for family-owned businesses, because I 
know it is something that I did not necessarily think about, 
but once I stepped into my role it seemed very natural.
    Mr. SCHNEIDER. And just to convey my bias, I spent much of 
my career consulting to family-owned businesses and working in 
family business. And my wife is in a family business. I think 
the advantage, and Mr. Strongin, you pointed to something about 
communities. The fact that small businesses--and I will add 
family businesses--are important for resilience, and the 
resourcefulness of communities, I think we need to make sure we 
continue to push that forward.
    Having been in a third generation business, and Mr. Foster, 
I will come to you next on this because it is a different 
experience than for Ms. Johnson-Cope, how has the 10,000 Small 
Businesses experience, the classroom program dealing with other 
people who may have started businesses, different experiences 
than you, how has that affected your approach to business? Ms. 
Johnson-Cope first.
    Ms. JOHNSON-COPE. So we all cook at home; right? So it is 
one----
    Mr. SCHNEIDER. No.
    Ms. JOHNSON-COPE. You do not even make toast? So it is one 
thing to try to cook at home based on what you have watched 
someone before you do. It is another thing to go to culinary 
school and learn how to do it professionally. And so the 
Goldman Sachs 10,000 Small Businesses program actually gave me 
context to what I had watched growing up. And then it taught me 
how to leverage the experience I had gained working for other 
businesses outside of my family business and to actually lead 
my firm. Because the jobs that I had did not teach me how to be 
a CEO. If I had waited until I had worked my way up through IBM 
where I previously worked, it would have been 20-some years 
before I would have been CEO, if that. Right? And so the 
Goldman Sachs 10,000 Small Businesses program actually gave me 
a shorter runway to pick up the skills that I needed to lead 
and actually be the CEO of a company, to grow the business, and 
to make decisions on a high level that I would not have that 
opportunity to do had I been working for someone else or had I 
been trying to figure out those skills on my own.
    Mr. SCHNEIDER. Mr. Foster, your experience. You said you 
came from New York.
    Mr. FOSTER. Well, I lived in New York doing investment 
banking.
    Mr. SCHNEIDER. Doing investment banking. Okay. But very 
different experiences than going back home and starting a 
business with a friend as a partner, which I imagine sometimes 
strains friendship and sometimes strengthens it. How has this 
affected what you are trying to do?
    Mr. FOSTER. From the 10,000 Small Businesses standpoint? 
You know, as she said, it really shortened that runway. And for 
me, it reinforced all the things that I had been experiencing 
prior to joining the program. And also as I mentioned earlier, 
just the community of folks to leverage within my cohort was 
second to none because you do not know what you do not know. 
And when you are in business and you are going through trying 
to win contracts, trying to manage employees, you are just 
doing it as you think you should do it, right, and then going 
through the program and then coming out of the program, I just 
had so much of a stronger toolkit behind me. And so that is how 
it has helped me.
    Mr. SCHNEIDER. Great. And I am almost out of time so I am 
going to ask a rhetorical question of Mr. Strongin, about 
something you said in your submitted testimony that I think is 
really important. And it is the statistic that between 1977 and 
2007, so a 30-year period, projections for small business 
startup and development, there are 675,000 ``missing 
businesses.'' I think there are a lot of reasons for that. We 
have talked about some of them here, but promoting a culture of 
entrepreneurship, helping young people understand that they can 
be their own boss, they can pursue their own dream, I think our 
role--I say all the time there are four things needed for 
success--a business model. You guys are responsible for that 
and Goldman is helping with that. But access to capital, access 
to talent, and a stable and conducive business environment, 
that we all have to work together. Congress has to do its part. 
But promoting that and trying to fill that gap, because if we 
are going to continue to grow our economy, whether it is after 
recovery in difficult places, in communities that are trying to 
turn around having lost major companies, or just in general 
looking at a new economy developing every decade, we need to 
promote a strong startup culture and give the people in those 
businesses the skill.
    So let me close and say thank you to Goldman Sachs for 
doing this program. It is a fabulous program, and thanks to 
both of our witnesses from experience. You did a great job. And 
with that I yield back.
    Chairman CHABOT. Thank you very much. The gentleman's time 
has expired.
    And we want to thank our panel here this morning and now 
this afternoon for really excellent testimony. I think it was a 
very enlightening discussion. Great questions from the folks up 
here on both sides and great answers from you all. So hopefully 
we can replicate much of what you have accomplished across the 
country and have more and more small businesses created all 
over American and thrive and get the American economy booming. 
So thank you very much for participating in this today.
    I would ask unanimous consent that all members have 5 
legislative days to submit statements and supporting materials 
for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
Committee other than Happy Valentine's Day, everybody, the 
Committee is adjourned. Thank you.
    [Whereupon, at 12:17 p.m., the Committee was adjourned.]
    
