    [Senate Hearing 116-517]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 116-517

                          CAPITAL ACCESS FOR MINORITY
                      SMALL BUSINESSES: COVID-19 RESOURCES
                   FOR AN EQUITABLE AND SUSTAINABLE RECOVERY

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON SMALL BUSINESS
                              AND ENTREPRENEURSHIP

                                     of the

                              UNITED STATES SENATE

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 23, 2020

                                   __________

        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
    46-603 PDF               WASHINGTON : 2022

                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                         ONE HUNDRED SIXTEENTH CONGRESS

                                  ----------
                         MARCO RUBIO, Florida, Chairman
                  BENJAMIN L. CARDIN, Maryland, Ranking Member
    JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington
    RAND PAUL, Kentucky                  JEANNE SHAHEEN, New Hampshire
    TIM SCOTT, South Carolina            EDWARD J. MARKEY, Massachusetts
    JONI ERNST, Iowa                     CORY A. BOOKER, New Jersey
    JAMES M. INHOFE, Oklahoma            CHRISTOPHER A. COONS, Delaware
    TODD YOUNG, Indiana                  MAZIE K. HIRONO, Hawaii
    JOHN KENNEDY, Louisiana              TAMMY DUCKWORTH, Illinois
    MITT ROMNEY, Utah                    JACKY ROSEN, Nevada
    JOSH HAWLEY, Missouri
                    Meredith West, Republican Staff Director
                     Sean Moore, Democratic Staff Director

                                C O N T E N T S

                                  ----------

                               Opening Statements

                                                                       Page

    Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida.........     1
    Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from
      Maryland.......................................................     3

                                   Witnesses

    Bayles, Ms. Talibah, Founder and CEO, TMB Tax and Financial
      Services, Birmingham, AL.......................................     6
    Busby Sr., Mr. Ronald, President and CEO, U.S. Black Chambers,
      Inc., Washington, DC...........................................    14
    Estrada, Ms. Fabiana, Director of Lending Southeast Region,
      ACCION, Miami, FL..............................................    24
    Bilonick, Ms. Marla, Executive Director and CEO, Latino Economic
      Development Center, Washington, DC.............................    29

              Alphabetical Listing and Appendix Material Submitted

    American Indian Alaska Native Tourism Association
        Prepared statement...........................................    68
    Bayles, Ms. Talibah
        Testimony....................................................     6
        Prepared statement...........................................    10
    Bilonick, Ms. Marla
        Testimony....................................................    29
        Prepared statement...........................................    32
        Responses to questions submitted by:
          Senator Cantwell...........................................    74
          Senator Hirono.............................................    76
          Senator Duckworth..........................................    82
    Busby Sr., Mr. Ronald
        Testimony....................................................    14
        Prepared statement...........................................    16
    Cardin, Hon. Benjamin L.
        Opening statement............................................     3
    Coalition to Help Everyone Access Resources to Thrive (HEART)
        Prepared statement...........................................    83
    Engine Advocacy
        Prepared statement...........................................    89
    Estrada, Ms. Fabiana
        Testimony....................................................    24
        Prepared statement...........................................    26
        Responses to questions submitted by:
          Chairman Rubio.............................................    94
          Senator Cantwell...........................................    95
          Senator Hirono.............................................    96
    Inclusiv
        Prepared statement...........................................    97
    National Association of Federally-Insured Credit Unions
        Letter dated July 22, 2020 to Chairman Rubio and Ranking
          Member Cardin..............................................   100
    Rubio, Hon. Marco
        Opening statement............................................     1
    The Spirit of Enterprise U.S. Chamber of Commerce
        Prepared statement...........................................   102

                          CAPITAL ACCESS FOR MINORITY

                      SMALL BUSINESSES: COVID-19 RESOURCES

                        FOR AN EQUITABLE AND SUSTAINABLE

                                    RECOVERY

                                  ----------

                            THURSDAY, JULY 23, 2020

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                        Washington, DC.
        The Committee met, pursuant to notice, 10:07 a.m., in Room
    SD-430, Dirksen Senate Office Building, Hon. Marco Rubio,
    Chairman of the Committee, presiding.
        Present: Senators Rubio, Scott, Ernst, Young, Kennedy,
    Romney, Hawley, Cardin, Cantwell, Shaheen, Booker, Coons,
    Hirono, Duckworth, and Rosen.

    OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A U.S. SENATOR
                              FROM FLORIDA

        Chairman Rubio. Good morning. Today's hearing on the Senate
    Committee on Small Business and Entrepreneurship will come to
    order.
        I want to thank everyone for joining us, both in person and
    virtually, for this hearing and sort of getting used to this
    new normal of doing hearing this way.
        I just want to alert everybody. We have two votes. One just
    started now at 10:00, and so what will happen here at some
    point is you will see members shifting in and out to try to get
    into the timing of it. That's the explanation for why you're
    seeing it.
        So I'm going to abbreviate my opening statement just to be
    able to accommodate all that. Obviously, we don't need to
    convince everyone about what impact this pandemic has had on
    all Americans from a health care perspective certainly, but
    also from an economic perspective.
        I also don't think we need to do a lot to convince people
    that small businesses have been disproportionately impacted by
    this pandemic, and all small businesses of every kind have been
    hurt by it across the country.
        The purpose of this hearing is to focus specifically on the
    even greater impact that the pandemic has had on minority-owned
    small businesses. Bad as it is for all small businesses, it is
    catastrophic and terrible. It has been even worse, if you can
    imagine it, among minority-owned businesses.
        Part of this disparity can be explained by the sectors that
    have been hit hardest by the COVID crisis. Construction,
    restaurants, hotels, transportation, these are sectors of our
    economy in which minority ownership is high, higher than it is
    in other sectors.
        But the data from the Census Bureau suggests that only 27
    percent of small businesses have enough cash on hand to cover 3
    or more months of operations. Those numbers, of the number of
    businesses that have enough cash, is much smaller than 27
    percent when we are talking about minority-owned businesses.
        So today the major question we face is one of uncertainty.
    What happens next as communities--some are reopening, partially
    reopening. Some have reopened and have had to pull back. We are
    telling people not to go out. We are telling people not to go
    to places. So, in essence, we are--and they are following our
    advice, hopefully, but as they do, it has an economic toll. It
    is hurting all small businesses, but again, we are seeing that
    disproportionate impact is even higher among those that are
    minority-owned.
        So the two goals we have specifically to address is this
    disparity and the damage that is being done but also the
    concern that there will be a disparity in the recovery, that if
    some of these businesses go under, they will not be there to be
    able to recover and thrive.
        Part of what we have already talked about and continue to
    talk about as we try to prepare the next round of assistance to
    small businesses is not just so we can target the relief to
    more small businesses, but also how do we make sure that
    assistance reaches the most underserved small businesses as
    well.
        So one of the most important lessons we learned in PPP,
    some of the answers some from some of the sectors to save more
    jobs than others. The overall unemployment rate has dropped in
    April, from an April high of 15 to 11 percent; however, the
    African American unemployment rate remains at 15 percent. So
    there is just an example of an employment disparity that we
    need to address.
        There are some clues as to how to go after this. The first
    is, according to the SBA's data, only three sectors supported
    more jobs per dollar of PPP funds in low-income areas than they
    did for the Nation as a whole. So there are three sectors in
    which PPP funds helped support more jobs in low-income areas
    than they did nationally. The three sectors were manufacturing,
    health care and social assistance, and retail. So that tells us
    there that anything we do to be helpful to those sectors should
    have a positive outcome or impact on these communities.
        Another lesson is about access. Many minority-owned
    businesses have experienced problems accessing the capital
    because they lack relationships with SBA-approved lenders.
        There has been progress. As a proportion of the total
    quantity of loans disbursed, minority-owned businesses received
    PPP loans in equal or greater volume than their share of
    business ownership in the U.S. economy. I think some of that
    was due to some of the changes that were made to the program as
    it went on; for example, allowing as many lenders as possible
    to participate was key to this progress. We will need to do
    more.
        The CARES Act and the program within it approved 303
    Community Development Financial Institutions, CDFIs, approved
    171 Minority Depository Institutions, MDIs, and 19 FinTechs,
    financial technology companies, to provide these loans and more
    access. So that was helpful, and it is something we want to
    retain and build on.
        So we recognize that right now as we talk about the future,
    we are in a different place than we were in March when we first
    started talking about it. Some businesses will need additional
    short-term relief. Others are going to need access to low-cost,
    long-term working capital to recover, which was already hard
    for them to access. It will be even harder after this.
        PPP is basically a short-term grant to help keep a business
    open and their employees on payroll, but the hit that many
    small businesses are taking is much deeper than just staying
    open to make up for. They are not going to generate enough
    revenue in this environment to stay open under the
    constrictions that we are facing.
        So that is why one of my proposals, built on input and
    ideas that Senator Young first innovated, is proposing an
    expansion of the SBA 7(a) program to make available targeted
    long-term, low-interest loans to small businesses that are
    located in low-income communities. Obviously, that needs to be
    fleshed out further, but it is something we care about a lot.
        So that is what we will keep working on. Ultimately,
    anything we pass will have to be bipartisan. That has been the
    tradition of our work on this, both because it is better that
    way and because it is the only way to get it done. That is what
    we intend to do. We work very closely with the Ranking Member
    and Senator Shaheen and Senator Collins who is not a member of
    this Committee, Senator Lankford as well, who is not a member
    of this Committee, and then all the members of this Committee
    who have input. And that is what we intend to continue to do
    because we need to do something. We need to do it soon, and we
    need to make sure it is getting to the right people in the
    right way.
        With that, I want to recognize the ranking member, Senator
    Cardin, for his opening statement.

    OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, RANKING MEMBER, A
                       U.S. SENATOR FROM MARYLAND

        Senator Cardin. Well, thank you, Mr. Chairman. I really
    want to thank you, not just for holding this hearing on access
    to capital for minority small businesses, but your commitment
    to deal with the inequities that minority small businesses have
    in our system.
        You have been a leader in bringing us together to try to
    find effective ways to make sure that those businesses that
    need the help the most, minority small businesses, small
    businesses in underserved communities get the attention of this
    Committee.
        I want to thank you for the process that we have been able
    to use in this Committee to bring about not only a bipartisan
    product but to get a product that can get to the finish line
    and provide help to businesses.
        Increasing Federal support for minority-owned small
    businesses as well as small businesses in underserved
    communities have been my top priority since I joined this
    Committee in entering the Senate in January 2007, and it has
    remained my priority as Ranking Member.
        My home State of Maryland boasts the highest concentrations
    of minority-owned and women-owned businesses in the country. So
    this issue is particularly important to Marylanders.
        Decades ago, Maryland leaders recognized the key role
    entrepreneurship had in efforts to close the wealth gap. In
    fact, the first Federal set-aside for minority-owned businesses
    was proposed in 1977 by the late Baltimore Congressman Parren
    J. Mitchell, who introduced an amendment to a $4 billion
    Federal public works program that required city and State
    recipients to set aside 10 percent of the funds for minority-
    owned businesses.
        Congressman Mitchell understood that any plan to shrink the
    wealth gap in America must include entrepreneurship, and that
    the Federal Government has an important role to play in helping
    minority entrepreneurs overcome the historic, pervasive
    challenges put before them. The most pervasive of those
    challenges is access to capital.
        Mr. Chairman, while our hearing is focused on ensuring an
    equitable recovery, I feel the need to place today's discussion
    in historical context.
        During a field hearing I held on this topic in September
    2018 at Morgan State University, an HBCU in Baltimore, an
    executive of Harbor Bank, which is one of the few remaining
    black-owned banks in the country, stressed that lenders working
    with minorities need to understand borrowers, not only where
    they are going, but where they have been. It is vital that we
    in Congress approach this problem with the same understanding.
        Minority entrepreneurs' inability to get capital they need
    to operate and grow their businesses is not new, and, in fact,
    that minority-owned small businesses have been
    disproportionately harmed by the COVID-19 recession should not
    be a surprise.
        Prior to this pandemic, lending to minority-owned small
    businesses still had not returned to their pre-Great Recession
    levels.
        The protests sparked by the deaths of George Floyd and
    Breonna Taylor have further exposed the public health and
    economic disparities in communities of color, particularly
    black communities that have been made worse by the COVID-19
    pandemic.
        There is a common saying that I have heard many times by
    black leaders in Maryland: ``When America has a cold, black
    communities have pneumonia.'' These disparities exist because
    Civil Rights and true equity are still the unfinished business
    of America.
        More than 50 years ago, the nonpartisan Kerner Commission
    created by President Lyndon Johnson warned of the negative
    consequences of continued inequality. The commission wrote in
    its report that America was headed toward two societies, one
    black, one white, separate and unequal.
        It is no question that our country has made progress in the
    decades since the Kerner Commission released its report, but
    there remains a rooted economic divide between communities of
    color and white America.
        In 1968, a typical middle-class black family had less than
    one-tenth of the wealth of the typical middle-class white
    family. It is the same today. For black small business owners
    and minority entrepreneurs, the wealth gap has worsened the
    disparity in lending.
        Minority business owners are two to three times more likely
    to be denied a loan than nonminority business owners and are
    more likely to receive less funding and pay higher interest
    rates on the loans they do receive.
        Mr. Chairman, it was with this inequality in mind that
    Senator Shaheen and I drafted the CARES Act provision
    instructing SBA and the Treasury Department to issue guidance
    to financial institutions participating in the Paycheck
    Protection Program to prioritize loans for underserved small
    businesses.
        Unfortunately, the administration did not issue that
    guidance, which led to the SBA's IG's finding that the
    implementation of PPP did not fully align with congressional
    intent in the CARES Act.
        Implementation of PPP was not the only program in which the
    administration failed to use every tool in its toolbox to
    prevent minority-owned businesses from falling behind during
    this crisis.
        The administration also failed to implement the EIDL and
    Emergency Grant Program in a way that would benefit more
    minority-owned businesses.
        So, Mr. Chairman, as we discuss how to ensure an equitable
    recovery for small businesses today, we must think about the
    problem historically. We must invest in the programs that we
    know work--the Minority Business Development Agency, which is
    the only Federal agency dedicated to supporting minority-owned
    businesses; the 7(a) Community Advantage Pilot Program, which
    has a long record of successfully getting capital to minority-
    owned businesses. I have introduced legislation to make both of
    these vital initiatives permanent and codified because right
    now they are not.
        We cannot stop there. I was proud to work with Senator
    Booker to release a plan outlining steps Congress can take to
    provide greater help for small businesses in underserved
    communities with regard to startup and operating capital, as
    well as technical training and mentorship.
        The aim of our plan is to ensure that when we make it
    through this pandemic and we have the next economic downturn,
    we will have the institutions, programs, and knowledge in place
    to support underserved small businesses in a timely way.
        Mr. Chairman, I want to thank you again for calling this
    overdue hearing, especially as we in Congress continue to
    negotiate and debate the next round of economic stimulus.
        Last time, we got the funds out the door quickly and helped
    a lot of people, but far too many minority-owned businesses
    were left behind. The truth is that even with the CARES Act,
    there was inequality in how resources were allocated, including
    inequality in some of the basic underpinnings of the PPP. The
    primary use of traditional financial institutions to disburse
    capital meant minority-owned businesses would have a harder
    time obtaining these important loans, and the focus on payroll
    made the program less useful to many minority-owned businesses,
    which not only have fewer employees on average, but are less
    likely to have any employees at all.
        This next stimulus gives us an opportunity to improve the
    success of the CARES Act and do a better job of providing help
    to minority-owned small businesses. Let us take advantage of
    this opportunity to avoid the consequences predicted by the
    Kerner Commission 50 years ago, so America is not two
    societies, separate and unequal.
        Thank you, Mr. Chairman, and I look forward to hearing from
    our witnesses.
        Chairman Rubio. Thank you.
        So let us move to the witnesses. As I said, there is a vote
    that started now. It will probably end around 10:45, and then
    there will be a second vote. So we will try to time it out so
    someone will be here. I think if we stop and try to restart, it
    is going to be more complicated.
        Our witnesses today are Talibah Bayles. She is the founder
    and CEO of TMB Tax and Financial Services, which is a full-
    service tax and revenue planning firm that assists small
    businesses with financial strategies promoting growth and
    stability. She sits on the city of Birmingham's Inaugural Small
    Business Council serving as the chair of the Women Minority and
    Disadvantaged Business Enterprise Subcommittee, belongs to the
    National Small Business Association Leadership Council and the
    National Association of Women Business Owners.
        That is a lot of meetings.
        Mr. Ron Busby serves as the president and CEO of USBC,
    which supports African American chambers of commerce and
    business organizations in their work developing and growing
    black enterprises. He currently serves on the Pfizer Small
    Business Counsel, the National Newspaper Publishers Association
    Foundation board of directors, and the White House African
    American Leadership Council.
        Ms. Fabiana Estrada is the director of Lending for South
    Florida ACCION. ACCION is a Community Development Financial
    Institution helping connect underserved communities to needed
    capital. She was recognized by the U.S. Small Business
    Administration in 2018 with the Mission-Based Lender Award.
        Ms. Marla Bilonick is the executive director of the Latino
    Economic Development Center. She previously worked at Seedco
    supporting businesses in Lower Manhattan that were affected by
    September 11th. She is a member of the board of directors of
    the National Association of Latino Community Asset Builders,
    the Montgomery County Comprehensive Economic Strategy Advisory
    Group, and the Institute for Community Economics.
        I thank you all for being here. Why don't we begin with Ms.
    Bayles because you are here. Thank you for being here. We will
    begin with your opening testimony and then go to Mr. Busby. We
    will do it in the order in which I presented, but thank you so
    much.

