[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN THE 
                              21ST CENTURY

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

                                HEARING

                               BEFORE THE

        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                            FEBRUARY 7, 2019

                               __________
                               
                               
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               

            Small Business Committee Document Number 116-003
             Available via the GPO Website: www.govinfo.gov
                  
                
                              __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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                  HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                         ABBY FINKENAUER, Iowa
                          ANDY KIM, New Jersey
                         SHARICE DAVIDS, Kansas
                          JARED GOLDEN, Maine
                          JASON CROW, Colorado
                          JUDY CHU, California
                           MARC VEASEY, Texas
                       DWIGHT EVANS, Pennsylvania
                        BRAD SCHNEIDER, Illinois
                      ADRIANO ESPAILLAT, New York
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                                 VACANT
                   STEVE CHABOT, Ohio, Ranking Member
   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
                        TRENT KELLY, Mississippi
                          TROY BALDERSON, Ohio
                          KEVIN HERN, Oklahoma
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        TIM BURCHETT, Tennessee
                          ROSS SPANO, Florida
                        JOHN JOYCE, Pennsylvania

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

                           OPENING STATEMENTS

                                                                   Page
Hon. Andy Kim....................................................     1
Hon. Kevin Hern..................................................     6

                               WITNESSES

Ms. Marla Bilonick, Executive Director, Latino Economic 
  Development Center, Washington, DC.............................     4
Ms. Sharon Pinder, President & CEO, Capital Region Minority 
  Supplier Development Council, Silver Spring, MD................     7
Mr. Davy Leghorn, Assistant Director, American Legion Veterans 
  Employment & Education Division, Washington, DC................     9
Mr. Michael Romano, Sr. Vice President of Industry Affairs & 
  Business Development, NTCA--The Rural Broadband Association, 
  Arlington, VA..................................................    10

                                APPENDIX

Prepared Statements:
    Ms. Marla Bilonick, Executive Director, Latino Economic 
      Development Center, Washington, DC.........................    23
    Hon. Kevin Hern..............................................    27
    Ms. Sharon Pinder, President & CEO, Capital Region Minority 
      Supplier Development Council, Silver Spring, MD............    29
    Mr. Davy Leghorn, Assistant Director, American Legion 
      Veterans Employment & Education Division, Washington, DC...    36
    Mr. Michael Romano, Sr. Vice President of Industry Affairs & 
      Business Development, NTCA--The Rural Broadland 
      Association, Arlington, VA.................................    44
Questions and Answers for the Record:
    Questions from Hon. Bradley Schneider to Mr. Davy Leghorn and 
      Answers from Mr. Davy Leghorn..............................    54
Additional Material for the Record:
    CCA-Competitive Carriers Association.........................    56

 
EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN THE 
                              21st CENTURY

                              ----------                              


                       THURSDAY, FEBRUARY 7, 2019

                  House of Representatives,
               Committee on Small Business,
                   Subcommittee on Economic Growth,
                                   Tax, and Capital Access,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:10 a.m., in 
Room 2360, Rayburn House Office Building. Hon. Andy Kim 
[chairman of the Subcommittee] presiding.
    Present: Representatives Kim, Davids, Schneider, Delgado, 
Radewagen, Hern, and Spano.
    Chairman KIM. We are going to get started here. We have a 
number of members that are coming over from the National Prayer 
Breakfast so they will come in and the Ranking Member will come 
in as he is able.
    I am Chairman Andy Kim. I am eager to get started here. I 
just want to have an opportunity to be able to make sure we are 
hearing from the incredible people that we have today that are 
going to be sharing with us.
    Small businesses make up over 99 percent of all businesses 
in the United States and employ almost half of our nation's 
workers. In 2018 alone, America's small employers added 1.9 
million net new jobs to the economy. As I have seen firsthand 
in my district in New Jersey, Main Street businesses are the 
backbone of our communities.
    In my home state, small businesses employ nearly two 
million people, making up nearly half of the private workforce. 
Among them are approximately 58,000 veteran-owned businesses 
and over 250,000 female-owned businesses, which is why I am 
particularly happy to be chairing this hearing today.
    While nearly every entrepreneur faces obstacles when it 
comes to getting a new business off the ground and running, 
entrepreneurs from traditionally-underserved backgrounds tend 
to face even greater barriers to entrepreneurial success.
    We often hear that access to capital is the biggest 
challenge facing aspiring entrepreneurs. As the lifeblood of 
all new businesses, affordable capital is crucial to starting a 
business. Without it, new firms often cannot buy inventory and 
equipment, pay their employees, and expand operations.
    Unfortunately, studies have shown that women, minority, and 
veteran-owned businesses face heightened obstacles to securing 
affordable capital. For example, the Minority Business 
Development Agency found that minority-owned firms experience 
denial rates three times higher than other firms. Despite a 
similar demand, 60 percent of veterans reported a financing 
shortfall and had approval rates 10 percent lower than all 
other firms.
    In response to these challenges, minority-owned firms are 
more likely to rely on personal sources of funding, such as 
savings, a family member, or credit. This unfortunate reality 
is not only unsustainable, it is also hindering small business 
growth.
    Unfortunately, barriers to entering Federal procurement 
markets are also common for underserved firms. Federal 
contracts are a great source of potential for business growth 
and it is crucial that we find ways to make them more 
accessible to budding small firms.
    Setting government-wide small business contracting goals 
was a meaningful step towards increasing small business 
participation in the Federal procurement marketplace. However, 
as the numbers show, we will have work to do to level the 
playing field for underserved businesses.
    For instance, women-owned businesses were awarded $21 
billion of the total $500 billion in contracts for fiscal year 
2017. This is highly disappointing considering that women 
entrepreneurs contribute over $1 trillion a year to the U.S. 
economy.
    Meanwhile, rural businesses are facing a unique set of 
challenges, including smaller labor pools, slow population 
growth, net outmigration, and health problems including 
diabetes and opioid addiction. Though these issues impact rural 
communities at large, they can also have a devastating impact 
on rural entrepreneurship and business growth.
    To address these disparities, SBA created several 
initiatives which we will hear more about today. For many 
underserved businesses, initiatives such as Small Business 
Development Centers, Women's Business Centers, SCORE, and 
Veterans' Business Outreach Centers are there to provide 
mentorship and other key services.
    Today, I look forward to hearing the recommendations and 
feedback of our distinguished witnesses to strengthen these 
initiatives, as well as other Federal programs and private 
sector actions serving underrepresented entrepreneurs.
    I hope today's hearing will be a productive opportunity to 
explore the challenges facing small firms while identifying 
areas where we can work together on legislation that seeks to 
level the playing field for America's small businesses.
    Thank you.
    The Ranking Member will submit his statement for the 
record.
    And if other Committee members have opening statements 
prepared, we would also ask that they be submitted for the 
record.
    I would like to take a minute to explain the timing rules. 
Each witness will get 5 minutes to testify. Each member will 
get 5 minutes for questioning. There is a lighting system to 
assist you. The green light will be on when you begin, the 
yellow light will come on when you have 1 minute remaining, and 
the red light will come on when you are out of time. And we 
will ask that you stay within the timeframe to the best of your 
ability.
    Now, I would like to introduce our witnesses. Our first 
witness is Ms. Marla Bilonick. Ms. Bilonick has been the 
executive director of the Latino Economic Development Center 
since 2014. She has also worked for Seedco where she assisted 
businesses in Lower Manhattan that were impacted by the attacks 
of September 11th. Ms. Bilonick is a member of the board of 
directors of the National Association of Latino Community Asset 
Builders. She is a graduate of the University of Wisconsin at 
Madison and received her Master of Arts degree from Johns 
Hopkins University of Advanced International Studies (SAIS).
    Welcome back, Ms. Bilonick.
    Our second witness is Ms. Sharon Pinder. Ms. Pinder is the 
president and CEO of the Capital Region Minority Supplier 
Development Council (CRMSDC), a nonprofit corporation whose 
mission is to link corporations and government agencies with 
minority business enterprises. Prior to joining the council, 
she served as the director of the Mayor's Office of Minority 
and Women-Owned Business Development for the City of Baltimore. 
She was also Maryland's first appointed cabinet secretary of 
the Governor's Office of Minority Affairs. Ms. Pinder holds a 
Master of Science degree in Technology Management from the 
University of Maryland, University College, where she has the 
honor of serving as professor of practice in the School of 
Graduate Studies.
    Welcome, Ms. Pinder.
    Our third witness today is Mr. Davy Leghorn. Mr. Leghorn is 
the assistant director of the Economic Division of The American 
Legion where he oversees employment, small business, and VA 
contracting policies. He also administers The American Legion's 
Veteran Entrepreneurship Program. Mr. Leghorn served as a motor 
infantryman in the United States Army, then as a civil affairs 
specialist with the 450th Civil Affairs Battalion. He currently 
serves as the sergeant-at arms for George Washington Post 1 in 
The American Legion Department of the District of Columbia.
    Welcome, Mr. Leghorn, and thank you for your service.
    And today's final witness is Mr. Mike Romano. Mr. Romano 
serves as a senior vice president of Industry Affairs and 
Business Development for NTCA, the Rural Broadband Association. 
NTCA represents roughly 850 telecom companies throughout the 
United States, many of whom are located in rural communities 
and small towns with a goal of ``building a better broadband 
future for rural America.'' Prior to joining NTCA in 2010, Mr. 
Romano worked at Bingham McCutchen LLP, Global Telecom and 
Technology, America Online, and Level 3 Communications and 
Swidler Berlin. Thank you for joining us today.
    I want to just get started right from the beginning, so Ms. 
Bilonick, you are recognized for 5 minutes.

