[Senate Hearing 115-322]
[From the U.S. Government Publishing Office]
THE STATE OF SMALL BUSINESS IN AMERICA:
AN UPDATE FROM THE U.S. SMALL BUSINESS ADMINISTRATION
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
MAY 15, 2018
__________
Printed for the Committee on Small Business and Entrepreneurship
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
30-925 PDF WASHINGTON : 2018
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED FIFTEENTH CONGRESS
----------
JAMES E. RISCH, Idaho, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
MARCO RUBIO, Florida MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, NEW HAMPSHIRE
TIM SCOTT, South Carolina HEIDI HEITKAMP, North Dakota
JONI ERNST, Iowa EDWARD J. MARKEY, Massachusetts
JAMES M. INHOFE, Oklahoma CORY A. BOOKER, New Jersey
TODD YOUNG, Indiana CHRISTOPHER A. COONS, Delaware
MICHAEL B. ENZI, Wyoming MAZIE K. HIRONO, Hawaii
MIKE ROUNDS, South Dakota TAMMY DUCKWORTH, Illinois
JOHN KENNEDY, Louisiana
Skiffington E. Holderness, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
----------
Opening Statements
Page
Risch, Hon. James E., Chairman, and a U.S. Senator from Idaho.... 1
Cardin, Hon. Benjamin L., Ranking Member, and a U.S. Senator from
Maryland....................................................... 2
Witness
McMahon, Hon. Linda E., Administrator, U.S. Small Business
Administration, Washington, DC................................. 4
Alphabetical Listing
Businesses for Net Neutrality
Letter submitted............................................. 34
Cardin, Hon. Benjamin L.
Opening statement............................................ 2
McMahon, Hon. Linda E.
Testimony.................................................... 4
Prepared statement........................................... 6
Responses to questions submitted by Senators Risch, Cardin,
Cantwell, Shaheen, Scott, Heitkamp, Booker, Enzi, Hirono,
and Duckworth.............................................. 142
Risch, Hon. James E.
Opening statement............................................ 1
Warnick, Kathleen, National Association of Women Business Owners
Board
Statement dated May 15, 2018................................. 140
THE STATE OF SMALL BUSINESS
IN AMERICA: AN UPDATE FROM THE U.S.
SMALL BUSINESS ADMINISTRATION
----------
TUESDAY, MAY 15, 2018
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 3:31 p.m., in
Room 428A, Russell Senate Office Building, Hon. James Risch,
Chairman of the Committee, presiding.
Present: Senators Risch, Scott, Ernst, Inhofe, Young,
Cardin, Cantwell, Shaheen, Markey, Coons, and Hirono.
OPENING STATEMENT OF HON. JAMES E. RISCH, CHAIRMAN, AND A U.S.
SENATOR FROM IDAHO
Chairman Risch. The meeting will come to order.
Good morning. Today we are going to hear from the
Administrator.
Linda, it's so good to see you back here again. You know,
it's been over a year now--gosh, where does time fly?--since
you've been sworn in as the SBA Administrator, and we're happy
to have you here again today.
This hearing will focus on the state of small business in
America, and the Small Business Administration's efforts to
support entrepreneurs. By many measures, small business owners
today are optimistic and forward looking. The National
Federation of Independent Business' Small Business Trends
Survey for April reached a near-record reading of 104.8, and
also saw 61 percent of small businesses say they are increasing
their capital expenditures. The payroll provider Paychex has
recorded a nearly 3 percent increase over the past 12 months in
wages paid by small businesses. The MetLife and U.S. Chamber of
Commerce Small Business Index for the first quarter of 2018
found that 61 percent of small business owners are expecting
increased revenues, and nearly a third are expecting increased
hiring. This is all great news for America and for the American
economy.
The Tax Cuts and Jobs Act, which was passed last year, has
already been a big win for small businesses and, more
importantly, their employees. As I just noted, many small
business owners have already begun hiring more workers and
making new capital investments in their businesses. For the
first time since 1982, the NFIB reported the fewest number of
small businesses citing taxes as their number-one problem.
While small business owners are doing better than they have
in over a decade, small businesses in Idaho continue to talk to
me about difficulties and challenges accessing capital and
complying with and understanding a seemingly never-ending
number of regulations, all of which Administrator McMahon has
been working on.
The SBA is at the forefront of all these issues, assisting
small business owners across the Nation with its various loan
guarantee programs, its excellent technical assistance and
resource partners, and its contracting and set-aside offerings.
In her time at the SBA, Administrator McMahon has traveled
around the country as part of her Ignite Tour to better
evaluate the small business environment and to hear directly
from small business owners and SBA employees. Impressively, she
has completed over half of her tour, visiting 44 out of the 68
SBA district offices, and many, many small businesses in each
of those districts. I'm delighted to say that Idaho was on the
tour, and we were happy to meet with the office there and with
a number of small businesses.
The Administrator visited Boise last September, and she and
I had the opportunity to visit with several small businesses in
the Treasure Valley, including Cravin's Candy Emporium and
Winspear Construction. We were all pleased to show her just a
part of what makes Idaho such a great State for small business.
Administrator McMahon, I welcome you, and I look forward to
hearing about your perspective on the sensational small
business environment in this country today, your experiences
thus far at the SBA, and your ideas on how the SBA continues to
improve for the good of America's small businesses.
With that, Ranking Member Cardin.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, RANKING MEMBER,
AND A U.S. SENATOR FROM MARYLAND
Senator Cardin. Well, thank you, Mr. Chairman. Thank you
very much for convening this hearing.
Administrator McMahon, it's a pleasure to have you back
before our committee. I applaud your leadership on behalf of
small businesses in America. I join the Chairman in
acknowledging your commitment to visit each of the 68 district
offices across the country. That's an incredible commitment.
But I do think there's no substitute for meeting one-on-one
with the people that are in the field carrying out the
important responsibility of the Small Business Administration.
So I thank you for that commitment.
Two weeks ago I had the opportunity to attend the ribbon
cutting of the Baltimore Small Business Administration's
office. Now, I want to tell you, it was not a difficult task
for me to do this since it's located in the same building as my
Baltimore office is located in. I just had to go down seven
flights of stairs, so it wasn't that difficult. But it's very
impressive to see the operations we have in our Baltimore
office, for most of Maryland is done out of the Baltimore
office. We also have a Washington office that handles Prince
Georges County and Montgomery County, and they do just great,
great work. I thank you for the attention that you've paid.
Like you, Administrator McMahon, I celebrated National
Small Business Week last week and highlighted the outstanding
entrepreneurs and small business owners in Maryland who are
creating jobs, driving innovation, and increasing America's
competitiveness, and that is my focus on the committee, helping
small business access the tools and resources to better compete
in the 21st-century global economy.
SBA has helped countless businesses start and succeed, so
I'll just brag about one of those loans that took place in
1996, where the Small Business Administration took a chance and
lent money to a University of Maryland student on an apparel
idea, and that business grew from $17,000 in sales in 1996 to a
multi-billion-dollar global performance brand company, Under
Armour, that today employs thousands in Baltimore.
There are success stories like this all across our country,
and the importance for the SBA, the work that you do. But there
are some issues I hope we can examine today. Like Chairman
Risch, I am concerned about the challenges that are facing
small businesses today. I want to ensure small businesses have
equal access to Federal procurement and contracting
opportunities, particularly our women-owned, minority-owned,
and veteran-owned businesses.
In Maryland, we are fortunate to have a good number of
local credit unions and community banks serving the small
business community. However, these institutions can only do so
much to meet the growing need for capital, especially in an
environment where banks are consolidating and may prevent them
from reaching small business customers. I am interested in your
thoughts in how to get more community and independent banks
participating in SBA programs.
A priority for me is helping small businesses export and
sell products overseas. We talk about a global economy, and we
are in a global economy. But if you're a small business, it can
be almost impossible to try to get through the bureaucracies of
international trade. This is an area with tremendous upside for
small businesses, and I hope we can talk about your efforts to
strengthen export finance programs.
