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

                      BUILDING OPPORTUNITY: ADDRESSING THE
                      FINANCIAL BARRIERS TO MINORITY- AND
                      WOMEN-OWNED BUSINESSES' INVOLVEMENT
                           IN INFRASTRUCTURE PROJECTS

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

                                VIRTUAL HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON DIVERSITY

                                 AND INCLUSION

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                FEBRUARY 3, 2022

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 117-67

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    47-105 PDF                 WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                     MAXINE WATERS, California, Chairwoman

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

                       Charla Ouertatani, Staff Director
                    Subcommittee on Diversity and Inclusion

                         JOYCE BEATTY, Ohio, Chairwoman

    AYANNA PRESSLEY, Massachusetts       ANN WAGNER, Missouri, Ranking
    STEPHEN F. LYNCH, Massachusetts          Member
    RASHIDA TLAIB, Michigan              FRANK D. LUCAS, Oklahoma
    MADELEINE DEAN, Pennsylvania         TED BUDD, North Carolina
    SYLVIA GARCIA, Texas, Vice Chair     ANTHONY GONZALEZ, Ohio, Vice
    NIKEMA WILLIAMS, Georgia                 Ranking Member
    JAKE AUCHINCLOSS, Massachusetts      JOHN ROSE, Tennessee
                                         LANCE GOODEN, Texas
                                         WILLIAM TIMMONS, South Carolina

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        February 3, 2022.............................................     1
    Appendix:
        February 3, 2022.............................................    33

                                   WITNESSES
                           Thursday, February 3, 2022

    Ali, Farad, President and CEO, Asociar LLC.......................     4
    Black, Tawanna, Founder and CEO, Center for Economic Inclusion...     6
    Gaskin, Philip, Vice President, Entrepreneurship, Ewing Marion
      Kauffman Foundation............................................     7
    McGuire, Ying, President and CEO, National Minority Supplier
      Development Council (NMSDC)....................................     9
    Quick, Jeanette, Head, Compliance and Public Policy, Gusto.......    10

                                    APPENDIX

    Prepared statements:
        Ali, Farad...................................................    34
        Black, Tawanna...............................................    38
        Gaskin, Philip...............................................    40
        McGuire, Ying................................................    55
        Quick, Jeanette..............................................    58

                  Additional Material Submitted for the Record

    Beatty, Hon. Joyce:
        Written statement of the Credit Union National Association...    64
        Written statement of the Innovative Lending Platform
          Association................................................    66
        Written statement of Women Impacting Public Policy...........    68
    Garcia, Hon. Sylvia:
        2020 Research Report--State of Latino Entrepreneurship--by
          the Stanford Graduate School of Business in Collaboration
          with the Latino Business Action Network....................    71
    Williams, Hon. Nikema:
        Written responses to questions for the record submitted to
          Farad Ali..................................................   105

                        BUILDING OPPORTUNITY: ADDRESSING
                           THE FINANCIAL BARRIERS TO
                           MINORITY- AND WOMEN-OWNED
                            BUSINESSES' INVOLVEMENT
                           IN INFRASTRUCTURE PROJECTS

                                  ----------

                           Thursday, February 3, 2022

                 U.S. House of Representatives,
                              Subcommittee on Diversity
                                         and Inclusion,
                               Committee on Financial Services,
                                                         Washington, DC
        The subcommittee met, pursuant to notice, at 10 a.m., via
    Webex, Hon. Joyce Beatty [chairwoman of the subcommittee]
    presiding.
        Members present: Representatives Beatty, Pressley, Lynch,
    Tlaib, Dean, Garcia of Texas, Auchincloss; Wagner, Budd,
    Gonzalez of Ohio, Rose, and Timmons.
        Ex officio present: Representative Waters.
        Chairwoman Beatty. The Subcommittee on Diversity and
    Inclusion will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the subcommittee at any time. Also, without
    objection, members of the full Financial Services Committee who
    are not members of this subcommittee are authorized to
    participate in today's hearing.
        Members are reminded to keep their video function on at all
    times, even when they are not being recognized by the Chair.
    Members are also reminded that they are responsible for muting
    and unmuting themselves, and to mute themselves after they
    finish speaking. The staff has been instructed to only mute
    Members and witnesses as appropriate, when not being recognized
    by the Chair, to avoid inadvertent background noise.
        Members are reminded that all House rules relating to order
    and decorum apply to this remote hearing.
        Today's hearing is entitled, ``Building Opportunity:
    Addressing the Financial Barriers to Minority- and Women-Owned
    Businesses' Involvement in Infrastructure Projects.''
        I now recognize myself for 4 minutes to give an opening
    statement.
        Today's hearing will highlight the key challenges and
    barriers faced by minority- and women-owned businesses of all
    sizes, including obtaining the capital and opportunity
    necessary to participate in large-scale Federal infrastructure
    projects, and what is needed to ensure that the mistakes of the
    past are not repeated and do not become the missed
    opportunities of the future.
        After several years of celebrating fruitless Infrastructure
    Weeks during the previous Administration, I am now proud to say
    that the Biden Administration and Congress, led by Democrats in
    the House and Senate, passed historic investments in our
    nation's infrastructure last November. The bipartisan
    Infrastructure Investment and Jobs Act includes an additional
    $550 billion to rebuild our roads, bridges, and ports, and to
    ensure clean drinking water, expand access to high-speed
    Internet, improve our public transit systems, and address the
    climate crisis. And, yes, that is a lot that we have done.
        According to the Economic Policy Institute, this law will
    create roughly--I want you to hear this--772,000 jobs per year,
    in addition to strengthening our supply chains, improving
    productivity, and reducing long-term inflation. We do say long-
    term inflation. That is why infrastructure spending has
    typically been a bipartisan issue, with widespread support from
    both sides of the aisle.
        But for whatever reasons, that was not necessarily the case
    this time around. We are already witnessing announcements of
    infrastructure projects across this country as a direct result
    of passing this bill, even announcements by Members of Congress
    claiming credit for investments that they voted against.
        The benefit of this historic law will be felt for
    generations to come, and numerous studies have shown that
    infrastructure yields up to 17 percent return on investment, on
    average, which is why we need to ensure that all Americans have
    the opportunity to share in this economic activity.
        While Federal infrastructure projects of the past have
    increased economic growth, historically, they have come to cost
    Black and Brown communities their wealth. Fortunately, under
    the leadership of Chairwoman Waters, the Financial Services
    Committee Democrats worked to include several provisions in the
    infrastructure bill and the American Rescue Plan that will
    undeniably assist minority- and women-owned businesses' access
    to the capital necessary to complete these projects, including
    investments in State Small Business Credit Initiatives (SSBCIs)
    and the Minority Business Development Agency (MBDA), amongst
    others.
        Even with these investments, the challenges associated with
    minority- and women-owned businesses accessing the capital
    required to be in on these infrastructure projects will not be
    solved overnight. Thus, the reason for this hearing, so we can
    hear from our experts.
        Lastly, according to the Small Business Administration,
    just 1.7 percent of Federal contracts went to Black-owned small
    businesses, and 1.8 percent to Hispanic-owned small businesses.
    Historic lack of access to capital, delayed payments from
    contractors, and the lack of credit and insurance are all
    contributing factors to these dismal numbers.
        Thus, thank you, Chairwoman Waters, for your leadership,
    and for also establishing the first-ever Diversity and
    Inclusion Subcommittee.
        With that said, I am excited to hear from our experts in
    this hearing.
        The Chair now recognizes the ranking member of the
    subcommittee, my friend from Missouri, Congresswoman Ann
    Wagner, for 5 minutes.
        Mrs. Wagner. Thank you, Madam Chairwoman, for holding this
    hearing today, and I want to welcome and thank our witnesses
    for testifying about the obstacles that women- and minority-
    owned businesses face when it comes to accessing capital and
    financial services.
        Small businesses make up 99 percent of all employers in the
    United States, employing some 61 million Americans, or almost
    half of our workforce. As our economy continues to recover from
    the pandemic, it is critical that Congress focus on policies
    that enable all businesses, regardless of race or gender, to
    open, grow, and thrive.
        While not every business goes public, all businesses need
    access to capital, and private market exemptions provide a
    useful option for raising capital for many companies.
        Fintech is also proving to be a new avenue to accessing
    capital that can be more efficient and less costly. This
    includes access to microfinance, which can be especially
    beneficial to small business owners and entrepreneurs who might
    have difficulty obtaining the funding from more traditional
    financial institutions to start or scale up their business.
    Fintechs have filled this gap, and according to Opportunity
    International, a nonprofit that offers microloans, microfinance
    offers the chance to, ``focus more on marginalized people,
    people who are left behind, and we ensure that the excluded
    have access to responsible financial services.''
        Congress should continue to focus on finding ways to reduce
    the regulatory burdens to starting and growing a business,
    highlighting innovative solutions like those offered by fintech
    and microfinance, and encouraging startups that are working
    toward understanding the needs of underserved communities.
        While this hearing is about access to capital and financial
    services, this subcommittee must also focus on permanent
    regulatory reforms to lift and strengthen minority- and women-
    owned businesses. These businesses benefit when we cut
    unnecessary costs and expand opportunities for investors to put
    their money to work.
        Thank you, Madam Chairwoman, and I yield back the remainder
    of my time.
        Chairwoman Beatty. Thank you.
        The Chair now recognizes the Chair of the full Financial
    Services Committee, the gentlewoman from California, Chairwoman
    Maxine Waters, for 1 minute.
        Chairwoman Waters. Thank you so very much, Chairwoman
    Beatty. I am so pleased that you are holding this hearing. It
    is so timely, it is so important, and I thank you for your
    leadership.
        President Biden's $1.2-trillion Infrastructure Investment
    and Jobs Act not only will repair our nation's crumbling roads
    and bridges but also presents an opportunity for minority- and
    women-owned small businesses. As we celebrate Black History
    Month, we must keep in mind that diversity and inclusion
    require intentionality. We saw with the initial rollout of the
    Paycheck Protection Program (PPP) that the big banks provided
    concierge access to their larger, majority-owned clients
    instead of providing fair access to all small businesses, and
    it required the members of this committee to end that practice.
        I am interested in hearing from our witnesses on what needs
    to be done to ensure the Federal Government and the financial
    sector make available the resources necessary for minority- and
    women-owned firms to access the many Federal contracts in the
    infrastructure legislation.
        I thank the witnesses for their testimony, and I yield
    back.
        Chairwoman Beatty. Thank you so much, Madam Chairwoman.
        Today, we welcome the testimony of our distinguished
    witnesses: Mr. Farad Ali, President and CEO of Asociar; Ms.
    Tawanna Black, Founder and CEO of the Center for Economic
    Inclusion; Mr. Philip Gaskin, Vice President of
    Entrepreneurship at the Ewing Marion Kauffman Foundation; Ms.
    Ying McGuire, President and CEO of the National Minority
    Supplier Development Council; and Ms. Jeanette Quick, Head of
    Compliance and Public Policy at Gusto.
        Witnesses are reminded that their oral testimony will be
    limited to 5 minutes. You should be able to see a timer on your
    screen that will indicate how much time you have left, and a
    chime will go off at the end of your time. I would ask that you
    be mindful of the timer, and quickly wrap up your testimony if
    you hear the chime, so that we can be respectful of both the
    witnesses' and the subcommittee members' time.
        And without objection, your written statements will be made
    a part of the record.
        Mr. Ali, you are now recognized for 5 minutes to give an
    oral presentation of your testimony.