   STATEMENTS OF MARLA BILONICK, EXECUTIVE DIRECTOR, LATINO 
ECONOMIC DEVELOPMENT CENTER; SHARON PINDER, PRESIDENT AND CEO, 
  CAPITAL REGION MINORITY SUPPLIER DEVELOPMENT COUNCIL; DAVY 
     LEGHORN, ASSISTANT DIRECTOR, AMERICAN LEGION VETERANS 
EMPLOYMENT AND EDUCATION DIVISION; MICHAEL ROMANO, SENIOR VICE 
 PRESIDENT OF INDUSTRY AFFAIRS AND BUSINESS DEVELOPMENT, NTCA-
                THE RURAL BROADBAND ASSOCIATION

                  STATEMENT OF MARLA BILONICK

    Ms. BILONICK. Good morning, Subcommittee Chairman Kim and 
members of the Subcommittee. It is my sincere honor to be 
speaking with you all today.
    My name is Marla Bilonick, and I am the executive director 
and CEO of the Latino Economic Development Center (LEDC).
    LEDC is a 28-year-old organization with the mission to 
drive the economic and social advancement of low- to moderate-
income Latinos and other underserved communities in the D.C. 
and Baltimore metropolitan areas. We operate out of six offices 
in the region, with over 40 professional and bilingual staff 
providing top-notch services to our clients. On an annual 
basis, we serve well over 4,000 low- to moderate-income 
residents. We are a SBA Microlending Intermediary, SBA 
Community Advantage Lender, and certified Community Development 
Financial Institution (CDFI).
    Since we began lending in 1997, we have rolled out more 
than $15 million in capital and have provided small business 
technical assistance services to thousands of aspiring and 
existing small business owners in the region. LEDC is a member 
of, and I sit on the board of the Opportunity Finance Network, 
a membership organization representing the over 1,000 CDFIs in 
the United States. The challenges I will outline are consistent 
with what we hear from our fellow CDFIs operating similarly 
underserved communities around the nation.
    LEDC exists to help underserved populations overcome the 
challenges that stand in their way of achieving their full 
potential for achieving financial stability and income 
mobility. While the challenges before them are countless, those 
I would characterize as the most significant are: lack of 
access to capital, lack of access to information and 
educational resources, poor or no credit history, and systemic 
and institutional racism and sexism.
    In my testimony, I will elaborate on each of these barriers 
to success. As the head of a Latino-facing organization and 
member of the Board of Directors of the National Association of 
Latino Community Asset Builders (NALCAB), I will also include 
information on small business challenges that are specific to 
the Latinx community.
    So starting with lack of access to capital, the traditional 
commercial banking system is often not a viable resource for 
underserved small businesses. Commercial banks defer to a fixed 
minimum credit score they will accept for loan approvals and 
are further hindered from serving small businesses due to 
restrictions around lending to startups or providing smaller-
dollar financing. A recent report from the Woodstock Institute 
cited that the number of CRA-reported loans under $100,000 in 
2015 remained 58 percent lower than in 2007. What is more, bank 
branches are consolidating and closing at a steady clip, with 
1,700 bank branches closing in the 12 months between June 2016 
and June 2017.
    The alternative for underserved entrepreneurs operating in 
this climate is to take out credit cards that often charge high 
interest rates, access high-cost financing via the emerging 
online lending industry, tap into merchant service cash 
advances, obtain a loan from a loan shark, or obtain a loan 
from the CDFIs in their area. I will note that we have several 
loans in our portfolio that are restructured financing deals 
for entrepreneurs who fell prey to the allure of online 
lenders.
    On the other hand, data shows that CDFIs in OFN's 
membership alone have originated more than $65 billion in 
financing in urban, rural, and native communities through 2016. 
To quote OFN's president, Lisa Mensah, `` CDFIs exist to move 
money to places missed by traditional lenders.'' However, CDFIs 
face challenges in terms of reaching the very communities that 
need our services due to minimal or nonexistent marketing 
budgets, challenges to capitalizing our loan funds, and/or 
sustaining the high overhead costs associated with the labor-
intensive loans we underwrite.
    In terms of lack of access to information and educational 
resources, starting or growing a business is not for the faint 
at heart. In an ideal scenario, an entrepreneur has the time 
and support to complete an in-depth business plan, complete 
with a market analysis, elaborate revenue projects, a well-
developed management plan, and options for financing their one-
time startup costs, as well as ongoing or variable costs to 
come.
    Unfortunately, underserved entrepreneurs do not always have 
access to business planning information or resources, nor do 
they have the time to invest in business planning as they are 
looking to their business ideas as a source of income for 
themselves and their families.
    In addition, the regulatory framework is a maze of 
processes and agencies that few could understand without 
outside support. Depending on the business type, entrepreneurs 
frequently need to go through several licensing agencies and 
register with their state and jurisdiction to be compliant. 
Layer on top of that the language barrier that many of our 
immigrant Latinx clients face, and it is doubly challenging to 
meet compliance requirements.
    I am actually going to skip the reference to poor and no 
credit history, although it is a significant challenge. I want 
to get to sort of the last section which I think is probably 
the most challenging around systemic and institutional 
discrimination.
    So my testimony cites the same research that you cited, Mr. 
Kim, from MBDA, around the disproportionate disapprovals for 
minority and female borrowers. And, you know, just showing that 
identical applications from minority and nonminority applicants 
were rejected up to 54 percent times more frequently. And for 
women, women-owned businesses received nearly 50 percent less 
funding than men-owned businesses, and that funding actually 
declined by 42 percent between 2016 and 2017.
    In closing, my request would be that we do not lose sight 
of the protections for consumers in general, as well as 
minorities. The CFPB, OCC, Fed, and FDIC should continue and 
deepen their evaluation of commercial bank activities with 
regard to the demographics of who is and who is not receiving 
loans.
    Just yesterday, the CFPB said it plans to abolish most of 
its critical consumer protections governing payday loans. And 
while that is not necessarily a direct correlation with our 
small business clients, it just is a signal to the attitude of 
the CFPB at this moment in time, which is certainly troubling. 
Specifically, the CFPB should finalize its implementation of 
section 1071 of the Dodd-Frank Act, which would require 
financial institutions to compile, maintain, and report 
information regarding credit applications made by women-owned, 
minority-owned, and small businesses. This kind of information 
would provide policymakers with insights into the precise 
shortcomings of diverse businesses in seeking credit, enabling 
policymakers to craft narrowly-tailored legislation designed to 
remedy the shortcomings within each of these entrepreneurial 
communities.
    Thank you.
    Chairman KIM. Thank you so much.
    Before we move on to our next witness, I just wanted to 
recognize our Ranking Member here and turn it over to him for 
his opening statement.[16]fb[17]
    Mr. HERN. Thank you, Mr. Chairman. Thank you for your 
kindness in doing that. My apologies for my tardiness. We were 
at the National Day of Prayer, so I appreciate that.
    I just want to say that as a small businessperson for 34 
years and a person who has lived the American dream, come from 
extraordinary poverty to being a very successful 
businessperson, there is nothing that has been a greater joy 
for me later in my life than to help small businessmen and 
women see their ideas brought to life, to start small 
businesses, to help so many try to find, actually write 
business plans, and to find access to capital, help them mold 
and model their business plans to work.
    And so with about 99.9 percent of all businesses in the 
United States being classified as small, the impact that small 
businesses have on our economy cannot be overstated. In my home 
state of Oklahoma alone, we have over 340,000 small firms who 
employ over 700,000 people. Many of these businesses are owned 
by minorities, women, and veterans, and many of these 
businesses are located in rural areas.
    Small businesses owned by minority, women, and veterans 
face a unique set of challenges, ranging from raising adequate 
financing, to building social capital, to finding the effective 
mentors. Rural businesses, however, while facing those 
challenges, also tend to face a different set of challenges, 
most notably, access to reliable and affordable broadband 
service.
    Today, more than 24 million Americans lack access to high 
speed internet, the vast majority of whom live in rural 
communities. When comparing urban and rural broadband 
development, 97.9 percent of urban America has access to both 
fixed and mobile broadband, while only 68.6 percent of rural 
citizens have the same access.
    The lack of a solid business case for rural broadband 
deployment remains a certain reason for what is often referred 
to as the `` digital divide.'' Large telecommunications 
companies have little incentive to invest in broadband 
infrastructure in areas with low population density. Instead, 
small telecommunications carriers are far more likely to invest 
in rural communities, often because they are communities. 
Frequently, however, these small firms face numerous challenges 
in their efforts to increase broadband access.
    Small businesses specifically require access to reliable 
and affordable technology to compete with larger competitors. 
According to a recent study, digitally advanced small 
businesses were shown to be more than three times likely to 
create jobs and experience revenue growth at a rate four times 
higher than small businesses who do not employ technology. Yet, 
despite such outstanding returns, many small businesses do not 
take full advantage of the technologies available to them. 
Often, this is due to owners not realizing the benefits of such 
tools offered to them, or simply lacking access to reliable 
technological resources as a result of cost or location.
    Today's hearing will allow us the opportunity to further 
discuss these and other challenges that businesses owned by 
minority, women, veterans, and rural Americans face while also 
exploring potential ways to improve and elevate these issues 
moving forward.
    I look forward to hearing from our witnesses, I again 
apologize for my tardiness, and to having a productive 
conversation.
    Thank you, Mr. Chairman. I yield back.
    Chairman KIM. Thank you. I look forward to working with you 
on this Subcommittee to do what we can for small businesses. 
And I have to say I am just in awe of your experience, the 
great success that you have had over your career, your 
particular knowledge about small businesses. I think it is 
going to add a tremendous amount of expertise to this 
Subcommittee, and I am looking forward to working with you on 
that.
    Mr. HERN. Thank you.
    Chairman KIM. Why do we not get moved back to the witness 
panel?
    I want to move it over to Ms. Pinder, if you do not mind. 
You are recognized for 5 minutes.