       STATEMENT OF TALIBAH BAYLES, FOUNDER AND CEO, TMB TAX AND
                           FINANCIAL SERVICES

        Ms. Bayles. Good morning, Chairman Rubio, Ranking Member
    Cardin, and members of the Committee. My name is Talibah
    Bayles, and I am the founder and CEO of TMB Tax and Financial
    Services, a 100 percent black and woman owned firm located in
    Birmingham, Alabama.
        As a small business owner and a small business advocate, I
    thank you for the opportunity to speak on today's hearing focus
    of capital access for minority small businesses.
        TMB Tax and Financial Services is a full-service tax and
    revenue planning firm with clients across the United States. We
    are on a mission to help small businesses thrive with air-tight
    financial strategies and tools such as small business tax
    preparation, tax planning, bookkeeping and payroll, and
    business credit and financing coaching.
        I started this company here in the D.C. Metro Area while
    working for the Department of Justice where I worked for over
    12 years. Prior to working for the Department of Justice, I was
    an employee right here in the Senate, where I worked for 3
    years. With over 15 years of Federal Government and small
    business experience, I made the decision to relocate back home
    to Birmingham as a full-time entrepreneur. And my company has
    hit the ground running. So today I have come full circle and am
    extremely honored to have a seat at the table from this view.
        Today's focus on equitable and sustainable small business
    recovery is vital to the fabric of local, State, and Federal
    economies. As you know, small businesses employ nearly half of
    the Nation's workforce. Small businesses have traditionally
    created approximately 2 million jobs a year.
        In Alabama, there are over 400,000 small businesses, which
    represents 99.4 percent of the State's total business count.
    However, since the official COVID-19 declaration of emergency
    on March 13, 2020, small business job creation has declined
    nationally by 17 percent.
        Small business legacies are disappearing. Companies like
    mine have found themselves on a battlefield trying to assist
    troops who are fighting without the proper armor.
        Of course, there were challenges that existed prior to
    COVID-19. In the interest of time, I will only highlight two
    that I believe are the greatest challenges for minority-owned
    businesses.
        The first is the small business survival rate. Eighty
    percent of small businesses survive their first year. That
    number drops, however, to 70 percent at the end of the second
    year. By year five, if businesses are still around, there are
    approximately 50 percent of small businesses that are still
    operating.
        The second greatest challenge is the credit profile of a
    typical small business owner. According to NAV's Small Business
    American Dream Gap Report from 2015, one in five business
    owners who applied for funding in the last 5 years were denied,
    and 82 percent of all business owners surveyed did not know how
    to interpret their credit scores.
        I believe the root of both challenges is a small business
    financial literacy failure. Even further, inequitable access to
    information and expert-level technical assistance should be the
    focus on this Committee.
        Without the information provided to small business owners
    through the services of small business tax preparation,
    bookkeeping and payroll, and financial planning, there will
    continue to be a lack of access to capital for minority-owned
    businesses.
        Equitable access to information and expert-level technical
    assistance, it properly equips the small business troops on
    this COVID-19 battle because now they can see what they are
    fighting against.
        Said differently, equitable access to information allows
    business owners to see the areas that they need to fortify in
    their business. If the deficiency is becoming compliant with
    taxes, well, now they know and now they know how to do it.
        If the deficiency is not having an accounting software so
    that they can produce a profit and loss or a balance sheet to
    show the health of their business, well, now they know it and
    now they know how to do it.
        If the deficiency is the need to restore personal credit or
    to build business credit so that they can actually be approved
    for funding, well, now they know it and now know how to do it.
        Equitable access to information and expert-level technical
    assistance yields equitable access to capital for minority
    business owners.
        TMB Tax and Financial Services has become the perfect blend
    of small business financial literacy and trusted financial
    services. Therefore, through my business, I have launched a
    movement to Get Bankable, and we have experienced wins for our
    clients during this COVID-19 crisis.
        I am a part of a team of six other black women in
    accounting, financial planning, and bookkeeping that has
    collectively accomplished over $1.5 million in CARES Act
    funding for minority-owned businesses. And with a couple more
    weeks left of PPP, we will surpass this accomplishment.
        My clients' high PPP approval rates were accomplished as
    the result of year-round technical assistance in the areas of
    tax preparation, bookkeeping, and payroll. Well before this
    COVID19 crisis, we provided small business financial literacy
    to our clients.
        For our Schedule C entrepreneurs, we trained tax compliance
    and small business tax strategies. We not only focused on the
    importance of year-round recordkeeping of business income and
    expenses, but most importantly, we discussed the importance of
    reflecting a positive net income on the Schedule C tax form.
        We deployed what we call the ``leave something for
    investors and the underwriters'' strategy. Without advising our
    clients of this strategy, we found that most Schedule C
    entrepreneurs were inclined to ``write off'' as much of their
    expenses as possible which results in either a very low net
    income or a negative net income for the business on the
    Schedule C tax form.
        Those clients that actually deployed the ``leave something
    for investors and underwriters'' strategy obtained PPP loans,
    and those loans ranged between $4,000 all the way to $15,000
    for those who applied as Schedule C or Sole Proprietor
    applicants.
        And I think it is very important to note that clients that
    were approved for the smaller PPP loans were just as happy as
    if they had received a million dollars because it motivated
    them to keep their doors open if just for a little longer.
        For our corporation entrepreneurs, we trained on the
    importance of having a formal payroll system in place. We
    stressed the importance of payroll tax withholding and
    compliance and the adverse effects of paying through other
    platforms that do not account for payroll tax compliance.
        And because my company is also a payroll provider, we were
    able to create and maintain formal payroll structures for these
    small business owners, and this actually allowed business
    owners to have those quarterly 941 tax forms and other payroll
    documentation that was required by the PPP process.
        So those clients that deployed the strategy for
    implementing a formal payroll structure, they obtained loans,
    and some of those loans were between $7,000 to $250,000. So for
    these approved applicants, that amount translated in the
    ability to cover payroll and to divert the money saved by that
    loan into keeping the doors open and other expenses paid for
    just a while longer.
        PPP was a necessary short-term lifeline for small
    businesses, and it certainly addressed an immediate need for
    the business owners that were approved. However, to weather the
    storm over the long run, it is critical that business owners
    have access to flexible long-term working capital.
        Minority businesses often do not have significant cash
    reserves or access to traditional capital, and any effort of
    Congress to provide long-term loans with low interest will help
    sustain these businesses, and I wanted to add that especially
    coupled with a blend of expert technical assistance with real
    financial tools so that these business owners can actually be
    approved for these long-term loans.
        In closing, the information that I have shared with
    everyone today is from the front line. I again state equitable
    access to information and expert-led technical assistance
    grants access to capital that businesses owners need.
        Small business owners are ready for it, and we expect it.
    Small business owners whisper stories of courage and strength
    into the fabric of the American dream.
        I grew up seeing the American dream of small business. I
    practically grew up in my parents' office supply business,
    Bayles & Company, which was once located on Second Avenue North
    in Birmingham, Alabama. And today my daughters are practically
    doing the same thing in my office, with the original Bayles &
    Company sign donned on the wall. The grit, the successes, the
    failures, the motivation, the legacy of the small business
    entrepreneur.
        Again, thank you for the opportunity to come full circle
    and testify today. I wholeheartedly offer my blended background
    to a continued discussion on what this very important topic is
    and what it means, and I look forward to working with this
    Committee in the future.
        [The prepared statement of Ms. Bayles follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Chairman Rubio. Thank you.
        Mr. Busby?
        [No response.]
        Chairman Rubio. I think your microphone is muted. Just
    stand by one second. There we go.

     STATEMENT OF RONALD BUSBY SR., PRESIDENT AND CEO, U.S. BLACK
                             CHAMBERS, INC.

        Mr. Busby. Thank you, Chairman Rubio, Ranking Member
    Cardin, and distinguished members of the Committee for the
    opportunity to share testimony with you this morning. Again, my
    name is Ron Busby, and I am the president and CEO of the U.S.
    Black Chambers, Inc., where we serve 145 black chambers located
    in 42 states, with a membership base of 332,000 members.
        U.S. Black Chambers, also known as the USBC, for the past
    decade has been providing committed, visionary leadership, and
    advocacy in the realization of economic empowerment. Through
    the creation of resources and initiatives, we support black
    chambers of commerce and business organizations in their work
    of developing and growing black businesses.
        As the leading voice for black business owners in the
    Nation, U.S. Black Chambers stands on our five pillars of
    service to foster entrepreneurial growth and wealth creation
    within the black community. Our five pillars of service are
    advocacy--the U.S. Black Chamber fights for legislation that
    promotes small business growth, particularly policies that
    address the challenges of black business owners. Access to
    capital. The USBC works with financial institutions with a
    strategic focus on black-owned institutions to create avenues
    in which black businesses can gain greater access to capital,
    credit, and other financial institutions. Three, contracting.
    The U.S. Black Chamber educates members on contract
    opportunities, helping them increase their capacity to vie for
    large-scale contracts and offering resources and information
    that enhance black owners' abilities to compete. Four,
    entrepreneur training. The USBC provides quality educational
    opportunities and professional development resources that help
    our members manage and grow successful businesses; and five,
    chamber development. The USBC leverages our roles as the
    national organization to provide technical assistance and
    leadership training to member chambers, assist with
    establishment of new black chambers, and facilitate the sharing
    of best practices and industry data amongst our members.
        Decades before the advent of the coronavirus pandemic,
    historical discrimination has consistently distorted the
    advancement of black America. The structural and systemic
    racism continues to this day. Unfortunately, the ongoing
    economic and health crisis sparked by the pandemic have
    drastically exacerbated preexisting disparities. Many of them
    have been stated.
        For example, the coronavirus-related labor losses have been
    especially devastating for black America due to the historical
    struggles from higher unemployment rates, lower wages, lower
    income, and the resulting higher poverty rates.
        On the health disparities front, black Americans still face
    the brunt of the crisis. Across the country, black citizens
    experience COVID-19-related deaths at rates nearly twice that
    are present in the population. Remarkably, the rate is three or
    more times greater in some States.
        Clearly, the pandemic and resulting economic disruptors
    have proved particularly disastrous for the Nation's small
    business community. Notably, the onslaught of coronavirus
    closed over 3.3 million, 22 percent, of businesses within a 2-
    month period from February to April. In that time, black firms
    suffered at a greater damage among other demographics, as we
    lost 41 percent of black-owned business, nearly 450,000.
        Today's hearing on improving COVID-19 relief resources for
    minority businesses is opportune, but it is really much more
    than that. This is an opportunity to change the course of
    history in a way our country addresses race, discrimination,
    and equity.
        We at the U.S. Black Chambers believe that today's
    discussion should lead to the creation of equitable and
    sustainable Federal policy that will address our Nation's most
    marginalized and underserved entrepreneur population, which are
    black business owners.
        Earlier this month, I provided testimony at the House
    Committee on Financial Services Subcommittee on Diversity and
    Inclusion hearing entitled ``Access Denied: Challenges for
    Women- and Minority-Owned Businesses Accessing Capital and
    Financial Services.'' I testified that despite the presence of
    black-owned businesses in many of the Nation's fastest-growing
    markets, we still experience above the index, economic
    disruptions and revenue loss before the pandemic in part
    because black-owned firms are overwhelmingly represented in a
    high-impact industry, as was stated, lack of accommodation of
    food service, personal care, luxury service, health care, and
    social assistance, which I am so happy that Senator Rubio
    acknowledged because we are already in a weaker financial
    position.
        The U.S. Black Chamber applauds the Committee's recent work
    to mitigate the pandemic economic impact on small businesses
    with the CARES Act, and its subsequent relief legislation has
    deployed over $518 billion to the small business community
    through the Payroll Protection Plan. Likewise, the CARES Act
    has provided nearly $140 billion to businesses through the
    Small Business Administration and the EIDL loan program. Black
    business owners, though, went largely underserved by the
    Federal relief programs.
        In early May, the SBA's Inspector General report on
    implementation of the PPP found that the Trump administration
    was unsuccessful at prioritizing underserved and rural markets.
    In that same time since, the Department of Treasury and the SBA
    have worked to correct the structural barriers within the
    programs. Despite regulatory actions, the truth for black
    businesses remains. Black-owned firms continue to be overlooked
    and underserved in the Federal relief measures across the
    board.
        I will be around to address many of the questions as well
    as the opportunity for a recommendation as we continue this
    conversation this morning.
        Thank you.
        [The prepared statement of Mr. Busby follows:]