I'm concerned about the Administration's efforts to cut the
SBA budget. Now, I applaud the bipartisan effort in Congress to
make sure that the budgets were restored to an appropriate
level, but I am concerned about the cuts being proposed by the
Trump Administration as to how it could affect your ability to
carry out this important responsibility.
And then finally, too many small businesses remain unaware
of SBA programs, particularly the free and low-cost counseling
opportunities. So I hope you can address your efforts to raise
awareness.
Administrator McMahon and I appeared at the same small
business panel last week where we were together and talking
about the small business programs. I listened to your remarks,
and many of your observations I completely agree with,
particularly with regard to the implementation of tight labor
markets, workforce training, and access to capital challenges
facing small businesses. That's why I am particularly pleased
that you're here today, so that we can work together in order
to increase the opportunities for small businesses in this
country, and I look forward to your testimony.
Chairman Risch. Thank you very much.
Administrator McMahon, the floor is yours.
STATEMENT OF LINDA E. McMAHON, ADMINISTRATOR, U.S. SMALL
BUSINESS ADMINISTRATION
Ms. McMahon. Thank you, Chairman Risch, Ranking Member
Cardin, and members of the committee. I appreciate the
opportunity to testify today and talk about the state of
America's small businesses.
Last week we all celebrated National Small Business Week. I
began the week by honoring the National Small Business Person
of the Year. That distinction was given to one of Senator
Duckworth's constituents, the owner of a pest management
business in Illinois.
Following the award celebration, I was off on a bus tour
that started in Florida and ended in North Carolina. The trip
was similar to my travel over the past year. Soon after being
sworn in as Administrator, I set out on a goal to visit all 68
of SBA's district offices, as you've kindly mentioned. Our
field staff make up close to half of the agency's employees, so
the purpose of my travel has been two-fold: one, I wanted to
provide leadership and direction to SBA's workforce and visit
them in their offices on their turf; two, I want to see the
front line of where SBA interacts with America's small business
owners.
To date, this Ignite Tour has taken me to 44 district
offices across 38 states. I've met with our district staff and
leadership, as well as SBA's resource and community partners. I
have also had the opportunity to engage over 700 small business
owners through roundtable discussions and site visits. I've
toured a lot of facilities, sampled a lot of products, and I've
ridden a lot of equipment. Along the way, I've been honored to
make these visits with several of you.
Last fall I enjoyed visiting several businesses in Boise
with you, Mr. Chairman. In November, Senator Shaheen and I
hosted a small business roundtable in Manchester. And in
January, Senator Coons and I toured a manufacturing facility in
Wilmington. These visits have reinforced to me the valuable
role small businesses play in our economy and the importance of
SBA and our resource partners helping them to succeed.
My tour has also allowed me to hear directly from business
owners about what is on their minds. Among the frequent things
I hear are the burden of Federal and State regulations, and
complexities of health care and taxes, and recently workforce
and labor challenges.
When I look back on last year, in addition to my travel and
small business engagements, I also reflect on the agency's
response to Hurricanes Harvey, Irma, and Maria. From the
arrival of Hurricane Harvey in Texas to our continued work
today, I'm incredibly proud of our staff. Since last summer,
SBA has deployed over 5,000 personnel. We have staffed over 400
disaster centers. We fielded over 1 million calls for
assistance, and we approved 130,000 loans totaling $6.7 billion
in lending. Our disaster efforts might be best summed up by a
comment from the mayor of Port Aransas, Texas, located on the
Gulf Coast. At the National Small Business Week dinner, he
commented that SBA was the first one in and the last one out.
While such comments are reassuring to our team, we still
have a lot of work to do, especially in Puerto Rico and the
U.S. Virgin Islands. We have a significant amount of staff on
the ground there, and we will remain as long as necessary to
continue to help disaster survivors.
SBA is also active in other areas across the country.
Within the last week, disaster declarations were made for
Illinois and Indiana as a result of severe storms and flooding.
A declaration was also announced for Hawaii in response to
April flooding and the ongoing lava flows.
In my written testimony I highlighted some of our agency's
successes. Our 7(a) program, the key tenet for access to
capital, had a record year in Fiscal Year 2017. In addition,
access to mentorship was high, as our SBA network reached 1.4
million people. Some other areas of positive developments
include our efforts to expand opportunities through our women
business centers. We recently made announcements to expand
centers in certain states like North Dakota, and want to
establish centers in states that do not have a presence like
Idaho and South Carolina.
Elsewhere in our micro-loan program, I am pleased to see
that over 40 percent of those loans have been made to
minorities. In our veterans program, more than 17,000 veterans
were trained in Fiscal Year 2017. In our Emerging Leaders
Program, we've increased the number of locations and are
expanding a record number of participants.
And lastly, the agency has worked hard to address
management challenges. From 2017 to today, we have closed over
170 outstanding Inspector General recommendations, and
addressed and closed over 20 GAO recommendations.
In closing, Mr. Chairman, I want to thank you and members
of the committee for your ongoing support of the agency. I feel
we have a shared mission to foster growth and develop our
Nation's small businesses, and I look forward to our continued
work together toward that goal.
I appreciate very much the opportunity to come and testify,
or, as I like to think about it, to chat with you all this
afternoon.
[The prepared statement of Ms. McMahon follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Risch. Well, thank you so much for coming in.
That's a great report for us. You have obviously hit the ground
running pretty hard over this year and got a lot of things
done, and we're happy to hear that.
We're going to do a 5-minute round of questions, and I'm
going to start.
As you know, Senator Sullivan and I have worked with you on
the 8(a) program, and we've had lots of discussions in that
regard, so I'm going to give you a question. If you want to
take it now, you can, but I would certainly accept a response
for the record if you'd like to do that. We're going to hold a
field hearing in Alaska at the urging of Senator Sullivan
because of the issues that surround the 8(a) program. Do you
have any comments on that now, or do you want to take that
question for the record? I'm hoping you can attend the field
hearing, if you can, and we'll take your answer.
Ms. McMahon. In the spring?
Chairman Risch. It will be this summer.
Ms. McMahon. This summer?
Chairman Risch. Yes.
Ms. McMahon. Better than next winter.
[Laughter.]
Chairman Risch. That's true. It will be light when we're
there.
Ms. McMahon. I was in Alaska at the invitation of both
Senators Sullivan and Murkowski. I learned so much about the
State when I was there, and it was end of last summer, I think,
when I was there.
I think the 8(a) program is incredibly important and
beneficial to Alaska. It's a very different State, that's for
sure, in how it's set up, and our 8(a) in charge of our
government contracting office just returned I think yesterday
or today. So they were up again visiting to see what programs
were in place, how could they better the 8(a) program, et
cetera. So that's kind of a general response. As to specifics,
I'd like to wait until I hear from the hearing, and if possible
I would love to be there as well.
Chairman Risch. Thank you so much.
Senator Cardin.
Senator Cardin. Well, once again, thank you for your
testimony.
I want to drill down a little bit on a challenge,
especially in those small businesses that need loans under
$250,000 in which women and minorities are finding it very
challenging to get financing. When we take a look at the 7(a)
program, your own data from 2017 reflects that only 4 percent
of the 7(a) approvals and 2 percent of the 7(a) dollars went to
African American businesses.
Now, the pilot program Community Advantage has a much
higher success rate in that regard. The African American number
is 13 percent of approved loans and 14 percent of the dollar
values. This isn't the micro-lenders. It's the loans up to
$250,000. It's the community development finance institutions.
The pilot program is scheduled to expire in 2020, and the
Urban League has urged us to increase the limits from $250,000
to $350,000.
So can you just let us know your commitment to reach
minority communities, women-owned communities, particularly in
these smaller loans, and whether this pilot program should be
expanded and continued?
Ms. McMahon. I like very much the pilot program. I think it
did give us an opportunity to test the waters. That micro-loan
program, women have participated I think in good numbers, and
our African American outreach is strong. You can loan up to
$50,000. Most of those loans are averaging about $14,000.
