[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]




 
                  SUPPORTING SMALL AND MINORITY-OWNED
                    BUSINESSES THROUGH THE PANDEMIC

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

                            VIRTUAL HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,

                       INTERNATIONAL DEVELOPMENT

                          AND MONETARY POLICY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 4, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 117-2
                            
                            
                            
                            
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]             





                           ______                       


             U.S. GOVERNMENT PUBLISHING OFFICE 
43-965 PDF            WASHINGTON : 2021 
                            
                            

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa                     TED BUDD, North Carolina
SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
           Subcommittee on National Security, International 
                    Development and Monetary Policy

                  JIM A. HIMES, Connecticut, Chairman

JOSH GOTTHEIMER, New Jersey          FRENCH HILL, Arkansas, Ranking 
MICHAEL SAN NICOLAS, Guam                Member
RITCHIE TORRES, New York             LEE M. ZELDIN, New York
STEPHEN F. LYNCH, Massachusetts      ROGER WILLIAMS, Texas
MADELEINE DEAN, Pennsylvania         TOM EMMER, Minnesota
ALEXANDRIA OCASIO-CORTEZ, New York   WARREN DAVIDSON, Ohio
JESUS ``CHUY'' GARCIA, Illinois      ANTHONY GONZALEZ, Ohio
JAKE AUCHINCLOSS, Massachusetts      VAN TAYLOR, Texas, Vice Ranking 
                                         Member
                                         
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 4, 2021.............................................     1
Appendix:
    February 4, 2021.............................................    31

                               WITNESSES
                       Thursday, February 4, 2021

Brown-Massey, Nneka, Founder and CEO, Innovative Supplies 
  Worldwide, Inc., on behalf of Main Street Alliance (MSL).......     6
Cunningham, Gary L., President and CEO, Prosperity Now...........     8
Kellogg, Clifton G., Executive Director, C-Pace Alliance.........     9
Sands, Everett K., CEO, Lendistry................................    11
Wade, Holly., Executive Director, Research Center, National 
  Federation of Independent Business (NFIB)......................    13

                                APPENDIX

Prepared statements:
    Brown-Massey, Nneka..........................................    32
    Cunningham, Gary L...........................................    38
    Kellogg, Clifton G...........................................    40
    Sands, Everett K.............................................    42
    Wade, Holly..................................................    55

              Additional Material Submitted for the Record

Himes, Hon. Jim A.:
    Written statement of the Brookings Institution's Metropolitan 
      Policy Program.............................................    60
    Written statement of the Center for Indian Country 
      Development at the Federal Reserve Bank of Minneapolis.....    66
    Written statement of the Center for Responsible Lending......    70
    Op-Ed co-authored by Chairman Himes entitled, ``Opinion: 
      small business owners face inequality during coronavirus,'' 
      dated April 18, 2020.......................................    97
    Written statement of the Opportunity Fund....................    99
    SEC's Annual Report for Fiscal Year 2020 of the Office of the 
      Advocate for Small Business Capital Formation..............   100
    Written statement of the Small Business Majority.............   208
    Joint written statement of the Asian/Pacific Islander 
      American Chamber of Commerce (National ACE), the United 
      States Hispanic Chamber of Commerce (USHCC), and the U.S. 
      Black Chambers, Inc. (USBC)................................   209