         STATEMENT OF FARAD ALI, PRESIDENT AND CEO, ASOCIAR LLC

        Mr. Ali. Good morning, Chairwoman Beatty, Ranking Member
    Wagner, and members of the Diversity and Inclusion
    Subcommittee. My name is Farad Ali, and I am the President and
    CEO of Asociar.
        Additionally, I represent the U.S. Black Chambers
    President's Circle and the Airport Minority Advisory Council on
    behalf of my group.
        On behalf of Asociar and all of the Black businesses
    everywhere, I am honored to share my testimony with members of
    the subcommittee today on the myriad of issues that Black-,
    women-, and minority-owned businesses face when accessing
    capital contracts in infrastructure projects. Thank you for
    giving me the opportunity to participate in the hearing today.
        Asociar was founded in 2012 and established as a valued
    partner working to provide technology solutions for various
    companies in IT services. For the past 10 years, we have been
    able to implement growth strategies for service delivery and
    supply chain solutions as a value-added supplier.
        As a certified minority-owned business by the National
    Minority Supplier Development Council, and a certified Black-
    owned business by the U.S. Black Chambers, and a certified
    Historically Underutilized Business in Texas and North
    Carolina, we still face challenges in accessing opportunities
    for growth in the public and private marketplace.
        Federal procurement has provided many Americans with
    opportunities to grow a business, hire employees, build wealth,
    and strengthen the economy in the communities where we live and
    work and serve. The Infrastructure Investment and Jobs Act is a
    once-in-a-generation opportunity to invest in critical projects
    throughout the nation. However, if we are to realize the long-
    term return on those investments, we must also understand that
    we must hire to do these projects in a way that is very
    intentional. This will require coordination and making sure
    that we are able to be transparent from Congress to address two
    key factors: access to capital; and access to contracts.
        First, whether it is pouring concrete, replacing outdated
    pipes, or installing next-gen broadband and electric charging
    stations, many minority-owned firms will be blocked from
    bidding on these contracts because of a lack of capital, not a
    lack of capability. To address the barrier of capital access,
    financial institutions should be incentivized to create lending
    products that align with Federal procurement contract terms.
    This will improve cash flow management and alleviate credit
    risk.
        Additionally, Congress should expand and increase funding
    to the Emergency Capital Investment Program through the U.S.
    Department of the Treasury. That is to help the Community
    Development Financial Institutions (CDFIs) and Minority
    Depository Institutions (MDIs) to invest in these underserved
    communities, helping to build and investing in the funding and
    the programs which will be direct and create the effectiveness
    for these financial institutions that participate.
        Second, to ensure that the Federal and State agencies
    awarding the contracts are able to identify qualified, capable
    firms of various sizes, there needs to be a formal alignment
    between agencies that serve minority- and woman-owned
    businesses, like the U.S Black Chambers, the National Minority
    Supplier Development Council, the Airport Minority Advisory
    Council, and the Conference of Minority Transportation
    Officials. As you know, much of this infrastructure bill is
    going towards DOT and FAA, and those are the organizations that
    can support their work. For decades, these organizations have
    facilitated increasing the capacity of thousands of diverse
    firms. They provide support for shovel-ready projects at the
    Federal, State, and municipal levels.
        Third, to build marketplace capacity, Congress must
    strengthen policies that facilitate, measure, and report
    mentoring partnerships between larger government contractors
    and minority and women contractors. Historically, underutilized
    businesses risk falling into a cycle of underutilization. For
    example, to get contracts, you must show past performance. But
    if you have a chance as a buyer to choose between a vendor who
    has less performance or more performance, you are going to
    choose the one that has more performance. So, I think it is
    going to be critically important that we begin to work on
    strengthening mentor-protegee partnerships.
        You have my written testimony before you, and in the
    interest of time, I would just like to follow up with the last
    three points.
        Making racial disparity and racial wealth gap reductions is
    an economic imperative which benefits everyone, not just a
    social benefit directed at a select population. It is critical
    that we highlight business solutions that ensure utilization of
    women- and minority-owned firms, and I think there are three
    ways we can do this: promote lending products in line with
    Federal procurement contracts; incentivize coordination between
    agencies and minority-serving institutions; and incentivize
    measurement and subcontracting mentorship and lending with
    financial institutions.
        Businesses build communities, and policies set the
    foundation for the growth and sustainability of business and
    community prosperity for everyone. If executed correctly, the
    Infrastructure Investment and Jobs Act can help transform
    minority businesses and communities and accelerate the nation
    towards long-term success.
        Thank you for the opportunity to testify, and I look
    forward to answering any questions you may have. Thank you,
    Madam Chairwoman, and Madam Ranking Member.
        [The prepared statement of Mr. Ali can be found on page 34
    of the appendix.]
        Chairwoman Beatty. Thank you so much, Mr. Ali, for your
    testimony.
        Ms. Black, you are now recognized for 5 minutes to give an
    oral presentation of your testimony.

        STATEMENT OF TAWANNA BLACK, FOUNDER AND CEO, CENTER FOR
                           ECONOMIC INCLUSION

        Ms. Black. Thank you, Chairwoman Beatty, Chairwoman Waters,
    and members of the subcommittee. I appreciate and am honored
    for this opportunity to provide testimony today. I am Tawanna
    Black, the founder and CEO of the Center for Economic
    Inclusion. The Center is committed to closing racial
    employment, income, and wealth gaps by building racially
    inclusive and equitable regional economies. Founded in 2017,
    the Center is the nation's first organization dedicated
    exclusively to closing racial wealth gaps by partnering with
    employers and regional government agencies in order to build
    civic infrastructure and build the capacity of employers, both
    in the public and private sectors, in order to close racial
    wealth gaps and build racially equitable and inclusive
    workplaces.
        In addition to working with the public sector and the
    private sector, the Center supports the work of employers
    throughout the Minneapolis-St. Paul region and the seven-county
    metropolitan area, as well as regions across the State of
    Minnesota and across the country.
        Our economy right now requires diverse talent in high-
    demand, resilient industries with family-sustaining jobs. The
    economy of the future needs businesses that are resilient,
    businesses that can meet the growing supply chain needs, which
    will require that Black, Indigenous, Latinx, and Asian
    businesses and communities have improved access to capital,
    land, and homeownership opportunities.
        Our organization is deeply committed to growing Black- and
    Brown-owned businesses, and I want to lift up both the
    challenges that our businesses face and the opportunities that
    our businesses provide toward creating jobs and wealth in our
    economy. The Center imagines an economic shift that can occur
    as we continue to invest in generational opportunities to
    address our country's infrastructure needs. However, this can
    only be accomplished if we address systemic barriers in
    contracting and the undercapitalization of minority- and women-
    owned businesses, particularly those faced by our Black- and
    Latina-owned businesses.
        Black, Indigenous, Latinx, and Asian-owned businesses and
    communities carry the historical burdens of structural
    inequities that have been combined and added to throughout the
    COVID-19 pandemic to create powerful obstacles facing our
    businesses.
        Nationally, more than 41 percent of Black-owned businesses,
    totaling 440,000 enterprises, have closed, compared to just 17
    percent of White-owned businesses.
        Minority-owned businesses grow at 3.5 times the rate of all
    Minnesota businesses, yet our inequitable access to capital is
    keeping our businesses from continuing to grow.
        More than 8 in 10 Black employees and 7 in 10 Indigenous
    employees have filed for unemployment in our State; and we see
    that between 2000 and 2020, the wage gap between Black and
    White workers has continued to increase at a rate that our
    economy can no longer afford.
        In Minnesota, we have a saying that we all do better when
    we all do better. This comes from former and late United States
    Senator Paul Wellstone. Today, we are not all doing better. At
    the Center, we believe that now is the time for us to invest in
    creating an inclusive economy that benefits all people. We
    project that achieving racial equity and inclusive growth leads
    to better economic participation and would generate close to
    $6,000 to $8,500 in annual per capita income. This economic
    activity would lead to greater opportunities for
    intergenerational wealth that benefits our entire economy and
    demonstrates the need and opportunity for both assessing and
    prioritizing inclusive policies and investments that accelerate
    economic growth and competitiveness.
        I thank you, Chairwoman Beatty, Chairwoman Waters, and
    members of the subcommittee, for both your leadership and your
    time today. Together, we believe we can write a new story in
    our country's history, developing processes and investments for
    informing our infrastructure policies and investments possible
    to fuel our country's economic growth through the power of
    inclusion, equity, and belonging.
        Thank you, and I yield back.
        [The prepared statement of Ms. Black can be found on page
    38 of the appendix.]
        Chairwoman Beatty. Thank you so much, Ms. Black, for your
    testimony.
        Mr. Gaskin, you are now recognized for 5 minutes to give an
    oral presentation of your testimony.

