[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
SMALL BUSINESS ADMINISTRATION'S FY 2023 BUDGET
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
APRIL 27, 2022
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-053
Available via the GPO Website: www.govinfo.gov
HOUSE COMMITTEE ON SMALL BUSINESS
______
U.S. GOVERNMENT PUBLISHING OFFICE
47-393 WASHINGTON : 2022
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Blaine Luetkemeyer.......................................... 2
WITNESS
Hon. Isabella Casillas Guzman, Administrator, United States Small
Business Administration, Washington, DC........................ 4
APPENDIX
Prepared Statement:
Hon. Isabella Casillas Guzman, Administrator, United States
Small Business Administration, Washington, DC.............. 46
Questions and Answers for the Record:
Questions from Hon. Velazquez to Hon. Guzman and Answers from
Hon. Guzman................................................ 55
Questions from Hon. Golden to Hon. Guzman and Answers from
Hon. Guzman................................................ 56
Questions from Hon. Phillips to Hon. Guzman and Answers from
Hon. Guzman................................................ 57
Questions from Hon. Houlahan to Hon. Guzman and Answers from
Hon. Guzman................................................ 58
Questions from Hon. Luetkemeyer to Hon. Guzman and Answers
from Hon. Guzman........................................... 60
Question from Hon. Fitzgerald to Hon. Guzman and Answers from
Hon. Guzman................................................ 72
Questions from Hon. Van Duyne to Hon. Guzman and Answers from
Hon. Guzman................................................ 72
Questions from Hon. Salazar to Hon. Guzman and Answers from
Hon. Guzman................................................ 74
Questions from Hon. Meuser to Hon. Guzman and Answers from
Hon. Guzman................................................ 77
Additional Material for the Record:
Credit Union National Association (CUNA)..................... 79
Letter to Hon. Merrick B. Garland, Attorney General, United
States Department of Justice from Hon. Blaine Luetkemeyer.. 81
Letter to Hon. Richard Delmar, Acting Inspector General,
United States Department of the Treasury from Hon. Blaine
Luetkemeyer................................................ 83
National Association of Federally-Insured Credit Unions
(NAFCU).................................................... 86
U.S. Small Business Administration Office of Advocacy........ 88
SMALL BUSINESS ADMINISTRATION'S FISCAL YEAR 2023 BUDGET
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WEDNESDAY, APRIL 27, 2022
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 10:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia Velazquez
[Chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Golden, Davids, Mfume,
Phillips, Newman, Bourdeaux, Carter, Chu, Evans, Delgado, Andy
Kim, Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney,
Garbarino, Young Kim, Van Duyne, Donalds, Salazar, and
Fitzgerald.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I would like to begin by noting some important
requirements. Standing House and Committee rules continue to
apply during hybrid proceedings. All Members are reminded that
they are expected to adhere to these rules, including decorum.
House regulations require Members to be visible through a
video connection throughout the proceeding, so please keep your
cameras on. Also, remember to remain muted until you are
recognized to minimize background noise.
In the event a Member encounters technical issues that
prevent them from being recognized for their questioning, I
will move to the next available Member of the same party and I
will recognize that Member at the next appropriate time slot
provided they have returned to the proceeding.
I want to thank Administrator Guzman for appearing before
the Committee today. When your tenure began, small businesses
were experiencing a once in a lifetime crisis. Since your
confirmation, you and the staff at SBA have worked tirelessly
to stand up new programs, institute new protections against
fraud, and handle unprecedented demand for traditional SBA
programs.
Today, the worst of the pandemic is believed to be behind
us and there is some good news to report. Since President Biden
took office, our economy has added over 7.4 million jobs,
unemployment is down to 3.6, and entrepreneurs have started new
businesses at record rates. With that said, the deep wounds
inflicted by the pandemic and the conflict in Ukraine continue
to fester. As small employers work towards a full recovery,
they will need our utmost support.
Moving forward, we must utilize the SBA to drive success
and empower entrepreneurs. That is why SBA programs must have
the funding necessary to meet the needs of small business
owners. We have an opportunity to discuss the SBA's 2023 budget
request and learn how it will help our main streets flourish.
The administration's proposed budget lays out the investments
needed to build a stronger, better, and more equitable America.
The funding outlined in this plan will help lower costs for
families, create good-paying jobs, and drive our recovery
forward. The proposal also places a strong emphasis on
supporting the needs of entrepreneurs with three overarching
goals: ensuring equitable design and delivery of programs,
building resilient businesses and a sustainable economy, and
implementing strong stewardship of resources.
The pandemic taught us that access to critical resources is
often unequal among businesses, particularly those owned by
women and people of color. The SBA's focus on equity will help
ensure that all firms have access to the resources they need to
succeed. I am also pleased to see that the proposal includes
funding and investments in key programs, modernization,
customer service, and core contracting initiatives.
I am eager to discuss how the money requested in this
budget will strengthen and improve initiatives that increase
access to capital, improve disaster assistance, and create more
government contracting opportunities for small firms.
Administrator Guzman, you have been at the forefront of the
recovery effort and your work has kept millions of businesses
open and people on the payroll. I look forward to hearing from
you about the specifics of this request and the agency's top
priorities for the upcoming year.
I would now like to yield to the Ranking Member, Mr.
Luetkemeyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chair, and thank you,
Administrator Guzman, for joining us in person this morning to
discuss the Biden administration's Fiscal Year 2023 budget
request.
The SBA has played an outside role in assisting the
American economy recovery from the COVID-19 pandemic. As the
nation moves away from the emergency period of the pandemic and
into recovery, it is critical that we evaluate SBA's role
moving forward. To do so requires a full and complete
evaluation of the agency's performance, including the critical
pandemic relief programs.
Unfortunately, a full evaluation of one of the largest
pandemic relief programs, the Paycheck Protection Program,
continues to be hindered by Secretary Yellen's failure to
appear before this Committee. In the CARES Act, the Department
of Treasury was charged with onboarding new lenders into the
program. Yesterday, on the 1-year anniversary of Secretary
Yellen missing her first deadline to testify before this
Committee, and thus America's small businesses, I sent two
letters requesting follow-up investigations in this matter. The
first letter I sent was to Attorney General Garland asking for
a Department of Justice Investigation into whether Secretary
Yellen remains in violation of the law by failing to appear
before this Committee. The second letter I sent was to the
Department of Treasury's Acting Inspector General, Richard
Delmar, requesting an investigation into the department and
Secretary Yellen.
I ask unanimous consent to enter into the record these
letters, Madam Chair.
Chairwoman VELAZQUEZ. Without objection, so ordered.
Mr. LUETKEMEYER. Thank you.
It has been just over a year since you assumed the role of
administrator and you have faced no small task, Administrator
Guzman, from unprecedented state and local shutdown orders that
forced small businesses to either operate at a reduced capacity
or close their doors entirely to rising inflation, labor
shortages, and supply chain disruptions. The SBA has its work
cut out for it. So if there is ever a time for the agency to
rise to the occasion, this is it.
Despite the country moving toward recovery, American small
businesses continue to feel repercussions thanks in no small
part to the actions and failures of this administration.
Headwinds are blowing stronger by the day, and if that sounds
familiar, it is because economic indicators were bad the last
time you were here in November and since then have only
continued to go in the wrong direction. Prices are now rising
at the highest rate in 40 years. Job openings continue to rise,
even in just a few months since you last testified, and
creating staffing headaches for small business owners across
the nation.
If it is not the labor shortage, it is a supply chain issue
as more and more small businesses are finding it nearly
impossible to obtain goods and products. Add to that the
concern among small business owners when they hear of tax
increases this administration is routinely proposing, and it is
no wonder so many small business owners have begun to question
who is supposed to be standing up for small business?
I can answer that question, Madam Administrator. It is you.
You are the one who should be advocating for small businesses
in this administration. If a policy or regulation creates red
tape or a cost for small businesses, it is you who should be
pointing this out to the president.
The American Action Forum has studied the regulatory costs
associated with the Biden administration's first year in
office. Unfortunately, those costs come to a staggering $201
billion. Let me repeat that, $201 billion in just 1 year of
compliatory costs. This is unacceptable.
If the Biden administration continues to impose tax
increases, you should be pointing out that no matter how they
spin that increase, the impact on small businesses is, in fact,
going to be hurting them. Now more than ever, we need a Small
Business Administration that is responsive to the nation's 32
million small businesses, entrepreneurs, and startups. Yet, we
continue to see the same thing.
This hearing is scheduled, and magically, our letters and
inquiries start to receive responses. The speed at which our
concerns are being addressed is improving but more work needs
to be done. With $1.2 trillion flowing through the agency's
doors, the American public needs accountability and
transparency. Plain and simple, the SBA needs to be improved
and I have a plan to do it.
Now, more than ever, small businesses need an SBA that is
responsible and fulfills the statutory mission day in and day
out. The core responsibilities that are outlined in law need to
drive the agency's decision making. Anything else is
irresponsible. Unfortunately, that is what we see with your
budget, more spending without outcomes for main street USA.
