[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
AN EXAMINATION OF THE SBA'S COVID-19
PROGRAMS
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MAY 26, 2021
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-015
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
44-922 PDF WASHINGTON : 2022
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Blaine Luetkemeyer.......................................... 3
WITNESS
Hon. Isabella Casillas Guzman, Administrator, United States Small
Business Administration, Washington, DC........................ 6
APPENDIX
Prepared Statement:
Hon. Isabella Casillas Guzman, Administrator, United States
Small Business Administration, Washington, DC.............. 43
Questions and Answers for the Record:
Questions from Hon. Velazquez................................ 49
Questions from Hon. Golden................................... 54
Questions from Hon. Tenney................................... 55
Questions from Hon. Van Duyne................................ 58
Questions from Hon. Salazar.................................. 61
Questions from Hon. Fitzgerald............................... 64
Questions from Hon. Luetkemeyer.............................. 66
Additional Material for the Record:
CWALAC - Concerned Women for America Legislative Action
Committee.................................................. 77
CUNA - Credit Union National Association..................... 79
Letter from Hon. Blaine Luetkemeyer to Hon. Isabella Casillas
Guzman..................................................... 81
Letter from Hon. Blaine Luetkemeyer and Byron Donalds to Hon.
Janet L. Yellen and Hon. Isabella Casillas Guzman.......... 83
Letter from Hon. Blaine Luetkemeyer and Roger Williams to
Hon. Janet L. Yellen....................................... 86
NAFCU - National Association of Federally-Insured Credit
Unions..................................................... 88
SBIA - Small Business Investor Alliance...................... 90
Secretary Yellen Schedule.................................... 92
AN EXAMINATION OF THE SBA'S COVID-19 PROGRAMS
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WEDNESDAY, MAY 26, 2021
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., via
Zoom, Hon. Nydia Velazquez [chairwoman of the Committee]
presiding.
Present: Representatives Velazquez, Davids, Phillips,
Newman, Bourdeaux, Carter, Chu, Evans, Delgado, Houlahan, Kim
of New Jersey, Craig, Luetkemeyer, Williams, Hagedorn, Stauber,
Meuser, Tenney, Garbarino, Kim of California, Van Duyne,
Donalds, and Salazar.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I want to thank everyone, especially our witness for
joining us today.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during remote
proceedings. All Members are reminded that they are expected to
adhere to these standing rules including decorum when they are
participating in any remote event.
With that said, the technology we are utilizing today
requires us to make some small modifications to ensure that
Members can fully participate in these proceedings.
House regulations require Members to be visible through a
video connection throughout the proceeding, so please keep your
cameras on. If you participate in another proceeding, please
exit and log back in later.
In the event a Member encounters technical issues that
prevent them from being recognized for their questioning, I
will move to the next available Member of the same party and I
will recognize that Member at the next appropriate time slot
provided they have returned to the proceeding.
Should a Member's time be interrupted by technical issues,
I will recognize that Member at the next appropriate spot for
the remainder of their time once their issues have been
resolved. In the event a witness loses connectivity during
testimony or questioning, I will reserve their time as staff
address the technical issue. I may need to recess the
proceedings to provide time for the witness to reconnect.
Finally, remember to remain muted until you are recognized
to minimize background noise. In accordance with the rules,
staff have been advised to mute participants only in the event
there is inadvertent background noise. Should a Member wish to
be recognized, they must unmute themselves and seek recognition
at the appropriate time.
Before we get started, let me take a minute to welcome our
newest Member, Troy Carter, from the Second District of
Louisiana. Mr. Carter is a dedicated public servant having
enjoyed a distinguished career at nearly every level of state
and local government. He previously served in both the
Louisiana House and Senate and also as New Orleans city
councilman. Mr. Carter has a track record as a successful
entrepreneur. We think this will serve him well and our
Committee, and I look forward to working with him. Welcome, Mr.
Carter.
Administrator Guzman, welcome to the Small Business
Committee, and thank you for being here today. First and
foremost, I want to commend you for the tremendous work you
have done for our nation's small businesses.
It is important to point out that you took over the helm of
SBA in the midst of an unprecedented crisis for our nation's
small firms.
In 2020, COVID-19 closed more businesses than any other
year on record and left countless other entrepreneurs clinging
for their survival. I appreciate the fact that you are here
today in compliance with statute.
Unfortunately, Treasury Secretary Yellen has declined to
appear before us in complete disregard for the law, which
requires her to do so. Without her at the table, this Committee
cannot properly fulfill our oversight responsibilities to
American taxpayers nor the nation's entrepreneurial community.
While she and her team may believe their role in PPP and
other small business COVID relief programs is dwindling as we
move towards economic growth and economic rebirth, they are
sorely mistaken. In light of the feedback we have received
about the MOU between Treasury and SBA, it is incumbent upon
Secretary Yellen to fulfill her statutory requirement and
appear before this Committee. I look forward to working with
Chair Cardin and Ranking Members Luetkemeyer and Senator Paul
to find a mutually agreed upon date for Secretary Yellen to
appear before our Committee with Administrator Guzman in the
near future.
Congress has passed eight small business relief bills,
allocating more than $1 trillion to small firms during their
darkest hour. The federal government's efforts to save small
business were extraordinary, but distributing this aid was a
monumental task for SBA. The $1 trillion-plus in federal
funding represented more than 10 times SBA's annual budget. As
a result, the agency administered more aid during the COVID
crisis than it had for all other disasters combined during its
67-year history.
To that end, it is important to recognize SBA employees for
their tireless work in getting these programs up and running.
The agency's efforts made an undeniable impact on
entrepreneurs' lives and helped millions of small businesses
and nonprofits avoid permanent closure.
Yet, the massive scale of PPP and other relief programs,
coupled with a quick rollout, overwhelmed the agency at times
and resulted in a number of problems. My hope for today is that
we will not blame but instead work constructively in a
bipartisan manner to assess the current programs and partner
with SBA to make improvements where needed.
One of my top priorities has been increasing equity in
relief programs. Early on, evidence emerged showing the
smallest of firms were not getting the same access as their
larger counterparts with ties to big banks. That is why I
fought hard for PPP modifications last year.
Additionally, under the Biden Administration, SBA has taken
deliberate action to deliver relief to underserved communities.
These efforts have proven to be effective in reaching those
that were left behind in the initial round of PPP.
With the current round of PPP, SBA has approved more than 6
million loans for a total of nearly $266 billion, with an
average loan size of approximately $44,000. This is a
substantial improvement compared to an average loan size of
$199,951 during the first round of PPP in 2020.
I also look forward to hearing more about the Targeted EIDL
Program, Restaurant Revitalization Fund (RRF), and the
Shuttered Venue Operating Grant Program (SVOG), three new
programs that are awarding direct grants to small firms hit
hard by the pandemic.
Another issue that has plagued both PPP and EIDL has been
fraud and abuse. Unfortunately, to get loans out the door, the
previous administration lowered guardrails and fostered an
environment ripe for fraud and abuse. GAO added PPP and EIDL to
its annual ``High-Risk List'' in March of this year, meaning
there is a need for better management and oversight. I am
pleased that under your leadership, the agency has confronted
these issues head-on. It is vital that SBA combats fraud and
protects taxpayers' dollars.
For over a year, small businesses have persevered through a
once-in-a-lifetime crisis. Today, thanks to our collective
efforts, small firms have hope. Across the country, customers
are returning and business conditions are normalizing thanks to
vaccines and public health measures. Though the pandemic may be
receding, we must continue to work as a Committee to see small
businesses to the end of the crisis and help facilitate a
strong recovery.
I now yield to the Ranking Member for his opening
statement.
Mr. LUETKEMEYER. Thank you, Madam Chair. And thank you for
calling this important hearing.
While I am glad we will be having a conversation with Small
Business Administrator Guzman, I am deeply disappointed and
concerned that Secretary Yellen is not with us today.
As you spoke, she is required to be here by law, and I will
not state the law but it is supposed to be at least 120 days
after enactment of the law. She is supposed to be here at least
twice a year. This is very troubling and it is in complete
violation of the law. I appreciate your comments, Madam Chair,
and I would like to work with you to make sure that the law is
followed and that we schedule time in the future for Secretary
Yellen.
To that end, I have a letter here that has been signed by
all the Members, the Republicans on the Committee, as well as a
list of events and the schedule of Ms. Yellen over the last 2
months that I would like to enter into the record. I have a
couple things----
Chairwoman VELAZQUEZ. Without objection. Without objection.
Mr. LUETKEMEYER. Thank you, Madam Chair.
And the list of activities I have no problem with. I think
that she is doing her job. Probably doing it well. But there
are a couple of events on here that are actually political
activities. And again, I do not have a problem with her doing
it except that it shows that she is prioritizing political
activities over her job which is by law supposed to be in front
of us. That cannot happen.
The Paycheck Protection Program (PPP) was established in a
bipartisan manner to be administered by the SBA and the
Department of Treasury. With reservation, Secretary Mnuchin
testified before this Committee last Congress. His testimony
was critical as it helped Members on both sides of the aisle
export questions from their constituents and assisted Members
with next steps for the COVID relief programs. It is a clear
sign that this administration's Treasury Department, one of the
biggest in the federal government, is ignoring America's small
businesses. Simply put, if the Treasury Secretary and Biden
Administration truly cared about the nation's small businesses
and their employees, Secretary Yellen would be testifying
today.
Despite the Treasury secretary not being with us, we have
much to discuss. COVID-19 was devastating to our nation's small
businesses, entrepreneurs, and startups. Without precedence,
state and local shutdown orders forced small businesses to
operate either under restricted capacity numbers or close their
doors to the public all together.
Responding to the backbreaking impact on small businesses,
Congress and the Trump Administration quickly focused on
assisting small business workers. According to SBA's Office of
Advocacy, small business employees represented approximately
half the nation's workforce. Importantly, one program that was
front and center for struggling small businesses was the
Paycheck Protection Program, which private sector lenders
delivered to small businesses many, many, many loans and all
the dollars in those loans.
PPP offered potentially forgivable loans in the dollars
that were used and on payroll and a few other eligible expenses
and millions and millions of small businesses took advantage of
the program. And it is now concluding. The next phase of the
program will focus strictly on the PPP forgiveness.
Beyond PPP, Congress also activated the EIDL program. But
unfortunately, this program, which is administered as a direct
loan program through SBA, has been riddled with fraud. The SBA
Inspector General Report highlighting $78 billion in fraudulent
activity to a report released 3 weeks ago where the inspector
general found over 800,000 EIDL applications that were flagged
for identity theft concerns, it is clear the program is not
safeguarding American taxpayer dollars.
Any amount of fraud is absolutely unacceptable. However,
this level of fraud shows the SBA is not suited to administer
any direct lending program.
On top of the fraud issues, the EIDL program is slow to
reach small businesses in time of need. Historically, the SBA
turn time to small businesses has always been at a snail's
pace. In stark contrast, the PPP, unlike the EIDL program, was
set up to capitalize on the efficiencies of private sector
lenders, not the SBA. In addition to the turn time, the PPP
also protected taxpayer dollars more effectively compared to
EIDL due to lenders having responsibility to know their
customers and know how to underwrite loans.
As we continue to explore the SBA programs, we must look to
the private sector to find efficiencies and innovations. The
SBA's ability to make direct loans to small businesses must be
studied.
In addition to making loans, the SBA has also inefficiently
operated the Shuttered Venue Operator Grant Program for
struggling venues, theaters, and other cultural entities. The
night before the program launched, the SBA's inspector general
warned of a series of concerns or serious concerns about the
oversight controls in place. Then, a few hours after the
opening of the portal, the SBA had to take it offline to
troubleshoot. The program eventually relaunched but has yet to
disburse any funds to struggling venues, although this morning,
conveniently this morning, they announced that they are going
to disburse some money very shortly. Amazing how that works.
While the SBA has been ignoring the venues program, it has
been championed by the Biden Administration's Restaurant
Revitalization Fund Program. The SBA celebrated the priority
period which unfairly picks winners and losers. This
administration even highlighted that the program is reaching
potentially undocumented individuals and those with an unknown
immigration status over hardworking citizens of the United
States. And they are even being sued for this discriminatory
practice today.
Overall, it seems each day brings another complication from
the SBA. I know Republican Members have many of the same
concerns that I do. However, the SBA's track record for
answering our questions has been underwhelming, and at times,
nonexistent. Thus far, my colleagues and I have sent numerous
letters to Administrator Guzman and received limited responses.
I would like to insert every letter that has failed to
receive a response in today's record. The hearing record, Madam
Chair. I would like to insert some records, some letters.
Chairwoman VELAZQUEZ. Without objection.
Mr. LUETKEMEYER. Thank you, Madam Chair.
I am hopeful this conversation produced results because at
the end of the day, small businesses drive our nation's
economy. We must provide an environment for small businesses to
operate independently and as quickly as possible.