                   STATEMENT OF SHARON PINDER

    Ms. PINDER. Good morning. I am Sharon Pinder, and for the 
last 4 years I have been the president and CEO of the Capital 
Region Minority Supplier Development Council. Good morning, 
Chairman Kim, Ranking Member Hern, and distinguished Committee. 
I thank you for the opportunity today to have this 
conversation.
    Today I am actually in real awe as I look at the picture of 
the late Congressman Parren Mitchell on the wall when he was 
Chairman of the Small Business Committee. I think about 40 
years ago, and the foundation of all MBE programs that exist 
today, Public Law 95-570. And so as we look at the basis of the 
foundation of MBE programs and its challenges, we will talk 
about day, they (challenges) still exist 40 years later.
    The Capital Region Minority Supplier Development Council, 
is the nation's certifying body for the private sector created 
on the heels of civil unrest in the late 1960s, our mission is 
to certify, develop, and advocate for minority businesses.
    The Capital Region Minority Supplier Development Council 
(my particular territory) is the State of Maryland, District of 
Columbia, and Northern Virginia. In addition to that, I operate 
two Minority Business Development Agency (MBDA) Centers. One is 
the MBDA Business Center Washington D.C., and the other one is 
the only federally funded center, federal procurement center.
    Yesterday, I was talking to a group of minority businesses 
and I just arbitrarily asked the question, ``What are your 
issues''? ``What are the problems that you face as 
businesses''? And without script, just generally what they said 
to me was (1) capitalization or the undercapitalization of 
their businesses; (2) not having that network or those 
relationships; and (3) not being able to navigate as you look 
at contracts opportunities.
    As we look at the 21st century, many programs and ideas 
aimed at leveling the playing field have existed for over 40 
years, and across this country we witness enormous gaps that 
exist between the current measures of minority and women 
availability and number of relative size of minority-owned 
firms that you would expect to exist across the country. These 
gaps are not without severe consequences for economic health of 
the country as a whole.
    When minority businesses thrive, communities of color 
thrive as well. Diverse businesses which are more likely to 
hire local and employ people of similar backgrounds work as 
powerful forces for economic development. Communities of color 
will become the majority in 2044 or before. And how minority 
businesses fair will impact the sustainability and strength of 
our nation.
    Our nation's economic history is rich with examples of 
public policy and government actions facilitating the spirit of 
entrepreneurship and directly contributing to the success of 
capitalism. At critical junctures throughout the 
industrialization of America, the Federal Government has 
proactively redirected the flow of commerce and in effect has 
launched the birth of new giants of American industry. From the 
issuance of Federal land grants that were essential to spurring 
the growth of railroads and to breathing life into the 
telegraph and telephone industries, from granting the licenses 
and broadcasting frequencies to radio and television companies, 
and from the construction of Federal highway systems to the 
creation of aviation and aerospace programs, the government has 
been a willing partner in forging a path for new industries.
    For example, the adoption of airmail as the primary mode of 
transportation for the U.S. Postal Service consequently aided 
in contracts to a number of airlines and placed them in a path 
that they became really successful in the private airline 
industry.
    Due to time, I am going to skip down to the next part of my 
testimony.
    So what we should consider that timing is everything and 
that this is a critical juncture in our history with an 
opportune time to use the model of the past for purposeful and 
intentional support from the government. Today's minority 
businesses can be tomorrow's moguls, whereas past 
discriminatory practices prevented their participation in 
building some of the nation's top industries because quite 
frankly minority businesses were not at the table when those 
industries were born. There is an opportunity now by which 
minority businesses can benefit by being at the table during 
the infancy of some of today's emerging industries and 
technologies. As in the past, partner with the government and 
as that industry grows, those minority businesses will grow as 
well. Thank you.
    Chairman KIM. Thank you for that. And I agree with you. 
Timing is everything. And we are at a critical juncture, which 
is why we were grateful to have your expertise here today to 
help us think through the way forward. So thank you so much for 
that.
    Mr. Leghorn, I want to turn it over to you. You are 
recognized for 5 minutes.