Moreover, fraud is fraud, Madam Administrator. As
Republican leader of this Committee, I do not care when it
happened, it needs to be addressed. The integrity of the SBA's
programs need to be restored fully and comprehensively. I stand
ready to work with anyone and everyone to ensure the SBA has
the oversight and metrics in place to deter and catch bad
actors. The agency must be cleaned up.
And that brings us to voting. There is no place in the
Constitution that supports the SBA getting involved in
elections. That is squarely in the state's purview. With a 30
percent fraud rate on one of your loan programs, and having to
close two of your women's business centers because of dubious
activities, what makes you think the SBA would be able to
protect the integrity of voting? It is a question we are going
to have to answer.
With that, Madam Chair, I look forward to today's
conversation, and I yield back.
Chairwoman VELAZQUEZ. The Ranking Member yields back.
With that, I will now introduce our distinguished witness,
The Honorable Isabella Casillas Guzman. Administrator Guzman is
currently serving as the 27th Administrator of the Small
Business Administration. Her previous experience includes
serving as Director of the California Office of the Small
Business Advocate and Deputy Chief of Staff at SBA. Outside of
her time in government, Administrator Guzman has advised
entrepreneurs and owned her own small business, giving her
extensive insight into the needs of entrepreneurs.
Administrator Guzman earned a Bachelor of Science from the
University of Pennsylvania Wharton School of Business.
Welcome, Ms. Guzman. Ms. Guzman, you are now recognized for
5 minutes.
STATEMENT OF THE HONORABLE ISABELLA CASILLAS GUZMAN,
ADMINISTRATOR, UNITED STATES SMALL BUSINESS ADMINISTRATION
Ms. GUZMAN. Thank you, and good morning, Chairwoman
Velazquez, Ranking Member Luetkemeyer, and distinguished
Members of the Committee. Thank you for the opportunity to
appear before you today to discuss President Biden's Fiscal
Year 2023 budget request for the U.S. Small Business
Administration.
The president's budget requests a total of $1.06 billion to
foster growth and opportunity across America's economy by
supporting the SBA's critical small businesses programs and
disaster assistance. This funding level generates practical
investments in economic progress, and with your support, allows
us to continue delivering crucial programs and services for a
surging wave of new American entrepreneurs.
Over the past year, I have visited small businesses across
28 states and Puerto Rico. I have had the opportunity to visit
many of the communities you represent and witness the strength
and resilience of American entrepreneurship firsthand.
Despite hardships from the pandemic, America's small
businesses and innovative startups are creating new jobs,
powering our economy, strengthening our global competitiveness,
and supporting working families.
And Americans are launching businesses at record rates.
Business applications have risen more than 30 percent from pre-
pandemic levels, and in 2021 alone, 5.4 million Americans
applied to start a business.
One of this administration's top priorities is making sure
the opportunities of this growing economy are reaching all
Americans. President Biden often says that ability is spread
evenly but opportunity is not, and that is important because
building equity, ensuring access and opportunity are open to
all, is not just the right thing to do, it is good for
business.
Thanks to historic legislation passed by Congress, the SBA
has been able to deliver critical relief and help millions of
small businesses, especially in the hardest hit communities,
survive the pandemic.
In Fiscal Year 2021, the SBA distributed more than $450
billion in financial relief through the Paycheck Protection
Program, the COVID Economic Injury Disaster Loan and Advance
programs, the Restaurant Revitalization Fund program, and the
Shuttered Venue Operators Grant program. Those vital relief
funds saved jobs in every community in the country.
Now, we are delivering on the promise of PPP forgiveness.
To date, 87 percent of all eligible PPP recipients have
submitted forgiveness applications, and nearly all, 99.4
percent of qualified applicants have had their loans partially
or fully forgiven.
SBA has not only delivered on pandemic relief, but our core
capital programs, which support hundreds of thousands of jobs
are also breaking records. Demand for SBA capital support is
outpacing the resources available with a 62 percent increase in
7(a) loans and a 41 percent increase in 504 loans approved.
Given the high demand for SBA's capital programs and their
effectiveness for our small businesses, President Biden is
requesting a 13 percent increase over our core programs for a
total of $71 billion.
In addition, the budget recognizes that SBA needs
additional support to service those $361 billion in COVID-EIDL.
The budget requests authority to reprogram existing balances in
targeted COVID-EIDL funding to advance to support and service
loans for the 3.9 million borrowers.
A large percentage of these borrowers will start making
payments in the months ahead, requiring SBA to shift from
origination to servicing. As we enter this new phase of
recovery, SBA must provide borrowers with needed resources and
the quality customer service that they deserve.
While my written testimony outlines other budget
priorities, one additional key area I want to highlight is our
efforts to upgrade our systems and processes to detect and
prevent fraud. During this administration, the SBA has acted
quickly to protect taxpayer dollars, first by restoring
controls and deploying new technology to mitigate fraud. Our
work to implement or enhance fraud control has been recognized
by federal accountability agencies and watchdogs.
I also recently announced the creation of a new Fraud Risk
Management Board to replace the Fraud Risk Management Council.
This new board provides the oversight and agency-wide
coordination recommended by the GAO. Additionally, I designated
a Special Counsel for Enterprise Risk to work directly in my
office to further limit fraud and risk across the agency in
coordination with our established fraud management framework.
To recover taxpayer funds, we are working closely with the
Office of Inspector General and other federal authorities to
refer suspected fraud to law enforcement. Effective stewardship
is necessary for the SBA to achieve our mission. I am committed
to working with stakeholders, including Congress, to protect
SBA's programs from abuse and ensure that legitimate businesses
have a clear path to access the financial resources Congress
has created for them.
Thank you again, Chairwoman Velazquez and Ranking Member
Luetkemeyer, and distinguished Members of the Committee for the
opportunity to appear before you today. And I look forward to
the questions.
Chairwoman VELAZQUEZ. Thank you, Administrator Guzman.
I will begin by recognizing myself for 5 minutes.
Ms. Guzman, access to capital, as you know, is critical to
small businesses and the SBA loan programs have had a banner
year. How will you continue this success and also expand to
employee-owned businesses and cooperatives as mandated by
statute?
Ms. GUZMAN. Our capital access team is positioning and
their whole agency is positioning to make sure that we can
serve not only those new 5.4 million entrepreneurs but all of
our firms across the country. And we know that access to
capital remains a really important issue for so many of them to
overcome. In particular, around the Main Street Act, we are
really committed to making sure that all businesses have
pathways to accessing capital, including those that are
employee-owned and those ESOPS. And so we have worked with the
advocates in the industry to see what we can do to assess and
adapt our programs to fit their needs and we have made some
important changes. And we will continue to assess those
programs as we move forward and as we see more loan volume
coming through so that we can work with ESOPs and work with
cooperatives. We know that as small businesses exit, employee
ownership is a good pathway in many cases to transition and
exit their firms successfully. And we would like to make sure
that capital is available.
Chairwoman VELAZQUEZ. How is SBA using new technology to
streamline loan processes and focus outreach to promote the
programs, particularly to the undeserved?
Ms. GUZMAN. Across all of our loan programs we, of course,
rely on our 68 district offices, our over 1,300 resource
partners, and now our newly established community navigators to
really reach out to more small businesses to get them capital
ready. In addition, we have a strong network of lenders and
have looked to expand that with the Community Advantage pilot
program that we recently overhauled, as well as opening it up
so that we can allow new licensees to come into the program,
especially those mission lenders.
Chairwoman VELAZQUEZ. Thank you.
Fraud controls previously removed in 2020 to expedite
relief were reinstituted under your leadership. At our hearing
in January, the IG commended SBA for its action implementing
his recommendations. Can you expand on your efforts to prevent
fraud and abuse related to the agency's COVID and relief
programs?
Ms. GUZMAN. President Biden is really committed to making
sure funds get into the hands of those businesses it was
intended to serve, and the administration early on, we ensured
that we could put in those controls, some of those across our
COVID-EIDL program, of course, in which that was a unique case,
a tale of 2 years, truly. We have also leveraged technology so
that we can assess our portfolios and make sure that fraud is
indicated. And created strong partnerships in collaboration and
transparency with the IG, as well as the GAO. We want to make
sure that we are implementing fraud detection at inception of
design and that is what we have committed to do.
Chairwoman VELAZQUEZ. How often are you meeting with the
IG?
Ms. GUZMAN. I meet with the IG biweekly to make sure that
we are coordinated on all of the reports and that we are ahead
of the game because obviously fraud is an iterative process and
we need to continue to evolve. And then with the GAO, I meet on
a quarterly basis and just recently met with Comptroller
General Dodaro to discuss the SBA.
Chairwoman VELAZQUEZ. Thank you.
SBA is requesting $20 million to implement the VA-SBA Act,
which mandated SBA to become the sole provider of formal
certifications for all veteran-owned small businesses. What is
SBA's plan to stand up this certification program and why is
this funding critical?