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        Senator Cardin [presiding]. Mr. Busby, let me thank you for
    your testimony. As you can see, we are doing a little bit of
    rotating here. There are two votes on the floor of the U.S.
    Senate. So Senator Rubio just went over to the floor to vote. I
    have already voted on the first vote. He will wait for the two
    votes and then come back. So we are going to continue with the
    witnesses, and we thank you very much for your understanding
    and patience.
        This is an extremely important hearing, and I can assure
    you that we are listening to all the testimonies, and we value
    your input.
        We will now turn to Ms. Estrada. Glad to hear from you
    remotely. Hope you are safe.

      STATEMENT OF FABIANA ESTRADA, DIRECTOR OF LENDING SOUTHEAST
                             REGION, ACCION

        Ms. Estrada. Hi. How are you? Good morning, Chairman Marco
    Rubio, Ranking Member Cardin, and members of the Committee.
    Thank you for inviting ACCION to testify about the recuperation
    phase for the small business owners during the COVID-19
    pandemic.
        As Chairman Rubio just introduced, I represent ACCION, a
    Community Development Financial Institution, CDFI, whose role
    is to provide financial services in the form of access to
    capital and economic education in low- to moderate-income
    areas, LMI.
        ACCION also assists underserved small business owners with
    the objective to be considered by the traditional financial
    system in the near future.
        ACCION began funding small business owners back in 1991 in
    New York City. Last year, we supported over 1,000 small
    business owners with $15 million in capital through microloans,
    traditional microloans and also SBA microloans, and SBA
    Community Advantage loans. We disbursed over $1 million per
    month in 2019.
        2020 started with the implementation of our traditional
    industry-related products, like the one supported by the Tory
    Burch Foundation for women entrepreneurs, Brewing the American
    Dream supported by Samuel Adams that supports food and beverage
    entrepreneurs, and our Child Care Express Program which
    supports child providers throughout the State. However, the
    pandemic immediately had us to implement a recovery program.
    One such important program that we implemented was our Paycheck
    Protection Program response.
        Our response has been threefold. First, we educate our
    clients on the criteria and eligibility. We found that many
    minority-owned businesses were confused about the conditions on
    who could apply. For example, some business owners were not
    aware that they could apply as sole proprietors. Second, we
    created an easy process for those borrowers who found
    themselves left out by their traditional lenders. Third, we
    implemented a technical assistance component to the process to
    help ensure that our clients' loans are going to be forgiven.
        We worked to certify that the correct forms were completed
    so that the loan amounts were accurate and effective.
        In addition, our business owners needed guidance on proper
    documentation on how to use those funds for the loan to be
    forgivable in the near future. All these steps were done on a
    one-on-one basis by our organization.
        To date, in Florida we have disbursed $970,000 to 87
    minority-owned businesses. Our average loan size is around
    $11,000.
        At ACCION, we used to say that ``we offer more than a
    loan,'' and during this pandemic, we have continued to live out
    this teaching. We serve minority-owned businesses who without
    our support would have been left out of the PPP program.
        One such client we supported through this process was
    Myriam Encio. She is the owner of Pet Avenue Grooming and
    Boarding, located in Allapattah, but here it is called the
    ``Little Santo Domingo in Miami.'' Myriam approached us with a
    business that had proven steady gross sales that is around
    $200,000 yearly and a strong net income of $63,000. However,
    her business had no W-2 employees, and nobody was there to
    guide her with her application or to help her think through how
    to sustain her independent contractor employees.
        A local community organization introduced her to ACCION,
    and we were able to process her PPP in the amount of $12,000 to
    keep her store open. Due to the pandemic, she has to follow
    current guidelines and open at a limited capacity. The PPP loan
    allowed her to pay her groomers, skilled in working with furry
    clientele. If not for the PPP program, Myriam would no longer
    have been able to support paying her groomers. She would have
    lost her skilled labor.
        Due to the pandemic, Myriam had to redesign her business.
    She has gone mobile for booking appointments and for managing
    client visits.
        A second wave of PPP will benefit Myriam and others like
    Myriam with access to capital to a level where she could pay
    accordingly and invest in her sustainability as she works to
    stay open through these very insecure times.
        In conclusion, a small business owner, in particular,
    minority-owned businesses, have other capital needs that has to
    be addressed in order to stay open and keep their employees
    employed. Extending the PPP will allow organizations like
    ACCION to continue to play an important role in serving the
    most vulnerable with a small loan amount, with SBA and
    microloans as well, with the community advantage as well, and
    the traditional microloan program, so business could remain
    open.
        Furthermore, clients need advice on how to re-envision
    their businesses, and here at ACCION, we can play that
    important role of getting funds to those that need it most.
        My last words will be for gratitude for your interest in
    mission-based organizations like ACCION and to your technician
    and your team that they were able to make this online meeting
    possible.
        Thank you very much.
        [The prepared statement of Ms. Estrada follows:]

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        Senator Cardin. Ms. Estrada, thank you again for your
    testimony. We appreciate it very much.
        Our final witness will be Marla Bilonick, who is the
    executive director of the Latino Economic Development Center,
    which is one of the largest SBA microlenders in the State of
    Maryland.
        Ms. Bilonick?