                   STATEMENT OF DAVY LEGHORN

    Mr. LEGHORN. Chairman Kim, Ranking Member Hern, and 
distinguished members of the Subcommittee, on behalf of our 
national commander, Brett R. Reistad and the nearly two million 
members of The American Legion, we thank you for the 
opportunity to testify today on exploring challenge sand 
opportunities faced by veteran businesses.
    In our testimony, we covered a broad spectrum of topics 
from Federal contracting to entrepreneurial development 
programs and access to capital. We would like to dedicate the 
balance of our time this morning to just two issues.
    One detriment to the veteran small business industrial base 
has always been the misinterpretation of legislation that has 
designated SDVOSBs as a preferred contracting group. In 
legislation from 1999 and 2003, Congress gave SBA and other 
agencies broad business development authority to help veterans. 
Unfortunate, the SBA and FAR Council announced in 2005 
rulemaking comments that government-wide SDVOSB program was for 
established businesses and was not meant to aid in development 
for new businesses.
    The Kingdomware decision affirmed the intent of the SDVOSB 
set-aside goal in the Veterans Entrepreneurship and Small 
Business Development Act of 1999, was to encourage small 
businesses and was not intended for the purpose of fulfilling a 
quota. The Supreme Court opined that the goals exist to provide 
real opportunities for service-disabled veterans and that the 
subsequent enactment of the Veterans Benefits, Health Care, and 
Information Technology Act was ancillary in nature to the 
Veterans Entrepreneurship and Small Business Development Act 
and shares the same intent.
    This is significant because agencies are now reminded that 
this reasoning applies to both the Small Business Act goals as 
well as goals under agency-specific laws like the Veterans 
First Contracting Program at VA. The American Legion had hoped 
that the outcome of Kingdomware would force SBA and the FAR 
Council to revisit the rules of the Veterans Entrepreneurship 
and Small Business Development Act. This has not occurred. To 
this end, The American Legion asked Congress to encourage SBA 
and the FAR Council to carry out their business development 
authority.
    Further, the Kingdomware decision signaled the Supreme 
Court's approval for a model of veterans first or service-
disabled veterans first to exist in contract set-aside and 
preference programs. Congress can now extend this model 
government-wide in a Small Business Act or an agency-specific 
legislation.
    Additionally, The American Legion would like to discuss our 
support for SBA's entrepreneurial development programs. Since 
2012, the Boots to Business curriculum taught during the 
military's Transition Assistance Program has been very 
successful. Since its implementation, Boots to Business has 
been the litmus test that has convinced veterans to launch 
their business or to delay the process until they are ready.
    In the 2019 National Defense Authorization Act, there was 
an attempt to make at least one of the TAP capstone courses 
mandatory. The American Legion supports this effort and hopes 
this will expose more service members to SBA and their 
grantees.
    The American Legion believes more service members should 
have access to SBA programs. Currently, National Guard and 
reservists are not eligible for veteran entrepreneurship and 
loan programs until they are activated under Title 10. This is 
why The American Legion supports legislation that would amend 
15 USC to extend the eligibility for veteran-focused SBA 
programs to service members who have been ordered to perform 
active service for more than 30 consecutive days.
    Increased utilization of SBA's veteran-centric programs 
will require more veteran business outreach centers (VBOC). The 
American Legion supports the creation of more VBOCs.
    Puerto Rico, Guam, Virgin Islands, and American Samoa are 
often overlooked for veterans programs and services, despite 
the heavy military presence and recruitment efforts that occur 
there. This is why we support the Puerto Rico Small Business 
Assistance Act. The American Legion asks this Committee to 
authorize VBOCs in Puerto Rico and other underserved areas 
where veterans reside.
    In conclusion, Chairman Kim, Ranking Member Hern, and 
distinguished members of the Committee, The American Legion 
thanks you for the opportunity to explain the position of 
nearly two million members of The American Legion, and we look 
forward to any questions you may have.
    Chairman KIM. Thank you, Mr. Leghorn. That was very 
informative.
    I want to turn it over to Mr. Romano. You are recognized 
for 5 minutes.

