[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
ENTREPRENEURSHIP IN THE NEW ECONOMY
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
NOVEMBER 3, 2021
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[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-039
Available via the GPO Website: www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
45-954 WASHINGTON : 2022
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Blaine Luetkemeyer.......................................... 3
WITNESSES
Ms. Ellie Diop, Chief Executive Officer, Eliza Revella Consulting
Services, Los Angeles, CA...................................... 6
Mr. Andrew Fogaty, Executive Director, 36Squared Business
Incubator, Chicago, IL......................................... 8
Ms. Stephanie E. DeVane, Vice President of Entrepreneurship &
Business Development, National Urban League, New York, NY...... 9
Mr. Raymond Keating, Chief Economist, Small Business &
Entrepreneurship Council (SBE Council), Vienna, VA............. 11
APPENDIX
Prepared Statements:
Ms. Ellie Diop, Chief Executive Officer, Eliza Revella
Consulting Services, Los Angeles, CA....................... 39
Mr. Andrew Fogaty, Executive Director, 36Squared Business
Incubator, Chicago, IL..................................... 42
Ms. Stephanie E. DeVane, Vice President of Entrepreneurship &
Business Development, National Urban League, New York, NY.. 44
Mr. Raymond Keating, Chief Economist, Small Business &
Entrepreneurship Council (SBE Council), Vienna, VA......... 50
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Airbnb Report................................................ 68
Kauffman Foundation.......................................... 94
ENTREPRENEURSHIP IN THE NEW ECONOMY
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WEDNESDAY, NOVEMBER 3, 2021
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:03 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
[chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Golden, Crow, Davids,
Phillips, Newman, Chu, Evans, Delgado, Houlahan, Andy Kim,
Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney,
Garbarino, Young Kim, Van Duyne, and Salazar.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I 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 proceedings, 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 who
attend this hybrid hearing in person will be required to wear
masks in the hearing room.
Furthermore, all Members and staff who have not been fully
vaccinated must also maintain six-foot social distancing from
others.
With that said, Members will be allowed to briefly remove
their masks if they have been recognized to speak.
With that, let me start my opening statement.
Since the 1980s, America has largely been in a slump when
it comes to new business formation. This fact rarely generates
headlines or garners attention in the media, but its
implications are severe.
New businesses make up the foundation of our economy.
Entrepreneurs that launch enterprises and products are the
catalysts for American innovation.
The statistics paint a startling picture of the state of
our country's entrepreneurial environment over the past four
decades.
In 1980, 12 percent of employers were new businesses. By
2018, this figure had dropped to 8 percent. In 1982, 38 percent
of all businesses were new firms, compared to just 29 percent
in 2018.
In 2018, larger corporations were doing quite well, but
small firms were exiting the market at a higher rate than they
were being started.
This was the state of American startups in March of 2020
when the pandemic began to intensify. As COVID spread and
businesses closed, our country was staring down an
unprecedented economic crisis.
Using the Great Recession and its aftermath as a guide,
experts predicted that the pandemic would continue to drop the
rate of business startups to new lows. Despite the dire
forecast, American entrepreneurship didn't crater during the
pandemic--it flourished.
In 2020, Americans filed paperwork to start 4.3 million new
businesses. This figure represents a 24-percent increase from
2019, and by far, the highest number over the past 15 years.
Many of these businesses didn't look like traditional small
firms. As the pandemic drove commerce online, these new
enterprises were primarily concentrated in the nonstore, online
retail sector.
The entrepreneurs starting these new businesses also
reflected the diversity of the American population in the 21st
century. Black and Hispanic communities led the way in
launching new companies.
Young entrepreneurs dealt with the tough job market by
pivoting toward entrepreneurship to develop businesses and
products to serve their communities.
No one factor fully account for this entrepreneurship boom.
Layoffs, a favorable credit market, and federal stimulus
efforts all helped lay the ground work for this record rise in
new businesses.
So today I hope that this hearing allows us to better
understand this entrepreneurial revival and apply those lessons
moving forward. The pandemic disrupted many areas of American
life, not least of which being the nature of work.
The challenges facing this new generation of entrepreneurs
aren't identical to the problems of the pre-pandemic economy.
We must work to understand these new challenges and find ways
Congress can better support them in the post-pandemic world.
It is also vital that we grasp why entrepreneurship
flourished during COVID and what can we do to sustain that
increase in the future. COVID closed countless small businesses
and left many others on the brink of disaster.
Yet, at the same time, it is possible the pandemic set in
motion a revitalization of American entrepreneurship. Today I
look forward to hearing from our witnesses about the journey
that led them to start a business and how this committee can
support them and others like them in the future.
I now would like to yield to the Ranking Member, Mr.
Luetkemeyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chair, and good morning.
We meet today for a hearing on entrepreneurship in the new
economy. Regrettably as we have all witnessed over the past
year, the outlook for our nation's entrepreneurs is dismal.
Small businesses, small business owners, entrepreneurs, and
startups are known to be resilient and skillful, easily
adapting to changing conditions. They are fast and can adjust
to meet the needs of their customers. They can pivot with speed
and capture market share.
These small business attributes, along with vigilant risk-
taking and investing, are key ingredients to a growing economy.
The COVID pandemic, coupled with Biden and the Democrats'
failed economic policies have brought severe economic
challenges to main street USA. Entrepreneurs across the
country, from both coasts to the middle of the country, face
incredible obstacles.
This fall economic growth ground to a halt as all
businesses confronted by severe supply chain disruptions,
ongoing labor shortages, skyrocketing inflation, higher costs
of nearly everything, and threats of tax increases from the
Democrats.
To follow, an overreaching vaccine mandate has been
proposed with very limited information.
Small business owners and the entrepreneurs require clear
and concise rules and information to make business decisions.
Uncertainty can't be part of their business model. Unknown next
steps bring their planning to a complete halt.
With each of these issues coming to the forefront, let's
review them. We can begin with supply chain disruptions and
higher costs. Small businesses, which operate on thin margins,
have been shocked by recent supply chain failures.
NFIB September Economic Trends survey found 90 percent of
small businesses have been affected by these disruptions, and
nearly half of all small businesses experience product delays
from their suppliers.
With empty shelves continuing to be a common sight in our
local communities, the fourth quarter and the holiday season
could be a rough stretch for the nation's job creators.
At the same time, demand for goods has increased, pushing
prices even higher.
Labor. Across all industries, labor shortages have hindered
the ability of companies to get products made, shipped,
unpacked, and transported. Once the products and goods have
arrived, the businesses often do not have a full staff ready to
meet and greet customers.
The Biden administration's worker shortage means that
employers now have 10.4 million job openings. Let me repeat
that: 10.4 million job openings, and no one willing to fill
them. NFIB found 51 percent of small businesses have unfilled
job openings, a staggering and record number.
In addition, employers are facing record numbers of workers
quitting their jobs. And, according to the Federal Reserve, the
pandemic has resulted in a record 3 million early retirements.
This is a dreadful situation as we head into what should be
the busiest time of the year for businesses: the holiday
season.
Inflation. Despite the Biden administration's denials, it
is very clear that inflation is no longer temporary or
transitory. In October, the Department of Labor reported that
the Consumer Price Index, one trusted measure of inflation, is
now at a 13-year high of 5.4 percent.
Even the Federal Reserve Chairman, who has insisted for
months that inflation is transitory, recently admitted that
inflation is expected to remain high well into next year.
Overall, inflation means higher prices for small businesses,
along with higher prices for their customers.
Tax increases. Could there be a worse time to threaten
entrepreneurs and small firms with tax increases? In February,
President Biden said the U.S. had lost more than 400,000
businesses since the pandemic began, and many more were at
risk.
Yet the Biden administration and congressional Democrats
have proposed a huge number of tax increases to fund their
massive spending programs. We are not sure, however, which tax
increases are still on the table, although it seems to be
changing by the minute. But surely the last thing small
businesses need coming out of a pandemic are tax increases.
Employer vaccine mandates. In September, President Biden
announced that his administration is developing a regulation
that would require all private sector employers employed by a
business with a hundred or more employees to be vaccinated or
submit to weekly testing.
According to the Society of Human Resource Management, 89
percent of employers fear at least some of their employees will
quit as a result. The uncertainty surrounding these rules is
putting the brakes on small businesses as they try to get back
on their feet and serve their communities.
A labor shortage crisis, accompanied by an employer vaccine
mandate, are a grave threat to American small business
prosperity. How much more can small businesses withstand? Taken
alone, each of these policies is devastating, but taken
together, their impact is likely to have serious, long-term
consequences for entrepreneurship.
Madam Chairwoman, we should be enacting policies that will
empower entrepreneurs. Attentive risk-taking and investing are
what will grow our economy. However, entrepreneurs are facing
an economic storm that is preventing this progress.
I appreciate our witnesses being with us today. I look
forward to the testimony.
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. Each 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 witnesses. Our
first witness today is Ms. Ellie Diop, CEO of Ellie Talks
Money. Ms. Diop was laid off from her corporate job months
before the pandemic. After submitting over 50 job applications,
Ms. Diop capitalized on her $1,200 stimulus check and
entrepreneurial spirit to create her business.
Ellie Talks Money is an online coaching and consulting
service for aspiring and established business owners that was
able to build a net worth of over a million dollars in less
than 1 year.
Welcome, Ms. Diop.
I would like to yield to Ms. Newman to introduce our second
witness.
Ms. NEWMAN. Thank you, Madam Chair and Ranking Member. I am
proud to introduce Mr. Andrew Fogaty, a resident of the great
State of Illinois and from my district. He currently serves as
both the director of the Illinois Small Business Development
Center at the Greater Southwest Development Corporation and as
executive director of the 36Squared Business Incubator, both in
Chicago.
In addition, he serves as a mentor with the Gallery
Incubator in Evanston, Illinois.
For over 12 years, Andrew has led local economic
development initiatives, help launch nearly 70 companies,
served as an adviser to more than 300 others, and facilitated
more than $40 million in funding for his clients.
In 2017, he founded an all-abilities business incubator in
the 36Squared building on the Chicago southwest side and was
selected at the 2020 State Star by the Illinois Small Business
Development Center Network.
I just have to tell you on a personal note that Andrew is
quite amazing, and we are so proud to have him in our district.
But it is a pleasure to welcome Mr. Fogaty to speak today.
Thank you, Chairwoman, and I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Our third witness is Ms. Stephanie DeVane, the Vice
President of entrepreneurship and business development at the
National Urban League. The National Urban League is a historic
civil rights organization dedicated to economic empowerment of
historically underserved urban communities.
As the Vice President of entrepreneurship and business
development, Ms. DeVane manages, oversees, and advocates on
behalf of 12 entrepreneurship centers located in key
affiliates. In this capacity, her division supports these
affiliate small business programs through capacity building and
programming sub grants and by providing them with training and
technical assistance.
Welcome, Ms. DeVane.
I would now like to yield to the Ranking Member, Mr.
Luetkemeyer, to introduce our final witness.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Our next witness is Raymond J. Keating. Mr. Keating is a
chief economist with the Small Business and Entrepreneurship
Council, or SBE. He writes and speaks on a wide range of issues
impacting the entrepreneurship sector of the economy.
His areas of expertise include taxation, monetary policy,
federal, state, and local budgets, regulation, and economics.