    STATEMENT OF MARLA BILONICK, EXECUTIVE DIRECTOR AND CEO, LATINO
                      ECONOMIC DEVELOPMENT CENTER

        Ms. Bilonick. Thank you very much.
        Good morning, Chairman Rubio, Ranking Member Cardin, and
    members of the Committee. It is my sincere honor to be speaking
    with you all today about the challenges that minority-owned
    businesses are facing in light of the COVID-19 pandemic and how
    your decisions can positively impact their return, recovery,
    and rebuilding. My name is Marla Bilonick, and I am the
    executive director and CEO of the Latino Economic Development
    Center, LEDC, and I am also a mom. I have my daughter right
    here next to me.
        LEDC is an organization that is 29 years old 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 as well as Puerto
    Rico.
        We operate out of six offices, with over 50 professional
    and bilingual staff providing top-notch, culturally competent
    services to our clients. On an annual basis, we serve well over
    5,000 low- to moderate-income residents, 90 percent of which
    represent an ethnic or racial minority.
        We are an SBA Microlending Intermediary, an SBA Community
    Advantage Lender, a USDA-designated Rural Lender, and certified
    Community Development Financial Institution, CDFI.
        Since we began lending in 1997, we have rolled out close to
    $20 million in capital in small business and consumer loans. We
    have forged close and longstanding relationships with the
    businesses in the communities we serve, and to say they are
    struggling given the implications of COVID-19 would be a severe
    understatement.
        Our businesses are fighting to stay open, keep their
    employees on payroll, and work on their businesses while caring
    for children that are at home indefinitely.
        These blows to businesses come at the grave cost of
    business owners' livelihoods and the livelihoods of the people
    they employ. The ripple effect on communities will be felt for
    months and years to come.
        This year, we have led the charge in our region providing
    PPP loans to small businesses in the markets we serve. This was
    no easy feat, as we had to hustle to fundraise for the
    liquidity needed to make PPP loans on an extremely tight
    timeline as well as aggressively assert our eligibility to
    provide PPP as a certified Community Advantage Lender.
        An analysis of our PPP loans to dates shows that 84 percent
    went to minority-owned businesses and 62 percent to women-owned
    businesses. Eighty-two percent of all of our PPP loans were
    made to businesses in the following six industries: food,
    health, construction, consulting, cleaning, and child care.
        To give you a sense of the demand for COVID-related
    assistance that we have seen, we have provided PPP loans to
    almost 100 small businesses since late April. For context, our
    organization typically provides around 200 small business loans
    per year. So, in just one quarter, we have done almost half of
    our traditional annual volume of loans with just this one
    product.
        We have also partnered with local governments to help
    deploy their small business COVID financial assistance
    products. For example, in partnership with the District of
    Columbia's government, we have provided $4.5 million in
    microgrants to just over 1,100 businesses since April.
        Our staff has been working literally around the clock to
    serve as many businesses as we can humanly support.
        At the national level, the PPP program has not been as
    successful in reaching true mom-and-pop, minority-owned small
    businesses as it could be. I was pleased to see the CDFI set-
    aside that came into play during the second round of PPP funds
    in May. However, it feels like engaging CDFIs was an
    afterthought, which is puzzling when CDFIs have historically
    been the most highly leveraged tool that commercial banks have
    used to reach the hardest-to-reach populations in the United
    States. Of the more than 5,400 PPP lenders, only 303 are CDFIs
    as of the SBA's July 20th PPP report, yet in under 3 months,
    those very CDFIs made a total of $7.5 billion in PPP loans.
        Our average PPP loan made has been around $30,000, and our
    overall PPP efforts stand to retain 373 jobs to date. As of
    July 20th, the Nation's average PPP loan size was $105,000, and
    nearly 87 percent of all PPP loans were for less than $150,000,
    which is to say that the PPP program investment stands to have
    substantial impact if distributed properly and equitably.
        It is extremely disheartening and disappointing to see
    high-wealth individuals with direct ties to the Trump
    administration accepting PPP loans in the $350,000-to-$5-
    million range. With the funds in just one of the PPP loans made
    to the likes of the Kushner family, Elaine Chao's family, or
    Kanye West, a CDFI like LEDC could have helped more than 10
    times the businesses we have been able to support to date,
    retaining at least 3,700 community jobs. This is a glaring
    example of the perpetuation of systemic inequality that has
    rightfully propelled our country into civil unrest in the past
    weeks.
        In May, Senators Cardin and Booker penned a white paper
    that contains practical suggestions for preventing underserved
    small businesses from falling even further behind than they
    already have due to the implications of COVID, disproportionate
    to the general small business population. We are particularly
    encouraged by the following recommendations of this proposal:
    the recommendation to allocation $1 billion in emergency
    appropriations to the CDFI fund to increase liquidity for
    CDFIs; the suggestion to create an Office of Emerging Markets
    specifically focused on and more attuned to the needs of
    underserved communities; recommended support for SBA's core
    programs to expand them and make them more affordable; the
    suggestion to move SBA Community Advantage from pilot
    designation to permanent program status; and recommendations
    around expanded support for minority-owned, women-owned, and
    returning citizen-owned businesses.
        The House of Representatives has taken an important first
    step by including $1 billion in grants to CDFIs in the HEROES
    Act. Congressional leaders on both sides of the aisle
    understand that CDFIs are the lenders to reach the businesses
    that have been left out of PPP for the most part. The Senate
    and administration must approve $1 billion in rapid response
    CDFI fund grants.
        In addition to financial resources, small businesses
    affected by the implications of COVID-19 require technical
    assistance to navigate their new reality. They have sought out
    support from LEDC in the areas of legal advice, which includes
    commercial lease negotiation, accounting, and reimagining their
    businesses for survival in this new time. We have helped
    countless clients with adding e-commerce, take-out, and
    delivery options into their business models.
        It is worth noting that funding made available through the
    CARES Act restricts access to funding to provide
    entrepreneurial assistance, 80 percent, to SBA-designated Small
    Business Development Centers, the vast majority of which are
    operated by the universities and colleges and a small portion,
    20 percent to SBA's designated Women's Business Centers. The
    legislation does not recognize that SBDCs and WBCs are not the
    only critical elements of our Nation's infrastructure for
    providing entrepreneurial assistance.
        In closing, while there are many stories that make the
    evening news around unicorn businesses that have turned the
    pandemic's lemons into lemonade, the distillery that is making
    hand sanitizer or the T-shirt company that is making face
    masks, the truth is that the majority of small businesses are
    in trouble.
        I am very grateful to this Committee for considering my
    remarks and for the time and effort you dedicate to making sure
    America's small businesses survive and thrive during these
    unprecedented times.
        Thank you so much for your time. I look forward to our
    discussion.
        [The prepared statement of Ms. Bilonick follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Rubio [presiding]. Thank you so much.
        I am going to turn it over to Senator Young to start. My
    only request is that apparently our--are those on the WebEx? If
    you would just make sure your mic is turned up as loud as you
    can, just because there are some challenges over here from time
    to time listening to it, so thank you.
        Senator Young?
        Senator Young. Thank you, Mr. Chairman.
        I know all of us feel a share of ownership for the PPP
    program, but I want to commend you and members of your team for
    helping to put that program together and get it done. It has
    provided major relief to thousands of hardworking Hoosiers.
        Of the nearly 80,000 Indiana businesses that have received
    PPP loans, over $9 billion in total, over 85 percent of these
    businesses received loans under $150,000. So we know that this
    program has fulfilled its intent, helping those smaller
    enterprises.
        Ms. Bayles, you have experience working with a diverse mix
    of small businesses, particularly those firms who have been
    applying for PPP loans. In your testimony, you state that PPP
    was a necessary short-term lifeline; however, to weather this
    storm over the long run, you indicate it is critical that
    business owners have access to flexible, long-term working
    capital.
        I could not agree more, which is why I introduced the
    RESTART Act to provide low-interest, long-term loans, which
    allow small business owners greater flexibility.
        Can you expand, Ms. Bayles, on the need for minority-owned
    businesses to have broader access to relief, longer-term loans,
    and greater flexibility for expenditures and loan forgiveness,
    as I propose in my RESTART Act?
        Ms. Bayles. Absolutely. As I mentioned in my testimony, the
    PPP was an immediate fix, and so having the flexibility to have
    funding that will last, larger amounts will definitely go a
    longer way because nothing is more frustrating than getting
    just a short toss in the pot. So having that long-term
    flexibility, larger amounts would greatly be appreciated.
        The biggest piece that I stress in my testimony that I add
    and that has been mentioned by the other witnesses and other
    Senators is really just going to be that technical assistance,
    because even for a long-term loan, you still are going to have
    the credit challenges. You still are going to have the
    financial documentation challenges. So any sort of funding
    opportunity is going to have to be matched with equal access to
    technical assistance to actively get those businesses prepared.
        Senator Young. And when you think about barriers that
    minority-owned businesses face with respect to PPP access and
    financial services education, is this what you are speaking
    to----
        Ms. Bayles. Yes.
        Senator Young [continuing]. or are there other barriers
    that we should be thinking about?
        Ms. Bayles. Well, for PPP, the challenge was a formal
    payroll system, and so getting out there and proactively
    providing the tools to businesses so that they know the
    advantages of using a formal payroll structure would have
    certainly maximized the amount of minority-owned businesses
    that qualify for the PPP.
        But the Schedule C option did certainly help. So just going
    down that road in a more refined fashion, I think, will have
    the greatest impact.
        Senator Young. So this Committee should be aware of what
    you have discussed as we try and support the SBA in advancing
    minority business-related services.
        Ms. Bayles. Yes.
        Senator Young. I think that is really important.
        Ms. Bilonick, in your testimony, you know the critical role
    that NDIs and CDFIs play in providing the needed sources of
    capital to minority- and women-owned businesses, but also as
    related to what Ms. Bayles said, but also as educators on
    financial services and lending tools.
        We can authorize new forms of funding, but it is community
    lenders such as yourself that will ensure the underserved have
    true access to these opportunities.
        So, Ms. Bilonick, my time is running a bit short, but can
    you briefly speak to the importance of prioritizing these kinds
    of institutions as in my RESTART proposal when extending credit
    to businesses operated by traditionally underserved
    entrepreneurs?
        Ms. Bilonick. Absolutely. Thank you for the question.
        You know, I would say I think there is sort of a narrative
    going around that the challenge or the main challenge for
    underserved businesses in terms of accessing PPP is a challenge
    around filling out the application, gathering the necessary
    documents, and while that may be true for a subset of our
    clients, I really think the challenge was around accessing the
    product.
        We had many, many clients come to us that sort of had a
    false-start attempt with their bank and never got to the end of
    the process because they just simply were not a high enough
    priority for their commercial bank based in terms of their
    depository accounts or other factors that put them lower on the
    list of priority.
        So what I really think is that Community Development
    Financial Institutions working in neighborhoods, working in
    communities where we have the trust, where we have the track
    record. We are the resource that small businesses in our
    communities are going to trust and come to first and rightfully
    so. This process has just been an example that underlies the
    fact that commercial banks often turn away our clients who are
    perfectly viable loan clients.
        Senator Young. Thanks so much.
        Chairman Rubio. Thank you.
        Senator Coons, are you ready?
        He just arrived.
        Do you need to catch your breath, or are you ready to go?
        Senator Coons. I am happy to proceed, if I might, Mr.
    Chairman.
        Chairman Rubio. All right.
        Senator Coons. I just want to take a second and thank all
    the witnesses and thank you, Mr. Chairman and Ranking Member
    Cardin, and to my colleagues from Indiana. I just spent time on
    the floor discussing the RESTART Act with our lead co-sponsor
    and look forward to figuring out with you how we might find a
    path forward together.
        I just wanted to share by my own opening, if I might, that
    I am really grateful we are having a constructive and
    bipartisan hearing. I am grateful, Mr. Chairman, that this has
    been a broadly constructive bipartisan part of what has
    otherwise been a very difficult process for responding to the
    pandemic and moving forward.
        I recently spoke with Blanche Jackson. She is the CEO of
    Stepping Stones Federal Credit Union in the East Side in
    Wilmington. They are also a CDFI, Community Development
    Financial Institution, and they provide their services at no
    cost to low-income communities in Wilmington.
        They became a PPP lender. They provided over $1 million to
    small businesses and nonprofits, overlooked by other PPP
    lenders, even those seeking loans under $10,000. So I was
    encouraged to hear that at least in that instance, this worked
    out very well.
        Let me direct a question, if I could, to Ms. Bilonick. In
    my experience in the conversations I have had in Delaware, it
    is clear from Stepping Stones and other CDFIs in my home State
    that additional funding to the CDFI fund is critical getting
    this assistance out to underserved communities.
        I am advocating in this next package for $1 billion for
    certified CDFIs. How do you see additional funding for CDFIs
    actually affecting the viability of the survival, short term
    and long term, of minority-owned businesses?
        Ms. Bilonick. Well, first, let me thank you in advance for
    advocating on behalf of additional funding to CDFIs. Of course,
    that is a self-serving compliment, but I do really think that
    that is where the money needs to go.
        From our perspective, it would be extremely helpful, both
    in terms of additional liquidity, that we could then put out to
    our clients.
        As I mentioned in my comments, we really struggled
    initially because we did not have sufficient liquidity to take
    on this new demand, and so luckily, we had three partners who
    stepped up and were able to provide us with the capital to be
    able to do the additional lending. But, obviously, funding
    through the CDFI fund, which is one of our primary sources of
    capital, would be extremely helpful and then in addition to
    support our operations. So those would really be the two pieces
    of what would help us to be able to serve our businesses even
    in a more robust way.
        Senator Coons. If I could, Ms. Bayles, I have heard--and
    you have testified--there is a lack of community outreach in
    some of these relief programs.
        A program that was actually founded in my hometown of
    Wilmington, Delaware, called SCORE in Delaware has done a great
    job at providing easy accessible outreach in terms of getting a
    business plan done, getting started.
        How can we reach business owners more broadly? How can we
    do a better job of outreach in terms of connecting available
    SBA relief programs to minority businesses?
        Ms. Bayles. Thank you, Senator.
        I would say that the training and the technical experience
    needs to be more diversified to finding businesses where they
    are.
        So SCORE, as you highlighted, focuses on a business plan
    and sort of the startup functions of a business. That is
    definitely helpful. That is vital.
        However, my experience, particularly during this round of
    CARES Act funding, you are dealing with businesses that are
    already started. They are already open. They are trying to keep
    their doors open, so sort of a more advanced approach covering
    things that I testified on, payroll compliance, tax withholding
    compliance, so a more refined technical assistance that finds
    businesses where they are. So it is a little past the startup
    phase. That is where we have had the most success.
        Senator Coons. Mr. Chairman, how much of your patience can
    I prevail upon, given the absence of other members? Because I
    have got two other questions, I am happy to ask, but----
        Chairman Rubio. Go ahead and do those.
        Senator Coons. Thank you.
        Ms. Estrada, if I might. Just interested in whether or not
    authorizing another round of PPP lending, as I am sure you have
    heard from Senators Cardin or Shaheen, we have been working
    hard on a bill to prioritize Paycheck Protection Program, which
    would provide a second forgivable loan to the smallest and
    hardest hit businesses with a set-aside for firms of 10 or
    fewer. And I know we have been in active conversations with the
    Chairman and others.
        But I just would be interested, Ms. Estrada. If Congress
    authorizes another round like that of PPP lending to the
    smallest and hardest hit, how do we make sure that underbanked
    businesses actually are aware and participate?
        Ms. Estrada. Thank you for your question, and it is true.
    There is some need in reference of making the awareness, in
    reference of the CDFI, that we are the ones that we could have
    the relationship with the business owner. And we are the ones
    that we are working close to the minority business owner.
        So the idea for these funds, it will be that we need to
    make sure that this money is going to be in the right hands for
    the ones that they are looking for this assistance, or the ones
    that probably they already covered the payment for the
    employees, and they need right now just to have some additional
    working capital.
