[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
SBA'S ENTREPRENEURIAL DEVELOPMENT
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
OCTOBER 6, 2021
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[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-035
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
45-779 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.......................................... 2
WITNESS
Mr. Mark Madrid, Associate Administrator, Office of
Entrepreneurial Development (OED), United States Small Business
Administration, Washington, DC................................. 4
APPENDIX
Prepared Statement:
Mr. Mark Madrid, Associate Administrator, Office of
Entrepreneurial Development (OED), United States Small
Business Administration, Washington, DC.................... 35
Questions and Answers for the Record:
Questions from Hon. Velazquez and Answers from Mr. Madrid.... 39
Questions from Hon. Delgado and Answers from Mr. Madrid...... 41
Questions from Hon. Phillips and Answers from Mr. Madrid..... 42
Question from Hon. Chu and Answer from Mr. Madrid............ 44
Questions from Hon. Luetkemeyer and Answers from Mr. Madrid.. 45
Questions from Hon. Hagedorn and Answers from Mr. Madrid..... 56
Questions from Hon. Stauber and Answers from Mr. Madrid...... 58
Questions from Hon. Meuser and Answers from Mr. Madrid....... 60
Questions from Hon. Garbarino and Answers from Mr. Madrid.... 62
Questions from Hon. Young Kim and Answers from Mr. Madrid.... 64
Questions from Hon. Van Duyne and Answers from Mr. Madrid.... 65
Questions from Hon. Donalds and Answers from Mr. Madrid...... 66
Additional Material for the Record:
CATO Policy Analysis......................................... 67
CUNA - Credit Union National Association..................... 111
SBA'S ENTREPRENEURIAL DEVELOPMENT PROGRAMS
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WEDNESDAY, OCTOBER 6, 2021
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 10:07 a.m., via
Zoom, Hon. Nydia Velazquez [chairwoman of the Committee]
presiding.
Present: Representatives Velazquez, Golden, Crow, Davids,
Mfume, Phillips, Newman, Bourdeaux, Carter, Chu, Evans,
Delgado, Houlahan, Andy Kim, Craig, Luetkemeyer, Hagedorn,
Williams, Meuser, Tenney, Garbarino, Young Kim, Van Duyne,
Donalds, and Fitzgerald.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I would like to begin by noting some important
requirements. Standing House and Committee rules and practice
will continue to apply during hybrid proceedings. All Members
are reminded that they are expected to adhere to these standing
rules including decorum.
House regulations require Members to be visible through a
video connection throughout the proceeding, so please keep your
cameras on. Also, remember to remain muted until you are
recognized to minimize background noise. If you have to
participate in another proceeding, please exit this one 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
will recognize that Member at the next appropriate time slot
provided they have returned to the proceeding.
For those Members and staff physically present in the
Committee room today, in accordance with the attending
physician's most recent guidance, all Members and staff will be
required to use masks in the hearing room. Furthermore, all
Members and staff who have not been fully vaccinated must also
maintain 6-foot social distancing from others. With that said,
Members will be allowed to briefly remove their masks if they
have been recognized to speak.
Today, our nation's 30 million small businesses are the
foundation of the American economy. Small firms employ nearly
half of the private workforce, account for 44 percent of the
economic activity, and export over $1 trillion in goods
annually. It is hard to overstate the importance of small firms
to the country's economic well-being.
Recognizing the structural importance of these firms and
the need for new business formation, the Small Business
Administration offers a range of free or low-cost counseling
and training services to entrepreneurs. SBA relies on its
resource partners to deliver these services: Small Business
Development Centers, Women Business Development Centers, and
SCORE.
These resource partners provide invaluable training to
small businesses all across America, from first-time
entrepreneurs to system business owners, these resource
partners offer training to help small firms succeed.
Resource partners have a profound impact on the small
businesses that take advantage of their services.
A 2013 report from SBA found that small businesses that
receive 3 or more hours of counseling have higher survival
rates than firms that receive less counseling.
We also witnessed the power of entrepreneurial development
training throughout the COVID crisis. Over the past 18 months,
SBA resource partners have helped small businesses navigate
unchartered territory. From shifting business models to stay
afloat, to instituting health precautions to protect customers
and employees, these organizations have helped small firms
overcome enormous challenges.
The Office of Entrepreneurial Development (OED) at SBA
oversees the programs and services that support the counseling
and training needs of small businesses. It is considered SBA's
technical assistance arm with the resource partners located all
across the country.
OED has also been charged with implementing one of
President Biden's top small business priorities, the new
Community Navigator Pilot Program. The new program will
increase outreach to underrepresented small businesses by
partnering with trusted voices in the community. I look forward
to learning more about the agency's work to get this new
program up and running.
I am also looking forward to learning more about what is
working and what needs to be improved with the entrepreneurial
development programs. The Committee plans to reauthorize these
programs in the coming months and SBA's perspective is an
important part of this process.
In sum, the strength of our recovery is dependent on the
well-being of small businesses. That is why SBA's
entrepreneurial programs must be well-equipped to offer their
services to small businesses in need.
I now yield to the Ranking Member for his opening
statement, Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Madam Chair. And thank you for
calling this important hearing with Mr. Madrid, Associate
Administrator of the SBA Office of Entrepreneurial Development.
As Members of the Committee, it is crucial that we hear
directly from SBA officials on implementation and oversight of
the SBA's programs. The success of our entrepreneurs determines
the success of our nation's economy. Entrepreneurs are not only
our nation's innovators and job creators, but they are also the
key to advancing America's economic opportunities.
Unfortunately, entrepreneurs continue to be hamstrung by the
Democrats who are forcing through increased government
mandates, misguided entitlement programs, and reckless
spending.
For months, Democrats' failed policies and unemployment
incentives have paid Americans to stay home and not go back to
work which has hindered economic growth for small businesses
and our communities. As reported in the August NFIB's Small
Business Economic Survey, they have found that 50 percent of
small business owners have at least one unfilled job opening.
This was a disincentive for 8.4 million Americans who were
unemployed in August to stay off the job and on the sidelines
while there were 10.5 million job openings across the country.
This is obviously counterproductive.
Additionally, staffing shortages and supply chain
disruptions are hindering business operations and limiting
small businesses from reaching their full potential. The NFIB
Research Center's September COVID-19 survey found that half of
small business owners reported supply chain disruptions
significantly impacting their business.
Main street USA continues to be left with the bill for
President Biden's reckless tax and spend agenda. As inflation
hits a 30-year high, it is no surprise that a recent Goldman
Sachs 10,000 Small Businesses Survey found that 81 percent of
small business owners say inflationary pressures have increased
since June. 84 percent have seen an increase in operating
costs, and 74 percent report inflationary pressures having
negatively impacted their business's financial health.
As Republican leader of this Committee, I appreciate the
resources and training that the SBA's Entrepreneurial
Development Resource Partners continue to provide to small
businesses, especially as they recover from the COVID-19
pandemic. I also look forward to learning more about these
programs and how they are supporting small businesses as they
navigate the previously mentioned government mandates, supply
chain disruptions, labor shortages, and inflationary pressures.
However, I remain concerned that taxpayer dollars are not
being used wisely after several Office of Inspector General
reports found that SBA did not provide effective oversight of
both the SCORE and Women's Business Center programs. I am also
concerned that the Community Navigator Pilot Program is
duplicative of current resources. This program was signed into
law in March, yet not a single grant has been awarded and no
services have been deployed to assist small businesses to date.
Instead of creating a new program with new providers, I believe
that resources would have been better spent ramping up Small
Business Development Centers and existing resource partners.
This should be thoroughly examined.
Beyond the SBA resources, numerous private sector partners,
including nonprofit organizations and companies, exist to
advocate for entrepreneurs, provide mentorship, increase
awareness of financial opportunities, and offer support to
innovators as they stand and expand their businesses. The SBA
programs must be examined closely to ensure that duplication
does not occur and that waste, fraud, and abuse is prevented.
Mr. Madrid, I thank you for being here today. I look
forward to working together on effective, economical, and
efficient policies to support entrepreneurs.
And with that, Madam Chair, I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. The
gentleman yields back.
I would like to take a moment to explain how this hearing
will proceed. Our witness 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.
With that, I would like to introduce our witness. Our
witness today is Mr. Mark Madrid, Associate Administrator for
the Small Business Administration's Office of Entrepreneurial
Development. Mr. Madrid is charged with leading the
administration's technical assistance arm of the Small Business
Administration. Before joining the SBA, Mr. Madrid served as
the CEO of the Latino Business Action Network at Stanford
University. In 2019, the Silicon Valley Business Journal named
him the Silicon Valley Non-profit CEO of the Year. In addition,
he is an honorary colonel of the U.S. Army and a Jefferson
Award recipient which recognizes individuals and organizations
for excellence in service at a national or international scale.
Quite an impressive resume.
Thank you for joining us today, Mr. Madrid, and you are
recognized for 5 minutes.
STATEMENT OF MARK MADRID, ASSOCIATE ADMINISTRATOR, OFFICE OF
ENTREPRENEURIAL DEVELOPMENT, UNITED STATES SMALL BUSINESS
ADMINISTRATION
Mr. MADRID. Good morning, Chairwoman Velazquez, Ranking
Member Luetkemeyer, and distinguished Members of the Committee.
Thank you for the invitation, and I am energized to discuss
SBA's Office of Entrepreneurial Development. Our mission is to
help small businesses start, grow, and compete in global
markets by providing quality training, counseling, and access
to resources. OED is SBA's technical assistance arm.
Throughout my career, nothing has been more purposeful than
truly empathizing with and supporting small business owners. I
am a product of entrepreneurship.
Like many of our U.S. small business owners, my dad was
unrelenting in changing the course of our family's destiny as
he built a welding business in the Texas panhandle. We are
proud of my dad for his evolution from the cotton fields to
being his own boss. Mi Papa, my dad, died of COVID-19 and we
almost lost my mom. We are thankful to God that my mom
survived. So I consider supporting small businesses like my
dad's the honor of a lifetime and I have a proven track record
of doing so.
At OED, we oversee SBA's network of resources partners,
including Small Business Development Centers, Women's Business
Centers, and SCORE. Additionally, our Office of
Entrepreneurship Education (OEE) spearheads our Electronic
Learning Initiative and the Community Navigator Pilot. Over the
last 9 months, we have made great strides in fighting the
pandemic and recovering our economy, achieving historic job
growth for a new administration.