    STATEMENT OF PHILIP GASKIN, VICE PRESIDENT OF ENTREPRENEURSHIP,
                    EWING MARION KAUFFMAN FOUNDATION

        Mr. Gaskin. Thank you, Chairwoman Beatty, Ranking Member
    Wagner, and members of the subcommittee, for the opportunity to
    testify today.
        Kauffman is a private, nonpartisan foundation based in
    Kansas City, Missouri, where I lead our work on
    entrepreneurship. While most of our work happens outside the
    Beltway, we are engaging Washington to bring half of our
    nation's potential entrepreneurs off the sidelines. This work
    is deeply personal. My family lived one block away from a ZIP
    Code with a better reputation. My dad would pick me up after
    school, and we would regularly go to a bank. One day I asked
    dad, ``Why do we go to so many banks?'' It turns out he was
    trying to get that first loan to open a chain of convenience
    stores. My dad's barrier to entry was simple: He didn't live in
    the right ZIP Code.
        He had good credit, but he didn't have credit experience.
    Four years later, a Black-owned bank gave him that loan which
    he used to open a successful convenience store in South Central
    Los Angeles. His success led to another loan and a second
    store. But even with that success, my dad continued to face
    barriers because of the color of his skin. His experience
    resembles the reality that many Americans still face.
        Today, Black-owned businesses are twice as likely to be
    rejected for loans, start with 3 times less in overall capital,
    and 4 in 10 entrepreneurs of color are too discouraged to even
    try for a loan for fear that they won't get it.
        Even more alarming, of the $69 trillion in global assets
    under the 4 major asset classes, less than 1.3 percent is
    invested in firms owned by women, Black Americans, and other
    people of color.
        America cannot afford to waste the energy and ideas of even
    one entrepreneur. Women and minorities represent the last great
    untapped asset class in America today, and we have no better
    opportunity to bring these entrepreneurs out of hiding than
    ensuring equal participation in rebuilding our infrastructure.
    Untapping this great American resource, our people, is
    something for which I see strong bipartisan support, but it
    will require that we address the capital access gap for
    underserved businesses who stand ready to meet the moment.
        At Kauffman, we know the four keys to success: equitable
    access to opportunity; funding; knowledge; and support. These
    are the pillars of our America's New Business Plan, a research-
    vetted policy platform this committee should consider. If our
    plan is the, ``what,'' we must not forget the, ``who.'' We all
    must champion the help of the locally trusted organizations,
    smaller, non-traditional lending partners, and institutions
    grounded in the historical and cultural implications of a
    community, including Minority Depository Institutions (MDIs)
    and Community Development Financial Institutions (CDFIs).
        In our own work, innovative capital solutions like AltCap
    and the Kansas City COVID-19 Relief and Recovery Loan Fund, and
    our Capital Access Lab, are proven models the committee should
    examine for replication for the entrepreneurs ready, willing,
    and able to rebuild America.
        But capital alone is not enough. The knowledge gap needs to
    be addressed as well, ensuring that all can find these lending
    solutions or even the contracting opportunities rolling out
    across the country. In the who-do-you-know world of contracts,
    our research shows that new business owners simply do not know
    as many people. These challenges are also discussed in
    America's New Business Plan.
        The role of the Federal Government is critical in assisting
    these entrepreneurs. A thriving entrepreneurial landscape will
    require a robust public-private commitment towards change.
        In closing, the Kauffman Foundation is not only an
    incubator or grantor, but we also conduct real-world research
    into what succeeds and what fails in entrepreneurship and
    capital access. Because of this, we would like to remain a
    resource to policymakers and members of the committee as a go-
    to partner for premier research, policy recommendations through
    America's New Business Plan, industry knowledge, and case
    studies on successful models of expanding opportunity to
    America's greatest untapped asset class.
        Thank you, and I yield back.
        [The prepared statement of Mr. Gaskin can be found on page
    40 of the appendix.]
        Chairwoman Beatty. Thank you so much, Mr. Gaskin. And let
    me also thank you for sharing your family's story. It is very
    much appreciated.
        Ms. McGuire, you are now recognized for 5 minutes to give
    an oral presentation of your testimony.

    STATEMENT OF YING MCGUIRE, PRESIDENT AND CEO, NATIONAL MINORITY
                  SUPPLIER DEVELOPMENT COUNCIL (NMSDC)

        Ms. McGuire. Thank you, Chairwoman Beatty, Ranking Member
    Wagner, Chairwoman Waters, and distinguished members of the
    Subcommittee on Diversity and Inclusion. Thank you so much for
    the opportunity to testify today.
        My name is Ying McGuire, and I am the President and CEO of
    the National Minority Supplier Development Council (NMSDC). We
    believe every business deserves an unbiased chance. Our
    organization serves as a growth engine for minority-owned
    businesses, while enabling our 1,500 corporate members to
    advance economic equity. NMSDC-certified, minority-owned
    businesses have created $400 billion in economic output
    annually while generating $48 billion in tax revenue and 2.2
    million jobs across the country.
        Today's hearing comes as America is experiencing a
    widespread and long-overdue reckoning with systemic racial and
    gender injustices and inequalities.
        Since taking office last year, the Biden-Harris
    Administration has made several important commitments to
    minorities to decrease the racial wealth gap. These include
    requiring 15 percent of all Federal contracts to go to small
    and disadvantaged businesses by 2025, releasing the SBA
    disaggregated racial and ethnic data on small business
    contractors, and making improvements to the category management
    system. These efforts are welcome, especially as we learn that
    the racial wealth gap continues to be a driver for change and a
    policy priority among business owners.
        While there have been significant efforts made to address
    the racial wealth gap, more opportunities exist within
    contracting and procurement through the Federal Government. The
    bipartisan Infrastructure Investment and Jobs Act serves as a
    catalyst to meet this moment. With the passage of the
    infrastructure bill, Congress and the Biden Administration
    pledged that minority-owned businesses would be prioritized for
    Federal contracting opportunities and would not be left behind
    as infrastructure projects unfold across the country.
        At a time when many minority-owned businesses find
    themselves in a long recovery period from the pandemic, it is
    absolutely critical that they are in the pipeline for
    procurement. Not only do Federal contracts help businesses, but
    they also create jobs and contribute to the recovery and
    stability of our communities.
        In order to meet the moment, besides access to contracts,
    there are two other areas in which I believe this committee and
    the Administration can take action towards ensuring equitable
    recovery: one, continued emphasis and action towards ensuring
    that minorities have access to important financial and
    increased capital to start and grow their businesses; and two,
    the creation of a Minority Business Enterprise designation to
    equalize access to contract opportunities.
        As members of this committee are well aware, access to
    capital remains one of the most significant issues for minority
    business owners. Small Business Administration (SBA) loans have
    been great instruments to assist small businesses with fiscal
    challenges during these difficult economic times. However, as a
    business owner, one never wants to take on more debt. A shift
    towards new access-to-capital models that do not add additional
    debt burden is needed in order for Minority Business
    Enterprises (MBEs) to be economic growth engines in underserved
    communities.
        My recommendation for the creation of a Federal designation
    for Minority Business Enterprises is based on evidence that
    while there are existing designations for small and
    disadvantaged businesses, it is our experience that these
    historical designations have not addressed the wide
    institutional disparity of Federal contracts awarded to MBEs.
        I have 28 seconds left. I applaud the work of the
    subcommittee, and I am committed, and our communities are
    committed to working with you on these issues. A friend once
    said, ``Access to capital is a bridge; access to contracts is
    sustainability.'' Thank you, and I look forward to answering
    your questions.
        [The prepared statement of Ms. McGuire can be found on page
    55 of the appendix.]
        Chairwoman Beatty. Thank you so much for your testimony,
    Ms. McGuire, and you used your last 48 seconds well, so thank
    you so much.
        And let me also say, thank you for what you are doing. Your
    predecessor, Adrian Crumble, also sat in that seat several
    years ago. So, thank you so much.
        And now, Ms. Quick, you are recognized for 5 minutes to
    give an oral presentation of your testimony.