                  STATEMENT OF MICHAEL ROMANO

    Mr. ROMANO. Thank you, Mr. Chairman.
    Good morning, Chairman Kim, Ranking Member Hern, and 
members of the Subcommittee. Thank you for the opportunity to 
testify today.
    My name is Mike Romano. I am the senior vice president at 
NTCA-The Rural Broadband Association. We represent 
approximately 850 small businesses that provide broadband in 
rural America.
    Our hope today is to offer a helpful perspective as a 
complement to the discussion of underserved areas and 
populations by my fellow witnesses. The capital-intensive 
nature of building infrastructure is particularly challenging 
in light of the deeply rural, sparsely populated areas NTCA 
members serve. Yet even as our members' rural broadband 
networks are difficult to build and maintain, they are 
essential to ensure that other small businesses and consumers 
in rural America can connect with the rest of the world.
    Indeed, we believe that a key to helping underserved 
communities of all kinds in the 21st century is to deliver 21st 
century connectivity--high-speed broadband upon which users can 
rely to invest in and operate their own businesses to create 
jobs and provide opportunity.
    Investing in broadband has far-reaching effects for urban 
and rural America alike, creating efficiencies in health care, 
education, agriculture, energy, and commerce. America needs 
rural broadband not only to help farmers efficiently produce 
crops sold across the U.S. and around the world, but to help 
small businesses of all kinds participate in the national and 
global economies and to help all rural citizens experience the 
life-changing benefits of distance learning, telemedicine, and 
teleworking.
    This task of connecting everyone, however, is easier said 
than done. These challenges can present in different ways in 
different parts of the country for different communities of 
users. In rural areas, communities are more likely to be 
underserved from a broadband perspective because the economics 
of connecting them are difficult, if not impossible to 
overcome. Distance and density present physical challenges 
unlike any other for the business case of deploying and 
sustaining connections. To compound the business case further, 
rural areas are on average poorer than many urban areas and 
have lower broadband adoption rates.
    Despite such challenges, NTCA's small business members have 
worked to connect rural America through an effective mix of 
entrepreneurial spirit, community commitment, and Federal and 
state support programs. Most NTCA members live and work in the 
communities they serve. They therefore have ever incentive to 
upgrade networks that connect their workplaces, their kids' 
schools, their libraries, and their hospitals. But as I 
mentioned, the business case is challenging and complicates 
greatly both access to and use of capital.
    This is where Federal and state programs play a key role. 
For example, the Federal Universal Service Fund (or USF) 
enables and sustains communications infrastructure in rural 
America, helping carriers make the business case needed to 
justify loans or use of other private capital. Although the 
USF's effectiveness was hampered for years due to arbitrary 
caps and regulatory uncertainty, the FCC responded late last 
year to consistent calls from hundreds of members of Congress 
on a bipartisan basis, calling for an infusion of resources and 
other improvements. It is our hope that the bipartisan reforms 
adopted by the FCC will unleash a new round of broadband 
investment in rural areas and help to sustain the networks 
already built.
    It is important too that the USF programs involve more than 
just helping connect rural areas. More than two decades ago, 
Congress wisely structured the USF as a comprehensive umbrella 
with components that seek to address connectivity concerns for 
discrete sets of potentially underserved populations through 
coordinated programs--schools and libraries, low-income 
consumers, rural healthcare, and high cost support for rural 
networks generally.
    Indeed, in helping to make sure rates for services are 
affordable on rural networks, the high cost program of USF 
helps Americans living in rural poverty afford better access to 
communications. We therefore believe the Federal universal 
service mechanisms as a whole represent a well-thought, 
comprehensive strategy aiming to ensure that every American--
regardless of the specific challenge that renders them at risk 
of being unserved or underserved--will be connected.
    The Rural Utilities Service (or RUS) also plays a 
significant role in helping small broadband providers access 
capital to deploy infrastructure in areas where returns on 
investment are measured in decades. Congress has expanded the 
role of RUS and rural broadband deployment through significant 
resources for new broadband loans and grants. These additional 
funds are welcomed and it is now important to ensure that the 
USF and RUS and other programs are coordinated and used as 
efficiently as possible.
    Much has already been accomplished in connecting rural 
America. For example, 70 percent of NTCA's members' customers 
already have access to 25/3 megabits broadband which the FCC 
deems to be the standard at this point for broadband, and many 
have faster connections, even up to gigabit service.
    But much work remains, too, especially in the areas not 
served by smaller operators like those in our membership where 
a digital divide exists.
    We look forward to working with your Subcommittee and your 
congressional colleagues to ensure that we can address the 
connectivity needs of underserved and unserved areas and keep 
connected those areas that are fortunate enough to be served 
today. Thank you.
    Chairman KIM. Thank you. And I just wanted to thank again 
all four of you for your testimony here today.
    I will certainly start moving forward with turning it over 
to my distinguished colleagues in just a few minutes but I did 
want to just start by asking a few questions myself.
    I want to start by saying I come into this position with a 
lot of humility. You know, I have a lot to learn. All of us 
have a lot to learn about what it is that we can do to serve 
small businesses, and the four of you, amongst many others, 
bring that kind of experience that we need to keep hearing 
about.
    I joined this Committee, and this was a priority of mine 
because my district in New Jersey is a small business district. 
You know, my district has, from the largest employer, a joint 
military base, but all the small businesses that continue to 
serve the base or are a part of both Burlington County and 
Ocean County.
    My priority is always to protect these military families 
and, veterans living in my district in particular. And less 
than 3 months ago, SBA and the Federal Reserve Bank of New York 
released a comprehensive report on the state of 
entrepreneurship for military veterans, and it is quite frankly 
concerning. The report found a generational decline in veteran 
entrepreneurship with fewer young veterans owning businesses 
than past generations. At the same time we are now beginning to 
see veterans owning businesses at lower rates than nonveterans.
    I want to ask unanimous consent to submit this report to 
the record.
    Without objection, the motion is agreed to.
    We know that historically the opposite has been true, that 
veterans have been generally more entrepreneurial than 
nonveterans. Of course, the skills gained during military 
service, teamwork, discipline, perseverance, a strong work 
ethic and crisis management all are important parts of the 
equation and those skills certainly have not changed.
    So Mr. Leghorn, I want to build off of your very 
informative statement. I want to ask you, just taking a step 
back, what has changed? You know, why in your experience are 
fewer young veterans launching businesses and having 
difficulties with access to capital and the financing 
shortfalls? I just wanted to hear from you that bigger picture.
    Mr. LEGHORN. Thank you for your question, Chairman. I think 
the main reason why we are not seeing as many veterans get into 
small business these days and embrace that entrepreneurial 
spirit is because of the recession and we are still kind of 
climbing out of the recession. A lot of these folks are very 
hesitant to take risks right now. As the economy improves, I 
hope that this is a trend that will be reversed.
    In terms of lending, I think one of the rather cool things 
that have happened since the decline of regional and community 
banks is that lending has kind of diversified and this is a 
trend we would like to see a lot more of and I think when the 
veterans do come back and start their own businesses the 
lending field is going to be very different for them and it is 
going to be very conducive to starting new business.
    Chairman KIM. Thank you for that.
    Based on what you were saying, what we have heard from all 
four, not every business owner experiences the same struggles 
when starting or growing a business. So Mr. Leghorn, just one 
final follow up. What are some of the obstacles unique to 
veteran startup companies? I want to get a better sense of what 
you feel like is particular obstacles or opportunities that are 
being faced and things that we might be able to do to support.
    Mr. LEGHORN. The main thing that hampers veteran-owned 
small businesses is collateral and we are generally cash poor. 
You know, and that is why folks like what I spoke about before 
with the diversity of lending and CDFIs are so important for 
the veteran community because normal bank products generally do 
not work for us and larger banks are less likely to make 7(a) 
loans to folks without collateral.
    Chairman KIM. Well, thank you for that.
    I want to make sure we turn it over to my other colleagues 
who I am sure have very insightful questions.
    So Ranking Member, Mr. Hern, I want to turn it over to you. 
You are recognized for 5 minutes.
    Mr. HERN. Thank you, Mr. Chairman.
    As an opening statement to your testimony, I will tell you, 
I look around. I think I may be the oldest up here. I have been 
creating jobs for a long time. I know that. First small 
business 1985. I will tell you, also having started a bank and 
still in banking, I sat on the board until I got this gig in 
November and I had to resign that board. But I chaired the Loan 
Committee for 10 years. And as you probably can imagine, I have 
a tremendous heart for small businesses and people who want to 
take that journey.
    Mr. Leghorn, you said your problem with your folks are lack 
of collateral and cash poor. I will tell you that represents 
about 99.9 percent of the folks out there that have an idea, is 
how do I get that idea off the ground? So I would say that is 
probably ubiquitous to everybody that is trying to create a 
business for the first time.
    I will tell you, you are so right that there are a lot less 
community banks today than there were 15-20 years ago. And 
Dodd-Frank was really the catalyst to that because right now 
community banks over the last 5 years are hiring a lot more 
compliance officers than they are actually lending officers 
because you still have to make money in the banking business 
and you have to also comply with Federal Government 
regulations.
    So, you know, you all have to work within the banks. The 
banks are very competitive. They are trying to loan to 
everybody and they still have to meet the creditworthiness that 
is required of them of the Federal Government because they are 
monitored relentlessly, audited by the Federal Government and 
by their banking institutions in their states. And so as we 
look at this, you know, we have got to figure out how to help 
folks get mentored, and I think your agencies do that. How to 
present a business plan, because everybody has to look at 
everybody as if there are no color, there are on genders, to 
actually make a loan. Because we have to have the ability to 
repay our loans, either through a guaranteed process through 
the SBA, or if it is a traditional loan, which many are made, 
there obviously has to be the ability to actually function and 
make that loan work.
    Ms. Pinder, could you tell me, since we are talking about 
this mentorship, could you tell me how you do that with the 
folks that you represent in getting them off the ground if they 
come to you with an idea?