However, we still have a long way to go, which is why
President Biden announced the COVID-19 Action Plan, a
comprehensive national strategy to fight COVID-19 and to
protect our economic recovery. At the SBA, we are honored to
support these efforts, making critical improvements to the
COVID Economic Injury Disaster Loan, streamlining forgiveness
of small Paycheck Protection Program funding of $150,000 or
below, and launching the Community Navigator Pilot.
Enacted by the American Rescue Plan Act of 2021,
Navigator's goal is to strengthen outreach to our nation's
smallest businesses, both in rural and urban America,
particularly those owned by women, veterans, and socially or
economically disadvantaged individuals. This program will
advance our reach of SBA services and access to federal, state,
and local resources by leveraging a national network of hyper-
local community navigators who, in the words of Administrator
Guzman, are ``on the ground truly connecting, empathizing, and
tailoring solutions for our small businesses.''
The Community Navigator Pilot is a $100 million competitive
grant funding opportunity. Alongside our Office of General
Counsel, our office is currently reviewing proposals and we
look forward to announcing the grant recipients this month.
Our combined efforts are more critical now given the urgent
state of recovery of our U.S. small businesses. Thus, in
addition, Navigator's OED is laser focused on supporting our
Resource Partners. Supported by our Office of Small Business
Development Centers, we are proud of our network of SBDCs for
their tireless work throughout the pandemic, including
utilization of CARES Act funding to increase support of our
small businesses over this past year and a half. Between April
and December 2020, SBDCs were able to use CARES Act funding to
support 592,000 small businesses.
Supported by our Office of Women's Business Ownership
(OWBO), our 138 Women's Business Centers support female
entrepreneurs through training, technical assistance, and
providing access to capital, credit, and federal contracting
opportunities. These hyper-local centers are more important
than ever as women business owners have been disproportionately
impacted by the pandemic. We are proud that OWBO has launched
24 new WBCs this year, including two in Puerto Rico and Tulsa.
Supported by our Office of Entrepreneurship Education and
SCORE, our nation's largest network of volunteer business
mentors, with over 250 local chapters and over 10,000 mentors
nationwide, provide personalized mentorship to entrepreneurs
across all 50 states and Puerto Rico. During the pandemic, the
application of mentorship became increasingly critical and
SCORE made it accessible through the creation of an online
resilience HUB.
I close by stating OED priority to execute strong controls
to ensure our programs have robust management and oversight. To
underscore this commitment, we have introduced a next
generation reporting system to monitor performance and
accountability. This is a very difficult time for America's
small businesses, and yet, they continue to embody that grit
and resilience and hope. And we look forward, alongside your
efforts, to support them every step of the way.
Thank you for this invitation. I am honored to be here and
I look forward to your questions. Thank you.
Chairwoman VELAZQUEZ. Thank you, Mr. Madrid. My condolences
to you and your family.
I will begin by recognizing myself for 5 minutes.
SBA has been relying on an outdated legacy system, EDMIS,
to collect data on counseling and training programs. I
understand that SBA developed a performance reporting system to
replace EDMIS. To what extent has SBA implemented the system
and how has it increased operational reliability performance?
Mr. MADRID. Thank you, Chairwoman, for that question. We
are definitely leaning in to Administrator Guzman on Technology
Forward and that also applies to what you are referring to in
terms of we have had a migration from an EDMIS Legacy system to
EDMIS Next Generation which will increase our reporting
capabilities, efficiency, allow for real-time reporting of data
and data acquisition which will also increase our efficiency of
human capital. With the Community Navigator Pilot, we will have
graduated to a new system altogether that will increase these
capabilities even further.
Chairwoman VELAZQUEZ. Are all resource partners reporting
performance data in the system to date?
Mr. MADRID. That is right. Thank you, Congresswoman. In
fact, with the EDMIS Next General reporting system as of May
there was a 100 percent deployment across all resource
partners--the SBDCs, WBCs, and SCORE.
Chairwoman VELAZQUEZ. Thank you.
In a recent hearing, we heard concerns from resource
partners about delays in notices of awards and grant
reimbursement. I have since learned that OED worked hard to
address outstanding reimbursement. Why did the backlog occur
and what can be done to prevent it from happening again?
Mr. MADRID. Thank you, Chairwoman.
First and foremost, that is absolutely on target. We are
committed to getting those timely reimbursements in place.
There was a little bit of a delay with the initial funding to
disburse. Having said that, we also experienced some delays
frankly with the supply of demands that were in the system with
the pandemic but now with graduation to our EDMIS NG system, we
have also created efficiencies within the teamwork. We have
opened lines of communication. Those delays have been
mitigated.
Chairwoman VELAZQUEZ. Okay. Are you telling me that OED
needs additional support from the Committee to ensure funding
is disbursed on time or not?
Mr. MADRID. Well, thank you for that statement. We
definitely appreciate your support. You know, we are leveraging
our resources as Administrator Guzman has commissioned us to
do. So your ongoing support is appreciated. We have established
new efficiencies. We have opened lines of communication. And so
thank you for your ongoing support. It is very, very helpful to
us and we are reaping the rewards from it. Thank you.
Chairwoman VELAZQUEZ. Thank you.
Let's talk about the Community Navigator Pilot Program. It
is projected to begin disbursing grant awards in the coming
weeks. Can you please tell us or give us an update on where SBA
is in the grantee selection and funding disbursement?
Mr. MADRID. Thank you, Chairwoman.
We are energized that the grantees will be awarded this
month, in October. We are in the third leg of our review
process that spans 6 to 7 weeks. It was diligent, and as a
frame of reference, we were anticipating 200 to 250 proposals.
We received over 650. That was a product of our message getting
out, making sure that we increased our outreach plan to all
communities. So we are excited that we are in the third leg of
this review process, which is a business management review,
alongside our Office of General Counsel. And we will be
announcing the grantees later this month in October.
Chairwoman VELAZQUEZ. Can you please explain how the
Community Navigator Pilot Program will work with SBA's resource
partners to provide counseling and training?
Mr. MADRID. Absolutely. The Community Navigator Pilot is a
hyper-local approach which is deploying community navigators
that know their local territories, their audiences, and most
importantly, the small business owners that truly connect with
them in culturally relevant ways. And so through these
community navigators and this national network, including the
resource partners and any organizations supporting small
businesses, we have to support our small businesses during
recovery. The bottom line is, as reported by our Office of
Advocacy in the first quarter of 2020, Black-owned businesses
declined 41 percent, Hispanic declined 32 percent, Asian
American declined 26 percent, and Women business owners, active
business owners, declined 25 percent. So it is going to take
this consolidated effort, which is a coalition-building
endeavor, and we are committed to it.
Chairwoman VELAZQUEZ. Thank you. Thank you very much. My
time has expired.
Now we recognize the Ranking Member, Mr. Luetkemeyer, for 5
minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Mr. Madrid, on May 4, 2021, the OIG released an audit of
SBA's oversight of the Women's Business Center program and
found that SBA did not provide effective oversight of the
program. Specifically, the SBA did not detect that WBCs had
failed to remedy accounting deficiencies identified during the
mandated financial reviews. They did not detect anything that
the WBCs made improper budget transfers. They did not detect
that they had used federal funds for unallowable costs. They
did not detect reported unsupported matching funds and program
income earned. And they also failed to submit accurate
financial reports. Even more concerning, SBA program officials
detected significant noncompliance that warranted removal of
two WBCs from the program but did not take action.
So the question, I guess, is how far along is SBA in
resolving OIG's 10 recommendations? And have any of these WBCs
been closed in the last few weeks here?
Mr. MADRID. Thank you, Ranking Member, for your question.
The Office of Women's Business Ownership is active in
resolving the recommendations from the IG. And so I can go over
some of those with you now. Recommendation, there is one that
has been closed. There is one that is in negotiation in terms
of our Office of Women's Business Ownership is finalizing
discussions and receiving feedback from the OIG itself. Three
recommendations have final closeout dates of September 24, 2024
as they have financial obligations on the part of WBCs that
need to be regrouped and reconciled if possible. So OIG has
agreed to a date of September 24, 2024 for final action. And
five recommendations have final target dates associated with
them for the end of this year, calendar year 2021, and these
five recommendations overall relate to oversight, compliance,
and monitoring of the WBC program with specific concerns
regarding finance examination. On this front----
Mr. LUETKEMEYER. Thank you for that. But one of my concerns
is that, number one, we knew that at least two of these
programs had problems to the extent that they should have been
closed and were not. So I guess my question to you on that is,
why not? What kind of action have you taken since then to
rectify the situations? Number two, even though you say that
these recommendations were implemented, the IG report on a
couple different occasions on different programs have said that
the employees do not implement the rules. They do not follow
the rules. Even though the recommendations are put in place,
the employees still do not follow them. So what have you done
to make sure that there is a follow up on this to make sure
that the employees actually follow through on the
recommendations? Because obviously, there is no action been
taken on the two that should have been closed, which tells me
that somebody is asleep at the switch. And if that is going to
happen, then who is going to actually push people to actually
do the job because nobody is pushing people to do the job to
begin with on these two that we have shown do not work?
Mr. MADRID. Thank you, Ranking Member. I would like to
report that three WBCs have indeed been closed.
Mr. LUETKEMEYER. Good.
Mr. MADRID. So that is on the one front in terms of action.
On the second, there is an important, let's say,
advancement that has occurred here at the Office of
Entrepreneurial Development, is that there is a strong
relationship between the office itself and all the offices of
the department, including the Office of SBDCs, the Office of
Women's Business Ownership, and our Office of Entrepreneurship
Education. So there are open lines of communication. And
another action that has occurred in this administration, this
leadership, is we have a tracker for all OIG and GAO audits. So
we meet on those frequently and I concur with the head of
Office of Women's Business Ownership every week. So I hope----
Mr. LUETKEMEYER. I support that. I support the Women's
Business Centers. Do not get the wrong impression here. But by
the same token, my job is to provide the oversight of all of
the programs, to make sure they are working properly. And if
they are not, number one, they are hurting the integrity of the
program and they are wasting taxpayer dollars. And if they are
found to do that, which you say they have now closed three,
that is great. We need to correct those things and fix them
quickly.
And another thing is, again, I urge you to continue to
follow up to make sure that the personnel follow up and adhere
to the recommendations of the IG once they are implemented
because what is very concerning to me is that the report on a
couple of other issues here, EIDL program in particular, the
employees were ignoring the IG report and the recommendations
that are set out. And so they really do not do any good, even
though they are in place, they are still not doing any good
because if they are not being implemented and followed, we are
still back to the same place doing business the same way we
always did. And so I would urge you to look into that. And I am
sure my time is about up.