                  SUPPORTING SMALL AND MINORITY-OWNED

                    BUSINESSES THROUGH THE PANDEMIC

                              ----------                              


                       Thursday, February 4, 2021

             U.S. House of Representatives,
                 Subcommittee on National Security,
                          International Development
                               and Monetary Policy,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 3:06 p.m., via 
Webex, Hon. Jim A. Himes [chairman of the subcommittee] 
presiding.
    Members present: Representatives Himes, San Nicolas, 
Torres, Lynch, Auchincloss; Hill, Zeldin, Williams of Texas, 
Emmer, Davidson, and Taylor.
    Ex officio present: Representative Waters.
    Also present: Representatives Green and Huizenga,
    Chairman Himes. The Subcommittee on National Security, 
International Development and Monetary Policy will come to 
order. Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee, 
who are not members of this subcommittee, are authorized to 
participate in today's hearing. If you are participating today, 
please keep your camera on, and if you choose to attend a 
different remote proceeding, please turn your camera off.
    Members are also reminded that they are responsible for 
muting and unmuting themselves, and to mute themselves after 
they are finished speaking. Consistent with the regulations 
related to remote proceedings, staff will only mute Members and 
witnesses as appropriate, when not being recognized by the 
Chair, to avoid inadvertent background noise. Members are 
further reminded that all House rules relating to order and 
decorum apply to this remote hearing.
    Before I kick us off, I want to just spend a couple of 
minutes, since this is the maiden voyage of the National 
Security, International Development and Monetary Policy 
Subcommittee. I am just delighted to be joined by French Hill 
of Arkansas as the ranking member. I consider French a good 
friend of many years, and there are really few Members for whom 
I have so much respect in this institution. If you want an 
example of French's commitment to technical policy issues, look 
no further than his Op-Ed in yesterday's Wall Street Journal on 
IMF Special Drawing Rights. I recommend you do that right 
before bedtime.
    As chairman, I have two objectives for this subcommittee. 
First, our subcommittee needs to make progress on, and conduct 
hard-hitting oversight on a wide variety of issues, from the 
financing of violent extremists, to the economic implications 
of a massive Federal Reserve balance sheet. We have a lot of 
work to do. I invite every single member of this subcommittee 
to talk to me or to French about areas that you would like to 
pursue.
    Second, and just as importantly, I would really like to do 
this right. I would like to do this in a way that honors the 
trust that lots of our constituents have put in us and which 
begins to rebuild this institution. As I look at the 
subcommittee membership, with the exception of Mr. Lynch, I 
think I have been in the House longer than anyone else on the 
subcommittee, for 12 years now. So, I am not one bit naive 
about the political pressures that we all face, and frankly, I 
have never seen it so bad.
    As we sit here, many of us are full of anger, suspicion, 
and anxiety. Some of us want revenge for this or that. All of 
us went through something on January 6th that we never imagined 
would ever happen. So, my second objective for this 
subcommittee is to show the Congress and the world that even in 
these days of white-hot emotion, we can make progress, model 
more decent politics, and maybe even build some bridges.
    I have been here for a while, so let me offer just a little 
bit of specific guidance. First, let us be forward-looking. The 
Presidency of Donald Trump will be scrutinized by historians 
for generations to come. We all have views. Hillary Clinton's 
emails and Paul Manafort's friends are catnip for all of us, 
but let us keep that stuff out of a room that is about 
improving national security and conducting oversight.
    Second, let us go after each others' ideas in a way that 
improves them. Let us stay away from motives from personalities 
and from hidden agendas. I will be far more grateful to the 
Republican who changes my thinking with a good argument and 
good facts than I will be to a Democrat who simply agrees with 
me. If you think my ideas are bad, change my mind with facts 
and a good argument.
    Third, and finally, let us respect each other. Whatever 
else we think of each other, a whole lot of people sent each 
and every one of us here to represent them. We have to respect 
that. Like I said, I have been here for a long time. I 
understand why Democrats need to repeat the word, ``QAnon,'' 
and why Republicans need to call me a, ``radical socialist.'' 
Just please, do that in a different room. The chairman does not 
have immense power, but he has discretion in determining when 
language becomes unbecoming, and I really would like to model 
something better than what we have been showing these last 
couple of weeks. I think we have a real chance to lead here, to 
show that there is a better way, and so, let us do it.
    Today's hearing is entitled, ``Supporting Small and 
Minority-Owned Businesses Through the Pandemic.'' I now 
recognize myself for 4 minutes to give an opening statement.
    Welcome to the first hearing of the Subcommittee on 
National Security, International Development and Monetary 
Policy. I am eager to delve into the many subject matters under 
the jurisdiction of the subcommittee. Our purview is broad and 
cuts across a range of issues important to the American people, 
whether it be keeping terrorists from accessing our financial 
system, ensuring that we are leading on the global stage 
through international institutions, or overseeing the Federal 
Reserve's efforts to rescue the economy, these issues have 
never been so important.
    I look forward to working with all of you on those issues. 
As I said before, I am also just delighted to be joined by 
Ranking Member French Hill. I want to, as I said before, 
continue the history of bipartisan work on the subcommittee.
    The issue before us affects all Americans, and I am 
confident that this subcommittee will serve as a model for what 
can be achieved. Today's hearing focuses on an issue that I can 
say for certain every member on this subcommittee has dedicated 
a tremendous amount of time to since the onset of the pandemic: 
Support for small and minority-owned businesses. I see the 
challenges every single day in my very, very diverse district. 
In March, as the sheer scale of the economic challenges before 
us became clear, Congress acted to pass the largest stimulus 
bill ever, the Coronavirus Aid, Relief, and Economic Security 
(CARES) Act, to deliver the desperately-needed aid across the 
economy.
    In December, we again came together to continue that 
support. However, as the stimulus made its way into the 
economy, many of us became concerned about the undeniable fact 
that not all communities were equal beneficiaries of that aid. 
In April, I co-authored an Op-Ed with Connecticut's Treasurer 
Sean Wooden, arguing that more needed to be done to ensure that 
aid was making its way to minority-owned businesses as well as 
businesses in traditionally underserved and underbanked 
communities. And without objection, I will enter that Op-Ed 
into the record.
    In this hearing, the subcommittee will explore the 
successes and the failures of the systems we set up to help 
small and minority-owned businesses weather this pandemic. It 
is vital that we understand why aid to minority-owned 
businesses was delayed, while other well-connected businesses 
that were hurting the least made their way to the front of the 
line. Our efforts today are not focused on laying blame, but on 
helping lay the groundwork for how we can do better going 
forward, because the issues we are addressing here today will 
not simply disappear after we defeat this virus.
    I would like to profoundly thank our witnesses for being 
here. I am sorry we could not welcome you more formally and in 
person, but we are going to really enjoy your testimony as we 
wrestle with these questions. At this point, I would like to 
yield to Ranking Member French Hill.
    And, Ranking Member Hill, since I took more than my fair 
share of time up-front, you will get the same discretion.
    [laughter]
    Mr. Hill. I thank my friend from Connecticut, and I want to 
say what a treat it is to refer to Jim Himes as, ``chairman'' 
of the subcommittee. Not that those of us on the Republican 
side of the aisle do not want the word, ``chairman'' as a 
prefix to our names, but we look forward to working with you 
and we appreciate the attitude which you have and the critical 
support you delivered as a member of the Intelligence 
Committee, and a long-time supporter of America's national 
security. Representative Steve Lynch will certainly report that 
this subcommittee was transformed from a task force into a 
subcommittee the year that Mr. Emmer, Mr. Zeldin, and I came 
into the House. And I, actually for all 6 years, have been very 
impressed with the original Terrorism Task Force, that is now 
the National Security Subcommittee, and, as you pointed out, 
the bipartisan nature of the subcommittee.
    And I want to thank the Republicans in the last Congress 
for being creative and collaborative with their Democratic 
colleagues. We got a number of good bills out of this 
subcommittee, through the Full Committee, and across the House 
Floor, that countered China's debt trap, lack of transparency, 
and their accreditor status in the Third World. It is very 
important to a lot of Members on both sides of the aisle to 
shine a light on that, as well as holding them accountable in a 
number of ways. So, I thank all of my colleagues on both sides 
of the aisle for their work on this subcommittee.
    I also would say that Mr. Himes and I share this interest 
in international affairs, and we know that this subcommittee is 
a major partner in America's strategy, both in sanctions and 
identifying ways to cut off terrorism finance, and 
collaboration on combating transnational crime around the 
world. And that issue has not gone away, even though the 
subcommittee, in the last Congress, was more focused in the 
international finance arena and in China's emerging rival 
status with the United States.
    So again, let me echo what the chairman said, which is to 
encourage Members on both sides of the aisle to visit with me 
on the best ideas you have for both hearings and for 
legislative priorities.
    Today, we will be discussing the State Small Business 
Credit Initiative (SSBCI), which would reintroduce a program 
that was created back in 2010 after the financial crisis. It is 
aimed at providing additional funding to assist small 
businesses. It seems to me that this is a similar hearing to 
the one this subcommittee held last summer on H.R. 6918, the 
Paycheck Recovery Act, that would require the U.S. Treasury to 
provide grants to small businesses.
    As I mentioned last summer, and it bears repeating now, 
these types of programs, in my view, should not be moving 
through this subcommittee. Instead, the House Small Business 
Committee should be analyzing the state of all aspects of 
financing for small businesses, including the State Small 
Business Credit Initiative.
    As a long-time supporter of small business, and as someone 
who previously spent a part of 4 decades starting businesses, I 
am not denying the importance of ensuring that small businesses 
remain operational. I am simply stating that our subcommittee 
is better suited to discussing the issues squarely in our 
jurisdiction, such as items just mentioned by Chairman Himes 
and myself: threats from China; the annual oversight of the 
Committee on Foreign Investment in the United States (CFIUS), 
which we were supposed to do, and even in the last Congress, 
whenever accomplished, it, and obviously, the importance of 
monetary policy oversight, just to name a few. Instead, we're 
using our very limited hearing time to discuss this program.
    As of today, the Federal Government has authorized nearly 
$3.8 trillion in COVID-19 relief. Of that, about a trillion 
dollars is aimed at business relief. Specifically, the Paycheck 
Protection Program (PPP), the largest of the Federal small 
business programs, has allocated $650 billion, $100 billion of 
which is still available, including for first-time users and 
second-chance PPP users.
    I was reviewing the State Small Business Credit Program 
that was set up during the Obama Administration. It was about 
$1.5 billion, and not all of the funds ended up being allocated 
over the years of the program. It had very limited oversight 
and did not seem to achieve its proposed goals, based on 
looking at the Government Accountability Office's (GAO's) 
summary of this program.
    In my home State of Arkansas, I contacted the Arkansas 
Development Finance Authority, which oversaw this program. I 
spoke to the individuals who were responsible for implementing 
it, and was told, ``It was not a pleasant experience.'' And as 
they noted to me, it did not save or create a single job during 
the term of them attempting to use it in my home State.
    As many of us know, the success of the PPP program from 
last year's CARES Act had kinks and faults, as does any start-
up program that the government has. Something was created, and 
immediately, in 2 weeks, it began extending loans to small 
businesses. However, over the last 10 months, many of those 
flaws have been corrected and businesses are receiving the 
benefits of the Paycheck Protection Program.
    So another thing I am very cautious about today, as we 
start this hearing, is trying to initiate another program with 
a start-up phase, and changes, and notices of rulemaking, and 
frequently asked questions that would potentially complicate 
things, and delay our small businesses' further access to 
funds, particularly when we have so much at stake, now that we 
have advanced in the Economic Injury Disaster Loans (EIDL) in 
the Paycheck Protection program, two big, well-funded 
successful programs as a part of the CARES Act, that are in the 
jurisdiction of the Small Business Committee.
    And with that, Mr. Chairman, I yield back, and I look 
forward to the discussion today.
    Chairman Himes. Thank you, Mr. Hill.
    The Chair now recognizes the Chair of the Full Committee, 
the gentlewoman from California, Chairwoman Waters, for one 
minute.
    Chairwoman Waters. Thank you, Chairman Himes. I wanted to 
be here to congratulate you on hosting your first subcommittee 
hearing this Congress, and on such an important and urgent 
topic. Small and minority-owned businesses are the heart of our 
economy. Unfortunately, the COVID-19 pandemic has caused heavy 
financial and public-health pressures upon them, so reviving 
programs like the State Small Business Credit Initiative, which 
provides specific programs for the hardest-hit businesses like 
restaurants, could provide targeted relief. This hearing must 
also focus our attention on minority-owned businesses, whose 
historical challenges with accessing capital and assistance 
programs have been exacerbated by this pandemic. Thank you for 
the minute. I yield back the balance of my time.
    Chairman Himes. Thank you, Chairwoman Waters.
    Chairwoman Waters. You are welcome.
    Chairman Himes. Today, we welcome the testimony of our 
distinguished witnesses. In order, Nneka Brown-Massey, founder 
and CEO of Innovative Supplies Worldwide, Inc., testifying on 
behalf of the Main Street Alliance; Gary Cunningham, president 
and CEO of Prosperity Now; Cliff Kellogg, executive director of 
the C-PACE Alliance; Everett Sands, CEO of Lendistry; and Holly 
Wade, executive director of the Research Center at the National 
Federation of Independent Business (NFIB).
    Witnesses are reminded that your oral testimony will be 
limited to 5 minutes. You should be able to see a timer on your 
screen that will indicate how much time you have left, and a 
chime will go off at the end of your time. I would ask that you 
be mindful of the timer, and quickly wrap up your testimony if 
you hear the chime, so that we can be respectful of both the 
witnesses' and the committee members' time. And without 
objection, your written statements will be made a part of the 
record.
    Ms. Brown-Massey, you are now recognized for 5 minutes to 
give an oral presentation of your testimony.

 STATEMENT OF NNEKA BROWN-MASSEY, FOUNDER AND CEO, INNOVATIVE 
  SUPPLIES WORLDWIDE, INC., ON BEHALF OF MAIN STREET ALLIANCE 
                             (MSA)

    Ms. Brown-Massey. Chairman Himes, Ranking Member Hill, and 
members of the subcommittee, thank you for the opportunity to 
testify today on the need to better support minority-owned and 
smaller businesses like mine. I am honored and humbled to speak 
before your esteemed panel and to be alongside my distinguished 
fellow witnesses. And more importantly, thank you for putting 
this hearing topic front and center at the start of the 117th 
Congress, and demonstrating your strong commitment to helping 
the small business community.
    My name is Nneka Brown-Massey, and I am the founder and CEO 
of Innovative Supplies Worldwide, a school supplies design 
company based in Tulsa, Oklahoma. I am also speaking today as a 
member of the Main Street Alliance, a national network of more 
than 30,000 small business owners who, like me, are eager to 
share their perspectives on critical public policy issues, 
especially as we try to find a way out of this once-in-a-
lifetime pandemic.
    In July of 2016, less than 2 months after finishing my 9-
year career as a human resources specialist in the United 
States Army, I launched Innovative Supplies Worldwide, a 
stationery manufacturing company. In the first 24 hours of my 
e-commerce launch, my brand-new business had sold more than 
8,000 stationery notebooks globally. I received numerous awards 
and was accepted into entrepreneurship programs. The future 
could not have looked better or brighter for my start-up 
company.
    Then, COVID-19 hit us all last spring, and in my case, 
caused consumers to shift to online classes. With the 
transition to remote and digital learning, demand for my 
physical product dipped and my sales dropped more than 60 
percent. When relief programs opened last April following the 
passage of the CARES Act, I immediately applied for the 
Economic Injury Disaster Loan (EIDL) advance grant. However, 
after months of radio silence, I was finally told in June by a 
Small Business Administration (SBA) representative that I had 
been denied for vague credit reasons. I was forced to establish 
a new relationship with a new bank when I tried to apply for 
the PPP, because the bank I previously worked with closed their 
only branch in my town, only to be told by the new bank once I 
had opened my account, that they would not accept new PPP 
applications at the time.
    To compound matters, I am a service-disabled veteran with 
concussion complications from airborne missions with the 82nd 
Airborne Division. The injuries I sustained have impacted my 
ability to manage and process large amounts of paperwork 
without disability accommodations or support. The extensive and 
complicated loan application process required to access credit 
and capital became overwhelming for me.
    As profits dissipated and capital dried up for my 
struggling business, I resorted to using disability benefits 
from the Department of Veterans Affairs for my traumatic brain 
injuries and PTSD. It was not too long before my car was 
repossessed by Fifth Third Bank. With what little faith I had 
left, I applied for and was accepted into the Tulsa Remote 
Program, which pays remote workers $10,000 to move to Tulsa, 
Oklahoma, for a year. However, just to pay for the move, I had 
to use my tax refund and my stimulus check.
    What my experience underscores are the very real barriers 
that exist when it comes to accessing capital and credit. As a 
person of color, living in a rural area, who was not well-
connected to the banking industry, I am here today not just to 
share my story, but to advocate for other small business owners 
who could just as easily be sitting on this panel. What would 
have helped me the most, and could still help me now, is a 
flexible, responsive, direct grants program. Even just a $5,000 
or $10,000 grant could change the course of my business and my 
life.
    In closing, I am grateful to appear before this committee 
today. Despite experiencing the highest of highs and the lowest 
of lows, at the end of the day, I am an entrepreneur trying my 
hardest and doing my best to succeed. I have proudly and 
dutifully served my country, sought the same opportunities that 
others have been afforded, and done whatever was necessary to 
achieve financial freedom, including packing my bags, moving to 
a foreign place, and securing my daughter's well-being by 
making the incredibly painful decision to send her to be with 
her father in another State rather than force her to share the 
same sacrifices I am making.
    Despite the setbacks I have been dealt, I look forward to 
resuming the business mentorship I was providing to my 
employees, many of whom are at-risk youth, training them on 
inventory software, social media marketing, resume building, 
and other skill sets. Despite everything I have been through, I 
still believe in myself and the potential of future 
entrepreneurs.
    I hope that you and your colleagues in Congress will make 
the most of this uniquely challenging yet historical moment in 
time to learn from the past and rethink entrepreneurship in 
this country. There are a number of lessons from 2020 and the 
uneven implementation of COVID relief programs for small 
businesses. My experience is one data point that could be built 
into a more intentional and systematic effort to collect 
quality disaggregated data about minority-owned small 
businesses.
    There should be a thorough examination of SBA lending, 
technical assistance, and other programs to assess their 
effectiveness for supporting very small businesses. Consumer 
protections should be expanded to small business borrowers--
    Chairman Himes. Ms. Brown-Massey? Your time has expired.
    Ms. Brown-Massey. Thank you.
    [The prepared statement of Ms. Brown-Massey can be found on 
page 32 of the appendix.]
    Chairman Himes. We will have an opportunity to finish up 
during the period of questioning. But thank you for your 
testimony, Ms. Brown-Massey.
    Mr. Cunningham, you are now recognized for 5 minutes to 
give an oral presentation of your testimony.