    Ms. PINDER. Our organization is made up of the Fortune 500 
type companies of corporations. So we do not necessarily look 
at startups. And so when a startup comes to us, our question is 
``Are you ready to do business with these corporations?'' And 
if they are not ready to do business, offer building capacity 
support. And so startups, depending upon the industry, because 
sometimes industry if it is like information technology or if 
that is the idea, may attract more equity (funding) kind of 
things. But to answer your question, we do mentor companies in 
terms of getting them prepared to do business with our 
corporations. And we do that in a number of ways.
    We have a MBE Academy. We have educational and training 
programs to help people become, at the end of the day, 
competitively viable.
    Mr. HERN. Okay. Mr. Romano, more and more people today, 
usually they are sole proprietors, they do not really have 
employees. They have an idea and to go from being an idea to 
having multiple employees, which lends itself to usually going 
into an urban area, if you live in the rural area which many of 
Americans do, especially throughout the Midwest, how does what 
you are trying to accomplish, putting broadband in rural areas, 
how does that help them make that transition from an idea to 
concept of starting, making money, getting contracts and work, 
to getting employees?
    Mr. ROMANO. Thank you, Ranking Member Hern.
    I would say the first thing is if you are looking to locate 
a business, one of the first things we hear from relocation 
firms or from folks looking to get something off the ground is 
what kind of connectivity do I have? Because whether it is 
obtaining supplies, finding customers, finding markets, that 
connectivity is critical.
    One of the programs we have started is called Smart Rural 
Community, and it is really intended to focus on not just the 
fact that you have got networks out there but sort of celebrate 
and accentuate the uses of them--focusing on what are people 
doing to generate economic development, job creation, and 
therefore be able to stay in a rural area rather than have to 
move necessarily to the city. We want people to be able to 
choose where they live rather than be forced to live in a 
certain place based upon what kind of access they have.
    Mr. HERN. Thank you.
    One last question for, is it Ms. Bilonick? Oh, wow, two in 
a row. That is good.
    Could you help me understand, and I apologize that I missed 
your opening statements, but could you let me know what is your 
default rate of when you are trying to lend and get folks 
started?
    Ms. BILONICK. So we have typically stayed below a 10 
percent default rate, which we feel is excellent given the fact 
that we are giving loans to what folks would call sort of the 
most risky population out there. That is startups. That is 
folks with poor or no credit. And so we are very proud of the 
default rate.
    Mr. HERN. That is incredible.
    Ms. BILONICK. Yeah, thank you.
    Mr. HERN. Thank you.
    Chairman KIM. Great. Thank you for that.
    I want to recognize my colleague from New York, Congressman 
Delgado.
    Mr. DELGADO. Thank you, Chairman, Ranking Member. Thank all 
of you. I find your testimony very, very informative.
    I am going to get right to it. I have a few questions.
    So in parts of my district, Upstate New York, Hudson 
Valley, Catskills, very, very rural area. I have driven by 
signs that say broadband access coming soon. It is a sight that 
is hard to imagine in New York, in the USA, in the 21st 
century. I cannot overstate how big an issue this is for small 
businesses and communities in my district and Upstate New York. 
Mr. Romano, your testimony very powerfully speaks to that. In 
today's global economy it is unthinkable that startup 
businesses; mom and pop shops; young students; small dairy 
farmers; and innovative, sustainable ag operations are being 
left behind. Left behind because of where they live and 
operate.
    Now, my state has made significant investments of late to 
bridge this gap, but as we look to a more connected future, I 
think it is critical that we also work to ensure equitable 
broadband access. And again, as you note in your testimony, the 
minimum service thresholds today will be unworkable for folks 
tomorrow. We should be aspirational as we think about the 
quality and speed of service folks need to keep up with our 
rapidly changing economy.
    So with that in mind, Mr. Romano, what is an acceptable 
speed of service? Not by definition, but in practice. And how 
can we ensure rural communities like mine do not get left 
behind again?
    Mr. ROMANO. Thank you, Congressman.
    We have a number of members in your district and I know 
that they are doing a very good job with broadband but they 
also look around and see the challenges you are talking about. 
New York is taking important steps to try to address that.
    It is somewhat frustrating sometimes when you focus on a 
static speed definition. You're building a network that is 
financed for and then intended to last for decades, 20 years. 
We really believe that you should be looking more at the future 
proof utilization of the network, the applications that are 
going to be utilized, not aiming for a speed standard by date X 
but thinking about will that network be scalable to fulfill 
demands that we might expect reasonably 10, 15, 20 years from 
now, telemedicine applications, 4K TV definitions, 8K and 
beyond. So we really like to focus more on the future-proof 
nature of the technology underlying the network than speed at 
any given moment in time specifically.
    Mr. DELGADO. And I appreciate your desire not to want to 
put a number out, but is there a range?
    Mr. ROMANO. I would say we should be aiming for networks 
that are capable of delivering at least 100 megs today and 
scalable to hit gigabit and beyond tomorrow.
    Mr. DELGADO. Good.
    Another issue, again, this is for you, Mr. Romano, is 
broadband mapping. Current mapping practices rely on census 
blocks, meaning that if just one home in that block has 
broadband, the entire area is considered served. In rural 
areas, one census block can span several counties. Can you talk 
a little bit about the importance of establishing an accurate 
national broadband map?
    Mr. ROMANO. One of the most significant problems in 
identifying where broadband is needed is false positives. 
Overstatement of coverage that leads to--in census blocks that 
might be miles wide--one customer on one part of one location 
denying service essentially to a customer miles and miles away. 
Movement towards a more granular or accurate map is going to be 
important. I would submit that granularity and accuracy are not 
the same thing. We need to both get more granular and get more 
accurate. Unless you are going to independently verify the 
submissions by providers in question, I believe you are always 
going to need sort of like what RUS is looking at now, a 
challenge process or some way of having a verification of no 
matter what kind of data is submitted by a provider, ultimately 
having the opportunity to say, yeah, they are there or no, they 
aren't. That is the only way we are going to get to make sure 
that no customer is left behind simply because they happen to 
live in a geography where somebody else claimed to serve.
    Mr. DELGADO. Thank you. Thank you.
    And I have just one more question for you, Ms. Bilonick. I 
really appreciate your remarks.
    I want to speak to some of the limitations you outlined for 
CDFIs. And putting aside the impact of Dodd-Frank, you do list 
a couple of other items that you think pose stress or strain on 
your ability to do the work that you are doing. Specifically, 
and I just want to note, too, that in my district the work that 
your kind of program provides has had a tremendous effect and 
has provided a lot of opportunities, particularly for folks 
actually just north in the Albany area. So I really appreciate 
that work.
    But specifically, you talk about nonexistent marketing 
budgets, challenges to capitalizing on your loan funds and/or 
sustaining the high overhead costs associated with labor-
intensive loans we underwrite.
    Could you specifically tell me what we can do to help 
address these factors?
    Ms. BILONICK. So I think to start, the marketing issue is 
an issue that all CDFIs face. I think anyone who has worked in 
the industry and gone to a dinner party knows that once you 
tell someone that you work for a CDFI it is then like a 20 
minute later conversation describing what CDFIs do, the 
coverage in the whole United States and the impact that we 
have.
    So one thing, you know, specifically, I think, and I was 
actually speaking with OFN about this as well, is just a 
broader marketing campaign about the existence of CDFIs. I 
think there are so many clients that come through our offices 
that say we had no idea this existed, if I had only known 10 
years ago, you know, fill in the blank. But it is just sort of 
the best kept secret out there and we really feel like that, 
and maybe that is more at the local level in doing PSAs and 
some things we could certainly engage our local governments in 
as well.
    And then with regard to capitalizing our loan funds, I 
would just, I would not say beg but I would request that you 
please keep the line items for CDFI fund in Treasury and the 
Small Business Administration be fully funded because that is 
something that really impacts our bottom line it is actually 
the lowest cost capital that we can access in terms of debt to 
then relend out.
    And then my last issue around the labor intensivity of the 
work that we do, we are really dependent on the philanthropic 
community, whether that be government grants or corporate 
foundation grants that we rely on just because the work that we 
do lending with small businesses is so intensive. You know, if 
you walk into a bank you may meet with a loan officer and then 
they ship your application to a central office located 
elsewhere and that is sort of the end of the story and you may 
have a really quick turnaround, but there is not that face to 
face and personal experience. For us, we are typically working 
with people who have a very big story behind what they are 
presenting on paper and then in addition to that what they are 
presenting on paper requires a lot of support from us to 
actually get from their idea phase to like we help people put 
together their projections for their loan applications to us. 
So we are doing a lot of technical assistance just in the 
underwriting process, so it is not, you know, we do have an 
algorithm that we use internally but it is not like a spit it 
into the machine and get a response, which is the beauty of 
CDFIs, and that is how we are able to do the loans that we are 
able to do, but it costs a lot of money and it costs a lot of 
manpower even at our most efficient.
    Thank you so much. Thank you.
    Chairman KIM. Great. Thank you so much.
    I want to now recognize the gentlelady from American Samoa.
    Ms. RADEWAGEN. Talofa. Good morning.
    I want to thank Chairman Kim and Ranking Member Hern for 
holding this hearing. I represent the territory of American 
Samoa. We have the highest enlistment rate in the United States 
Army, and because of that we are also among the highest veteran 
rate per capital. Veterans and serving reservists own and 
operate businesses throughout my district, so I would like to 
direct a couple of questions to you, Mr. Leghorn, though you 
are all welcome to answer if you have any additional input.
    What resources are veterans currently lacking during their 
business creation process?
    Mr. LEGHORN. Thank you for your question, ma'am.
    One of the issues with the military's Transition Assistance 
Program is that it overly focuses on making resumes. The 
problem with American Samoa is that when veterans go back to 
American Samoa there are not any employers there for them to 
give a resume to. What American Samoa really needs is a VBOC so 
that there can be economic development and veterans can go back 
and actually create jobs. So that is definitely something I see 
that needs to happen.
    Ms. RADEWAGEN. Okay. Your testimony highlights challenges 
associated with veteran participation in the Federal 
contracting process. Can you please expand on what those 
challenges are and any solutions you would recommend? And what 