Sometimes it's that little bit you need, a little bit to get
started, and we've really found that what's as important as
anything, as the access to capital, is also the mentoring that
goes on to help the people in those communities.
Through the micro-loan program, we do have the intermediary
that the money goes to, and then they make the loan, the non-
profit. At one time we were going to look at different kinds of
programs that we thought might enhance those programs. We've
tried to develop more of the non-profits in those areas so we
could have a little bit stronger outreach.
So I think we've had good success there. I'd like to wait a
little bit closer to the expiration of the pilot program to see
if that's one to continue to focus those efforts. But what it
looks like to me is that those are good programs, and we would
like to continue them.
Senator Cardin. I think the micro-loan program has been
very successful. We had the challenge on the next size loans of
$350,000, and that's the area that I think we need to have a
little more permanent program to help particularly minority
businesses and women-owned businesses.
There was a mission rating that would judge the performance
of lenders based upon their reaching small businesses in the
most critical business apps. These include small loans of less
than $350,000, rural loans, loans to small businesses that are
majority owned by minorities, women, veterans, new businesses,
export businesses.
That was rescinded last August by the SBA, and in
rescinding you stated that the SBA continues to explore ways to
encourage 7(a) lenders to further SBA's mission to expand
access to capital for all small businesses, including those in
underserved and emerging areas.
Do you have a game plan now to make sure that we get those
types of activities in those areas?
Ms. McMahon. One of the reasons that I do like to go out
and visit with all of our district offices is because not every
district is the same, and the needs in district offices vary
all over the country. What we are trying to do, clearly, is to
increase the number of our lenders. We want to give them
support and understand how important our programs are.
I think one of the things that we have done over the last
year to do that is a program that we developed called Lender
Match, which if you go on our website and you look at Lender
Match and you can put in the kind of company you are, what your
needs are, and it will list the lenders in your area. So that's
one great step to be able to see where lenders are that you as
a potential entrepreneur can go to.
However, I think the continuing development and support of
our resource partners, our SCORE offices, our women's business
centers, our SBDC centers, our veterans outreach, all of these
are so important to give the support to our entrepreneurs as
they start to develop and grow their businesses. So it's that
interaction, I think, with our lender specialists in our
district offices who are constantly working with our lenders in
the community to help them understand the needs of our
potential entrepreneurs.
Senator Cardin. I'll just conclude with this observation. I
agree with all the efforts that you're making in all these
program areas, but the bottom line is the 7(a) program is the
largest program we have, and the numbers there are
unacceptable. It didn't happen under your watch. It's been
unacceptable for a period of time. We've got to get those
numbers more reflective of the demographics of this country.
Thank you.
Chairman Risch. Thank you, Senator Cardin.
Senator Ernst.
Senator Ernst. Thank you, Mr. Chair.
Thank you, Administrator McMahon. It's good to see you and
have you here today.
Over the past year we've made significant progress towards
removing a lot of barriers that our small business owners face,
and most notably, of course, we passed the Tax Cuts and Jobs
Act, which allows our job creators of all sizes to grow and
reinvest in their employees.
In Iowa, over 99 percent of our employers are small
businesses. So I visit with a number of them as I travel out on
my 99-county tour, and really there is a great sense of
optimism out there. I've heard from a lot of those small
businesses from all over the State, and they're providing their
employees with bonuses, with wages, they're giving increased
retirement benefits. I heard from an employer today that
they're adding additional paid time off for all of their
employees. Surveys show a record number of business owners plan
to boost their hiring; and, of course, as I just said, increase
wages, and expand their businesses.
As you're out and about, I know you're visiting a lot of
those employers as well. Can you share some input that you
might have received in regards to the Tax Cuts and Jobs Act?
Ms. McMahon. Thank you. Yes, you're absolutely right, that
feeling of optimism is clearly there. I think it was Chairman
Risch in his opening statement that talked about not only some
of those benefits that you talked about, but also I believe it
was just this week or late last week the NFIB also published
information that businesses are going to experience or are
already showing signs of having profitability increases that
they haven't seen before. So profits are on the rise, business
growth is on the rise, and really helping that happen has
really been tax cuts, rollback of the regulatory environment.
When I first started out last year--I'll just digress for a
second--and I was talking to some of these 700 business owners,
and I was talking to them about what is your main issue, and I
would have these business roundtables or tour their businesses,
and it was taxes, taxes, tax cuts, almost all the time. That
was first and foremost.
I don't hear that now, but the optimism level is still
there, optimism for growth and how they're going to expand
goods and services, they're going to hire more people. In fact,
when I was visiting one business up in Braintree,
Massachusetts, a bread baker there, when I was in his plant and
he was baking all this wonderful bread, and it smelled so great
when I was in there, and he said, you know, the tax write-off
provision is going to allow me to buy another one of those
ovens, and they're $1.5 million. I'm going to be able to buy
one. I'm going to hire more people. I'm going to bake more
bread. I'm going to increase my facility. And, he said, I'm
really going to grow my business.
So those were really hard examples of how it is being
beneficial. So I'm very pleased to hear the benefits of the tax
cuts.
Senator Ernst. That's great. No, and that's perfect.
You did mention rolling back regulations as well, the
regulatory environment, and we have worked as Congress on
rolling back a number of harmful regulations, those that impact
small businesses, and what we are seeing is tens of billions in
savings for taxpayers and businesses because of that.
But over-regulation still does remain a pretty high concern
with a lot of our Iowa job creators, and on average our small
business owners across the country, they spend about $12,000
annually conforming to those regulations. So I did introduce
the Prove It Act, which does strengthen the voice of small
businesses in the rulemaking process and improve the quality of
agency certifications and analysis of a rule's impact on small
businesses.
What steps are the Small Business Administration taking
right now to ensure small businesses do have a stronger voice
in that rulemaking process?
Ms. McMahon. You know, it's interesting, when I first
became the Administrator of SBA, and as I started doing some
touring around the country, what I really realized is that the
SBA is the best-kept secret in the country because not all
businesses understand that not only do we help provide access
to capital, but it is the mentoring aspect of what we do, the
support system, the encouragement, the helping to develop
business plans through the resource partners that we have.
So I made it a goal--it's still my goal--that SBA doesn't
remain the best-kept secret. In order to let businesses know
how we can be their advocates during the rulemaking process, I
want to collect information from them. I tell them all, look,
I'm out here. There are about 30 million small businesses in
the country. One of my jobs and functions is to be your
advocate in Washington. So I want them to tell me some of the
issues.
When I talk to them, I don't often hear it's this
particular regulation, you've got to get this one off the
books. It is regulation in general. Albeit, some of that is
State and municipal combined with Federal, but you mentioned
the number of almost $12,000. It's like almost $12,000 per
employee. That is a huge number for a small business owner to
have to absorb. So thank you for your work in that regard, and
we'll keep bringing back information that we have.
Senator Ernst. Excellent. I appreciate it.
Thank you, Mr. Chair.
Thank you, Administrator.
Chairman Risch. Thank you.
Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chair.
Good to see you.
Keeping on that theme, the women business centers, I'm
assuming you think we should reauthorize those?
Ms. McMahon. Yes, I do, very definitely. In fact, we're
adding nine new centers this year. There will be some in states
that have a center already but need expansions. Others are for
states in which we have no presence at all. We're looking to
make sure that we can have more of those centers. So that will
bring us up to about 109 centers around the country.
Senator Cantwell. Thank you for that.
Switching gears to a more specific sector in the timber
area, we've operated with the Forest Service with two different
types of logging contracts, but the SBA's set-aside only
applies to one of them. That was maybe okay a few years ago
because you didn't have as many of the contracts that we were
using for stewardship, but now stewardship contracts are
bigger.
So do you think the SBA set-aside should apply to both
types of logging contracts so that small businesses get access
to both?
Ms. McMahon. You know, Senator, may I get back to you on
that? I honestly am not familiar with the different kinds of
contracts in your State on that, but I will be happy to look
into it and get back to you.