STATEMENT OF GARY L. CUNNINGHAM, PRESIDENT AND CEO, PROSPERITY 
                              NOW

    Mr. Cunningham. Chairman Himes, Ranking Member Hill, 
Chairwoman Waters, and members of the subcommittee, thank you 
for inviting me here today. It is such an honor. I really 
appreciate it.
    My name is Gary Cunningham. I am the president and CEO of 
Prosperity Now, a national nonprofit that creates, identifies, 
tests, and scales new and existing solutions that address the 
root causes of the racial economic injustice in America. I came 
to Prosperity Now after serving as the president and CEO of a 
Community Development Financial Institution (CDFI) and a 
Minority Business Development Agency (MBDA) in Minnesota. 
Therefore, I have had experience working hands-on to help 
entrepreneurs of color succeed.
    I would like to start today by just setting the stage. 
According to the data from the U.S. Senate Committee on Small 
Business and Entrepreneurship, over the last 10 years, minority 
businesses accounted for more than 50 percent of all new 
business starts in the United States and created more than 4.7 
million jobs. There are more than 4 million minority-owned 
companies in the United States with annual sales of close to $7 
billion. That is a sizable footprint. Ensuring their financial 
health as employers and economic contributors, therefore, is 
critical.
    It is critical that we develop specific approaches to help 
minority businesses grow and scale. This will require targeted 
programs designed to serve those who have historically been 
left out.
    For instance, the Paycheck Protection Program, a universal 
program with outstanding goals, did not reach all businesses 
equally. Many minority business owners were left out of the 
process because the universal program was not targeted to their 
specific needs. For example, many minority-owned businesses do 
not have relationships with commercial banks and other 
mainstream financial institutions. We are losing economic 
productivity and trillions of dollars in GDP when we do not 
fortify and support for a strong ecosystem of minority business 
enterprises.
    In fact, Black-owned businesses were the fastest-growing 
business segment in our economy before COVID-19 hit. Between 
February and May of last year, however, a whopping 41 percent 
of Black-owned businesses were shuttered. The impact of COVID 
on minority businesses is dire and threatens to undo the growth 
we have seen in the last decade.
    I must be clear: I am not here to argue for handouts. I am 
here to argue that targeted, strategic investments to minority 
businesses will yield significant returns in the form of 
increased home ownership, jobs, and tax revenue. From my 
experience in working with minority entrepreneurs, access to 
technical assistance is the secret sauce of success. Trusted 
guidance in the form of technical assistance is needed to grow 
and scale these businesses. Many need investments in 
infrastructures, simple things like bookkeeping and accounting 
support, or help filling out a loan application. The current 
system with MBDA and SBA is needed, but we need more. We need 
to increase the level of technical support and assistance and 
capital going to minority businesses.
    Despite all of these barriers, entrepreneurs of color are 
making a difference in this country. They are at the forefront 
of closing the racial wealth gap. We are facing a moment of 
true reckoning. There is so much at stake at this moment. 
Giving minority businesses the tools to survive can result in 
stronger employment and economic outcomes, a healthier 
trajectory for communities across the country, and a chance to 
truly close the growing racial wealth gap. Closing this gap, 
this racial wealth gap, is not just a moral argument. It is 
vital to establishing a sound economic future for this country, 
and it could increase the GDP by $1 trillion to $1.5 trillion 
over the next decade.
    Thank you for giving me the opportunity to speak today. I 
look forward to your questions. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Cunningham can be found on 
page 38 of the appendix.]
    Chairman Himes. Thank you, Mr. Cunningham.
    Mr. Kellogg, you are now recognized for 5 minutes to give 
an oral presentation of your testimony.

  STATEMENT OF CLIFTON G. KELLOGG, EXECUTIVE DIRECTOR, C-PACE 
                            ALLIANCE

    Mr. Kellogg. Thank you, Chairman Himes.
    Good afternoon. My name is Cliff Kellogg. I commend the 
subcommittee for holding a hearing on this important topic. I 
have worked on these issues in many professional capacities 
during my career from South Shore Bank to City First Bank in 
Washington, D.C. However, I believe the subcommittee invited my 
testimony today due to my experience as the Director of the 
State Small Business Credit Initiative (SSBCI) during the 
Obama-Biden Administration.
    My testimony is in two parts: first, I will highlight some 
of the most significant outcomes of SSBCI; and second, I will 
offer a few ideas on how a reauthorized SSBCI could extend its 
impact to create even more benefit for minority-owned 
businesses and disadvantaged communities.
    In 2010, lawmakers designed SSBCI with one overriding goal: 
To stimulate more private sector lending and investing. Then, 
as now, dire economic conditions made lenders and investors 
extremely cautious. Just yesterday, the Federal Reserve Banks 
released their Small Business Credit Survey showing that only 
13 percent of African-American-owned firms received the full 
amount of financing they sought, while their White-owned firm 
peers met their financing needs more than 3 times as often.
    SSBCI's strategy is simple: Provide States with funds to 
share in the risk of making loans and investments. SSBCI 
required at least one dollar of private capital at risk for 
every Federal dollar, with the goal of achieving ten-to-one 
leverage over the life of the program.
    The specific outcomes were as follows. In 2010, SSBCI 
awarded $1.5 billion to programs in all 50 States, Washington, 
D.C., and the Territories. The result was over 21,000 new loans 
and investments exceeding $10 billion. On average, businesses 
supported by SSBCI employed 11 people, though half of the firms 
employed 3 people or less. Clearly, the program reached small 
firms.
    Forty-three percent of the loans or investments were 
located in low- or moderate-income communities, and 41 percent 
went to women-owned or minority-owned businesses. Again, it's a 
good sign that SSBCI reached underserved communities.
    So, what makes SSBCI distinct? First, SSBCI gave States the 
flexibility to design their program to suit local conditions. 
States could fund startups and expansions, manufacturing loans, 
and microloans. Some States chose to provide additional 
collateral. Other States funded reserve accounts for a 
portfolio of loans. States could operate their program directly 
or they could hire a contractor. Because local conditions 
varied from State to State, flexibility in design made SSBCI 
successful.
    Second, SSBCI enabled lenders to make larger loans or make 
loans with more favorable terms than they would have made 
otherwise. SSBCI shared in the risk, but the private sector 
always had the greatest skin in the game.
    SSBCI demonstrated that a well-run program reaches a vast 
range of small businesses, including underserved businesses. 
Again, the data from version 1 of SSBCI are promising. As the 
committee considers reauthorizing SSBCI with higher 
appropriations, it is clear that the States have the capacity 
to scale up their SSBCI programs, and that alone will be a new 
benefit, a larger benefit to small businesses. However, more 
can be done in Version 2 of SSBCI.
    First, States should be required to include outreach 
through CDFIs and Minority Depository Institutions (MDIs). And 
they should be authorized to collect demographic information on 
the small businesses they serve.
    Second, the committee might consider increasing the amount 
allocated to States or run a competitive round for States, 
provided they reach an above-average share of minority-owned 
firms. The committee might lower the required leverage for 
these high-performing states.
    Third, States should be asked to fund technical assistance 
to small businesses from their allocations to ensure equitable 
access and optimum use of these resources.
    And finally, the committee might consider allowing multi-
State applications, or in the alternative, running a 
competitive round that awards funds directly to those lenders 
with a multi-State footprint. A multi-State footprint is 
especially important for equity investment programs that target 
underserved communities.
    In summary, Version 1 of SSBCI clearly supported small 
business economic recovery. Reauthorizing a larger SSBCI with 
enhancements to reach underserved communities would be a 
valuable part of helping small and minority-owned firms recover 
from this pandemic. I welcome any questions you may have. Thank 
you very much.
    [The prepared statement of Mr. Kellogg can be found on page 
40 of the appendix.]
    Chairman Himes. Thank you, Mr. Kellogg.
    Mr. Sands, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