Unfortunately, this administration is threatening the small
business recovery with increased taxes and more regulatory
burdens. We cannot allow these changes to occur. The health of
our nation will depend on the health of small businesses.
And with that, Madam Chair, I yield back. Thank you.
Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. The
gentleman yields back.
I would like to take a moment to explain how this hearing
will proceed. You will have 5 minutes to provide a statement
and each Committee Member will have 5 minutes for questions.
Please ensure that your microphone is on when you begin
speaking and that you return to mute when finished.
I would like to introduce The Honorable Isabella Casillas
Guzman, who was sworn in as the 27th administrator of the SBA.
She previously served as Director of the California Office of
the Small Business Advocate in the Governor's Office of
Business and Economic Development. From 2014 to 2017,
Administrator Guzman served in leadership of the SBA as the
agency's Deputy Chief of Staff and Senior Advisor where she
oversaw policy and new program implementation. She earned a
Bachelor of Science from the University of Pennsylvania Wharton
School of Business. Welcome, Administrator Guzman.
Ms. Guzman, you are now recognized for 5 minutes.
STATEMENT OF THE HONORABLE ISABELLA CASILLAS GUZMAN,
ADMINISTRATOR, UNITED STATES SMALL BUSINESS ADMINISTRATION
Ms. GUZMAN. Good morning, Chairwoman Velazquez. Thank you
so much. And Ranking Member Luetkemeyer, as well as Members of
the Committee. I really appreciate the invitation and the
opportunity to be here to discuss SBA's programs in response to
the COVID pandemic.
When I appeared before you as a nominee, excuse me, when I
have been meeting with you all over the past couple of months
since I have been in office, I have mentioned how this
unprecedented crisis for our nation's 30 million small
businesses and innovative startups has created a sense of
urgency at the SBA to work harder, think more creatively and
build more collaboration to meet the desperate need presented
by this moment. And in my first 100 days as SBA administrator,
I can tell you that my motivation to deliver for our
entrepreneurs has only intensified. And I have to share how
proud I am of my incredible mission-driven team at the SBA who
despite having had to scale at a high intensity the past year-
plus remained incredibly committed to our nation's
entrepreneurs. They have been working around the clock to
deliver all the components of the American Rescue Plan's
crucial relief program to ensure our small businesses can
survive this disaster and get on the path to recovery, growth,
and resilience.
We are making significant progress, particularly in our
efforts to reach small businesses owned by women and people of
color, who, because of longstanding barriers to capital,
markets and networks have suffered disproportionately from this
pandemic and by many accounts were not able to access relief.
We are seeing the impact. The latest economic reports show
that small business jobs have begun to rebound, and
proprietors' income levels have begun to recover. And, we are
hearing from the small businesses we serve that both our
traditional and our new relief programs have created vital
lifelines.
Earlier this month, we successfully launched the $28.6
billion Restaurant Revitalization Fund. As of Monday, when the
application portal closed, we have received more than 372,000
applications representing over $76 billion in requested funds,
and more than half of those applications came from food and
beverage businesses owned by women, veterans, and people of
color, who as directed by Congress, received priority access to
the program. And we are reaching the smallest of the small food
and beverage businesses, with one-third of the total funds set
aside just for them, including a specific set-aside I created
for businesses with revenues of $50,000 and under. I am proud
of how we have rolled out this program in under 2 months while
focusing on my key priorities of meeting small businesses where
they are and integrating a customer-first, technology-driven,
and equitable approach.
We also launched the $16.2 billion Shuttered Venue
Operators Grant Program. As of May 25, the SVOG program has
received more than 13,000 applications for approximately $11
billion in requested funds. We started awarding our SVOG funds
this week and we hope to continue to help our nation's venues
hold on until they can bring back the performances and
experiences that are the lifeblood of the American culture.
Through our Paycheck Protection Program and Economic Injury
Disaster Loan Program, we have now gone beyond $1 trillion in
relief, and so far in 2021, 95 percent of PPP loans have gone
to small businesses with fewer than 20 employees.
Our priority across all of our relief programs is to get
funds into the hands of small businesses swiftly, efficiently
and equitably. At the same time, we are also committed to
maintaining a high level of oversight to minimize fraud and
abuse while elevating transparency and open communication. We
have implemented controls and oversight to better achieve that
balance and reverse some of the previous fraud challenges that
initially plagued the PPP and EIDL programs.
I was pleased to hear both GAO's Bill Shear and SBA's
Inspector General Mike Ware say in a recent House Committee
hearing that transparency at the SBA has improved under my
watch and that our relationship is off to a very good start.
There is a lot of work to do but we are working diligently to
ensure this relief gets into the hands of the businesses for
whom it was intended.
Beyond our COVID relief program, we are also looking to the
future and our nation's economic recovery with an eye toward
equity. Small businesses are starting to reopen but they are
still reeling with major revenue losses, and most expect
recovery to take more than 6 months. This means that we will
continue to see the need for capital, which is why the SBA is
exploring all options to open up capital access, including
direct lending.
Additionally, we know that the best thing we can do for our
small businesses is to help our nation recover from COVID and
get our marketplaces and main streets back to normal. With more
than 61 percent of adult Americans who have taken at least one
shot of the COVID vaccine, we are making progress. The SBA is
doing its party by getting the word out about the American
Rescue Plan tax credit available to small businesses that
provide paid leave to employees receiving or recovering from a
COVID vaccination.
There is so much more work to do. As the voice for
America's small businesses and innovative startups, I will be
leveraging every tool at my disposal to bring businesses back,
create jobs, and build an equitable economy that works for
everyone. I look forward to partnering with you all to give
entrepreneurs the tools they need to start, sustain, and grow
into the future.
Thank you so much, Chairwoman Velazquez, Ranking Member
Luetkemeyer, and Members of the Committee, for the opportunity
to appear before you today.
Chairwoman VELAZQUEZ. Thank you, Ms. Guzman.
I will begin by recognizing myself for 5 minutes.
Ms. Guzman, Administrator, we will hear a lot today about
fraud, which has been a concern since the relief programs
opened. Since you took over as administrator on March 17, how
has the agency worked to prevent fraud, waste, and abuse in its
pandemic response programs, both old and new, like restaurants
and shuttered venues?
Ms. GUZMAN. The administration has made it a priority to
implement all of our relief programs with integrity and
transparency, and SBA has been implementing a holistic approach
to fraud mitigation to ensure consistency across all of those
programs. It is a high priority of mine as well. As I said, I
want to get these funds into the hands of those businesses it
was intended to serve. So my staff is aware that I take this
seriously in cooperation with the GA and IG has been of high
importance for us to make sure that we are implementing best
practices and doing the most that we can to prevent fraud,
waste, and abuse.
I have directed my team to look at best in class practices,
adopting technology where it works to ensure that we are
aligned with bets practices that the IG and GAO have
recommended, and we have been implementing controls and
evaluating it.
Chairwoman VELAZQUEZ. Thank you. So you are open to
providing any information required by the IG, GAO, providing
data that they must access in order to make an assessment as to
if the programs are working as they were intended by law?
Ms. GUZMAN. That is correct.
Chairwoman VELAZQUEZ. The Restaurant Revitalization Fund
has a 21-day priority period for grants to women- and veteran-
owned businesses and socially or economically disadvantaged
firms. Who would this program help to ensure the equitable
distribution of pandemic relief?
Ms. GUZMAN. We have worked really hard to do extensive
outreach across the board for restaurants, reaching our
smallest businesses, as well as those priority groups across
the board. We have reached over 100,000 people in multiple
events. And so that is reflected in the large number of
applicants that we have seen come through the system. We
believe that that outreach, that connection to resources is
most critical to make sure that businesses of all types can
access this program.
In addition though, we tried to streamline, put ourselves
in the customers' shoes, and adopt technology to make sure that
this process was as simple as possible for them to access. And
we have seen those results come into play because on average,
about 20 minutes to fill out the application. There are
technology prompts throughout to help businesses, and they have
gotten assistance with greater customer service in over 17
languages.
Chairwoman VELAZQUEZ. Thank you.
Ms. GUZMAN. And we have done a lot.
Chairwoman VELAZQUEZ. Yes. I have another question and too
many to ask.
In the first round of the PPP, large companies took
advantage of the emergency relief, squeezing out the
neighborhood restaurants and ``mom and pop'' shops. Could you
discuss how the set-asides for community lenders and small
businesses in LMI areas can ensure that the capital was made
available to the smallest of the small businesses and truly
underserved businesses?
Ms. GUZMAN. Based on the performance that we have seen with
these community financial institutions, our CDFIs and CDCs, and
minority depository institutions, we know that they oftentimes
reach those businesses that have been underserved. And so those
priorities have enabled businesses to access the program. And
as I shared that we have seen in 2021 that the PPP has been
accessed more by LMI communities, as well as rural and those
underserved marketplaces.
Chairwoman VELAZQUEZ. Thank you. The pandemic has exposed
the systemic inequalities facing women- and minority-owned
small businesses, which have been particularly hard hit this
past year. What steps are you taking to address these
inequalities and to make sure all small businesses have access
to SBA resources?
Ms. GUZMAN. I have instructed my teams to really position
themselves in the customers' mindset. I mean, understanding
what their financials look like, what their situation is.
Businesses have been transformed especially during COVID. Their
situations are quite different. So we are evaluating all our
programs to make sure that they can serve all constituencies
equitably and everything is on the table. In addition, we are
focusing on the outreach and the Community Navigators Pilot
Program will be just another tool that we can make sure that
our businesses are connected to the resources that they need.
Chairwoman VELAZQUEZ. Thank you. I really want to commend
you for raising the limit on the EIDL program to $500,000 as
one of your first actions as administrator.
My time has expired and now I recognize the Ranking Member,
Mr. Luetkemeyer, for 5 minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair. And welcome,
Administrator Guzman.
As we all know and we discussed here, COVID hit our country
and caused all sorts of unprecedented things within our economy
to happen, shut down the economy, and as a result, lots and
lots of small businesses were in dire straits. Some of them
going out of business, some of them temporarily postponing
their ability to have their businesses open. And we put in
place the PPP program and the EIDL program but they had
dramatically different outcomes. The PPP program, which was run
by and administered by the financial institutions did a really,
really good job. When you look at over $800 billion going out
the door and the minimal amount of fraud and theft, identity
theft that went on, it is in a ten-thousandths of a percent,
which by any measurement that is very successful. The EIDL
program to contrast that was over $200 billion and roughly a
third according to the SBA's Inspector General as in my opening
remarks, has either been pointed out as potential fraud if not
documented fraud, identity theft in particular, with that
program. Over 800,000 applications have been flagged for
identity theft. There is a difference in the way these two
programs are administered. One is through the private sector
which has law and rules with regards to knowing your customers.
They have processes and procedures in place. They know how to
administer loans, make loans. And then the SBA was totally in
charge of the EIDL program.
Do you believe or do you acknowledge that the private
sector lenders from the community banks, the CDFIs and MDIs,
efficiently delivered funding to small businesses during COVID,
Administrator Guzman?
Ms. GUZMAN. Our partners have done a great job as they have
across our historic programs in implementing the PPP. Yes, I
would agree with that. And then in terms of the EIDL,
specifically, note that there were some challenges in the way
the program was designed, which is why I have informed my staff
that we need to look at fraud controls from inception of design
and implementation. For example, by statute, we are not allowed
to collect tax returns, which is one of the biggest controls
that we can use as a tool. So without some of those controls in
place in the beginning, of course, that has now shifted and we
have adopted controls in place to prevent fraud in order to
really meet the needs of these small businesses to make sure it
gets into the hands of the right folks.
Mr. LUETKEMEYER. Do you think incorporating some private
sector lenders in the middle of that would be helpful?
Ms. GUZMAN. I know that across the board our private sector
lenders are great partners across the board. But in terms of
the interest in providing disaster assistance, historically,
they have not been interested. It has been too costly for them
to adopt this type of relief and that is why the government has
stepped in to provide assistance.
Mr. LUETKEMEYER. Well, maybe we can work together,
administrator, to iron out that little problem there in that a
third of the money could be susceptible to fraud is totally,
totally unacceptable. Something has got to change structurally
within what is going on in the EIDL program. And it looks to me
if you just compare PPP to the EIDL program, the template is
there for how to fix this. But I want to work with you on that.
We have got a huge problem. Together we can come up with some
solutions. Thank you.
Ms. GUZMAN. I look forward to that.
Mr. LUETKEMEYER. The PPP program, I just want to talk about
it for a little bit with regards to the forgiveness aspect of
it. We just got a letter back from Mr. Kelly within your office
there and he was telling us that there is still roughly a
little over 36,000 PPP loan forgiveness applications that have
now exceeded the 90-day window requirement within which the SBA
should begin to administer this forgiveness program. What is
your solution on that? How can we get this fixed?