And with that, Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize Mr. Golden, the gentleman from Maine.
Let me just say that, yes, Mr. Luetkemeyer, we all care
about protecting the program from fraud and abuse and taking
corrective steps. Many of those points that have been raised by
the IG occurred under the Trump administration. So far, this
administration has a track record on addressing those issues.
With that, let me recognize Mr. Golden.
Mr. LUETKEMEYER. Let me just respond to that, Madam Chair.
I appreciate that and I acknowledge that some of this was done
under the previous administration. It does not make it right.
It still needs to be cleaned up. And I think----
Chairwoman VELAZQUEZ. But they are. They are, sir.
Mr. LUETKEMEYER. My concern though is that the IG report
also showed that the employees of SBA, the staff, was not
following up and adhering to the recommendations. That is the
point I am trying to make. We have got to make sure that if the
recommendations are put in place that they are followed. The IG
is trying to do their job but if these recommendations are not
followed, they are worthless. We have accomplished nothing. So
that is my point. Thank you.
Chairwoman VELAZQUEZ. Mr. Golden, you are recognized for 5
minutes.
Mr. Golden, you are muted.
Ms. Davids, you are recognized for 5 minutes, the
gentlelady from Kansas.
You are muted.
Ms. DAVIDS. Sorry. Thank you. Good morning.
I did not realize that Mr. Golden would be unavailable.
Okay, well, thank you so much. I appreciate, Chairwoman, you
holding this hearing.
SBA's Entrepreneurial Development programs have been
critical resources for small businesses, for small business
owners and entrepreneurs from before and during this pandemic.
And our ED partners, our Entrepreneurial Development partners
have gone above and beyond to provide small businesses across
the country with information, with assistance during this
unprecedented public health and economic crisis. In fact, the
Kansas City Women's Business Center, which is based in and
serves not just--it is based in the Third District here in
Kansas but it also serves a pretty wide area here. And they
helped over 600 clients last year. And helping small business
owners adjust to things like COVID safe workplaces and
navigating the various relief programs that we have heard a
little bit about this morning, it is part of the reason that
last Congress the Women's Business Center here helped me see
that the Women's Business Centers Improvement Act was
necessary. Reauthorizing the WBC program, increasing funding
levels, increasing the cap on individual center grants is an
important priority for me.
A few months ago, the Subcommittee on Economic Growth, Tax,
and Capital Access held a hearing focused on women's
entrepreneurship where we discussed the importance of WBC
programs for entrepreneurs.
So Mr. Madrid, I was hoping to hear from you about how the
passage of a similar bill this Congress could expand the WBC
program and frankly, expand opportunities for female
entrepreneurs.
Mr. MADRID. Thank you, Congresswoman, for that question.
Women's entrepreneurship continues to be the fastest
growing segment in the U.S. They are contributing to the
economy. They are job creators. We all know that. We all know
women business owners. Thank you for that reflection about the
Women's Business Center in Kansas City.
It is important to note that the Women's Business Centers
have risen up to meet the occasion of the pandemic. I can tell
you that the network overall had almost $10,000 capital
infusions. On the ground, I have been on the road in Fort Dodge
Iowa, I have been on the ground in Milwaukie and Brooklyn and
Nevada, that women business owners were just instrumental in
pandemic resourcing and they are instrumental as we digitize.
So the Women's Business Centers have been absolutely critical
during the pandemic. They continue to be critical for recovery.
And when you have that stat to reflect upon that in the first
quarter of 2020, businesses owned by women declined by 25
percent, you know, in our minds, one business closing is one
too many. And so we are going to continue on the effort to
increase the scope of the WBCs.
Ms. DAVIDS. Thank you for that. And I would just close, and
I will not take up the entire time, I just thank you for the
work that you all are doing over at SBA. It has been a long
year and a half and there has been a lot of pressure put on
frankly everybody during the pandemic. And I appreciate your
efforts to continue to work on those OIG issues that have been
brought up and also to just continue supporting our small
business owners. We will talk to you soon, hopefully. Thank you
so much.
Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now, we recognize the gentleman from Texas, Mr. Williams,
for 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chair. And thank you,
Chairman, for being with us today.
I am an entrepreneur. I have been in business and still am
51 years. This is my 51st year in business. I employ hundreds
of people and it is challenging right now. And as you are
aware, small businesses across the country continue to face
financial uncertainty as we reemerge from the COVID-19
pandemic. Unfortunately, we have not seen the necessary speed
from the SBA that main street America deserves after Congress
has passed billions of dollars in aid over the past year.
Now, as a prime example is the Shuttered Venue Operator
Grants program which I basically wrote which left music venues
and movie theaters waiting for over 7 months until money was
disbursed and thousands of businesses did not survive the
delays that were caused by that. Now, I am concerned that the
implementation that you talked somewhat about this morning of
the Community Navigators Program is headed in a similar
direction and this program has been in the works since April of
2021 and still have not seen any money from the SBA about the
selection process. And I just need to remind you, Small
Business, unlike government employees, where government
employees have salaries and guarantees, small business owners,
they are out every morning trying to sell something. They are
on commission. They need to bill. They cannot have these
delays. So we need to do better with that.
And you talk about how you support small business. Well,
how can you support small business when you support raising
taxes and raising regulations to small businesses? Can you
answer me that?
Mr. MADRID. Thank you, Congressman, and the perspective of
that you bring as a business owner. Thank you very much.
In terms of SVOG, the Shuttered Venue Operators Grant, we
have issued decision on 97 percent of all initial 17,644
applications. And $11 billion in grants have been awarded, $9.7
billion disbursed.
In terms of your question on the Navigator Pilot and the
timing, just as a frame of reference, there was a hyper-local
interest in terms of the local institutions that wanted to be a
part of this process and apply. We had to extend the deadline
for proposals that we pushed forth the end of July and when we
had 656 proposals come in relative to the 200 to 250 that we
were anticipating, we had to make sure and instill a diligent
oversight process and review process. So we look forward to
announcing those this week.
In terms of the tax question under the Build Back Better
plan, it is important for small businesses to know that no one
earning under $400,000 incur or experience a tax increase. And
so I just wanted to make sure and address your points.
Mr. WILLIAMS. I know that is what you all say but that is
not true. But we will move on.
The SBA has also shown an inability to track taxpayer
dollars in implementing some of these programs. With the EIDL
program alone, there has been an estimated $1.1 billion in
potential fraud. Since the Community Navigators program was
allocated $100 million, we must ensure that we do not repeat
the mistakes of the past and take the appropriate measures to
prevent the waste of taxpayers' dollars.
So Mr. Madrid, can you talk about the measures that the SBA
has taken to detect fraud with the Community Navigators
program?
Mr. MADRID. Absolutely. Thank you, Congressman.
We are ensuring oversight in compliance is top of mind. We
are complying with quarterly reporting that will occur at the
grantee level, so that is going to be one way that we enforce
compliance and oversight. The technology that also is being
deployed will increase our accuracy and ensure our accuracy. It
is real-time, so that is one area that we will keep our eyes on
very, very diligently. As well, we are collaborating with our
Office of Field Operations when it comes to the spokes on the
ground level. And so all that said, we have our mind to
mitigate fraud, waste, and abuse, and also being compliant to 2
CFR regulations. And also increasing our open line of
communications through our GAO and IG tracker that also
includes internal controls. And that will definitely apply with
the Community Navigator Pilot immediately as it is launched. So
thank you for your question.
Mr. WILLIAMS. In the time that I have got left. Rural
communities. I have a rural district that face unique
challenges while recovering from the pandemic. So can you
elaborate on how the SBA is ensuring rural businesses have
access to these programs and are made aware, which is
important, of the assistance that is available?
Mr. MADRID. Thank you, Congresswoman--Congressman.
Mr. WILLIAMS. Now you are calling me Congresswoman.
Mr. MADRID. No, Congressman.
Mr. WILLIAMS. Because of my hairdo?
Mr. MADRID. We have our Office of Rural Affairs and that is
being handled at our Office of Field Operations. Thank you for
your question on rural entrepreneurs.
Mr. WILLIAMS. Okay. Thank you very much. And just in
supporting small business, when you cut taxes it helps small
business. When you raise taxes, it really hurts small business.
I yield back.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize the gentleman from Maryland, Mr. Mfume,
for 5 minutes.
Mr. MFUME. Thank you very much, Madam Chair. I want to
thank you and the Ranking Member for scheduling this hearing.
And thank the representatives here who have given written and
oral testimony.
The gentleman before me raised the issue of potential
possible fraud and abuse of the Navigators program. I want to
just stay on that program for a second and ask you, sir, if you
would take a moment to talk about expressly the goals as stated
of that particular program. And then as juxtaposition give us
on this Committee some sense as to where you are meeting those
goals.
Mr. MADRID. Thank you, Congressman, for the question on the
Community Navigator Pilot.
The bottom line is small businesses, the smallest of the
small were left behind of pandemic resources. And some have
historically been left behind. So our goal is to bridge that
gap with the Community Navigator Pilot. And that is deploying
community navigators that are culturally competent in terms of
understanding their terrain. I say let's fight a ground war,
not an air war meaning that you are in touch with the ground.
That you know exactly what their small businesses are facing
and that is including, of course, in rural America. And so this
effort here is a chance to build coalitions and in order to
bridge that gap. In prior positions that I have held supporting
small businesses we used to say get to know the bank before you
need the money. In this instance it is get to know the SBA
before you need the SBA. Also, the Community Navigator Pilot is
ensuring access to federal, state, and local resources.
And what I would say as well is those that have not
experienced SBA for whatever reason including during the
pandemic, we want to introduce these small businesses to the
SBA so they keep coming back, not only in the present and the
future. And that is in line with Administrator Guzman in terms
of saying we have to to build the customer-first environment,
technology forward, and advancing equity. That is exactly the
goals that we will achieve with the Community Navigator Pilot.
And that includes geographical diversity in terms of service
commitment. So thank you for your question.
Mr. MFUME. Well, how long has the program been operational?
Not conceptually but operational?
Mr. MADRID. Great question. Thank you very much for asking
it.
We will announce our grantees later this month in October
and then it starts a 2-year period of performance.