He has written hundreds of articles with pieces published in
The Washington Post, Wall Street Journal, Boston Globe, Chicago
Tribune, and Investor's Business Daily.
Mr. Keating holds an M.A. in economics from New York
University and an MBA in banking and finance from Hofstra
University, and a B.S. in business administration and economics
from St. Joseph's College.
I want to thank all the witnesses for joining us today.
And, with that, Madam Chair, I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer.
Thank you all for being here today.
Ms. Diop, you are recognized for 5 minutes.
STATEMENTS OF ELLIE DIOP, CHIEF EXECUTIVE OFFICER, ELIZA
REVELLA CONSULTING SERVICES, LOS ANGELES, CA; ANDREW FOGATY,
EXECUTIVE DIRECTOR, 36SQUARED BUSINESS INCUBATOR, CHICAGO, IL;
STEPHANIE E. DEVANE, VICE PRESIDENT OF ENTREPRENEURSHIP &
BUSINESS DEVELOPMENT, NATIONAL URBAN LEAGUE, NEW YORK, NY; AND
RAYMOND KEATING, CHIEF ECONOMIST, SMALL BUSINESS &
ENTREPRENEURSHIP COUNCIL (SBE COUNCIL) VIENNA, VA.
STATEMENT OF ELLIE DIOP
Ms. DIOP. Thank you. Good morning, Members of the Small
Business Committee--oh, there we go. Sounds a lot better. Good
morning, Members of the Small Business Committee. I am very
grateful to be here. My name is Ellie Diop, and I am CEO and
founder of Eliza Revella Consulting Services, also known as
Ellie Talks Money. I have a business coaching and consulting
company that I started in the pandemic.
So my path and journey to entrepreneurship is not like many
others. I am also a mother of four, and as you mentioned in
introducing me, I wanted to get another job after being laid
off before the pandemic began. And I did apply feverishly to
several jobs, over 53 in fact.
And my experience is one in corporate America. I have
served as director of sales for over 3 years, but I was not
able to find employment. And so, when the stimulus checks, when
I knew that they were coming, I began to make a plan on
starting a business with that small--what I was looking at as a
capital investment.
And I conducted market research and really analyzed what
did other businesses need at this time, what--where are
businesses struggling, you know, and I did this market research
by leveraging social media.
And so I came to the determination that other small
businesses really needed assistance in sales, which is
something I was very good at. They needed assistance in finding
funding, something I also knew how to do.
And so, when I received the stimulus check, I put it to use
and purchased things like a website, a domain, a new phone, a
ring light, all things that I knew I would be able to use to
build a brand and build a following online.
And so, with consistency, dedication, and posting content
on social media about three to five times per day, in 10
months, I was able to net $1.3 million. And that is sheerly by
having the access to entrepreneurship.
So I share with my clients all of the time, and as their
coach, I am giving them the tools and strategies that they need
to scale their own businesses by leveraging what we have, which
is the internet and social media.
And, because I started this with, you know, $1,200, I am
always reminding them that you don't need a large sum of money
or a large capital investment in order to make a lot of money
in your business. It is just about utilizing the right
strategies. It is about staying committed. It is about staying
dedicated and leveraging what we have available to us.
So now I am very grateful that the business has grown, and
I have been able to employ, myself, five people. It is a very,
you know, amazing turn of events, being that it was so
challenging for me to find a job. Now I am in a position where
I can actually create jobs.
And my goal for 2022 is to increase our staff to 10,
hopefully, and to continue from there, but definitely where the
biggest success in this entire accomplishment truly is, is just
that I have been able to show and inspire people, over 300,000
people, that if I can do this, so can you.
You know, a lot of--there is a misconception that
entrepreneurship, or the ability to start a business, is one
that begins with a silver spoon in someone's mouth. But I think
that my journey has been able to show people that, regardless
of where you are starting with, even as, you know, a mother,
just coming out of a divorce, single mother trying to find a
job, you can actually take the circumstance that you are given
and completely change the narrative and change the scenario.
So we live in a time where entrepreneurship is truly more
accessible than ever, and given the right tools, small business
owners can absolutely repeat what I have been able to do.
Now, you don't need to have money to pay for advertising.
You don't need to always have a lot of connections. You need to
have grit. You need to have resilience. You need to have
dedication and commitment to what product you want to sell.
And now, with platforms like social media--Instagram,
Facebook, Twitter--all platforms that I have leveraged, you are
able to go directly to your audience and make the sale.
We don't have to go through all of these complicated
channels, which actually gives small businesses a higher
opportunity to thrive and survive than we may have had 4 or 5
or 6 years ago.
So I am very grateful to be able to share my experience and
my success and entrepreneurship with you all and thank you.
Chairwoman VELAZQUEZ. Thank you, Ms. Diop for that
inspiring story, it is really rewarding to know that there is a
role for the federal government to play, particularly by
empowering women like yourself.
Now I will recognize Mr. Fogaty for 5 minutes.
Mr. Fogaty, please unmute yourself.
Mr. FOGATY. I was afraid that would happen. Good morning,
Chairwoman Velazquez----
Chairwoman VELAZQUEZ. We cannot hear you, Mr. Fogaty.
Mr. FOGATY. Really? I am unmuted. Can you hear me now?
Chairwoman VELAZQUEZ. Mr. Fogaty, we are going to correct
the technical issues, and now we will recognize Ms. DeVane.
Ms. DeVANE. Chairwoman Velazquez, Ranking Member----
Chairwoman VELAZQUEZ. Ms. DeVane, please unmute yourself.
Ms. DeVANE. I am also unmuted.
Chairwoman VELAZQUEZ. The problem is here.
Mr. FOGATY. I should say I can hear Ms. DeVane.
Ms. DeVANE. And I can hear Mr. Fogaty.
Chairwoman VELAZQUEZ. We are going to take a brief recess
until HRS address the issue.
[Recess.]
Chairwoman VELAZQUEZ. This hearing is called to order.
Now we recognize Mr. Fogaty for 5 minutes.
STATEMENT OF ANDREW FOGATY
Mr. FOGATY. Thank you very much and good morning,
Chairwoman Velazquez, and distinguished Members of the
Committee. Again, my name is Andrew Fogaty. I am with the
36Squared Business Incubator in Chicago.
I also oversee two of the Illinois Small Business
Development Center locations, one at 36Squared and one at the
Greater Southwest Development Corporation. Both locations are
also part of the City of Chicago's Neighborhood Business
Development Center Program.
What this means is that myself and my colleagues, both
across the city and the State, provide business assistance,
training, and advising to area residents at no charge.
I want to thank Congress for inviting me to participate in
this hearing and also for the quick action that was taken last
year with programs like the Economic Injury Disaster Loan,
Paycheck Protection Program, and CARES Act funding.
Given that this was the first time that an unforeseen
disaster affected virtually every business in the country at
the same time, I think that the actions of Congress and the SBA
were key to averting what could have been a much more serious
crisis.
These programs continue to help save businesses across the
country, so again thank you for that.
That being said, the small business landscape has changed,
and serious challenges remain. The subject today is
``Entrepreneurship in the New Economy,'' and my testimony will
focus on four main areas: access to capital, reducing the
digital divide, manufacturing, and working with underserved
communities.
Access to capital for small businesses, and especially
startups, remains a challenge. In fact, if a business needs a
small loan of $10- or $20,000, I am only aware of one bank in
Chicago, CIBC, that actively markets programs to meet that
need.
There are, of course, also some nonprofit lending options.
However, these are typically at a higher interest rate and less
desirable than a bank loan.
I would like to see more banks offering micro lending and
startup funding, and I would like to see the reporting process
for lenders streamlined to make small business lending more
attractive.
It is my understanding that there is legislation now that
may--on the books right now--that may significantly increase
reporting requirements in all small business loan applications,
and I am concerned that this may negatively impact my clients.
Access to capital is key to supporting entrepreneurship in
the new economy.
Next, I would like to address computer literacy. The
digital divide is real, especially in underserved communities.
Today, computer literacy and basic business training are as key
to an entrepreneur's success as being able to read or write was
20 years ago.
We need to do better with this by making basic computer
skills training and business assistance programs widely
available across the country.
In fact, when CARES Act funding ends next fall, many small
business development programs across the country will actually
see a decrease in capacity, and this is a concern.
Next, I would like to address manufacturing. Last year's
difficulty in obtaining vital PPE supplies and this year's
supply chain issues demonstrate a clear need to support our
domestic manufacturing capabilities.
Certainly a simplification of the federal procurement
process would be a start.
And, finally, I would like to discuss the underserved
population. Here on Chicago's south side, we have a diverse and
vibrant small business community, including a significant
number of immigrant business owners who hold ITINs instead of
Social Security numbers. Currently these business owners are
shut out of most SBA lending programs.
I certainly don't presume to jump into the immigration
debate. However, if a business seeks to expand, buy equipment,
a building, or create jobs, I would like to be able to present
the same options to all my clients.
Perhaps the most disadvantaged of the underserved
populations are the disabled people. Advances in technology and
making small business ownership--are making small business
ownership a much more viable option for our disabled
population.
This is a trend that is only going to increase in the
coming years. I would like to see more of an effort made to
include these entrepreneurs into the wider business development
world.
Thank you again for having me, and I look forward to your
questions.
Ms. VELAZQUEZ. Thank you, Mr. Fogaty.
Ms. DeVane, you are recognized for 5 minutes.
STATEMENT OF STEPHANIE E. DEVANE
Ms. DeVANE. Chairwoman Velazquez, Ranking Member
Luetkemeyer, and Members of the House Committee on Small
Business, thank you for the opportunity to testify at today's
hearing titled ``Entrepreneurship in the New Economy.''
My name is Stephanie DeVane, and I am the Vice President of
Entrepreneurship and Business Development at the National Urban
League. I bring you greetings on behalf of Marc Morial, our
president and CEO.
The National Urban League is a historic civil rights
community-based organization dedicated to economic empowerment
and the guarantee of civil rights for African Americans and
other underserved communities in America.
We are a national nonprofit intermediary and provide
direct, comprehensive services that improve the lives of nearly
2 million people each year. We are a network of 91 Urban League
affiliates and the District of Columbia.
In my role, I manage, oversee, and advocate on behalf of 12
Urban League Entrepreneurship Centers, which provide
management, counseling, mentoring, and training services for
entrepreneurs looking to start, grow, or scale their business.
While the typical client of the Entrepreneurship Center
program is a low- to moderate-income African-American woman
with an existing business, our centers also serve Caucasian,
Hispanic, Asian-American entrepreneurs.
In 2020, our centers helped approximately 23,928
participants secure $108.6 million in financing and contract
opportunities, as well as save or create 714 full- or part-time
jobs through our counseling and training services.
The COVID-19 pandemic and resulting economic disruption has
disproportionately impacted minority businesses and also
exacerbated existing structural inequities in small business
lending.
In April 2021, a Federal Reserve survey found that
minority-owned businesses were simultaneously hardest hit by
pandemic-related closures and were only half as likely as
White-owned firms to receive the necessary Paycheck Protection
Program small business relief funding they needed to pay their
workers and stay afloat.
For minority-owned business, the racial wealth gap and
implicit bias have made securing access to capital exceedingly
difficult.
During the pandemic, our entrepreneurship centers conducted
training, workshops, and counseling sessions through digital
and telephonic means with clients. We hosted webinars to guide
entrepreneurs experiencing cash flow issues through the
disaster loan application process and provided links to
resources to help entrepreneurs develop disaster recovery
plans.