Senator Cantwell. Well, I thank you for that. I know that
the Small Mill Association and others, they very much care
about this issue, and I think people just want certainty and
predictability, so we'd certainly want to see the SBA working
to implement that set-aside requirement across all of the
Forest Service.
Thank you.
Chairman Risch. Thank you, Senator.
Senator Scott.
Senator Scott. Thank you, Mr. Chairman.
Good afternoon, Administrator McMahon. I hope you're doing
well.
Ms. McMahon. Thank you.
Senator Scott. Let me start by thanking you for taking the
time to come through South Carolina during your National Small
Business Week tour. It was certainly a pleasure to have you in
Columbia, and I was in Columbia at the same time you were
there.
I recall a story from 2015. We had a 1,000-year flood in
Columbia, South Carolina. It was a devastating incident that
imperiled a lot of small businesses, frankly. One business in
particular was the Forest Lake Drapery. The Marsha family
started that business back in 1964.
Ms. McMahon. I toured that.
Senator Scott. Yes, ma'am.
Ms. McMahon. When I was in Columbia.
Senator Scott. Absolutely. The business was decimated. They
were nearly gone, which meant that dozens of South Carolinians
would have been out of work because of that business. The good
news for them is that the Small Business Administration stepped
in and provided some assistance that was desperately needed.
So on behalf of the challenges that we've seen in South
Carolina and the amazing response that came from the Small
Business Administration, we want to say thank you for the type
of work that you all do over there at the Administration, and
we are incredibly thankful for that, and I know the Marsha
family was excited to have you there.
But their story, a 50-plus-year story, has a happy ending
because of the good work that you guys have done. I think the
same is true, frankly, for looking at small business throughout
America right now. We are looking at a 3.9 percent unemployment
rate. We have a 2.9 percent increase in wages. Small businesses
now say that--only 13 percent of small businesses say that
taxes are the number-one issue since the tax reform. That is
fantastic.
Ms. McMahon. Yes.
Senator Scott. The fact is that we see 21 percent of small
business owners expect higher sales volumes--tax reform. Fifty-
seven percent of small business owners are hiring or trying to
hire. When you get down to 3.9 percent unemployment, it becomes
more and more difficult to find the kind of folks that you're
looking for for your businesses, but this is a great problem to
have.
A third of small businesses report increased worker
compensation. The tightening of the market is good news for
employees. Forty-three percent are spending more money on
equipment. And as you suggested earlier, we're looking at a 45-
year high in optimism according to the NFIB's last survey.
What's next, and how can we help encourage and promote even
greater success in small businesses from your perspective?
Ms. McMahon. Well, if I may, just going back to the Marsha
family, the business that you cited----
Senator Scott. Yes.
Ms. McMahon [continuing]. I think, when you look at a small
business like that, that has literally been so decimated----
Senator Scott. Yes, ma'am.
Ms. McMahon [continuing]. It speaks to what I talk about
all the time about small businesses being the glue of the
community and the innovators that really bring everybody
together. What I saw there--and I'm sorry to take time for
this, but it's just so important to me.
Senator Scott. It's worth it.
Ms. McMahon. Not only did this family come together,
because it's a family owned small business, but they were going
to shut down. Two of the younger members of the family said no,
no, this has been our business for generations. They were able
to come back, and it's great that SBA was able to be there with
the loan. I'm really happy that we were able to do that. But it
was the community, the community who came and shoveled mud out.
It was the community who came and sat and painted walls and
helped take away debris, and they did it almost without being
asked. Front loaders just showed up and just started taking
stuff away before the family even got there on the first
morning. They said, well, we had to get it out of here, knew
you needed help. So I think that really speaks to the spirit of
communities and the helpfulness in our country and the support
for small businesses.
So what I want to continue to do as the head of the SBA is,
again, to make sure that we have the policies and procedures in
place so that we can help our businesses get access to capital.
On our 7(a) program, we are up 5 percent year over year for
this same timeframe, and I'm pleased to see those numbers grow,
and women actually had about 30 percent of those loans,
minority communities had about 31 percent of those loans. So I
was really happy to see the growth in both of those areas for
the business loans. The 7(a) loans are the flagship of what we
do. So to be able to continue to provide access to capital for
those small businesses is going to help the growth.
But as I mentioned, I want SBA not to be a secret. I want
people to know about all of the free access to mentoring and
counseling and business development programs that there are. As
we keep talking about it, more people will have access to that
and know about it, and we'll continue to grow.
Women cite more often than other businesses that they
flourish more in an environment in which they can have
mentoring and counseling, and so that's why our WBCs are so
important in those areas. But not only that, our district
offices--it's not just that you go to a WBC and you get
counseling for women. You go to the SCORE partners that we
have. So we want to make sure that each of these entities has
the right amount of investment that they need to continue to go
forth.
Senator Scott. Absolutely.
I know I'm out of time, Mr. Chairman, but I will close by
saying that Forest Lake Drapery is now experiencing record
month after month after month. There's no question that the
community coming together and providing the glue for small
businesses is so critically important, and it happens because
small businesses are so ingrained within the communities that
their identity, their DNA comes from the communities that they
serve, and this is just such a tremendous success story on
behalf of Forest Lake, the community where I visited after the
2015 floods, and the Marsha family that's been dedicated and
committed to not only staying open but staying successful.
Thank you.
Ms. McMahon. Thank you, sir.
Chairman Risch. Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman.
Administrator McMahon, it's so nice to have you back.
Ms. McMahon. Thank you.
Senator Shaheen. Thank you for the good work that you're
doing at the SBA.
Ms. McMahon. And I appreciate all the support from here,
too. Thank you.
Senator Shaheen. Earlier this month I convened a field
hearing with the support of the Chairman and Ranking Member and
the good work from the staff of the committee at the University
of New Hampshire to hear from small businesses about what the
FCC's decision to end net neutrality means for them when it
becomes effective in June. The people who testified expressed
real concern that the end of net neutrality protections would
affect their ability to compete on the internet with their
larger competitors, and several of the witnesses talked about
the uncertainty that's created by the end of the net neutrality
rules.
One witness, Robert Zakon, who is a SCORE counselor, talked
about the businesses that he's working with and said that one
of his clients said that the uncertainty caused by net
neutrality repeal could be disruptive in the business planning
and funding stages.
So I think it's fair to say there was real concern among
the small businesses in New Hampshire about what this means for
them. Have you been working with the FCC, and are you concerned
about what their decision to repeal net neutrality means? And
what is SBA thinking about in terms of helping small businesses
that might be affected by this ruling?
Ms. McMahon. Thank you for bringing that up. I've not had
any conversations with any of the small businesses that I've
met with, or any of the roundtables that discussed net
neutrality. I would really like, after the hearing, to get with
you and get some further information on that. I do think
anytime that there is indecisiveness, that's not helpful to
small businesses because they like to know where they're going,
they like to know where the rules--big business, too. So I know
that that's probably an issue for them. I've not had any direct
input from them, but I'd like to learn more and hear more about
what their experience has been.
Senator Shaheen. We will certainly share with you the
testimony from that hearing.
Ms. McMahon. Thank you, and I'll put it on my docket when
moving around to have more conversations about that.
Senator Shaheen. That would be great. Thank you.
I'm also hearing from New Hampshire small businesses about
the uncertainty around the Administration's decision around
trade, the decision to impose new tariffs and the uncertainty
with respect to some of our trade agreements. Last week we
heard from a company in New Hampshire called Moonlight Meadery
that makes mead, which is, as we know, a form of alcohol. They
had been putting the finishing touches on a deal with China,
and it would have doubled their output. But the tariffs that
have been announced have effectively killed this deal. They've
been forced to lay off six people, and it's a small business,
so that has a real impact.
So I wondered if you have engaged with either Secretary
Ross or Trade Representative Lighthizer about what the impact
of tariffs on small businesses might be, and are we collecting
any data about what we're hearing?