Mr. MFUME. And has SBA developed a matrix to be able to
measure? I agree with you on the issue of cultural competency,
but have you developed a matrix to be able to see where you
actually are in terms of success or lack of success? And what
has been the feedback back into the SBA from those businesses
that you are working with specifically?
Mr. MADRID. That is a great question. I can tell you that I
have been on the ground in rural America and Iowa and also
talking to tribal-owned businesses and Native American
businesses in Nevada. I also had the experience of talking to
women entrepreneurs in Brooklyn. And so I have talked to
businesses that were eligible and applied and received our
pandemic resources, one or the other or combined. I also talked
to business owners who had not. And I said, what would it take,
what would it have taken for you to be more engaged with us?
Give us your feedback. And overall, it was lack of navigation,
that they had more questions. They did not understand a
process. They needed help with the paperwork. They did not have
a scanner. They needed some tax codes in order for document
preparation. They needed translation services. So all these
issues here on the ground is what we are trying to resolve with
the pilot.
Mr. MFUME. And let me just ask if I might in the time that
I have left, first, an observation. Racial minorities
primarily, ethnic minorities secondarily, tend to be
underrepresented in small businesses and small business
programs. Can you tell me just what sort of efforts the SBA has
in place to provide counseling, training assistance to those
businesses who are doing everything they could do but in
oftentimes find themselves lacking, or excuse me, not lacking
but up against procedures and policies that make their job more
difficult? So whether it is capital standards or bonding
requirements or anything else?
Mr. MADRID. Thank you, Congressman.
We are definitely leaning in to Administrator Guzman. She
says, let's bring silos amongst the units of the SBA so we are
working together. The OED, the Office of Entrepreneurial
Development is working with our government contracting and
business development unit. We are working with OFO in our
district offices. We are working with OII, Investment and
Innovation on innovative startups. So all that said is
advancing equity is definitely central and all our units
working independently and collectively.
Mr. MFUME. Well, my time has expired but I am assuming you
have done that with that or are doing it with the Women's
Business Centers as well, and hopefully, we will get a chance
to follow up in a future hearing. But I may very well have some
questions directly to you following this.
I want to thank you. I want to thank the Chairman, and I
yield back any time I may have.
Chairwoman VELAZQUEZ. The gentleman yields back. Now we
recognize the gentleman from Minnesota, Mr. Hagedorn, for 5
minutes.
Mr. HAGEDORN. Thank you, Madam Chair. I appreciate you
holding the hearing. Administrator, it is good to see you
today.
I want to focus a little bit on the administration's
executive orders on vaccinations and how it applies first to
the SBA. The SBA has many, of course, these small business
development centers across the country. In the state of
Minnesota, five of them are located in universities, different
university systems in our state. And if the administration
comes along and says people have to be vaccinated that are
covered contractors and yet they work in a university system
that may have different rules, how do you square that,
Administrator? What are they supposed to do?
Mr. MADRID. Thank you, Congressman.
As we continue to navigate COVID-19, the administrator has
made safety and security top of mind.
Mr. HAGEDORN. I do not need the lecture on that. What are
they supposed to do? What are the rules?
Mr. MADRID. Well, we are working directly with the Office
of OPM, frankly, and leaning into their advice and counsel. I
can take this back and we would be happy to answer any follow-
up questions.
Mr. HAGEDORN. That is fine. That is fine, but I think a lot
of your people have asked you over the last many weeks what are
the rules and you have not even discussed it with them. You
have given the no guidance. And so, again, it looks like you
have a policy that you are just dumping out and then you will
try to figure it out later. That does not make a lot of sense.
Let's move on to the one that President Biden has to force
every company over 100 employees to have their employees
vaccinated. First of all, we are in a situation in American
where virtually, every business, every entity is looking for
work. And the idea that we are going to go out of our way to
fire people at this point in time does not make a lot of sense
with 10 million or so open jobs and 8 million people still
unemployed. Why the heck would we want to do that, particularly
when according to the science that I have seen, whether you
have a vaccination or not, you can still get COVID and you can
still transmit COVID. The vaccination does not stop you from
getting it. It just makes hopefully the end result much better
because it reacts and helps you get through it hopefully
without death. So it seems like what has happened is the
president came out and said there is going to be this rule
under OSHA and then since then he has gotten on the phone with
American Airlines and a bunch of other companies and used the
pressure of the federal government in order to get those
entities to implement his policy so it looks like everybody
likes what he is doing even though, of course, the federal
government has a lot of oversight over these companies and
sometimes can deliver money or not deliver money. And yet, who
knows when this is coming out? Who knows what the details would
be? But I do not understand where the administration is coming
on this. Why is the president and others so intent to get
people fired and to push this issue when it looks like the
science is anybody can get COVID and anybody can spread it
whether you are vaccinated or not. Someone has got to answer
that question for me.
But if you could, since we are talking about small
business, and if you want to help small businesses, please
deliver this message to the administration. We have 80 people
in Caledonia, Minnesota, who are going to lose their jobs.
Eighty good manufacturing jobs down there because Rawlings
Company and Major League Baseball decided that they want to
shut down that plant and move the vast majority of those jobs
to Communist China. Now, the people at that plant, what they do
is they make batting helmets for the Major League baseball
players and they make composite softball bats. And the
president of the United States, he has been out there again. He
has been calling all these companies, trying to get them to
implement his policy which is going to leave the people being
fired and less workforce in America. Here is an opportunity for
the administration to pick up the phone and call the
commissioner of baseball and say, look, let's not be shipping
our jobs to China. Let's keep our manufacturing jobs in the
United States. And so I hope you will deliver that message to
the administration that they can help save a small business and
save jobs and it is very important to the community that I
represent down in Southeast Minnesota.
Lastly, the last thing you can take back to the
administration is they have it exactly backwards. Instead of
trying to regulate everything and every business and every
person to go get a shot or not get a shot or whatever, we
should have a liability shield for businesses, for educational
entities, and of course, medical care providers. So if people
cannot just have a bunch of lawsuits and then maybe these
entities will not have to worry so much about whether or not
everybody that works for them has the shot. Again, I am
vaccinated. I think these decisions should be made between
doctors and patients, not with the federal government,
politicians, or bureaucrats leading the way, and certainly not
the heavy hand of the federal government.
With that, I will yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Mr.
Phillips, for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair. Greetings, Mr. Madrid
and colleagues.
In my past life as an entrepreneur, I engaged with a SCORE
mentor who shared memorable and really impactful counsel with
me that I have employed ever since in my business career. So I
really know firsthand how impactful these programs can be,
particularly for those who lack the experience or the
mentorship networks, particularly the access to capital that
one needs to succeed as an entrepreneur. And I also believe
deeply that business can and should be a means to an end, the
end not being how much an owner can accrue in success; rather,
how much that owner can share with those who made it possible.
And I really believe strongly that building this kind of
stakeholder capitalism into business models is best done at
early stages.
Earlier in another hearing, Mr. Rowe mentioned succession
planning and transitioning businesses to employee-owned models
as an example of how SBDCs can engage in this work. So could
you explain how OEP can maybe play a role in helping inspire
more employee ownership at early stages of companies as they
are seeking counsel to establish themselves.
Mr. MADRID. Thank you, Congressman, on a very important
topic in terms of let's talk about ESOPs, for instance. We are
delighted that the SBDC network in pockets of the county has
introduced webinars that approach this topic. In fact, there
was an ultimate linkage that occurred at OED and connecting the
dots is very, very important to us. And I will talk about SCORE
here in a moment. But literally, I was talking to an 8(a)
certified firm that is a Native American business and I was
talking to the two sisters that opened the company Sister Sky
that has been in operation for 20 years. And one of the sisters
had her two daughters there. And she said these two daughters
are going to take over this family business. I was able to then
connect that with the ESOP training happening with the SBDC. So
that is critical. As well, you mentioned mentorship. I have
very diligent experience and the last experience where I led a
nonprofit focusing on the largest cluster of scale Latinx firms
in U.S. history is mentorship was the secret sauce of what
SCORE has offered during the pandemic and their persistence
through an online resilience HUB has been beneficial. As well,
the WBCs are also having trainings throughout on succession
planning. So I think we have our bases covered on a very
important topic.
Mr. PHILLIPS. I appreciate that. And a note to my
colleagues. I think Democrats and Republicans can agree that
capitalism works best when we have more ownership, not less,
and if we can bake some of these principles into early-stage
businesses with incentives and counsel and mentorship, I think
we are all better off for it.
My second question, Mr. Madrid, is relative to the CARES
Act. Of course, it provided $25 million for SBDC and WBC
associations to create a centralized platform if you will for
COVID-19 resources and backend and training platforms for
counselors. With funding for those programs set to expire in
April, forthcoming in 2020, how do you categorize the success
of that platform? And what were the metrics for success? And
how would OED like to see the platform pivot perhaps to a post
pandemic use?
Mr. MADRID. Thank you for that question, Congressman. The
Resource Partner Training Portal is definitely a coalition-
building endeavor, so we thank America's SBDC and the
Association of Women's Business Center for stewarding that
particular platform. The best way to talk about the platform
and its success and potential for the future is that most
recently when we rolled out EIDL enhancements through the
Office of Capital Access, we partnered with the Resource
Partner Training Portal and there was an appetite frankly for
that from the business advisors across the resource partners,
including SCORE and the VBOCs, the Veteran Business Outreach
Centers. We had a record attendance that was navigated through
America's SBDC and the Association of Women's Business Centers.
And so those are the type of metrics that we want to capture.
They have captured, of course, attendance, and so we just need
to keep pushing the metrics further. I was encouraged. I was
encouraged by the couple of events that we have held together
and more on the way if it continues.
Mr. PHILLIPS. I appreciate it, sir. With that, I yield
back, Madam Chair. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back. Now, we
recognize the gentleman from Pennsylvania, Mr. Meuser, for 5
minutes.
Mr. MEUSER. Thank you very much, Madam Chairwoman. And I
thank the Ranking Member and my colleagues. And Administrator
Madrid, good to see you.
Yes, I think the Small Business Development Centers have
been important throughout my district in Pennsylvania. In fact,
I have gotten to know a few. They certainly help facilitate the
PPP loans and they seem very excited and driven to assist and
create outreach, so that is good. And I think that should
continue. Many of them are involved with schools where the
centers are within my district and it is a very positive thing.
The OIG report, that oversight has got to be taken very
seriously. I hear what the Chairwoman said, that it happened
very much in the previous administration. Fine. But we are just
finding out about it for the most part now. And we are really
not hearing it being taken completely seriously. We have met
with the Inspector General and he is a great individual. I
really appreciate him. But it has got to be taken seriously.