                            A P P E N D I X
                            
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    Mr. Chairman and members of the committee, thank you for 
the opportunity to testify at today's hearing. My name is J.R. 
Foster, Founder and CEO of Robert Louis Companies based in 
Cincinnati, Ohio. I feel very fortunate to have a few moments 
to speak with you about my story as a small business owner.

    Of the thousands of commercial real estate and investment 
banking companies in the country, I am a rarity among the 
bunch. My company is one of the only minority-owned full 
service commercial real estate brokerage, facility management 
and access to capital firms in the country. Our approach is 
two-fold. We help large corporations, government agencies and 
non-profits with their real estate brokerage and facility 
management needs--and do so in a way that can also help them 
reach their minority inclusion goals. Secondly, we are leading 
the charge in helping small business owners gain access to 
capital and debt financing. Last year alone, we helped over 200 
small business owners secure $345 million in capital ranging 
from SBA loans to conventional and alternative debt.

    I am here today because I am one of the recent graduates of 
the Goldman Sachs 10,000 Small Businesses program and I'm proud 
to represent my fellow alumni, the program, and other small 
business owners who share my story.

    I personally knew I had the drive and determination to run 
my own company. So when I was 31 years old, my best friend and 
now business partner left two well-paying jobs on Wall Street 
to do so.

    What I did not realize is all of the hurdles that comes 
with being a small business owner, and a minority business 
owner at that. You take a leap of faith without knowing the 
underlying pitfalls that can derail, frustrate and leave some 
of the best minds in the country for broke.

    By our second year in business, I found myself lost in the 
sea of managing employees, customers, contractors, payroll, 
marketing, and the like. I needed something more than my 
corporate career had taught me.

    By chance, I was introduced to the Goldman Sachs 10,000 
Small Businesses program (which we affectionately call 10KSB). 
After a year of course work, excellent class room engagement, 
and dialogue with the 100 (plus) small business owners in my 
cohort--I was able to excel in areas where I fell short. I also 
discovered that our local chamber of commerce in Cincinnati and 
other minority organizations like the Urban League have been 
helpful in growing the capacity of small business owners.

    Since graduating from the program, over the past three 
years we have increased our employee count, secured additional 
financing for growth and our revenue has gone from $350K in 
2014 to well over $2MM at the end of the 2017. Basically, 
doubling year after year.

    What I ask of the Chairman and the committee is to help 
level the playing field for all small business owners. Having 
spent the last two days at the 10KSB Summit here in DC, I've 
continued to hear access to capital on the minds of my small 
business alumni. Far too often business owners are scaping 
funds together, using high interest cards or taking on private 
capital partners that ultimately put them in golden handcuffs. 
Even with access to SBA lending--having already tarnished their 
credit and over leveraged themselves with debt, they quickly 
become unable to qualify for government backed loans. I see 
this every day as my company strives to help companies gain 
access to capital.

    I ask that you consider helping a business like mine create 
a credit-friendly national lending platform and ecosystem that 
business owners can have a centralized place to secure capital 
and where banks compete for their business.

    Thank you for your time today. I have enjoyed sharing my 
small business experience and am grateful to be here.
             Testimony of Ms. Jessica Johnson-Cope

                        President & CEO

                 Johnson Security Bureau, Inc.

Before the House of Representatives Committee on Small Business

    Mr. Chairman and members of the Committee, thank you for 
your time and for the opportunity to testify at today's 
hearing. I am Jessica Johnson-Cope, President and CEO of 
Johnson Security Bureau, Inc., located in the Bronx, New York. 
I am also the Vice President of the Cope Brothers & Sons, LLC 
dba the Soap Box, located in Brooklyn, NY.