Ms. GUZMAN. For context, the SBA has processed over 60
percent of the 2020 PPP loans for forgiveness. That 36,000
represents about 1 percent of the total and we are committed to
trying to work through those issues with the lenders. The
Office of Capital Access obviously has been collaborating with
the lenders to try to figure out how we can help their review
process. On average, it takes about 6 days for the SBA to
process forgiveness once the lender has signed off. And so we
are working in partnership with them to solve this issue.
Mr. LUETKEMEYER. Is there an ability to contract that out
so we could speed that up? Because the next round of
forgiveness is just around the corner here with this last
tranche of PPP money. Is there a way we can speed that up, make
sure that this gets done in a more timely fashion? Would
contracting it out be helpful?
Ms. GUZMAN. I am not sure that contracting out would be
helpful but we have been working with the lender groups. I have
been meeting with them myself, as well as Patrick Kelley to
come up with solutions to try to streamline this system.
Obviously, we have a simplified process so that $150,000 to $2
million loan sizes are obviously what we are looking at to try
to streamline it. The demand is going to increase if we shift
towards forgiveness. So I look forward to partnering with you
on that.
Mr. LUETKEMEYER. Very good. Because I know we appropriated
lots and lots of money over the last two or three bills here to
be able to do this. So we either need to be hiring more people
or we need to be contracting this out so this can get done in
the timely fashion the way it is supposed to. So I look forward
to working with you on that, Administrator Guzman.
With regards to communication, we started out I think on
the right foot and it took about a week to get our first call
set up but we finally got that done and we were able to respond
pretty quickly to my first initial letter. But yesterday, or I
guess last week, we finally got a letter in response to
something we did 2 months ago. And I know my colleagues are
very concerned. You are going to get a lot of questions on this
today about communication.
Chairwoman VELAZQUEZ. Mr. Luetkemeyer?
Mr. LUETKEMEYER. Yes, ma'am.
Chairwoman VELAZQUEZ. Time has expired.
Mr. LUETKEMEYER. Okay.
Chairwoman VELAZQUEZ. You have it.
Mr. LUETKEMEYER. We will send this question in written form
to the administrator.
We thank you, Madam Chair, and yield back.
Chairwoman VELAZQUEZ. Thank you. The gentleman's time has
expired.
Now the gentlelady, Ms. Davids, from Kansas, is recognized
for 5 minutes.
Ms. DAVIDS. Thank you, Chairwoman. And thank you for
holding this hearing. I also want to say thank you to
Administrator Guzman for joining us today.
We know that even with the rising numbers of vaccines and
vaccinations getting into people's arms, even with the
decreasing numbers of infections that many small businesses are
still feeling the impacts of this pandemic and there are still
a lot of financial and logistical hurdles that face small
businesses throughout the economic recovery and reentry. And I
know that Ms. Guzman and our Committee and all my colleagues
remain committed to supporting our small business community
through all of these challenges.
I am going to piggyback a little bit on some of the
comments that the Ranking Member shared. In February, my office
raised concerns with the SBA about the fraud and abuse and the
PPP and EIDL programs. In part, it is because a number of
Johnson County residents, which is in the Third District in
Kansas, have been the victims of identity theft and fraud that
took place in the EIDL program. And I have urged the SBA to
focus on these cases, and it sounds like you are. Because they
are not only a misuse of taxpayer funds but also directly and
personally impacting the constituents in my community.
Ms. Guzman, or Administrator Guzman I should say, I would
love to hear you talk a little bit about the work that the SBA
is doing to eradicate the fraud and waste and abuse from the
EIDL program. And then if you could also talk a bit the ways
that the SBA is working with the victims of identity theft and
fraud that is taking place through either EIDL or PPP just to
ensure that those victims are not held personally liable and
that they are made whole.
Ms. GUZMAN. Thank you for that. As I had shared, we are
implementing controls and evaluating on an ongoing basis, an
iterative process to stay best in class, to prevent fraud. And
that happens at the program design phase 41:23xxx way. So we
are really committed to this issue. We have obviously put in a
lot of specific frameworks in place across our capital access
programs, including PPP and the Restaurants program. And then
within our Office of Disaster Assistance on the Shuttered
Venues, as well as the EIDL program. We are really committed to
making sure these funds get into the hands of those businesses
as it was intended and we are seeing enormous drops now that we
have implemented those controls.
However, in February, we did impellent a process to help
businesses through identity theft issues as clearly that was a
huge problem in the beginning of these programs. And so we want
to make sure that businesses are supported through that
process. There is now a support system and a process in place
for them to reach out to the SBA, get assistance in fighting
that specific identity theft case. And we actually have
hundreds of investigators on support with the IG to help
prevent, help investigate and actually pursue any cases of
fraud as we take all cases very seriously.
Ms. DAVIDS. Thanks. I appreciate that.
If necessarily, our office, of course, will reach out if we
are hearing things that continue to be of concern so that you
are aware of it and are able to address it. I appreciate that.
And then the second thing, you mentioned a little bit about
restaurants. Restaurants, bars, the shuttered venues have
obviously been hit especially hard during this time, which is
why we targeted resources towards those small businesses. I
know the demand for those funds are oversubscribed.
I am curious if you could talk a little bit about the
expansion of eligibility or allowing for additional funds to
continue these programs. In your view, does that make sense?
And is it something that we should be working toward?
Ms. GUZMAN. We have seen a huge demand as I said. Over $76
billion in requests on the Restaurant program. On the Shuttered
Venues program, over $11 billion but it looks like applications
are still coming in. We are still accepting applications but it
looks like there might be enough funding for that in addition
for them to get supplemental. But on the Restaurant
Revitalization Fund, we are happy to provide any data and
support Congress if they make that decision to replenish that
fund and support restaurants through this time. We are still
seeing obviously a huge demand and this assistance is helping
them keep their doors open.
Ms. DAVIDS. Thank you, Administrator. I appreciate you
being here and your testimony today.
And Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
The gentleman from Minnesota, Mr. Hagedorn, is recognized
for 5 minutes.
Mr. HAGEDORN. Thank you, Chairwoman Velazquez. I appreciate
you bringing up the fact that Ms. Yellen was not here today.
Thank you for doing that on behalf of the Committee.
Administrator Guzman, as a Member on the Republican side of
the aisle, I can assure you that every colleague that is on the
Committee that I have served with in both the last Congress and
this, has tried to in a bipartisan way pass bills that are
going to help all of the American people, particularly our
small businesses in this instance, get from one side of the
coronavirus to the other. And we did that in a number of ways
with a bunch of different programs but we wanted to treat
everyone equally. And just last Thursday, I, along with my
fellow Republicans, sent you a letter talking about the
Restaurant Revitalization Fund. And we do not really believe
that everyone is being treated equally when it comes to that
particular program.
For whatever reason, the Biden administration, the
Democrats put together a priority list which prioritizes a lot
of different restaurant owners, and they are great and we want
to help them all. But for whatever reason, the priority list,
the people who were not on that list were not allowed to be
funded at this time because you closed the whole portal the
very day that the priority list was set to end sending in
applications.
For the record, can you explain to us the characteristics
of the people that are barring restaurant owners who were not
on the priority list?
Ms. GUZMAN. Sure. Of course. The initial outreach that SBA
did was extensive with the National Restaurant Association, as
well as the Independent Restaurant Coalition, to reach all of
the businesses. We informed everyone that this was ``first
come, first serve'' and that everyone should apply, despite
what the processing priority was going to be for those first 21
days. And I think that is reflected in the 372,000
applications. Only 214,000 of those are for the underserved or
priority groups which includes, of course, veterans, women, and
socially and economically disadvantaged individuals.
Mr. HAGEDORN. Who is not on the priority list? That was my
question.
Ms. GUZMAN. Well, the priority list includes women,
veterans, and socially and economically disadvantaged
individuals.
Mr. HAGEDORN. Who is not on the priority list?
Ms. GUZMAN. Those individuals that do not fall into those
categories, if they are not socially or economically
disadvantaged as outlined.
Mr. HAGEDORN. I will reclaim my time.
It would helpful if we would just be honest about it.
So anyway, the portal closes. The only people at that point
who are going to be funded are people on the priority list. One
hundred thousand or more bar and restaurant owners across the
country that are not part of the priority at this point will
not be funded. They happen to be, let's just be honest with it,
White men that own bars and restaurants. Those are the folks.
How is that not discriminatory or even outright racist?
Ms. GUZMAN. Well, you know, White men who either have
partners who fall into those categories, it is not 100 percent
ownership. It is, you know, 51 percent. In addition, veterans
are able to access this program. And what I would say is that
the priority, while the applications closed, we have all these
applications and we are beginning to process all applications,
nonpriority as well. There were also small business set-asides
and so some of those small business set-asides remain and so
those will also, you know, businesses that fall into those
categories will have an opportunity to be funded.
Mr. HAGEDORN. But those are the only people who were not
part of the priority. So it makes sense to me that that would
be discrimination in any sense.
The other thing I would add is that how can we be sure that
illegal aliens are not receiving this money before U.S.
citizens?
Ms. GUZMAN. We know that restaurants are job creators,
clearly, and immigrant entrepreneurs just as much so, they are
all job creators. They are all taxpaying. You have to be based
in the U.S., a tax paying entity in order to access this
program and that is the threshold that we follow.
Mr. HAGEDORN. So there is no assurance of that.
Look, I think it is bad enough that when a government,
federal government picks winners and losers, that is socialist
policies. And to do so based on race, and even putting illegal
aliens ahead of U.S. taxpayers to me does not make any sense.
We should all be treated equally. We should all have the same
opportunity. And right now it does not seem it. It seems like
there is a big segment of our population who happen to be bar
and restaurant owners who are not being treated equally. And I
hope that we would reject that type of racial politics. I yield
back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Mr.
Phillips, for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair. Welcome, Ms. Guzman.
All of us are hearing about the current programs--PPP, EIDL--
not meeting the needs of certain heavily impacted small
business industries. Fitness and wellness being a good example.
Has the SBA considered recommendations to this Committee on
some alternative solutions perhaps to buoy these small
businesses?
Ms. GUZMAN. We do. We hope to continue to serve PPP until
it is over, the smallest of the small businesses, and including
those highly impacted industries referenced. And so we do
believe that there is opportunity to access that program as it
was opened up more for sole proprietors and independent
contractors to change the way that we assess the dollar amounts
of that program. So I do believe that is still an opportunity.
In addition, of course, you have your targeted EIDL Advance
Program that we have been pushing out. There are specific
eligibility requirements across that program, but in early
June, we will be opening up that program more broadly to all
those in the eligible categories outside of those who
previously applied for EIDL Advance. And so we think that is
another opportunity to support these underserved businesses,
impacted industries that still need relief.
Mr. PHILLIPS. Okay. And Ms. Guzman, any potential to expand
the SVOG program to include fitness operators?
Ms. GUZMAN. The statute on the SVOG was very specific in
many ways and very restrictive about the eligibility
requirements, and SBA is following that guidance from Congress.
Mr. PHILLIPS. Okay.
Ms. GUZMAN. At this time there is no way to expand that.
Mr. PHILLIPS. Okay. I just wanted to make sure my advocacy
is clear relative to certain industries that really have
struggled disproportionately.
My next question is about the Restaurant Revitalization
Program as it relates to closed locations in determining
eligibility. Despite the SBA indicating that closed business
locations are ineligible, which is I think on Form 3172, Item
3, some are being shut out from receiving the funding to keep
the businesses afloat because the forms require them to count
closed locations amongst their operating entities. So will the
SBA provide any guidance and updates in its forms that reflect
that restaurant locations not doing business as of March 13,
2020, and those permanently closed will not prevent a group
from qualifying for the RRF?
Ms. GUZMAN. I will go back with my RRF Team to explore that
issue and get back to you.
Mr. PHILLIPS. Okay. I appreciate that.
Lastly, when the Committee heard from the GA and SBA
Inspector General, we learned that while millions of America's
small businesses have benefitted from the programs, SBA was
repeatedly warned that the speed in which the programs were
implemented left the agency with limited safeguards to identify
and respond to risks such as improper payments and clearly
fraud. I am concerned about the potential for fraud in the
Restaurant Program as well, as some of my colleagues have
already indicated. With the Ranking Member of the Subcommittee
on Oversight, Investigations, and Regulations, the two of us
have introduced legislation to require the SBA to report to
Congress on the plan, their plan, your plan, and the steps that
have been taken to ensure that the resources within the program
reach the businesses in need.
Can you share with us, the entire Committee, what steps, if
any, that you have taken so far relative to oversight?
Ms. GUZMAN. On the Restaurant Revitalization Fund
specifically, we have implemented industry best practices, as
well as strong controls, fraud controls in place to ensure that
there is limited fraud. In the program, we have reviewed our
full plan with the IG and GAO and feel comfortable with the
current process that we are following to reduce that and
minimize that risk wherever possible. And it is an iterative
process and we continue to look at upgrades as we move forward.