From June 1, 2020, through May 31st of this year, with
support from a CARES Act MBDA award, our centers helped 11,250
businesses secure $137.6 million in financing and contract
opportunities, as well as save or create 1,174 full- and part-
time jobs, with over 15,800 hours of counseling and over 33,000
hours of training.
Specifically, our services were directed at providing COVID
relief to minority businesses lacking access to capital or with
inadequate financial management practices and less flexible
operating models.
We also received support through the PepsiCo Foundation to
run our Black Restaurant Accelerator Program which is helping
keep the doors of small businesses and food-and-beverage
industries open.
One of the program's beneficiaries is Beaucoup Eats, a New
Orleans neighborhood eatery that provides full-service catering
and meal prep services. Here is what owner Keisha Reed had to
say about the program: ``The grant from PepsiCo allowed us to
purchase three tents, which meant we could serve at least 50
people, and overhead costs were lowered. Given the current 72-
hour test and vaccine card mandate for inside eating and the
inside reduction, we were only able to accommodate 6 to 10
people on the inside at any given time. Without the assistance
of the grant, we wouldn't be able to generate the revenue
needed to stay in business during this ongoing pandemic.''
I also note that the National Urban League was just awarded
a $5 million Small Business Administration Community Navigator
Award, which will allow us, through 25 Urban League affiliates,
to reduce barriers for minority-owned businesses through
critical support and resources.
Last year, Black-owned businesses saw a surge in sales
corresponding to the rise of the Black Lives Matter movement.
However, as public support for it began to stagnate, business
owners saw sales level off.
In the new economy, Black-owned small businesses continue
to experience lower paths returning to pre-pandemic employment
levels and face a more uncertain future recovery relative to
their peers.
Many Black-owned businesses continue to lack access to
capital needed to fully recover due to implicit bias and the
legacy of racism.
To ensure a full economic return for minority-owned
businesses in this new economy, we urge Congress to enact civil
rights protections and guardrails that will reduce any racial
disparities in access in capital, while increasing access to
prime government contract opportunities, mentorship, minority
incubator support, and technical skills training.
Please see my submitted testimony for more detailed
recommendations.
On behalf of the National Urban League, thank you for the
opportunity to testify. I look forward to your questions.
Ms. VELAZQUEZ. Thank you, Ms. DeVane.
Now we recognize Mr. Keating for 5 minutes.
STATEMENT OF RAYMOND KEATING
Mr. KEATING. Chairwoman Velazquez, Ranking Member
Luetkemeyer, Members of the Committee, thank you for hosting
this important hearing.
My name is Raymond Keating. I am chief economist with the
Small Business and Entrepreneurship Council. For more than 26
years, SBE Council has worked to strengthen and improve the
ecosystem for startups and small business growth.
As you all know, entrepreneurs take on risks and
uncertainty in order to innovate, introduce new products and
services, and find better ways to do things. And, by doing so,
they boost productivity, enhance competition and choice, fuel
economic growth, and create new jobs.
Indeed, entrepreneurs, along with the investors who are
essential for funding startups and business growth, are central
to the economic income and employment growth we all want to see
happen.
For our economy, in my written testimony, I look to key
indicators on where we stand right now. By the second quarter
of 2021, entrepreneurs, investors, businesses, and workers had
worked to get the economy back to where it was pre-pandemic.
However, we still face the task of getting back to where we
should be, given the lost growth, and then maintaining strong
growth thereafter.
Unfortunately, 2 percent real GDP growth, which is where we
stood in the third quarter, is anemic under normal
circumstances. At 2 percent growth, U.S. economic
underperformance will be extended far into the future.
We need to do much better, and that will depend
significantly on the state of entrepreneurship.
So I go on to look at various measures of entrepreneurship
in my testimony. It is clear that entrepreneurship was lagging
well before the pandemic. It suffered when COVID hit, and it
has struggled to come back in many ways.
But hope can be found in the trend in new business
applications. After suffering big declines when the pandemic
first struck, the number of business applications quickly
skyrocketed beyond where they had been prior to the pandemic
and have remained at elevated levels.
The historical relationship between such applications and
actual business formations indicates that they are, again, as
reason for hope. Although, it must be noted that a pandemic
economy is uncharted waters.
At the same time, the expansion of what many call the gig
economy would support this data, as would more people
positively considering entrepreneurship due to their pandemic
experiences, as we have heard here already.
As for challenges for entrepreneurs, there are many, some
being evergreens and others specific to our current situation.
For example, a key evergreen, again, is financing. We have
heard people talk about that already.
As businesses reach various stages, though, angel investors
and venture capitalists, for example, become vital for
providing the funds to fuel innovation and growth.
And regarding our current situation--again, in my written
testimony, I explore the labor shortages, supply chain
challenges, and inflation--these are all quite real and quite
significant issues, creating problems, risks, and
uncertainties.
Of course, there are also expanding opportunities for
entrepreneurs. I highlight two areas in my written testimony.
The first is technology. Whether generating new products,
improving and enhancing production, and/or expanding
distribution, technological advancements in areas like
computer, digital, and broadband technologies, for example,
have served to expand opportunities for entrepreneurs.
Social media, again, as we have heard, for instance, has
served to help create and transform businesses.
A second major area of expanding opportunities for
entrepreneurs is the international marketplace. Technology
advancements coupled with economic growth abroad have opened
doors in the international arena for entrepreneurs.
Keep in mind that some 95 percent of the world's consumers
are outside the United States, and as the data show,
international markets are not the near exclusive domain of
large businesses, as many assume.
Finally, in this, getting the public policy mix right is
always critical for our economy and for entrepreneurship, but
getting it right becomes even more critical as we struggle to
emerge from a pandemic economy.
I just offer what I call a pro-entrepreneur policy
framework in my testimony: Avoiding tax increases and providing
substantive and permanent tax relief that enhance incentives
for starting up, building, and investing in businesses.
Emphasizing regulatory relief, not imposing additional
regulatory burdens. If anyone understands the cost of
regulation, it would be small business owners, especially as
those costs mount with more and more regulations imposed, you
know, regulation after regulation.
Advancing free trade is critical. Reducing--meaning, you
know, reducing government-imposed cost on trade such as tariffs
is pro-growth, and the U.S. really needs to reclaim its global
leadership role on trade.
Also, implementing a constructive immigration policy agenda
that expands avenues of immigration for those who wish to
contribute by working and starting businesses, while enhancing
security, of course, to keep out terrorists and others who
would do us harm.
That is a pro-entrepreneur framework that we put forward.
Thank you again for your invitation to be part of this hearing
today, and I look forward to any questions.
Ms. VELAZQUEZ. Thank you, and thank you to all our
witnesses. We really appreciate all you have shared with us
today.
I will begin by recognizing myself for 5 minutes, and I
would like to address my first question to Ms. DeVane.
As Americans quit their jobs in record numbers, women are
leading the change in what is known as the great resignation.
Ms. DeVane, what shift in the labor force occurred during the
pandemic to make women more likely to launch a small business?
Ms. DeVANE. Thank you for that question, Chairwoman
Velazquez. My experience, through our entrepreneurship center,
is that many of the women that started businesses during the
pandemic had been laid off from their jobs, similar to Ellie,
who told her story.
Many of these women business owners had decided at that
point to start their own business. Some of them were passion
projects. Some of them were built out of necessity. But many of
the business owners that we saw were women, and they were using
that opportunity to start businesses.
They use and utilized our centers, which had technical
assistance services, counseling and mentoring and training
services to start businesses.
In addition to that, many of them saw opportunities through
grant programs that the National Urban Leagues and other
organizations made available that were specifically for women-
owned businesses to start and grow their businesses.
In addition to that, there were grants available for
minority women-owned businesses to help undergird some of the
training that we were providing to them.
Ms. VELAZQUEZ. Thank you for that answer.
Ms. Diop, what advice do you have for others that are
considering starting a business during times of uncertainty?
Ms. DIOP. Thank you, Chairwoman Velazquez, for that
question.
I would definitely advise women who want to start
businesses in a time of uncertainty, or any time, to utilize
the resources that they have available to them to the fullest
extent.
And that may be monetary, but also I would advise them to
utilize the resources within themselves. Many times we don't
realize that the experience we have gained in jobs or in life
can directly lend to success in business.
And I know for myself, everything that I have put into my
coaching and consulting business are skills and experience that
I have gained throughout corporate America and just throughout
college and all of the experience that I have.
So I think that is a number one thing is to--I always teach
my clients to make a list of everything you know how to do,
your experiences, your knowledge, your skills, and pull a
business from that list. That way you are more guaranteed to
succeed because you are naturally working within something you
already know how to do rather than venturing off into a
business that you think you should start based on what, you
know----
Ms. VELAZQUEZ. Thank you. Thank you for that answer.
Mr. Fogaty, during the pandemic, many businesses have
struggled to adapt to the changing nature of work and have
faced challenges with supply chain issues, access to capital,
and employee retention. Can you please describe your role at
the 36Squared Incubator and how a $1 billion investment in
incubators in the Build Back Better Act will help create more
entrepreneurs?
Mr. FOGATY. Certainly. Well, I certainly agree with the
testimony of the previous witnesses.
What we do is provide assistance and support, not only
through the SBDCs; I also have colleagues in the ITCs,
International Trade Centers. This is a network of professionals
who, at no charge, will help manufacturers and facilitate their
exports, as Mr. Keating alluded to.
We also have what is known--I also have colleagues who are
what is known PTACs, Procurement Technical Assistance Centers,
and these are available across the country, as are SBDCs and
ITCs. The PTACs will facilitate and assist entrepreneurs with
getting government contracting.
We are also in--the city of Chicago has Neighborhood
Business Development Centers. So my point is there is a lot of
free assistance out there. We don't have all the answers, but
we have a number of resources so that we can find the answers.
And I think it is important to support small business
development centers, entrepreneurship centers, incubators, as
they reach out and try and guide entrepreneurs and small
businesses through this time.
Ms. VELAZQUEZ. Thank you.
Mr. Keating, I just ran out of time. Maybe if we go into a
second round, I will be able to ask you a question. Thank you
very much.
Now I recognize Mr. Williams, Vice Ranking Member of the
Committee, for 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chairwoman, and I want to
thank our Ranking Member too, and witnesses for being here
today.
Every American can see that our country is facing one of
the worst supply chain stories in history. I see it firsthand.
I am a car dealer--I have been for 51 years--employ hundreds of
people, and I can tell you, it is serious.
And U.S. ports are struggling to unload deliveries, and
inventory is just sitting on container ships in the middle of
the ocean.
Families are preparing for the most expensive Thanksgiving
meal ever, and we are told that by the administration, and
worry if Christmas gifts will even be available.
This supply chain crisis has become a substantial issue for
small businesses across the country, forcing business owners to
make operational adjustments in order to compensate for the
lack of inventory and revenue.
So, Mr. Keating, what are small businesses who operate on
fixed margins to do when they don't have a product to sell or
can't afford to pay their workers, and what do you think the
long-term effects of these supply chain disruptions will have
on our economy?
Mr. KEATING. Well, I agree with you a hundred percent, and
in terms of small businesses owners, they are being impacted
more so than large firms just because they operate on such thin
margins.