      STATEMENT OF JEANETTE QUICK, HEAD OF COMPLIANCE AND PUBLIC
                             POLICY, GUSTO

        Ms. Quick. Thank you.
        First, I would like to thank Chairwoman Beatty, Ranking
    Member Wagner, and the distinguished members of the
    subcommittee, for holding this important hearing.
        We have the shared goal of ensuring that women- and
    minority-owned businesses have equal access to capital and
    opportunities for growth.
        My name is Jeanette Quick, and I am Head of Compliance and
    Public Policy at Gusto, a people platform that empowers small
    businesses nationwide.
        On a personal note, small businesses are near and dear to
    my heart. My mother is a Vietnamese immigrant who owned an ice
    cream shop when I was growing up. I know firsthand how hard the
    work is of small business owners and how important capital can
    be to their success. And as a former staffer, I am thrilled to
    be on this side of the dais to be able to speak for the more
    than 200,000 small businesses and the millions of their
    employees that Gusto serves.
        Gusto provides payroll, human resources, health benefits,
    and financial tools to small businesses across the country. Our
    work uniquely positions us to understand the needs of small
    businesses and how best to serve them during this challenging
    time.
        Throughout the pandemic, Gusto has focused on ensuring that
    small businesses have access to capital. Gusto facilitated
    billions of dollars in Paycheck Protection Program (PPP) loans
    for our small businesses, and we are connected to more than 80
    financial institutions, including CDFIs, to ensure that our
    customers have access to fair and responsible capital.
        Gusto is also the Founder and Chair of the Small Business
    Relief Council, a cross-industry coalition of over 80 companies
    representing millions of small businesses. We are well-
    positioned to provide insight into small business financing
    challenges.
        Gusto believes that a healthy small business ecosystem is
    one that is fair and inclusive for all businesses, including
    those owned by women and people of color. We support proposals
    that ensure equal access to the financial system and include
    access to Federal procurement and infrastructure projects.
        My written remarks today include a longer discussion on
    obstacles that women- and minority-owned businesses face in
    starting and expanding their businesses, and policies that can
    help address these disparities.
        According to Gusto data, action is needed now to help small
    businesses. Our data show that small business payroll reserves
    in hard-hit industries are tighter now than they were during
    the height of the early pandemic. Since the start of 2022, 26
    percent of businesses, primarily in the personal services
    sector, have less than one month of payroll in reserves. That
    is up from 10 percent, when PPP funds first started to impact
    small businesses in 2020. Without any new Federal aid, small
    businesses have fewer resources and capacity to absorb future
    shocks.
        Minority-owned businesses have historically experienced
    unequal access to capital. For example, White-owned startups
    began with more than 3 times the capital of Black-owned
    startups. Women- and minority-owned businesses persistently
    report having lower levels of access to financial institutions
    and, as was demonstrated during the pandemic, lack of
    relationships with traditional lenders led to lower access to
    PPP loans for these groups.
        Our data show that the government can and should do a
    better job of outreach to these communities to ensure they have
    access to financial products and services that can meet the
    needs of their businesses. Gusto is encouraged that the
    subcommittee is considering legislation focused on providing
    equity funding to minority business owners through the Minority
    Business Development Agency (MBDA). These targeted funds,
    coupled with technical assistance and training from MBDA, will
    have an amplified impact on businesses and the communities they
    serve.
        Gusto supports reforming the Small Business Administration
    (SBA) to better serve women- and minority-owned businesses. We
    urge the subcommittee to consider mechanisms to incentivize
    private lenders to enter the small business lending market,
    including by reducing barriers for SBA lender eligibility and
    reevaluating whether the SBA's lending programs are fair and
    inclusive, including whether the SBA or other lenders should
    continue to use criteria such as background checks, personal
    credit scores, collateral, or other information that has
    historically disfavored women and minority business owners.
        This is an incredibly challenging time for our country and
    we can't lose sight of the fact that small businesses are the
    job creators and economic engine of our country. Despite the
    massive upheaval caused by the pandemic, we are seeing an
    increase in new business starts since 2020. Women, and
    particularly women of color, are jump-starting the recovery.
    Nearly half of businesses started by women in the past year are
    minority-owned. Our goal at Gusto is to create a world where
    work empowers better lives, and we owe it to all entrepreneurs
    to ensure that policies are in place to allow them not just to
    survive but also to thrive.
        I thank you again for the opportunity to testify, and I
    welcome any questions you may have.
        [The prepared statement of Ms. Quick can be found on page
    58 of the appendix.]
        Chairwoman Beatty. Thank you so much, Ms. Quick, for your
    testimony. And let me also thank you for sharing your family's
    story, as well.
        I now recognize myself for 5 minutes for questions. I am
    going to try to get through several questions, so if you could
    use brevity in your answers, I would appreciate it.
        The first question is for you, Mr. Gaskin. I stress the
    importance of ensuring geographical diversity of venture
    capital investments in an effort to attract more investment and
    talented diverse opportunities across the country. In my first
    hearing, someone on the other side asked me if I would look at
    rural areas, and the answer is yes.
        Can you speak to the impact of venture capital investment
    in places where it is not typical, as it is in Silicon Valley?
        Mr. Gaskin. Thank you, yes. If we look at research showing
    that over 75 percent of all venture capital goes to fortified
    geographic areas, highly populated, what happens if you are an
    entrepreneur and you are in the middle of a State or you are in
    the middle of the country? Too many entrepreneurs are on the
    sidelines.
        And I would say, of that funding, only just over 2 percent
    goes to African-American women-led firms, and just over 1
    percent to African Americans, and it is lower for all of the
    others, which is unacceptable.
        The role of CDFIs and MDIs is really important here,
    because they understand community and they understand the
    businesses that are in those communities and how to better
    support them and get money to them. So, I highly recommend that
    the role of CDFIs and MDIs is something that the committee can
    consider as they move forward. Thank you.
        Chairwoman Beatty. Thank you.
        Mr. Ali, last Congress in the House, we passed bipartisan
    legislation that I introduced to codify a mentor/protege
    program at the Treasury Department, a new voluntary program
    that seeks to partner large financial institutions with small
    community and minority-owned banks.
        In your testimony, you actually mentioned such a program.
    My question is, would you, as an expert, be willing to write a
    letter and to work with the Department of Transportation, since
    we know these dollars go through the U.S. Department of
    Transportation, and also work with the Department of Commerce?
    Because when you look at their Minority Business Development
    Agency (MBDA), which is there, they are responsible for a large
    number of dollars and programs. Tell us what you think about
    that and what impact it could have?
        Mr. Ali. Yes, thank you so much. I like to think it is very
    important to understanding the capital, and the capacity
    building is important. So, having the capital be there with the
    Emergency Capital Improvement Plan is critical. As you had
    banks, for example, with the MDIs--JPMorgan partnering with
    Mechanics and Farmers Bank to build--and because, as we have
    heard from testimony from Mr. Gaskin, that provides some
    community awareness, allowing the capital to be deployed
    quicker.
        MBDA having these centers where we are building capacity is
    also critically important. It allows for there to be
    connectivity between capital and capacity. I would love to work
    with that. I appreciate the MBDA. I have worked with them for
    20 years, understanding their ability to build the capacity of
    minority businesses. But aligning those businesses with capital
    so they can get access to contracts is critical, because the
    contracts have requirements, and without capital you can't
    access those.
        So, I would be honored to be a part of that. Thank you very
    much. I appreciate it.
        Chairwoman Beatty. Thank you.
        And lastly, as we know, prior to the passage of the
    Infrastructure Investment and Jobs Act, Congress passed the
    American Rescue Plan, which authorized some $500 million for
    technical assistance and outreach to minority-owned small
    businesses through the State Small Business Credit Initiative.
        Ms. Black, and Mr. Gaskin, do you believe it would be wise
    for States to leverage the State Small Business Credit
    Initiative to enable minority-, women-, and even rural-owned
    small businesses to compete with this flood of dollars that we
    have? And I am going to give you 20 seconds each.
        Ms. Black. It is a simple answer: absolutely. It is
    critical that we leverage those networks and leverage those
    businesses in order to stimulate economic growth in the
    communities.
        Chairwoman Beatty. Well, we heard that from an expert.
    Okay.
        Mr. Gaskin?
        Mr. Gaskin. Absolutely. When you have 83 percent of
    entrepreneurs who can't get a bank loan or venture capital at
    the time of starting a business, we have to get money to them
    and find them in communities, especially in rural America.
        Chairwoman Beatty. Ms. McGuire?
        Ms. McGuire. Absolutely. The government agencies like MBDA
    need to partner with private sector and community partners.
        Chairwoman Beatty. I have 1 second, for the last witness.
        I'm sorry, my time is up, so I yield back.
        And I now recognize the gentlewoman from Missouri, our
    ranking member, Mrs. Wagner, for 5 minutes.
        Mrs. Wagner. I thank my friend, the chairwoman of this
    subcommittee.
        Small businesses are responsible for employing almost half
    of the workforce in America today. Ms. Quick, could you please
    provide insight on why companies like Gusto and other fintechs
    offer crucial resources to companies that lack the capital to
    hire in-house legal or finance or HR services that most large
    businesses can afford? Ms. Quick?
        Ms. Quick. Thank you for the question. Gusto helps small
    business owners bridge the gap to transition to a comprehensive
    company. Our comprehensive services, which span payroll, human
    resources, health benefits, and financial health benefits, help
    small businesses scale and manage their growing business.
        Gusto offers a suite of financial products called Gusto
    Wallet, which is available to employees and employers who use
    Gusto Payroll. These products include cash accounts where
    employees can put savings, and another product called Gusto
    Cashout. These products help promote financial health and
    wellness by putting the user in control of their paycheck and
    avoiding high-cost, often predatory small-dollar lending
    products.
        We believe that fintechs and other non-bank lenders have
    the ability to expand access to credit for small businesses in
    underserved communities. Businesses disproportionately obtained
    PPP loans from business lenders who often use automated
    underwriting systems to approve loans. These automated
    underwriting systems improved approval rates for Black
    borrowers who sought loans at both fintechs and traditional
    banks.
        Through our platform and products, Gusto has deep expertise
    in understanding the financial help of small businesses and the
    challenges they face in accessing capital and financial
    services. This understanding became stronger as we assisted our
    small business customers through PPP and other COVID assistance
    programs.
        Fintechs are able to respond faster and enter underserved
    markets more efficiently than some traditional financial
    institutions. We view fintechs as a value-added in the
    financial ecosystem. Both fintechs and traditional players are
    important, but we know fintechs are a great addition, based on
    our customer experience.
        Mrs. Wagner. Okay. Ms. Quick, do you believe that the
    services you provide to these small and micro businesses have
    helped new firms, for instance, survive?
        Ms. Quick. Yes, we do.
        Mrs. Wagner. Ms. Quick, the Consumer Price Index increased
    7 percent over the last 12 months, a record increase that is