Ms. GUZMAN. Within our funding request, our budget, we are
requesting $20 million in 2023 to continue our efforts. We have
been collaborating with the VA on this transition and we are
looking forward to it. In talking to the veteran stakeholders
across the country, we have found that they are looking forward
to the transition and that SBA has a host of services and
offerings that they can access. Going to a one stop shop in
essence will be beneficial to them. Working closely with the
VA, we have made sure that we are aligned on transitioning
personnel, technology, and that we can have a seamless
transition so there is no interruption of service for veterans
and we can expand it to more veterans across the government.
Chairwoman VELAZQUEZ. Thank you.
Now, my time basically has expired even though I have other
questions.
The Ranking Member, Mr. Luetkemeyer, is now recognized for
5 minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair.
I would like to begin with something that I mentioned
earlier in my opening statement, Ms. Guzman. The SBA has just
come through 2 years of unprecedented activity. The attention
on SBA has been heightened and with that your actions should
carry a lot of weight with this administration. I want to focus
on this.
When reports come out by groups that identify over $200
billion in regulatory costs that were added by President
Biden's first year in office, what has been your response? Have
you discussed these numbers and their impact with the White
House?
Ms. GUZMAN. I continue to track, especially through our
Office of Advocacy, as you know, which tracks all regulation,
any impact on small business and continue to travel around the
country to make sure that I am----
Mr. LUETKEMEYER. The question, I am sorry to interrupt, but
the question is, have you discussed the impact with the White
House?
Ms. GUZMAN. We continue to, you know, share learnings about
small business with our partners across the whole of
government, including the White House.
Mr. LUETKEMEYER. What has been their response when you tell
them that $200 billion worth of increased compliance costs is
crushing small business? What has been their response?
Ms. GUZMAN. I cannot speak to that specifically, that
number, but I can share with you----
Mr. LUETKEMEYER. That number is the administration's
number. We pulled that from each agency when they propose a
rule, it also has to give the cost of that. When you total
those things up it is $201 billion last year, Ms. Guzman. That
is devastating to small businesses.
Ms. GUZMAN. What I can share with you, Ranking Member, is
that, of course, we have our Ombudsman office that works with
all small businesses that have to navigate regulatory issues so
that we can continue to support them on the back end on the
front end of the Office of Advocacy.
Mr. LUETKEMEYER. My point of the question, let me claim my
time, my point of the question is that you should be advocating
for small businesses and tell the administration stop the
onslaught of rules and regulations. It is killing small
businesses. If you truly have been to 28 states I think you
said a while ago----
Ms. GUZMAN. Correct.
Mr. LUETKEMEYER.--over the last year, and you have talked
to small businesses, you have got to come back with a sense
that rules and regulations are one of the top things that they
are concerned about. The costs of those things are enormous. I
can tell you in my district this is a concern of it. Inflation
is the next one. Are you talking at all with the administration
about the effects of inflation and high energy costs on our
small business community?
Ms. GUZMAN. Yes. The president is, of course, very
sensitive to the fact that the inflationary pressures and cost
pressures impact American families as well as small businesses.
And I continue to track what those impacts are.
Mr. LUETKEMEYER. Have you talked to them about the impact
of this? Have you advocated and offered solutions to this
problem?
Ms. GUZMAN. The president's actions speak for themselves.
He is trying to address these costs----
Mr. LUETKEMEYER. Oh, my gosh, ma'am.
Ms. GUZMAN.--for our small businesses and their families.
Mr. LUETKEMEYER. They speak for themselves? They're
devastating. He adds more fuel to the fire. He continues to
allow energy prices to go through the roof. He adds $200
billion worth of regulatory costs. He adds more money to the
money supply, which is extremely important when it comes to
inflation. That is one of the drivers of inflation. Are you
talking at all about those things with him and say, please, Mr.
President, stop the onslaught of these nonsensical things that
are under your control?
Ms. GUZMAN. I tis important to note that there are multiple
impacts on our small businesses and we continue to track and
share them and make sure that our small businesses get the
support that they need.
Mr. LUETKEMEYER. I assume the answer is no. I cannot get a
yes or no from you this morning, ma'am, Ms. Guzman, so I assume
the answer is no, you have not talked to the president about
this. You are an advocate for small business. You should be
standing in front of his office once a week. Say, Mr.
President, the businesses that I oversee are struggling. Please
help me to help them by stopping the nonsense of your office
continuing to support and enhance inflation in this country
through all the things that they are doing. If you are not
doing that, then you are not doing your job, Ms. Guzman.
One more quick thing here. The last 2 years have seen the
agency has gone under stress and there is no question what
agency is under stress. You can also see some of the problems
and weakness of that agency. Fraud and oversight metrics are a
weakness of this agency. You mentioned a minute ago that you
are trying to work on fixing them. But fraud is fraud. It has
got to be addressed somehow, some way. And I know that, it
would appear to me that with regard to the PPP loan program and
with regard to the EIDL program, there seems to be a difference
in the ability of those two programs to operate. Would you
agree that the private sector lenders that initiated the PPP
loans were more efficient at delivering these dollars and
deterring fraud than the SBA's direct EIDL program?
Ms. GUZMAN. Our lending partners on PPP have been very
effective. In the COVID-EIDL instance, it is a tale of 2 years.
As I had said earlier, COVID-EIDL, in 2020 when the majority of
the loans were through and where you see the IG and GAO reports
on, had no controls. And so in 2021, we have reinstituted the
controls. We have leveraged technology to ensure----
Mr. LUETKEMEYER. So your answer is yes. The private sector
did a really good job of getting the money out the door, almost
three times as much money as what the EIDL program did with
probably one-sixth of the fraud rate.
Ms. GUZMAN. I would add that PPP3, which was implemented in
2021, had the loan volume higher than in 2020, also had
controls and speed in place and thanks to the administration's
actions to put those controls in place. And so my answer was
not yes but that we are implementing controls----
Mr. LUETKEMEYER. If it cannot be yes, you are not doing
your job if that is the case. You are totally misunderstanding
the question or you are misunderstanding how your agency runs
if your answer is not yes, unfortunately.
Ms. GUZMAN. What I am saying is that----
Mr. LUETKEMEYER. My time is up. I yield.
Ms. GUZMAN. Thank you.
Chairwoman VELAZQUEZ. Now the Chair recognizes the Chairman
of the Subcommittee on Oversight, Investigations, and
Regulations, Mr. Phillips.
Mr. PHILLIPS. Thank you, Madam Chair. Welcome, Ms. Guzman.
I am sorry for how you were treated with disrespect by
certain Members of this Committee.
I am a small business owner. I know what it takes to build
a business. I know how tough it is, especially recently. I have
traveled the world in the business world. There is no place in
the world in which small businesses can thrive like the United
States. Are we perfect? No. Is there a lot we all can do? Yes.
I hope we can do it together.
I actually admire what you have done and your team in
extraordinary time with little preparation, and frankly, little
experience amongst any of us to face the circumstances that we
have. And I want to thank you, and I hope you extend our
gratitude to everybody that works at the SBA for doing the best
with what we had with the time we had. And frankly, saving
millions of jobs and hundreds of thousands of small businesses.
Thank goodness. And we did so in a bipartisan fashion and we
should continue to do so.
As Chairman of the Subcommittee on Oversight, I also
applaud the creation of the Fraud Risk Management Board. I
think it is a great step. We have to use taxpayer dollars well.
Every dollar that we have lost to fraud is a dollar that has
not gone to the very businesses that you look out for and all
of us want to see succeed.
I want to also applaud the increased funding for the
Entrepreneurial Development program. By the way, I hope that is
something that we can all talk about bringing into high schools
in this country to teach entrepreneurship at some point, but
perhaps that is for another day.
Our nation's small businesses and owners deserve the best
opportunity to access financing and counsel from their
government and support so that we can ensure that the American
dream is accessible to everybody, whether they live in
Brooklyn, New York or Brooklyn Park, Minnesota that I
represent, or even little tiny Brooklyn, Texas.
So with that in mind, many of us believe deeply in economic
equity and racial equity. I do not think we talk enough about
geographic equity. What can the SBA do to ensure that the
programs that we support, that we discuss, that we provide
oversight for can serve entrepreneurs in the tiniest parts of
this country that are often overlooked?
Ms. GUZMAN. Thank you so much for your comments and your
question.
I could not agree with you more. During the pandemic, we
found that connection was key, and being able to be aware of
resources and prepare to access those resources was really
critical. And so that is why you see within our budget request
an increase within our Entrepreneurial Development programs and
why in addition we launched the Community Navigator pilot
program so that we can better reach the 32.5 million small
businesses and the newly created firms that are being birthed
every year.
Rural communities, geographic equity is really important to
me, and I continue to ask that we distribute our resources and
make sure that we are reaching into those communities. I think
we will go a long way with broadband being built up in
communities so that every community can have high-speed
Internet. More micro entrepreneurship occurs when there is
high-speed Internet according to studies. And so I was pleased
that nearly half of the Community Navigators are focusing on
rural communities and making sure that they have services to
deliver and connect to those communities. And as we expanded
our women's business centers, as well as focused on our SBDCs,
we commit to making sure that we can serve those communities.