Mr. PHILLIPS. Okay. If anything, it unifies Democrats and
Republicans in this case. It surely is relative to prevention
of fraud and assured dollars are being used appropriately,
effectively, and efficiently. So we thank you for your
attention to that.
With that, Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Mr. Stauber.
Mr. STAUBER. Thank you, Madam Chair. And Administrator
Guzman, I appreciate you being here today.
I am extremely frustrated with Secretary Treasurer Yellen
not following the law. As the Chairwoman eloquently stated, it
is her responsibility to follow the law and be here. And I
equate my frustrations with both the Chairwoman and Ranking
Member Luetkemeyer for the comments against Yellen for not
showing up. It is just unconscionable that she is not here,
blatantly not following the law which says, I think, a lot
about the individual.
Now, Administrator Guzman, how many small businesses are
organized as a subchapter C corporation?
Ms. GUZMAN. I do not have those exact numbers. It
represents more of the employers than small businesses as a
whole.
Mr. STAUBER. Can you give us a guess? Can you give us a
guess?
Ms. GUZMAN. I cannot give you a guess. I apologize. I do
not have those numbers off the top of my head. Of course, I
have looked at it because obviously, it is not, you know, there
are some tax benefits we have looked at before and small
businesses category.
Mr. STAUBER. Would you say hundreds of thousands?
Ms. GUZMAN. Oh, I am sure.
Mr. STAUBER. Okay. Has the Biden administration proposed
increasing the corporate tax rate, thus increasing taxes on
these one hundreds of thousands small businesses that are
organized as a subchapter C corporation?
Ms. GUZMAN. You know, I know that small businesses across
the board have average revenues that are very small. I mean, if
you look at the Office of Advocacy's report, under $50,000----
Mr. STAUBER. And Administrator Guzman, because my time is
limited, the question was, has the Biden administration
proposed increasing the corporate tax rate on these subchapter
C corporations?
Ms. GUZMAN. Those should not. We are focused on trying to
remove some of those loopholes for the larger entities. We do
not intend to affect the small entities.
Mr. STAUBER. Is that a yes or a no?
Ms. GUZMAN. To my understanding, we are not focused on the
small entities. We are focused on the larger corporations and
the loopholes that exist for some of those entity types.
Mr. STAUBER. Administrator Guzman, how many small
businesses are organized as pass-through businesses?
Ms. GUZMAN. Again, I do not have those numbers offhand and
I could not share those with you. But I am happy to follow up
with your staff and we can have a more----
Mr. STAUBER. Administrator Guzman, there is approximately
95 percent of small businesses that are pass-through. Has the
Biden administration proposed rolling back the Section 198
deduction on these pass-through incomes, thus potentially
increasing taxes on some 95 percent of small businesses that
are organized as pass-through businesses?
Ms. GUZMAN. I am not familiar with the specifics so we will
have to follow up. But I appreciate the question and, of
course, small businesses seek simplicity. They are obviously,
you know, it is critical that we are able to help them both on
the revenue side of the equation as well as support them with a
tax structure that does not favor large corporations.
Mr. STAUBER. Will the Biden administration increase taxes
on pass-through corporations?
Ms. GUZMAN. Again, I do not have those specifics.
Mr. STAUBER. How will a substantial increase in a capital
gains tax and regulation help small businesses ``build back
better''?
Ms. GUZMAN. I appreciate the line of questioning around the
tax issues for small businesses. Obviously, it is really
critical that our economists continue to look at ways that we
can improve the economy and help those small businesses, you
know, across the board. Again, the focus is on traying to
ensure that the system is equitable for our small entities, as
well as large corporations and ensure that----
Mr. STAUBER. Administrator Guzman, in light of time, I just
have 30 seconds.
Ms. GUZMAN. Sure.
Mr. STAUBER. Will the increase in the capital gains tax
help or hurt small businesses?
Ms. GUZMAN. It will depend on the size and scale of those
investments. So I cannot peak specifically. I do not have the
analysis.
Mr. STAUBER. So you cannot answer the question whether
capital gains will help or hurt small businesses?
Ms. GUZMAN. I do not have the full analysis, economic
analysis on that.
Mr. STAUBER. Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
This is the reason why we need Secretary Yellen here. The
SBA administrator is in charge of programs that have nothing to
do with tax policies.
Now we recognize Ms. Newman from Illinois for 5 minutes.
Ms. NEWMAN. Thank you, Chair Velazquez. And thank you,
Ranking Member, for putting this together. Administrator
Guzman, welcome.
So I am just going to refer to my colleague's comments just
right before me. By and large, when you have spoken to the
Biden administration at length, they are making sure that small
business is not affected by any tax increase of the largest of
companies. And again, I stress that the Biden administration
has made--in fact, that is a line in the sand I would be
willing to commit to from the Biden administration. So that for
the record.
And then secondly, capital gains has been studied time and
time again. It never affects small businesses. So I encourage
him to look that up.
But my question for you, Administrator Guzman regards two
things. I know that you have hit the ground running since March
17th. A lot going on very obviously. But structurally, the
first thing you do when I have gone into an organization is to
look at the structure of the organization. Have you made
enhancements or improvements across your leadership? And you do
not have to get into hiring/firing, but have you reorganized in
any way that will help address some of the issues that have
been cited? Right? Data integrity. There is a little bit of
fraud out there, and some of the other bigger issues. So if you
can talk broadly about your structural reorg.
Ms. GUZMAN. Well, the number one thing is that we continue
to look at the symptom process and that includes the structure
and how our departments are functioning under the leadership.
However, across the board what we have tried to implement is an
enterprise-wide approach. You know, breaking down some of those
silos and increasing collaboration across the board. A great
example is in the EIDL and PPP programs. Our Office of Capital
Access and Officer of Disaster Assistance are working more
collaboratively now with the Office of Field Operations so that
those boots on the ground at the SBA and district offices
across the country are able to access information on those
loans for our constituents and be able to help them through the
process. Previously, that was shut down and so we reimplemented
that as an example. So that cross-collaboration, enterprise-
wide approach, I have definitely already been started and we
will continue to look at other improvements specifically in
departments as we move forward.
Ms. NEWMAN. Thank you for that.
Second question is with regard to Community Navigator. I
thought this was a brilliant program. You know, about 80
percent of my GDP in Illinois 3 are companies under 15
employees and under $2 million in net revenue. And therefore,
these folks, the owners, and they are largely family owned, are
working very hard every day on their business and do not have
time to navigate onerous documents. And so the Community
Navigator Program I think is brilliant but I know that we are
not quite there yet. Can you give us an update on when those
navigators will be available and if you are going to use
consultants and volunteers and the like. So if you can share.
Ms. GUZMAN. Yes. On the Community Navigator Pilot Program,
the Notice of Funding Opportunity was released yesterday. We
have a 45-day open period for nonprofits, both national, as
well as local, regional, to apply to either be a hub or a spoke
in the system. Obviously, the ultimate goal is to get
hyperlocal with authentic and competent local organizations who
can help businesses navigate the resources that are available
to them and hopefully better access in the future.
Ms. NEWMAN. Great. Thank you very much for your time. Thank
you for being here. And I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Texas, Mr. Williams.
Mr. WILLIAMS. Thank you, Madam Chairman.
I am a small business owner. Have been for 51 years. I am
also the author of the Save Our Stages bill that we have been
talking about today.
Madam Chairman, you are the head of the Small Business
Administration; correct? Can you hear me, Madam Chairman?
Ms. GUZMAN. Are you speaking----
Mr. WILLIAMS. You are head of the SBA; right?
Chairwoman VELAZQUEZ. Administrator.
Ms. GUZMAN. Yes. Administrator.
Mr. WILLIAMS. Okay. All right. So my question is, have you
ever met a payroll? Have you ever started a small business?
Have you ever drawn a line of credit? Have you ever sold a
product?
Ms. GUZMAN. Yes, I have. I come from a family of small
business owners and I grew up working.
Mr. WILLIAMS. Okay. And just to help you along the way, let
me tell you, on these taxes you are getting asked about, just
remember this: low taxes helps business, high taxes hurt
business.
Now, I sent you letters on February 4, February 25, March
18, April 9, April 15, and April 19 to try to give my
constituents an update on the Save our Stages and the PPP
Program. And like we have heard today, to date I have not
received one response, even with the Chairwoman being on these
letters with us. So what you are doing, you are ignoring my
requests. You are blowing me off. You are blowing 700,000
people off in my district in Texas that sent me to Washington
to help fix problems.
So Madam Administrator, when we spoke on the phone last
month, you said that these communication problems would be
fixed and yet nothing has changed. Not only for me, but for
others. So what are you going to do to get these communication
issues fixed? Or should we just talk to lobbyists? I mean, we
are hearing more from the lobbyists than we are from your
office. So should we talk to you or lobbyists? How are you
going to get this fixed, and with a short answer, please.
Ms. GUZMAN. I remain committed to transparency and
collaboration. And we have done over 100 briefings to date. We
are providing weekly/monthly reports.
Mr. WILLIAMS. Okay.
Ms. GUZMAN. An increase in outreach to our Oversight
Committee.
Mr. WILLIAMS. But you have failed to call me back.
Second question. Today marks 151 days since the Shuttered
Venue Operator Grant Program was signed into law by President
Trump. I am the author of that. We have seen countless music
venues and movie theaters go out of business while the rest
have been struggling to keep their doors open until this
1:04:58xxx assistance hits their bank accounts. And as these
businesses have been waiting while the Small Business
Administration struggles to get the program off the ground, the
agency turned all their focus to the Restaurant Revitalization
Fund and got funds in bank accounts within 7 days of the
application opening. To the date that now has sent nearly $28.6
billion out the door while the Save Our Stages program has
delivered absolutely zero. Nothing. So it is hard to classify
the SBA's rollout of this program under your watch as anything
but a total disaster and a total failure.
So on behalf of 12,000 venues who have waited over 5
months, when will these businesses see the money? We understand
today through the lobbyists, we have learned that, and was the
problem this way because this was a President Trump thing and
you just pushed it to the side like we saw so many with the
Biden administration? So why can we not get it right like we
did with the restaurants?
Ms. GUZMAN. I appreciate that question. And to clarify, the
Shuttered Venues Operator Grants Program is being administer by
a whole different team, our Office of Disaster Assistance. We
actually placed the Restaurant Revitalization Fund in a
different office to ensure resources were available for both.
Mr. WILLIAMS. Then Madam Chairman, why do you not give it
to that group and let them get it out?
Ms. GUZMAN. Actually, this team has been working really
diligently around the clock. They are capable and being
effective in terms of finally overcoming some of the initial
technical issues that we experienced with the vendor of this
program. Obviously, we have had over 13,000 applications and we
are working through those as quickly as possible. This was a
much more complex program as written. Some of those learnings,
yes, were taken as the RRF was written so that we had some
simplification in the process----
Mr. WILLIAMS. I hear you. I have got another question but
it is going to be hard to tell those people that. Okay?
Now, thirdly, building off this last question, when we say
that there has been zero money delivered to Save Our Stages,
that is just talking about the first priority group. There are
two more groups that will likely be waiting until July to
receive any money at the rate we are currently moving. So
additionally, we saw the RRF that the money ran out for the
first priority group after they were able to apply.
So Administrator Guzman, can we expect to see the same
numbers in the Save Our Stages Program with a great deal of
businesses being left out of any assistance at all as we did
with the Restaurant Revitalization Fund or should we just ask
the lobbyists?
Ms. GUZMAN. We actually have applicants from all of those
priority groups. You know, the 1:07:39xxx. We have about 4,000.
We have another couple of thousand in the 70 percent and
another 4,000 in the 25 percent. So we encourage everyone to
apply. We do not anticipate that this money will run out.
Mr. WILLIAMS. They do apply but they cannot get the money.
Ms. GUZMAN. Correct. We are processing them as we go in
those priority categories. However, based on the demand so far
that we have seen, we do believe that we have enough funding.
Mr. WILLIAMS. Well, you need more people then, I guess, to
help get it done.
Anyway, I think my time is up. Madam Chairman, I yield
back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Georgia, Ms.
Bourdeaux.
Ms. BOURDEAUX. Thank you, Chairwoman Velazquez, and Ranking
Member Luetkemeyer. And thank you, Administrator Guzman, for
joining us today and for reaching out to the many small
businesses in my district and holding a forum here to help them
as you rolled out the Restaurant Revitalization Program.
The Paycheck Protection Program, as you know, has provided
millions of small businesses with a lifeline to keep their
doors open and employees on the payroll over the past 14
months. But now that the PPP funds are virtually exhausted, we
are hearing from more and more small business owners who will
be seeking loan forgiveness in the coming months. Nearly 2
million 2020 PPP loan recipients have yet to apply for
forgiveness, and I know that they are anxious to better
understand how they can obtain this.
So I was just wondering how the SBA is working with lenders
to reengage borrowers and ensure that they understand how to
apply for loan forgiveness. And have you observed a difference
in the speed or manner in which the large versus small PPP
lenders have processed their borrowers' forgiveness
applications?