         STATEMENT OF EVERETT K. SANDS, CEO, LENDISTRY

    Mr. Sands. Good afternoon, Chairman Himes, Ranking Member 
Hill, and Chairwoman Waters. Thank you for your interest in my 
perspective on today's topic, which has been an every-day 
conversation for so many of us over the past 10 months.
    My name is Everett K. Sands, and I have more than 20 years 
of experience in lending. For the past 5 years, as founder and 
CEO of Lendistry, my focus has been on responsible lending to 
underserved small businesses, particularly those owned by 
minorities, women, veterans, and people in rural areas. 
Lendistry is a minority-led CDFI, Fintech CDFI, a member of the 
Federal Home Loan Bank of San Francisco, and an SBA lender. We 
are a signatory on the Small Business Borrowers' Bill of 
Rights, and we also have a nonprofit technical assistance 
affiliate. Lendistry rates second nationwide in SBA Community 
Advantage Loans, which range from $50,000 to $250,000.
    Community advantage is the only category of SBA loan in 
which Black and Latinx borrowers combined account for more than 
10 percent of annual loan buy-in. More than 73 percent of 
Lendistry's total outstanding principal loan balance is with 
minority- and women-owned business borrowers.
    Lendistry's focus on small and minority-owned businesses, 
and our ability to efficiently process high volumes of 
applications has enabled us to make an impact during this 
period of urgent need. By the one-year anniversary of COVID 
lockdowns, Lendistry wealth has deployed nearly one billion 
dollars to nearly 70,000 small businesses in PPP loans and 
government grants.
    Prior to the pandemic, Lendistry funded millions in SSBCI-
backed loans. The program gave us flexibility in our 
underwriting criteria without sacrificing our credit and risk 
management. But we could have originated more and made more 
impact if certain barriers were lowered.
    Before discussing specific recommendations for the SSBCI 
legislation, I would like to discuss four urgent objectives and 
opportunities for SSBCI that I believe should frame the 
subcommittee's work in this matter.
    First, SSBCI must clearly answer the urgent need of small 
and minority-owned businesses for capital to help them survive, 
stabilize, and recover through the pandemic in a way that 
recognizes the disparate impact of the pandemic on minorities.
    Second, SSBCI should be robust enough to act as an engine 
for inclusive national economic expansion. Whenever there are 
massive economic shocks, from Hurricane Katrina to the Great 
Recession, the driving force of recovery and job creation comes 
from new business formation. The decisions this subcommittee 
and your colleagues make concerning the size and the design of 
the program will make a difference. There is a positive 
correlation between businesses that can have a significant 
multiplier effect on the economy and businesses that require 
capital.
    I want to emphasize inclusive expansion. Starting and 
owning a business is one of the most effective paths for 
minorities to close a wage and wealth gap, while minority-owned 
businesses face well-known disparities in accessing capital.
    The third guiding objective for the SSBCI is the 
opportunity to draw more responsible lenders. The program's 
size and features should make it so attractive to banks and 
community lenders that they come full-force into the small end 
of the lending market, providing businesses with a welcome 
alternative to predatory lending.
    Finally, SSBCI should enable CDFIs to have a maximum 
impact. As we have seen during the PPP, CDFIs made efficient 
access to capital and to geographies. But in the original 
program, it was very difficult for the CDFIs to be where the 
available funds were, leaving small businesses to suffer as a 
result.
    I will now refer you to the section of my written testimony 
Roman Numeral V, for an expanded discussion on six specific 
recommendations for the legislation. Here's a summary. Number 
one, the funding level for SSBCI should be at least $10 
billion. Number two, the portion of authorized funds dedicated 
to minority-owned businesses should be 60 percent.
    Number three, at least 5 percent of authorized funds should 
be dedicated to technical assistance and certain specific areas 
of pronounced need. Number four, the legislation should 
automatically authorize CDFIs, SBA-approved Community 
Development Corporations, and Business Development Corporations 
to offer SSBCI-supported loans nationwide.
    Number five, for every program supported by SSBCI, loans to 
minority-owned businesses should qualify for an additional 10 
percent of guaranteed coverage. And finally, there should be 
mechanisms to rescind funds from States that failed to deploy 
their allocated capital expeditiously, and redeploy those funds 
to States operating those programs effectively.
    To close, a robust reauthorization of SSBCI is necessary to 
meet the dual imperatives to stabilization and recovery, and 
new business formation and growth. It is vital that SSBCI is 
large enough for both needs. I want to thank the Chair and the 
subcommittee members, and I am happy to see Congressman Lynch 
on this subcommittee.
    [The prepared statement of Mr. Sands can be found on page 
42 of the appendix.]
    Chairman Himes. Thank you, Mr. Sands.
    And Ms. Wade, you are now recognized for 5 minutes to give 
an oral presentation of your testimony.

 STATEMENT OF HOLLY WADE, EXECUTIVE DIRECTOR, RESEARCH CENTER, 
       NATIONAL FEDERATION OF INDEPENDENT BUSINESS (NFIB)