Mr. PHILLIPS. Terrific. Also, I am a deep believer in
employee ownership. I think that also is a bipartisan notion.
That is the American dream, in fact.
What can the SBA do better to reduce barriers, to employee
ownership, to promote the concept, to educate small business
owners especially as it relates to succession planning? How can
we do better in that area with the resources available to you?
Ms. GUZMAN. In my home state of California, we actually
looked at this issue quite extensively as communities were
finding with a lot of retiring small businesses, they wanted to
be able to retain those businesses and look at employee
ownership as an option. There are folks focused especially on
manufacturing where we do not want to see businesses close
down. We want to see businesses take over, and some are
focusing on ESOPs in particular. I think we can highlight those
activities to show small businesses a path forward for exists
through ESOPS or employee ownership. Our SBDCs actually have
expertise around the country that are focusing on this and so
we need to continue to cultivate that, build best practices,
and share them across the country.
Mr. PHILLIPS. And what can we do in Congress to support
that?
Ms. GUZMAN. And I would look forward to partnering more
with you on that to try to identify some of those best
practices on training because it does take quite a bit to
transition a business to employee ownership and we need to help
and support the owner. So funding that additional
entrepreneurial development support will help us expand that
type of technical assistance. But in addition, on the capital
front, we are continuing to monitor the additional changes that
we have made on our capital programs in compliance with the
Main Street Act and we look forward to continuing to have
discuss about that with those borrowers to see what we can do
to do more for them.
Mr. PHILLIPS. Thanks, Ms. Guzman.
I yield back the balance of my time.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize the gentleman from Texas, Mr. Williams,
Vice Ranking Member of the Committee.
Mr. WILLIAMS. Thank you, Ms. Guzman, for being here.
I want to say for the record I have been to Brooklyn,
Texas. You need to go to Brooklyn, Texas, and find out what
they think about the SBA.
Ms. GUZMAN. I would love to.
Mr. WILLIAMS. You need to go talk to those people.
Also, I think that the head of the SBA, regardless of party
preference or whoever the president is, should always be for
less taxes and less government. You should always stand for
that regardless of who nominated you.
I am a small business owners. Have been for 51 years.
Hundreds of employees today I employ. And so I feel like I am
Main Street America.
So, I have a few questions to start. It will be simple.
Keep your answers to a quick yes or no.
First of all, the rollout of the Save Our Stages program
which you mentioned, it was disastrous. The delays and
dysfunctions your agency faced during the implementation
prolonged critical aid to small businesses. Indeed, many of
them could not stay in business waiting for you. This is
unacceptable, and main street businesses want answers.
So quickly, yes or no, have you held anyone accountable for
the failed rollout of the Save Our Stages program that delayed
billions of dollars in emergency aid?
Ms. GUZMAN. I was not happy with----
Mr. WILLIAMS. Yes or no.
Ms. GUZMAN. Yes, I transitioned the program.
Mr. WILLIAMS. Okay. Thank you.
Ms. GUZMAN. Thank you.
Mr. WILLIAMS. While our economy faces a looming recession,
you still publicly support the Biden administration's tax hikes
saying it will clearly affect large corporations.
So yes or no, would you support raising taxes on small
businesses or individuals earning less than $400,000 per year?
Ms. GUZMAN. President Biden's plan----
Mr. WILLIAMS. Yes or no.
Ms. GUZMAN.--will not affect any businesses under $400,000.
Mr. WILLIAMS. Yes or no. Do you believe in raising taxes to
small businesses? It is a simple question.
Ms. GUZMAN. I agree with the president. Yes.
Mr. WILLIAMS. Okay. You will raise taxes. Let the record
show----
Ms. GUZMAN. No, that President Biden will not raise taxes
under $400,000.
Mr. WILLIAMS. Okay. Well, that is not true. And then do not
forget inflation. He has already raised taxes. Okay? And done
nothing about that.
So we are here today to discuss the Biden administration's
SBA budget request of $1 billion, a $135 million increase from
Fiscal Year 2021. However, this proposal outlines initiatives
that go beyond your agency's core responsibilities. You must
want to get into everybody's business.
The SBA is tasked with aiding, assisting, and advising
small businesses across the country; correct?
Ms. GUZMAN. Correct.
Mr. WILLIAMS. Which is why it is unclear to me and many
others why you would request more taxpayer dollars for climate
change within the SBA.
So in lieu of directing more money to actually small
businesses' aid, this request is further proof that President
Biden's SBA is completely out of touch with main street.
Businesses in my district are concerned about their ability
to compete in the future and are looking at the SBA to be a
nonpartisan, which we do not have, resource that has their best
efforts to be looked at in mind.
Administrator Guzman, why should Congress increase funding
for your agency without first addressing underlying problems
such as your failure to rollout business saving aid, the
significant fraud we have talked about with the SBA programs,
and general underperformance? Why should we give you more money
to just continue to do that?
Ms. GUZMAN. SBA has successfully scaled to meet the needs
and really helped millions of businesses, over 8 million unique
businesses during COVID relief. Done a remarkable job in your
districts, across our 68 field offices to support small
businesses.
Mr. WILLIAMS. Well, not in my district and not in Brooklyn,
Texas.
Ms. GUZMAN. And in addition, we have implemented fraud
controls so that we can better get the funds into the hands of
the businesses it was intended to serve.
Mr. WILLIAMS. Well, okay.
Ms. GUZMAN. And we are committed to making sure that they
have the capital that they need, the market access they need,
and the technical assistance that they need. That funding for
climate is about making sure that businesses can prepare and
mitigate----
Mr. WILLIAMS. But you do not control that. You have no
business being----
Ms. GUZMAN. It is not for me to engage in climate but for
me to give loans----
Mr. WILLIAMS. Well, that is fine.
Ms. GUZMAN.--to help mitigate.
Mr. WILLIAMS. I am running out of time. Let me move on.
Ms. GUZMAN. Thank you.
Mr. WILLIAMS. But you do not need to be in everybody's
business. Take care of the people that you are required to take
care of--the small business owner; the guy trying to make the
payroll; the guy that signs the front of the check, not the
back of the check; the guy who is drawing a line of credit.
Help him. He needs help. He does not need to worry about the
climate change which is not even part of what you are staffed
to do.
So small businesses across the United States are still
desperate to fill job openings. These labor shortages are
hindering business operations and they are a driving factor in
the supply chain model and inflation issue. I can tell you all
about that.
A recent report by the Jobs Opening and Labor Turnover
Survey found that President Biden's worker shortage remains at
historic highs with more than 11 million job openings.
So Administrator Guzman, that is nearly a 4 percent
increase since the last time you testified before this
Committee. Main street businesses are bearing the weight of
this unsustainable worker shortage and their optimism is very,
very low. So, real quick, what recommendations are you making
to small business owners, like me, who have open jobs that they
cannot fill?
Ms. GUZMAN. When SBA provides services to support small
businesses----
Mr. WILLIAMS. But you can tell me. I am a small business
owner.
Ms. GUZMAN. I appreciate that.
Mr. WILLIAMS. So I would like to know what to do.
Ms. GUZMAN. I appreciate that, Congressman. And I
appreciate your expertise having run and successfully built a
business with hundreds of employees. The small businesses that
we serve, obviously, are facing workforce shortages and
challenges and have had to compete in this marketplace, this
tight labor market. We are prepared by providing them with
technical assistance. About half of our time of our small
business development centers and our women business centers is
often spent on workforce development issues, as well as
strategic planning for the businesses.
Mr. WILLIAMS. I believe my time is up.
Ms. GUZMAN. So we are committed to helping those businesses
survive.
Chairwoman VELAZQUEZ. Time has expired.
I would ask the Members, please, stop badgering the
witness. Treat her with the respect that she deserves. Allow
her to answer your questions. We never got into this when we
were in the minority. We always treated the witnesses with
respect with Ranking Member Mr. Chabot.
Mr. LUETKEMEYER. Madam Chair----
Chairwoman VELAZQUEZ. Let's have a decent, respectful
discussion.
Mr. LUETKEMEYER. Madam Chair, the reason that we are having
to interrupt her responses is she is not responsive. She is
taking a page out of the Secretary Yellen, the Federal Reserve
folks who sit there and tap dance around every single question.
We cannot get a straight answer. So the only way to talk to her
is to request our time back and then redo the question. If she
will give us a straight answer, we will be glad to continue to
have a dialogue with her. But we cannot have a dialogue when
she will not answer the question.
Chairwoman VELAZQUEZ. She is answering the questions.
Mr. LUETKEMEYER. She is not answering the questions. With
all due respect, Madam Chair----
Chairwoman VELAZQUEZ. When it comes to fraud and abuse,
fraud happened because fraud controls were taken away from the
previous administration. She reinstituted that and now you
continue to raise the issue of fraud while the IG and the
Office of the Comptroller has stated for the record that they
have access to the administration, that they have been
implementing their recommendations, and you just continue to
bring the same talking points.