Ms. GUZMAN. We are working closely with the lenders to just
make sure that we have the systems in place to support the
forgiveness applications that will be coming in. In addition,
we are looking to be creative about how we can find innovative
ways to streamline that process as we move forward into
forgiveness, especially for, as I mentioned previously, the
$150,000 to $2 million range that does not have the expedited
process.
And what we have seen in the past is that it is all
different sizes of forgiveness loans of the 60 percent that we
processed so far from 2020 loans. And so we have not seen any
specific trends. I think just overall, folks are looking for
simplicity, looking for assistance, and we hope to continue to
provide the outreach necessary to support them.
Ms. BOURDEAUX. Okay. Well, thank you.
One other question here. EIDL. About the EIDL program. It
has provided over $200 billion in relief to small businesses
since last March but less than $10 billion in new loans have
been approved since February. And you mentioned in your
testimony that the Small Business Administration still has
about $263 billion in loan program authority remaining.
Do you have information on the amount of unspent funds
appropriated for the COVID-19 subsidies?
Ms. GUZMAN. Yes. And what we are doing on EIDL, obviously,
I made that initial change increasing the limit from $150,000
to $500,000. We saw $1.5 billion in demand come through from
just that change alone. And as I committed, we will be
increasing that to $2 million, which is the true authority of
the EIDL program so that we can continue to support businesses
that need that assistance. There is $263 billion in authority
left and we will be focused on making sure that those
businesses who are interested in it can access the program.
Ms. BOURDEAUX. Just to follow up, the $263 billion in loan
authority represents how much in the funds appropriated that
are used to support that $263 billion? How much remains of the
funds appropriated in that program?
Ms. GUZMAN. I will have to follow up with you and get those
specifics.
Ms. BOURDEAUX. Okay. We appreciate that.
And if the maximum loan amount is increased to $2 million
as you mentioned in your testimony, how much of those funds do
you anticipate will be used?
Ms. GUZMAN. We are not sure yet of that demand as we roll
out that program by July. We are hoping to finalize the
technology to accommodate for those increases. We will start to
get a better sense of those numbers and can share that with the
Committee at that time.
Ms. BOURDEAUX. Okay. Thank you so much.
I yield back the balance of my time.
Chairwoman VELAZQUEZ. The gentlelady yields back. Now we
recognize the gentleman from Pennsylvania, Mr. Meuser, for 5
minutes.
Mr. MEUSER. Thank you very much, Chairwoman. And thank you,
Administrator, for being with us. And certainly, thanks to our
Ranking Member Luetkemeyer.
So the PPP loans were quite successful. They were not
perfect. They were a lifeline. We did a lot. It was a very
holistic approach to assuring that they were as efficient,
valid, purposeful as possible. Secretary Mnuchin and many
Members and banks and small businesses. It was very
inclusionary on how to get it right. It still is very
important, of course, and I am hearing from many businesses as
well as banks that there are problems with the forgiveness
initiatives, primarily related to loans between $150,000 and $2
million and the loan forgiveness over $2 million. I am not sure
any have been forgiven as of yet. Now, we all understand that
there is going to be an audit of the loans over $2 million, but
Administrator, is there a plan? Because currently, it is a
problem for banks and businesses. We are not seeing a real
process for forgiveness of loans in these categories.
Can you comment on that, please?
Ms. GUZMAN. For the over $2 million loan categories, yes,
there is a specific process. It is an individual review.
Obviously, those were flagged for SBA loan review due to the
amount. And there is a process that SBA is following to review
those within the same partnership. And so I know that those,
obviously, this is a huge task that the SBA is taking on and
will increasingly do so as those payments come due. So we are
hoping to try to come up with a streamline process as well for
those $150,000 to $2 million bucket as well as you mentioned to
make sure that those can be processed efficiently and give us
the time and resources to be able to address those individual
1:14:36xxx.
Mr. MEUSER. Sure. Thank you.
Is it a priority? And will we see some sort of plan that
will be put into effect?
Ms. GUZMAN. Yes, it is a priority. We are working on that
currently. And so hopefully we can follow up soon with some
specifics.
Mr. MEUSER. Great.
Administrator, Representative Stauber brought up the 20
percent business income deduction that occurred in the Tax Cuts
and Jobs Act. Many small businesses are concerned about the
Biden administration's plans for tax increases.
Can you tell us what you think about the 20 percent removal
from small businesses? And are you weighing in with the Biden
administration on behalf of the millions of small businesses in
our country to assure or do what you can to keep that deduction
in place? Because that deduction, I think you know, was not a
gift to the wealthy. It helped small businesses expand, get
stronger, and hire more employees as we saw with a 3.5
unemployment rate.
Your thoughts on the 20 percent?
Ms. GUZMAN. Yeah. I mean, I closely collaborate with the
Office of Advocacy as well. It has the economists that can do
the research as well. Clearly, I am not a tax expert. That is
not my forte. I am administering these programs on behalf of
the Small Business Administration, relief for small businesses.
So I continue to try to track those issues and report up our
findings to the necessary channels.
Mr. MEUSER. It is a major interest and a factor for small
businesses' growth, survival and just maintaining and working
through the recovery. So I think the SBA administrator should
be very much an advocate for the health of small business.
As well, you know, it came up before about capital gains.
And that is very important. The idea that the Biden
administration wants to raise capital gains from 20 percent to
43 percent does have a great effect. If a small business is
looking for a partner and/or thinking about selling and
retiring and passing the business along, that transfer has to
take place. That is going to cost them 23 percent, which is
$23,000 per $100,000. So it is not a trivial thing. It is very
important.
The other thing I want to bring up, please, is the
unemployment compensation. Ninety percent of my small
businesses in my district are literally diametrically opposed
to President Biden's comment that the additional supplement of
unemployment compensation as the president said is not
measurable for the level of workforce availability. And I will
tell you this. I do weekly business calls with dozens of small
businesses and virtually 100 percent say it is the number one
issue, if not the number two issue that they face. A headwind
that they face.
Can you comment on that? Do you believe that where some of
this is being targeted in some states and, you know, it is
going to by law continue to supplement through August. Again,
as an advocate for small businesses, I would hope you would
recognize that, be inclusionary, talk to the small businesses
and get directly from them what their concerns are and work on
their behalf.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Mr. MEUSER. I yield back, Madam Chair. Thank you.
Chairwoman VELAZQUEZ. Now we recognize the newest Member on
the Committee, the gentleman from Louisiana, Mr. Carter.
Welcome to the Committee.
Mr. CARTER. Thank you very much, Madam Chair. Thank you
very much for your very warm and gracious welcome. I am honored
to be a part of this Congress. Honored to be a part of this
Committee. Ranking Member Luetkemeyer, good morning. Or good
afternoon I should say. Well, I guess it is still morning.
Thank you all very much.
And Administrator Guzman, I would like to personally thank
you. I know your job has been difficult. I feel the frustration
of all of the Members here. I share their frustration, but I
also recognize that you have a very difficult task. There is
nothing in the playbook to address a worldwide pandemic, the
pain that it has caused for many of the people throughout our
country. Certainly in the Second Congressional District we are
no different. So I applaud your efforts. I feel the frustration
of my colleagues who expressed concerns about the availability
of funds, the rapid nature of getting those funds, and the
frustration that we hear from our businesspeople.
So at the risk of being redundant, I will try to not repeat
questions that have been asked. But I will share that, as you
know, I represent the Second Congressional District, which is
Louisiana, home of the Historic French Quarter and our
beautiful river parishes up and down the river from West
Jefferson to West Baton Rouge Parish.
One of the issues that I hear repeatedly from small
businesses is the ability to access PPP as rapidly as some of
the larger companies that have access to lawyers and
consultants and accountants. What plans, if any, do we have to
address perhaps in the next round of resources to assist small
businesses who oftentimes miss out because they do not have
access to the resources of accountants and consultants to
prepare paperwork?
Ms. GUZMAN. Yes. And obviously, once the Community
Navigators Pilot Program is launched and those organizations
are brought on board to fully help the SBA and communicating
resources and supporting businesses through process of relief,
that will obviously make a big difference. But I will submit
that on the Restaurant Revitalization Fund Program, we were
able to effectively, through partnerships, reach to all
different size businesses, as well as from different
communities and regions across the country. And so really, that
is reflected in the application, the interest, the access. And
I think what also was attractive was that we created a simple
process. Leveraging technology, using partners such as Square
and Toast and other point-of-sale vendors to help us access
those restaurants who are underserved so that they can connect
to the platform and apply for the program. So I think that
there are some learning in our Restaurant Revitalization Fund
in terms of how we do our outreach, how we are structuring our
programs so that they are more customer friendly so that
businesses of all sizes can access the program easily. And we
will be applying those types of monies across our program as we
move forward.
Mr. CARTER. And Madam Administrator, I have some thoughts
that I would like to share with you and my staff will be
preparing some documents to share with you some thoughts that I
think may assist with kind of segregating those funds to make
it easier for small businesses to access them.
One final question as my time runs out. AS you know, in
Louisiana, we are just about 15 years past Katrina, one of the
largest hurricanes and issues ever to hit, natural disasters
that ever hit Louisiana for certain. Many of our small
businesses are still suffering and still paying back SBA loans
from that situation and have since had other situations of
similar magnitude, like COVID. What relief, if any, can we look
forward to in the way of forgiveness of some of those Katrina-
related SBA loans?
Ms. GUZMAN. We did provide that relief on all our programs.
We have extended payments on any EIDL loans to 2022. But in
terms of any forgiveness, we would be happy to collaborate with
you, work with you to provide you any information that you need
about our programs and we will implement any programs that
Congress directs us.
Mr. CARTER. Very good. And finally, I would like to once
again thank Representative and Chairman Velazquez for governing
this meeting as smoothly as you have. And thank you,
Administrator Guzman, for making yourself available. I yield
back my time.
Chairwoman VELAZQUEZ. The gentleman yields back. Now we
recognize the gentlelady from New York, Ms. Tenney.
Ms. TENNEY. Thank you, Chairwoman Velazquez, and Ranking
Member Luetkemeyer, for holding this meeting. And I want to say
thank you to Administrator Guzman for being here. We know that
working at SBA is not an easy job right now, especially in
light of the pandemic. And I might add, thank you for being
here. I am very disappointed that Secretary Yellen has not made
the effort to be here. She did speak before Financial Services
in the past and really needs to fulfill her legal obligation to
be here. So hopefully, we will be hearing from her soon. And I
am sure Chairwoman Velazquez and Ranking Member Luetkemeyer
will make sure that happens.
But I wanted to just address the administrator. This is an
issue that is really big in my region. Actually, it is across
the country.
I am a small business owner. Our family business is
celebrating our 75th year here. We almost did not think we were
going to make it because of the pandemic last year. So many of
the programs put out by SBA and the CARS Act have been vitally
important to us.
But one of the big issues now facing every employer where I
go, every business forum. It is the number one issue, is the
enhanced unemployment insurance benefits extending through
August and how that is putting a huge impact on their ability
to attract and to get people to work and in some cases, their
own employees back to work because the benefits are so strong.
What is your opinion on that? And do you think that we can
in some way target that relief instead of having this blanket
coverage where we are hurting even seasonal employees, seasonal
businesses, agribusinesses in my community. You know, ag is
number one in my region. What do you think we can do to try to
minimize that impact on small business owners?
Ms. GUZMAN. From what I have heard from small businesses,
it is the combination of factors, and definitely across the
board, small businesses want help in making sure that their
work is still safe as well to come back to work. And so that is
why we have been emphasizing heavily the vaccination rates and
by emphasizing the American Rescue Plan taxpayer, tax credit,
rather, for small businesses to give time off to their
employees to get that shot, as well as recover from it. Because
we know that feeling safe in the workplace is also a big
factor. Also, just the vaccination rates would help with the
care economy and with schools being reopened fully for the
children to go back to work because I am also hearing that that
is a huge factor for a lot of the employees of these businesses
is that they not only potentially fear of COVID in the
workplace but as well that problem with having no care for
children at home. So I do believe that the Biden administration
focus on fighting COVID is going to go a long way towards
helping our small businesses access workforce.
Ms. TENNEY. Can I just reclaim my time for a second? I am
not hearing that from small businesses. We have a fairly decent
vaccination rate here, very low contraction rate, a low death
rate in rural areas here. So my concern is many businesses
either shut down entirely or invested a small fortune, which is
a lot for businesses, tens of thousands of dollars into
plexiglass, PPE, and other items to make it safe for employees
to go back to work. We are not talking about our police
officers, our firemen, our essential workers and all the other
so-called essential. I think every worker is essential. But
people who went back to work and are back working. We have to
get our economy going. I am just concerned that if we do not
have a more targeted approach, we are going to see a collapse
in our economy and we are going to have a problem getting them
back to work. Do you not think that that should be an issue
that the Biden administration should be addressing with you as
the key administrator, one that deals with small business? I
mean, look, NFIB has said that almost 50 percent of businesses
are specifically citing the enhanced unemployment as the reason
that people are not coming back to work because they can wait
it out until August. And we know that is partly true. I know a
lot of people are working even though they might even be making
less. Do you not think that is something the Biden
administration should be doing to get our economy going again?