Ms. McMahon. I do have opportunity to chat with them in
Cabinet meetings, primarily in Cabinet meetings, to talk to
them about it and to listen to what's being said relative to
tariffs. Again, uncertainty is not good for small businesses.
When I was out with Secretary Perdue and we were touring some
small farms up in Ohio, that issue came up, and Secretary
Perdue's response, having spoken directly with the President
about it, was that the President has indicated to our farmers
that he's not going to let them pay the price for tariffs and
that they can feel comfortable in that.
So my experience so far has not been that any of the
businesses that I'm talking to are specifically asking me about
a specific trade, except that they would like the certainty. I
think, though, what I have heard primarily from our small
businesses is that they want the opportunity to compete in a
marketplace, and they want to feel like they're being dealt
with fairly as well. They want to make sure that the trading
market for those that are involved in exports, that there is a
level playing field for those who produce products like the
company you cited that utilize products that tariffs may be
placed on.
So I think the sooner that we can finalize our trade
policies and our tariffs will be much better for our
businesses, because they will know how to go forward. But I
think we are well served by an Administration that wants to
have fair and free trade and reciprocal trade that benefits all
of our economy.
Senator Shaheen. Well, I'm out of time, but I appreciate
that. I hope you will be a strong voice to advocate for that.
Over the last five years in New Hampshire, our exports are up
46 percent, and they attribute support from the STEP program as
being the reason that they're up so high. So I hope that you
will continue to advocate for increased funding for the STEP
program as well.
Thank you, Mr. Chairman.
Chairman Risch. Thank you, Senator.
Senator Inhofe.
Senator Inhofe. Thank you, Mr. Chairman.
Nice to see you again and to be with you.
Ms. McMahon. Thank you, sir.
Senator Inhofe. Just an observation. This morning I was on
the Axiom program talking about the effect of this thing. This
is actually right now the infrastructure. They're kind of
celebrating that. I see a relationship here because I was
commenting there that when you look and see the regulations,
we've been talking about that for quite a while now, and the
imposition that is on not just small businesses but large
businesses, too. I think that right now--in fact, I keep score
on these, and one reason I do it is because the first CRA that
was successfully done was my bill. So we had a signing ceremony
with the President.
But when you go through these things, we realize that the
prosperity that we're in the middle of right now is really due,
in my opinion, to some things that you're involved in. Number
one, the regulations that we're trying to relax; and the other
is the tax ramifications.
Now, there is a direct relationship, and I think most
people have not realized this when we talk about it, and I know
that Senator Markey and I talk quite often about what we're
going to do with our highway bill and our infrastructure
efforts that we've worked so closely on in the past, that we're
going to be in a position to get some of these things done and
done successfully. But at the same time that we're doing this,
we're also freeing up a bunch of money that can be used for
infrastructure.
The whole idea of reducing the tax rates was not a
Republican idea, it was a Democratic idea. It was 1964, and it
was John Kennedy when he was President. He said--and this is a
quote--he said, ``In order to keep up the Great Society
programs that we've started, we need more tax revenue, and the
best way to increase tax revenue is to reduce the marginal
rates.''
Well, that worked. As a matter of fact, it went up from the
total amount of revenue coming in of $900 billion at that time,
up to $1.8 trillion. It doubled the amount. The same thing
happened when President Reagan came along. The total amount of
money that came in at that time to run this government was $469
billion, and that translated at the end of that period of time
to almost doubling that amount.
So all of that is happening right now, and I see a lot of
prosperity that's come in, which I really am excited about. So
as you go around--and I've been following your tracks. You've
been spending a lot of time, not in Oklahoma, but all the
other----
Ms. McMahon. I've been to Oklahoma.
Senator Inhofe. Oh. Well, you didn't call me.
[Laughter.]
Ms. McMahon. I believe I did.
[Laughter.]
Senator Inhofe. But I know that you've been around, and
what kind of experiences have you heard anecdotally,
experiences that they've had as a result of the regulations
being relaxed in terms of their prosperity as you visit the
small businesses?
Ms. McMahon. As I mentioned a couple of minutes ago, I have
not heard from small businesses about a single particular
regulation that's been rolled back, but it's been in terms of
in general the regulatory environment being lifted so that they
don't have to focus so much, they being business owners, on
compliance issues relative to regulations, and they have more
money in their pockets to invest in their businesses, and they
have more time to focus on their businesses. So it's the
compliance cost not only in dollars but compliance cost in
terms of time, and they're very happy that the regulations are
being rolled back.
Senator Inhofe. Okay. There is one area that I have not
heard you talk about. As you know, in Oklahoma we've had a lot
of wildfires. We've had two sessions right now. I get my
airplane and go over, and you see the cows being burned alive.
It's really a tragic thing, and we try to do everything we can
to help the people. Right now FEMA, for example, they don't go
beyond the help with a residence. So you have all the damage
that's being done that's not being addressed. We have
legislation that's going to allow our community banks to be
free from some of their regulations to allow them to do things
that are not being done now.
But the SBA is involved in a program that I don't think we
fully utilize. What types of loan programs do you have in cases
of disaster such as the tornadoes and the wildfires that we
have so many of in Oklahoma?
Ms. McMahon. Once the disaster declaration has been made by
SBA at the governor's request, and then we make the
declaration, SBA goes in to evaluate a situation, and it is the
time that SBA actually loans the money, not only for businesses
but also for homes. So there are mortgage loans to be made,
there are business loans to be made. These are low interest
rates and long term, and we pride ourselves on being able to
process these loans very quickly so we can start to get money
in the hands of those homeowners and those business owners. So
if the declaration has been made for that area, those loans are
available.
Senator Inhofe. And that's filling a void that's there
right now, so we appreciate that very much. Thank you.
Ms. McMahon. Thank you.
Chairman Risch. Thank you, Senator.
Senator Markey.
Senator Markey. Thank you, Mr. Chairman, very much.
Senator Inhofe and I, we are committed to agreeing on an
infrastructure bill.
Ms. McMahon. I'm sorry. On what?
Senator Markey. Senator Inhofe and I are committed to,
somehow or other, reaching an agreement on an infrastructure
bill, not a chimerical of a superhighway but a real highway
that we can----
Senator Inhofe. It's very effective. They say when you and
I can both agree on something, there's got to be something
there.
Senator Markey. And our disagreement on climate changes
proves how rare, and as a result correct, our agreement is.
Chairman Risch. Your time is almost up, Senator.
[Laughter.]
Senator Markey. So I'm going to ask you about net
neutrality. I asked you about that at your confirmation hearing
a year ago, and you said you needed more time to learn about
the issue of net neutrality because I talked to you about how
many small businesses are able to be created because of this
incredible online culture that we have, and you said you needed
more time. But in response to Senator Shaheen just 10 minutes
ago, you said you needed more time to learn about net
neutrality a year later.
So from my perspective, I think that was a mistake on your
part, that you did not learn more about it, because last year,
I will tell you, half of all venture capital in America went to
software and internet startups--all, by definition, small
businesses--all across our country. That's half of all venture
capital. And as we know just from our service on this
committee, most new jobs in America are created by small
businesses. So that flow of revenue into those companies
clearly was something that was helping to generate the new job
creation in our country.
I have here with me letters from 6,000 small businesses in
America that, Mr. Chairman, I would ask unanimous consent that
I can put in the record.
Chairman Risch. Without objection.
[The information referred to appears in the Appendix
Material on page 34.]
Senator Markey. And it is from these small businesses that
we received kind of a recommendation that the Federal
Communications Commission made a mistake in taking net
neutrality off of the books, and they support putting the FCC
rules on net neutrality back on the books, and we're going to
have that vote tomorrow on the floor of the United States
Senate. And as we think about the 21st century, it's hard to
think of a business that's not dependent upon net neutrality on
the internet.
So again, please try to respond to this issue of net
neutrality, the role that it's played in the creation of
thousands of companies, tens of thousands of companies, and
your view on the issue.
Ms. McMahon. Well, to be clear--thank you for asking that.