        So every business is different, and every business is run
    different. Probably, a major lender, a credit union, maybe they
    do not have the ability to understand in detail what is the
    real need of the business. So the CDFI with the SCORE, with
    SBDC, we are the ones that we are providing this technical
    assistance, this financial allocation, like we used to call it,
    and that is the reason it is important to make this program
    available for the near future.
        Senator Coons. Well, thank you, Ms. Estrada. Thank you, Ms.
    Bayles. Thank you to the audio system which just kicked in.
        Let me just in closing say that in addition to the
    prioritized Paycheck Protection Program I just spoke about,
    which I am excited to work with Senators Cardin, Shaheen, and
    others on, I also think an extension of the Small Business Debt
    Relief Program would make a great deal of sense. It is already
    pay the interest and principal for nearly 300,000 SBA 7(a) and
    504 borrowers, which are, a quarter of them, minority business
    owners. Black-owned businesses are two times more represented
    among SBA borrowers than among small businesses more broadly. I
    think we should extend this critical debt relief program and
    finalize a competitive entrepreneurship fellowship program that
    would focus on distressed areas, both urban and rural,
    providing a living stipend, mentorship, and capital access. And
    I am hoping that I can work with my colleagues on that.
        Thank you very much, Mr. Chairman, for your indulgence, and
    to you and the Ranking Member, I am excited to work with you on
    what I think is a critical part of this next bill.
        Chairman Rubio. Thank you.
        Senator Kennedy?
        Senator Kennedy. Thank you, Mr. Chairman, and I want to
    thank all of our witnesses today.
        I would like each of you to give me a one minute summary of
    your testimony, and specifically, here is what I have in mind.
    In the first 30 seconds, if each of you could tell me why you
    think there is an absence of access to capital, and number two,
    what laws would Louisiana--or rather the Congress should pass,
    not just impacting Louisiana, but impacting every State?
        And I will ask our Chairman to designate the order in which
    the witnesses should go.
        Chairman Rubio. Well, we will start with Ms. Bayles. She is
    sitting right in front of us, and then we will go from there.
    It gives everybody else a chance to think about how to put all
    that in 1 minute.
        Ms. Bayles. I know. Great. I get to start off. Okay.
        So I would say, just to reiterate what was in my full
    testimony, is access to information. So there is a huge busy,
    congested information highway that is out there, and there are
    numerous factors that would prevent a small business owner from
    being able to grasp that, first of all, and then interpret that
    exactly to the fit of their business.
        So that information is then inequitable, and so again,
    opening up and clarifying all the information that is out there
    through the technical assistance is going to be something that
    I will continue to emphasize, and that technical assistance has
    to be diversified to fit more businesses than at the startup
    phase.
        So as far as the particular laws, I would have to say
    without seeing the individual proposals that are currently on
    the floor, what we have discussed so far, and that is providing
    long-term options for financing and more flexible terms for
    those applications is a step in the right direction.
        Chairman Rubio. Ms. Estrada?
        Ms. Estrada. Yes. Thank you, Chairman.
        It is a really interesting question just to give an answer
    in one minute, but what we are seeing is that we cover certain
    gaps, the CDFI, in the financial invitation, education, in
    reference of how it is going to be the process for the PPP.
        But we are seeing right now that there is--okay. We pay the
    employees right now. We have this covered, but I need money.
    Just for example, right now in Florida, we are expecting a
    storm. So we have people that they are doing the landscaping,
    and they need probably money just to buy equipment. And you
    know what? There is nobody who will be doing a loan under these
    terms. If this person, this business owner is going to their
    bank, there is no way that he could get a microloan. Do not
    think about it, something for $10,000 or maybe $15,000, and if
    they are coming to us, we are in a really tough position where
    we need more money just to allocate in the right hands of the
    business owners.
        So it will be a program where we could have the amount of
    money that they need in reference to continuing operation with
    flexible terms, something that we could help with the cash
    flow.
        Remember most of the business owners, they were financing
    their business with credit cards. So the interest rate that
    they are paying is really very high, a lot of confusion,
    because they were applying for the EIDL. They received the
    advance. They do not know if they have to apply. So the
    information is there.
        We have the ability to digest the information for the small
    business owner, but anyway, we need to guide them through the
    process, because what we are seeing, if we are not guiding them
    through the process, predatory lenders, payday lenders, they
    are going to take advantage of the ones that are working hard.
    And they are the ones that are moving our economy. So that
    would be something that we need also to consider.
        Chairman Rubio. All right. Mr. Busby?
        Mr. Busby. Thank you so much. I will try to make it quick.
        Seven quick points. First, transparency. We must understand
    the information early on.
        Second, the information must be clear when we get it, and
    it must be early.
        Third, we must monetize the CDFIs. We understand that 70
    percent of loans made to black homeowners and black businesses
    come through CDFIs. So when we fund CDFIs, we are, in fact,
    funding our citizens, and are funding our communities.
        Third, the 8(a) program. We understand that many black
    businesses have gained great deals of revenue and success
    through the 8(a) program, but we are asking for the program to
    be extended for black-owned businesses. Currently, it is 9
    years: 5 years of growth, 4 years of entrepreneurship, and then
    exit. We are looking for a much longer program, especially
    during the years of 2021 to 2026 for particularly black-owned
    businesses.
        Fourth, prompt pay program. During the Obama
    administration, there was a program that said government
    contractors, they need to get paid within 15 days. That would
    change the outcome of many businesses that have to go and, in
    fact, get a loan just to cover the government's float. We think
    that is something that during these difficult economic times,
    it could definitely be changed.
        Next, codify MBDA. It is the only agency in the United
    States that has the word ``minority'' in it. We have got to
    make sure that they have the resources and the funds that they
    need to have long term.
        And then lastly, fund chambers of commerce, as we have
    discussed. They have boots on the ground. They understand the
    importance of entrepreneurial training, relationships,
    contracting, and making sure that there is a connect between
    what happens in Washington, DC, as well as what goes on, on
    their local communities and local businesses.
        Thank you very much.
        Chairman Rubio. Ms. Bilonick?
        Ms. Bilonick. Thank you. Yes.
        I would concur with the comments that I made and that my
    colleagues made, but I would also add that just sort of in a
    nutshell, the point that I would like to drive home is that
    because the majority of PPP loans that are going out are in the
    $150,000-and-below range, that with equitable distribution of
    the PPP program, there is a high impact to be expected with
    regard to retaining jobs.
        I would say sort of legislatively that the most important
    recommendation that I would make is around the investment of a
    $1 billion emergency appropriation to the CDFI fund to pass
    through two CDFIs that are on the ground working with small
    businesses to access this and other Federal programs.
        And lastly, to answer your question around why there is no
    access, I think we still are struggling with discrimination in
    our country, and I think that is one of the primary reasons why
    our clients are not accessing PPP through the commercial
    banking system and going to CDFIs and other alternative lending
    resources.
        Thank you.
        Senator Kennedy. Thank you, Mr. Chairman.
        Chairman Rubio. Senator Cardin?
        Senator Cardin. Well, let me thank all four of our
    witnesses for their testimony, and I think that your answer to
    Senator Kennedy's question really pinpoints an agenda. And I
    certainly agree with the CDFI points that have been raised.
        Mr. Busby, I want to drill down on what we could do within
    the SBA. They have an Office of Capital Access, but there is no
    specific point person to deal with access to capital for
    minority businesses or women-owned businesses or businesses in
    underbanked communities in rural America.
        Senator Duckworth and I have introduced legislation, and
    one of the things it would do, it would set up an office to
    deal with those underbanked communities.
        Do you have recommendations as to how we can sensitize the
    SBA itself to be more aggressive in helping the underbanked and
    underserved communities?
        Mr. Busby. Great question. Thank you so much for the
    opportunity to speak to that.
        A couple things. One, currently, there is no real
    certification for a black business owner. The government as
    well as private sector understands the importance that the role
    that business owners play in their local communities as it
    relates to moving our agenda forward, but right now if you ask
    the government or private-sector firms how much they are
    actually spending with black firms, they cannot really tell you
    because there is no SBA certification currently that says I am
    a black-owned business. It states that I am a minority or a
    woman or a small business, which I am none. I am black when I
    wake up. I am black in the evening when I go to sleep. We have
    to make sure that we are counting the black businesses that are
    participating in these programs.
        Next, there was $130 billion that was left in the Payroll
    Protection Plan, but at the same time, we lost 441,000 black-
    owned businesses. It is not because they did not understand the
    program or did not need the funds. It was about early
    participation, clarity of the program, and ensuring that they
    knew where and how to get the funds. We think that many black-
    owned businesses now have the opportunity to grow through
    mergers and acquisitions.
        Again, we lost nearly half a million firms. We have now got
    to go and find those firms, those contracts, and make sure that
    those revenue dollars are staying in our communities, and that
    is going to need a different type of funding. It is not going
    to be based on payroll but based on opportunity as well as
    growth. So we would like to look at the difference that the
    next funding has in reference to how do we move our communities
    forward, keep the businesses that we currently have, as well as
    make sure that there is new opportunities for new businesses to
    grow.
        Senator Cardin. Thank you.
        I want to ask Ms. Bilonick the same question, but I also
    want, if you could, to expand on your point about mom-and-pop
    minority businesses.
        What effort can we make to deal with the really small,
    small businesses which are more likely to be a higher
    percentage of minorities in addition, if you could, respond to
    whether there is a need for a point person within the Office of
    Access Capital?
        Ms. Bilonick. I think it would be very effective to have a
    point person. I think any sort of deliberate and thoughtful way
    of approaching access for minorities, small, black, Hispanic,
    however you want to break down the pie, businesses, can only be
    a positive.
        I think that one area of focus--and I mention it in my
    remarks--is to try to funnel through agencies not only CDFIs
    but also technical assistance providers that work directly in
    communities. I think that is how we will really reach the mom-
    and-pops.
        I understand that a lot of the dollars were funneled to
    SBDCs, and with all due respect to SBDCs that are doing
    fantastic work in the communities that we serve, there are some
    limitations around what they are able to do and their reach.
    And so I would say if there were a way to perhaps take the SBA
    PRIME recipients of the past 4 or 5 years and funnel dollars
    through them, I think it is just a little bit of an oversight
    to suggest that the SBDCs are the primary technical assistance
    provider in communities when there are organizations that are
    doing this work fully entrenched and sort of very deeply
    enmeshed in the community.
        Senator Cardin. One of the reasons why we focus on the
    CDFIs--and I would also put MDIs, minority depository
    institutions--is that to make a smaller loan is not as
    attractive to lenders as larger loans, and when we deal with
    the smaller the small businesses or you are dealing with
    minority-owned businesses that tend to be smaller loans. It is
    not quite as attractive.
        So one of the things I think we need to do is how do we
    focus on making it more attractive for the smaller loans to be
    made by traditional lending institutions.
        Ms. Bilonick, do you have a suggestion on that?
        Ms. Bilonick. Yeah. I almost wonder if there would be a way
    to sort of designate different lenders in different ranges for
    lending. So, for example, the CDFIs could be lending in a
    certain range. As I mentioned, our average loan size is $30,000
    under PPP. So I do not know many banks that would be chomping
    at the bit to make that kind of a deal.
        So if there were a way to sort of concentrate the higher-
    dollar loans perhaps the commercial banking sector, those that
    are in the millions of dollars, and then keeping those, you
    know, even $150,000 and below, having sort of designated
    tranches.
        Now, this is just what is coming off of the top of my head
    right now. I would happily discuss it further with your team
    and really fully flesh it out.
        Senator Cardin. I would just point out we have allocated
    certain funds to smaller lenders as part of our efforts.
    Senator Coons has suggested walling off a certain amount of
    money for the smaller small businesses.
        I think there are ways that we can try to work together to
    do this, but there is also the need to look at making it more
    financially attractive for lenders to make loans to smaller
    companies.
        Thank you, Mr. Chairman.
        Chairman Rubio. Senator Cantwell?
        Senator Cantwell. Thank you, Mr. Chairman.
        I wanted to see if I could ask Mr. Busby a question.
    Obviously, we want to have a variety of voices communicating
    about what the capital needs are from various aspects of our
    society and certainly have worked on these issues in the past
    when I was the chair of the Small Business Committee, women and
    minority businesses getting such a small percentage of access
    to capital.
        So that told us that you needed larger voices to
    communicate to people about the programs and make the programs
    work, all of the above.
        But one of the things, Mr. Busby, that we are facing is
    that African American news sources are also being challenged by
    the COVID crisis. They are being challenged by the fact that
    advertising revenue is falling off. They are being challenged
    by consolidation of newspapers, and when they get consolidated,
    they do not always--let us just say they are not always
    investing in diversity of local news and opinion.
        So one of the things that we would like to fix in the next
    COVID package is a provision that at least the House has
    considered, which would allow those radio stations or TV
    stations that are owned by a larger consortium to get funds if
    they are going to invest in local content.
        Unfortunately, newspapers and broadcasters owned by larger
    groups were left out of the Paycheck Protection Program. That
    means African American radio stations that are part of Urban
    One and Spanish language stations that are part of Univision
    could not get much needed relief.
        I have been pushing to change that along with Senators
    Ernst and others and still believe we need to find a way to
    help them in the next round of COVID assistance and I hope
    Chairman Rubio and Ranking Member Cardin will help as well.
        So, Mr. Busby, what about that issue?
        Mr. Busby. That is a great point. Many of our businesses
    across the country said that the reason that they did not
    either apply for payroll protection or the EIDL program was
    just lack of information.
        We have partnered early on in our existence with NNPA, the
    National Newspapers Publishers of America, which are the black
    newspapers, and last year, we partnered with NABOB, the
    National Association of Black-Owned Broadcasters, which
    represents roughly 170 to 180 black-owned radio stations and
    roughly 12 black-owned TV stations.
        It is important, especially during these times, for us to
    get the information that is out timely, accurate, and most
    importantly that is coming from individuals and voices that we
    know and trust. So for there to be an opportunity for the black
    media to participate in this, I think, is a very positive step
    in the right direction to ensure that our businesses have the
    opportunity to compete and have sustainability in our
    communities going forward.
        Senator Cantwell. Thank you.
        Could you just expound on that trust issue for a second?
    Because I think it is not fully understood how important these
    radio stations and newspapers are.
        I would say in my State, the Asian publications have the
    same force of veracity. I would say in Indian Country, the same
    thing. People listen to information that--I am sure in the
    Chair's case, there is probably Hispanic publications all
    throughout Florida that are the go-to source of information.
        Why is having this trusted source so important?
        Mr. Busby. It has been gaining that trust over decades, and
    for most of us, it is not just the entertainment piece of it,
    but it really is the information, the data that has been
    shared.
        And I will give you a great example. The U.S. Black
    Chambers was touting and yelling at a lot of our voices, about
    35 to 40 percent of black-owned businesses, we felt were going
    to be closed during the pandemic. No one really heard that, and
    then it came out to our black media that the Bloomberg Report
    came out and actually said that we had lost 450,000, almost 41
    percent of our businesses.
        The information that we get is reliable based upon who is
    telling it, and for black communities, black citizens, that
    information coming from black media is trusted. It has been
    tried, and over the decades, we have learned and gained
    relationships with them to make sure that our voices are being
    heard as well as our concerns are being brought both back to
    D.C. as well as from D.C. to local communities around the
    country.
        Senator Cantwell. Thank you.
        I hope that the Chair and Ranking Member will work with us
    on this important issue. Senator Ernst and other members of
    this Committee are big supporters of this concept, and to me, I
    think it is just something that is a little misunderstood. And