Ms. GUZMAN. I know that we are looking at all the tools.
And obviously, that support in the economy, those additional
funds have also propelled our economy and supported business
revenue creation at the same time. So, you know, it is not my
position at the SBA to judge in terms of the best economic
decisions to make overall for the economy but I know that that
has been a shot in the arm in the economy to have that stimulus
check distributed across the country.
Ms. TENNEY. Right. But we are running out of stimulus
checks.
Just one more thing. You said you are a small business
owner. I mean, a lot of businesses are C corps. You know, our
business has been around a long time. We are small. We are a C
corp. We are hurt by taxes. I think if you are a business
owner, I think you can safely say that taxes hurt all
businesses, large and small, but are particularly harmful to
small businesses. And in an area like mine, 94 percent of the
jobs created in my region are from small businesses. So we do
not deal with the large business problem. So these taxes are
going to really hurt our community.
Ms. GUZMAN. As I mentioned earlier, this is really
President Biden's focus on taxpayers over $400,000 is really
the priority focus, including the S corporation taxpayers. But
all of the exceptions that are typically benefitting small
businesses--the rent, capital gains, passive income--will
continue to apply. And so the budget includes provisions really
to close those loopholes I reference that allow larger
corporate taxpayers with income over $400,000 from avoiding
paying certain taxes. And so that is really the focus as I
reference earlier.
So I appreciate what you are hearing from the constituents.
I hear a combination of, of course, that plus the COVID issues
and the care economy issues and education. So I look forward to
continuing to partner with you to help support our small
businesses.
Ms. TENNEY. Thank you. I think my time is up. Thank you so
much and I appreciate your testimony and for actually being
here today. Thank you.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Now we recognize the gentlelady from California, Ms. Chu.
Ms. CHU. Thank you, Madam Chair.
Administrator Guzman, since the start of the pandemic, I
have been extremely concerned about the Trump administration's
failure to collect demographic data on PPP recipients. It
prevented us from understanding which types of businesses
benefitted from the program at a time when so many were
struggling. And that is why it was so significant that the Los
Angeles Times had a recent investigation in which they reported
an alarming finding that in L.A., businesses in majority White
neighborhoods in the early days of the PPP loans received loans
at twice the rate of majority Latino areas, 1.5 times the rate
of majority Black areas, and 1.2 times the rate in Asian areas.
So clearly there needs to be more help for underserved
businesses. And one of the most important lessons of this past
year is that community financial institutions can effectively
reach businesses that are not served by traditional banks and
they can do so at scale.
Now, I have long championed the Community Advantage Program
which leverages nonprofit, mission-oriented lenders and have
authored legislation to give the program long-term stability by
authorizing it for 5 years. So how can we expand the role of
CFIs, such as Community Advantage in the small business lending
ecosystem so that we can support an equitable, long-term
recovery?
Ms. GUZMAN. Well, one of the silver linings of the pandemic
has been SBA's increased network of lenders that have been
accessing the PPP program. And we hope to continue to partner
with them, including those mission lenders, CDFIs and CDCs and
others to make sure that we are supporting small businesses
that are underserved because the data is stark in terms of
access to these programs and the U.S. Chamber had a similar
study which showed that Black businesses were unable to access
capital at the same rate. Half the rate actually of White
businesses. And so we continue to see that in the data and so
the SBA is working hard to try to find a solution to partner
with institutions that are serving these constituents as well
as all of our traditional banking partners to better support
through SBA programs capital access for these constituents.
Ms. CHU. Thank you for that.
Administrator Guzman, I wanted to ask about another issue
which is the Shuttered Venue Grant Operator Program. I am proud
to operate Southern California and the countless live venues,
such as the Troubadour and the movie theaters that make our
region so special. They were the first businesses to close and
will be the last to reopen. And that is why the Shuttered Venue
Program includes this supplemental phase for businesses still
experiencing deep losses in the first quarter of 2021, like so
many of the live venues in L.A. County. But because of the
program delays, SBA already actually has the necessary data
from the applicants to calculate both the initial loans and the
supplemental loans right now. So given the delayed
implementation of this program, can you discuss if SBA can help
these businesses by automatically calculating and processing
the supplemental grant awards to expedite disbursal of these
funds? And are there tools that Congress can provide to help
you do this?
Ms. GUZMAN. Yeah. I mentioned before that the Shuttered
Venues Operator Grant Program was a complex statute that we
were implementing and the program design dictated by statute
obviously had lots of control for eligibility requirements.
There were so many different types of entities that were
eligible with very unique requirements under each. And we
worked very closely with our vendor and cross agencies to make
sure that we were leveraging technology to the fullest and
simplifying processes. And we are continually working through
some of those issues to see how we can expedite as we go
through in processing taxes and other issues. And so while the
program has been delayed, I feel confident that we will start
to roll out these funds as we have been doing this week and we
appreciate the patience from the industry. Obviously, they do
not have time to wait. Their rent is due and other expenses are
critical for them so we are working and take this program very
seriously in implanting it as quickly as possible. And so we
look forward to any further input that you have specifically
with certain venues and how we can improve the experience.
Ms. CHU. Thank you. I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from New York, Mr.
Garbarino.
Mr. GARBARINO. Thank you, Chairwoman. And thank you to the
Ranking Member for doing this. And Administrator, we appreciate
you being here. I want to echo my colleagues' disappointment in
Secretary Yellen's absence today.
But I have a question. I have been in Congress as a new
Member for a only a little under 5 months now. And prior to
being in Congress, with my law practice and being in the State
Assembly in New York, I dealt with SBA, the local offices, and
they were very good in answering questions when I dealt with
them. But my time now, and I have heard this from other Members
as well, a lot of questions to your office have gone unanswered
or been very delayed if they get an answer. Can you explain
what is behind this underwhelming response? And if we cannot
receive a response directly from you and your team, what
recommendations do you have for us to get answers to the
questions that we have? It seems like the communication right
now between the SBA and Members of Congress is very bad. We
would like to have something done in a timely manner. How can
you help us with this?
Ms. GUZMAN. Yes. And SBA is working to increase
communication. It has increased dramatically in the Biden-
Harris administration. And so just to confirm, as I said, we
have had hundreds of briefings. We send out regular reports.
And we continue to try to respond to all of these letters as
quickly as possible. Understanding, of course, that these
requests require career staff time as well as just sometimes
days to pull these reports and that is disruptive to the
process. Obviously, we are highly impacted by the scale that we
have had to reach in order to serve small businesses which
remains a priority and we will continue to try to get through
all of your requests as quickly as possible. So we appreciate
your patience.
Mr. GARBARINO. I understand that. And I know you try to
talk with small businesses, but a lot of small businesses
contact us when they have problems with the SBA, so we send
questions over. I spoke to the previous administrator, Ms.
McMahon, and she told several of us that she prioritized
responses to Members of Congress where she got back within
several days. Is that something that we can count on your
office for, that when a request comes in, when a question comes
in from a Member of Congress that we can expect a response from
your office within a matter of days?
Ms. GUZMAN. Yes. And unfortunately, during a disaster it is
a little bit of a different situation because we are so
impacted by all these programs, unlike under Administrator
McMahon. However, yes, it is a priority. My team knows it is a
priority.
Mr. GARBARINO. I think we had COVID all last year.
Ms. GUZMAN. What we have tried to do in the programs is, as
I mentioned before, is open up access to some of those portals,
to our field operations as well. And we are also in touch with
our local field office as they can also help navigate some of
these specific issues. But yes, constituent requests, those
customer requests, we are trying to open up and access more of
our team Members to be able to answer questions like this. And
so, yes, we will continue to try to work with you to speed that
up. I do want to make sure that we will reach out to you and
make sure your staff is in contact with our field office who
has this expanded now access into our portals to be able to
understand where loans are in the process.
Mr. GARBARINO. I appreciate that. Thank you.
And I have another question. Dealing back with the EIDL
program and fraud, the fraud is extremely concerning, the
amount of fraud. We know that the SBA's Shuttered Venues Grant
Program was flagged by serious problems in the beginning. It
seems that new reports come out monthly on these programs. In
your response to these reports, we know the SBA plans to
inquire and implement many of the recommendations that it gets
from the SBA Inspector General, that it gets from the
Government Accountability Office regarding these relief
programs. Out of these recommendations that you have received
from the SBA Inspector General and the Government
Accountability Office, how many recommendations have you gotten
and how many have you closed out? Which means how many have you
implemented of those recommendations?
Ms. GUZMAN. A lot of the requests, too, in a lot of the
reports that we are seeing now are unfortunately assessing the
portfolio pre in 2020. And so a lot of the controls were put in
place post in 2021. And so, unfortunately, that is not
reflected in a lot of the current reports. But we are working
to close out as many of the IG and GAO reports as possible
across the board and my teams are----
Mr. GARBARINO. Okay. I only have a few seconds. How many
have you closed out, your team, to date? I believe you have had
32 recommendations. But how many have you closed to date and
how many are open?
Ms. GUZMAN. We will follow up with you to give you that
exact number.
Mr. GARBARINO. Okay. Thank you. I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Evans, for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
Madam Administrator, many small businesses in my district,
especially minority-owned businesses are in desperate need of
technical assistance. In your testimony, you mentioned that the
American Jobs Plan will provide SBA the ability to create a
national network of small business innovators and innovative
hubs and technical assistance partners to ensure women,
inventions, and rural businesses basically receive what they
need. Could you please elaborate on this proposal and how it
would work and the current resources?
Ms. GUZMAN. Yeah. Obviously, the SBA has resource partners,
our Small Business Development Centers, our Women's Business
Centers who have expanded recently, including through HBCUs, as
well as SCORE. And so with those resource partners, they play a
critical role in helping us reach small businesses. But with
the Community Navigator Pilot Program, we are going to be able
to partner more extensively and resource partners are eligible
to apply for that as well, of course. But the point of that is
to create a hub and spoke model where there is an essential
source of information and a network of more local navigators
who can help small businesses connect to resources and help
them understand the process, application process, et cetera.
And so with that program, we hope to fund national as well as
regional and local organizations to create that system of
disbursing information about these programs as quickly as
possible so that businesses that have traditionally been
underserved will be able to access those relief programs.
Mr. EVANS. So how would you say you think it is proceeding
at this point?
Ms. GUZMAN. We have just released the Notice of Funding
Opportunity yesterday, and so we know that we have done
extensive outreach with organizations across the country to
make sure that they were ready to apply through the grant
portal process and hopefully serve our small businesses through
this system. And that includes diverse organizations and
organizations across our regions that are underserved.
Mr. EVANS. Madam Administrator, I thank you for your
leadership and your organization, what they are doing. And I
think the technical assistance is probably of utmost
importance. Obviously, resources are important, but the
technical assistance I believe is very important as a priority.
Again, I thank you for your leadership.
I yield back, Madam Chair.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now we recognize Ms. Young Kim from California for 5
minutes.
Ms. YOUNG KIM. Thank you, Chairwoman.
I want to thank Administrator Guzman for joining us
virtually, though I must say that I share Chair and Ranking
Member and my colleagues' frustration, and I am also
disappointed Secretary Yellen is not testifying today to
discuss how Treasury is assessing the impact on a possible
increase in taxes on small businesses.
As one of the Members of Congress who helped craft the
bipartisan PPP Extension Act, I wanted to follow up on some of
the recent funding numbers that the SBA has been reporting and
the decision to close the border. Let's acknowledge that the
PPP application window will remain open for CFI lenders, so
what specific steps did you take to alert all other lenders
that the portal was going to close a few weeks back? And did
you provide advanced notice to the lenders? If so, how many
days or weeks in advance did you provide?
Ms. GUZMAN. We continue to communicate with the lenders
through our portal. That is how we communicate with them
regularly in terms of where we are at in the system. Obviously,
all the lenders have been tracking closely the remaining funds
as we have been walking through this program and reaching the
end. So I do not believe it should have come as a complete
surprise to many and we informed them in advance that we were--
--
Ms. YOUNG KIM. All right. Let me reclaim my time.
As a follow-up then, what should lenders do if they have an
application with an unknown status?
Ms. GUZMAN. If there are any lenders with hold codes in the
system, we are working through those still. Those funds remain
for those lending institutions and their ability to process
them remains open. And they have not been shut out from the
system. If it is for new loans, obviously, they can work
through CFIs, whether it is NDIs or CDCs or CFIs, the partner,
and make sure that those new applicants get through.
Ms. YOUNG KIM. Thank you.