role does mentorship play in veteran entrepreneurship?
    Mr. LEGHORN. So I think there were two questions there. I 
will tackle the first one. I will parse them apart.
    So in terms of participation in Federal contracting, like 
we mentioned in our testimony, the foundation legislation that 
created SDVOSBs as a preferred contracting group was focused on 
established businesses and it was determined at the time that 
it was not meant for business development. So what that means 
is that in Federal contracting right now we see a huge sum of 
money being given to very few small businesses, whereas we want 
the business development aspects to lead the program towards 
giving more money to a larger pool of veteran-owned small 
businesses.
    And the second part of the question was regarding what we 
are doing mentorship-wise?
    Ms. RADEWAGEN. Yes.
    Mr. LEGHORN. Okay. So The American Legion is one of the few 
organizations that offer small business counseling. We help you 
with your governance documents. We help you onboard to VA's Vet 
First program. And we also provide advocacy and also we do a 
lot of events that bring government officials into the room 
where veteran small businesses can interact with them. So 
pretty much advocacy, counseling, and events is what we do.
    Ms. RADEWAGEN. Thank you.
    And so as a follow up to that, what additional resources 
are necessary to foster increased mentorship opportunities?
    Mr. LEGHORN. Can you clarify if you meant what The American 
Legion needs?
    Ms. RADEWAGEN. Well, what additional resources are 
necessary to foster increased mentorship opportunities? That 
would be part of it.
    Mr. LEGHORN. Well, I definitely think The American Legion 
could use another small business counselor and advocate like 
me. I think on the government side we definitely want more 
entrepreneurial development programs for veterans. We want the 
programs to have more of a business development aspect. We want 
access to the 7(J) program, and definitely more VBOCs. When we 
are talking about mentorship, VBOCs are where the rubber meets 
the road for veterans.
    Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
    Chairman KIM. Thank you.
    I want to now recognize the gentlelady from Kansas, 
Congresswoman Sharice Davids.
    Ms. DAVIDS. Good morning. Thank you for your time, and I 
really enjoyed reading through your testimony. I know I missed 
a significant portion of it.
    But there are a couple of things, so I am actually in the 
Kansas City metro area in Kansas and I always love to talk 
about how entrepreneurship is baked into the DNA of the 
community that I live in. And because of that, one of the 
things that I have seen a lot of is this idea of an ecosystem, 
and actually, I am sure that you all have talked about this a 
lot, is the ecosystem that is needed to support entrepreneurs 
and small businesses as they develop and grow from very small 
businesses to small businesses that can do contracting with 
larger organizations.
    Can you talk a little bit about the, maybe coalition, if it 
is coalition building that you have done? I know the OFN exists 
and there are a few other spaces. And actually, this is 
probably something that all four of you could maybe say a 
little bit of something about. I think that when we look at 
statistics, like the Kansas City Fed did a report not too long 
ago showing that across the country African American women are 
the highest, fastest growing segment of entrepreneurs, and I 
know in Kansas City, the Kansas City area, we have got an 
ecosystem that can help support folks, like law firms, SEED Law 
in Kansas City does a lot of work with small businesses. We 
have got a number of other organizations that help people from 
CDFIs until they are ready to take on larger contracts.
    Can you talk a little bit about how we can look at, I do 
not know if it is metrics? I do not know what it is, but how we 
look at how we are supporting the entire ecosystem, not just 
individually CDFIs or mentoring programs. You cannot mentor 
your way out of not having access to capital. So can you talk a 
little bit about that?
    We will start here with Ms. Bilonick. Thank you.
    Ms. BILONICK. So I would just say we have been very lucky 
in that we have had at the local level and national level sort 
of preexisting coalitions like OFN, like the National 
Association for Latino Community Asset Builders. At the local 
level we are part of a coalition called the Coalition for 
Nonprofit Housing and Economic Development, which is a 
longstanding organization that has people both from the housing 
and small business development side of work here in Washington, 
D.C.
    I think what is challenging, at least from my point of 
view, and I do not purport to speak for the entire panel, but 
from my perspective I think the coalitions that exist between 
like organizations are there and are in place. The more 
challenging piece is forming coalition and community between 
needed partnerships that are in differing spaces. For example, 
you mentioned like the legal field. So we have a partnership 
with the D.C. Bar Pro Bono Legal Clinic, but that was sort of 
happenstance because someone on our board is the person that 
leads that clinic. And so I think fostering those kinds of 
relationships would be extremely valuable for the ecosystem. 
Like, those of us who are operating in the same space, we know 
each other, we see each other at meetings. You know, we work 
together. But I think the more challenging hurdle for us to 
overcome as an ecosystem is really bridging those networks that 
are sort of outside of our comfort zone or outside of our usual 
suspects because those networks, you know, I mean, I would even 
say for myself, the people on the panel are not people that I 
work with on a daily basis and we could all benefit from 
working together. And so, you know, that is where I think there 
is a big challenge.
    Ms. PINDER. Again, thank you for your question.
    I think what we need to do is recognize that some groups 
are different. You talked about African American women being 
the fastest growing segment in entrepreneurship, and they are. 
And so when you then think about wraparound services for 
businesses, it is not a cookie-cutter approach. I always tell 
businesses that they need the ABCs. That is the attorney, 
banker, and the CPA. Right? And so once you have that 
foundational kind of activities understand that is an integral 
part of your business it helps. But I agree with my colleague, 
there are some intersections of resource that are available. 
Whether you are the person that wants to kick the tires and see 
if an idea works, well, there are resource centers for that, 
whether that is PTAP, SBRC, and that kind of thing. And so just 
an understanding of those issues that businesses face, in 
particular businesses of color, you know, and looking at 
microlending, for example, looking at alternative methods of 
financing businesses, bootstrapping is, yes, universal in terms 
of people starting businesses, but the long-term effect of 
businesses that are bootstrapped, which mean started without 
capital on minority businesses is greater than other 
businesses. And so just recognizing what those nuances are 
relative to groups of entrepreneurs.
    Chairman KIM. Ms. Davids, do you want to follow up?
    Ms. DAVIDS. Well, the time ran out.
    Chairman KIM. Yeah, I mean, I am happy to allow it.
    Ms. DAVIDS. Do you mind? Yes, do you mind if we take the 
time? Thank you.
    Mr. LEGHORN. Thank you for your question, ma'am. And I 
believe part of your question was regarding metrics. And that 
is the part that I really want to address.
    From our testimony, we discussed how SBA and the resource 
partners were really reliant on metrics drawn from the 7(a) 
loan program. The 7(a) loan program has diminished in 
utilization coinciding with the disappearance of regional and 
community banks. So we do not believe that the 7(a) loan should 
be used as the primary metric anymore. I do not know what other 
metrics might be but we have to find other ways of getting 
information aside from pulling it all from 7(a) loans when it 
comes to job creation and lending.
    Mr. ROMANO. And to pick up on that point about metrics, 
there is no shortage of metrics in the telecommunications 
industry, but one thing I think that could be relevant here is 
the areas our members serve, a town of 5,000 people is a 
metropolis. And so any small business growth there accrues to 
the benefit of the community as a whole because there are not 
that many businesses to start, and a lot of people working from 
home even as well, telecommuting, if you will, teleworking. 
Some way though it occurs to me that tracking sort of small 
business growth in these deeply rural areas paired with, quite 
frankly, and there are statistics separately on this, what 
kinds of increases in connectivity--what has made it possible 
for the small businesses to either establish, relocate, or grow 
in those deeply rural areas--I think is the kind of metric that 
would be relevant to see the better broadband somebody gets, 
how much better do they do in terms of building and growing 
small business.
    Ms. DAVIDS. Thank you.
    Chairman KIM. Thank you so much. Thank you again to all the 
witnesses for taking time out of your schedule to be with us 
here today, and I want to thank my colleagues as well for their 
time and for their insightful questions and points.
    As we have heard today, we certainly have our work cut out 
for us. As we are striving to create more opportunities for 
underserved businesses, small businesses, from accessing 
affordable capital to being able to meaningfully compete for 
contracts in the Federal procurement marketplace, 
underrepresented entrepreneurs have had the deck stacked 
against them for too long and it has kept them from creating 
good private sector jobs in their local neighborhoods.
    I look forward to working with my colleagues to find policy 
solutions that will empower them to create the good-paying jobs 
of the 21st century.
    I would ask unanimous consent that 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, we are adjourned. Thank you.
    Mr. HERN. Mr. Chairman, can I say one thing?
    Chairman KIM. Yes, please.
    Mr. HERN. I just want, because in business you are about 
getting results, and I know that you are probably going to 
leave here and feel like you testified and nothing really got 
done. But we will work hard on this because it is so important 
to our nation and I said this in our Full Committee, that we 
cannot have big businesses in the future if we do not have 
small businesses today because we are the incubators, the small 
businesses, for all the big businesses that we have in American 
today that put so many people to work. So I know you are not 
asking to create more programs. You are asking us to help make 
these better and secure them. And so I assure you that I will 
work with my Chairman that we make that happen with the team, 
that we look at every opportunity. And I am with you on the 
metrics, and Ms. Davids, my colleague from Kansas. You know, 
the problem in business is when you have more than one set of 
books you never get anything done. So we have to find the right 
numbers that measure everything because every group that is 
asking us for help will say that they are the fastest growing. 
And so we have to really determine the fastest growing and 
where the real needs are because it is different across this 
very nation and we have to make sure that we take care of 
everyone to the best of our abilities. Thank you.
    Chairman KIM. Thank you for that. I think that spirit and 
that energy is something all of us here on the Subcommittee 
feel. There is a reason why I wanted to join this Committee on 
Small Business because it has a reputation of just working 
together across the aisle, bipartisanship, to be able to get 
things done for small businesses in America. And I think I am 
looking forward to working with the Ranking Member and members 
on both sides for us to be able to make sure that we can move 
ahead in that productive way.
    So we certainly will follow up. We are eager to get to work 
and do what we can to improve the overall climate and 
ecosystem, to borrow a word, for small businesses in America.
    So thank you again. We stand adjourned. Thank you.
    [Whereupon, at 11:23 a.m., the Subcommittee was adjourned.]
                            