You know, the long-term issue--listen, in the short term,
this is going to be an issue that we need government to not
impose additional burdens, like I mentioned in my testimony--
taxes, regulations, things like that--provide relief where they
can, and then the private sector is going to work through this.
It is going to be very painful. It has already been very
painful.
And then the question is how--you know, long-term effect.
The long-term effect is going to be determined by how many
businesses survive these issues and these problems. We have
already seen what the pandemic has done.
I mean, various surveys, you know, either we have lost
hundreds of thousands or even millions of small businesses
during the pandemic. So now we have got this additional issue
of working through trying to get back to where we were at
least. And the long-term impact is going to be, again, how many
small businesses have we lost.
Again, I take some hope in those business application
numbers, where you see people think--at the very least, they
are thinking about entrepreneurship as an option, and that is
what we are going to need going forward.
Mr. WILLIAMS. Perfect. Let's talk about inflation. It is
still on the rise, and hardworking Americans are paying more
for food, gas, and other utilities. And a recent report by the
Department of Labor showed that inflation has spiked to 5.3
percent, a record high in 13 years.
So, meanwhile, Democrats continue their push to inject over
$3 trillion of new federal spending into the economy and
threatening to worsen inflation for months or years to come.
So the Biden administration refuses to acknowledge the risk
of hyperinflation. They argue that proposed spending packages
are fully paid for and will have no impact on inflation.
So, again quickly, Mr. Keating, in your testimony, you
state that the inflation numbers are undeniable, and can you
talk briefly about the current impact on inflation, whether you
think it is transitory like the Federal Reserve argues?
Mr. KEATING. Yeah. I always get concerned when the Fed,
whose primary responsibility is stable prices, kind of pooh-
poohs what is going on with inflation. So I am not quite clear
how long this is going to last. I don't think any of us are,
and that is part of the problem, right?
Inflation comes with uncertainty, there is volatility, all
of the issues that, you know, higher interest rates, all of
these problems. So the issue--going forward, I wish I heard
more from the Fed, that, hey, listen, we are taking this
inflation issue very seriously, and perhaps we are going to
start to rein in these historically unprecedented loose
monetary policies that we have been running really since the
summer of 2008. I think that would be a great step.
And then also, on the fiscal side of things, you know,
inflation is all about too much money chasing too few goods. I
like the idea of incentivizing the production of more goods.
So, if we could have pro-growth fiscal policies, meaning tax,
regulatory, trade policies, combined with some monetary
restraint, that is how we got out of this mess in the 1980s
when we had stagflation, and that is how we are going to get
out of the mess today.
Mr. WILLIAMS. Okay. Quickly, in the time I have remaining,
in your opinion, what are the impacts of higher taxes and
increased government regulations on small businesses,
particularly on the heels of the COVID-19 setbacks? Higher
taxes do nothing but hurt business. We need to cut taxes. So,
quickly, how do you feel about that?
Mr. KEATING. Well, you are right on. Listen, higher taxes
always come with costs for negatives to the economy, negatives
for small business. And then, when you are thinking about doing
it as we struggle to get out of a pandemic economy, I am
bewildered by that. This is the worst possible time to be
imposing higher taxes and more regulatory burdens.
And, without a doubt, you can talk about targeting at this
income level or that income level; ultimately, everybody gets
hurt and largely because investors get hit. That means less
capital for entrepreneurs, and we need entrepreneurs, again, to
drive innovation, economic growth, and job creation.
Mr. WILLIAMS. Thank you, Madam Chairman, I yield my time
back.
Ms. VELAZQUEZ. The gentleman yields back, and now we
recognize the gentlelady from Kansas, Ms. Davids, Chairwoman of
the Subcommittee on Economic Growth, Tax, and Capital Access,
for 5 minutes.
Ms. DAVIDS. Thank you, Chairwoman, and I am excited about
this hearing today. You know, America's small businesses and
small business owners, entrepreneurs, have really faced
enormous and unprecedented challenges over the last year and a
half because of COVID, and we have heard about that during this
time from our witnesses.
And we also heard that, against all odds, we are seeing
Americans start new businesses. Even in 2020, 4.3 million new
businesses were started, and that is the highest number of new
businesses over the last 15 years.
So, while we have unprecedented difficulties, we are also
seeing unexpected and inspiring startup and unexpected and
inspiring startups surge. It is, I think, a testament to the
entrepreneurial spirit that we have got in this country, and I
am glad we are taking the time to understand that today.
And so my first question, Ms. Diop--is that the--okay--I
wanted to ask you about, you know, in your written testimony,
you mentioned that you became an entrepreneur because you had
to. And I think that is something that a lot of folks face, but
I am curious, of the things that you were able to navigate, can
you share with us a little bit about the challenges that you
didn't see coming, and, you know, what were those?
Ms. DIOP. Thank you so much, Ms. Davids.
Certainly there were challenges that I ended up facing
which I couldn't have anticipated, and I would say the largest
one is learning how to go from a one-woman, or person, business
to then delegating and expanding it.
I, as I mentioned in my testimony, started my business out
of necessity. Because I couldn't find a job but I had children,
I needed to take what I knew how to do and turn it into a
business that could then serve others.
Where the shift happened and where the first challenge
really came is, okay, now how do I take this and make it
something that is not only about me but then can create a space
for other people who either need a job or further need support
in their own businesses.
So scaling is a huge part of entrepreneurship, a huge part
of running a small business, and can be the largest challenge,
but I was able to navigate that through research, support, and
trial and error.
Ms. DAVIDS. Thank you. And I am--the idea of scaling and
kind of those almost, like, back-office type of skills, you
know, the Kauffman Foundation, which is based in the Kansas
City area--the Kansas Third is on the Kansas side of the Kansas
City metro area--and the Kauffman Foundation has done a lot of
research, and they talk about accounting and legal advice. And
I am curious about how that is one of the biggest obstacles. I
am curious how you handled--like, you mentioned research. Like
what kind of steps did you take to address that?
Ms. DIOP. Absolutely. So I did ask a lot of questions. I am
very grateful that, in my time running this business, I have
been able to make connections. And so a lot of clients who
would book me for a call would actually be in the field of--the
legal field, or perhaps they were in the field of finance.
And so, in exchange for me helping them to gain clarity on
how to scale their own businesses, I was then able to ask them,
well, since you are in the financial field, what should I do?
You know, since you are in the legal field, what steps can I be
taking to really expand this so that it is not just my small
business but something that can really grow and walk on its own
legs? So that was a key element of my research.
And then, as well, I am from Los Angeles, California, so I
looked up small business development programs and centers near
me where I could go and ask questions: How do I navigate this
next step? I have done this much so far by myself, but I know
that I need further support.
So those types of programs, such as the one you mentioned
in Kansas, are so very needed. I really did mine the scrappy
way by just, you know, researching and figuring it out. But,
when people can have access to information that provides them
with that necessary infrastructure support, it really
strengthens their ability to be a long-term, lasting business.
Ms. DAVIDS. Thank you for that. And I think, you know, from
your description about how you got into being an entrepreneur
and also from Ms. DeVane, you know, the work that they are
doing, and now as a community navigator--community navigator
grantee, it sounds like one of the things that we need to do is
try to make sure that our resources, from the federal
perspective, are available and known to everyone.
With that, I will yield back. Thank you, Madam Chair.
Ms. VELAZQUEZ. The gentlelady yields back.
Now we recognize the Ranking Member, Mr. Luetkemeyer.
Mr. LUETKEMEYER. [Inaudible.]
Ms. VELAZQUEZ. The gentleman from Pennsylvania, Ranking
Member of the Subcommittee on Economic Growth, Tax, and Capital
Access, Mr. Meuser, is recognized.
Mr. MEUSER. Thank you, Chairwoman Velazquez, and thank you
to our Republican leader, Mr. Luetkemeyer, and thank you very
much to our witnesses, and thank you, Ms. Diop for being here
with us, and to all on virtual.
Clearly, the last 19 months have been very challenging for
small business. Even though I am a Member of Congress, I have
been experiencing it from my past life, as well as just working
with the constituents and helping them through, navigating
through the COVID crisis, from PPP to shutdowns to you name it.
Ms. Diop, your story was compelling, amazing.
Congratulations. I want to ask you a couple questions about
that, but first I am going to just go to Mr. Keating.
Mr. Keating, as small businesses, entrepreneurs, as you
have mentioned a couple of times, have dealt with cost of
goods, shortages, all kinds of cost increases, inflation, wage
increases, which we all like, but when they come so suddenly
and creates the shortages, as well as the added unexpected
expenses--government is not in the business of creating jobs.
Government's role is to create the best environment
possible for the private sector to create those jobs. So, in
light of the many issues that exist--workforce, I mentioned
them, inflation, cost of good increases, supply chain problems,
pending OSHA mandates--how has government done in helping or
worsening small businesses' challenges, Mr. Keating?
Mr. KEATING. Yeah. Unfortunately, I would like to say we
were doing better than we are. When you look at all the signals
that entrepreneurs, small businesses, investors, are getting
from Washington, it has been, you know, what taxes are we going
to increase; let's look at all sorts of new regulatory
initiatives. And they span across from labor to antitrust and
everything in between.
You know, we still haven't unwound tariffs that were
imposed. So, you know, there is not much going on, on the trade
front to be able to expand opportunities.
So bottom line is, you know, the overarching signals are
not positive from the federal government, I would argue, in
terms of policies for small businesses.
Mr. MEUSER. Okay. So perhaps reversing some of those,
keeping taxes competitive so goods made in Asia are not more
competitive, regulations that do affect supply chain, that is
what we should--in your view----
Mr. KEATING. Absolutely. Absolutely. Regulatory reform, in
a positive sense, would be great. I mean, imagine if the
business community, including entrepreneurs and small
businesses, were hearing from Washington that, hey, we are
going to start sunsetting regulations so that we can assess
each one if it makes sense going forward, right?
How about we have more input from Congress, rather than
leaving it all to appointees and bureaucrats, right, having
Congress actually approve each rule and regulation. So those
types of reforms would be a big plus, I think.
Mr. MEUSER. All right, thanks a lot.
So, Ms. Diop, you are based in Los Angeles? Well, again,
congratulations, your determination, hard work, probably a lot
of smart work as well, a tremendous amount of thinking and
probably loss of sleep, but really, really great American
business story.
So taxes in L.A. and federal taxes, I am not going to ask
you what you pay in taxes--it is your business--but I would
guess it is somewhere in the neighborhood of about 40 percent.
Do you think that that is helpful to your business or--so just
talk about that a little bit.
Would raising those taxes affect you? Would you prefer them
to stay where they are? Would you like to see them lowered a
little bit? How would that help your small business?
Ms. DIOP. Yes. Thank you so much for your question, Mr.
Meuser.
Taxes are definitely a challenge, and the biggest wake-up
call in this entrepreneurship journey that I have had.
I think that, you know, taxes as a new business owner can
be navigated more thoroughly with proper education and with
proper support. I think one thing that is lacking is taxes are
almost like a smack in the face when you start a business.
There isn't any, you know, preparation to help a small business
owner know what they need to expect in terms of the magnitude
of what the tax rate can be and how to fully prepare for it.
I do think that, as small business owners, you know, lower
taxes can certainly help because of the fact that we are
already operating on margins that, you know, we have to pay
other employees, we have to, you know, pay for other startup
capital, depending on what type of business that you are in.