The PPP Extension Act also extended application deadlines
to the end of this month but it also gave SBA extra authority
days to work through all error code issues for loans currently
in the pipeline. So can you please provide us with a detailed
response on how you envision the SBA using this 30-day period
after the application window closes? So will all eligible
applications that clear their error codes be able to proceed?
Ms. GUZMAN. I am willing to work with all the lending
institutions that still intend to move forward on any of their
held applications to get them to completion. And so those extra
30 days will be helpful. There is a process in place for SBA to
coordinate with the lenders to make sure that any information
is cleared. That the borrower is informed through the lender of
any requests for further information to release any of these
holds.
Ms. YOUNG KIM. Okay. Thank you.
Well, next question. How are the SBA's entrepreneur
development programs like SBDC, WBC, VBOC, SCORE, administered
to avoid duplication and prevent fraud?
Ms. GUZMAN. Across all of our grant programs, obviously, we
take fraud seriously as well. Our SCORE partners, as well as
our SBDCs, WBCs, have very strict--and VBOC, have very strict
reporting requirements to the agency and we follow through with
audits across the board as well.
Ms. YOUNG KIM. Well, let me ask one last question here.
Are there any current efforts to consolidate programs and
resources to make it easier for small businesses to access
resources in a one stop shop? Additionally, what efforts are
you taking to combat fraud and protect taxpayer dollars?
Ms. GUZMAN. Across our resource partners, obviously, they
are all engaged in local ecosystem building to try to support,
along with our field offices, small businesses and the support
that they need. And so we believe that it a cooperative
approach is most valuable to us and so we make sure that all of
our departments are collaborating with these resource partners
and have open communication to make sure that they are
positioned well to support small businesses. And our field
offices are really critical in bringing them all together. And
that will apply towards the Community Navigator Pilot Program
as well. We see that all these resources partners have been
inundated during COVID and have been contacted by many new
businesses for support and we hope that that engagement will
continue as we move forward. In terms of fraud control or
prevention of any misuse of those programs, again, our grants
program management is positioned with processes to make sure
that funds are used in how we intended them to be used to
support small businesses with technical assistance.
Ms. YOUNG KIM. Thank you. I see that my time is up. I yield
back. Thank you.
Chairwoman VELAZQUEZ. Time has expired.
Now we recognize the gentlelady from Pennsylvania, Ms.
Houlahan, for 5 minutes.
Ms. HOULAHAN. Thank you, Madam Chair. And thank you all for
being here.
I have several questions, and my first one has to do with
PPP loans and the forgiveness process. Through a bill that I
introduced and that was signed into law as part of the Economic
Aid this past December, SBA is now able to provide small
businesses that received a loan of $150,000 or less with a
streamline forgiveness process using the 3508S Forgiveness
form. This was really a welcomed change for small businesses
and lenders to be able to streamline the forgiveness process
and to make it easier for our smallest businesses to get that
relief. However, based on data that was released by the SBA,
there still are a substantial number of borrowers who have not
yet submitted, nor have been approved for forgiveness. And I
have heard suggestions from advocates lately that simplifying
the forgiveness application and associated requirements for all
PPP loans between $150,000 and $2 million would further allow a
more streamlined process. And it has also been raised that
additional resources may be needed to help the SBA expedite
reviews for PPP loans greater than $2 million. So as the agency
is beginning to move forward and move their focus from the
origination phase to the forgiveness phase, what kind of
considerations are being made by you all to ensure that there
is an efficient forgiveness process? Do you also feel that
raising the current cap on PPP loans eligible for streamline
forgiveness from $150,000 to $2 million would help you better
serve our businesses?
Ms. GUZMAN. Thank you for that. We are looking at best
practices in that $150,000 and under range because clearly that
simplicity is beneficial to our small businesses applying. We
do want to apply similar type streamlined processes for the
$150,000 to $2 million and are exploring our options currently.
And so we welcome a partnership in trying to circle back with
you once we have more specifics to recommend. Obviously, we are
talking to lenders who have been implementing PPP to understand
what they are seeing and what they are hearing in terms of why
borrowers are not pursuing forgiveness at this time but we know
that that cliff is coming with payments due and want to make
sure that we move forward to create a system that they will
access more readily.
Ms. HOULAHAN. My apologies for my dogs in the background.
Thank you, and I look forward to working with you on that
as well.
My next question has to do with concerns that constituents
in my community have been raising with me related to--and I
recognize you are facing unique challenges with the pandemic.
But with your agency being asked to distribute federal
assistance to small businesses, we are definitely hearing a lot
more about customer service and the needs to have a more
effective customer service. What recommendations do you have to
improve the customer experience for those of us in our
communities who are seeking assistance from SBA?
Ms. GUZMAN. Some measures we have put into place but I have
asked my staff to be as entrepreneurial as the small businesses
that we serve. And obviously, be providing strong customer
support and service is really critical for small businesses as
they seek revenues every single day. And so we have tried to
take that approach. With our small businesses, they obviously
need information easily accessible as well as in simple terms.
And so we have really been partnering externally with many
organizations to better reach small businesses with authentic
voices, people who can help them navigate and translate
government to better support their needs. In addition, we have
equipped our field with more information and direct access to
our programs so that they can better support our small
businesses and turn around these requests. Obviously, SBA has
been inundated but we are working to try to find better ways
with technology as well to streamline processes, including
support to give small businesses answers and resources that
they need ASAP.
Ms. HOULAHAN. And I would look forward to working with you
as well on that. It definitely is a trend, and I understand the
volume that you are realizing right now with PPP and EIDL and a
number of other large programs that you are implementing, some
more successfully than others. But if there is anything that
our office or this Committee can be doing to help you as you
work through what best practices are on customer service, I
would welcome that as well.
I only have a half a minute left so I guess I would ask how
we can be better supporting you on issues of fraud as well. If
there is 20 seconds worth of ideas that you might have that we
can help on the fraud area, that would be a welcomed last
couple of seconds.
Ms. GUZMAN. SBA is continuing to use resources. We have
obviously scaled up on customer service, as well as our fraud
teams. And so that support, that financial support for extra
administrative funds has been helpful for that. So that
continued support will be important going forward.
Ms. HOULAHAN. Thank you. I have run out of time and I yield
back, Madam Chair.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentlelady from Texas, Ms. Van Duyne
for 5 minutes.
Ms. VAN DUYNE. Thank you very much, Chairwoman Velazquez. I
very much appreciate the fact that you have called upon and
recognized the importance of getting Secretary Yellen here to
answer some of these most basic questions, and I hope that we
will continue to push her and make sure that she does have an
opportunity to speak directly to our Committee. Thank you,
Administrator Guzman, for being here today.
You have been unable to answer, or unprepared to answer a
lot of the questions that have been proposed and posed to you
by my colleagues, specifically those proposed impacts of the
current administration. The impacts of increasing the minimum
wage. Are you familiar that NFIB has found that 92 percent of
small business owners felt the wage mandate would harm their
businesses?
Ms. GUZMAN. You know, I am familiar. I know as well though
that there are other studies that show that there are other
factors that are impacting the workforce and small businesses'
ability to hire.
Ms. VAN DUYNE. Oh, without a doubt. I mean, including the
enhanced unemployment benefits. I was surprised when you said
that you had not heard that so much. That what you had heard
from small business owners was their questioning of coming back
in a safe environment I think. Congresswoman Tenney was very
clear that they have purchased and invested a lot of money into
ways of making sure that they are coming back in a safe
environment. So not being very clear about the enhanced
unemployment benefits and the effects that that is having on
small businesses, the increase on capital gains and the effects
that that will have on small businesses you have been unable to
answer. And quite frankly, not having any information about
what the increase in the corporate tax rate would have on small
businesses. Not just on the direct costs but on the indirect
costs. For example, increases in utility rates.
Administrator Guzman, you are charged with running the
Small Business Administration that was created to aid, counsel,
assist, and protect small businesses. And yet, you are not
aware of many of the proposed increases and tax consequences
that will directly affect small businesses that are coming out
of this administration. I guess my question is, if you are not
aware of the effects and the impacts of these policies that are
coming down from the Biden administration, who is advising the
administration for small businesses?
Ms. GUZMAN. Well, I mean, I know that, as we have discussed
this before, I have said President Biden's plan is really
focused on closing those loopholes for the larger corporations.
And I will----
Ms. VAN DUYNE. I yield back my time. I disagree. It is not
just, it may be focused but they are increasing the corporate
tax rate. When asked will that affect small businesses, what
was your answer?
Ms. GUZMAN. Only a very small percentage of small
businesses are C corporations. We talked about that previously.
Ms. VAN DUYNE. No, regardless of whether or not they are C
corporations, will increased corporate tax rate affect small
businesses?
Ms. GUZMAN. Again, I mean, Biden's plan is focused on those
who have earnings over $400,000----
Ms. VAN DUYNE. And I----
Ms. GUZMAN.--so yes, there will be small businesses that
are included in that.
Ms. VAN DUYNE. And----
Chairwoman VELAZQUEZ. Will the gentlelady please allow the
witness to answer the questions?
Ms. VAN DUYNE. If she answers the questions I would really
appreciate it.
Ms. GUZMAN. Look, I mean, the bottom line is that, you
know, there are important provisions, President Biden has
pledged to not only--to not increase taxes on taxpayers earning
less than $400,000. And, you know, including S corporation
taxpayers. All of the exceptions as I said----
Ms. VAN DUYNE. I would really appreciate it if you would
answer the question.
What would be the impact, and I know it is not the focus,
but there will be direct and indirect impacts on increasing our
corporate tax rate, correct, on small businesses?
Ms. GUZMAN. Not on the smallest businesses. And so, again,
we are----
Ms. VAN DUYNE. On small businesses defined by your
administration and by your department. I mean, things like
increases in utility taxes and utility costs, those will be
felt by small businesses; correct?
Ms. GUZMAN. Small business, yes. Small businesses will, you
know, will continue to have to navigate the systems in place
and any increases that vendors might transfer to them. But, you
know, again, the focus on this tax reform is really to ensure
that those smallest--there is a level playing field for the
smaller entities. I appreciate that SBA supports all small
businesses. You know, it could be as large as 500 employees.
Ms. VAN DUYNE. I reclaim my time. I have 20 seconds left.
It is obvious that small businesses that you are speaking with
are not telling you what the rest of us across the country are
hearing. I would welcome you, I would invite you to come down
to Texas 24 in Dallas-Fort Worth and speak with the small
businesses that we are talking to that will tell you what the
problems are directly so that you can be more prepared and
maybe then, when you are more prepared, we have heard directly
from small businesses, you can circle back with this Committee
and let us know what you are doing to be able to really prepare
and protect our small businesses across the country as these
Biden administration policies are coming down.
I yield back my time. Thank you very much.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from New Jersey, Mr. Kim.
Let me just react to this line of questioning. First of
all, the topic of this hearing is an examination of SBA COVID
relief programs and the administrator is prepared to answer the
questions related to the implementation of those programs.
There will be a time for us to hold a hearing on any tax
policies but this is not the space. I think the taxpayers
deserve answers from the administrator as it relates to those
programs that have been implemented by the current
administration. Now Mr. Kim----
Mr. LUETKEMEYER. Madam Chair, I am claiming some time in
response to your comments there. Those tax questions are fair
questions because we are talking about the COVID activities and
policies of this administration of the SBA. And tax policy on
those new programs is very important to have a basic
understanding of the tax policies' effect on small businesses
will help us understand how these COVID policies, these
programs can be helpful. If we find out that there are more
detrimental effects from the tax policy, we need to understand
how that can affect the COVID policies, the COVID programs.
They are very appropriate. It is unfortunate the administrator
is unprepared today to answer basic questions about the
administration's program. She is not representing the Small
Business Administration at the table when the administration is
talking about tax policy which is extremely alarming because if
she is not there, who is? We need to have answers because all
of this factors into how we address the COVID problem in this
country.
Chairwoman VELAZQUEZ. I just wish that you were so forceful
when we were conducting oversight hearings with the previous
administration as it related to the fact that ineligible
businesses were able to get assistance--relief assistance that
they did not qualify for. With that, Mr. Kim----
Mr. LUETKEMEYER. Madam Chair, we were. We were at the
table. We contacted Secretary Mnuchin and said, hey, we have
got a problem. And immediately, he took action. If you recall,
he got in the middle of this and rescinded about $280 million
worth of loans to people, to businesses that were ineligible.
Yes, we were active on this and will continue to be active, I
can assure you.
Chairwoman VELAZQUEZ. We will continue to be active on tax
policies and we will have Secretary Yellen at the table. We
will discuss those issues. To be fair to the witness, the topic
today is related to COVID-19 programs.
Mr. Kim, now you are recognized for 5 minutes.
Mr. KIM. Thank you, Chairwoman. And Administrator Guzman.
Thank you for taking some time to be able to come before our
Committee.