    hurting both businesses and consumers alike. Could you please
    expand on the importance of artificial intelligence (AI) and
    other fintech software that can quickly respond to market
    conditions and provide capital to small businesses and
    startups?
        Ms. Quick. Great question. As I mentioned, fintech software
    providers are able to respond quickly and more efficiently to
    changes in the marketplace, often through automated
    underwriting and taking into account market conditions in real
    time.
        Mrs. Wagner. Also, Ms. Quick, Gusto advertises their
    ability to help small companies and businesses with everything
    from payroll runs to filing your taxes at the local and State
    and Federal levels, as well as day-to-day employee management.
    Have you seen the positive impact of crowdfunding on small
    businesses?
        Ms. Quick. We support equal and fair access to capital for
    small businesses, whether it is needed for start-up funds or
    growth. Gusto doesn't have specific data on whether our
    customers use crowdfunding as a source of financing. We have
    focused on lending partnerships, but we certainly support any
    means of accessing capital and growing businesses.
        Mrs. Wagner. Do you believe crowdfunding is a reliable and
    essential part of raising capital at all stages of small
    businesses or startups?
        Ms. Quick. Yes. We believe crowdfunding can be helpful to
    starting businesses.
        Mrs. Wagner. Great, thank you.
        I will yield back my time, Madam Chairwoman.
        Chairwoman Beatty. Thank you so much, Ranking Member
    Wagner.
        I now recognize the Chair of the full Financial Services
    Committee, the gentlewoman from California, Chairwoman Maxine
    Waters, for 5 minutes.
        Chairwoman Waters. Thank you so much again, Chairwoman
    Beatty.
        I would like to direct my first question to Mr. Gaskin. I
    did not know that you were in California and the Los Angeles
    area. But I want to know whether or not you are aware of the
    $12 billion that Senator Warner and I put together for CDFIs
    and MDIs, and that $1.25 billion has been allocated already.
    Mr. Gaskin, are you aware of that?
        Mr. Gaskin. Yes, we are aware of that, and also doing our
    CDFI work here in Kansas City, so I appreciate greatly what you
    are doing. Thank you.
        Chairwoman Waters. Okay. Thank you very much, because one
    of the things that I believe in is that we have to do more to
    help our small businesses know about CDFIs, MDIs, and the
    resources that we are allocating to them so that they can have
    access to these funds.
        Mr. Gaskin. Yes.
        Chairwoman Waters. Also, I would like to know whether or
    not you understand the work that Chairwoman Beatty and all of
    us did on this Financial Services Committee with PPP? When the
    big banks basically took care of their concierge clients, we
    quickly put another $60 billion in and gave a timeframe to get
    it out. And, of course, MDIs did very well, and CDFIs, in
    getting that money out. So, it is a new day in this committee.
    This committee understands the value of CDFIs and MDIs and
    access to capital, and we work very hard.
        Now, I would like to know more about incubators. I believe
    that we need a lot of incubators. Chairwoman Beatty and I would
    like to work on funding incubators so that we can have the
    resources for small businesses to learn a lot that they need to
    know in order to be successful, the insurance and paying the
    taxes and the projections and all of that.
        What do you think about an effort to multiply incubators in
    this country?
        Mr. Gaskin. Thank you, and I agree. As I mentioned in our
    testimony, in our America's New Business Plan, we lay out the
    pillars of funding: knowledge; support; and opportunity. And in
    those are opportunities and suggestions that relate to those
    types of supports. A lot of our grant-making has been to what
    we call entrepreneurial support organizations, which have
    included incubators that help entrepreneurs overcome these
    barriers of startup, ranging from knowledge to connections to
    tools to--
        Chairwoman Waters. Do you think that Chairwoman Beatty and
    I should try and put together direct funding of some kind to
    develop more incubators?
        Mr. Gaskin. Yes. In communities, especially in rural
    communities where entrepreneurs may not have access to a larger
    city, I think that would be helpful.
        Chairwoman Waters. Okay. Now, what Chairwoman Beatty is
    focused on today with infrastructure, we know that the money is
    going out to the cities and the counties and the States and all
    of that, and what I have discovered is we don't have enough--
    many of our small businesses that are involved in pre-bid
    conferences to understand what the opportunities are for
    contracting. What can we do about getting that information out?
    You have to be in the pre-bid conference.
        Mr. Gaskin. Exactly. Contracts, as I mentioned in my
    comments, are very, very important. One of the things, whether
    it is incubators or accelerators, can do is communicate those
    out. Starting in the communities and asking the questions and
    looking at, what do the communities need, what do the people
    need, and getting an understanding of the ecosystem of
    communities and really listening block by block to what the
    entrepreneurs and business owners need will help in that area.
        Chairwoman Waters. I want to thank you very much. I have
    taken up most of your time. But I do want you to talk with
    Chairwoman Beatty further, and all of you, about what we can do
    to empower our small businesses and get them in the pre-bid
    conferences, get the incubators spread out so that they can
    help these small businesses, and we are working on the big
    banks, and we are seeing some progress there.
        Thank you, Chairwoman Beatty, for allowing me this time.
    Thank you.
        Chairwoman Beatty. Thank you so much, Madam Chairwoman, and
    thank you for directing us in our future direction.
        The gentleman from the great State of Ohio, Mr. Gonzalez,
    is now recognized for 5 minutes.
        Mr. Gonzalez of Ohio. It's a great State, indeed. Thank
    you, Madam Chairwoman.
        Chairwoman Beatty. I just have to add, ``Go Bengals,'' to
    that.
        Mr. Gonzalez of Ohio. I struggle with that as a
    Clevelander, but I am going to pull for them for Joe Burrow's
    sake.
        But in any event, this is a great hearing. As many of you
    know, for the last 3 years I have been focused on, how do we
    extend more affordable credit and capital to all Americans, but
    knowing in particular that it is oftentimes our minority- and
    women-owned businesses that struggle the most with this. So, I
    think this is timely, especially in the context of the broader
    contracting issues that we are talking about.
        Ms. Quick, I want to start with you. You have, obviously,
    the payroll product and a wallet product that is for employees,
    and I am curious why, from what I can tell, you don't have an
    actual loan product? I wonder why, because it strikes me that
    with payroll data and wallet-level data, your company is
    uniquely positioned to extend credit, or maybe go in that
    direction.
        I would love to just hear your thoughts as to why that is
    not a place where you all have gone to this point.
        Ms. Quick. Thank you for your question. We do have Gusto
    Cashout, which is a lending product that is based on estimated
    earned wages. It enables consumers who are on the platform to
    be able to access credit for no or low cost and--
        Mr. Gonzalez of Ohio. Can I interrupt you quickly on that?
    Does that product help them build credit or their credit
    scores? Does that data ultimately filter back to the rating
    agencies, or is that just siloed inside of Gusto?
        Ms. Quick. We are currently not reporting it to the credit
    system, but we are thinking about ways to continue to expand
    our product mix to help individuals build credit.
        Mr. Gonzalez of Ohio. Anything beyond the earned wage
    access products, like personal loans or anything like that? Or
    have you all just specifically avoided that, for any particular
    reason?
        Ms. Quick. Yes. We have partnered with institutions that
    offer small business loans. As I mentioned in my testimony, we
    are connected to more than 80 financial institutions that offer
    small business financing products, including a number of CDFIs.
    We have partnered with Opportunity Fund and Pacific Community
    Ventures in our home State of California, and we are continuing
    to look at other ways to partner with CDFIs as well.
        Mr. Gonzalez of Ohio. Thank you. It is my understanding of
    these products--I don't have the specific data around yours,
    but I believe it is a pretty strong way to help folks build
    credit who maybe are outside of the credit system today. I
    would encourage you to continue looking at that, because
    obviously, we want as many people to have access to affordable
    credit as humanly possible.
        Mr. Ali, I am going to shift to you for a second. I think
    your suggestion around mentorship programs and subcontracting
    to give MWBEs more opportunities and then to help them navigate
    the sometimes difficult bidding process makes a ton of sense.
    When I talk to some of these firms back home, they feel like
    they, for one reason or another, cannot or are excluded from
    being able to bid appropriately.
        You mentioned providing incentives for larger, more
    experienced firms to offer these mentorships. What sort of
    incentives did you have in mind? Maybe just drill down, if you
    could be very specific about what you are thinking? I think
    that would be helpful.
        Mr. Ali. Thank you for the question, Representative
    Gonzalez. I think it is important to understand that the
    connectedness is really how people get business done. People do
    business with people they know, people they like, and people
    they trust. And to have the ability to do that in an
    environment where we face difficulties has not been easy.
        I think specifically to have the larger businesses
    recognize connectedness through some of these minority business
    organizations, like the U.S. Black Chamber or the NMSDC or
    AMAT, to say we are looking for clients that we can help mentor
    and grow and develop, because we understand that would also
    build community. And by providing incentives in the scoring as
    they are gaining contracts to make sure they are utilizing
    these diverse businesses, and then measuring the impact of
    those minority businesses on what they are doing in their
    community by hiring and giving back.
        Mr. Gonzalez of Ohio. I only have 30 seconds, but I really
    think this is an area that we should explore because your point
    around connectedness is absolutely right. For those people who
    come from either a connected family or have the right pedigree
    and background, accessing capital, accessing opportunities, and
    getting bids, is easy. It is one of the easiest things they can
    do. It is one of the best advantages they have. For those who
    are outside of that system, it can be an enormous challenge,
    and it feels impossible in many respects.
        So, I think that is a great idea, and I look forward to
    exploring it more with you.
        Chairwoman Beatty. Thank you.
        The gentleman from Massachusetts, Mr. Lynch, is now
    recognized for 5 minutes.
        Mr. Lynch. Thank you, Madam Chairwoman. Thanks for holding
    this hearing.
        I have a background in construction management; that is
    what my Bachelor's degree is in. I spent 20 years as an
    ironworker, and I am the former president of the Ironworkers
    Union in Boston. And I have to tell you that in a lot of this
    work, the contracting process and the bidding process is
    really--it comes down to a secret handshake. Oftentimes, there
    is a preferred bid list and there is a process that is very
    difficult for a small firm or a new firm to break through. We
    did have some success on the Defense bill a few years ago. We
    ran into the same problem that we are talking about with the
    infrastructure bill, which is that firms that were known, that
    were reliable, that had good safety records, and that had been
    through the process were readily recognized and successful in
    the bidding process, but newer firms and smaller firms were
    shut out of the process.
        What Raytheon did--that is the big firm in my area on the
    Defense side--is they did a workshop. They brought in all of
    these small, women- and minority-owned businesses and did a
    workshop on how to bid in this process, and I think that would
    be enormously helpful. Because of the size, the dollar numbers
    on some of these big contracts coming out on infrastructure,
    you really have to try at the subcontractor level and bring
    people into the process. It really is complicated, it is
    difficult, and unless we make affirmative steps to educate
    people and help them become part of the process, they are going
    to stay on the outside, and we are just going to have this
    small number of contractors enjoying the benefits of this
    progress, and it is going to be less competitive.
        Those smaller firms--we saw this on the Defense side. The
    smaller firms bring the innovation and they bring the price
    down. Mr. Gaskin, or Mr. Ali, are we doing any of that, doing
    any workshops for women- and minority-owned businesses to