My next question, Administrator Madrid, was intended to be
what are your needs to do your job better for our businesses.
But first, I think it is very important that you have a real
good understanding of the needs of small business. And I say
this because even when we met with Administrator Guzman, I
asked her about taxes and her response was, ``Hmm, we do not
get into taxes. We leave that for another department.'' And
that is not an advocate of small business that does not
understand the taxes. And what you said a little while ago
about under 400K is not accurate. Okay. But first off, there is
a tremendous amount of uncertainty that exists with my small
businesses throughout Pennsylvania, throughout the great
Commonwealth of Pennsylvania. Tax is just one of the issues.
Inflation. All right? All this monstrous spending that we want
to even trickle down on moving forward. Inflation is a big
problem for small business. Workforce availability, big
problem. Supply chains, that is other matters are getting into
effect there. The energy costs. Okay. That is a direct result
of much of what is going on with the Biden administration. If
the reconciliation passes, utility costs are going up. That
affects everyone. Natural gas. You all want to tax natural gas.
More than half our small businesses get their energy from
natural gas. And homes. Thousands and thousands of home costs
are going to go up. So to say it is under 400K.
And then I am going to just give you a little bit of math
here. All right? A typical business with 40 to 50 employees
that does revenues of about $12 million has a net income of
about 8 percent, which is about a million dollars. If you
reduce the 400,000 level, because you are looking to reduce in
reconciliation, in the bill, the 20 percent small business
deduction. Okay, 20 percent of 600K, the difference between $1
million and 400K is 600. You take that 20 percent, that is
$120,000. At the new rate of 40 percent, that is about $50,000.
That small business owner is probably paying himself $150,00,
$180,000, maybe $220,000 for him and his family of four. So not
only will he have to pay $50,000 more in taxes, he will
probably let somebody go. That is what will probably happen. He
will try to do more with less and maybe invest in automation,
but you are also removing some of the cap gains or deductions.
Not to mention the capital gains increase. How does that not
affect anybody who makes $50,000 or more that looks to sell a
stock because their child is going to college? So to say it is
not under 400K is a complete inaccurate thing to say.
Stating that, I will now go back, because we need you all
to advocate for small business like your life depends upon it
because the small businesses' lives do depend upon it. Okay,
every day I hear from them.
Now, I will go back. How can we help your department serve
and advocate for small businesses?
Mr. MADRID. Congressman, I would be happy and energized to
answer questions related to our programming and our purview in
terms of business counseling and training and education and so
we appreciate your support with those tenets of OED.
Mr. MEUSER. All right. Thank you.
Madam Chair, 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, for holding today's hearing. And thank you
to Associate Administrator Madrid for joining us today and your
employment work with the SBA.
The local SBDCs in my district have been extremely helpful
resources as my office ahs helped small businesses navigate the
effects of the pandemic. I represent a rapidly growing company
in Gwinnett County where our population has grown by 20 percent
between 2010 and 2020. And much of this growth has come among
immigrant and first generation American communities moving into
our district. These are demographics that we know start
businesses at higher rates than the rest of the population.
This means that our SBDCs are serving a larger and more diverse
population of small business owners with the smaller allocation
which accompanied our previous census results.
So my question is, it is very important to me and to small
business owners that these new census numbers ensure that we
get federal resources and get them to where they are most
needed. So I was curious. Now that we have entered fiscal year
2022, albeit on a continuing resolution, when can SBA's
resource partners in and around my district expect to see the
implementation of the new funding allocations based on the
results of the 2020 census?
Mr. MADRID. Thank you, Congresswoman. Thank you for your
work in your area and experiencing that rise.
I can attest to the fact that our Office of SBDC leadership
has taken a look at the census. In fact, they reported to me
most recently that that is happening and occurring. There is an
open line of communication with the SBDC network on that so we
look forward to adjusting those measures accordingly. And thank
you for your efforts and your statements related to immigrant-
owned businesses, which they declined over 36 percent according
to our Office of Advocacy data for the first quarter of 2020.
So as well, through our Resource Partner Network, we have an
inclusivity for all challenge that has been launched through
that network. It started in Northern California, and my first
visit here officially at SBA was in Fort Dodge, Iowa, where the
Iowa SBDC invited me to be a part of their launch of their
Inclusivity for All Challenge. And that has extended itself
thanks to the SBC Network nationwide. So I hope all that
together that we are looking at making sure that the applicable
census figures do apply to allocations. Thank you for your
question.
Ms. BOURDEAUX. Great. Thank you so much. And inclusivity
and those kinds of initiatives we look forward to seeing that
in my community. We just have a lot of very, very diverse
communities, very entrepreneurial, and I want to make sure that
they are getting resources.
One of the other challenges we faced is making sure that
these very diverse communities are aware of the existence of
the SBDCs, the WBDCs, SCORE, the VBOCs, so I also wanted to
know what you are doing to promote awareness of these very
important resources across diverse communities, communities
where English may be a second language?
Mr. MADRID. Thank you for that question.
Inclusivity in diversity and outreach is definitely central
with Administrator Guzman's leadership across the agency,
across units, and definitely here at the Office of
Entrepreneurial development. We have made measures to make more
culturally linguistic options available, including pandemic
resourcing. We did the same when we were rolling out the
process of the Community Navigator Pilot. We messaged the
opportunity to minority chambers, regional economic development
organizations, to mayors, to states, to tribes. It was a very
successful endeavor in terms of building our ground game. And I
come back to having experience on the ground, fighting a ground
war, not an air war, meaning that you are connected to the
ground, know every part of the terrain. And so we were able
because of those efforts to receive triple the amount of
proposals than we were anticipating. So we will continue to
make sure to lift up the Inclusivity for All challenge with the
Women's Business Center Network. Several new Women's Business
Centers have been implanted in HBCU territory and also in rural
areas. So that continues to be a focus as well. And SCORE has
also stepped up with their resilience and marketing efforts,
including a Black-owned business initiative. So I hope all
those factors combined give you a sense of confirmation of
reinforcement. I appreciate your question.
Ms. BOURDEAUX. Great. Well, thank you so much for your
work, and look forward to working with you more in the future
to try to continue to build that support network for our very
diverse community of small businesses.
Madam Chairwoman, 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,
Ranking Member, for hosting this hearing. I also want to thank
Mr. Madrid for being here.
Mr. Madrid, in your opening statement you said your mission
is to help small businesses to start, grow, and expand.
According to the NFIB's latest COVID-19 survey, half of small
employers report supply chain disruptions and staffing are
significantly impacting their businesses. How is your office
assisting small businesses in overcoming these supply chain
disruptions and staffing shortages?
Mr. MADRID. Thank you, Congressman. I can tell you that
supply chain vulnerability is a scenario that is being
addressed by our Government Contracting Business Development. I
would be happy to take your questions back and get back to you
on that to support your questions.
Mr. GARBARINO. All right. Well, I mean, because I have
friends coming up to me now with little kids that are saying I
am not going to be able to get Christmas presents and a lot of
businesses in my district, I am sure most of my colleagues'
districts, do a majority of their business during the holidays.
And if they do not have products to sell, they will not be able
to grow or expand or pay their employees. So making sure supply
chain issues are addressed is huge. So I appreciate you getting
back to me with answers, more specific answers.
I also want to talk about inflation. A key metric measuring
inflation is at its highest rate since 1991, 30 years. How is
your office helping small businesses navigate the rising cost
of goods? What are you doing to educate them or to help them
grow?
Mr. MADRID. Thank you for your question. The best way to
create durable economic growth over the long run that eases
bottlenecks and inflationary pressures is to increase the
supply of goods that consumers want to buy, improve the
resiliency of our supply chains, and reduce the cost of
producing and getting goods to markets. So that is something
that we look forward to working with you. I do want our DCBD
area to get back with you. I assure you that I will get this
question to you. I can tell you on the workforce development
front because the resource partners are doing skill building
scenarios across the network. So thank you for your question,
Congresswoman.
Mr. GARBARINO. All right. But I mean, I am just wondering,
what is the answer. If a business is calling, that you are
dealing with is calling up a restaurant and saying chicken
wings. Chicken wings prices have tripled. You know, I cannot
sell chicken wings for $16. What are you telling them? How are
you telling them? How are you advising? How is your department
advising these businesses that do not know what to do with the
rising costs?
Mr. MADRID. Well, I would be happy to answer any questions
related to our programming at OED with our counseling and our
education and our training. I will tell you that I did meet a
woman-owned business in Iowa in a rural territory that had
benefitted from PPP and the Restaurant Revitalization Fund and
she was talking to me about the increased price of beef. And
what she did was she pivoted in terms of saying what else can
we do? What are the alternatives? Can we cut down our costs and
other endeavors? We have kept our employees. So that is just
one reflection I have heard on the ground that was offered by
herself, but she was frustrated with the rising cost of beef
but she was looking for alternatives. And that is where the
counseling, the skills building, the digitizing efforts at the
resource partner level really came to her benefit.
Mr. GARBARINO. But, I mean, it is hard for a steakhouse to
pivot when its business is based on selling beef. So, I mean,
that is an issue. It is not easy for every business to pivot,
especially small businesses.
Lastly, I want to bring up something Jeremy, as the Ranking
Member of the Cyber Subcommittee for Homeland, COVID made
everybody go digital. Every small business. People that never
thought they would. It is a new thing we are dealing with.
Everybody has got to deal with. What is your department doing
to help small businesses grow and start? How are you handling
it with cyber? Because it is definitely something that is a
huge issue. And ransomware, businesses are paying between
$5,000 and $15,000 to keep their businesses going due to
ransomware. So what is your department doing on that?
Mr. MADRID. Thank you, Congressman. Under our purview at
OED, we are releasing a notice of funding opportunity for a
cybersecurity grant that will be offered to the state
government. So more to come on that. And cybersecurity is a
priority. Thank you.
Mr. GARBARINO. Thank you. And I yield back.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize the gentleman from Louisiana, Mr. Carter,
for 5 minutes.
Mr. CARTER. Madam Chair and Ranking Member, thank you very
much for the opportunity. Thank you for having this hearing.
Mr. Madrid, how can the Office of Entrepreneur Development
increase their coordination with HBCUs and minority-serving
institutions?
Mr. MADRID. Thank you. Thank you, Congressman, for that
question.