Mr. LUETKEMEYER. If you want to talk about the Inspector
General report, let's talk about the entire report. The entire
report when he was here, we asked the question, okay, are those
changes being implemented? He said yes. Why are we not seeing a
drop in the problem with fraud? Because the employees are not
adhering to the new principles, the new protocols in place.
That is a problem.
Chairwoman VELAZQUEZ. Okay.
Mr. LUETKEMEYER. That goes back to leadership. That is what
we are trying to get at.
Chairwoman VELAZQUEZ. The Chair recognizes the
congresswoman from Georgia, Ms. Bourdeaux, for 5 minutes.
Ms. BOURDEAUX. Thank you, Chairwoman Velazquez, and thank
you for holding this hearing. And thank you, Administrator
Guzman, for your continued work as SBA administrator and for
joining us here today.
The president's budget request of Fiscal Year 2023 includes
a 21 percent increase in SBA funding levels for a total of $914
million in discretionary funding. And much of this funding is
aimed at increasing access to SBA resources and services in
communities like mine which have historically had difficulty
accessing some of the critical tools that the SBA provides to
entrepreneurs and would-be entrepreneurs.
The budget also includes several indications about the
SBA's priorities for Fiscal Year 2023 and areas for potential
collaboration with Congress. The administration's Fiscal Year
2023 budget in particular says that SBA is establishing an
agency priority goal to increase the number of community
financial institutions in SBA's lender match portal, something
I am very pleased to see. Each of the federal bank regulators,
however, have offices dedicated to CDFI and MDI engagement and
have initiatives to support their activities.
So my first question is, do you think a similar office at
the SBA would help the SBA get more community-based lenders
into programs like the 7(a) program? And what else is being
done concretely to really engage the CDFI and MDI community?
Ms. GUZMAN. Thank you so much for that question as we know
that access to capital is a big issue. Forty-four percent of
small businesses get their funding through a bank and we would
like to leverage SBA's programs to expand that.
Within our Office of Capital Access, we do have an office
dedicated to working with mission-based lenders through our
Microlending program, as well as our Community Advantage
program. And so we feel that we are well prepared to be able to
expand with this group of lenders who serve underbanked, as
well as unbanked and underserved small businesses.
We are currently making efforts to streamline our programs.
We have launched with the Community Advantage overhaul which
included an expansion of licenses that we will be able to
extend to CDFIs and CDCs to expand our Community Advantage
program and really focus on small dollar lending and ensuring
that we can fill those gaps as that has been in decline as
well. So we look forward to working with you and your offices
as well as all of the Members to make sure that we can expand
the number of lenders who participate and can reach into
communities and geographies that are not served.
Ms. BOURDEAUX. Wonderful. We are very excited about this
initiative.
One other question. SBA data shows that most PPP borrowers
who have not yet applied for forgiveness are the smallest of
businesses. And these are borrowers with loans of $50,000 or
less. In my district, I know this includes many minority
immigrants, women-owned small businesses, and I just wanted to
touch bases with you again about what the SBA is doing to
address this gap in forgiveness of these applications.
Ms. GUZMAN. We definitely want to deliver on the
forgiveness of PPP to all the communities and borrowers. We
have done a couple things. Firs and foremost, of course, we
wanted to make sure that our lenders were equipped to deal with
this next phase of PPP and we set up a streamlined offering of
technology for them to be able to utilize over 1,000 banks, and
lenders have signed up to use our technology to process
forgiveness. And we have also, of course, streamlined for
$150,000 and under as per the statute. So we are working hard
to make sure that all of our borrowers can access these
programs through the lenders.
However, we know that some of that requires technical
assistance. Our Community Navigators are working hard, many of
them to work with PPP borrowers to make sure that they can
access forgiveness, as are all of our centers.
Ms. BOURDEAUX. Thank you. Thank you so much. And thank you
for your service to our small business community and for your
service to the country.
I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Meuser, Ranking Member of the Subcommittee on Economic Growth,
Tax, and Capital Access.
Mr. MEUSER. Thank you, Madam Chairwoman, very much.
Administrator, thank you very much for being with us again. We
appreciate it.
Clearly, there is maybe some misunderstanding of the
frustrations that exist because I spend a lot of time with my
small businesses in my district. I do tours probably twice a
week when we are in district and visit with five, six, seven,
or eight in a row. And it is usually the same feedback. The
feedback is that they are struggling. Their sales might be up.
Their margins are weaker, are constricted, and they cannot get
people to work. And they are concerned about inflation. They
are concerned about gasoline price spikes. They are concerned
about the deliveries that do not come in because of the supply
chain issues. And they are concerned about the added
regulations. And I think when speaking with you since you are
the advocate for the small business, if we are not hearing that
these issues are being addressed, we are the voice of those
businesses. We represent them and advocate for them. So we have
got to provide the oversight and ask these questions for them.
That is the purpose of this hearing and that is why I very much
appreciate you being here.
Now, with the budget plan, inflation is rising as we stated
at record paces, 1991 paces. Right? Labor shortages, supply
chains. I went through it. Many plagues of small business. Yet,
in the budget that we saw for the SBA, we are not seeing any
solutions to these very serious issues that are not going away
anytime soon, by the way. Okay? But we do see a lot of climate
change. Okay? Which is terrific, but not the issue that people
are bringing up when we are visiting them and what is keeping
them perhaps from going out of business.
We are also stating that you want to be the first federal
agency to get the designation as a voter agency. Okay? This is
just off the grid of what truly is important on main street.
So do you believe that these requests and initiatives
illustrate a sufficient focus on your mission, on the advocacy,
on finding solutions for the small businesses that make up 75
percent of the employment throughout my district and most
districts throughout the country? If you would not mind
answering that question.
Ms. GUZMAN. Thank you. Thank you for the question. And I
agree with you that our small businesses are facing those
inflationary pressures, workforce shortages. They tell me about
the individual prices that they are paying higher within their
product mix. And so they have had to adapt and pivot and change
their model and access capital in order to survive during this
time. So I appreciate what the SBA can do specifically on these
issues. We know that for small businesses, they need that
advisory service to make sure that their financial management,
their supply chain management, their strategic sourcing and
strategic planning overall is really strong during this time
because those businesses recognize that the only constant for
them is going to be change and they need to be very adaptive.
And so our technical assistance and that request for increases
is supportive of small businesses to help them. I will speak to
the----
Mr. MEUSER. But it is not in the budget. I do not want to
interrupt you but let's just focus on inflation if we would.
Okay?
Ms. GUZMAN. Sure.
Mr. MEUSER. What are some of the solutions to help small
businesses and help America reduce inflation? Because the only
thing that comes up in the budget regarding inflation is how
wages need to stay up with inflation. That is the only time it
is mentioned.
So what are we doing about the high gasoline prices, and
heating prices, and increase of delivery costs, and so much
manufacturing that goes up because of the high fossil fuel,
domestic fossil fuel increases? What are we doing about that?
Ms. GUZMAN. Well, the president's budget really tries to
address and create a more productive economy to improve our
supply of goods here in the United States which will help in
the long term as we look towards supply. He is also trying to
address some of those pocketbook issues, like childcare, and
that is where SBA also has a role. We are trying to train up
more childcare facilities around the country. Those
entrepreneurs. We offer bootcamps for childcare entrepreneurs
so that they can start those businesses. Those costs are
meaningful to our small businesses, to families across the
country.
And the president, consistently, is trying to address
energy costs as well. But when we go to what the SBA authority
is and what we can do, you know, obviously, we are the agency
that provides capital and technical assistance and tries to
give market access. So we are also working to try to increase
the revenue side of the equation.
Mr. MEUSER. And I believe childcare is important. Most
private businesses tend to deal with that and that is a story
in itself.
I am running out of time but I would like to get from you
later on the 504 lenders getting to the Express program, why
has that been delayed?
Madam Chair, I know I am over my time but administrator, if
I can get an answer on that, because that would be really
helpful for many small businesses if that Express program could
be finalized and created ASAP.
Thank you. I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Evans, for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
I am dedicated to increasing minority entrepreneurship,
especially Black entrepreneurship. Small business ownership is
a tool in the economic toolbox to help lift communities out of
poverty.
Early this month, SBA released its Equity Action Plan in
conjunction with the Executive Order to advance racial equity
and support for underserved communities through the federal
government.
Can you expand on some of the details of this plan? And how
can Congress support these efforts?
Ms. GUZMAN. Thank you so much for that question on equity,
congressman.
Obviously, we know that the face of entrepreneurship is
changing. That women and people of color are starting
businesses at the highest rates, and that is across the
country. And so we want to make sure that our programs are
accessible and available to all. So that is underlying
everything we do. And our equity plan is focused on ensuring
that we can get capital distributed to all of our
entrepreneurs. And you saw the increase in our focus on the
Community Advantage program to focus on small dollar loans
where our small businesses are facing the largest gaps in the
financial services marketplace.