To be clear, in my conversation I believe with Senator Shaheen,
what I was saying to her was that I had not spoken to many
businesses who had raised the issue with me, and I'd be very
interested in getting the information from her from her
roundtable, and I would be very interested in looking at the
letters that you have received.
Senator Markey. I guess my question to you is did you raise
the question given how prominent it is in terms of venture
capital going into that sector of the American economy for
small businesses? Have you raised the question yourself?
Ms. McMahon. Well, I have been focused on dealing with
small businesses with the issues they brought to me so that I
could advocate on their behalf. Relative to the internet, I
don't disagree with you at all about how important the internet
is for reaching the rural areas, for providing a platform for
information, for having commerce to sell goods and services. So
we are in agreement that the internet is incredibly important
for the growth of sustaining businesses.
Senator Markey. Well, if you had asked the question, which
I think you should have, by the way, I think that should have
been something that you did given the incredible role it plays
in job creation in our country in the 21st century, that
without net neutrality it's harder to raise money because
there's uncertainty with regard to your ability to not have
your service throttled or blocked, that you'd have to pay
extra.
So we know from not just these 6,000 companies but tens of
thousands of companies across the country that net neutrality
is critical, because small businesses don't want to be in a
slow lane compared to a big company. Do you agree that that's
absolutely essential, that from an online culture perspective
that they not have to pay more, and that they also don't have
to be in a slow lane, that they need protections so that they
can compete against big companies?
Ms. McMahon. Well, I do think that businesses need to have
access to the internet, and I think one of the issues we ought
to look at more----
Senator Markey. But the issue isn't access to the internet.
It's----
Ms. McMahon. Excuse me, sir. Would you let me finish? I
would like to respond.
Senator Markey. Okay, sure.
Ms. McMahon. Thank you very much. I think it's very
important that businesses have access, so I think we need more
infrastructure. I do think we need to be building out into
those areas where we don't have it, and I think those
businesses, those companies that are going to do the build-out
on that infrastructure are going to be looking to invest their
capital there to provide that access.
Senator Markey. But slow lanes don't help a small company
against a big company.
Ms. McMahon. I think access is more important, and I do
believe that businesses need that access to be on the internet
for information and for their commercial purposes. That's what
I've heard from the small businesses I've spoken to. But I am
clearly interested in speaking to more of them about the issue
if it becomes something they would like to discuss with me as
well. I want to make sure I advocate on their behalf as well.
Senator Markey. Well, I don't think you're doing that today
because there's been an incredible outcry from small businesses
in America to keep net neutrality rules on the books.
Thank you, Mr. Chairman.
Chairman Risch. Thank you, Senator Markey.
We will go to Senator Young.
Senator Young. Administrator, great to see you.
Ms. McMahon. Thank you.
Senator Young. Thank you so much for the hard work that you
and your team are engaged in to support our doers, our
dreamers, our entrepreneurs. I see so many of our small
businesses around the State of Indiana, and they often ask
about the Small Business Administration and how it can be
helpful, and I enjoy spreading that word.
During your nomination hearing we discussed a few different
things, and I'd like to follow up in each of these areas.
First we discussed the Office of Advocacy. You had an
intention to evaluate, as you communicated to me, how the
Office's operations might be improved, and if there are
additional authorities or resources required to advocate on
behalf of our Nation's small businesses. Do you have any
findings that you can report to the committee today with
respect to this topic?
Ms. McMahon. Well, we are still waiting for the approval of
our permanent head of advocacy there, our acting head there,
who I think is doing a good job.
Senator Young. For the record, that's on us. We need to get
that done, working with this Administration.
Ms. McMahon. That was just a little push. Thank you.
Senator Young. We need to do that.
Ms. McMahon. But the role of advocacy really is a quasi-
independent part of SBA. It's not something--I don't manage the
head of advocacy. It is an independent acting agency, and it is
their role to make sure that, as all the agencies are passing
or promulgating rules and regulations, that small businesses
have a seat at the table to understand the impact of that.
I think advocacy is doing well. They actually did invite me
to attend one of their roundtables--two of their roundtable
discussions out of Wisconsin, which I did. So I was able to
listen to some of the complaints that came out of the small
businesses there--issues. ``Complaints'' maybe is the wrong
word, but where they needed help, and they were primarily the
same issues that I heard from the roundtable discussions that I
was having, which at the time were taxes, which were
regulations, and health care came up. I can tell you that more
and more often now today, the issue of workforce and workforce
development is very prominent.
Senator Young. Well, to the extent in your dialogue with
the quasi-independent Office of Advocacy you and they identify
new authorities or resources that are required to advocate on
behalf of our small businesses, please let our office know, let
this committee know. We'd be grateful for that, and we'll
continue to stay in touch in that regard.
What opportunities--another issue we covered in your
confirmation hearing--have you found to streamline within the
Small Business Administration, already by reputation a fairly
lean agency in comparison to others? And have you implemented
any of those findings?
Ms. McMahon. We did. It was one of the reasons I wanted to
get out into the field. I really don't think that you can
adequately manage what I would call satellite offices out of
headquarters if you don't understand and feel what it is they
feel and experience on a day-to-day basis and how they're
managing.
One of the issues I heard across the board was that the
district offices felt that they were disconnected from
headquarters. So we made a huge effort, we spent six or seven
months making sure that my vision from headquarters was the
vision that was shared with every district office, that
everyone operated under the same rules and regulations,
everybody had the same directives, everyone had the same
accountability, and everyone got on board with that. The
district director, the deputy district director, now we have
our regional administrators, everybody has the same song sheet.
Senator Young. I just call that good leadership, so thank
you very much for taking that approach. That's quite
encouraging.
Ms. McMahon. Thank you. Not only has productivity
increased, morale has been boosted.
Senator Young. I believe it.
Ms. McMahon. So I think we're on a good start. I've been
there 15 months. I think we've set some good pins. Now we have
to follow up.
Senator Young. So, Administrator, the last topic we
addressed in your nomination hearing that's really important to
me is taking best practices, which might be occurring at the
local level or the State level, and seeing whether we at the
Federal level can play a constructive role in elevating those
best practices. Are there steps that the SBA has taken to
identify best practices with respect to starting a small
business or growing a small business that could be replicated
by other states or localities in America?
Ms. McMahon. Well, I think most of those conversations are
held in our resource partner offices, our SCORE offices that
are manned by retirees, sometimes by active members in
business, and also our women's business centers and our SBDCs
that are affiliated typically with universities. They are the
ones formulating a lot of the actual programs to coach and
mentor the entrepreneurs who are there to start.
I think what I'm seeing as those programs grow, and they
are adopting more and more of best practices, is they look at
what's happening through digital technology, how that's being
implemented, are we making sure that we are coaching our
entrepreneurs on stock ownership in their companies, are we
making sure that they're looking at other programs that are
going to benefit them moving forward, are they aware of cyber
security and the steps they need to take, because a lot of
entrepreneurs starting a business, they don't think about
somebody coming in and stealing their information.
So those are some of the kinds of things that I think
weren't on the burner before that we are trying to push through
now.
Senator Young. Thank you.
Chairman Risch. Thank you.
Senator Hirono.
Senator Hirono. Thank you, Mr. Chairman.
Administrator McMahon, it's good to see you.
Ms. McMahon. Thank you.
Senator Hirono. I appreciate the fact that you spoke today
about SBA's work helping businesses impacted by natural
disasters because we've had a number of them, especially in the
context of last year's hurricanes and floods, and you mentioned
Hawaii. As you know, several communities in Hawaii are
currently responding to or recovering from a number of natural
disasters. Last month, East Honolulu and Kawai's north shore
experienced severe flooding that damaged homes, businesses, and
public infrastructure. In fact, torrential rainfall on Kawai
set a new national record of nearly 50 inches in a 24-hour
period. So you saw cars floating in the ocean. You saw cars
full of mud. So, that was rather historic.