    Ms. Wade. Good afternoon, Chairman Himes, Ranking Member 
Hill, and distinguished members of this subcommittee. Thank you 
for the opportunity to testify today on supporting small and 
minority-owned businesses through the pandemic. NFIB is the 
leading small business advocacy association, founded in 1943 as 
a nonprofit, nonpartisan organization. NFIB's mission is to 
promote and protect the rights of its members to own, operate, 
and grow their business. NFIB proudly represents approximately 
300,000 members nationwide from every industry and sector.
    The NFIB Research Center promotes greater understanding of 
small business and the conditions that impact it. The Center 
produces and disseminates various surveys and studies on small 
business, focused on areas related to business operations and 
public policy effects. The Research Center has conducted a 
series of surveys over the last 10 months assessing the impact 
the pandemic has had on small business owners. These surveys 
assess economic conditions in their local area, utilization of 
Federal and State loan and grant programs as well as tax 
credits designed to help small business owners survive the 
crisis.
    From the onset of the crisis, small business owners have 
struggled to adjust to rapidly changing economic conditions. 
The initial months were particularly damaging to the small 
business sector as historically large numbers of small 
businesses closed temporarily and permanently. Those businesses 
that remained open had to navigate strict business operating 
restrictions, and dramatic shifts in consumer spending, which 
often forced owners to use their own limited savings to keep 
their business open while trying to access funding through the 
Paycheck Protection Program (PPP).
    The PPP has been extremely popular with small business 
owners, with 76 percent of NFIB members receiving a PPP loan in 
2020. However, it is not without significant complications and 
stress among small business owners who are desperate for 
immediate financial assistance. The initial challenges for many 
were immense. Owners were often confused on eligibility, how to 
calculate loan amounts, and how to spend their loan dollars to 
maximize forgiveness. NFIB quickly became an educating force 
for small business owners trying to reach as many as possible 
to help them navigate the program, but also reach those 
populations of owners, mostly non-employers, to let them know 
that they, too, were likely eligible to participate.
    We also heard from small business owners struggling to find 
lenders to accept their PPP application. We know that small 
banks and community banks have significantly declined in recent 
years, and that became a clear issue in accessing the PPP 
program. The initial months were difficult. But as the Paycheck 
Protection Program evolved, and Congress allocated more money 
to the program, and more lenders were eligible to accept 
applications, small business owners were generally able to 
access a loan.
    The first round of PPP was very effective in helping small 
employers maintain payroll as well as paying other eligible 
expenses that were critical in business operations. The 
reopening of the PPP loan program last month appears to be 
operating much more smoothly. Lenders and small business owners 
are far more familiar with the program, and the allocation of 
funds was staggered at the beginning to better serve first 
those populations of small business owners who found the 
program extremely difficult to access during the initial 
rollout last year.
    Small business owners are eager to get back to business, 
but it will be some time before those more public-facing 
businesses--restaurants, retail, and many in the service 
sector--are able to fully operate again. These small businesses 
will likely need additional support so that when the economy 
fully reopens, they are in a strong position to take advantage 
of returning customers and consumer spending.
    Small business owners often have limited time and resources 
to find, navigate, and access target-assistance programs. Most 
small business owners are familiar with the PPP, and the SBA's 
Economic Injury Disaster Loans, another program, that despite 
its challenges, is often very effective in helping keep small 
business owners afloat. I would encourage members of the 
subcommittee to keep these programs front and center and focus 
resources on reaching out to those communities still struggling 
to access the programs. The PPP loan program is currently the 
best way to help those small business owners who are still 
negatively impacted by the pandemic.
    In going forward, the SBA's EIDL and 7(a) loan programs 
will be valuable resources for those needing additional 
financing not otherwise available to them. Thank you for having 
me here, and I yield back. Thank you.
    [The prepared statement of Ms. Wade can be found on page 55 
of the appendix.]
    Chairman Himes. Thank you very much, Ms. Wade.
    I now recognize myself for 5 minutes for questions. And Mr. 
Cunningham, I am going to start with you, but I am going to 
invite the other witnesses to add on to this. The question of 
technical assistance has sort of permeated all of your 
presentations, and I saw in my own district what happened with 
less sophisticated businesses as they were asked to approach 
banks and did not necessarily have banking relationships.
    Mr. Cunningham, what would technical assistance actually 
look like on the ground? I remember when the PPP was rolled 
out, there was an absolute panic, in the sense that banks were 
getting the guidance 24 hours before they had to open for 
business. So I would love to have you paint a picture of what 
effective technical assistance would look like.
    Mr. Cunningham. Yes. Thank you, Mr. Chairman. I would start 
by saying that effective technical assistance really begins 
with a trusted relationship between the person or the 
organization providing that technical assistance and the 
business. And we call it trusted guidance for that reason 
because many of the minority businesses do not have that kind 
of resource to actually buy technical assistance like many 
other businesses do.
    So by providing that technical assistance, what it looks 
like on the ground is, one, going through completely the 
financial situation of that business, looking at them from a 
strategic perspective of where they are trying to position 
their business, and it is also getting down in the nitty-gritty 
of what are their support structures such as accounting, such 
as issues of marketing, such as their ability to actually seek 
new markets for their products or services. And so,technical 
assistance experts actually help that business figure out what 
their current path is, restructure their loans or other 
financing if necessary, engage them with a formal bank in a 
formal banking relationship, or a deep relationship with a CDFI 
or others. So it can take different forms, but it is all about 
starting a business off in one place and then moving them 
actually to a growth trajectory over time or creating some 
stability for that business so that business can survive in 
this pandemic that we have.
    Chairman Himes. And, Mr. Cunningham, before I open it up to 
the other witnesses to opine, I am still not 100 percent clear 
on who would actually be providing--are we talking about people 
inside banks? Are we talking about the SBA? SCORE? Who would 
actually provide that technical assistance?
    Mr. Cunningham. Yes. Mr. Chairman, there are several 
different ways that can happen. One is that the Minority 
Business Development Agency has over 40 centers throughout the 
country that actually provide deep and technical assistance. 
There are also community-based organizations that are 
nonprofits in those communities that provide technical 
assistance. CDFIs provide a lot of that technical assistance.
    Most of the time with the larger banks and others, they do 
not provide those types of services, and so part of the reason 
why minority businesses come to alternative lenders such as 
Lendistry and others is because they actually have a trusted 
relationship, and that organization is located directly in 
their community. And so, it creates a dynamic of, you are not 
going to open up your books to everybody. You are going to open 
it up to folks that you actually have a relationship with and 
who are trying to change.
    So, those are the institutions that are in community, and 
it could be different in Indianapolis than it is in Minneapolis 
in terms of the ecosystem of supports, but they all are doing 
the same thing.
    Chairman Himes. Thank you. Thank you, Mr. Cunningham.
    I have just 60 seconds left, so let me invite the other 
witnesses, if they have views on how we might be more effective 
on technical assistance, to offer their thoughts?
    Ms. Brown-Massey. Chairman Himes, I do have one that I 
would like to suggest. I know this meeting was held virtually, 
but I actually did travel to New York for this meeting. And 
when I was meeting with a massage therapist inside of the Tulsa 
Airport, she said that she was unable to access the loans as 
well because she did not know how to classify her income as a 
massage therapist inside of an airport right now during these 
times. So, I ended up giving her extra money, on top of the 
payment, so that I could help her in some way to get groceries, 
because she was not getting the income that she once would have 
right now.
    Chairman Himes. Thank you. Thank you, Ms. Brown-Massey. I 
am pretty much out of time. The Members are aware of the fact 
that we have an unanticipated Floor vote right now, so I am 
going to recognize Ranking Member Hill.
    Mr. San Nicholas, before I do that, you are getting the 
virtual gavel, so I will recognize Mr. Hill, then you are next, 
and hopefully, I can get back and reassume the chair. But if 
not, you are Chair pro tempore. Thanks.
    And with that, I recognize Ranking Member Hill.
    Mr. Hill. Thanks, Mr. Chairman, and what an excellent 
panel. I know the Members are delighted to listen to these 
informed, knowledgeable panelists. And, of course, you are 
talking about very good specifics on how to improve our small 
business lending programs like the PPP, EIDL, and the 7(a) 
program, and those are all under the jurisdiction of the House 
Small Business Committee, not this committee. But I think the 
discussion has been very informative.
    I represent the fourth-largest CDFI, depository CDFI in the 
country, Southern Bancorp in central Arkansas, and they do such 
a great job. And I was on the CDFI advisory board during the 
end of Bush 43 and the beginning of the Obama Administration. 
So, I have seen the good work of the CDFIs and the CDFI loan 
funds around the country. And I know how engaged you have been 
and that is why Congress, in both the CARES Act and the 
subsequent bills, has increased the set-asides that were being 
discussed.
    Mr. Sands talked about $30 billion in PPP for CDFIs and 
minority banks. And then in the December bill, $12 billion 
direct to the CDFI fund so that they can do direct investment 
in low- to moderate-income communities. And then, a $15 billion 
set-aside, if you want to use that term, for minority banks and 
CDFIs in the third round of PPP.
    And when you look at the loans in those programs, they 
really are for everything from $500, up to 87 percent of the 
loans were under $150,000. So, it really was a remarkable 
program. And I appreciate Ms. Wade talking about how many of 
her members benefitted, and all of our Members of Congress love 
doing business with and visiting with our NFID members in our 
district.
    Ms. Brown-Massey, I really feel your pain. I was a very 
entrepreneurial person, starting businesses and helping others 
start theirs for over 3 decades before I came to Congress. And 
I really could relate to your story, and Tulsa is 5 hours from 
Little Rock, so I urge you to move to Little Rock. We will take 
better care of you than those Oklahomans. But you made a really 
good comment, that we need support urgently and it cannot be in 
loans. And, of course, this program to the States can do other 
things besides loans, but it is effectively another loan 
program.
    This is why we are all frustrated, everybody on this call, 
with how ineffectual EIDL was. It was a black box. You did not 
know if you were going to get $1,000 or $10,000. You did not 
know if you were going to be qualified, and you had to wait 
weeks. That has been improved, but if I could wave a magic 
wand, we would have a significant improvement in the EIDL 
program and remove it from this black-box status.
    It is designed for a hurricane. It is designed for a 
tornado. It is not designed for a permanent--not permanent, but 
a 50-State crisis like this pandemic. So, do you still believe 
that a PPP-type loan grant program is the better approach to 
help you, Ms. Brown-Massey?
    Ms. Brown-Massey. Ranking Member Hill, I think both at this 
point are needed.
    Mr. Hill. Yes.
    Ms. Brown-Massey. I really think this idea of exploring, 
getting extra capital to each State to deploy out to the 
citizens of each State, is more effective. Like Holly was 
saying, a lot of the banks are bigger. Smaller ones have gone, 
and so there are a lot of challenges in that relationship-
building that a lot of cities and towns have lost in this day 
and age. I think that incorporating the States in some capacity 
in these times is very much necessary.
    Mr. Hill. I agree. And in the technical assistance 
discussion, the hand-holding, the mentorship that Mr. 