HBCU outreach, engagement, and application of engagement,
meaning results and action, is very, very important to the
administrator. It is important to our agency and definitely
resonates at the Office of Entrepreneurial Development. We are
excited to see with the SBC network that there is over 30
service centers. And just as a frame of reference, there are
over 900 service centers. There are over 30 that are implanted
in the HBCU environment. We need to do more, frankly. And we
are working here this office knows under this leadership that
we want documented results. Certainly, our role into the
platform of EDMIS from a Legacy system to Next Generation
reporting is going to help us with that.
And on the WBC side, we are extremely excited. A number of
new WBCs have been implanted in HBCU environments so that in
and of itself I think speaks volumes in terms of action. But we
have got to do more and that extends itself to MSIs, to tribal
colleges and universities, to Hispanic-serving institutions.
But we are very, very excited on the progress from HBCUs. And
you will definitely be learning more from it with our
implementation with the Community Navigator Pilot as well.
Mr. CARTER. Excellent. Thank you. Let me ask you this, and
I appreciate that, and that is incredibly important
particularly to my district. But tell me, what can we do as
Members of this Committee or me as a Member of Congress on the
ground in Louisiana with multiple HBCUs in my district, what
can I do to assist you or to advance this very noble cause?
Mr. MADRID. Congressman, we would be happy to work with
you. And so if you have nuances, sometimes being on the ground,
what I have learned in my 15 years of supporting small
businesses, specifically before that I was in the banking
industry, is I come back to that premise of being on the
ground. And so if we are several states away, we want to know
what is happening. So we would be happy to work with your
office on nuances that are specific on your ground.
Mr. CARTER. Okay, great. Fantastic. I have two quick
questions before my time runs out. Tell me about the reentry
entrepreneurship counseling and training program because that
is sounding also very important. We know that we have to do
something different for our recently incarcerated individuals
if we expect them to be able to survive in main street America.
Share with me a little bit about what you are doing there and
how those programs work.
Mr. MADRID. Absolutely, Congressman. Thank you for that
question.
The best way to approach this question is from an example,
frankly. I will point to an entrepreneur, Larry, who was
formerly incarcerated in prison 20 years for a first offense,
nonviolent crime. And with the help of an SBDC in Nashville,
all Larry has done is launched his new business in the waste
removal industry. And now they are working together. He is
trying to obtain a line of credit. So we are committed here at
OED to expand the footprint of our resource partners and also
to start the process before release. That is very, very
important. We have got to be as entrepreneurial as our small
business owners and we look forward to this particular
population contributing toward the economy. So starting before
their release in structured programming----
Mr. CARTER. I do not want to cut you off but I have got
just about another, less than a minute. So two quick questions.
One is we have a program in Louisiana called First 72. It
is a program that in that significant period of the first 72
hours of someone being recently incarcerated, there is
programming set up. I would love to offline have a conversation
with you to talk about the merits of this program in Louisiana
and see if there may be some practices that they have that you
can use or maybe some best practices you can share with them to
improve on them.
So lastly, real quickly, my last 30 seconds, there were
several organizations in my district that applied for Community
Navigator Pilot competitive grants. If an organization in my
district was not selected, will they have an opportunity to
apply again for this funding in the future?
Mr. MADRID. Thank you, Congressman. I look forward to
hearing more about First 72.
The Community Navigator Program is a pilot, so the imagined
state is that it is institutionalized in some way, shape, or
form. If it is done through Congress, we are happy to execute
it. Thank you very much for your question.
Mr. CARTER. Thank you.
I yield back, Ma'am.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentlelady from California, Ms. Young Kim, is
recognized for 5 minutes.
Ms. YOUNG KIM. Thank you, Madam Chair Velazquez. And I want
to thank our Ranking Member Luetkemeyer for holding this
hearing. And Mr. Madrid, thank you for being with us to discuss
the state of SBA's Entrepreneur Development Programs.
I want to point to your testimony where you talk about Mr.
Montgomery of American wagyu cattle. By the way, during the
pandemic, I am one of those who had mail orders and ordered the
delicious Wagyu beef because I really like that. So I really
appreciate you mentioning him and thanks to PPP, Mr. Montgomery
was able to keep his staff full force and expand his
businesses. And this is where he attended an event where he was
able to meet up with his partner, lending partner, find the
right banker that was able to guide him and tell him about the
PPP.
Can you describe how that partnership with local lending
institutions and the Entrepreneur Development Resource Networks
makes it easier for small businesses to gain access to capital?
Mr. MADRID. Thank you, congresswoman. I look forward to
ordering some wagyu beef myself. So beyond talking about it, to
do it myself. I look forward to that and we are proud of
Patrick Montgomery and part of the Missouri SBDC.
But clearly, at OED, we are trying to forge collaboration
building as much as possible. That is the case also with the
Women's Business Centers in terms of some of them being CDFIs.
That has been helpful to some of the women clientele that have
had barriers to access to capital. So we will encourage
coalition building when it comes to getting these
entrepreneurs. That case specifically, Patrick was a
serendipitous event as you had mentioned, and so we are glad
that he was able to pivot to keep up with that mail order
business, so I hope that is a reinforcement.
Ms. YOUNG KIM. Other than sharing our love of wagyu beef, I
want to get to the point of, you know, would you agree that it
helps to have the bank representatives who know their
communities on their ground as a resource for the networks?
Because I say this because a while ago we sent a letter to the
congressional leadership, both the Republicans and Democrats,
to ensure that we do not remove the lending institutions from
the equation and move towards a direct lending approach through
SBA because there is that talk of that in the latest
reconciliation package that went through the Committee. So
should that happen, who will be filling the void of those
community backers and credit union representatives that are on
the ground providing information and services to our small
businesses?
Mr. MADRID. Thank you, Congresswoman. I believe that you
are referring to the efforts surrounding direct lending by the
SBA. And I will just purport to this. I want to preamble this
by saying we will be happy as well to work with you and get
questions to our Office of Capital Access. But what I will
testify to is from being on the ground, those loan amounts,
that $150,000 or less have been so hard to access for many of
our communities that have been left behind historically who
were left out of pandemic resources. It is hard territory and
we frankly, we feel like we have to step in here. But I would
be happy to take your questions back specifically to our Office
of Capital Access. But some of those folks who are trying for
those loan amounts are subject to very high interest rates and
we all can agree that that is a very, very difficult
environment, especially for a business owner who has not had
access to funding. So sometimes they are first entry. So I look
forward to any questions that you have that we can take back to
that office.
Ms. YOUNG KIM. The point that I want to make and emphasize
is that we do not need to move away from that public-private
partnership model that has a track record of success and that
does a better job in protecting taxpayers from fraud and abuse
and other SBA direct lending programs like the EIDL because the
success of our entrepreneurs and small businesses should not be
reliant upon a greater extension of government on main street.
So in the remaining time, Mr. Madrid, you also indicated in
your testimony that you are committed to ensuring ED programs
have robust programs and that SBA is introducing Next
Generation reporting program. I think the Chairwoman mentioned
this, but can you clarify the reporting, the timeline of the
reporting system and its implementation? Can you provide a
little information on that?
Mr. MADRID. Yes, Congresswoman. Thank you.
In terms of the EDMIS Legacy System, I know I have a couple
of seconds, but 100 percent was deployed across our Resource
Partner Network, the SBDCs, WBCs, and SCORE. So we are about on
the fifth month of implementation there.
Chairwoman VELAZQUEZ. Time has expired and now we recognize
the gentlelady from California, Ms. Chu, for 5 minutes.
Ms. CHU. Mr. Madrid, thank you for being here and
representing the Office of Entrepreneurial Development and SBA
resource partners across the country.
When I came to Congress, I worked hard to bring two SBDCs
to my district in the San Gabriel Valley in Southern
California. Now we have two successful locations in Pasadena
and La Verne that have been immensely important and never more
so than during the pandemic. One of the reasons why it was so
important to get the SBDCs into our area is that we have a
large entrepreneurial immigrant and limited English proficient
community, and communities, actually. That is why I worked to
insert language into the CARES Act requiring that we make in-
language materials available for these business owners.
So I am especially glad to see that in-language services is
prioritized in the Community Navigator program but that is
actually just one part of the equation. When I talk to my local
SBDCs, they tell me that translations are important but not as
important as gaining the trust and confidence of the
communities that are hard to reach. And to do that, they have
been successful in partnering with different community-based
organizations that have both the language skills and the
longstanding relationships. So I am proud that our local SBDCs
do have these existing partnerships with these groups. But we
also have one of the largest immigrant populations in the
country and some well-established community organizations that
serve them.
So, this Community Navigator program that you are able to
reach these immigrant populations that some might consider hard
to reach that need to have access to those trusted
organizations. So how are you going to make sure that happens
through your guidance and awarding process? And I know there is
a program of having a hub and a spoke. And will the spokes get
funding? I just want to know how exactly you are going to work
this to make sure everybody is reached.
Mr. MADRID. Thank you, Congresswoman. Being culturally and
linguistically competent is very, very important to us in terms
of reaching those terrain elements that you speak of. And so we
were excited in our outreach endeavors with the Community
Navigator Pilot, that we leverage organizations that know
different communities where translation is an issue. It was
very, very important for us to have them at the table. With the
anticipation of the grantees being announced later this month,
I can assure you because of the diligent review process that we
will achieve geographical diversity, as well as diversity of
sectors being served. And through the spokes, which are the
community champions on the ground, you know, we have reinforced
over time different examples of what a navigator could be and
translators were definitely one of those items of reinforcement
that we addressed time and time again. So that is a very
important scenario here.
With the hub and spoke model, the hubs are grantees, so
they will be being funded by the SBA. And then the spokes on
the ground, through consortia agreements with the hubs will
receive their funding. So we are excited that this model, it is
a national model but with a hyper-local approach, we are
excited to go into new ground where folks who have been left
out running these businesses being job creators have the
opportunity to truly understand how to connect with SBA. That
is the first step of many but we are excited to take that first
step in many instances on the ground through this program.
Ms. CHU. And will the determination of the funding for the
spokes be made by the hub?
Mr. MADRID. That is right. That is right. And that is in
proposal all together in terms of the review, the review
process that we have now. It is a proposal of the hubs with
their spoke engagements.
Ms. CHU. And let me say also, people really need to know
about the Community Navigator Program but we know that SBDCs,
they were not allowed to advertise their services. So what is
going to be done to make sure that there is an actual awareness
of the Community Navigator Program? Will there be a role for
advertising?