    educate them on how this process works?
        Mr. Gaskin. Thank you, and I support your comments. This
    goes back to the connection and the understanding of community
    and the entrepreneurs and business owners in communities and
    local institutions like CDFIs, MDIs or others. They have
    access. They have the pulse of the community. They have been
    doing loans or microloans or other transactions with folks in
    the community. So, convening is very important because this is
    about equal access to opportunity and support and knowledge
    that we mention in America's New Business Plan, absolutely.
        You start at the community level and hold forums or have
    local folks invite local folks and come in. Because otherwise,
    as I said in my comments, people are hiding in plain sight.
        Mr. Ali. And I would just edify those comments. If you are
    not intentionally inclusive, you become intentionally
    exclusive. The work needs to be clear.
        And also, it is not only around providing education; it is
    that connectedness of really not being a mentor but a sponsor.
    So, when you have a corporation or a company that is bigger
    than a minority-owned business that says, I am going to sponsor
    you, that means they are investing in you, they want you to be
    successful. So, they become not just mentors but coaches, and
    coaches want to win. If they win with the right team members,
    they continue to provide them the success that they need, which
    means that they give them their connectedness, they help them
    with their capital, and they help them with their capacity-
    building.
        I think you can't just be teaching, because that becomes
    really apathetic because you are doing it out of whatever
    galvanized guilt you have. But when you say, I am going to take
    you in and build you, that is a different kind of conversation.
    Thank you.
        Mr. Lynch. I appreciate that, and it is building that
    relationship and that familiarity with the process that will
    lead to our success. There are examples of that happening, but
    unfortunately they are more rare than we would like. I am just
    trying to figure out a way to plug these smaller, minority- and
    women-owned businesses into the process so that they build
    those relationships and they have that opportunity.
        But I thank you, and, Madam Chairwoman, I thank you for
    holding this hearing, and I yield back. Thank you.
        Chairwoman Beatty. Thank you so much, Mr. Lynch.
        The gentleman from Tennessee, Mr. Rose, is now recognized
    for 5 minutes.
        Mr. Rose. Thank you, Chairwoman Beatty, and thanks to
    Ranking Member Wagner for holding this hearing.
        I also wanted to thank our witnesses for being with us this
    morning.
        One of the successes of our pandemic response was no doubt
    the Paycheck Protection Program (PPP), which had significantly
    less fraud, as we have learned, or appears to have had
    significantly less fraud than the Economic Injury Disaster Loan
    (EIDL) program. According to the Small Business
    Administration's Office of Inspector General, the PPP had
    approximately $4.6 billion in potentially fraudulent activity,
    compared to $80-plus billion in the EIDL program, although the
    PPP distributed exponentially more money.
        The PPP sent funds through the banking system, as we all
    know, while the EIDL program relied on the SBA as a direct
    lender. To quote from a statement by the Tennessee Bankers
    Association, ``The highlight for the SBA has been the PPP,
    which would have been an abject failure without the banking
    industry successfully executing the program. SBA has tried
    direct lending before and failed time and time again.''
        Ms. Quick, in your testimony you recommend streamlining the
    SBA loan application process to encourage more banks to
    participate in the SBA's lending programs. Could you also speak
    about the benefits of having SBA loans go through the banking
    system rather than relying on the SBA as a direct lender?
        Ms. Quick. Yes. Thank you for this question. As you
    mentioned, the banking system was successful in getting
    billions and billions of dollars out for PPP. We believe that
    the PPP loans were successful in helping thousands of small
    businesses to continue to pay their employees, and we are
    supportive of any kind of initiatives for both access to
    capital through the SBA or through additional private lenders
    in the system.
        As I mentioned, we believe that fintechs and other non-bank
    lenders do have the ability to extend access to credit for
    small businesses in underserved communities. We also believe
    that traditional financial institutions have the ability to
    help better serve small businesses, as well. Some of the
    feedback that we have gotten from our Small Business Relief
    Council that we run has mentioned to us that small business
    lending is currently very difficult, either through the SBA or
    as a private company, and there are a lot of barriers to
    providing services to small businesses.
        We recommend that both the private and public sectors
    consider looking at alternative data to underwrite small
    business lending and be able to open that credit box for all
    small businesses.
        Mr. Rose. Thinking about the experience we have just had
    with PPP and the financial institutions, what can we do now to
    ensure that financial institutions remain an essential part of
    providing loans and liquidity to support businesses and
    communities, and particularly in times of economic stress?
        Ms. Quick. I think we can encourage both lenders, the
    private lenders as well as the Small Business Administration,
    to look at alternative data, as I mentioned. I touched on the
    fact that many small businesses need to present personal credit
    scores, collateral, a track record of length of time in
    business, and that can be a challenge, particularly for women-
    and minority-owned businesses.
        We also think there is more we can do to provide financial
    education for small businesses. As we know, there are currently
    multiple avenues for small business resources through MBDA and
    SBA, but many businesses don't know about them. So, I think
    there is really an opportunity to make sure that these
    resources are more visible to small businesses and that
    education is increased to let businesses know what kinds of
    things they can access in the financial system.
        Mr. Rose. Thank you.
        In the few moments that I have left, you are no doubt aware
    of CFPB's Section 1071 proposed rulemaking, and I am wondering,
    without laying the predicate for that, could you talk about
    what the negative impacts are of increasing costs of credit for
    small businesses that would likely accompany that rule being
    implemented?
        Ms. Quick. Gusto is committed to transparency, and we
    support policies that can bring greater understanding of the
    small business credit market. We know from research that women-
    and minority-owned business credit applications are worse than
    White-owned businesses, resulting in lower access to capital
    for those groups.
        We do think it is essential to understand what is occurring
    in the market and to try to discern the reasons why underserved
    businesses face barriers when trying to obtain credit, and that
    the overall goal is to bring greater equity and fairness to
    small business lending and create a better ecosystem for small
    businesses.
        Mr. Rose. Thank you.
        I see my time has expired, Chairwoman Beatty, so I yield
    back.
        Chairwoman Beatty. Thank you so much.
        I now recognize the gentlewoman from Massachusetts, Ms.
    Pressley, for 5 minutes. Oh, and before you start, happy
    birthday to you.
        Ms. Pressley. Oh, thank you so much, Madam Chairwoman. This
    is a wonderful way to start my day off. Thank you so much for
    your leadership, and thank you to our State panelists for
    helping us tackle this critically important issue.
        As has been stated and we know, but it bears repeating, for
    too long, our traditional infrastructure investments and
    policies have really exacerbated inequities and disparities in
    our communities. In fact, the 1956 Interstate Highway Act,
    which created the cross-country system of freeways that we rely
    on every day, resulted in the displacement of more than 1
    million people and more than 475,000 families in just 2
    decades. These highways cut through our neighborhoods, they
    darkened pedestrian routes, they worsened air quality, and they
    massively diminished property values. Predominantly Black,
    Brown, Indigenous and low-income communities lost churches, we
    lost green space, and entire swaths of homes. Our communities
    lost access to jobs and other critical resources, divestment
    that to this very day contributes to the racial wealth gap in
    our nation.
        Ms. McGuire, what role does taking on debt play in serving
    as a barrier for minority-owned businesses in this space?
        Ms. McGuire. Thank you for the great question. As I shared
    earlier, as a business owner, we don't want to take on more
    loan debt. The critical key to success is to allow and give
    access to equity capital and government capital, enable them to
    grow.
        Ms. Pressley. Very good. And can you just expound upon that
    a little bit more as to what are some alternatives to loans
    that will help minority-owned businesses acquire the capital in
    order to be competitive for these contracts that we have been
    historically locked out of?
        Ms. McGuire. Absolutely. One thing is we can partner with
    some of the large financial institutions, and many of them are
    corporate members. Their vital critical stakeholders can really
    extend funding opportunities and really a lifeline to these
    minority-owned small businesses. All of them made a commitment
    to racial equity. We talk about the racial wealth gap, and all
    of them made a racial equity commitment to provide funding for
    infrastructure contracts, and this can be accomplished by using
    the racial equity commitment and associated funding to
    guarantee loans for MBE required to secure the contract.
        One example, a very actionable example, is to create a
    Letter of Intent or Memorandum of Understanding (MOU) which
    states that if an MBE wins a contract, we will guarantee a loan
    to cover 100 days of payroll. That is one example.
        The other thing is not just about access. It is the burden
    of getting the capital. The underwriting criteria should be
    evaluated, and many small MWBE just don't have the financial
    acumen to receive the loans, equity, and capital from different
    sources. So, helping MWBE understand the requirement and create
    a path to success would be ideal.
        The other thing that Mr. Ali and other people have talked
    about is the connection. People don't have a relationship or
    the knowledge to gain access to capital, so how do we, the
    government and a community organization like us, become a
    matchmaker to connect our underserved communities with sources
    of capital out there?
        One of the ways to do it is through technology enablement.
        Ms. Pressley. Thank you, Ms. McGuire. I will let you go on.
    Go on, please.
        Ms. McGuire. What if we have a pool that has all sources of
    capital out there and intelligently match with the small,
    minority- and woman-owned businesses who otherwise never had
    the access or relationship? That can be easily created with AI,
    with today's technology advancement. Thank you for the
    question.
        Ms. Pressley. No, absolutely. And I think it just goes to
    show that this is about intention, and the will, and the
    solutions are available to us.
        And on the technical assistance side, as you talk about the
    barriers in terms of relationships and access and acumen and
    why mentorship is so important and that we are intentional in
    our laws to support that, many of the folks that I hear from
    back in my district in Massachusetts, in my congressional
    district, just don't have extra revenue lying around to hire
    expensive consultants and accountants to prepare applications,
    so many are worried that they simply won't be ready.
        But again, thank you so much. At the end of the day,
    infrastructure, in its development and implementation, has the
    potential to divide or to bridge, to enforce oppression or to
    dismantle it, and we have to learn the lessons of the past and
    chart a better course. Thank you.
        Chairwoman Beatty. Thank you so very much.
        The Chair now recognizes the gentleman from South Carolina,
    Mr. Timmons, for 5 minutes.
        Mr. Timmons. Thank you, Madam Chairwoman.
        Ms. Quick, I want to follow up on Congresswoman Wagner's
    question about crowdfunding. I think there is a lot of
    potential in this space for women and minority startups to
    access capital. We have all seen the statistics about why these
    demographic groups have a harder time accessing institutional
    investors, be it pattern matching or whatever else.
    Crowdfunding seems to me to have a lot of potential in our
    efforts to create a more inclusive economy.
        In that same vein, I introduced legislation last year which
    would allow small businesses to more easily access venture
    capital. My bill, the Improving Capital Allocation for
    Newcomers (ICAN) Act, would codify the recommendations from the