    if people are going to make the investment in local content, I
    think we should try to help them.
        So thank you.
        Mr. Busby. Agree. Thank you.
        Senator Cardin. Mr. Chairman, if I might just thank Senator
    Cantwell for her leadership on this issue. This is an extremely
    important issue, and I hope we all can work together on this.
        Chairman Rubio. Thank you.
        Senator Hirono?
        Senator Hirono. Thank you, Mr. Chairman.
        This is a question particularly for Ms. Estrada and Ms.
    Bilonick because you are both direct lenders.
        So even in normal times, pre-pandemic times, it was really
    hard for minority-owned businesses to have access to capital.
    So based on your experience, because of this pandemic, what
    have you observed? What have you learned? What can we do to
    streamline the process, create some new methods, whatever we
    need to do? Because, as I say, even in normal times, it was
    really hard for minority-owned businesses.
        And I think that, Ms. Bilonick, if I heard you correctly,
    you said that part of the issue was that there has been
    discrimination----
        Ms. Bilonick. Yeah.
        Senator Hirono [continuing]. against minority-owned
    businesses.
        So, anyway, going forward, what can we do as a result of
    this pandemic to lessons learned? What can we do to improve
    access to capital for minority-owned businesses?
        Ms. Bilonick. I can jump in, Fabiana, if that works, unless
    you want to go.
        Ms. Estrada. Okay.
        Ms. Bilonick. Great.
        So I was just going to say something that is interesting in
    this time period is that, yes, it is always a challenge for
    small and minority-owned businesses to access capital, but I
    think that right now, CDFIs and community lenders are actually
    able to do loans that traditional banks are not--well, we are
    always able to do loans that traditional banks do not have an
    appetite for, but I think right now, we are even doing our
    normal lending.
        We have businesses that are taking advantage of new
    opportunities that are provided by this strange new world that
    we are living in, and I think there are lessons that can be
    learned from CDFIs that perhaps traditional lenders could take
    a look at around more flexibility, around credits or
    alternative sources of judging credit, more flexibility just in
    general.
        I mean, I think that nonprofit organizations are known for
    being agile and flexible, and that is really what these times
    demand.
        So to the extent possible, it is feasible that traditional
    lenders could sort of take a page out of the CDFI playbook and
    be a little bit less rigid around their requirements.
        Of course, we have a higher appetite for risk, but it often
    comes with a great payoff at the end.
        Ms. Estrada. If I may, I would like to add as well that our
    entrepreneurs, they need to understand the process for the loan
    application aspect because most of the time, in the older
    times, we have our entrepreneurs that they visited the CDFI or
    the banks, and they are asking for a large amount, let us say
    $50,000, and probably, they are not ready for that loan amount
    because they do not have the financial allocation that our
    colleague mentioned, taxes, or there is an issue with cash
    flow. So we need to work with programs that probably could feed
    different realities.
        In one point of myself being a business owner, maybe I need
    $5,000. There is no need for me to get a loan for $50,000, and
    also the flexibility in reference of inside the allocations for
    the payment, low-interest rates, requirement deferments or
    maybe grace period that it will be okay just to avoid affecting
    the cash flow issues with the borrowers.
        So, anyway, there is a lot of work that we are doing at the
    CDFI level because most of the time when we--let us say in
    January this year. We were working with entrepreneurs, that we
    are frustrated because that were applying for 150- to $50,000,
    but they were not having the capacity to repay this loan. So,
    as well, we need to understand our business. We need to
    understand our credit. We need to understand our cash flow. So
    we need to continue providing the financial allocation.
        And the ones that they are doing during this pandemic, that
    probably, unfortunately, they have to close down doors because
    there is no way that they could recuperate, the idea for us,
    the CDFI and all the community organizations, it will be to
    provide a friendly hand just to close business with their
    pride, taking the right tact, because we do not want for them
    eventually in 2 months or 3 months, reopening another type of
    activity, and they have something negative on credit or they
    were not able to close down their credit cards. So we need to
    also try to avoid in certain circumstances, as well any major
    decision, that it will be affecting the life of this program or
    for the future.
        So the ones that they continue working, continue helping
    them out with flexible terms and conditions, and the ones that
    they probably--they need to face the reality to close down
    business, also give them the hand to close in the proper ways.
        Senator Hirono. All right. So I have one question, Mr.
    Chairman, for Mr. Busby.
        I know that you have participated in the 8(a) program. I am
    a big supporter of the 8(a)'s, but you mentioned just now that
    we need to start thinking about a different kind of funding not
    based on payroll because, as you noted, that half a million or
    so of black-owned businesses have already gone under.
        You mentioned that we should be looking at some sort of a
    program to create new opportunities for them to restart
    businesses or something along those lines.
        So I would like you to talk a little bit more about what
    you had in mind.
        Mr. Busby. Sure. On the 8(a) program, we are looking to
    extend that past the 9 years that it currently operates for a
    business owner. We think that it could go anywhere from 16
    years up to 20 years for black-owned businesses. We feel like
    this will provide some generational wealth for a 9-year
    business, and then to be placed on your own really provides
    challenges that many of those firms cannot handle.
        If you look at the Black Enterprise Top 100 list, every
    year, the top 10 to 20 firms, many of them fall off because of
    their no longer opportunity to be in the 8(a) program. So as
    soon as we get and gain opportunities in statute, we are forced
    out of the program. We would like to----
        Senator Hirono. So we want to change the statute, the 8(a)
    statute, so that it is a longer timeframe for them to be
    participating? That would be a big positive for black-owned----
        Mr. Busby. We think so, and then we think the program would
    also be a big factor, something that could easily be done and
    would then provide real access to capital that many business
    owners do not have to go and get a loan. They could actually
    just live off of the cash flow that the Government is now
    making them go and get credit for.
        Senator Hirono. Thank you very much for that very specific
    suggestion, Mr. Busby.
        Mr. Busby. You are welcome.
        Chairman Rubio. Thank you.
        Senator Duckworth?
        Senator Duckworth. Thank you, Mr. Chairman.
        I just want to thank all the witnesses who are here today.
        I do want to sort of focus a little bit more on some of the
    provisions the Microloan Program Enhancement Act of 2019.
        Ms. Bilonick, as you know, several microlenders have seen
    an uptick in need for microloans, in particular, including
    intermediaries in Illinois. Senate Democrats have released
    proposed changes to the microloan program, many of which are
    included in the Microloan Program Enhancement Act. That bill
    would give intermediaries additional funding for technical
    assistance and lending. It would increase an aggregate and
    annual lending cap, and it would repeal the 155th rule that
    restricts lending in the first half of the year.
        Can you discuss how these changes, Ms. Bilonick, would help
    intermediaries, such as yours, get dollars into the hands of
    borrowers more efficiently and give you the increased resources
    you need to save micro borrowers, particularly at a time when
    there is increased demand such as we are in right now?
        Ms. Bilonick. Absolutely. Thank you, Senator Duckworth.
        I think these changes would be extremely helpful. One thing
    I note, I do appreciate sort of the parallel with technical
    assistance as well, which we find to be useful with regard to
    getting our businesses in the queue and funded.
        While I said that our PPP average loan amount was $30,000,
    our traditional, even though we do go all the way up to
    $250,000 as a community advantage lender, is more in the 13- to
    $17,000 space. So the microloan program is extremely helpful
    for us. It is the most reasonable debt that we have to be able
    to turn back over to our clients versus from either foundations
    or commercial sources, and so it would hugely expand our
    capacity to lend from the microloan program.
        I would also just say with regard to that, the 155th rule,
    we are in support of striking that. It sort of creates a false
    bottleneck that does not need to be there with regard to
    distributing money equitably during the whole course of the
    fiscal year, rather than splitting it up with the first half
    and second half, and so we would certainly view that as a
    positive for our lending ability.
        Senator Duckworth. Thank you.
        And I want to touch also on the need for the SBA to
    dedicate resources toward minority business owners. We have
    already touched on that, on this so far, my colleagues from
    Maryland, but I want to come back to this. We know that small
    businesses, borrowers of color, had a harder time receiving
    adequate capital from traditional lenders prior to COVID-19,
    and unfortunately, this pandemic has only made this issue
    worse.
        Last month, SBA and Treasury created additional set-asides
    in the Paycheck Protection Program for CDFI lenders to better
    serve borrowers of color. While this is a step in the right
    direction, more must be done when it comes to helping these
    folks have access to lenders and capital.
        And I will give you an example. I was just in East St.
    Louis just last week meeting with small business owners, and
    one of them was a black-owned business. All the others were
    white-owned businesses. Some of them were women-owned, but they
    were all white-owned. They, for the large part, received all
    the PPP loans through the full amount that they asked for, and
    yet this black businessman who had a better balance sheet and a
    longer track record only got a small percentage of what he
    applied for. And he could not figure out why he would have
    gotten a smaller percentage.
        In this discussion, it was very interesting because they
    were comparing their backgrounds, how much capital they had.
    They were on similar businesses, and there was no other reason
    where he was different from the others. In fact, he had more
    experience, had better balance sheets, except that he was a
    black-owned business.
        So, Mr. Busby, can you discuss what additional changes
    Congress must make to PPP and to traditional lending structures
    to make sure borrowers of color can access small business loans
    and capital? You touched on this before, but I want to give you
    more time to really emphasize this issue because it is very
    real. And I am seeing it on the ground today.
        Thank you.
        Mr. Busby. Thank you so much for the question because it is
    a real concern. Access to capital is the number one, number
    two, number three concern for black business owners.
    Discrimination exists, and so we are asking for all barriers
    for access to capital to be removed for black-owned businesses.
        We also know that 70 percent of black firms that applied
    got denied, of U.S. Black Chamber members, and 96 percent of
    our members that applied that did get some funding did not get
    what they requested. So either they did not get it, or if they
    did get it, they did not get what they need. And we found that
    to be historic. That is not just now. That is a historic
    pandemic as it relates to our community in reference to access
    to capital. Thus, we cannot grow, so we cannot hire, and if we
    cannot hire, then we cannot continue to have sustainability in
    our communities.
        The credit scores need to be twice as high as our white
    friends. When we go in and ask for a loan, we only get 40
    percent of the funds that we ask for. We have to have twice or
    somewhat almost twice the credit scores of our white peers.
        I could own my home. My white peer could own their home. I
    could go in with a great business plan looking for $100,000. I
    will walk out with $40,000, praising to God for allowing me to
    get that $40,000, only understanding that 90 percent of
    businesses fail within the first year, and the majority of the
    reasons is because they did not have the access to the capital
    that they needed when the first emergency happened.
        The average black family has less than $400 for an
    emergency. The average black business, only 30 percent of them
    have any credit at all, and so when we are in situations where
    things come unexpectedly, it is only going to exacerbate the
    problems that black business owners have during pandemics and
    just regular challenges of businesses itself.
        Senator Duckworth. Thank you.
        I yield back, Mr. Chairman.
        Chairman Rubio. Thank you.
        And before I turn to Senator Scott, Mr. Busby, just to
    clarify, the figures you gave, the 70 percent were denied and
    96 percent got less, was that for PPP?
        Mr. Busby. That was for PPP. Yes, sir. That was our members
    of the United States----
        Chairman Rubio. I want to address that when I get to my--I
    am trying to give everybody a go, but I want to talk to you
    about that. I just want to make sure we are talking about PPP.
    Got it.
        Mr. Busby. Yes.
        Chairman Rubio. Senator Scott?
        Senator Scott. Thank you, Mr. Chairman. Thank you for your
    interest and your passion around helping small and minority
    businesses have access to the Paycheck Protection Programs.
        As we look at this pandemic, the one thing that we can
    conclude without question is that 41 percent of African
    American-owned businesses from February through April declined.
    We know that those numbers are stunning, frankly, especially
    when you compared to other groups. Hispanics declined by about
    32 percent, Asians around 26 percent. So that means that this
    pandemic not only created a health crisis, which African
    Americans, unfortunately disproportionately impacted by this
    global pandemic, and then on top of that, the employers started
    vanishing.
        Mr. Busby, I think this is an accurate depiction?
        Mr. Busby. Very accurate, Senator Scott. Things that were
    being challenged for our community just exacerbated through the
    pandemic, and so for many of us, we said the country was
    willing and able to write a $2 trillion check for a stimulus
    package. The black community is saying, ``Hey, where is our
    support that we desperately need to continue to have
    sustainability in this country?''
        Senator Scott. And I will say to answer that question, in
    part, I just finished an Instagram Live with Secretary Mnuchin
    talking about the important role that CDFIs and MSIs play,
    especially in the second tranche or the second iteration of the
    Paycheck Protection Program, working with folks like Robert
    Smith and others. We were on the call with Secretary Mnuchin
    and redesigning the second half of the PPP. I think if that
    part of the story was in isolation, that part of the story is a
    far more positive part of the story than the overall story
    because we were able to put the focus where it needed to be,
    and if we do that in this next round, we may have far better
    success than we did in the first iteration.
        Is that about right, Mr. Busby?
        Mr. Busby. That is fair to say. I just think that it needs
    to be very transparent, and it needs to be a commitment from
    both the financial institutions that are making the loan as
    well as the Government to ensure that there is accountability
    to the organizations, the banking institutions, to ensure that
    there is equity in loaning and the individuals that they reach
    out to make sure that all businesses have opportunity.
        Senator Scott. Thank you.
        I will say this. I think accountability and responsibility
    goes on both sides because I have been an African American-
    owned business for 15-plus years and started three or four
    other businesses, and we definitely have to address some of the
    challenges from the beginning into the crisis as well as the
    crisis on as it relates to minority-owned businesses.
        One of those challenges is that our banking relationships,
    frankly, as African American businesses were weaker. So when
    you come into an institution and they are prioritizing their
    clients, too often we found ourselves frankly in the back of
    that line, and I do not think that is an overstatement. I think
    that is an accurate statement.
        And that lack of relationship creates a domino effect
    throughout the entire Paycheck Protection Program but frankly
    through the entire life of a small business, having been one,
    and I can tell you it is painful when you need something and
    you are trying to get in line after the crisis starts.
        But what I did realize during this crisis--and I think this
    is a part of the silver lining and the good news to come--is
    that FinTechs and technology can be an equalizer when the
    relationship is not there.
        So if you would help me understand how the PPP and the EIDL
    is in a better place when we have FinTech and technology as a
    part of the solution. Can you speak to the importance of that?
        Mr. Busby. I think there are some benefits as well as some
    challenges when FinTech gets involved. The benefits there are
    that it is quick, but for our community, we are not as----
        Senator Scott. Savvy?
        Mr. Busby. No. We are not as committed to quick as we are
    long term. We understand that this is not going to be the last
    opportunity, and what they told us is when this fund came out,
    they said go to your existing banking relationship. FinTech is
    not a banking relationship. That is a transaction. I want my
    individuals to go to the bank, shake that banker's hand,
    because understanding that we are going to have opportunities
    to grow and the only way you are going to be able to grow is to
    have access to capital, access to credit, and relationships.
        When I talk about the future of my businesses, I may want
    to acquire. I may want to merge. I may want to do a joint
    venture. I am going to need a banking partner who understands
    my needs as well as the opportunities that they provide, and
    many times, that does not happen over a FinTech relationship.
        Senator Scott. Well, it is certainly harder to happen over
    technology, without any question, and that is part of the
    problem, and it was the foundation on which we stand was not
    there. So when the crisis happened, I think it only exacerbated
    and brought more light to the actual challenge of banking
    relationships and the importance of those relationships pre-
    crisis and frankly during the crisis.
        I know my time is out. Thank you very much, Mr. Busby, and
    I look forward to having a longer conversation with you at a
    later time.
        Mr. Busby. Thank you.
        Chairman Rubio. Senator Booker?