    Johnson Security Bureau, Inc. 
(www.johnsonsecuritybureau.com) provides professional security 
guard and armored car services. Since 1962 three generations of 
my family have helped to protect people, places, and valuable 
property across New York City. My grandparents left their homes 
in the segregated South in search of opportunities. To them, 
and many others, small business ownership represented freedom: 
the chance to live the American dream while providing for their 
family. I am the beneficiary of their vision and hard work.

    For the past 10 years I have led Johnson Security. Shortly 
after I took over the business, due to the untimely passing of 
my father, I applied to the Goldman Sachs 10,000 Small 
Businesses Program with hopes of keeping Johnson Security's 
doors open long enough to celebrate our 50th anniversary. Even 
though I had watched my father and grandmother achieve 
significant business milestones, I did not feel sufficiently 
equipped to help Johnson Security reach its full potential. 
10,000 Small Businesses provided the tools I needed, in 
executive business education through a local community college 
partner (CUNY LaGuardia Community College); networking and peer 
learning opportunities with other program participants; 
business advisory services and mentoring; and preparation to 
obtain financing.

    Since completing the program, Johnson Security has created 
over 150 jobs. Our revenues have increased more than 10-fold. 
Our operations have expanded into two neighboring states. We 
have done business with at least seven (7) other program 
graduates. Additionally, Johnson Security has successfully 
applied for financing to support our growth. Our team is now 
preparing for the next phase of innovation and job creation.

    Based on Johnson Security's success, and using lessons 
learned from 10,000 Small Businesses, my husband and I started 
another company, the Soap Box (www.soapbox.nyc), where we 
continue his family's entrepreneurial legacy. The Soap Box 
provides premium laundry services in the Bedford Stuyvesant 
neighborhood where we live. The Soap Box not only allows us to 
save our clients time, it allows us to employ seven (7) people, 
and to transform our community, while collaborating with other 
local businesses. Our work comes with challenges though as we 
try to navigate burdensome regulations. Nonetheless we are 
determined to continue to grow.

    The impact of the 10,000 Small Businesses program is 
evidenced not only in the results I've cited, but also in the 
outcomes the 2,200+ program alumni who have gathered here in 
Washington, D.C. this week have experienced, and in the 
research data that have been presented.

    My peers and I face many challenges as we grow our 
businesses. The current business environment makes it 
increasing difficult for small businesses to survive, let alone 
grow. One challenge is finding capable talent. In addition to 
leading our family businesses, I serve on the New York State 
Workforce Investment Board. In this capacity, I hear of many 
job candidates who lack technical skills that are required as 
industries advance. I also hear of a number of people entering 
the workforce who lack key soft skills, such as communication 
and critical thinking skills.

    I know countless small business owners who welcome 
workforce development investment from the government. By 
providing small businesses with better information on and 
access to local Workforce Innovation & Opportunity Act (WIOA) 
initiatives, you can make a significant difference in 
addressing some of the workforce disadvantages small businesses 
like our face compared to larger corporate competitors.

    Another challenge is in obtaining the capital firms like 
ours need, which can be even more difficult for minority and 
women-owned businesses. Johnson Security received financing 
that provided working capital to mobilize new projects, cover 
payroll expenses, and expand our marketing efforts. You can 
ensure that our nation's small businesses can effectively 
utilize the U.S. Small Business Administration (SBA) lending 
programs that are intended to benefit firms like ours.

    Federal contracting is another area where you can remove 
some barriers to small business success. Johnson Security is a 
federal contractor that has leveraged federal small business 
programs as a business development tool. There are several 
agencies that fall short in meeting the small business 
contracting goals. You can put stronger accountability measures 
in place to ensure more contracts are awarded to our nation's 
qualified small businesses.

    In closing, the Goldman Sachs 10,000 Small Businesses 
program has been instrumental in the growth of Johnson Security 
Bureau, Inc., the Soap Box, and more than 6,700 other program 
alumni, particularly in job creation, and in access to capital. 
I encourage you to promote the program to viable firms in your 
districts. Watch and see what impact those businesses will have 
on our economy. I also implore you to consider making changes 
to some of the regulations that are hindering small business 
growth.

    Mr. Chairman, I thank you for your time and attention this 
morning. I look forward to the work this Committee will 
continue to do to help make our nation's Small Businesses Big!