I----
Mr. MEUSER. I am sorry. I am out of time.
But, Madam Chair, I would just like to ask, perhaps Ms.
Diop can provide us with what you would like to see us do to
help your clients and to help you. So maybe we can do that even
in a second round or maybe you could just send us an email on
that.
Ms. DIOP. Okay.
Mr. MEUSER. I yield back, Madam Chair. Thank you.
Ms. DIOP. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentlelady from Illinois, Ms. Newman, is recognized for
5 minutes.
Ms. NEWMAN. Thank you, Madam Chair.
I just have a quick question for Mr. Fogaty and then for
Ms. Diop.
So, Andrew, first of all, good to see you. Can you share a
little bit of what you think would be the number one most
powerful thing that Congress can do to help incubators,
particularly with entrepreneurs of color and entrepreneurs with
disabilities? If you could nail a number one down that Congress
could do to provide incubators specifically and then
providing--or providing and empowering more incubators, what
would that be?
Mr. FOGATY. Well, support, of course, in the financial
sense for incubators, and I would also--for disadvantaged
entrepreneurs, especially the severely disadvantaged
entrepreneurs that I deal with, with blind people, severe
disabilities, I would like to see some sort of a grant program.
Right now, I have a chef who is blind. I would love to see her
be able to get a space at O'Hare. She has--she had a restaurant
and, fortunately, closed it just before the pandemic--it was a
great time to close a restaurant--so that she could start a
family, but she is getting ready to get back into it. She would
do well at a place like O'Hare or Midway, but the cost of
getting into one of those spaces is really prohibitive for a
disabled entrepreneur.
So, you know, certain segments of our entrepreneurship
world do need grants and startup support, and we should also
encourage the lenders, the banks, perhaps through the CRA
program, to support both incubators and the entrepreneurs
themselves.
Ms. NEWMAN. Thank you very much.
And then, Ms. Diop, so, first of all, congratulations.
Amazing. So, if you think back to when you were first starting,
what do you think would have been the number one thing that
would have helped you with what you are calling the surprise
around taxes? And so I was in exactly your shoes 17 years ago,
and I was, like, wow, that is interesting.
Now, as we all know, that, once you identify your
deductions properly, legally, and ethically and all of those
things, your taxes come down greatly. And then, when you choose
a tax category, it is a breeze then. And, actually, it is much
better to be a small business than a big business. And, as you
know, moving forward, your rate will likely stay the same or
lower based on the Build Back Better plan, so I just wanted to
clarify that for the record.
That said, what would be the number one thing maybe in
terms of, you know, small business literacy on the ledger side
or whatever that would have been, gosh, it would have been good
to know that?
Mr. DOHERTY. Yes. Thank you so much, Ms. Newman, for your
question. I would definitely say that what would have been
helpful at the very beginning is perhaps when small businesses
go to register for their business, and they are in that initial
phase of becoming official, you know, any type of documentation
or any type--maybe a letter or just something that can really
assist them with understanding, okay, now that you have
registered a business, here are the most common deductions for
the category you have chosen, for the industry that you have
chosen. Here are ways that you should be tracking those
deductions. Here are resources maybe near you or resources
online that can help you to start practicing tracking your
deductions and proper accounting measures. Because once I got a
handle on my taxes and the expenses, I then immediately had to
start coaching other business owners on the proper ways to
track their own expenses and track their income because, truly,
they had no idea. And if you don't set aside a certain amount
of money, then you are slapped with a very large tax bill that
then can really set you way back, and you almost feel like you
are starting your business from the beginning if you are not
fully prepared.
So I definitely think measures like that would be very
helpful and can further educate business owners even before
they start the business on, hey, here is everything you need to
be ready for. Yes, it is great, but also make sure that you
know what to do when it comes to paying your taxes and when it
comes to doing it the legal and ethical way.
Ms. NEWMAN. Well stated, and thank you. Great idea. So
thank you for your time.
And I yield back, Chairwoman.
Chairwoman VELAZQUEZ. The gentlelady yields back.
The gentleman from Minnesota, Mr. Stauber, is recognized
for 5 minutes.
Mr. STAUBER. Thank you very much, Madam Chair.
You know, the COVID shutdowns were devastating to
communities and the American economy. By the end of 2020,
government lockdowns eased, businesses began to reopen, and our
economy started to rebound. Things were on the up, and
businesses had great optimism, but the Democrats marched
forward with their first partisan spending spree, the American
Rescue Plan, a $1.9 trillion package, despite the nation's
positive recovery trends. This was the beginning of the many
crises we are facing today.
First, the cost of the American Rescue Plan has caused
immense inflation. Gasoline is up 42.1 percent. Electricity is
up 5.2 percent. Transportation is up almost 5 percent. And all
these costs mean less money for our small business owners to
take home to their families, who, by the way, are having to pay
12.6 percent more for meat, 12.6 percent more for eggs, and
11.9 percent more for their children's footwear.
Second, the American Rescue Plan continued to pay people
more money not to work. Now, U.S. employers are still
struggling to fill more than 10.4 million job openings. Labor
shortages for truck drivers, dock workers, warehouse employees,
no wonder there are issues with our supply chain.
So here we are in the middle of a crisis. Prices of goods
continue to skyrocket right before the holidays. Shelves are
empty. A real look at what the Biden agenda has gotten the
American people so far, and, yet, the Democrats say let's spend
more, trillions more. And how will we pay for it? How are we
going to pay for that? Oh, that IS right. Taxes again on small
businesses. That is wrong. I simply do not understand how my
Democratic colleagues can convince themselves that they are
doing good work on behalf of the American people.
With that, I would like to use the remainder of my time to
turn to the testimony of our witnesses, and I thank you all for
being here today.
Mr. Keating, do you know how many small businesses are
organized as subchapter C corporations or passthrough
businesses?
Mr. KEATING. Actually, most businesses are passthrough
businesses, S corps, LLCs, sole proprietorships and so on, so
that is the bulk of--it is--over 90 percent, I believe, off the
top of my head, are non-C corps.
Mr. STAUBER. Okay. So close to 90 percent. So can you speak
to how an increase in the corporate tax rate and a limitation
on section 199A deduction will harm these businesses?
Mr. KEATING. Well, there are a couple things, real quick,
about the corporate tax. First off, there is this misnomer
going around that most C corps are large businesses. And,
again, when you break down the numbers, most C corps are small
businesses, small and midsize companies. So, when you are
talking about an increase in the corporate income tax rate, you
are talking about an increase directly on many small
businesses. And then, obviously, any kind of tax increase on C
corps are going to affect their universe, their network of
businesses as well, which obviously covers non-C corps that
serve those businesses, that work with those businesses and
work with their employees.
Mr. STAUBER. Well, thank you very much.
I think, Madam Chair, Ranking Member Luetkemeyer, I
appreciate you holding this hearing. And, you know, we have
always talked about small businesses are the engine of our
economy. They are the engine of main street. And we continue to
tax them and put devastating policies, not allowing them to
succeed. We need to protect small businesses and ensure they
are the engine of our economy.
And I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentlelady from California, Ms. Chu, is recognized for
5 minutes.
Ms. CHU. Ms. Diop, I was so inspired to hear your story,
and as a Representative of Los Angeles area congressional
district, I was especially inspired. You faced obstacles that
could have defeated so many people, having been rejected from
job interviews 53 times, but you used your creativity and
determination to use that $1,200 stimulus check that we sent
out to start your own business.
And I was thrilled to hear that, because of your success,
you hired 5 people and are planning to hire 10 more--5 more for
10 people total.
So, Ms. Diop, in April, I reintroduced my legislation, H.R.
2680, the PROGRESS Act, which would support the smallest of
businesses, those without any employees, by helping them expand
and incentivize third-party investment. This legislation will
create a refundable payroll tax for non-employer firms that
hire their first full-time employee and also an investment
credit to encourage third-party capital investment into non-
employer firms. Non-employer firms are much more likely to be
owned by women and female entrepreneurs on average and start
out with roughly half the capital as male entrepreneurs; hence,
the legislation.
So can you talk about policies to level the playing field
by having such incentives for first-time employees as well as
third-party investments could help entrepreneurs like you?
Ms. DIOP. Absolutely, and thank you so much for your
question, Representative Chu. I would definitely agree that
incentives to level the playing field, to use your words, and
assisting new business owners, as well as new women business
owners, can certainly be helpful because especially those of us
who are new entrepreneurs that are mothers, we have an entirely
different set of challenges to face when it comes to starting a
business. So any measures and incentives that could alleviate
some of those to, for example, in my case, give me access to--I
had the $1,200 but any other programs that provide grants or
simply just access to resources to further assist in starting a
business in that way is certainly helpful.
Ms. CHU. Okay. Thank you for that.
Mr. Fogaty, thank you for your testimony. I am glad that
you mentioned that many small businesses struggle to access
affordable loans for smaller amounts in the private market,
even some nonprofit lenders. In fact, you say that the access
to capital is a challenge. And, of course, also some nonprofit
lender options exist but that they are typically at a higher
interest rate and are less desirable than a bank loan.
So that is why I have been working for years to authorize
the Community Advantage Loan Program, which provides SBA backed
7(a) loans to this exact subset of small businesses, those who
cannot qualify for an affordable loan from a commercial bank or
traditional 7(a) lender but need financing that is under
$250,000. So I am so pleased that the current Build Back Better
framework does include $275 million in funding for the
Community Advantage Program.
So can you elaborate on this gap in the lending market for
smaller dollar loans and what that means for small business
borrowers? And can you discuss how SBA programs like Community
Advantage, which leverages a government subsidy to offer
favorable rates to borrowers, can play in filling the gap?
Mr. FOGATY. Sure. The SBA loan programs, all of them,
including the Community Advantage, are key to small business
growth, and I am all for them, and they should certainly be
supported. It is certainly good legislation although, as I did
say before, in Chicago, especially on the southwest side, we
have a number of ITIN holders who cannot access most of those
loan programs.
Every small business, every startup, when they are looking
for small loans, $20-, $30-, $40,000, it is really not worth
the bank's while, in my opinion, to make those loans happen. So
I would like to see some way of incentivizing the banks,
streamlining the reporting procedures, helping us as the
business advisors make these loans available to small
businesses because there is that gap from the small amount of
startup funding when you get going, and then, when you are
ready to expand, hire employees, you are not looking for a
million dollar loan. You are--many of my clients are looking
for $20-, $30,000, and there are just not a lot of choices out
there. Thank you for your question.
Ms. CHU. Thank you. I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentlelady from New York, Ms. Tenney,
for 5 minutes.
Ms. TENNEY. Thank you, Chair Velazquez and Ranking Member
Luetkemeyer, for holding this minute. I am a small business
owner in New York. Our business is celebrating its 75th year.
It is a very difficult landscape in New York, high taxes, a lot
of frustration obviously with the employment situation now, but
95 percent of the businesses and the people in my district
actually got a tax cut from the Tax Cuts and Jobs Act. Only the
wealthiest actually received a tax increase under the last
plan. It was a breather for us to finally get some relief to
reinvest in our communities, reinvest in our business from, you
know, the heavy tax burden that is put on us by New York State.
But my question and my concern is that 60-plus or more
percentage of these new jobs always come from the small
business community like ours.