In addition, we want to focus on the revenue side of the
equation because we think that, you know, of course, small
businesses need to grow their revenues and be able to compete
in order to deliver the products and services that we all
depend on. And so with that, we are focusing in on the federal
contracting space. We are the largest buyer in the world and
making sure that there is equity in government contracting and
that all small businesses can access contracts. We have seen a
40 percent decline in the number of small businesses doing
business with the federal government and that is not good for
our industrial base or innovation. And so we are focused on
making sure that emerging entrepreneurs and all entrepreneurs
can access contracting. As well as the technical assistance.
And obviously, the Community Navigators pilot program has
enabled us to level up our outreach into more communities,
build bridges to underserved communities across the country so
that they can better access the resources of the federal
government, in particular, the SBA and the capital programs and
the contracting and other market access programs we provide.
So with those actions, we hope to continue to expand our
reach, and beyond that though. Of course, this is a moment for
the SBA to step into a broader role in entrepreneurship. We are
seeing increased rates of entrepreneurship. We want to leverage
the attention through the Paycheck Protection program and all
of our relief programs to now better reach and serve and build
trust in communities that we have seen come into the SBA's
programs. I said over 8 million unique small businesses have
tapped into those relief programs. More sole proprietors and
mom and pops where we know people of color are over indexed and
we want to make sure that we are serving them with the products
and services that meet their needs and meet them where they
are.
Mr. EVANS. Community development financial institutions
were critical to getting PPP loans to small businesses in my
home city of Philadelphia. During the pandemic, several
minority-owned were turned away from larger banks. The budget
says SBA is establishing an aging priority call to increase the
number of community financial institutions in SBA. Each of the
federal banks where they have offices dedicated to CDFIs and
Minority Depository Institutions. Do you think a similar office
would help SBA get more community-based lenders into the 7(a)
program?
Ms. GUZMAN. We have within the Office of Capital Access, a
team dedicated to growing lenders in our communities starting
with the Microlending Intermediary program and then as well
with our Community Advantage attracting CDFIs and CDCs. We have
increased and strengthened our relationship with the key CDFI
organizations to ensure that they have access to our programs
and are familiar. We also offer technical assistance across to
all lenders, community banks, and CDFIs and others to make sure
that they can access our programs. And we know that the most
important thing is to simplify our programs across our
portfolio. We have started with the Community Advantage program
in trying to simplify eligibility in underwriting to make sure
that we can support the lending institutions with these small
dollar loans that are just as expensive as doing larger dollar
loans.
And so we want to enable the industry to better support
small businesses through our programs and we believe that the
existing structure that we have in place will allow us to do
so.
Mr. EVANS. I want to thank you sincerely for coming to
Philadelphia and walking down 52nd Street. I really appreciate
your leadership and the way that you are operating. And I thank
the Chairperson who also was in Philadelphia and spent time
with us. So again, I thank this collective leadership. Us,
working together collectively, it is in our interest for the
sake of small businesses being Small Business National Week. I
thank you again.
And I yield back to you, Madam Chair.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from California, Ms. Kim,
Ranking Member of the Subcommittee on Innovation,
Entrepreneurship, and Workforce Development, for 5 minutes.
Ms. YOUNG KIM. Thank you, Chairwoman Velazquez. And I want
to thank Administrator Guzman for joining us today to discuss
the administration's Fiscal Year 2023 budget request for SBA.
Small businesses that you represent are facing many
economic headwinds with supply chain disruptions, record-
setting inflation numbers, and increase in gas prices. I am
sure you saw the report from NFIB that reports that the number
of small business owners expecting business conditions to
improve in the near future has fallen to the lowest level in
nearly 5 decades. And that is a troubling report considering
small business owners are some of the most optimistic people
that we know.
Back in my district in Orange County, the average gas price
is close to $6 now. That is $2 more than what it was a year
ago. So, Administrator Guzman, my question to you is, can you
tell us if there is anything in the budget request for SBA that
specifically helps small business owners overcome some of the
issues that they are facing with high inflation, labor
shortages, and energy costs? And what are you and your
department, SBA, doing to regain the confidence from small
business owners moving forward?
Ms. GUZMAN. I thank you so much for that question. As I
know, I share that empathy with small businesses and the
challenges they are facing, and I am hearing from small
businesses that they have these issues. I know that within the
SBA's budget specifically, you know, we try to make sure that
we are offering support for our small businesses for all the
impacts to their bottom line and helping them to ensure that
they are strategically positioned around their pricing
strategies, around ways that they can improve operational
efficiency, their staffing strategies, so that they can
navigate any challenges that come their way.
And so within our budget, we are expanding entrepreneurial
development across our key program offices. And importantly,
within some of our grant programs that hope to improve their
revenue creation as well. The 7(j) grant program is about
making sure that our businesses are contract ready and can grow
their businesses, bring in the revenue through federal
contracting, as well as fast grants which, of course, support
innovation to strengthen economies locally. So I do believe
that those are really core to helping small businesses and our
advisor network around the country do work daily with small
businesses, helping them to ensure that their business models
are strong to navigate and to connect them to capital when that
is a solution for them.
Ms. YOUNG KIM. Glad to hear that. But are you deploying any
SBC resources such as SBDC, women business centers, the veteran
business centers, as well as SCORE mentors, how are you
deploying those?
Ms. GUZMAN. So what we have asked them to do is to come up
with specialized programming. One of the SBDCs has a
specialized program on supply chain and they are trying to
share those best practices around the country so that they can
better train businesses on supply chain management. Others,
there is a veterans focused center that is working with local
military spouses to connect them to businesses for employment
so that we can help with those wage pressures. So there are
specific programs within our centers that focus targeted on
these issues.
Ms. YOUNG KIM. Thank you.
I want to talk about the recent report of the Office of the
Inspector General that some loans totaling $66.4 billion that
SBA did not meet the 90-day statutory requirement to remit the
forgiveness payments to lenders. Additionally, the report
states that SBA did not meet the 90-day requirement for over 98
percent of those loans over $2 million.
So can you talk about why is it that SBA is failing to meet
that 90-day statutory requirement? What is your plan to develop
a plan to ensure that the forgiveness reviews and remittances
are completed within the 90 days as required by the law?
Ms. GUZMAN. The Office of Capital Access continues to work
with the lending institutions to make sure that they get the
technical assistance they need to follow through on all the
forgiveness requirements. We continue to support our lending
institutions on that front as well as on the backend try to
help with the small business preparedness. And so we will----
Ms. YOUNG KIM. Can you give us a little more specifics on
that?
Ms. GUZMAN. I can have my team follow up with your staff,
as I know, to make sure that we give you the full plan on
forgiveness.
Ms. YOUNG KIM. Okay. Well, thank you very much. My time is
up.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Maine, Mr. Golden,
Chairman of the Subcommittee on Underserved, Agricultural, and
Rural Business Development for 5 minutes.
Mr. GOLDEN. Thank you, Madam Chair.
One thing I want to ask about is the Office of Advocacy.
You talked about that office a little earlier. Earlier this
year, the Office of Advocacy actually put out a recommendation
that the Department of Correction--not Department of
Correction, Department of Commerce, revisit the timeline for
implementation of some regulations that were first announced
under the previous Administration but this administration is
still moving forward with. This has to do with right whale
regulations and our fisheries in New England, and specifically,
in Maine.
So, I wanted to ask, the Office of Advocacy does not
frequently just put out these positions. I think they cross
their Ts and dot there is and in this instance what they have
said is the market really does not have the equipment necessary
to comply and therefore, the Department of Commerce should
delay the deadline. We have yet to see that recommendation
adhered to or really had any engagement from Commerce about it.
So what role does SBA play working with the Office of
Advocacy to make sure that when they put out a recommendation
that it is consumed and hopefully acted upon?
Ms. GUZMAN. The Office of Advocacy is an independent office
that reports directly to Congress, as well as me and the
president. As they track these regulations that are being
promulgated by the different agencies, they flag when there are
small business concerns so that they can take into account
those issues and final rule. On this specific issue, I would
need to follow up with my chief advocate, acting chief
advocate, Major Clark, to understand a little bit more and see
if there is something that the SBA can do to support.
Mr. GOLDEN. Thank you. I appreciate that very much. And the
suspense on that is pretty tight. I think it is a May 15
deadline.
Ms. GUZMAN. Thank you. My team will follow up for sure with
your staff.
Mr. GOLDEN. Thank you.
I really appreciate the focus on trying to identify fraud
where it is taking place through some of these programs,
particularly the ones related to COVID programs. Obviously,
very important to put in good, new standards to prevent that
from being an ongoing problem in the future. But I think
finding the right balance is really important, too. And I am
thinking specifically about a constituent back home who has an
EIDL loan that is pending and it has been quite a long time
now. Small businesses really I think need a timely response as
much as they also need it to be adjudicated correctly.
So how do you see the SBA finding the right balance between
doing what we need to do to prevent the fraud and make sure we
identify any that has taken place and hopefully pursue working
with the other partners? How do you find the right balance to
make sure that you are going to be able to process these loan
applications quickly enough for them to be helpful?
Ms. GUZMAN. Thank you so much.