    SEC's Small Business Capital Formation Advisory Committee by
    increasing the cap on the aggregate amount of capital
    contributions and uncalled commitment capital from $10 million
    to $150 million, and also by increasing the allowable number of
    investors or beneficial owners from 250 to 600 for qualifying
    venture capital funds.
        Chair Gensler has yet to act on these recommendations made
    to him, so we introduced this bill. He seems to be more
    interested in making life difficult for investors with more
    bureaucratic hurdles than anything else. He does not seem to
    have any capital formation agenda at all. I hope my colleagues
    will support this bill. I know it would certainly be a huge
    help to women- and minority-owned startups and small
    businesses.
        Ms. Quick, could you speak to this proposal and how it
    could help entrepreneurs access additional capital?
        Ms. Quick. Yes. We are supportive of proposals to help
    expand all options for small businesses to grow. We think
    capital is important. We don't have particular data on
    crowdfunding, per se, but we would love to work with your
    office to further understand the proposal and to help think
    about additional small business capital options.
        We also support education and mentorship programs to help
    inform business owners of different financing options and
    making sure that there are sufficient protections and risks and
    benefits considered in thinking about other forms of capital
    for small businesses.
        Mr. Timmons. Sure, thank you for that.
        One in six women have experienced domestic abuse, and 99
    percent of women who have experienced domestic violence have
    also encountered financial abuse. This often includes the
    abuser taking out loans under the survivor's name to ruin their
    credit score. This was something I saw as a domestic violence
    prosecutor before I served in Congress.
        Ms. Quick, again, is there a way fintech could support
    these women and their desire to become entrepreneurs and
    overcome challenges with their credit scores?
        Ms. Quick. Yes. I believe that fintech has the possibility
    and opportunity to help these women who may be experiencing
    issues with credit scores. As I mentioned in my testimony,
    credit scores have been problematic for many different groups,
    including the women that you mentioned, as well as minorities,
    and we do think there are opportunities for fintechs to use
    alternative data in their underwriting to help provide better
    financial services to women and to all individuals.
        Mr. Timmons. Sure, thank you for that as well.
        Another problem facing employers and entrepreneurs of all
    shapes and sizes is the current labor shortage we are
    experiencing, but the problem is felt much more sharply for
    small businesses where the loss of even a single employee can
    truly handicap an operation.
        What type of resources can your company and other fintechs
    offer to folks who may not have the abilities or tools that
    come with a larger business?
        Ms. Quick. Gusto provides a number of services to the
    smallest businesses and to larger businesses. We help all of
    them manage their payroll, human resources, taxes, health
    insurance, and financial health benefits, and help them grow
    and scale their businesses. We really consider ourselves to be
    a partner to these businesses in their day-to-day business
    experience. We believe in creating a world where work empowers
    a better life, and we think that both ourselves and other
    fintechs and other companies have the ability to help small
    businesses scale and grow, and it is very important for the
    economy.
        Mr. Timmons. Sure, thank you for that.
        Just for your awareness, I own Swamp Rabbit CrossFit, and
    Soul Yoga, in Greenville, South Carolina, and we are actually a
    customer of yours, so I appreciate all the good work you are
    doing. Thank you.
        Madam Chairwoman, I yield back.
        Chairwoman Beatty. Thank you so much.
        The Chair recognizes the gentlewoman from Michigan, Ms.
    Tlaib, for 5 minutes.
        Ms. Tlaib. Thank you, Madam Chairwoman. I appreciate so
    much that we continue to be so laser-focused on making sure
    that we have a seat at the table and that implementation is
    really the heart of how to make sure that we all have access.
    Thank you so much.
        According to research conducted by our own Federal Reserve,
    business owners of color report having reduced access to
    traditional capital from banks and credit unions. In addition,
    their analysis also found that creditworthy Black-owned
    businesses experienced greater challenges raising capital than
    other counterparts.
        We know that this lack of access--we have heard it over and
    over again as Members of Congress--to traditional capital has
    made it incredibly difficult for women and minority
    entrepreneurs to stand up and grow their business, and the
    Federal Reserve has found that in almost every financing
    category, be it loans, credit cards, outside investors, or
    grants, people of color entrepreneurs were the least likely to
    receive full funding.
        So, I am incredibly concerned with how these barriers to
    capital are affecting the implementation of many of our Federal
    programs and the distribution of Federal dollars, whether it be
    the emergency Paycheck Protection Program funding or access to
    Federal contracting opportunities, and the bipartisan
    infrastructure law.
        Ms. Black, Mr. Ali, would public banking help the
    administration of programs like the Paycheck Protection Program
    be faster and more effective, as well as accessible, to
    minority-owned businesses?
        Ms. Black. Thank you so much for that question. I would
    echo the comments that you offered. I would also offer another
    statistic coming from the Federal Reserve Bank's Small Business
    Credit Survey, which noted that Black-owned business
    application rates for new funding are higher than that of their
    White counterparts, yet approval in terms of the amounts that
    are approved for them continues to be lower. And while I do
    think that public banking is a tool that we have, we also have
    the opportunity to continue to invest in community resources
    like key revenue-based financing, forgivable loans, to help
    address some of the opportunities that have been elevated by
    you and by your peers earlier in the questioning, and
    opportunities for equity investments.
        The more that we continue to see those dollars come
    directly into communities that are trusted sources by our Black
    and Brown business owners, the more we are going to accelerate
    regional inclusive economic job growth.
        Ms. Tlaib. Mr. Ali?
        Mr. Ali. Yes, thank you very much for the question. I think
    it is important to recognize the impact that we have seen that
    minority institutions have done because of their ability to
    understand what is going on, on each block, as Mr. Gaskin
    indicated. I think it is important to do both. If public
    financing is going to support, it should probably be more
    around the equity space of investing in businesses, much like
    we do with Small Business Innovation Research (SBIR) and other
    groups, to share in the prosperity of businesses, because
    ultimately, when businesses prosper, they end up paying taxes
    anyway.
        How do we make sure that we can invest in these businesses
    in a way that will help them to grow? First, understanding that
    minority- and women-owned firms are not all small businesses.
    We do have businesses that exceed $10 million, $50 million,
    $100 million, that are still suffering, not having the
    opportunity to access enough capital for them to grow and to
    make the impact that they are making. And remembering that a
    lot of these businesses also are hiring people who act and look
    more like them, or are gender-specific, so, we see that women-
    owned businesses hire more women employees, and we also see
    that diverse businesses, Black businesses hire more Black
    people, more Asian, more Hispanic.
        Ms. Tlaib. I have seen it in my own community. I do want
    you, Ms. Black, and Mr. Ali, to know that public banking for me
    is really going to be one of those things in the toolbox. I
    know we will combat some of the things that traditional banks
    are just not going to do. It is overwhelming how much we
    educate, tell people about various opportunities, but they
    continue to get denied. I know it is going to be effective in
    increasing access to Federal contracting opportunities for
    minority-owned businesses and expand access to credit for so
    many folks.
        I think everyone on the panel knows that the PPP was
    specifically designed to assist businesses that were hit the
    hardest. Yet, according to the National Bureau of Economic
    Research, minority businesses were less likely to receive those
    loans. Many of the members of the Congressional Black Caucus
    tried to address it in the second round, but I know that the
    Federal Reserve Bank of New York found that counties, including
    Wayne County, Michigan, which I represent, with a higher
    concentration of Black businesses, saw the lowest rates of PPP
    allocation.
        The inequities, as you all know, aren't new. I am worried
    that if we are not deliberate in empowering MWBEs in the
    implementation of the bipartisan infrastructure law, we risk
    making that racial wealth divide worse. Again, I want to
    reiterate a push to come up with an alternative to traditional
    banks.
        Thank you, Madam Chairwoman, and I yield back.
        Chairwoman Beatty. Thank you so much, Ms. Tlaib.
        The gentlewoman from Pennsylvania, Ms. Dean, is now
    recognized for 5 minutes.
        Ms. Dean. Thank you, Chairwoman Beatty, and thank you to
    all of our witnesses for your testimony today.
        As has been discussed at length here today, we cannot
    improve minority- and women-owned businesses' access to Federal
    contracts without addressing the fundamental issue of access to
    capital.
        When I talk to minority- and women-owned businesses in my
    own district, in suburban Philadelphia, one of the most common
    things I hear is how difficult it is to access capital, and as
    you all know, especially adequate startup capital. A sad
    statistic in Philadelphia, which is adjacent to my district--I
    am struck by an analysis that shows we have the lowest number
    of Black-owned businesses per capita compared to other big
    cities. We clearly have a lot of work to do to ensure that
    these businesses can access the capital that they need.
        Mr. Gaskin, in your testimony you speak about the Kauffman
    Capital Access Lab, an innovative pilot program to develop
    investment managers and provide new capital to underserved
    entrepreneurs. Can you tell us a little bit more about the
    lessons learned from this program? Do you think this model
    could or should be adopted at the Federal level?
        Mr. Gaskin. Thank you for the question. Absolutely, we do.
    We started with our research showing that 83 percent of
    entrepreneurs do not access a bank loan or venture capital at
    the time of startup. We looked at how could we test a new way,
    a new system of getting access, improving capital access to
    entrepreneurs. And through a mechanism, we invested in six
    funds, and those funds are doing innovative types of financing,
    revenue-based financing and other types of things that take the
    pressure off the entrepreneur at the beginning. With revenue-
    based financing, you are paying back the loan as you make
    revenue. And we are seeing that, of our initial $3 million
    investment through the Capital Access Initiative, those funds
    have now raised over $177 million in additional funding,
    funding 40 entrepreneur companies that are having returns.
        And it shows two things. It shows that alternative means of
    capital are very, very important, and that these entrepreneurs
    that may be perceived as being risky are not risky. Our work
    with CDFIs is showing that as well.
        But I highly recommend that alternative and innovative ways
    of financing are embraced more by traditional institutions.
        Ms. Dean. That is exciting, that innovation and that
    expansion by way of the innovation is really exciting. Thank
    you for that answer.
        Ms. Quick, and I apologize if you have spoken of this, but
    in your testimony you talked about the challenges of delayed
    payments for Federal contracts for businesses with the least
    access to capital, which unfortunately includes many minority-
    and women-owned businesses. Can you speak more about the
    consequences of delayed payments to cash flow and to the growth
    of a business? What can we in Congress do to address the issue?
        Ms. Quick. Yes, thank you for the question, Congresswoman.
    We have found that delayed payments have impacted small
    businesses. On average, small businesses are owed around $900
    billion by both companies that they work with, as well as by
    State, Federal, and local government agencies. And we are
    advocating for government payments to be made more quickly to
    small businesses. When they are not able to access the capital
    that they are owed, this leads to a mismatch in capital access
    between when that small business incurs expenses and when they
    receive the payments back from the government.
        We support a return of the QuickPay Initiative, an