Cunningham was addressing, this is so key. In Little Rock, we 
have the conductor, which is a Kauffman Foundation, a supported 
organization, a small business center at the university, plus 
our chambers, plus our CDFIs use their nonprofit arms to do a 
lot of that mentorship. But I also saw a lot of community banks 
bend over backwards to help people fill forms out just to get 
them the help, so I agree that mentorship is very important.
    But again, let me thank our panelists for being here. I 
know we are going to have a good discussion. I, too, am going 
to go vote, so Mr. San Nicholas, I am going to yield back.
    Mr. San Nicholas. [presiding]. Thank you, Mr. Hill.
    And let me begin, first, by recognizing myself in the 
speaking order, but also by stating for the record, that I was 
very impressed by our subcommittee chairman's introductory 
statement, and for sharing his sentiment as well, on the 
excellence of our ranking member and his ability to contribute 
to the dialogue.
    I also want to open by saying, Ms. Brown-Massey, that your 
story, your circumstances are not unique. But for you to be 
able to share them in this subcommittee, it is so important. 
And what you have gone through is what so many other Americans 
have gone through. And what this Congress needs to do and what 
it has been trying to do is to find ways to, of course, support 
the broad needs that are presenting themselves in this 
pandemic, but to now go in as we do these next rounds and 
figure out how we can further enhance the programs and tweak 
the programs to make them more effective.
    But I just wanted to say that your story is very, very 
impressive. With the sacrifices you are willing to make to be a 
successful entrepreneur, you are really the story of every-day 
Americans here in this country.
    Mr. Sands, I wanted to give you an opportunity to further 
elaborate on what your recommendations are and how we can 
improve, or particularly improve, access to SSBCI support. And 
I am interested in your perspective, being from a lender, on 
how we can further enhance the SSBCI program to help those 
borrowers out there who are coming to institutions such as 
yours, seeking support, and what some of the roadblocks might 
be on the SSBCI program, or what some of the components are 
that we can further support financially or with maybe some 
improved access points?
    Mr. Sands. Thank you, Congressman. I will first say that 
the program, as initially designed, was designed well, and I 
think that one of the things we have to always recognize is 
that programs need to be tweaked and we need to learn from 
different programs whether it be the SSBCI or whether it be PPP 
or others.
    The first thing I think we need to concentrate on when we 
are thinking about an intentional focus in terms of where 
capital flows is the deployers of capital. One great thing, 
which has been mentioned here, is that Congress has already 
made the decision to invest in CDFIs, giving more money to the 
CDFI fund, including the recent $12 billion in H.R. 7933. And 
we thank Chairwoman Waters and other Congress professionals, 
men and women, for that help.
    Now that that resource has been invested, and prior to that 
resource being invested, there were already CDFIs with this 
intentionality, whether it be the technical assistance that Mr. 
Cunningham mentioned or whether it be the ability to actually 
lend to these communities. They do not actually have to build 
rapport. They just need to be empowered to do more. And we have 
been able to see this in a couple of the programs that we run.
    For example, in the State of Pennsylvania, we ran a program 
in which 18 CDFIs collaborated. We took in 62,000 applications, 
in 20 days, for $1.1 billion of requests. That scenario of what 
we did, we have done through nine other programs. I have had 
admission-based lenders collaborate together.
    And so, I think in this SSBCI 2, what we need to do is just 
recognize where are the opportunities for these collaborations 
that have already been created? You take a company like 
Lendistry, which has already built a technical infrastructure 
or a technology infrastructure, and again, the intentionality 
and the capital is now pouring in. So, I think we have a huge 
opportunity to do something fairly significant here with SSBCI 
Version 2. Thank you.
    Mr. San Nicholas. Mr. Kellogg, please?
    Mr. Kellogg. Representative San Nicolas, thank you. I 
wanted to clarify one point that of the SSBCI funds, one-third 
was used for equity programs, so two-thirds were used for loan 
programs. One-third was for programs that would help launch new 
programs or help the growth of small business. And that money 
for equity is so scarce, especially for minority-owned firms. 
And it is critically needed in areas that are often not thought 
of as the--where equity capital is available. So this money for 
equity did not go to California, the Boston area, or the New 
York City area. Instead, it went to areas like Oklahoma, 
Tennessee, Michigan, Wisconsin, and the State of Washington. 
So, there is an important use of SSBCI for that kind of 
investment capital. I just wanted to bring that to the 
subcommittee's attention. Thank you.
    Mr. San Nicholas. Thank you very much. My time has expired, 
so I yield back. And I recognize Mr. Williams of Texas for 5 
minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman. Aggressive 
tax policy allows businesses to make money, create cash flow, 
and expand their operations. After we passed the Tax Cuts and 
Job Act, we saw more jobs than people, which caused businesses 
to compete in order to attract workers. In the auto industry, 
we saw car washers making as much as $18 an hour after the tax 
cuts went into effect. Competition and a booming economy 
increased workers' wages, not government mandates like a $15 
minimum wage. This one-size-fits-all system might be feasible 
in some cities like New York or Los Angeles, but for businesses 
in Clifton or Coppers Cove, Texas, this additional cost would 
be devastating for small businesses.
    Ms. Wade, can you talk about the effects of increasing the 
Federal minimum wage to $15 an hour?
    Ms. Wade. Certainly. We just actually today released a 
survey on the effects of a proposed $15 minimum wage on small 
employers. And roughly three-fourths of them said they would be 
negatively impacted if they had to comply with a $15 minimum 
wage increase over 5 years. And this increase of a $15 minimum 
wage would most negatively impact those industries that are 
most negatively impacted, unfortunately, by the pandemic. So, 
those public-facing businesses--restaurants retail, and 
accommodations--would have the most negative impact of an 
increase in minimum wage.
    But it is not just having the increase to a $15 minimum 
wage. It is increasing everybody around that $15 minimum wage 
level and adjusting those compensations for experience and the 
technical aspects of the position. Business owners, when asked 
how they would absorb those costs, said it would primarily go 
to lower earnings, but also reducing employee hours, reducing 
the number of employee, both part time and full time, and not 
filling open positions.
    Mr. Williams of Texas. Coming out of the COVID-19 pandemic, 
we need to make sure entrepreneurs are able to take a chance on 
themselves to pursue the American Dream. If someone lost their 
job because of the pandemic and wants to try to start their own 
business, and we have some great examples here today, we need 
to do all we can to support those efforts. Our economic system 
is built on competition, it is built on risk and reward, and we 
need to be examining the barriers to entry that are preventing 
people from taking that leap of faith and to bet on themselves.
    So another question to you, Ms. Wade, can you talk about 
some of the barriers to entry that we should be looking to 
lower in order to make it easier for someone to start their own 
business?
    Ms. Wade. Sure. Absolutely. For small business owners or 
people trying to start a small business, lowering the barrier 
to entry is a critical component. The increased costs, not only 
on the Federal level, but on the State and local levels, just 
raised the barrier of entry for many people who are wanting to 
start a small business. The more it costs to hire that next 
employee, the less likely that will happen. And the more 
challenging it is to navigate the regulatory system and tax 
compliance system in operating a business, you will find less 
folks likely to open and start a business. Those are the main 
challenges. It is a lot, but regulatory and tax compliance are 
two of the biggest ones.
    Mr. Williams of Texas. That is right. The nation puts more 
in the hands of the people and the small business owners than 
the government, which gets its return on investment. So lastly, 
the Paycheck Protection Program was a success in quickly giving 
out money to businesses in need. By partnering with the private 
sector, banks and financial institutions were able to 
distribute hundreds of millions of dollars in record time. 
There were some flaws with the program when it was first 
implemented, but it seems to be running smoother now than it 
has been, this second time around.
    Ms. Wade, what lessons can we take from the Paycheck 
Protection Program that we could try to incorporate in other 
government programs to assist small businesses?
    Ms. Wade. Using the vast structure of the banking system 
was key in getting the money out to small business owners. But 
many said that the relationship of small business owners to 
their bank was a crucial component that many small business 
owners lacked, and that relationship is often occurring at 
smaller and community banks, which have those relationship 
lending experiences that are important. So the decline in those 
types of banks, I think is crucial in supporting that 
relationship.
    Mr. Williams of Texas. I would just close by saying the 
banks did a tremendous job. I do not know another country in 
the world that could have done what our banks did, and we need 
to compliment them.
    With that in mind, Mr. Chairman, I yield back.
    Chairman Himes. Thank you, Mr. Williams.
    With that, we will go to Mr. Torres of New York.
    Mr. Torres. Thank you, Mr. Chairman. I have a question 
about the performance of the Mainstream Lending Program, which 
is run by the Federal Reserve before expiring at the end of 
2020. Even though the program had $600 billion in lending 
capacity, it only generated $16.5 billion in loans. I am 
wondering if anyone on the panel knows why the program appeared 
to have performed so poorly?
    Ms. Wade. I will just jump in here quickly. At NFIB, we 
surveyed to see how the understanding or just knowing about the 
program for the small business community and it was largely not 
heard of. It was not advertised. But also, the big component 
that was such a challenge was the 5-year loan term and having 
to pay that back in such a quick timeframe. That is why the 
Economic Injury Disaster Loan Program is so helpful, with that 
30-year term loan. The Main Street Lending Program was just too 
difficult to navigate, in terms of being comfortable and paying 
back those loans, but also even knowing that the program 
existed was a challenge.
    Mr. Torres. Thank you. That is helpful.
    I have a question for Mr. Kellogg. I know the Obama 
Administration regarded SSBCI as a success story in partnership 
with the Federal Government. The States leveraged a $1.5 
billion to generate $10.7 billion in loans and investments, and 
it is said to have led to the creation and retention of 240,000 
jobs. I know you laid out some of the reforms that could be 
made to the program. I am curious to know how you would 
evaluate the efficacy of the program relative to PPP? I do not 
know if you heard my question, Mr. Kellogg? I think you are on 
mute.
    Mr. Kellogg. Thank you. I'm sorry. My connection has not 
been reliable, but I can hear you now.
    Mr. Torres. Did you hear my question?
    Mr. Kellogg. No. Would you mind repeating it?
    Mr. Torres. I was just asking if you could compare the 
merits of the PPP program to the merits of SSBCI. Which one do 
you see as more effective?
    Mr. Kellogg. I think they are both critical. The PPP was 
designed to provide 2\1/2\ months' worth of payroll expense on 
a forgivable basis, which was critical to survival. But it was 
never designed to be a program to help businesses grow. And the 
SSBCI program was designed to encourage banks and investors to 
make those kind of growth investments. So, they serve a 
different policy service. Is that helpful?
    Mr. Torres. Fair enough. I have a question about minority-
owned businesses, which were hit the hardest by the pandemic. 
As you know, in the early months of the pandemic, 41 percent of 
Black-owned businesses, and 32 percent of Latino-owned 
businesses were wiped out essentially overnight by the economic 
impact of COVID-19. And not only are minority-owned businesses 
the first to be hit the hardest, but they are often the last to 
receive relief, as we saw with the first round of PPP.
    I am wondering, should there be a program that is dedicated 
specifically to providing financing to minority-owned 
businesses? It seems to me that whenever we create a race-
neutral, generally-applicable program, it almost invariably 
leaves behind minority-owned businesses. I know the MBDA is a 
dedicated facilitator for minority-owned businesses, but I am 
wondering if there should be a dedicated lender for minority-
owned businesses? Any thoughts on that?