                            
                            A P P E N D I X


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             Opening Statement of Ranking Member Kevin Hern


                      Committee on Small Business


   Hearing: ``Exploring Challenges and Opportunities of Underserved 
                    Businesses in the 21st Century''


                            February 7, 2019


                       *As Prepared for Delivery*


    Thank you for yielding, Chairman Kim.

    With 99.9 percent of all businesses in the United States 
being classified as small, the impact that small businesses 
have on our economy cannot be overstated. In my home state of 
Oklahoma alone we have over 340,000 small firms who employ over 
700,000 people. Many of these businesses are owned by 
minorities, women, and veterans and many of these businesses 
are located in rural areas.

    Small Businesses owned by minority, women, and veterans 
face a unique set of challenges, ranging from raising adequate 
financing, to building social capital, to finding the effective 
mentors. Rural businesses, however, while facing those 
challenges, also tend to face a different set of challenges, 
most notably, access to reliable and affordable broadband 
service.

    Today, more than 24 million Americans lack access to high 
speed internet, the vast majority of whom live in rural 
communities. When comparing urban and rural broadband 
deployment 97.9 percent of urban America has access to both 
fixed and mobile broadband, while only 68.6 percent of rural 
citizens have that same access.

    The lack of a solid business case for rural broadband 
deployment remains the central reason for what is often 
referred to as the `digital divide'. Large telecommunications 
companies have little incentive to invest in broadband 
infrastructure in areas with low population density. Instead, 
small telecommunications carriers are far more likely to invest 
in rural communities, often because they are their communities. 
Frequently, however, these small firms face numerous challenges 
in their efforts to increase broadband access.

    You may ask, why do small businesses need broadband access? 
Why is this a challenge to rural businesses? Simply put, small 
businesses need access to modern technology to complete in the 
modern marketplace. In 2018, 95 percent of Americans own a cell 
phone and 89 percent of Americans use the internet. Technology 
has influenced nearly every aspect of society. From 
manufacturing to education, access to technology is synonymous 
with success.

    Small businesses specifically require access to reliable 
and affordable technology to compete with larger competitors. 
According to a recent study, digitally advanced small 
businesses were shown to be three times more likely to create 
jobs and experience revenue growth at a rate four times higher 
than small businesses who don't employ technology. Yet despite 
such outstanding returns, many small businesses do not take 
full advantage of the techniques available to them. Often, this 
is due to owners not realizing the benefits such tools offer 
them, or simply lacking access to reliable technological 
resources as a result of cost or location.

    Today's hearing will allow us the opportunity to further 
discuss these and other challenges that businesses owned by 
minority, women, veteran and rural Americans face while also 
exploring potential ways to improve and elevate these issues 
moving forward. I look forward to hearing from our witnesses 
and to having a productive conversation.

    Thank you and I yield back.
    
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