        [No response.]
        Chairman Rubio. You are muted. Senator Booker? Go ahead,
    Senator Booker.
        Senator Booker. Thank you. Thanks.
        I just want to start by thanking the Ranking and Chair. It
    is clear with the attention and care that this Committee is
    really just trying to focus on what is fair, focus on what is
    really important, and I am just happy to hear a lot of
    conversation of my colleagues today.
        So I want to jump right in. The stakes are so high in this,
    not only for each small business owner and employee, but really
    what we are talking about today deals with the entire economy.
        So a July poll just found that 7 percent, 7 percent of
    minority business owners are very confident they will be able
    to maintain payroll if no further Government relief is
    provided. Just 7 percent have that confidence, and McKinsey
    estimates that black communities enjoy the same level of
    economic activity, if they did enjoy the same level of economic
    activity as white communities, our country would enjoy a 1- to
    $1.5 trillion boost to our overall economy. So this is about
    all of us. It is not just about making sure that African
    American businesses get a fair share, fair opportunity, equal
    opportunity. That is obviously important. We all have a stake
    in this.
        Earlier this week, Leader McConnell proposed a second round
    of PPP in this next package. That is wise. That is important. I
    say vital. But we cannot simply put forward the same policy
    again and expect a different result.
        As I see it, the PPP was successful in getting emergency
    assistance to many small businesses to help cover payroll for a
    short limited time, but there are deep structural challenges
    with the program that prevent it from lifting very small
    minority-owned businesses up. And that is the challenge I have.
        Maybe, Mr. Busby, I can just ask you. Could you comment on
    what I believe are facts? And if you have issues with any of
    these facts, I want you to say it, but number one, unbanked and
    underbanked businesses are disproportionately minority-owned,
    and they are less likely to participate in PPP, given the
    program's reliance on a mainstream banking system.
        For minority-owned businesses that do have actually lending
    relationships and have been able to participate in PPP,
    discrimination actually still exists. If there is any doubt in
    that, the National Community Reinvestment Coalition just
    conducted a blind test, in fact, sending black borrowers for
    PPP and white folks in for PPP and matched all the payer
    testers. So the black and the white, they matched them on all
    the details, but they experienced widely different treatment
    when applying for PPP loans, including different levels of
    encouragement to apply and different products offered by banks,
    just by the color of their skin.
        So we know how the fee structure works. This is hurting
    black businesses. Banks also prefer to originate, say, a $5
    million loan than they would a $250,000 loan, a dynamic that
    really disadvantages small businesses and disproportionately
    black businesses.
        Then, finally, Ms. Busby, the last point I would like for
    you to comment on is that many very small businesses have
    short-run, nonpayroll expenses that exceed the 40 percent
    threshold permitted under PPP.
        All of these things combined, Mr. Busby, would you agree to
    make a serious impact on the fairness that African American
    businesses are facing?
        Mr. Busby. So true, Senator Booker, and thank you for the
    comments.
        Let us start with the title of the program: Payroll
    Protection Plan. Of the 2.6 million African American-owned
    businesses today, 2.5 million have no employees. So they are
    not mom-and-pop. They are mom-or-pop, single-employer firms
    doing great work, not because they are small, but because they
    have 1099s or they have subcontractors or they work
    differently. And the whole idea of young people saying, ``I
    want to create my own business, but I want to have the
    flexibility of being my own business owner. I do not
    necessarily want to be your employee,'' and so that is the way
    of the future.
        And now you are telling black business owners, who have
    grown. If you look over the last 10 years, black businesses,
    particularly black businesses, have been the fastest growing
    sector in the country. We have got to now look at them
    differently than we look at the majority of businesses in
    America because we operate differently, and as it relates to
    credit, again, only roughly 30 percent of black firms have any
    credit relationships. And that has a lot to do with the
    discrimination that we have faced over the decades of years,
    the amount that we pay for the credit when we do get it and the
    way in which we are treated when we go in the bank.
        A couple of things, when I go in the bank, I am never
    called by my last name. When I go in the bank, I never meet a
    bank loan officer or a bank president. When I go in the bank, I
    am only having a conversation with a teller. So for now you to
    tell me to go into a bank and apply for a loan on a Saturday
    where the bank is already closed due to COVID is only going to
    put me that much further behind when it talks about getting the
    capital that I need to make it through the most difficult times
    that we have seen in this country.
        Senator Booker. Right. Then just the study where they were
    sending people in with all the same details, the only thing
    different was a black person versus a white person, and they
    found that while differences, all of these are just
    compounding. That kind of discrimination is just compounding a
    lot of the structural inequities that are already there.
        So if we do not address this with a sense of urgency, that
    McKinsey data I showed you before, our overall economy is
    suffering upwards of a trillion-plus dollars annually, and so
    we have to find ways of getting additional channels of capital
    distribution to very small and minority-owned businesses or we
    will fail our overall economy, not to mention--not just the
    discrimination but compounded, because in a crisis time, so
    often minority entrepreneurs or minority communities face
    greater levels of impact than the overall community.
        So I know there is a lot of good energy on this. This is
    why I am grateful for this hearing and we are having this
    conversation again. I have got a bipartisan proposal, the
    RELIEF for Main Street Act, that I am pleased also has the
    support of my fellow Small Business Committee colleague,
    Senator Young. The bill would send $50 billion to States,
    cities, and counties to seed and scale small business relief
    funds.
        We have seen that the funds that pop up in every State of
    this country, but they are massively oversubscribed. These
    funds are over demand, and so our bill would push funding
    closer to the communities that they serve and allow funds to
    make loans and grants to very small businesses less likely to
    benefit.
        So I just want to thank again the Ranking and Chair for
    this business. This is imminent. We are obviously coming up in
    negotiations for this final COVID package. If we fail in this
    moment, we hurt all of America. We hurt our entire economy. We
    hurt a considerable amount of our entrepreneurs and job makers
    in this country, and we perpetuate structural racism in a way
    that unacceptable. We have to address this.
        Chairman Rubio, thank you very much for the time.
        Chairman Rubio. Thank you.
        Senator Ernst?
        Senator Ernst. Thank you, Mr. Chair, and thanks to all of
    our panelists for being here today.
        We do know that our minority-owned small businesses play a
    critical role in the success of all of our communities, and I
    am glad we are having this conversation about how we can get
    these essential businesses the tools that they need to survive
    this crisis and lead then on the front lines for economic
    recovery.
        Earlier this month, I had the pleasure of meeting with a
    number of local leaders of our black community in Des Moines,
    and one of the gentlemen that I spoke with is Izaah Knox. He is
    the executive director of Urban Dreams, which is a nonprofit
    that is focused on financial empowerment for underserved and
    underrepresented populations, very important.
        I was happy to hear about Izaah's experience receiving a
    PPP loan as well as the positive impact it has had on his
    nonprofit. Of course, relying on technical assistance and that
    longtime relationship that he had developed with the bank, he
    was able to overcome some of those initial obstacles to receive
    the loan, and he stressed the importance, just as we have heard
    today, of having a lender who knows the community and has more
    than just the transactional relationship with the borrower as
    well as the training that he had received in this area.
        So we have discussed a lot about that today, but I did want
    to give a shout-out because I think it has been echoed so many
    times over how important it is that our local lenders, our
    local credit unions have that relationship with those in our
    underserved communities.
        So what I will not do, I will not dive into that because we
    have heard a significant amount about how to develop those
    relationships, and we need to lean on our lenders to work on
    developing those relationships.
        But what I would like to pivot to is an area that I am very
    concerned about with the impact that COVID-19 is having on our
    child care businesses, which has seen the significant declines
    in enrollment and revenue. Of these child care businesses, half
    are minority-owned. Forty-five percent of our child care
    workforce are black, Latino, or Asian, and according to a
    recent survey, the National Association for the Education of
    Young Children, two out of five child care providers and half
    of minority-owned child care businesses are, quote, ``certain
    that they will close permanently without additional public
    assistance,'' end quote.
        So it is critical that we are providing additional relief
    to stabilize these businesses, which is why I recently
    introduced legislation that would create back-to-work child
    care grants, and it would provide 9 months of financial
    assistance for child care programs to make sure that they can
    safely reopen and make it through this pandemic.
        Just very briefly, if I could ask our panelists--and maybe
    if we could go to Marla. If you could answer the impact of
    keeping these child care providers afloat and its impact on
    those minority communities, that would be very helpful.
        Thank you.
        Ms. Bilonick. Absolutely. I did not get to it in my
    testimony because the written comments that I made were longer
    than the time allotted, but one of the client profiles that I
    featured was a Latina-owned child care business in Washington,
    DC, Little Angels Child Development. They currently serve seven
    families and have only had three of those seven families
    confirm that they are considering continuing to use them, just
    given all the considerations around COVID, both from a safety
    point of view and then their own economic capacity to pay for
    the service.
        So, yes, child care is actually one of the six industries
    that has been sort of the highest hit of the PPP loans that we
    have made. It is one of the six highest industries that is
    represented in the portfolio of PPP loans that we have made.
        We have always seen, in the Latino and African American
    community, this to be a very strong and vital business type,
    both for starting and expanding. And it has so many ripple
    effects because it is also affecting the ability of the people
    who use the child care center to work.
        As you may have seen earlier, I had my daughter. My
    daughter is literally sitting next to me right now. I do not
    have child care. My other children are in high school, so they
    are less labor intensive. But that being said, this is a real
    struggle that we are all facing, and the child care centers are
    so essential, not just for the owners and their livelihoods and
    their employees and their livelihoods, but for those of us who
    are trying our very best and in many cases having to work even
    harder than ever while juggling children, homeschooling, all of
    this.
        I think part of the reason why I had my daughter show her
    face is because I think we are all sort of living in this
    fallacy that we are not all really juggling this insane balance
    or lack of balance in this time period, and so I think it is
    excellent that you are bringing that bill to bear.
        Senator Ernst. Yes. Thank you very much. This is all very
    important, one, to be able to provide the services and lending
    necessary for our minority communities, but then also the
    ability to provide care for their little ones as well.
        I struggled with that as a young mother, myself, and so we
    want to make sure that all of our businesses are successful.
    And this is one way that we can do it. So thank you so much.
        Incredibly important topic. I appreciate it, Mr. Chair. I
    yield back.
        Chairman Rubio. Did Senator Hawley drop off?
        [No response.]
        Chairman Rubio. Senator Rosen?
        Senator Rosen. Thank you, Chairman Rubio, Ranking Member
    Cardin. This is really an important, critically important
    hearing to ensure that we are doing all we can to support our
    Nation's minority-owned businesses, and I want to thank all the
    witnesses for everything you do and for spending your time with
    us today.
        Over the past few months, the coronavirus pandemic has
    devastated small businesses in Nevada, across the country, and
    put millions out of work. Many minority business owners in
    Nevada work particularly hard due to lack of access to capital,
    like we have discussed.
        Congress stood up emergency lending programs to fill in
    these gaps. My office has heard countless stories from
    minority-owned small businesses struggling with the SBA's
    Economic Injury Disaster Loan, or EIDL, and one of the common
    complaints is that 1,000 per employee cap on EIDL Advance
    grants. And it is arbitrary $150,000 cap on EIDL loans, a 93
    percent reduction from the $2 million level, we in Congress
    authorized in the CARES Act.
        Small business owners. They have contacted my office
    telling me that $150,000 does not provide the support they
    need, and that without further help, they will likely be forced
    to permanently close their businesses.
        This is why earlier this week, I introduced, along with
    Senator Cornyn, bipartisan legislation to address this problem,
    the EIDL for Small Business Act. This bipartisan bill would
    prevent the SBA from imposing any arbitrary limits on EIDL and
    EIDL Advance, including providing $10,000 grants to all
    eligible small businesses, regardless of their size, but also
    appropriate $100 billion of EIDL and $80 billion for the EIDL
    Advance program.
        So, with that in mind, Mr. Busby, as you know, EIDL Advance
    program, well, it has run out of funds. I know that business
    owners in Nevada feel this is a particular problem.
        Ken Evans, he is the president of our Urban Chamber of
    Commerce in Nevada, and he supports my effort. And I want to
    quote him. He said, ``The EIDL for Small Business Act will help
    our businesses secure much needed capital to counter the impact
    of COVID-19 in the Southern Nevada region.''
        So can you please discuss why it is so important for us to
    recapitalize the EIDL and EIDL Advance programs and why it is
    critical that our smallest and most vulnerable minority-owned
    businesses receive the full $10,000 grant, regardless of their
    size?
        Mr. Busby. Thank you so much, and also thank you to Ken who
    is a member of the U.S. Black Chamber, one of our chamber
    members there in Las Vegas. So, again, tell him thank you.
        For us, again, many of our businesses were not able to
    participate in the Payroll Protection Plan. The title was
    difficult to understand. There was a real concern about ``Will
    I be eligible? Do I have to pay the funds back?'' and the
    transparency was really unclear. So for many businesses, we
    said take the other avenue of the EIDL loan.
        The challenge with the EIDL loan was a couple of things.
    Credit was tied to the EIDL loan program, and so many of our
    businesses were not able to apply or to get funding because
    they did not have the credit score appropriate to be able to
    get funding.
        Secondly, I think there was an either/or conversation for
    most business owners. Either I apply for PPP, or I apply for
    EIDL. For us, now that we understand, all of us understand a
    better clarity of both programs----
        Senator Rosen. Right.
        Mr. Busby [continuing]. we are telling folk, ``It is not an
    either/or. It really should have been about both,'' and for the
    businesses that did not have payroll, the EIDL loan was a much
    more appropriate program for them. And so we are looking for
    that to be funded fully.
        As it relates to the smaller businesses, the microloan
    businesses, they should be able to apply for that in the EIDL
    loan, and it should be up to $10,000. It should not be based
    upon other criteria.
        What we heard was during the first tranche of funds, those
    firms that got it did not have the same accountability,
    criteria, and questions that many of the small business owners
    are now having to face as it relates to the EIDL loan program.
        So we are asking for it to continue to be funded. We want
    to make sure that it is there long term so that our businesses
    can be able to participate.
        Senator Rosen. Thank you.
        I just have one last quick question to everyone on the
    panel. How can we strengthen these relief programs to get the
    money out more quickly? Do you have a suggestion what we can do
    to get the money out more quickly to those who need it?
        Mr. Busby. I will start. I think that putting the money
    directly in the hands of the CDFI that we know fund the
    businesses in those local communities. Nothing wrong with the
    big banks, but again, based upon the financing of those large
    loans, many black businesses were not able to get it from the
    larger banks.
        I think, again, as all of us have said, it really is about
    relationships, and many of our businesses have those
    relationships with the CDFIs. And so I would say fund directly
    to the CDFIs as well as funding the nonprofits that can make
    the microloans and the microgrants, I think, are extremely
    important.
        Thank you.
        Senator Rosen. Anyone else like to give a suggestion to us
    quickly?
        Ms. Estrada. For me, nothing more to add because it is
    clear that we have the relationship, and we know the small
    business owner and where is the need. And we could provide the
    financial allocation because, again, the frustration with the
    disaster loan with SBA, sometimes it is related to the cash
    flow, to credit, like Ron mentioned. We need to be sure the
    credit, if there is something we need to work, just to fix
    credit or wrong information that is in credit.
        So, again, we need to give the support, but the financial
    allocation is key because, if not, there is another emergency,
    there is another situation where they are going to be set to
    fail. And we do not want our small business owner to be setting
    to failure.
        Senator Rosen. Thank you.
        I believe my time has expired. So I thank you all for being
    here. I really appreciate the work you do.
        Thank you, Mr. Chairman and Ranking Member Cardin. I
    appreciate it.