We believe that you do have to have speed and certainty,
and so a balance of both. We want to make sure that the
customer service experience is also really strong. And with the
programs that I have been able to control for the full
environment, like the Restaurant Revitalization Fund program or
after we have made changes on Shuttered Venues, you know, we
feel that we have tried to put the customer experiences at the
forefront as much as possible. With COVID-EIDL, regrettably,
although we have been putting out still an average of $700
million a day through June when I made all the significant
changes to overhaul the process and move it to my Office of
Capital Access, we put out $1 billion a day, as high as $3
billion a day. The largest banks in America put out $1 to $2
billion a month on all loans, including credit cards. And so,
our scale and the amount of support that we have been able to
give to small businesses has been large. But I know that there
are still a few thousand businesses that remain. On average, it
is taking 2 to 3 weeks to process every loan under $500,000.
Above $500,000, up to a month. Most of the cases for those who
are remaining are through their second or third request for
reconsideration. And so we are taking all of those
reconsideration requests seriously. But it is important to note
that a lot of the borrowers that were processed in 2020 without
any controls have now had to come back to the table and provide
tax documentation and clear some of the fraud controls.
We are happy to work with your team on specific constituent
requests to see if we can help shepherd any issues that they
might be having.
Mr. GOLDEN. Thank you. I appreciate that very much. And we
will follow up.
Ms. GUZMAN. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Wisconsin, Mr.
Fitzgerald, for 5 minutes.
Mr. FITZGERALD. Thank you, Administrator Guzman, for being
here today.
On April 7, the House passed H.R. 3807, which I will be
kind, I think it was a disingenuous piece of legislation. I
will be kind and not call it an all-out fraud on the restaurant
industry, the relief for restaurants and some of the other
small businesses that were directly affected. And basically, I
think you are probably well aware, it provided $44 billion in
appropriations for restaurant revitalization. An additional $13
billion to stand up some of the brand new grant programs, I
guess, is the best way to describe them. And then it was sold
as, you know, this was going to be paid for with EIDL and PPP
fraud monies recovery.
And so I think the most recent estimate is, and this is
from Secret Services, that $1.1 billion in the fraudulent
pandemic loans has been recovered. So with the total estimated
$84 billion in fraudulent payments, I mean, I hope we can agree
that there is not enough time or money or personnel to possibly
get that number to match up and recover the $57 billion.
So let me ask you this. Is it fair to say the SBA does not
currently have the capability to recover the $57 billion needed
to pay for the bill that the House has already passed?
Ms. GUZMAN. My understanding is that that bill would
rescind funds from COVID-EIDL targeted advance and advance that
were remaining, not on the fraud side. It is remaining funds
from those unused programs as well as, you know, Shuttered
Venues and EIDL.
Mr. FITZGERALD. Yeah. Well, let me interrupt you. Because
the ENTREE Act is what was introduced by my colleagues here on
the Committee. And in fact, you know, the Committee for
Responsible Government is saying there is still $884 billion
out there that could be recovered, that could be brought back.
But that does not seem to be happening at all. And I think what
we are frustrated by is that there is this idea that this
product is being sold out on the street as, hey, no problem. We
are going to do the due diligence on this and the fraud and we
are going to recovery all these funds and then it is going to
be readily available for the restaurants. But the math does not
add up at this point and I am wondering what your comment is on
that.
Ms. GUZMAN. What I would also share is that the SBA works
closely with the IG and other federal authorities who actually
recover funds. We report fraud. We collaborate with them.
Mr. FITZGERALD. That is great. That is great. I am asking
you more about the numbers though. It is just not going to
happen though, is it? Can you admit that it is not going to
happen?
Ms. GUZMAN. They are going to be working really hard to
investigate all of this potential fraud and actually prosecute
their final----
Mr. FITZGERALD. Well, that is awesome but like I said, I do
not think that gets the job done. And this is the frustration I
think. It is like some of my colleagues said earlier, we have
got to go back to the district. And when you talk to these
restaurateurs, they are like, well, I just read in the paper
yesterday that the money is coming. But the fact of the matter
is there is no way to et these two figures to match up. The
recovery, the amount of fraud and abuse recovery that is
happening out there does not match up with what restaurants are
being told throughout this nation is going to be available to
them.
Ms. GUZMAN. Well, I know that the IG himself has not
completely estimated how much would be recovered. I know they
work hard every day to ensure that that happens. Our budget
request actually requests a nearly 30 percent increase for the
IG budget so that they can continue to manage to those resource
constraints.
Mr. FITZGERALD. So I am just going to make the assumption
that it is not going to happen. That you are not going to be
able to recover those funds at a rate that is going to fund
H.R. 3807.
So what would the strategy be from this point moving
forward? How would we address that once it is obvious that
there is a shortfall and that the wheels fall off of this
entire thing?
Ms. GUZMAN. The SBA stands ready to implement the program
if it is moved forward by Congress. And in terms of the
decisions from any remaining funding or any other sources of
capital, I would not be able to speak further about that.
Mr. FITZGERALD. I mean, you know, clearly, I think that the
speaker put the Bill 3807 on the floor to develop some
political cover for her Members. And I think there are even a
few Republicans who have voted for it. Shame on them. Because
it is disingenuous. It is not going to happen. And the
restaurants of this nation need to hear that and need to find
that out. And I would hope that the SBA be part of not only
disseminating that but lowering the expectations that this
bailout is coming any time soon.
Ms. GUZMAN. What we are trying to do is continue to support
our restaurants. We know, we agree with you, they have been
impacted and continue to struggle and face challenges. And we
would stand ready to implement anything Congress decides on.
Mr. FITZGERALD. Thank you, Madam Chair. I yield back.
Chairwoman VELAZQUEZ. Time has expired.
Now we recognize the gentlelady from Illinois, Ms. Newman.
Ms. NEWMAN. Thank you, Madam Chair. And good morning to
everyone.
So first of all, Administrator Guzman, thank you so much
for your tremendous work. I know you were handed a proverbial
hot mess and you have done a really good job. So thank you from
this Committee, but all of Congress.
A couple of other clarifying comments. You know, I hated
taxes when I was a small business owner as well. Absolutely
hated it. I thought it was unfair and all of that. But as we
know, and as you articulated very clearly, that largely small
businesses will not be affected by President Biden's new tax
model. So I just want to be clear and reiterate that again for
the record that that is not true that small businesses will be
affected adversely. In fact, what it does do is will make large
businesses pay at a fair rate and do their job and be good
patriots and Americans in this country.
So a couple of other clarifying comments before I get to my
question about access to capital and a few other things.
So, you know, I am very certain you are talking to the
president all the time about advocating. So thank you for your
advocacy on behalf of small business. I truly appreciate it.
I do want to make a comment about climate. Climate change
is everybody's business. It is small business's business. It is
my business. It is everybody's business. So, the fact that you
are supporting green entrepreneurs, I am introducing a green
incubator act pretty soon that will coordinate with the SBA.
And it is critically important that we all engage. So thank you
for your advocacy there.
So my question. Staying consistent with the topic of
capital access, I would like to segue into poor climate
decisions. How does the SBA intend to update policy on
addressing small business capital access needs on climate
crisis issues within the existing 504 program or the Microloan
program?
Ms. GUZMAN. Thank you so much for your comments and the
question. I will agree that small businesses, according to the
Treasury 97 percent of them would be not impacted by the taxes.
With the climate, specifically, the request that was made,
we would hope to shore up our lending specifically. We know
that small businesses and communities that are increasingly
impacted by disasters are the ones that are hardest hit and
they have the hardest time recovering. They need to mitigate
for future disasters, especially when you look at communities
that have been hit time and time again and continue to have to
draw disaster assistance. They need to mitigate so that they
can have less damage. So that funding would go a long way
towards helping small businesses mitigate. I have repositioned
my Office of Disaster Assistance to focus on resilience and
really make sure that small businesses are aware of these
resources, and communities. Because, obviously, we do
homeowners and renters as well within our disaster programs.
So, we would definitely want to lean in on supporting small
businesses in that effort.
As well as across our 504 program. It is a perfect example
as well. As we are funding, we would want to level up and allow
them to make those mitigation changes as they develop property
to make sure that they are prepared for any natural disasters
on the horizon. And of course, within the 504 program, it is a
really critical asset-building resource for small businesses as
they expand in property.
I think within the programs that SBA offers on innovation,
that is why there is also quite a bit of excitement around
climate. We are funding technologies overall within the federal
government on the SBIR-STTR program and SBA is the one that
channels those funding supports to small businesses and helps
with education. We will continue to lean in on that and all the
issues that are challenging our nation and the world, whether
it is health, agtech, or climate, or any other issue.
Ms. NEWMAN. And then I have one final question I am going
to sneak in at the end here. Anti-trust related.
In light of President Biden's most recent executive order,
do you feel like the SBA has enough money to fund, study, and
report on the federal government's effort to protect small
business competition through anti-trust enforcement?