Mr. MADRID. That is right. There will be a role. There was
an appropriation, aside from the one under our purview, that
talks about that application of marketing the Navigator Pilot.
Thank you very much for your question.
Ms. CHU. Thank you. I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
The gentlelady from Texas, Ms. Van Duyne is recognized for
5 minutes.
Ms. VAN DUYNE. Thank you very much, Chairman Velazquez and
Ranking Member Luetkemeyer. And thank you, Mr. Madrid, for
joining us today.
Your visit comes at a difficult time for small businesses
that have endured many challenges and hardships over the last
18 months. And now as they try to get back on their feet they
are faced with a slew of new manufactured challenges. Luxurious
and unsustainable unemployment benefits have played a
significant role in labor shortages and seemingly never-ending
stimulus has led to record inflation.
In addition, Democrats are now trying to force through the
largest spending bill this country has ever seen, leaving our
smallest employers fearful of massive tax hikes bound to
stretch their already small margins.
I heard your answer to Congressman Roger Williams's
question about increases in taxes and you said that no one
earning under $400,000 will experience tax increases. Now, as a
direct result of this administration's fiscal policies, folks
making under $400,000 in small businesses are already paying
more in taxes. We are all suffering from increase in out-of-
control inflation. For example, and I would hope that working
for the Small Business Administration you see this, you have
heard this, and you know this, too. Example is the cost of
cargo containers. They have gone from $4,000 last year to now
an average of $29,000. We have seen a 54 percent increase in
fuel costs, a 7 percent increase in food costs, and escalating
employee costs if small businesses can even find employees. And
to that point, Congressman Hagedorn brought up the list of
impacts that are going to be hitting the small businesses as a
result of the vaccine mandates.
I spoke with Members of the aviation industry yesterday who
are already experiencing drastic shortages of pilots, and with
this December 8th deadline looming over their heads, cargo
carriers warn that this mandate will ``have a tremendous
disruption on commerce in this country.'' So pretty much anyone
who drives, buys anything, or eats will be paying more and it
is only getting worse.
So despite misleading claims pushed by this administration,
increased taxes, including the Democrat Reconciliation Plan,
will negatively affect the close to 1.5 million small
businesses organized as C corporations and most small
businesses organized as passthrough entities.
So according to the Texas Public Policy Foundation, I know
you are a Texan so you will appreciate this, the proposed
policies Democrats are pushing will result in Texas businesses
losing well over $650 billion in investments and reduce full-
time employment by 12,000 jobs. So given that the state
admission of your office is to ``help small businesses start
growing in global markets,'' my first question to you would be,
do you believe increased taxes on small businesses help them to
grow and compete?
Mr. MADRID. Thank you, Congresswoman. And a big shout out
to Texas. Thank you for that.
Regarding the tax plan, I would love to, you know, we are
happy to respond to your questions in writing. I would love to
respond or answer any questions about our counseling and
training related to the programs.
Ms. VAN DUYNE. What I asked you is do you believe that
increased taxes in small businesses help them to grow and
compete?
Mr. MADRID. Our forte is not tax policy so we would be
happy to address your questions in writing but I would be happy
to talk about----
Ms. VAN DUYNE. Do you believe increases in inflation helps
small business to grow and compete?
Mr. MADRID. I would be happy to take your questions and
respond to them in writing, Congresswoman.
Ms. VAN DUYNE. So do you believe federal mandates that
force small businesses to fire employees in a time when they
cannot find people to hire helps small businesses to grow and
compete?
Mr. MADRID. Congresswoman, I would be happy to respond,
take your questions back and respond in writing.
Ms. VAN DUYNE. So you come to us today to answer questions.
I am asking you what kinds of impacts on small businesses this
administration's fiscal policies will have. Are you unprepared
to answer those questions today?
Mr. MADRID. I would be happy to talk about the Community
Navigator Pilot, our resource partners, what is happening on
the ground with our WBCs, our SBDCs, and SCORE.
Ms. VAN DUYNE. Okay. So the mission, which is to make small
businesses be able to compete and grow, we are unable to talk
about that today?
Mr. MADRID. I would be happy to talk about what is
happening on the ground to support that mission.
Ms. VAN DUYNE. Okay. So as the Ranking Member of the
Subcommittee on Oversight, Investigations, and Regulations, I
was concerned by the Inspector General's audit of the Women's
Business Centers earlier this year found that the SBA did not
provide efficient oversight resulting in close to a million
dollars of potential fraud. So as the administrator overseeing
entrepreneurial development programs, can you tell me how many
people on your staff are designated to provide oversight of
these programs?
Mr. MADRID. Yes. Well, the Office of Women's Business
Ownership and the leadership there is responsible. We have
closed three Women's Business Centers as elaborated earlier.
Ms. VAN DUYNE. Can you tell me how many people are
designated to provide oversight of these programs?
Mr. MADRID. Yes. We have a grant management officer and the
supporting staff.
Ms. VAN DUYNE. Okay. So we have one person or----
Mr. MADRID. Congresswoman, we have a team supporting that
effort at OBO that is centered around the grant specialist and
the supporting staff underneath that.
Ms. VAN DUYNE. Thank you very much.
Mr. MADRID. Thank you.
Ms. VAN DUYNE. I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Evans.
Mr. EVANS. Thank you, Madam Chair. Thank you for your
leadership.
Good morning, Mr. Madrid. It is a pleasure to come to speak
before us today.
In my home of the City of Philadelphia, Temple University
and Widener Small Business Development Centers have been
critical to supporting entrepreneurs especially during the
pandemic. Many small businesses in my district do not have the
capital to hire accountants or professionals. During the past
year, the centers have assisted in starting up 112 new
businesses, 8,407 jobs, served over 2,600 clients, and helped
them in forming nearly $40 million in capital for small
businesses to develop. These centers are especially important
in cities like mine where nearly half of the population is
Black and nearly 25 percent is on poverty. However, this brings
us to an issue around priorities and resources. So I want to
ask the metric that comes with funding in making these
decisions. These centers are based on increasing job save and
capital formation. However, it appears to me that there seems
to be a mismatch on the goals as is well documented the
minority Black-owned businesses specifically have less access
to capital and fewer employees than in fewer White-owned
businesses. If the SBA keeps increasing the goals around job
save and capital, is this not counterproductive to the centers
increasing their already stellar performance of minority women,
veterans, and rural entrepreneurs?
Mr. MADRID. Congressman, I apologize but I had an
interruption. So I heard the first part of your commentary and
your question. I apologize to the Committee here but can you
repeat the last part of your question. I apologize, all, for
that interruption.
Mr. EVANS. Basically, let me go back. I basically said
these centers in particular assisted in starting 112 new jobs,
new businesses, 8,000 jobs, and over 2,600 clients. Now, the
question I asked, in terms of the goals of job save and
capital, I asked the question is this counterproductive in
terms of increasing the centers' already stellar performance of
minority, women, and veteran entrepreneurs in terms of the
objectives?
Mr. MADRID. Yes. Well, thank you for your question,
Congressman. We certainly want to make sure that we are
evaluating the performance of the SBDCs. And so we are going to
continue to reevaluate metrics and be timely with, especially
what is happening during the pandemic. So we feel like new
business starts, capital infusion, job creation, of course, is
important, as well as asking if the folks being served are
veterans and go deeper on demographic information. So we are
definitely making sure that the metrics apply to the current
environment. And we have learned a lot from the pandemic.
Mr. EVANS. Well, can you talk a little bit about, just in
your mind, of what you think you have learned in terms of the
goals that you see of job save and capital? What specific
example can you give in terms of what you have learned?
Mr. MADRID. Absolutely. I mean, when it comes to capital
infusion, I mean, the SBDCs certainly across the network had
notable advancement there. Some of it was the numbers but they
had to pivot to a virtual environment. So bringing some of
those engagements into the fray is very, very important because
the digital and virtual world is not going to go anywhere
anytime soon. In other words, the SBDCs that we have talked to
them about that are going to have to evaluate new measures of
how that virtual audience is security capital, for instance, is
one item. With the WBCs, just extending to our resource partner
network, they had 10,000, almost 10,000 capital infusions. So
those are examples that were taken into account that also will
be applied with the Community Navigator Pilot just to connect
the dots between the resource partners and the open lines of
communications between our offices and the networks themselves.
Mr. EVANS. Any way you think that this Committee can assist
you more in terms of ensuring that you meet those goals?
Mr. MADRID. Well, we look forward to working with you. I
mean, I hope that is the commonality that I have across this
Committee. And so we proposition, we look forward to working
with you. Thank you.
Mr. EVANS. Thank you, too. Thank you.
Madam Chair, I yield back. I yield back to you, Madam
Chair.
Chairwoman VELAZQUEZ. Yes. Thank you. The gentleman yields
back.
Now we recognize the gentleman from Wisconsin, Mr.
Fitzgerald, for 5 minutes.
Mr. FITZGERALD. Thank you, Mr. Madrid, for being with us
today. The issues being discuss, kind of a cross-section
obviously on entrepreneurs as well as some of the SBA programs
and the PPP stuff. So I just wanted to go back to that.
Congresswoman Kim talked a little bit about it.
I think the frequent visits or the interactions I have at
the local level with either local bankers or those that are
part of the credit union system, oftentimes it is reassuring to
know that if there is a separate set of eyes on the process,
and I think this was very interesting when it came to the PPP
loans. Very successful. Absolutely bailed out a lot of small
businesspeople across this nation during the pandemic. But when
you talk to bankers and they say, listen, I had a conference
table and it was full of folders on people, some clients that
they knew very well, others that maybe they had just worked
with a little bit, but you know, they were going through these
files, making sure that all the T's were crossed, all the I's
were dotted. And as a result of that you can see in the PPP
program that there is a lot less fraud and abuse as a result of
that. And then if you move to the SBA program's direct loan
programs, and I have talked to individuals that have received
those loans, far less scrutiny, issued in a way that sometimes
was a mystery even to those that had received the loans
themselves.
So I would once again encourage you to be an advocate for
this within the SBA to say, hey, listen. If we want to reduce
those numbers, if we want to bring those fraud and abuse
numbers down, involve local financial institutions. It is like
an answer that is staring us right in the face. We just need to
reach out and make sure we embrace that. And it does not matter
which side of the aisle we are on. Obviously, we have an
inherent responsibility to make sure that we take care of the
taxpayer dollars.
So that is more of a comment, I guess, than anything else.