I have been on this Committee since my time in Congress,
and we certainly are trying to maintain the tradition of
bipartisanship on this Committee. This recognition that both
parties are trying to do what they can to be able to support
our small businesses, that is the reason why I wanted to stay
on this Committee because I felt like it was one of the few
places in the last Congress where we were able to talk with
each other civilly, with respect, and talk through a shared
problem that we face with small businesses going through some
of the toughest challenges in modern history. And I know you
have a lot on your plate and SBA has been working hard to be
able to do this. Some places where it has not performed the way
that I would like but other places where I understand that it
has been a tough go.
And one place that I want to just kind of hone in on is
about the Restaurant Revitalization Fund. Now, I know that this
has been moving forward, that you have been trying to take on
some lessons learned from the launch of the Shuttered Venues
Operators Grant Program as well, and I know that the
application is something that has been tried to be simplified
and easy to use so that restaurants are able to move forward
with this. And especially when it comes to making the program
accessible for the smallest independent restaurants and the
socially disadvantaged business owners.
I am also aware that the SBA had to work within the rules
set by Congress, including how the funding amounts are
calculated so you did not have a lot of discretion to spread
around the $28.6 billion that we knew would not even come close
to meeting the demand.
Still, I am very concerned to hear from businesses in my
district, including socially disadvantaged businesses that are
supposed to be prioritized, that their applications have been
rejected without being provided a reason or an opportunity to
correct errors. I worry that many of the most vulnerable
businesses that we are trying to help are being left out and
that minor errors could mean that a business eligible for a
very significant amount of money gets nothing while the next
applicant in line gets the full amount.
So I just want to ask, can you please explain how SBA is
handling applications with minor errors or insufficient
documentation? And will rejected applications ever be told the
reason, especially in the event that Congress provides more
funding for the program and they may have an opportunity to
reapply?
Ms. GUZMAN. Thank you. I think the challenges with first
in, first out programs is just that. And so obviously,
businesses were allowed to get back in line and reapply. But
that is obviously depending on the level of challenges in their
application. I do not have specifics. We would have to review
specific cases directly in terms of why individuals were
rejected from the program. But I am happy to put you in touch,
your team in touch with my team to make sure that we can work
through those specific issues. But SBA will be developing
processes for businesses, assuming that there are additional
funds put in place for businesses to reapply in the future.
Mr. KIM. I appreciate your willingness to help out but what
I just want to emphasize again, if you can kind of take it back
to your team is about just that feedback. When the businesses
do not know what it is that has gone wrong, why it is that they
are not being accepted, you know, we hear that kind of
breakdown there in the communication, we hear that also with
the PPP, for instance. I know you addressed this to a point but
I have also heard from these panicked business owners waiting
for PPP loans when they receive a notice that SBA will remove
all loans not approved and further research status from their
original platform by 5:00 p.m. on May 17. You know, that is
something that they receive that notice, they get very panicked
about it, and we are told before that no applications were
purged. I get it. But when we are looking at this, you know,
Congress has approved more than $800 billion for the PPP
program which has funded more than 11.6 million loans, the
program has become a crucial lifeline for small businesses but
what we are trying to figure out is how is SBA addressing the
confusing caused by that notice? And how are we working to
resolve these remaining hold codes, complete all pending
applications, and utilize the remaining amount before June 30?
So this is just something that I am continuing to hear is a
problem.
Ms. GUZMAN. Yeah. And we definitely noticed the banks so
that they could take action as all of those hold codes were a
minimum over 30 days. In some cases, over 90 days. And so they
needed to take action on those loans. Again, we did not remove
them from the system in any way and so they can continue to
work through those issues with the SBA if those were actual
pending loans that they intended to take action on.
So, I definitely appreciate that we need to have more
communication. That is a goal as we continue to look for
improvements in the program. And so I will take it back with my
team and see how we can improve that transparency as we move
forward without----
Mr. KIM. Just letting them know what they need to do to
resolve it. That is what it comes down to. I yield back.
Chairwoman VELAZQUEZ. Time has expired.
Now we recognize the gentleman from Florida, Mr. Donalds.
Mr. DONALDS. Thank you, Chairwoman, Ranking Member, for
this actually quite lively Committee.
You know, first of all, Administrator Guzman, I will tell
you, you know, I have been coached on kids. I always tell them
the number one ability is availability, so I want to thank you
for making yourself available. It is unfortunate that Secretary
Yellen does not know that the best ability is availability and
so she needs to be here to answer these questions.
I will tell you, Administrator, I mean, I get it why you
cannot frankly keep the 100 with the American people about
President Biden's tax policies and other economic policies
because you would be in trouble with your boss. So I understand
why you cannot be 100 about those things. But what most people
do not know is that my career was actually as a bank
underwriter, as a credit loan underwriter for many years, so I
underwrote small business loans. And I will tell you, 100
percent that increases in the corporate tax rate, increases in
the capital gains rate are going to affect small businesses
whether you are a C corp or a pass-through S corp, simply
because that is what happens with increased taxes. Either it is
going to hurt them directly on their bottom line. It is going
to hurt the people that they do business with. It is going to
impact them as well. So just for the record, as somebody who
has actually been a lender that has dealt with SBA from the
front lines, I will tell you point blank, increased tax policy
is going to hurt small businesses across the United States.
That being said, I know that in the last spending bill that
was passed in Congress, there was a change to PPP which
expanded the ability for nonprofits, specifically large
nonprofits to access PPP loans. One of the concerns by myself
and other Members of the Committee was that nonprofits like
Planned Parenthood and their affiliates will be able to gain
access to the PPP program. As to this point, has any nonprofit
like Planned Parenthood or their affiliates received PPP loans?
Ms. GUZMAN. It is SBA's longstanding policy not to comment
on specific borrowers. But yes, there have been over 80,000
nonprofits who have accessed the system.
Mr. DONALDS. Is there ability for this Committee to get an
understanding of what nonprofits have gained access? Can you
provide that to us?
Ms. GUZMAN. We have provided specific reports of all the
loans, and so that information is readily available to you if
you were to search through the system. Yes.
Mr. DONALDS. All right. We will make sure we definitely
look into that.
Real quick, I want to piggyback on something that the
Ranking Member was talking about in the EIDL program. You said
that it is really not something that frontline lenders want to
do is get involved in the EIDL program. It is not really in
their incentive base to do so. Have you guys actually itemized
or estimated the amount of total fraud in the EIDL program to
this point?
Ms. GUZMAN. There have been estimates from the IG and we
are still working through. I mean, as an example----
Mr. DONALDS. I mean, but real quick because I have got 2
minutes. So what is that number? What is that number? Can you
tell us?
Ms. GUZMAN. As an example, on identify theft it is less
than 1 percent of actual cases. But we continue to work through
all those flagged issues with the IG and----
Mr. DONALDS. I mean, but how much money are we talking
about? Give me dollars. Dollars and cents. I like percentages,
too, but dollars and cents, how much are we talking about?
Ms. GUZMAN. We do not have final numbers in terms of the
total fraud picture yet as we continue to investigate.
Mr. DONALDS. Let me ask you this question. Do you think it
would probably be cheaper for the United States taxpayers to
incentivize lending institutions who administer EIDL as opposed
to paying out money in fraudulent means?
Ms. GUZMAN. We would have to work through that together so
I welcome----
Mr. DONALDS. Quick question. I mean, you are the
administrator now. Do you not think that is a worthwhile
calculation to perform?
Ms. GUZMAN. Yes. Once we get the final calculation of what
the actual fraud is on the program, especially knowing that we
have implemented new controls going forward that were not
allowed in previous years then, of course, we can look at that
trend.
Mr. DONALDS. All right. Real quick. The last thing I really
want to ask you about is it has also been a point in this
Committee that under Administrator McMahon the response time
from SBA was actually very, very prompt even though they have
new information. You are the administrator now, so quick, what
changed? Why have we gone from quick response times to very
slow or nonexistent response times?
Ms. GUZMAN. I do not know what Administrator Carranza's
response times were during the disaster but obviously, the team
is highly impacted in terms of their ability to respond as
quickly as possible. We have----
Mr. DONALDS. But Administrator, the pandemic was last year,
too, and the pandemic is ending this year so I am trying to
understand what is the difference in response time between last
year and this year?
Ms. GUZMAN. My understanding is that the comparison between
the previous administration and Administrator Carranza who was
in position during COVID versus my time here that we have been
very transparent. We have tried to respond as quickly as
possible and by expediting these briefings, life briefings as
well as reports that we have been sharing with you that that
has in addition provided you with more information than in the
previous times.
Mr. DONALDS. I yield back.
Chairwoman VELAZQUEZ.--expired.
Now we recognize the gentlelady from Minnesota, Ms. Craig.
Ms. CRAIG. Thank you so much, Chairwoman Velazquez. Thank
you for being here, Administrator Guzman. For the record, I
think you are exactly the right person to be testifying as a
witness in front of us today about the SBA's COVID relief
programs since you are the administrator of the Small Business
Administration. So I want to thank you and everyone at the SBA,
and I would like to thank those who worked in the previous
administration, with the Small Business Administration, because
it is all of your hard work over the last year obviously in
implementing the various, mostly bipartisan programs that this
Committee approved in the last Congress. It was an
extraordinary challenge during a public health crisis. And at
the end of the day, we are here to make sure that as many of
our small businesses as possible can get through this crisis.
And of course, we are going to learn as we go in a public
health emergency. So shame on anybody here today who would turn
this into a partisan exercise.
I especially want to commend the administrator on the
creation and implementation of the Restaurant Revitalization
Fund. In fact, I would like to thank my colleagues from across
the aisle for those of you who supported that. I have been a
proud advocate of this program since the Restaurants Act was
introduced in the last Congress and I was incredibly pleased to
see this get across the finish line when it was included in the
American Rescue Plan.
Just last week, I heard from one of my constituents, the
owner of Tawakal Restaurant located in the great city of
Burnsville, who told me that they have already received
financial assistance from the RRF. I am pleased to see that
these vital funds being disbursed to our hardest hit small
businesses are going out so quickly to some. However, you know
there is another side of this. In terms of the RRF applicants,
such as Nick's Diner in Cannon Falls, I am really disappointed
to learn that the likelihood of that independent restaurant
receiving assistance is incredibly small. As some of my
colleagues before me have mentioned, the RRF does not currently
have enough money to assist many of its applicants. That is why
I am working on leading a group of my colleagues and pushing
House leadership to replenish the program to fulfill current
demand or as many of those independent restaurants who have
taken the brunt of this public health crisis. Literally, our
government asked them to shut down during a public health
crisis. We need to work together to uphold our ongoing
commitment and replenish this fund.
Administrator Guzman, you noted in your testimony that the
RFF program has received more than 362,000 applications with a
total of $75 billion in funding requested. At the current
funding level, is there a possibility a large number of those
applicants could miss out on receiving any of those grant
dollars?
Ms. GUZMAN. Yes. There will be significant demand unmet at
the close of this program once awards are finalized.
Ms. CRAIG. Administrator, is there any estimate or
prediction on how many of those applicants are not going to
receive any of those grant dollars at this time?
Ms. GUZMAN. Not the specific numbers that they work through
the specific applications and the dollar amounts for each.
Obviously, we had the $9.5 billion in set-asides for the
smaller entities but the latest numbers are over $76 billion in
applied, and with only $28.6 billion available there will be a
significant number of those 372,000 applicants.
Ms. CRAIG. Administrator, do you think that Congress should
strongly consider replenishing this program?
Ms. GUZMAN. The program has been effective at reaching out
to support small businesses, restaurants, food and beverage
businesses broadly. There is obviously a large pool of
applicants who are interested in this grant funding, and these
are the hardest hit industries that are big job creators in our
economy. And so providing that support to them is really
critical. And whatever Congress moves forward with we would be
more than willing to implement as expediently as possible.
Ms. CRAIG. Thank you so much for that answer. And from that
I am going to assume your answer is yes. Are you open to
working with this Committee and leadership to explore
replenishing the RRF?
Ms. GUZMAN. We would be happy to collaborate and provide
any information and intel that can better inform that decision.
Yes.
Ms. CRAIG. Thank you so much. And I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Again, Administrator Guzman, thank you so much for joining
us today. We appreciate your testimony and your service to our
nation's small businesses. I am also grateful for SBA's
responsiveness. The increased level of transparency and
receptiveness for information has not gone unnoticed. I commend
you for being more forthcoming with this Committee.
With that said, you have taken over the helm of SBA at one
of the most critical times in its history and the road to
recovery will be a long and winding one for small businesses.
Your testimony has also given us much to think about and we
will continue to look at the obstacles that small business
relief programs face. It is important to remember that no
program is perfect and we must help them operate as effectively
as possible. This hearing has made clear that there is much
work to be done and I look forward to partnering with you on
all of these efforts. I welcome your continued engagement,
particularly as we look to reauthorize the SBIR/STTR programs.
I would ask unanimous consent that Members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
If there is no further business to come before the
Committee, we are adjourned. Thank you all.
[Whereupon, at 12:17 p.m., the Committee was adjourned.]
A P P E N D I X
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