        Chairman Rubio. Thank you.
        So just to close the loop now, to use my turn to talk about
    it, let me just first say that there are three common themes in
    the testimony today. The first is the technical help, the
    assistance with all the technical aspects of understanding who
    qualifies, how much do you qualify for--talking about PPP--and
    where can I go get it. The second is the access, finding the
    places that will actually do it for you, and then the third is
    the long-term capital needs, which I think is a critical
    component of it. And I want to take it in that order.
        So on the first point about the technical help, I actually
    think that the point that was raised earlier, the statistic
    that I had asked Mr. Busby to confirm--70 percent of black-
    owned businesses were denied, 96 percent that got it got less
    than they asked for--is an important point.
        The way PPP works, not to be redundant here, but it is
    important because it is a new program. This thing was thrown
    together. Senator Cardin and I were there, Senators Shaheen,
    Collins, and others. So we had to come up with something that
    could get out there quickly. I assure you had we put all that
    money in through an existing program, we would still be talking
    about 5 percent of the people having gotten it because it is
    just on the infrastructure for something that is brand-new. And
    there was confusion, and the rules were thrown together.
    Something this big and this new is always going to have those
    problems.
        But the way the PPP works is you apply, and once you apply
    and the banks have it and they run it through SBA, the banks do
    not make the decision about getting it or not getting it. They
    cannot deny you a loan, and if they have, then they have broken
    the law.
        What they can deny you is the opportunity to apply, but
    they cannot deny you the loan. They cannot say you cannot have
    a loan. The loan is 100 percent guaranteed by the Federal
    Government. There is literally zero risk for the bank. In fact,
    the bank pushes its cash out the door and within 8 weeks can
    take it to the Fed and sell of the loan, and they make a 5
    percent fee on the smaller loans to begin with on top of it. So
    there is no denial process. You either qualify or you do not
    qualify.
        What they can deny you is the application, ``We are not
    doing any more PPP loans. We do not do loans for people that
    are not clients,'' that kind of thing, or as was cited, I
    think, by Senator Booker, they can discourage you from applying
    at the bank level. And that is one thing.
        On the amount, the amount is automatic as well. They do not
    get to decide, well, you qualify for 50, but we are only going
    to give you 25. If you are approved, you are approved for up to
    two and a half times of payroll. There is no discretion
    involved there. There is no bank decision, again, because it is
    not their money. They are basically acting as the intermediary
    between the Federal guarantee and the pushout.
        So that drives me to the point that it is--I do not know
    this to be true, but I am guessing that a substantial number of
    those that are a denial are actually not a denial of the loan.
    They are a denial of the ability to even apply, that in
    essence, they went to whatever their existing banking
    relationship is, and they told them, ``We are not doing any
    more PPP loans,'' or they did not have ones they could go to.
        Which leads me to the second point that everyone has
    raised, and that is lender access. I can tell you had it not
    been for regional banks--because the way we had to do it is how
    do you do something like this in 6 days. Well, first, you start
    with a baseline of 1,000 preapproved designated lenders who are
    a part of 7(a), and then you build on it. And it has built over
    4,000 additional lenders, basically everyone, FinTechs and
    obviously the push to get CDFIs in later in the game as well.
    It was a process to get to 5,000. It is an important stable of
    lenders.
        But the regional banks, I think it was Senator Ernst that
    raised this. Without the regional banks, this thing would not
    have worked. It is just that simple. What we found out with a
    lot of the bigger banks is if you were a large account, you
    were processed by the commercial division. If you were a
    smaller account, you were processed by the small business or
    the business division, and there are a lot more business
    applications than commercial applications. The commercial
    applications just moved a lot faster.
        The other thing that I think we learned in time through all
    this, is that one of the things that they did do which worked
    really well is that the SBA designated like a 12-hour window in
    which they would only accept applications from smaller lending
    institutions, and it kind of cleared some of the backlog. It
    allowed those to get--because you can imagine. I mean, these
    larger banks had loaded everything up when that second tranche
    of funds became available, and they just smashed the system
    with these automated applications and almost crashed it. So
    that is important.
        By the way, one of the things that I did want to point out,
    because the mention was made of 1099 employees, they actually
    for the first time ever were eligible for this sort of
    assistance. That is something we added into the bill. They
    would qualify for two and a half times whatever it is they
    make. I get it. It does not cover all their needs, but I think
    that goes back to the technical assistance piece, which is
    explaining to people these are your rights, this is what you
    are eligible for, and this is where you can go. So that, I
    think, highlights that. It also highlights the lender
    accessibility.
        And then the third is the long-term figures because all of
    these impediments that I say do not exist or should not exist
    in PPP most definitely exist going to the market and saying I
    want a long-term, low-interest loan to be able to survive as a
    business, and that is a piece that I think we have to address
    and that we have some ideas on, others have some ideas on. But
    it is one we want to make a priority.
        So just on those first two points, the technical assistance
    and the lender access, I think the point has been made
    repeatedly that CDFIs, whether it is not just making them
    eligible to be lenders, but infusing them with the cash to have
    the capital to transfer the funds, because you have to have the
    money. Money does not come from the SBA. It comes from the
    lending institution. So you have to have the cash in your
    accounts to push it, and then 8 weeks later, you could sell it.
    But you have to have it for 8 weeks, and if you do not have
    enough of that money, it limits the number of loans you can do.
    So that has come through loud and clear.
        On the technical assistance piece, all of you had some
    different ideas about what the appropriate organizations are,
    and maybe I could just flesh out with all four of our
    witnesses. Obviously, all of you are a part of that assistance
    process, but if we wanted to make sure that more of these small
    businesses were aware of what they could get and where they
    could get it--because, by the way, one last point I would make
    is that is valid even now.
        We have over $100 billion of PPP money sitting there right
    now that has not been accessed. So there are small businesses
    out there that are eligible for this that are not applying for
    it as we speak, and that is through to August 6th, thanks to
    Senator Cardin extended it to August 6th, right?
        Senator Cardin. The 8th.
        Chairman Rubio. The 8th, August 8th. So they could still do
    it today. So that tells you that there has to be--something is
    blocking between eligibility of people who need it that did not
    get it and getting after. This program has not ended, and now
    we are going to go into round two of it, which is going to be
    more tailored for the kind of businesses we are talking about.
    This impediment is still there.
        So who is it that can help really sort of create the
    awareness and then the guidance to make sure your application
    is filled out right, you are getting what you are entitled to,
    and then on the forgiveness side, you are getting the pieces of
    it forgiven?
        Let me start with Ms. Bayles, who is here now, and then I
    will go just down the list.
        Ms. Bayles. Thank you, Senator Rubio.
        I would like to maybe provide a deeper level into the
    technical assistance that my testimony did not specifically
    say, and that is the role that service providers like myself
    play in all of this discussion.
        So we get the money out quickly to CDFIs. Great. We allow
    flexible terms, longer terms. Great. But if that business does
    not have a relationship with a service provider, a year-round
    service provider that can make sure that all of the application
    requirements you have taken care of--tax, compliance,
    bookkeeping, to have those financial documents--if they do not
    have a relationship with the service provider, access to a
    service provider, this is all for naught, because they are not
    going to have the capacity because they are not looking at
    their numbers. So that is a little bit more than technical
    assistance.
        I am educating you on the information that is out there,
    how you would qualify for the loan, but now I am also
    interpreting your data so that you can remain a healthy
    business and have the capacity to really use those funds to the
    max. That comes from the service provider perspective. That
    comes from companies like mine that are actually sitting down
    with the employee on a year-round basis after you have received
    the money or even in preparation of the money, but you are
    going to have to have a relationship with a service provider
    that can help you maintain the health of your business once you
    get the money.
        So I think I want to add that piece and make sure that
    piece is not lost in this discussion, the vital role that a
    company like mine plays when it comes to just making sense of
    all of this to the business owner so they can stay open and
    really operate successfully.
        Chairman Rubio. And I would add be eligible for
    forgiveness----
        Ms. Bayles. That is right.
        Chairman Rubio [continuing]. because you have to be able to
    document all that.
        Mr. Busby?
        Mr. Busby. Thank you.
        I think that we should and could fund the Minority Business
    Development Agency. We have seen their work. We know that they
    were created to help and support both technical as well as just
    boosting their acumen in reference to business readiness.
        In our letter, we have requested a $10 million financial
    support to MBDA. We want it codified, and we believe that they
    have made direct relationships with many chambers of commerce
    and other nonprofit organizations around the country to ensure
    that those smaller and many times unrepresented firms get
    access to the capital that they need. MBDA is great at the
    technical assistance as well as the relationships, and they
    have boots on the ground through relationships like the U.S.
    Black Chamber and our 145 chapters around the country.
        Chairman Rubio. OK. Ms. Bilonick?
        [No response.]
        Chairman Rubio. Ms. Bilonick?
        Ms. Bilonick. Yes. I would say that I believe the best sort
    of conduits for the technical assistance would be community-
    based organizations and CDFIs. It would not necessarily only
    need to be CDFIs. There are plenty of organizations that
    strictly provide technical assistance and educational services
    to small businesses, but I just think the idea of funding in
    organizations that are entrenched in the community is an
    extremely important priority.
        Chairman Rubio. How are those normally recognized? Are
    those normally (c)(6)s?
        Ms. Bilonick. (c)(6)s? No. (c)(3)s.
        Chairman Rubio. (c)(3)s?
        Ms. Bilonick. Yeah. Or CDFIs.
        Chairman Rubio. Okay.
        Ms. Bilonick. The one thing that I wanted to add, though,
    just to sort of color this is that while we are all saying that
    we have really deep relationships in the community, which is
    true, I think there is an untapped market of businesses that
    could use our services that do not know about the CDFI industry
    at all.
        I was on a call yesterday where someone said it is less
    about what our name it and it is more about what we do. I think
    the name ``CDFI'' is not very easy to digest, and so I think it
    is just an unknown resource that is out there for small
    businesses. I could not tell you how many times we have had
    clients walk in and say had it not been for my neighbor or had
    it not been for my brother, I would have never known that this
    kind of organization exists.
        So in cities like D.C., where we have been for 20 years, we
    do not have that much of a challenge, but I do think there is
    something that could be done. I do not know that it is the role
    of the Federal Government to do it, but there is something to
    be done around broader marketing of CDFIs in general, because I
    believe that there are many, many businesses that could use our
    services, many more than currently use it, that are just simply
    not aware that we are here.
        Chairman Rubio. Okay.
        Ms. Estrada?
        Ms. Estrada. Yes. I have to be in agreement that we need to
    have more awareness about the CDFIs and what we are doing, and
    remember that probably the service that we provide, we work
    really well with the major lenders, with the banks, because our
    mission as well as for this business owner to graduate for the
    traditional lending system.
        Also, with our clients, that they work really very well
    with the MBDA. Also, they work really very well with the SCORE.
    Another, they work really very well with local community
    organizations. So my suggestion, if I may, it should not be
    just to identify only one organization. It should be a network
    of organizations, that we could work well together because,
    like mentioned here today, we need to be all together in order
    to sabotage the economy.
        Chairman Rubio. Okay. Senator Cardin, did you have a
    follow-up?
        Senator Cardin. Yes. Thank you, Mr. Chairman.
        I just really want to thank all four of our witnesses. I
    think this has been an extremely important hearing.
        I just want to make a brief comment. On the PPP program, we
    had some challenges, but we knew from the beginning that there
    were going to be challenges using existing and new lenders. And
    that is why we put the language in there urging the
    administration to make a special effort to deal with the
    underbanked community, and we were disappointed by the initial
    response. We then adjusted the program.
        The Treasury was certainly much more responsive than SBA to
    these issues, and we made certain changes. And it helped the
    underbanked and underserved and minority communities.
        But we also recognized that we needed the EIDL program in
    there. Mr. Busby, I agree with you completely. The EIDL
    program, we anticipated would be a program that could help the
    smaller small businesses, the minority small businesses to a
    greater extent, and you should not have chosen between the PPP
    and EIDL. Both were available, and the EIDL was supposed to
    give you some grant money up fast, quickly, and it didn't. And
    the EIDL program is supposed to be there for filling in the
    gaps, and it was not available. The window was closed, and the
    dollar amount caps were set. Then the information was not out
    there about how these two programs work together, not as an
    alternative.
        So I just mention all of that because as we look at COVID 4
    legislation, the legislation that hopefully we will be
    considering as early as next week, I hope that we can figure it
    in a way to deal with the issues that we have talked about
    today, about making sure that we get it right from the
    beginning, and we do what is right for the underbanked,
    underserved communities that we have seen were at a
    disadvantage at the beginning of the PPP program and were not
    served as well as they should have been under the EIDL program.
        So whether we adjust these programs or we look at the other
    programs that you talked about or we have set-asides, we have
    to make sure that we do a better job from the beginning, and I
    think this hearing has really helped us.
        And I very much appreciate the manner in which the Chairman
    manages our committee, gets the input of all of our members,
    and we all share the same objective, to make sure that all
    businesses in our community are served and there is access to
    capital for those who traditionally have had a much more
    challenging time getting access to capital.
        So thank you, Mr. Chairman.
        Chairman Rubio. Thank you.
        And I took want to thank the witnesses because, I mean, the
    goal coming in here is the following. Set-sides were important
    because it prevents you from running out of money, but I think
    we can all predict that this second round of assistance will be
    much more narrowly targeted at truly smaller businesses and
    those that have suffered tremendously.
        So there will still be pressure on money running out, but
    it will not be as acute as it was the first time. It will still
    be significant. So set-asides are important, but in essence,
    the targeting itself is a set-aside in that way.
        The bigger challenge is we are sitting here saying there
    are still thousands of businesses out there that could be using
    this help and are not accessing it--why is that?--answering
    that question, and I think we have gone a long way today toward
    getting answers to some of those questions. And they are
    complex. Some of it is the organizations that could help
    connect them either do not have the funding or the resources to
    reach them. Some of it is just awareness. We take for granted
    how small businesses, frankly, are just not aware of all the
    stuff that is out there, because they are busy surviving as a
    business, especially in these times.
        So I think today we went a long way toward really
    pinpointing what more can we do. It is not just enough to have
    more lenders. You also have to have people know they exist. You
    have to have people help guide them, how to fill out the
    application, how to manage the funds once they get it so they
    can survive, and how to position themselves for forgiveness as
    well. Otherwise, you wind up in a situation where you actually
    owe some money when you should not be because you could have
    easily met the criteria.
        Again, that is tough to do when the president, the
    treasurer, the CFO, and the employee is the same person, and
    they happen to be the only employee of the company. So the
    smaller you get, the harder that is. So I really do think
    today's hearing has helped us hone in on some of those
    impediments.
        So thank you for your patience. We are two and a half
    hours, as you saw a lot of member interest in this topic. I
    appreciate everything you have told us today. Believe me, it is
    meaningful. I was taking notes and have already passed on a
    bunch of them, if they can understand my handwriting, and then
    I will tell them what it meant.
        And for the members, the hearing record will stay open for
    2 weeks. Any statements or questions for the record should be
    submitted by the 6th of August at 5 p.m.
        With that, this hearing is adjourned. Thank you to our
    witnesses. Thank you. Thank you.
        [Whereupon, at 12:27 p.m., the hearing was adjourned.]

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