    initiative under the Obama Administration which guaranteed
    payment from the Federal Government within 15 days. That kind
    of requirement for States that are distributing infrastructure
    dollars will ensure that businesses are rightfully paid on time
    without needing to incur new debt.
        Ms. Dean. Thank you. That is powerful.
        Ms. Black, what actions can the private, public, and social
    sector organizations take so that the ecosystem of financial
    assistance and minority-owned businesses' access to capital is
    able to expand sustainably?
        Ms. Black. Thank you so much for that question. There is a
    real opportunity for us here to begin to marry solutions across
    sectors. The private sector has an opportunity to not only be
    investing in both the CDFIs and MDIs and other community-based
    solutions, but also to be leveraging their supply chain
    opportunities in the same way that government does here. It is
    not only about policies but also continuing to increase the
    purchasing that takes place from Black and Brown businesses,
    from women-owned businesses, in order to increase job growth in
    our communities, and they have to be married in those
    investments that are coming from the social sector in order to
    accelerate job growth and economic growth, recognizing again
    that there is not the risk that is inherently portrayed in our
    communities.
        Ms. Dean. Thank you very much for that answer, and so
    quickly delivered.
        Thank you, Madam Chairwoman. My times has expired, so I
    yield back.
        Chairwoman Beatty. Thank you so much for your questions.
        Madam Ranking Member, we are going to go to our next
    witness, who is a Democrat, unless you have any other
    witnesses.
        Mrs. Wagner. We're still waiting for Mr. Lucas, but I will
    see if he is able to join.
        Chairwoman Beatty. Okay. We will come back to you
    afterwards. Thank you.
        The gentlewoman from Texas, Ms. Garcia, who is also the
    Vice Chair of this subcommittee, is now recognized for 5
    minutes.
        Ms. Garcia of Texas. Thank you so much for bringing these
    witnesses forward. It has been very enlightening.
        I was a founding member of the Houston Hispanic Chamber of
    Commerce a couple of decades ago, it seems like, and I am
    feeling like I am in a movie sequel of, ``Back to the Future,''
    because we seem to be talking about some of the very same
    issues that we talked about back in the 1980s.
        While we have made some improvements, there is still so
    much more to do in this area to help our small businesses
    throughout the country.
        It is widely known that small businesses face greater
    barriers in accessing critical resources and new opportunities
    than bigger corporations. We saw that during the economic
    recovery that we have been going through. These barriers are
    compounded by factors such as race, ethnicity, gender, and
    language, making it more difficult for minority- and women-
    owned businesses to get ahead. Even if firms are not engaging
    in outwardly discriminatory behavior, subconscious bias and
    cultural distance have made it more difficult for lenders and
    entrepreneurs to connect, so we must do everything we can to
    get that connection.
        I want to start with Ms. Black. Ms. Black, first let me
    thank you for being, regrettably, the only member of the panel
    who mentioned Latinos and the impact of some of these programs
    on Latinos, so I thank you for that. I want to specifically ask
    you, can you describe some of the language and cultural
    barriers that you see small business owners face, and how does
    this impact their willingness to pursue new business
    opportunities that they can be competitive in?
        Ms. Black. Yes. Thank you so much for that, Representative
    Garcia. I think it is important to think about language
    barriers. We recognize that it is not only a barrier of
    translation which so often programs are designed in, but it is
    important for us to think about designing strategies from
    beginning to end in order to serve both consumers and also
    business owners in order to serve them in their own language.
        Our organization just today is announcing a new program, a
    set of both customized tools and solutions in order to grow
    programs and businesses specifically serving Black women and
    Latino women in Minnesota in order to grow businesses in growth
    sectors, in order to serve so many large corporations in our
    communities, and that means from the beginning to the end.
        So, having programs that represent those communities,
    making sure that they are able to serve their consumers,
    whether those are in growth sectors, restauranteurs being able
    to go the distance, and understanding those communities. But
    that means we have to have staff who come from those
    communities, inside government agencies like your own, making
    sure that we have those inside our corporations, and that we
    have them in every department and not simply concentrated on
    the front lines.
        Ms. Garcia of Texas. Thank you. As you know, the growth
    rate in the number of Latino-owned businesses was higher than
    the U.S. national average growth rate for all businesses in 41
    States. This is one of the conclusions of a study that Stanford
    did in 2020.
        Madam Chairwoman, I ask unanimous consent to submit this
    for the record.
        Chairwoman Beatty. Without objection, it is so ordered.
        Ms. Garcia of Texas. Thank you.
        I think it is critical that we look at the whole picture
    when we talk about diversity and inclusion.
        I have a question for Ms. McGuire. I was struck that one of
    your recommendations for the Congress was establishing a
    designation of Minority Business Enterprise. What do you mean
    by that? I know we go through the MWBE certification, so is
    this something different, and how would this be different?
        Ms. McGuire. Thank you, Congresswoman Garcia, my fellow
    Texan. I actually live in Austin, Texas.
        Ms. Garcia of Texas. Well, Austin is not Houston.
        [laughter]
        Ms. McGuire. The Minority Business Enterprise (MBE)
    designation is different because today, MBE is buried under
    small disadvantaged business. So, if you look at the SBA
    designations in the Federal procurement system, you have,
    ``woman,'' you have, ``veteran, and disabled veteran,'' you
    actually have an, ``Alaskan,'' and a, ``Native American''
    designation, but you do not have a designation for the
    minority-owned businesses.
        Ms. Garcia of Texas. Would it be a standalone designation?
        Ms. McGuire. Exactly, and that is the only way that we can
    clearly connect the 15 percent spend to that designation,
    because today there is not a Federal designation. The Federal
    procurement system says, ``minority-owned businesses.'' In the
    private sector, we certify Asian, Hispanic, Black, and Native
    American as MBE designation, and many State and local
    governments have MBE designation. The only place that doesn't
    have MBE designation is the Federal Government, and that is
    what I am suggesting.
        Ms. Garcia of Texas. Thank you for that clarification.
        And, Madam Chairwoman, I think that is something that
    certainly we can work on that shouldn't be insurmountable, and
    I would be willing to work with you and the rest of the
    committee on that.
        With that, I yield back. Thank you.
        Chairwoman Beatty. Thank you so much, Vice Chair Garcia.
        Now, I recognize the gentleman from Massachusetts, Mr.
    Auchincloss, for 5 minutes.
        Mr. Auchincloss. Thank you, Madam Chairwoman.
        Mr. Gaskin, in your written testimony you shared the story
    of your father's struggles to receive a small business loan to
    open a convenience store in his community, and after 4 years,
    he was finally able to receive a bank loan from a Black-owned
    bank.
        I introduced the Promoting New and Diverse Depository
    Institutions Act because banks and credit unions are a highly
    sought-after funding pool for small businesses, but bank
    closures and consolidations have limited the options for
    potential minority-owned small business owners who are
    constantly hearing, ``No.''
        In short, the Promoting New and Diverse Depository
    Institutions Act would require that prudential regulators
    create a strategic plan to help de novo financial institutions,
    including MDIs and CDFIs, start and restore competition on a
    level playing field to small business lending.
        Mr. Gaskin, I will start with you, but I would welcome any
    of our witnesses to weigh in here. Can you share the importance
    of how sustaining a competitive financial services market will
    help entrepreneurs, and particularly entrepreneurs of color,
    with affordable capital options?
        Mr. Gaskin. Thank you for the question. Looking back, I
    wish my dad had had more access and more competition in the
    banking and CDFI market.
        I will share a story here from Kansas City and the
    importance of CDFIs that we have proven out. During PPP, there
    was the creation of the Kansas City COVID-19 Recovery Loan
    Fund, and we invested in AltCap. AltCap is a leading CDFI here
    in Kansas City. And we helped them raise a larger fund, and
    over 153 microloans were made, with a zero default rate.
        It proves that there are entrepreneurs and small business
    owners right here in communities, and CDFIs and MDIs know the
    communities, they know the entrepreneurs. A lot of
    entrepreneurs, especially in smaller businesses, are just
    starting out, so, of course, they don't have relationships with
    banks.
        So when the PPP program happened, some of them just
    couldn't connect with banks because there was not a
    longstanding relationship there. I believe that more community
    banking and access to the entrepreneurs and small business
    owners in those markets is highly important.
        Mr. Auchincloss. Another question for you, Mr. Gaskin, or
    any of our other witnesses. Could you elucidate how these
    smaller institutions and how organizations like yours and
    others that are working to provide access to entrepreneurs of
    color can work with the really big players in the financial
    services system? Bank of America, Goldman Sachs, and JPMorgan
    have all made quite tangible commitments to funding small
    business formation, and particularly for underserved
    communities. Where are the ligaments of connection there to
    make sure that capital is going to the highest and best use?
        Mr. Gaskin. Thank you. I believe there is a connection
    opportunity there because I think there can be complementary
    funding initiatives. In America's New Business Plan, we lay out
    some funding suggestions that we hope that the committee takes
    a look at and considers, because I think there is some public-
    private financial investment that institutions could really
    find ways to close some of these gaps and connect the dots so
    that the money flow to communities is much more fluent and
    reaches the end users, who sometimes don't know the programs
    are available.
        Mr. Auchincloss. Right, because it sort of combines the
    best of both worlds. You have the capital of some of these big
    institutions, but then the community knowledge and
    relationships of the smaller credit unions and banks.
        Mr. Gaskin. Yes, exactly.
        Mr. Auchincloss. Ms. Quick, I was struck in your written
    testimony, and I didn't hear you say it but you may have, about
    the problem with receivables with small businesses and the
    Federal Government's delayed payment of those receivables. I
    think you calculated more than $800 billion outstanding, and
    the challenges that poses to working capital for small
    businesses. I wanted to give you a chance to expound upon that
    in the hearing.
        Ms. Quick. Sure. In 2020, Gusto was part of the Equal Pay
    Today Coalition that brought awareness to this issue. We
    partnered with Fundbox on this and found that small businesses
    are owed around $900 billion and take, on average, 28 days to
    get paid. This includes payments from both governments and
    larger companies that they may be owed money from on
    receivables, and government payments can take even longer.
    Sometimes, it will take months at a time to get paid money that
    is rightfully owed to the small businesses.
        Mr. Auchincloss. Ms. Quick, I am going to apologize. My
    time has expired. I am going to give you 10 seconds. What is
    the most important thing Congress can do to help that problem?
        Ms. Quick. Congress can require the Federal Government to
    pay small businesses faster, within 15 days.
        Mr. Auchincloss. Thank you.
        Madam Chairwoman, I yield back.
        Chairwoman Beatty. Thank you so much.
        Mrs. Wagner, if we have no more witnesses from your side,
    we have exhausted the witnesses from our side as well.
        Mrs. Wagner. It was a great hearing. Thank you.
        Chairwoman Beatty. Thank you.
        The Chair would now like to thank our witnesses for their
    testimony today.
        The Chair notes that some Members may have additional
    questions for these witnesses, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        This hearing is now adjourned.
        [Whereupon, at 11:44 a.m., the hearing was adjourned.]

                                A P P E N D I X

                               February 3, 2022

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