    Mr. Sands. Mr. Torres, can I--
    Mr. Torres. Sure. Thank you. Whomever has thoughts.
    Mr. Kellogg. I have two thoughts. I think we have--
    Mr. Sands. I'm sorry. I am just going to jump in. I think 
what we have, and you have seen this through a couple of 
programs, PPP, Main Street, and also in SSBCI, we do not 
necessarily have a programmatic issue. We have a deployment-of-
capital issue. And so, we are not giving the capital to those 
who understand where the capital needs to be deployed. And it 
is structurally incorrect. And I would also tell you an 
unintended consequence of the $4- to $5- to $6 trillion that 
will end up here through our multiple stimuluses, we are about 
to repeat the process.
    We keep assuming that a bank that has excess capital is 
going to all of a sudden do smaller loans. It is actually 
contrary to the business operations. If they have more capital, 
they are going to do larger loans. So what we have to 
understand is that we have to create structures in which the 
larger institutions capitalize the smaller institutions, and 
then the smaller institutions, which are already in touch with 
the community, will be the ones who deploy the capital.
    CDFIs represent the new community bank. We used to be in a 
structure where there were 30,000 banks, and now we are in a 
structure were there are 5,000, and we are saying, why didn't 
things happen the way they used to happen? Well, it is because 
our structure is out of line. Once we fix the structure, which 
is one of the things that we are recommending to the SSBCI 
program is their effort [inaudible] banks when they fund CDFIs. 
Thank you for your time.
    Chairman Himes. Thank you. The gentleman from Ohio, Mr. 
Davidson, is recognized for 5 minutes.
    Mr. Davidson. I thank the chairman, and I thank the 
witnesses. I really appreciate this hearing, as a small 
business owner myself. Having survived as the owner of 
manufacturing companies through the 2008 financial crisis, 
frankly, I have appreciated watching this one vicariously. It 
looks like a pretty tough thing to ride through as a business 
owner. So for those of you who are doing it as business owners, 
I hope you make it the full way through it. Far too many people 
have lost their lives. We have lost too much freedom. And a big 
part of that is the way to operate businesses during this 
cycle. So hopefully, we can get back to the great economy we 
had around this time last year.
    Virtually everyone I spoke with at this time last year 
would say the biggest barrier they had was work force. 
``Everything is going great. The only constraint on our growth 
is work force, the right skill set, availability, all those 
kinds of things.'' And I think our economy has the potential to 
get back to that, but it really highlights one of the most 
important things that is not being highlighted in this hearing: 
The most important stimulus check Americans can get right now 
is a paycheck.
    We have to keep that paycheck pipeline flowing and that is 
truly one of the big successes of the Paycheck Protection 
Program. It is artificial. It is clearly not sustainable, and 
you cannot replace a centrally planned, centrally distributed, 
government-printed money from future generations, a backstop, 
with a functioning market economy. So we are dealing with the 
limitations of that, and I think the sooner we safely reopen 
our country, the sooner we are going to see the market function 
and we are going to see paychecks happen.
    But I want to highlight the Paycheck Protection Program in 
the Eighth District of Ohio. There were just about 9,000 loans 
made during 2020 to small businesses in the Eighth District of 
Ohio. We have about 730,000 people in our district. We had over 
100,000 people stay on payroll because of the PPP. Roughly 80 
percent of those loans were for $150,000 or less.
    So I think it is fitting that we are highlighting small 
business, jurisdictional highlights, as Mr. Hill has made an 
aside, it is an incredibly substantial part of how this piece 
worked. And the benefit was, of course, to the businesses who 
were able to keep that payroll function there, but it was very 
importantly to individuals and families who not only stayed on 
payroll; they kept their benefits in many of the workplaces 
that provided their benefits.
    And so, when States did respond as situations permitted, 
sometimes with lots of criticism, but when they did open up and 
let people return to work, we could actually access the real 
impact of the pandemic because then people were making rational 
decisions based off of their risk-assessment of the pandemic. 
They really had political risk, and some places, like Ohio, 
still have political risk. You cannot operate your business 
between 10 p.m. and 5 a.m. in Ohio, depending on the nature of 
your business, for example. There are large restrictions in 
many parts of the country, especially on hospitality.
    I am thankful that in Washington, D.C., restaurants are at 
least able to have in-person dining again. There have been 
large blackouts, and this is real political risk, so this is 
not a sustainable thing.
    Ms. Wade, I want to highlight the NFIB. This is a strong 
voice in the Eighth District of Ohio, and so on behalf of the 
local folks, thanks for the work the national chapter does. And 
I really want to appreciate the work NFIB did to highlight the 
Corporate Transparency Act. This is a new requirement, a new 
burden on small businesses with 20 or fewer employees, to file 
a report with FinCEN once a year. So, thanks for your work on 
that.
    What other burdens have been put on small businesses that 
you wish this body would pay more attention to?
    Ms. Wade. Thank you for that. Most of the challenges that 
small business owners are facing right now outside of the 
health crisis, which is overwhelmingly the biggest issue that 
they are facing, are related to tax compliance and regulatory 
burdens. Once they are back on their feet and the economy 
largely reopens and consumer spending resumes, those challenges 
will remain, and again, on a Federal, State, and local level, 
it is becoming increasingly difficult for small business owners 
to operate and devote attention to their operations instead of 
paperwork and paying more taxes with their earnings that they 
can then reinvest in their business. So, those are the big 
challenges going forward.
    Mr. Davidson. Thank you. My time has expired, and thanks 
for the summary. Thanks to all of our witnesses, and I yield 
back.
    Chairman Himes. The gentleman from Massachusetts, Mr. 
Lynch, is recognized for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman, and congratulations, 
Mr. Chairman, on your appointment, and congratulations also to 
my friend from Arkansas, Mr. Hill. Congratulations to both of 
you. I do want to associate myself with the chairman's opening 
statement. I think it is very important to lay that groundwork 
and also, I think that the importance of the subcommittee's 
jurisdiction is as important as it has ever been, and I really 
look forward to working with all of the members of the 
subcommittee going forward.
    I do agree with French Hill. This is an exceptional panel, 
so my congratulations to the staff who puts this stuff 
together, on both the Majority and the Minority witnesses.
    Ms. Brown-Massey, thank you so much for your service, and 
for your family's service, and for your example. As Mr. San 
Nicholas pointed out, you have a great story, and you are a 
shining example of what we hope for.
    My friend, Mr. Sands, it is good to see you again. Mr. 
Sands was kind enough to testify before our FinTech Task Force, 
and he has been a wonderful example of the good work that 
fintechs can do in banking the unbanked. The first iteration of 
the CARES Act and our PPP program sort of misfired, right? We 
did not get to all of the minority businesses that we had hoped 
to get to--I think we put $130 billion out on the extension and 
that was very good.
    But one of the exceptions was Lendistry. Mr. Sands, it 
seems like you had a very good match. A lot of the fintech 
firms did not have a pre-existing relationship with the SBA. I 
do not know, but I get the sense that the fintechs viewed the 
SBA as sort of the old model, kind of stodgy, big on 
applications, all of that stuff and tradition data. But 
Lendistry was very good. You seemed to hook up right away. When 
we gave over $400 billion to the SBA, other people found them, 
right? Because they were the conduit, but you had a pre-
existing relationship with the SBA and you also had great 
success, much greater success than other fintech lenders in 
actually getting the money out the door to minority businesses.
    So I am wondering, is there something that you attribute 
your success to in being more successful than a lot of other 
people out there in the field? For awhile, I have been thinking 
about that, and it's good to have you before the subcommittee. 
So, I wondered if you could help me with that?
    Mr. Sands. Yes. Thank you, Congressman Lynch. I think what 
makes Lendistry different is the fabric of our team. We are a 
group of bankers similar to some of you here on the line. And 
so, we were financial people who had to learn technology. And 
once we were enabled to learn the technology and understand the 
velocity by which the technology comes, that made us be able to 
transcend what we normally do or what we had done in the past.
    Again, the intentionality and the community aspect, that 
was already borne in us, myself, personally, having worked at 
two African-American banks prior to going to a national bank. 
And I think I would be remiss if I did not mention that we 
started to partner with banks. Our first important partner was 
Goldman Sachs. They linked us up with their 10,000 small 
businesses. What started as a $10 million conversation matured 
into a $200 million conversation and we worked together and we 
partnered. I would also be remiss if I did not mention some of 
the CDFIs who worked with us to help us reach those 
communities.
    Thank you, Ms. Brown-Massey, for your service. We were able 
to reach small businesses that look like her, and feel like 
her, and unfortunately, I wish we could have reached her.
    But I still think there is work to be done and that is why 
I am here today to talk about SSBCI. And even SBA, we still are 
struggling as responsible lending institutions to be able to 
extend nationwide, to be able to have automatic approvals even 
though we have been through a regulatory process. Lendistry has 
four regulatory bodies that oversee us, but yet when we apply 
for things like SSBCI, we have to go on a State-by-State 
minutia, which I respect as a former banker.
    I definitely believe in regulation. I definitely believe in 
oversight. But I also think that it is imperative and urgent 
that we recognize what is going on now, because you take 
someone like Lendistry, we are going to end up doing a billion 
dollars [inaudible] 5 billion or $10 billion. Thank you for 
your time.
    Mr. Lynch. Thank you, Mr. Chairman. I yield back.
    Chairman Himes. Thank you, Mr. Lynch.
    The gentleman from Texas, Mr. Taylor, is recognized for 5 
minutes.
    Mr. Taylor. Thank you, Mr. Chairman. I really appreciate 
this conversation. I think it is really an important topic, and 
just to kind of build on what Mr. Lynch and you were talking 
about just in terms of, why are smaller loans not getting done, 
I think a lot of the regulatory requirements that have been put 
on community banks have really squeezed them. I was the vice 
chairman of a community bank for 12 years. In that short 12 
years, we went from 8,000 banks in the United States to 5,000 
banks. And fewer banks mean bigger banks, and bigger banks mean 
they are not going to do smaller loans.
    I want to say, in reading your written testimony, I am very 
impressed with some of the numbers, Mr. Sands, about what you 
are able to do in terms of doing smaller loans. And so to that, 
could you sort of go into some of the more technical aspects of 
what you were able to do with fintech, to be able to do smaller 
loans? Because that is something that I know at my bank, we 
wanted to do smaller loans. We just could not figure out how to 
underwrite and manage those loans that were smaller and really 
have it make sense. The margin was not really there to support 
that. So what have you done, and how did fintech help you do 
it?
    Mr. Sands. I think it is a two-part process. The first part 
is the partnerships and the collaboration on the ground. As a 
banker, old school, we would do loan production offices. New 
school is, you leverage technology.
    I will give you an example of that. In the State of 
California, we are doing a $500 million grant program. In 15 
days, we took in 344,000 applications, successful applications. 
We have 35 partners. We have 400 co-partners. All of them are 
mission--
    Mr. Taylor. Are you chartering branches in California to do 
that?
    Mr. Sands. We have two locations in California but we have 
500 [inaudible]. And then, this will get to the technology 
part.
    What is important, as you hear from Ms. Brown-Massey, is 
that we make sure that we give the user a seamless experience, 
that we give them a similar experience. So, we create multiple 
different types of applications, multiple different processes. 
This is where it gets clunky and these are the things that we 
need to work on. And this is what we have learned that 
technology enables us to do. So when you add collaboration plus 
technology, it creates a seamless user experience.