And now Hawaii Island is experiencing volcanic activity
that is destroying homes, businesses, and schools; and new
volcanic fissures are opening on a near-daily basis, and
families are facing the added danger of noxious gases and air
particulates that threaten public health. So small businesses
in all of these communities must completely rebuild, and
they're severely impacted by losses in visitor revenue.
Federal disaster declarations, as you know, have been
approved to provide public assistance and hazard mitigation
resources for Oahu, Kawai, and Hawaii Islands. The President
has issued two national disaster declarations. Our immediate
response has been focused on relief efforts, but these
communities will require additional resources to recover from
these disasters.
Could you clarify for me--I think you said that after the
President issues a national disaster declaration, that the SBA
also has to issue a disaster declaration in order for you to go
into the communities and help the people in those communities?
Ms. McMahon. No, that's if the President does not and a
governor of a State requests from SBA disaster assistance. Then
we review the documentation. I actually sign off on that
disaster declaration. So the President relative to Hawaii has
signed off on the public aspect of the disaster relief.
Senator Hirono. Yes, not the individual. That's being
appealed.
Ms. McMahon. So SBA would typically already be on the
ground, going in and assessing. But because of the gaseous
fumes, that whole area has been cordoned off and we're not able
to get in yet to start evaluating the damages that are there.
But we have a district office there, and we're already prepared
to go in as soon as we have access.
Senator Hirono. Thank you. I want to continue to work with
SBA to make sure that whatever resources can be provided to all
those affected individuals and businesses can receive those
resources.
I know that you have been doing your Ignite tour. I think
that's a really good way to frame it because you want to light
a fire under all these businesses, and your advocacy for the
businesses is much appreciated.
So you have visited 44 offices. I know you haven't come to
Hawaii yet, and we look forward to your coming to Hawaii
because I work very closely with the SBA office in Hawaii.
Can you tell me when you will be coming to Hawaii's
district office?
Ms. McMahon. I can't as I sit here because I don't have my
calendar.
Senator Hirono. But you are going to do it, aren't you?
Ms. McMahon. I'm definitely coming to Hawaii.
Senator Hirono. Everybody heard that? Okay.
[Laughter.]
Ms. McMahon. And I have to tell you, there is a long list
of people in my office who are volunteering to take this trip
with me to Hawaii.
[Laughter.]
Senator Hirono. Oh, yes, of course.
So, do you have a template or a framework for all of these
visits that you could share with me very briefly? If you have
something that you give to all of these district offices,
people that you meet with. Do you meet with businesses? Do you
meet with other stakeholders? Do you hand out certain things?
If you have a template or a framework for all of your visits,
I'd really appreciate receiving that from you so that when you
do come, and I hope that you coordinate with my office too,
that we can be ready.
Ms. McMahon. We'll do that, and it is really left up to the
district office as to what's important in their district.
Senator Hirono. Okay.
Ms. McMahon. So they do that. And what we try to do, just
on a very general basis, I try to do local media when I'm there
because I want people to know about SBA and why we're here and
what we're doing. We visit businesses, I conduct business
roundtables, and the topics of those roundtables will be
dictated by the district office and what's important in that
area. If there's been a declared disaster in that area, I like
to go and visit that as well. So we'll definitely coordinate
with you.
Senator Hirono. I'll certainly continue to coordinate with
Jane Sawyer of SBA.
Now, there have been some questions asked about the impact
of net neutrality on small businesses, and you have
acknowledged the importance of the internet to small businesses
and their success. So if you conclude, after you get more
information and et cetera, that small businesses are negatively
impacted in a significant way by the elimination of net
neutrality, would you take a position against the FCC rule to
eliminate net neutrality? Because you are an advocate for small
businesses.
Ms. McMahon. I'm an advocate for small businesses, and as
we look at the information that is coming in now, especially
since this issue is sort of top of mind again, we'll clearly be
looking at what the impact is.
Senator Hirono. Yes, and if you conclude that it is
negatively impacting small businesses, would you take a
position against the FCC's rule?
Ms. McMahon. If I were to conclude it's against the
totality or the great majority of small businesses, I would
certainly want to continue to have that conversation so that we
could look at how is the best way to service our small
businesses.
Senator Hirono. Well, I hope that extends to advocating on
their behalf and to say that this is not a time to be
eliminating net neutrality.
Mr. Chairman, I do have some other concerns relating to
Federal contracting opportunities and Native American outreach
programs, 8(a) programs, minority-owned businesses, including
women-owned businesses, so I can submit those questions for the
record.
Chairman Risch. If you would, Senator.
Senator Hirono. And veteran-owned businesses.
Chairman Risch. I don't know if you were here, but I think
we're going to have a field hearing this summer on 8(a)
programs.
Senator Hirono. Yes.
Chairman Risch. We're going to have a hearing this summer
on 8(a) programs, this summer in Alaska, and we'll talk with
you a little bit about that. But I think that perhaps
Administrator McMahon is going to be submitting something for
the record. So if you want to submit a question, we'd be
delighted to take that.
Senator Hirono. Certainly, and we have a lot of 8(a)
entities in Hawaii also, so we should contemplate a field
hearing in Hawaii also.
Chairman Risch. But not in the summer. How about December?
Senator Hirono. That would be fine. December encourages a
lot of people to show up, I would say so.
[Laughter.]
Chairman Risch. Thank you.
Ms. McMahon. Thank you.
Chairman Risch. Senator Coons.
Senator Coons. Thank you, Chairman Risch, Ranking Member
Cardin.
Welcome, Administrator McMahon. Great to be with you again.
I want to thank you again for making a trip to Delaware in
January of this year. Together we visited Masley Glove, a
fantastic woman-owned business in Wilmington. Donna Masley, the
owner, really appreciated the chance to visit and to show you
how SBA products and assistance from Delaware's SBDC has made
the difference as she sustained growth in her small business.
I also appreciate your Ignite tour and your focus on the
great work being done at SBA district offices around the
country. I know you had a chance to meet with the wonderful
staff in my State's district office, which happens to be in the
exact same building that I am, which makes it easy for me to
see just how busy they are as I go in and out during the day.
As you know, I'm the Ranking Member on the Appropriations
Subcommittee that funds SBA, and while much of the financial
services bill can be controversial, SBA is not. So let's talk
for a minute about your flagship loan program, 7(a), which
operates at no cost to taxpayers because the fees cover costs.
Last year, SBA's 7(a) lending supported more than 150 small
businesses in Delaware, and I know it has an impact on many
other member states that is much larger because their states
are much larger.
How will you work to ensure that the SBA continues to
adequately serve small businesses and entrepreneurs with the
7(a) loan program while maintaining sufficient oversight so
that the program doesn't return to requiring a subsidy?
Ms. McMahon. And I very much appreciate the oversight
program, or the bill that was recently passed out of committee.
I'm not sure--I don't think it's passed on the floor yet.
Chairman Risch, is your bill on oversight, has that passed
on the floor yet? I know it's passed out of committee.
Chairman Risch. I don't think it's passed on the floor yet.
Ms. McMahon. But in there are some really good things for
SBA, especially one of the programs in that, one of the
stipulations in that, I would have the ability to raise the
amount by 15 percent, obviously with notification to Congress.
But I think that's an important aspect of it.
We are very pleased with where we see the 7(a) program
today. It is year over year 5 percent ahead of where it was
last year in terms of our lending. While that doesn't sound
like a huge amount, it really is when we're thinking about how
many businesses are served through the 7(a) program.
So we want to continue to build our relationships with our
lenders. That's incredibly important. Our website now has a
section on Lender Match which startups or those who are already
in business who are looking for the lender in their area can go
online, put in information, find out exactly where those
lenders are.
The reason that's important is because the lenders
themselves don't often get the outreach that they might in
spite of the lender specialists in our district offices
constantly interacting with them to try to build that. I think
it's really, really important that we continue to create that
relationship for our prospective businesses who are looking to
have those loans.
Senator Coons. I agree. I recently went to the SBA awards
dinner in Delaware. We had a record lending year in Delaware,
and I hope we'll continue to grow that together.