And let me give you a chance to either respond or give me your
thoughts on that if you would.
Mr. MADRID. Congressman, thank you. The direct lending
legislation and lending is based off of our successful 7(a)
loan program. And this program will not be in isolation. We
will continue to partner with community banks and credit unions
and the community financial institutions which will counsel
borrowers through the application and repayment process. So
that is a little bit of an answer from this perspective but we
would be happy to work with you, take your questions back to
the Office of Capital Access. Thank you for your comments.
Mr. FITZGERALD. Well, very good. So let me just follow up
real quickly. I know I have got a couple of minutes.
So when it comes to entrepreneurs, I have been an
entrepreneur, small businessperson for many years before I
became a Member of Congress. Most of the time, small
businesspeople want you to just get out of the way. They are
not looking for all these types of programs and assisted grants
until they are kind of up and running. And Congressman Williams
talked about this earlier in his experience but, you know, the
last burdensome government can be and the less taxing that can
happen, the better off all small businesses will be. I do not
care if you have got one employee or if you have got 20
employees, that is something that consumes a lot of the day for
some of these people that are willing to jump in with both
feet. And it is a risky thing. And people lose sleep. And
people go without paychecks week after week who run these small
businesses. I do not care if it is a woman or a veteran or any
other group that can have great success in small business. You
need to develop programs and work to structure programs so they
may assist only when small business owners ask for their help.
For too long, the federal government specifically, but in my
state of Wisconsin, there has been too much intrusion in that
process and it leaves us in a position of trying to work around
government versus interacting with them.
And another thing, I felt, you know, I had the opportunity
today to talk a little bit about that. I want to thank you for
being with us today and I would yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Pennsylvania, Ms.
Houlahan.
Ms. HOULAHAN. Thank you, Madam Chair. And thank you for the
opportunity to speak. I think this hearing has been very
reflective of the complexity of small businesses in this
country and particularly during lots of distressors such as
this pandemic. Having been one of those people who has lost
sleep and signed my house over and a variety of other things to
grow small businesses, I can clearly empathize with the small
businesses in our community and all of the complexity of these
questions that people have been asked reflect why we are here
and why we are trying to be helpful.
One of the things that I was also struck by that I cannot
let go because it was mentioned several different times is
vaccine mandates. It is one of those kinds of things where it
depends on who you talk to how it is received. Some people,
business owners, are very positive about that. In fact, the
vast majority of people whom I have spoke with have been
extremely positive and grateful for the clarity that has been
provided by a mandate. One of the things that I find most
frustrating about the narrative is somehow that this should be
a choice between a doctor and a person. The irony there is not
lost on me and that somehow the science tells us that this ends
up with us just being able to be more safe from being
hospitalized rather than also to save one another from death.
And so I get extremely exercised, as you can probably tell, by
this frustrating narrative that somehow this is contributing to
the unemployment in our nation other than the fact that we are
also contributing to helping each other survive in this
country.
So the question that I have, Dean actually asked my
question regarding ESOPs and employee ownerships and the very
important aspect of making sure that we are thinking about
stakeholder capitalism, but with the remaining parts of my
time, if it is all right, I would like to ask about
cybersecurity which is also something that is true and present,
a true and present danger to particularly small businesses that
do not have the ability to protect their businesses, to protect
their bank accounts, to protect other people's financial
information. So if you could please in the remaining time that
I have, offer up what resources that the Office of
Entrepreneurial Development has for cyberhealth, cybersecurity,
and cyber awareness. I would appreciate that. Thank you.
Mr. MADRID. Thank you, Congresswoman. And Happy National
Cybersecurity Awareness Month to all. That is this month in
October. And this has been on the minds of the administrator
and also OED. And I will report on a couple of items, one of
which is a cybersecurity grant. We are releasing through the
Office of Entrepreneurship Education a notice of funding
opportunity for that program that will increase outreach and
application of cybersecurity, not only of awareness but we know
that ransomware has been a big issue. We are also partnering
with DHS on their Stopransomware.gov website to make sure that
socialize with our small businesses.
But we are not stopping there. We come back to the terrain,
making sure that we are on the ground, meeting small businesses
where they are. The smallest of the small, if we are really
honest, and I know you all have experienced this, is when you
talk to a small business owner that has one or two employees
and you talk to them in corner where they have built trust with
you and you ask them, do you really know what ransomware is and
how it can affect your business? Do you feel vulnerable? And
most of the time I have heard absolutely yes. So we want to
make that government website translatable and relatable to the
small business owners.
There is also another rung and it applies to certification
and procurement. So we are working with our GCBD, Government
Contract and Business Development. They are small businesses
that are certified that need C training, certification training
in cybersecurity in order to be eligible for procurement
opportunities. So the bottom line is segmentation, to approach
it that way. It is not a ``one size fits all.''
The last thing I will say is that our Office of
Entrepreneurship Education headlines an electronic learning
initiative which includes the Women's Online Business
Curriculum ASCENT and we will add to that a cybersecurity
pillar. So we are very, very excited about that going forward.
And it will continue to be a priority in OED and through our
office of entrepreneurship education.
Ms. HOULAHAN. Thank you. With what remains of my time, I
look forward to working with you on those issues of
cybersecurity because I think they are critical to the success
of small businesses.
Here in my community, we will be hosting a job fair where
more than 100 businesses will come to hopefully find people to
fill the jobs. It has been a month and a half or so since all
of these benefits supposedly have expired and still we have
only 4 percent unemployment in my community and many, many,
many jobs to fill. So this is a vastly complex situation that
we are managing. Only I believe it is 7 percent of people who
returned to the economy in August were women so we really have
quite a lot of complexity that we need to deal with in order to
find our way back to a level set in our economy right now.
Thank you and I yield back, Madam Chair.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Florida, Mr. Donalds.
Mr. DONALDS. Thank you, Madam Chair.
Mr. Madrid, what is your job? What do you do? I have been
on the road. So I have been driving from Tampa this morning. I
was at a prior engagement. So I have been catching the hearing
and bits and pieces. So what actually do you do at the SBA?
Mr. MADRID. Well, thank you. Thank you for your question,
Congressman.
I serve as associate administrator for the Office of
Entrepreneurial Development. And we oversee the technical
resources arm of the SBA through our Office of Small Business
Development Centers, our Office of Women's Business Ownership,
and our Office of Entrepreneurship Education. So there is a
rung there that----
Mr. DONALDS. I got it. That's cool. I do not need the long
version. I just need the short version, Mr. Madrid.
So obviously, your office is responsible for trying to help
small businesses get off the ground all across the country with
technical assistance they might need to help their financing
needs to keep their businesses afloat. That is the short note;
right?
Mr. MADRID. We help businesses start and grow. And that is
through our resource partner network. And we also have an
education aspect or Office of Entrepreneurship Education
through an electronic learning initiative. And then we are also
responsible for the Community Navigator Pilot that will be
launched.
Mr. DONALDS. Okay. All right. So I have got a couple
questions for you. So I had to stop at the gas station.
Obviously, there are some people who might try to start
convenience stores. What do you think the increased excise tax
on cigarettes will have on a small business or sole proprietor
trying to open up a convenience store or a gas station? Maybe
not a gas station. There is a little bit more regulations
involved in that. Let's say a convenience store in the United
States. What do you think an increase in the excise tax is
going to do to their ability? Do you think that is going to
hinder their ability to open and maintain profitability or do
you think it is going to hurt their ability to stay open and
help their profitability? Yes or no. Is it going to help or is
it going to hurt. Yes or no?
Mr. MADRID. Congressman, tax policy is not in our purview.
I would be happy to talk about----
Mr. DONALDS. Oh, Mr. Madrid, but you are a head--Mr.
Madrid, you are the head of the Entrepreneurial Division. You
engage with small business owners all across the country. You
have got to have that understanding of the impact of tax
policy.
All right. Let's move on. Another small business tax policy
in the Budget Req bill. Do you think it will help or hurt small
businesses getting rid of the section 199A small business
deduction on small business owners' taxes? Will that help or
hurt small businesses in the United States, yes or no?
Mr. MADRID. Congressman, I am not in a position for tax
policy----
Mr. DONALDS. Come on, Mr. Madrid, you are in the position.
You coordinate with small business owners all across the
country. You said so yourself. That is your job title. You
provide technical assistance to all types of small businesses.
So you have to have firsthand knowledge of what is going to
impact them. If the Section 199A is going to basically be taken
away from them, I mean, they are going to pay more in taxes,
you do not know if that is going to help or hurt the same small
businesses you are trying to provide technical assistance to
help?
Mr. MADRID. Congressman, I would be energized to talk about
our programs at the Office of Entrepreneurial Development, the
Community Navigator Pilot, how we are on the ground with
business and counseling and education. I would be happy to talk
about that.
Mr. DONALDS. Mr. Madrid, Mr. Madrid, that is not a yes or
no answer. You are trying to give me bureaucratic speech. And
to be honest, I have been listening to bits and pieces of this
hearing and I just find it to be ridiculous. You guys are
charged with helping small businesses open, thrive, and
prosper. That is your purpose. But I do understand that you
cannot talk about tax policy. Frankly, your boss, when she came
before us, she could not talk about tax policy. We were given
the same runaround in that hearing as we are getting today.
Last question. Do you think an increase in the corporate
income tax rate and/or increase in the personal income tax rate
for small business owners whose income passes through to their
1040, do you think that will help or hurt small businesses
being able to thrive in the United Sates, yes or no?
Mr. MADRID. Congressman, I am not in a position to, and it
is not my purview----
Mr. DONALDS. Mr. Madrid, I am going to reclaim my time.
With all due respect, if you are not in a position to make a
very clear delineation on the impact of increased taxes on
small businesses, then how in the heck are you the
administrator for entrepreneurial divisions with respect to
small businesses in the United States? If you cannot understand
that, then I am very, very concerned about what can be
understood at the SBA.
Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
I want to thank Mr. Madrid again for taking time to answer
our questions today.
SBA's Office of Entrepreneurial Development plays a
critical role in facilitating the well-being and growth of
American small businesses and your commitment and dedication to
small businesses shined through today. For many small
businesses, counseling from an SBA resource partner can mean
the difference between success and failure. Going forward we
must work together as a Committee to ensure those critical
organizations are in position to thrive and that the OED has
the resources it needs to effectively implement the various
programs under their jurisdiction.
I 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.
[Whereupon, at 11:58 a.m., the committee was adjourned.]
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