[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
                           
                                [all]