We would love to expand and grow, and we know that venture
capital is really important. But one of the things that, in
being the heart of the industrial revolution started in my
district when the Erie Canal was started, is the loss of a lot
of these manufacturing jobs, a lot of jobs where--a lot of the
manufacturing sector where we have a lot of investment, but we
need long-term solutions, and we have long horizons that we
need to meet which we are going to stay in there for a longer
period of time.
So we also provide a lot of jobs for people who don't
necessarily have to be skilled initially, but we want to put
the training in. We take advantage of that if we can. And that
is why, you know, one of the initiatives I put through is the
American Innovation and Manufacturing Act, which would--and I
am grateful for the bipartisan sponsorship of this bill--which
would give innovation to small manufacturers and give them the
flexible capital that they need. So this is really--you know,
we think this is a first step.
But I wanted to ask, first, Mr. Fogaty, because I know this
is a huge issue. It is a huge issue for my company. We are
small. We only have 70 employees. But what is--how important is
it to support domestic manufacturing and that we need to
streamline the reporting regulations? You alluded to it in
investing in small business, but specifically dealing with, you
know, the ability to thrive in a State like New York where we
have such heavy regulation?
Mr. FOGATY. Yeah. No manufacturer likes regulation, and
they have been having a very, very tough time of it. I would
also--when I talked about streamlining, I think that the
manufacturers that I work with would like to see some
simplification, some streamlining of the procurement process.
The Systems Award Management system, SAM, which is the federal
government system for enrolling to get federal contracts, last
year, I had a couple of manufacturers pivot pretty quickly from
what they were doing to making PPE. And this is a time when the
masks were, you know, in great demand. And they were able to
pivot quickly, but they were not able to sell to the government
in an expedited way.
And some of the systems, as I said, the SAM system. I have
helped a couple of blind entrepreneurs navigate the SAM system,
and it is--you know, I don't want to be overly critical, but it
is certainly in need of an update.
Ms. TENNEY. We got some of that criticism as well, you
know. Good intentions, but in practice, it was hard for a lot
of our entrepreneurs to really access it.
Mr. FOGATY. Yeah. Absolutely. And, again, we really, really
need to--I am sorry.
Ms. TENNEY. Go ahead. No. Go ahead.
Mr. FOGATY. I was going to say we really need to support
domestic manufacturing, American manufacturing through things
like on-the-job training programs so that we can bring a job
seeker in and the manufacturer, the employer does not have to
look to somebody who already has these skills. There is an
incentive so they can train them.
Ms. TENNEY. Yeah. We have invested heavily in that with our
business as well. Thank you.
Mr. Keating, you said in your testimony that the recovery
from the pandemic slowed dramatically in the third quarter of
this year, fiscal year 2021, and that real GDP grew at a mere 2
percent in the third quarter. You said this was largely because
of the consumer pullback. Why do you think consumers lost
confidence in the recovery, and what steps can we do to restore
confidence? Really quickly because I only have 20 seconds left.
Mr. KEATING. I would suggest consumers--it was also
business investment pulled back. I think the signals again from
Washington were very troubling. In your State, I am one of the
people that just left. I moved to Florida from New York. I grew
up there. The tax and regulatory burden is a mess. That is what
you have to deal with to get things right in New York, and good
luck. But, yeah, those signals from Washington, I think, had a
real effect.
Listen. I said for the longest time, and I know I am
probably talking too much, but after we experienced the bounce-
back, my question has always been, what are we going to do then
on the policy front to make sure that we accelerate economic
growth going forward? And what we are seeing right now is not
the answer.
Ms. TENNEY. Thank you. I really appreciate that.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Now we recognize Mr. Evans from Pennsylvania for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
Ms. DeVane, it is great to have you here. And, in my
younger years before I became a Pennsylvania State legislator,
I worked as a job developer at the Urban League in
Philadelphia. I have seen tremendous work that your
organization does to advance economic opportunity for Black
Americans and for those in underserved communities.
Despite the toll the pandemic has taken on the economy
here, there has been some silver linings. Last year, Americans
filed paperwork to start 4.3 million new businesses. This is a
24-percent increase from 2019. This 24-percent surge in
entrepreneurship was largely concentrated in Black and Hispanic
communities with high median income.
Ms. DeVane, this is my question to you: What factors do you
think contribute to this increase in Black and Hispanic
ownership businesses?
Ms. DeVANE. Thank you very much for the question,
Representative Evans. And, of course, once an Urban Leaguer,
always an Urban Leaguer. It is great to see you.
I think a couple of things have contributed to that. One is
that many people were laid off from their jobs and needed,
quite frankly, to find employment and took to entrepreneurship
as an opportunity to gain some economic freedom and
independence.
I think a number of other entrepreneurs came about because
they wanted to start their passion projects. They turned their
side hustles into businesses because the environment was right
to do so. There were grants available from private companies.
There were government grants available. There were PPP loans
available for those who could get them. I think, for many
business owners, this was an opportune time to delve into the
workforce.
Mr. EVANS. Ms. DeVane, the National Urban League website
states the number one challenge facing 80 percent of small
business owners is lack of capital and cash flow. Has this
changed during the pandemic, and if so, how?
Ms. DeVANE. Yeah. We saw our business owners tremendously
affected by the pandemic. Most of them were already struggling
beforehand. We have talked about that a little bit. They didn't
have the back office, the fiscal systems, the operational
systems, the strategic management in place, and so, when the
pandemic hit, it was just exacerbated. And I think many of
these businesses struggled and shuttered their doors.
I think the ticket for many of these business owners is the
technical assistance provided. Capital is sorely needed, and we
have talked about that. But capital always has to be
undergirded by coaching, by training and development. You don't
know what you don't know, as Ellie found out with the tax
situation. So I think for us, the National Urban League, our
affiliate network through our entrepreneurship centers have
been providing the knowledge and the tools and the skills that
folks need to very develop those operational systems, put
fiscal management practices in place, and to help people to
strategize to grow their businesses and to avoid this type of
situation as they learn to pivot during crises.
Mr. EVANS. Ms. DeVane, many small businesses fail after
just a few years. Can you tell us what Congress can do to
ensure many of the businesses that started during the pandemic,
especially minority businesses, continue to grow and provide
jobs and opportunities in their communities?
Ms. DeVANE. Absolutely. I think that what those businesses
need--obviously, capital is always sorely needed, but in
addition to that, it is the technical assistance. I think that
this SBA community navigator program is a great example of what
government can do. This program will help to use trusted
advisors, such as the Urban League affiliates, to go out into
communities where business owners don't have access to these
tools, don't understand what is available to them through the
government, and we can go out and talk about the resources that
are available and drive people to the SBA and to other
organizations that can provide the skills that they need to
grow these businesses. We really need technical assistance. We
really need incubation programs that help people to develop and
scale and grow their businesses, and we need capital.
Mr. EVANS. I think I have a few more seconds left.
My home city of Philadelphia had a poverty rate of 24.5
percent in 2020 with two-thirds of those at poverty being Black
or Hispanic. How do we better reach Black and Hispanic
entrepreneurs in communities with lower median income?
Ms. DeVANE. We used trusted advisors like our Urban League
affiliates. We live and we work in those communities. We know
those communities. We provide wraparound services, not just
entrepreneurship, through our Urban League affiliates. And
those are the folks that know business owners in those
communities, those are the ones that are trusted by the
business owners, and those are the ones that need to be going
out like we are doing through our Urban League affiliates,
evangelizing, providing services, technical assistance, and
capital to those business owners. And I think that is the
ticket.
Mr. EVANS. Thank you.
I yield back the balance of my time, Madam Chair. Thank
you.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentlelady from California, Ms. Young Kim, Ranking
Member of the Subcommittee on Innovation, Entrepreneurship, and
Workforce Development, is recognized for 5 minutes.
Ms. YOUNG KIM. Thank you, Chairwoman.
I would like to go right into questioning Mr. Keating.
Can you elaborate on how continual lackluster job growth,
like we saw this past September, this incentivizes individuals
from establishing their own small business?
Mr. KEATING. I am sorry. The lack of job growth; is that
what you are saying?
Ms. YOUNG KIM. Yeah. The lack of job growth.
Mr. KEATING. Yeah. I think what we have heard here is
absolutely correct. When you look at entrepreneurship, there
are different types of entrepreneurs, right. Some dive into the
waters; others get pushed. And what we saw during the pandemic
is, I think, a combination of people being pushed, right. I put
in my testimony, Walt Disney once said, when you can't get a
job, you start your own business, right, and that is what we
have seen here.
But, also, I think the fact that people have experienced
more independent work or independence, and I think that has
them thinking about being their own--you know, owning their own
business, looking towards entrepreneurship. I think, in a very
tough time, those are some of the positives that hopefully are
going to come out of this.
Ms. YOUNG KIM. If we are not hitting the mark with expected
growth on GDP, how does that affect business confidence in the
medium to long term?
Mr. KEATING. Yeah. Well, there is uncertainty now, right,
and we saw the bounce-back, the snap-back, and we were pleased
about that, even with all the problems, supply chains and labor
shortages, and all of a sudden, we see GDP kind of put the
brakes on at 2 percent here.
Now, there are a whole host of issues, I think, that are in
the mix, including the Delta variant and so on and so on, but
this just raises more questions. That is not good for business.
It is going to raise more questions with investors, right,
because we saw a part of the story on GDP was the slowdown of
business investment. Business investment is critical now, and
it is critical for future growth. So that just adds more
uncertainty into the equation, and that has me concerned.
Ms. YOUNG KIM. Yeah. You know, I represent southern
California, and my home State of California has one of the
highest unemployment rates in the country, and unemployment
claims keep raising. I mean, it keeps going up, not decreasing.
It is a concern for us from the big State of California.
But, Mr. Keating, in your written testimony, you noted a
MetLife U.S. Chamber survey indicating 44 percent of small
businesses are finding it harder to fill the open positions.
Can you tell us if you have found a correlation between small
businesses not having available workers and the decline in the
labor force? Why do you think we are seeing a decrease in labor
force participation?
Mr. KEATING. Yeah. That is--you know, when you look at that
unemployment number, I always tell people, go deeper when you
look at the unemployment rate because right now, we saw an
improvement in the unemployment rate. Like, hey, wow, that is
great, right, but part of that improvement was people leaving
the labor force again.
Now, with the pandemic, everybody should be coming back,
right, so this is--again, it is an issue that has been around
really since the 2008 recession. Why have people not come back
to the labor force to the degree that they should? Some people
say it is age, but when you zero in on the work, you know,
working age, 25 to 54, we are still not back to where we should
be, so that has me very concerned.
I am hoping that these business application numbers maybe
point to people becoming entrepreneurs. That would be a net
positive. But I am not quite sure what the answer is. There are
a whole host of things, I think, culturally, economically that
are in the mix here. And, again, that is something that I think
we need to wrestle with and really delve into.
Ms. YOUNG KIM. Something we need to continue to think about
and worry about, you know. One more question to you, Mr.
Keating. Some parts of California are experiencing some of the
highest average gas prices ever. In some parts where I am in
southern California, L.A., Orange County, they have hit a 13-
year high. Some place I saw close to $6 per gallon. Can you
speak of how supply chain bottlenecks and even the threat of
higher taxes can impact entrepreneurial behavior?
Mr. KEATING. Yeah, all those things. I mean, when you are
talking about gas prices, right, that is fundamental to
everybody, right, including small business owners. So, you
know, California does have to deal with its own regulatory
issues and tax issues. There is a reason why, even when gas
prices are low, you guys still tend to be among the highest. So
I think part of it is a California issue.