There are a lot of programs we talked about: Small Business
Development Centers; Women's Business Centers; the SCORE
program, which I'm a real champion of because it was founded in
Delaware; STEP, which helps with exports; all of which are
geared towards helping small businesses and entrepreneurs meet
specific goals.
How important do you think these grant programs are towards
SBA meeting its objective?
Ms. McMahon. I think it's incredibly important. I think
it's as important as access to capital for businesses who want
to grow because so often businesses fail--I see it all the
time, and I counsel entrepreneurs who are starting businesses--
most of them fail because they're under-capitalized and they
don't know how to manage cash flow.
Senator Coons. Yes.
Ms. McMahon. That means they've already gotten their money.
They didn't get enough. But now, how do you manage it? How do
you develop your business plan? How do you develop your
marketing plans? How do you know how to do that outreach to
continue to grow, to hire the right kind of people and put
those processes in place?
So if the mentoring aspect from those resource partners was
not there, I don't think we would see the success of the growth
of the small businesses.
Senator Coons. I could not agree more. Some of the winners
at the annual dinner in Delaware gave very compelling stories
about how SCORE and SBAC and Women's Business Centers were
essential to their success.
I'll just say that as I looked at the budget proposal for
this year, if these are so important, I was puzzled by why the
Administration continues to--and they enjoy bipartisan support.
I was puzzled by why the Administration is continuing to
propose cutting funding for these specific programs.
Ms. McMahon. Well, what I've done, we've taken a look at
them. You know, it's a little bit different when you're a CEO
for the private sector who comes in and starts taking a look at
what the programs are. And while we didn't go through zero-
based budgeting, which is sort of in my blood, we did take a
look at what do we actually need to continue to grow these
businesses, to have them operate effectively and efficiently,
and I believe that we matched the funding that we requested for
those to continue to provide them without reduction in services
and without reduction in personnel. So I thought we came to a
good place.
Senator Coons. One last question, Mr. Chairman.
Chairman Risch. You have one last question, 43 seconds.
Senator Coons. Senator Risch and I will soon be introducing
a bill to give small business access to the facilities and
expertise at the Department of Energy National Labs. As I'm
sure you know, we have 17 national laboratories that are
incredibly sophisticated and have some of the most advanced
technical machinery and equipment in the entire United States,
and small businesses often have great innovative ideas but
don't have the financial resources to properly test or develop
their ideas, and the national labs have some of that equipment.
Do you agree it would be important to promote ways for
small businesses to be more technologically innovative by
strengthening partnerships between small businesses and our
robust national laboratory network?
Ms. McMahon. Oh, it's exciting to me to hear that,
absolutely. You know, I've been around to many different
incubators around the country, and a lot of the businesses in
these incubators really are high-tech, biotech fields. If they
knew that they might be having the opportunity to be linked up
with some of those labs, it would be incredibly exciting.
Senator Coons. I'm excited about the bill, too.
Chairman Risch. Senator Coons, take all the time you want
on that subject.
[Laughter.]
Senator Coons. There is an additional bill that Senator
Risch and I are hoping we'll move to a markup soon and----
[Laughter.]
To reauthorize SCORE, a wonderful program, which you know
was founded in Wilmington, Delaware. Both of those are good
opportunities for us to help support America's small
businesses.
Ms. McMahon. Thank you.
Senator Coons. Thank you for what you do, and for everybody
at the SBA.
Thank you for your indulgence, Mr. Chairman.
Chairman Risch. Thank you.
Ms. McMahon. And I just want to say thank you to the
committee, because I do think that SBA is probably one of the--
not the only, but certainly one of the foremost agencies that
does receive bipartisan support, and I really appreciate that
so much.
Chairman Risch. Thank you. I think we all feel the same
way.
Administrator, just FYI, regarding the bill that you asked
about, it passed the House, but Senator Shaheen and I are the
co-sponsors here, and we're attempting to do the thing on a
hotline. Now, that may not mean anything to you, but it's part
of the arcane process over here because of the shortness of
time. But we are cautiously optimistic.
With that, thank you so much. You've done a great job over
there this first year, and we really appreciate you coming and
giving us an update and candidly answering the questions that
people put forward.
And with that, I yield to Senator Cardin.
Senator Cardin. Mr. Chairman, let me just agree with your
observation about the work of this committee, bipartisan, on
behalf of small business.
I want to comment on a couple of points that came up in
today's hearing, first on net neutrality, and let me try to put
this in context because it's more than access to the internet,
it's the quality of the access. I say that because if you're
selling bikes in Baltimore as a small business owner and your
product is on the internet, but it takes more than 3 seconds
for the consumer to see it, the consumer is off of your
webpage. That's what studies say. The impatience of a consumer
is dramatic. They expect to see the product immediately.
Now, the big companies that sell bicycles will have no
trouble getting their product before the consumer on the
internet within that 3 seconds. So if the internet provider has
a discriminatory pricing network against small businesses, it
can put small businesses out of business.
That's the reason why we all want to focus on the impact it
has on small businesses, and we would urge you to take a look
at it, because no one wants to put small businesses behind in
technology, and access to that quality service is essential for
small businesses to expand their business by the internet.
The second point I want to bring up, me and my colleagues
talked about the tax changes, and I'd just urge you to keep
taxes on your agenda, because I hear from small business owners
that they're not satisfied with the complexities of our tax
code. They don't think they're simple, and they are concerned
that many of the provisions of the new tax law were temporary,
so they don't know whether it's going to be permanent or not.
And then they look at the major provision, which is the 20
percent reduction for pass-through income, and at least the
initial review, it's about $415 billion of tax relief, is that
a very small percentage of that $415 billion is going to small
businesses or minority businesses or women-owned businesses.
So I'd just urge us, as we focus on small businesses,
recognize that in the tax code we still have challenges in
complexity and in predictability and in whether we're focusing
on the real challenges of small companies, and that's our
mission, and we need to work together to make sure we achieve
that.
I was listening on the disaster relief, and it just
reminded me that it was 20 years ago that we passed the Pre-
Disaster Loan Mitigation Program, and I don't believe that's
been utilized anywhere near as much as it should. We can't
prevent disasters, but we can do pre-disaster planning, and
there the small business has tools available that I would hope
we recognize vulnerable communities.
SBA was unbelievably helpful with regard to the flood that
occurred in Ellicott City, Maryland, and I've talked about that
several times. Ellicott City, Maryland, is flood prone. So part
of our response to the disaster was to do pre-disaster
mitigation, and we have, so that the shop owners who rebuild
are less likely to be impacted again by the next flood that
occurs, and that's part of what we do and part of your mission,
and we urge you to work with us on that.
And the last point, since Senator Coons mentioned Senator
Risch and got a little extra time, let me mention Senator Risch
and a letter that the two of us sent to you on cyber security
that followed up a hearing that we had here that I thought was
one of the best hearings that I participated in on any
committee, because we thought we got concrete suggestions on
how we could help small businesses prepare for cyber and
security issues.
It talked about the disadvantages that small companies have
in putting in software to protect against cyber attacks, and we
should be able to do a larger pool for small businesses, and
how SBA can help in providing technical information so small
businesses understand this. There's an embarrassment factor
when your business has been invaded and you don't want to talk
about it. There are things that we can do to help companies
deal with the reality of a number of vulnerabilities we have,
and we would ask that we work together in order to try to
develop a strategy where we can be more effective in helping
small businesses protect against the threat of cyber and ID
theft and all the things that are out there.
And with that, I'd just agree that we need to work together
in order to achieve these things.
Ms. McMahon. Thank you, and we will.
Chairman Risch. Thank you so much. Thank you, Ranking
Member Cardin.
Again, Linda, thank you so much for coming.
We're going to keep the record open for a couple of weeks
from today for members who want to submit questions for the
record. I suspect there may be some, and we would ask you to be
prompt in responding to those. I know you will be because it
will be helpful to us as we move forward.
So, with that, nothing further, the committee will be
adjourned.
Ms. McMahon. Thank you very much.
[Whereupon, at 4:52 p.m., the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]