    Then, we have to work on scalability. And scalability is 
about the partnerships and it is about the intentionality of 
what we are focused on. And what we have been able to do here 
at Lendistry is, we have been able to say it does not matter 
where we are at. So if you take California, we speak in 30 
different languages. We have webinars in 18 different 
languages. It does not matter whether it is rural. It does not 
matter whether it is Black, White, Asian; it does not matter 
because, again, you are leveraging technology, you are 
leveraging marketing automation, and you are leveraging 
partnerships in order to meet your need. And that is what we 
have learned how to do.
    Mr. Taylor. Are you underwriting in an automated fashion or 
are you using AI to underwrite so that you can expedite that 
component of what you are doing?
    Mr. Sands. Yes. It depends on the loan size. The best way I 
would say it is that what technology allows us to do is 
technology allows us to create filters and allows us to 
concentrate on where the underwriting should be spent. I think 
that is the most important thing. Because what we learn from 
the technology side is that you could have scalable 
infrastructure in terms of sales leads. What we learned from 
the technology side is that you can have a comprehensive 
approach to credit. And what I mean by comprehensive approach 
is that you have to treat a service business differently than 
you treat a restaurant business, differently than you treat a 
real estate transaction. But if you can create alignment inside 
of your banking unit, as you know, and generally a bank, it is 
an underwriting unit that is kind of A to Z. They know 
everything, as opposed to somewhat of a streamlined process 
where they become experts, whether it is an SBA loan, an SSBCI 
loan, or others.
    So the answer to your question is, we leverage the 
technology to filter. We still are bankers, hopefully not too 
old and stodgy as sometimes we call ourselves, but we still 
want to have that manual touch. What we do is we filter the 
loan and the information before we get to that manual touch.
    Mr. Taylor. Are you using credit scores in order to filter? 
Is that part of your underwriting process?
    Mr. Sands. That is part of our underwriting process. We 
have about 74 different points. Again, we are community-
oriented, so we have no problem picking up the phone and 
walking through things with the client.
    Mr. Taylor. Sure.
    Mr. Sands. But there are certain levels of clients that do 
not need that. They just want to get a loan. We have talked 
about banks and banks getting larger. Operational efficiency-
wise, loan size has become a big issue for banks, and so 
sometimes it is--
    Mr. Taylor. So if I were to get rid of credit scores, would 
that be deleterious to your ability to lend? Does that mess up 
your AI algorithm to figure out who is creditworthy?
    Mr. Sands. I think you always want the datapoints in 
lending, especially when we are talking about small businesses. 
We have to remember, when you get the sole proprietors, they 
are closer to consumer loans than they are to commercial loans. 
So, I think the credit report always plays a role.
    Mr. Taylor. Thank you.
    Mr. Chairman, I yield back.
    Chairman Himes. The gentleman yields back. The gentleman 
from Massachusetts, Mr. Auchincloss, is recognized for 5 
minutes.
    Mr. Auchincloss. Thank you all for joining us today. I 
agree with my colleagues that this is a very impressive and 
informative panel. My district is in Massachusetts, and the 
southeastern portion of it, on the border with Rhode Island, 
has been particularly hard-hit by the pandemic. It is just an 
hour outside of Boston, and the region is ripe for economic 
development, especially in life sciences, manufacturing 
everything from medical gowns to biologics. That would lead to 
good jobs but also to the public health resilience that we need 
in the face of this pandemic and for future pandemics.
    Technical assistance is obviously much-needed but so is 
capital to help this region, a post-industrial region, really 
seize on its economic-development opportunity. This question is 
for both Mr. Kellogg and Mr. Sands.
    Based on your experiences with Lendistry and with the State 
Small Business Credit Initiative, how can we better incent 
capital formation really, really far upstream in terms of 
creating bio-ready sites and in terms of giving the capital 
structure that would-be entrepreneurs need to become 
manufacturers in the life sciences space?
    Mr. Kellogg. Do you want to take that, Everett?
    Mr. Sands. Yes, sure. I think the first thing, Congressman, 
that we always want to look at is that creating structure means 
creating a path to success when you are talking about small 
business ownership. So, I think the structure, again, relates 
to capital. Where I think CDFIs and mission-based organizations 
play a role is in what I would call the startup to the small, 
and the medium-sized. Then, that business should graduate.
    As Mr. Cunningham mentioned, intertwined in that graduation 
is technical assistance, is business advising, is a certain 
amount of support. But that business should then graduate into 
a more structured approach. I do not think necessarily the 
industry matters because I think industry experts are really 
part of the technical assistance. And truthfully, no one knows 
better than the business owner when it comes to their industry. 
As bankers, we would like to think that we know things, but we 
do not know the metrics as well as the business owner does. 
What we want to do is just create a structure for the path of 
success as it relates to capital as they grow that business.
    Mr. Kellogg. My comments would focus first on physical 
infrastructure, and second on human infrastructure. And 
physical infrastructure--obviously, there is a lot of 
conversation nationwide about the state of our infrastructure 
of all types, and that is critical to making a location an 
attractive place to do business. And then the human 
infrastructure, I think, centers around our education 
intuitions, and by that, I am including universities, but also 
our community colleges. And the human infrastructure for 
entrepreneurship includes very much an ecosystem of investors, 
angel investors, successful entrepreneurs and mentors as well. 
So both of those are precursors, I think, to getting the 
maximum potential out of a region. I hope that is responsive.
    Mr. Auchincloss. It is. And I am proud to say that 
Massachusetts has many of those ingredients you just mentioned. 
We have reasonably good housing stock in the south coast, 
relatively good transportation infrastructure, although not 
good enough, and certainly a tremendous amount of talent both 
in greater Boston and in southeastern Massachusetts.
    Is there a role that you see the Federal Government playing 
in the provision of low-interest loans or in grants to help 
people with a process that at the beginning, is high risk, 
because it involves both permitting, if you are talking about 
bio-ready sites, for example, as well as being able to attract 
the right kind of investor and developer?
    Mr. Sands. Yes. Excuse me, Mr. Kellogg, if I am over-
speaking here, but I think this is one of the unique things 
that the SSBCI program did, is that it allowed States to 
determine what was important to them and then build capital 
programs accordingly. So, for example, Michigan was focusing on 
manufacturing and a couple of other things, which was obvious, 
because of the auto industry at the time the SSBCI first came 
out. So I think absolutely, on a State level, you could decide 
what are the industries you would like to see some significant 
capital investment and benefit from that.
    Mr. Kellogg. That is exactly right. As I said in my 
testimony, local conditions create different capital gaps and 
local conditions create different opportunities to use the 
credit and capital market systems that exist there. That is the 
value of a flexible State-by-State decision-making.
    Chairman Himes. The gentleman yields back. The gentleman 
from Texas, Mr. Green, who is also the chairman of our 
Subcommittee on Oversight and Investigations, is recognized for 
5 minutes.
    Mr. Green. Thank you ever so much, Mr. Chairman. And many 
times, Mr. Chairman, these words of gratitude and thanks are 
stated in a perfunctory fashion. I say this sincerely, not 
perfunctorily. I say so because I think this is a very 
meaningful hearing, and I think that it can cause us to give 
thought to how we can correct some of the things that we should 
have corrected years, decades, or perhaps even longer ago, so I 
thank you for the hearing.
    I also want to thank Chairwoman Waters because she has been 
a champion in this area for years, ever since I have known her, 
and I knew her before I came to Congress. This has been 
something that has been of importance to her. And I am grateful 
that she has you at the helm, and I thank Mr. Hill as well. He 
and I have collaborated on issues in the past, and I trust that 
we will be able to continue our collaboration.
    I would like to talk to you for just a moment, if I may, 
about something of importance, which is the Minority Business 
Development Agency. A little bit of history: In 1969, President 
Nixon, by way of an Executive Order, created an Office of 
Minority Business Enterprise. Later on, President Carter 
renamed it the Minority Business Development Agency. This 
Agency, as it were, is devoted exclusively to the growth and 
expansion of minority business enterprise by providing 
technical assistance, managerial expertise, support, and 
resources, and this is all for minority-owned businesses.
    Given that it was created by Executive Order, it continues 
to survive from President to President. In the CARES Act, we 
appropriated approximately $10 million, not nearly enough, but 
it was something, and that was a good benefit, because at least 
we continued it. Ten million dollars to this Agency which 
allowed minority Members of Congress to give grants to provide 
outreach and technical assistance to its members.
    Last Congress, I introduced H.R. 6869, the Minority 
Business Resiliency Act, and I wish I could say that I 
developed and synthesized it myself, but it was because of the 
Honorable Maxine Waters and the staff that I was allowed to 
have this as a piece of legislation to go forward with.
    In the CARES Act, we had $25 million for minority business 
development, for the Agency. And now, what we would like to do 
is permanently codify this Minority Business Development Agency 
into an administration, and have it as an independent agency 
that would be tasked with, and be the only one with this unique 
task of satiating and satisfying the needs of minority-owned 
businesses. I think it is time to give serious consideration to 
this, and for this reason, I would like to ask all of the 
witnesses, if I may, to tell me whether you think there is a 
need for an agency with this mission that can give benefit to 
you for a good many things that you have talked about today.
    So, I will start with Ms. Brown-Massey. Thank you for your 
service. I appreciate much of what you said about having some 
difficulties in accessing the system in an appropriate way. But 
with that said, ma'am, would you give your comments on the 
possibility of this Agency being codified, made permanent, so 
that we can help minority-owned businesses in this unique way?
    Ms. Brown-Massey. Yes, Congressman, thank you. I do think 
that this particular Agency that you are mentioning is of use, 
but I also think that we should be looking for local 
communities to set up minority chambers of commerce so that 
they are able to better understand what their community needs 
are at the local level. So, yes, I do agree.
    Mr. Green. Thank you very much.
    Mr. Cunningham, if you would please?
    Mr. Cunningham. Yes, briefly. Absolutely. The Minority 
Business Development Agency (MBDA) has a group of 40 
organizations that are located in cities and rural places 
throughout the country. It would be fantastic if we could 
actually knit together a permanent agency for the MBDA. The 
future of American small businesses actually are minority 
businesses. And so, if we concentrate on that, we will help 
everyone in this country. Thank you.
    Chairman Himes. The gentleman's time, having expired, we 
will bring this hearing to a close. I would like to profusely 
thank all of our witnesses for their testimony today. It was a 
very interesting and very timely conversation that we had, and 
we really appreciate your preparation and participation.
    Without objection, the following items are entered into the 
record: a letter from the Small Business Majority; a joint 
letter from the U.S. Black Chambers, the U.S. Hispanic Chamber 
of Commerce, and National ACE; a letter from the Brookings 
Institution Metropolitan Policy Program; the Annual Report for 
Fiscal Year 2020 from the SEC's Office of the Advocate of Small 
Business Capital Formation; and a letter from the Center for 
Indian Country Development at the Federal Reserve Bank of 
Minneapolis.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Again, with a big thank you to our witnesses, this hearing 
is adjourned.
    [Whereupon, at 4:43 p.m., the hearing was adjourned.]

                            A P P E N D I X

                            February 4, 2021
                            
                            
                            
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]