Ms. YOUNG KIM. Yeah----
Mr. KEATING. But then, obviously, nationally, we are all
dealing with the bottlenecks and the shortcomings and so on.
So, again, I think it is a question of, yes, the private sector
has got to work through this, but we have got to make sure that
government allows private and doesn't get in the way of doing
that.
Ms. YOUNG KIM. Thank you very, very much.
I am happy to yield back the balance of my time.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Minnesota, Mr.
Phillips, Chairman of the Subcommittee on Oversight,
Investigation, and Regulations.
Mr. PHILLIPS. Thank you, Madam Chair.
Greetings, colleagues, and great gratitude to our witnesses
for being with us today.
We all know the pandemic is wreaked havoc on our small
business ecosystem, both in the U.S. and around the world. The
recent surge in entrepreneurial activity, however, is really a
welcome silver lining, I think we would all agree. They
represent seeds of optimism, if you will. Now, we, Democrats
and Republicans on this committee, have to do everything we can
to water those seeds and ensure new businesses have access to
the resources and mentorship and assistance necessary for them
to keep their doors open and generate economic success.
And, you know, I think it is fair to say that all of us on
this committee want to see Americans become self-sufficient.
But too many people who have dreams, entrepreneurial dreams and
ideas, still can't access capital, mentorship, counsel, and
assistance. I hope we can unite around this.
And my first question is to you, Ms. DeVane. And I think it
is fair to say that human beings tend to seek out others who
share similarities. It is part of the human condition. It is
also a phenomenon that, in my estimation, can adversely affect
already underserved communities. A lot of the credited
investors are a disproportionate number, of course, in America
are older, White, and male, frankly, like me, and they tend to
invest in entrepreneurs who share similar backgrounds. And you
have noted in your testimony that this contributes to the very
disparities we are talking about between White and minority-
owned business owners and their abilities to access capital and
counsel. So if you might just detail for us policies that you
think can directly address that issue and help underserved
communities with entrepreneurial dreams and ideas gain access
to credit and other federal resources.
Ms. DeVANE. Certainly. Thank you for the question,
Representative Phillips. I think that one of the things that
needs to be addressed--and we have done this at the National
Urban League. When the PPP program first came out and a lot of
the Black-owned and other minority-owned businesses didn't have
access, we worked with the government to make sure that
minority depository institutions and CDFI, community-based and
community mission-driven institutions played a role and had
access to those programs so that they could provide those
businesses with capital. Those are businesses that operate in
underserved communities. They are trusted by those communities.
Having support and the government supporting those types of
financial institutions is certainly a ticket.
Also, ensuring that SBA lenders, many who our business
owners did not have relationships with, have access to and are
incentivized to work with those small businesses and also to
certainly provide small dollar loans with low interest rates
that are accessible and reasonable for small businesses is
something that the National Urban League is very interested in
making sure that our business owners have access to.
Mr. PHILLIPS. Great.
If I could go a little further upstream, my friend and
colleague Representative Van Duyne from Texas and I were
speaking the other day about business day. I remember business
day in my school, elementary school, where we learned to start
a little organization, whether it is selling lemonade or a
service or printing T-shirts, whatever you have. What do you
think of that notion of trying to establish entrepreneurial
education as part of the public curricula around the country so
we can teach kids who don't have entrepreneurial models in
their households or communities often, at least the
underpinnings of business and try to encourage a more self-
sufficient entrepreneurial generation? What do you think of
that notion?
Ms. DeVANE. That is a great question, and we are huge
supporters of that notion. In fact, we--you know, I live in New
Rochelle, a little bit upstate of New York City, and our high
school has an entrepreneurship program. And I am starting to
see many of those, and we are fully supportive of those types
of programs.
It is never too early for a child to have an option not to
go into the workforce but to be financially independent through
owning their own business. And our Urban League affiliates are
very successful, many of them, with youth entrepreneurship
programs down in the elementary and the high school level.
As a matter of fact, our Los Angeles Urban League recently
over the summer held a small business camp for youth
entrepreneurs, and one of our entrepreneurs was extremely
successful, just got $10,000 through another organization
pitching her business. And so, we are very much in support of
youth entrepreneurship. It is never too early.
Mr. PHILLIPS. Great. Since I only have 15 seconds left, if
the three other witnesses would just raise your hand if you
like that idea of trying to inspire business days and
entrepreneurship education. Good. I like that. We don't see too
much unanimity these days. Thank you all.
I yield back my time and am grateful to all of you for
being with us.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentlelady from Texas, Ms. Van Duyne, Ranking Member of
the Subcommittee on Oversight, Investigations, and Regulations
is now recognized.
Ms. VAN DUYNE. Thank you very much, Ms. Chairwoman, and I
appreciate Congressman or Chairman Phillips, your shoutout.
Yeah. We have--it is amazing when you talk to each other how
much you actually do have in common. And I appreciate your last
question and everybody agreeing on it. When you actually try to
find common ground, you can find it. So I appreciate that very
much and all of you being with us today.
Over the past 2 years, small businesses have struggled to
survive in this new economy, as my colleagues on the other side
have termed it. Now, as we look around, the environment our
small businesses and entrepreneurs are living in is dismal.
Every economic report we see falls short. GDP growth has slowed
to 2 percent. If you take into account what folks had, it is
actually zero percent that we have seen. Inflation has hit
record levels, raising prices for all Americans, and labor is
in short supply.
At a time when small businesses need to focus on keeping
their shelves stocked, they must begin planning for the higher
taxes and increased regulations that come within the two
historic new spending bills that some progressive Democrats are
rushing to pass.
If we want to retain our uniquely American entrepreneurial
spirit, the government shouldn't be paying people to stay more
at home and to work and trying to regulate American businesses
out of existence. Instead, we should be pushing for lower taxes
and lower barriers to entry for entrepreneurs.
Mr. Keating, I really appreciate your comments here today.
A recent World Economic Forum report pointed out that supply
chain barriers are hard to overcome for small businesses due to
the significant capital investments needed. You know, we have
seen Target, Walmart, others are able to figure it out. They
have got other avenues that small businesses simply don't. So,
in your view, how do regulations impact small business supply
chains and their ability to adjust compared with larger firms?
Mr. KEATING. Well, by definition, greater regulation is
going to make you less innovative, less--there is less agility
there to respond as needed, so that is a big part of the supply
chain challenges.
Now, on the positive side, to go positive for a moment, one
of the things about small businesses is that they are more
agile, right, so they can work to find ways to perhaps meet,
you know, the needs of their customers where bigger businesses
might be a little slower. I am not denying your point. Your
point is spot on in terms of the Walmarts and Amazons and so
on, but the great thing about being a small business owner and
entrepreneur is that you have that ability to pivot, and we
have seen that in this pandemic.
So the challenges are there. More regulation does not help.
It hinders it. But being an entrepreneur in and of itself
allows you to kind of do some things that a larger business
can't.
Ms. VAN DUYNE. We just left--it is ironic because I just
left. I am on the Transportation and Infrastructure committee
as well, and we just had a focus on supply chain issues. We had
folks there with trucking, with shipping logistics, and just
talking about some of the barriers that government has actually
put in their way of being able to be more productive, more
efficient, and it is actually hurting the supply chain.
One of the things that they discussed was the vaccine
mandates. And, obviously, we are in a different moment
laborwise. So we spoke with businesses of all sizes, and a
common concern is the upcoming vaccine mandate that is being
imposed by the Biden administration. How do you think this
mandate will affect small businesses?
Mr. KEATING. Well, that is the question, isn't it? And that
is part of the problem is that we don't know. You know, our
organization is--we say we are pro-vaccine, antimandate.
Businesses are pretty good at figuring out their own situation
and maybe how they might have to deal with certain employees in
a certain way, right. When government steps in and does the
mandate thing, that doesn't--you know, you don't have that
ability to now deal with your particular situation and be able
to deal with your particular employees. The flexibility is
needed, I think, for small business owners in a big way.
Ms. VAN DUYNE. I mean, the concern was--and I think you
know our Transportation Secretary, Pete Buttigieg, was very
callous in his response. The items in question are not simply
Christmas gifts or toys. I mean, we are talking about liquid
oxygen. We are talking about seeds and fertilizer to be able to
put food into the ground for crops. We are talking----
Mr. KEATING. Pharmaceuticals. I mean----
Ms. VAN DUYNE. Pharmaceuticals, you know, things to be able
to keep people's homes warm that don't live on the main grid.
Can you explain to me some of these logistics concerns are
moving forward, and if you have, in the next 18 seconds, any
kind of federal regulations that you think are impeding our
progress?
Mr. KEATING. Oh, my goodness. Off the top of my head, I
can't give you an exact regulation, but I think the key point
that I would like to make is all of those industries you
mentioned and every single other one are overwhelmingly
populated by small businesses. So it is very important for
lawmakers to understand that, whether you are talking about
trucking, pharmaceuticals, all the way down the line, every one
of those is about small businesses. The numbers are there. I
mean, I can provide more data if you want, or you can go to
our----
Chairwoman VELAZQUEZ. Time has expired.
Mr. KEATING. Sorry.
Chairwoman VELAZQUEZ. The gentlelady from Pennsylvania, Ms.
Houlahan, is recognized for 5 minutes.
Ms. HOULAHAN. Thank you, Madam Chair.
And thank you very much to all of you all for coming and
joining us today.
My questions are going to be focused on ESG or
environmental, social, and governance ideas, which I think are
something that has gained a lot of traction over the past 15 or
so years and across the nation. And, especially within my
Commonwealth of Pennsylvania, business incubators have been
serving as an important part to help startups and individual
entrepreneurs scale their businesses, and they provide a range
of services, as we have talked about, from legal advice to
venture capital funding.
But studies have shown and the pandemic has borne out that
companies that have a strong environmental and social
governance aspect or criteria to them have outperformed
companies that did not during this very critical time. And, in
fact, this initiative was started on the heels of 2007 and
2008's financial meltdown.
And so, as the cofounder, along with Representative
Phillips, of the Stakeholder Capitalism Caucus and as an
entrepreneur myself who has built a lot of CSR ESG companies, I
really acutely and personally understand the importance of ESG
as a model for investors to evaluate companies, for employees
to decide which ones to work for, for communities to embrace
these kinds of companies, for all of the different stakeholders
who are involved in these small business enterprises to be able
to understand what a good company looks like.
So, starting with Mr. Keating, if I could, could I ask you
to speak to any efforts that the incubator is acting on to
encourage this kind of model for small businesses? And, if it
is, can you discuss why this model is important during the
midst of a pandemic or, frankly, at any point in time? And if
the incubator does not encourage ESG criteria, can you explain
why not?
Mr. KEATING. I am not an expert in this area at all. The
only thing I will say generally, as an economist, that I think
it is great that we have all sorts of different business models
out there. And, ultimately, consumer sovereignty, consumers in
the end decide what works and what doesn't in the marketplace,
and we will see that with these types of companies and other
more traditional or innovative business models.
Ms. HOULAHAN. I think it is beyond the consumer. I think it
is also investors. I think it is also employees. I think it is
kind of the entire ecosystem, the entire stakeholder ecosystem
that makes the determination. And, as I mentioned, this kind of
a company has really--I hesitate to say flourished because I
don't think many of us have flourished during this difficult
time, but I think they have proved more resilient than any
other kind of corporation or structure.
So I would like to throw that open to anybody else on the
panel. Ms. Diop, perhaps if you have any input in that, whether
or not you are aware of these kinds of ideas and whether or not
you are embracing of them.
Ms. DIOP. Thank you so much for your question, Ms.
Houlahan. Certainly, it is not my area of expertise, but I am
from Los Angeles, California, and environmental measures are
very important to us out there and me personally. So I
definitely think that access to more information about these
types of programs so that small business owners or aspiring
business owners could implement them into their business model
would certainly be helpful. It would certainly be something
that could even increase the awareness of these types of
programs so that more people could participate.
Ms. HOULAHAN. Thank you.
Does anyone else on the panel have any input into this
question before I move on?
Mr. FOGATY. Yeah. This is Andrew. I would just like to say
I agree with the points that have been made. Most of our
entrepreneurs, especially the younger ones, are very sensitive
to climate change and the challenges that they create. One of
my client companies, Omni Ecosystems, was started by Molly
Meyer. She has developed a low weight soil. This is a little
bit out of my league, the science stuff, but it is a low weight
soil so that now rooftop gardens or urban farms are much more
viable options because they don't--it is lightweight soil, and
it retains moisture. So, yeah, absolutely climate change and
being aware of the ecological impact is very important among--
--
Ms. HOULAHAN. Thank you, sir. And, as a point of
clarification, although the E, obviously, in the ESG is for
environmental, the S and the G are for social and governance as
well, and they have everything as well to do with how a company
is structured, whether or not all employees or some employees
are included in things like equity decisions or whether the
board is inclusive, those kinds of things, as well as making
sure that we are thinking about the whole impact that a
business has and that there aren't externalities that are
passed on to other organizations.
And, with that, I will yield back my time. I really
appreciate you guys and the opportunity to speak to you.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from New York, Mr.
Garbarino, for 5 minutes.
Mr. GARBARINO. Thank you, Madam Chair, and to the Ranking
Member for hosting this hearing today, and thank you to the
witnesses for being here.
Mr. Fogaty, I have a question for you. You assist small
businesses, business owners with business planning, market
research, and financing. In the current economic turmoil of
labor shortages, price spikes, supply chain disruptions, and
inflation, what advice are you giving them?
Mr. FOGATY. Well, it very much depends on what type of
business that I am dealing with. Over the past 18 months or so,
we have been very much focused on keeping--on having businesses
survive, so things like EIDL and the Paycheck Protection
Program and that type of thing. Startup funding is--and we are
kind of repeating ourselves here, but startup funding is very
much a challenge. I am sure the other guests on the panel would
agree, and small business funding to grow, small loans below
$50,000, are also very difficult to come by.
So, as far as what I would--I would say that, for Congress,
I would like to find some way, I would hope you would find some
way of incentivizing banks to lend more to startups and in
smaller amounts, and that is what I am really hoping. But,
yeah, for the past 18 months, it has been a lot of work with
government programs to make sure that the companies survive.
Mr. GARBARINO. Okay. And then I imagine anybody dealing
with getting companies to survive, a lot of businesses
prepandemic did not have an online presence, and it was, I
guess, for a lot of them to survive, they had to convert to at
least having some sort of online presence.
I am the Ranking Member on the Homeland Security
Cybersecurity Committee as well, you know, and we have seen,
especially in the past couple years, a lot of ransomware
attacks, almost 50 percent of them, are targeted at small
businesses in a small amount, but, you know, it is a small
amount in the grand scheme of things but not to a small
business, who has to pay a couple thousand dollars for a
ransom.
What are you--or any of the other witnesses on the panel
today--what are you saying to clients or prospective clients or
small business owners on how to deal with this issue because a
lot of people don't understand cybersecurity? It is not at the
top of their list when they are starting a business.
Mr. FOGATY. The Illinois Small Business Development
Centers, of which we are a part, we do host cybersecurity
experts who have the--where they will come and speak to the
small businesses. And, actually, the gallery incubator in
Evanston where I am a volunteer mentor, they are--one of the
founders is very savvy in the cybersecurity realm. So, yeah, I
can't agree with you more. Cybersecurity is key. And certainly
an online presence is absolutely vital to any small business.
Mr. GARBARINO. And anybody else can jump in, but I would
think most new people who start a business now realize they
have to have an online business, but I guess some of the small
businesses that have been around for a while, it is something
they never had to do before. I don't know if Mr. Keating or Ms.
DeVane or Ms. Diop want to join in, you know. What are you
seeing with current small businesses, and how are they doing
making this change?
Ms. DeVANE. Sure. I would definitely add that you are a
hundred percent on point. One of the things that we saw with
our small businesses, many of our businesses are more mature in
age and more traditional and really aren't savvy or were not
savvy with social media and with technological changes. So, it
was a real eye opener for them, and we really had to help them
transition into the digital world. Some of that was by
necessity because everything had to be Zoom, and nothing was in
person, and everybody has phones.
But the thing is that we really had to take the type to
train them with those tools, branding, marketing your business
in a world that is virtual, and social media was very
important. And the other thing is through the CARES Act funding
that we had, we ran about seven different webinars and
workshops for businesses to help them with COVID, and one of
those was on cybersecurity. We still provide access to that
through all of our affiliates and online through the National
Urban League's website, so folks can go in any time and look at
that information.
Mr. KEATING. If I could add, what is fascinating is some of
the survey results that we have had in terms of the impact that
this technology, social media, has had on starting up a
business. You know, one of the results, we saw that 80 percent
of people said that they were able to start up their business
because of the affordable nature of online advertising. So it
is not just--obviously, it is helping existing businesses, but
it is also boosting startups, which is a very exciting aspect
of this.
Mr. GARBARINO. I appreciate that. And I believe I am out of
time, so I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Florida, Ms. Salazar,
for 5 minutes.
Ms. SALAZAR. Thank you, Chairman Velazquez and Ranking
Member Luetkemeyer, for holding this important hearing.
This comes at a pivotal time for countless small business
owners and their families nationwide. And I wanted to thank all
the guests that have been here and exposing their testimony,
specifically, Mr. Raymond Keating. You were mentioning how
constructive pro-immigration policy agenda would be good for
the economy, and I completely agree, so I wanted to ask you,
what are the major changes to the immigration system that you
think we should be implementing in this country directly to
improve the small business community space?
Mr. KEATING. Well, I think that, number one, it is
important to understand that foreign-born individuals have a
much higher rate of entrepreneurship than native born. And that
shouldn't surprise us because, you know, it is pretty risky to
move from one country to another.
Having said that, I think some sort of entrepreneurial
visa, right, is critical. Why aren't we offering this and
attracting entrepreneurs from around the world to the United
States? There is no downside. I can't figure out any kind of
downside, so I think that is step one.
And then, obviously, step two is just getting more--our
immigration policy more in tune with labor needs, you know.
Right now, we are coming out of the pandemic, but not too far
down the road, we are going to have additional problems in
terms of working age population and so on, and at the other
lower end of skills and the upper end of skills. So I think
immigration can help us with that issue in a big way, but the
entrepreneurship aspect is critical.
Ms. SALAZAR. And, when you are talking about labor, you are
talking about basically merit-based visas. What would be the
ideal scenario, according to you?
Mr. KEATING. Yeah. Well, I think that merit-based, the idea
that this is what I want to do, I can do--what I can contribute
to the United States as--you know, whether it is high-tech
visas or, again, at the lower end of the skill level. So I
think it is--we just have to be more cognizant of the realities
in our economy. I mean, listen. I am an economist, so I like
to--I would love our immigration policy to be focused more on
economics than some of the politics that we hear being tossed
about. And I think, when you look at the economics of
immigration, listen. Every poll of economists always--they
always come out lopsided that immigration is a net economic
plus for our country. And it can be in all sorts of ways,
whether it is lower skilled workers, as I said, high skilled or
entrepreneurs.
Ms. SALAZAR. So why do you think that we have not been able
to pay attention to what the marketplace is saying? You say
that you are an economist. How do you interpret?
Mr. KEATING. Well, I think--again--yeah. I think the--I
think it is politics overruling economics, unfortunately. I
think--listen. We also--we have history. We are an
entrepreneurial nation. We are a pro-immigration nation. We are
a nation of immigrants; it is true. But we have also had our
battles along the way where we have not been, at various times,
you know, exactly friendly towards immigrants. So I think, to
the extent that we can talk about how immigrant workers, for
example, new immigrants coming to this country are willing to
work, they are complementary to the people that are already
here.
So, for the most part, overwhelmingly--I mean, it is not
even close--they are not taking jobs from somebody else. They
are adding to the economy. And that is the part, I think, that
we economists fall down on, right. We have to tell people that
additional producers, additional consumers, and additional
entrepreneurs all lead to economic growth. It is not a case
that the pie is only so big, and we are going to divvy it up.
So I think it is talking more about growth and how immigration
can help.
Ms. SALAZAR. And, finally, in the last minute that I have,
I wanted to go back to the line that you said, that some people
believe that new immigrants or newcomers are going to be taking
jobs away from Americans. Why isn't that true?
Mr. KEATING. Because, as I said, they--what you see in the
research and, you know, in terms of economics straightforward
is that they come in and largely are doing work that other
people aren't doing. Either they don't want to do it, or we
don't have enough people doing it. So, again, in filling those
needs, those vacancies, that is how we say they are
complementary workers. So, therefore, they are helping other
people to be more productive. So it is a good news thing for
everybody. But sometimes you would never understand--well,
oftentimes, you don't understand that, listening to the
politics of it.
So, again, I think if we can get back to understanding the
role that immigrants have in the workforce and their role in
entrepreneurship, I think we can make some great headway in
getting to a more constructive immigration policy.
Ms. SALAZAR. So I like this complementary workers.
Mr. KEATING. Yes. That is what they do, yeah.
Ms. SALAZAR. Very good. Well, sir, thank you for explaining
that to us. So you are telling me that it is up to us, the
public servants, the people that have been elected, the
politicians, to learn and to explain to the rest of the
American population that the immigrants are coming to give, not
to take away?
Mr. KEATING. Absolutely. And, to the extent that we have
political leaders that can do that, that is a huge plus to talk
about, again, being a welcoming society and talking about how
this is pro-growth, and it is good for everybody.
Ms. SALAZAR. Thank you.
I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Thank you so very much to all the witnesses.
Mr. Keating, I didn't have time to ask you a question, but
I really appreciate your answers to Ms. Salazar regarding
immigration. I think this is a part of a discussion that needs
to happen among Members of Congress and that we approach this
issue with the honesty that it requires.
With that, I want to thank all of the witnesses for being
here today. Your testimony is proof that, even in the darkest
of times, the spirit of America's entrepreneurs shines bright.
The post-pandemic economy presents many opportunities and
challenges for small business owners. As the voice of small
businesses in Washington, we must work as a committee to
support these new business owners and help their firms
flourish. These new businesses will be critical as we work
towards full economic recovery and future growth. I look
forward to working with Committee Members to ensure that small
businesses have the resources they need to navigate this
changing economy.
I ask unanimous consent that the article and report by the
Kauffman Foundation entitled ``America's New Business Plan'' is
submitted for the record.
With that, I will 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 12:06 p.m., the committee was adjourned.]
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