Ms. GUZMAN. Well, the SBA, obviously, we have requested an
increase in our budget of 2.5 percent just to support all of
our activities around entrepreneur development and capital
access. We continue to just provide advisory services and
support to small businesses. And that is the purpose of our
focus around the entrepreneurial support and continue to try to
position them to compete and expand our productive capacity
within this country.
Ms. NEWMAN. And just very quickly, Administrator, because
it is important to note, and that is terrific and I so
appreciate that, but there is no specific money identified to
really reckon with the fact that large businesses are always
first in line for business in general. So, we are not studying
that right now?
Ms. GUZMAN. Not within the core SBA budget funding. So we
are, of course, always working with small businesses to better
compete in government contracting and better position them. And
that is the extent of our work.
Ms. NEWMAN. So we have work to do and I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentlelady from Texas, Ms. Van Duyne,
Ranking Member of the Subcommittee on Oversight,
Investigations, and Regulations.
Ms. VAN DUYNE. Thank you very much, Madam Chair, and to the
Ranking Member for holding this hearing today. And thank you,
Administrator Guzman, for appearing before us.
This has been interesting and entertaining comments that I
have heard from some of my colleagues. But to say that the
president's proposed tax plan does not negatively affect small
businesses is just completely not only disingenuous but
dishonest. To believe that small businesses do not get a pass-
through cost from large businesses or that small businesses are
not paying more as a direct result of this administration's war
on the oil and gas industry, it is not only naive but it is
completely dishonest and it is completely wrong. But again, it
has been entertaining.
Before I begin, I wanted to thank you, Administrator
Guzman, for coming to visit Texas 24 earlier this year to hear
directly from our businesses and their current challenges. If
you recall, one of the restaurant owners, she highlighted
exactly how difficult it was right now. And I think you heard
from almost everybody at that table to find labor. Labor that
was willing to work and not just leave after a few days on the
job or demand a wage that would bankrupt them. I think you also
heard from one of our local homebuilders who discussed just how
costly the skyrocketing energy costs have been as they disrupt
every single aspect of business.
So again, to say that somehow this administration's
policies are not affecting small businesses is completely
dishonest. But I think we both know that these concerns
continue to consist today. And I am really hoping that you
benefitted from your time down in District 24 and that you
heard these things directly from those business owners.
I do want to talk to you about the EIDL program and some of
the fraud and direct lending issues that we have seen from SBA.
SBA gave out approximately $369 billion in the EIDL program.
Within the EIDL program, the OIG identified approximately $84
billion in potentially fraudulent activity associated with
direct loans and direct grants from within the program. So
almost one out of four of the loans were considered fraudulent.
And based on that fraud rate, do you think it is best that
SBA expand direct lending in other programs?
Ms. GUZMAN. Thank you so much, Congresswoman, and I
appreciated visiting with your businesses and learning about
their challenges. So, I really appreciate that time that you
took with me.
With the COVID-EIDL program, it is a tale of 2 years in
terms of implementation as well. And the 2020 EIDL without
controls limited the agency's ability to control for fraud
completely. In 2021, thanks to the Economic Aid Act, we were
able to then reinstitute reviewing tax documentation from all
these businesses. And that is, of course, help to the Agency
limit fraud as well as we now again checked the Treasury's do
not pay list.
Ms. VAN DUYNE. I just have a question since you brought it
up. Between 2020 and 2021, can you tell me how much money was
fraudulently released in 2021?
Ms. GUZMAN. The IG and GAO reports largely address the 2020
funding. And so----
Ms. VAN DUYNE. Do we know how much money was fraudulently
released in 2021?
Ms. GUZMAN. The IG is still monitoring and assessing----
Ms. VAN DUYNE. I mean, your statement that all these things
happened in 2020 and then you had controls in 2021, how do you
know how to compare if we do not have the 2021 numbers yet?
Ms. GUZMAN. What I have is that the IG and GAO have been
pleased by the controls that we have implemented and agree that
that will go a long way towards addressing fraud and----
Ms. VAN DUYNE. So the idea is that when we get those
numbers that they are going to be considerably, substantially
lower than in 2020?
Ms. GUZMAN. That is the expectation from the watch dogs as
well as the agency based on what we are seeing. And keep in
mind that----
Ms. VAN DUYNE. Do you know when we can expect those numbers
to come out?
Ms. GUZMAN. No, I do not have any assessment on that. So,
we continue to work with the IG very closely and as I know he
does with you as well to make sure that you receive that
information in a timely manner. But with the EIDL program----
Ms. VAN DUYNE. And I know I have only got 45 seconds left.
Since you are talking about fraud, I also want to mention that
there is over $100 billion of fraud estimated in various small
business relief programs. One hundred billion going overseas,
to put it plainly, our federal government dollars literally to
billions of taxpayer dollars and handed it over to fraudsters
who put in minimal effort to obtain those funds. And as you
know, this fraud limited the amount of access that well-
deserving businesses had to relief. This is all unacceptable.
But Administrator, how does the SBA relieve fraud--how do
you estimate that will end to sending money outside of the
U.S.? I mean, it seems like we have already had a quarter of
the money going out illegally for the EIDL program, and now we
are sending hundreds, you know, billions of dollars overseas
fraudulently.
Tell me how the SBA is going to be handling that in the
future.
Ms. GUZMAN. We have implemented the super robust fraud
controls, as well as mitigation. And recently, I announced a
Fraud Risk Management Board to replace the Fraud Risk
Management Council to ensure that across the whole of agency,
across all of our key program offices, we are putting in fraud
at the design of programs, as well as ensuring that the
controls are strong across the agency. So, we feel with these
added measures, we can have strong controls for all the funding
to be controlled.
Ms. VAN DUYNE. Well, I look forward to getting those
numbers for 2021. Thank you very much.
I yield back.
Chairwoman VELAZQUEZ. Time has expired.
Now we recognize the gentlelady from Kansas, Ms. Davids,
Chairwoman of the Subcommittee on Economic Growth, Tax and
Capital Access.
Ms. DAVIDS. Thank you, Chairwoman. Thank you again,
Administrator Guzman, for joining us here today to talk about
our Fiscal Year 2023 SBA Budget proposal. The SBA is requesting
$4 million for the manufacturing hub proposal, which is a new
initiative to address supply chain deficiencies that have been
both exacerbated and made more visible during the COVID-19
pandemic. I am really interested to hear more about this effort
on expanding and strengthening our small business manufacturing
bases. It is going to be incredibly important as part of our
diversification of and building up of our supply chains. That
is something I have been particularly focused on. I am very
fortunate to have been named a conferee alongside Chairwoman
Velazquez as we look at the supply chain and manufacturing
legislation that we are hoping is going to actually address
some of this stuff.
I am curious if you could elaborate a bit on the scope of
the manufacturing hub proposal and how that will work or the
intention behind it. And then, you know, what the proposal will
involve in terms of the resources being requested.
Ms. GUZMAN. Thank you, congresswoman. And this is SBA's
effort and contribution in trying to expand the productive
capacity in the United States. We know that 75 percent of
manufacturers are 20 and under employees. Still over 90 percent
small overall. And so, we want to make sure that we support
them and give them access to especially government contracting.
We focused this initiative within the government
contracting business development space because we want to make
sure that the government is buying from Made in America, and so
we are hoping to expand our outreach, our training, as well as
technical assistance to more manufacturers to engage in
government contracting. But in addition, beyond that, we want
to make sure that we are deploying resources to help more
businesses interested in manufacturing in the United States.
Just recently, I met with a small business owner who was
specifically wanting help in trying to manufacture her products
here in the United States as she is having to deal with supply
chain global issues in her business currently. And so, these
are the types of businesses that we want to support by giving
them the technical assistance around manufacturing in the
United States.
Ms. DAVIDS. Thank you. And I am sure our office will be in
touch as that program gets stood up and starts moving forward.
There are a lot of smaller, like 75 percent of manufacturers
being under 20 employees. There certainly are a lot in the
Kansas 3rd that fit into that criterion.
I wanted to switch over really quickly to the Fraud Risk
Management Board that we have heard a bit about this morning. I
think getting those guardrails in place, making sure that
moving forward we are addressing and preventing fraud.
Can you talk a little bit about what kind of structures are
being implemented through the board? And then kind of what they
are replacing?
Ms. GUZMAN. With the Fraud Risk Management Board, I hoped
to integrate a more holistic approach to fraud risk management
so that all of our program offices would be engaged. All of
them have a role in setting up programs and making sure that
they design them with good controls.
And so, the management of the Fraud Risk Management Board
includes all my key program office leads, as well as it is
chaired by my CFO. So that is an important addition. We want to
make sure that controls are guided by the organizations that
deliver our capital access programs, our disaster assistance
programs, our government contracting, and entrepreneurial
development.
But in addition to that, as well as building a more
collaborative effort across the agency, I wanted to make sure
that the framework complied with the GAO standard. And this new
Fraud Risk Management Board does that and ensures that we
satisfy that requirement of the GAO. The structure itself, it
will report in through the Enterprise Risk Management Board
that was established back in 2015 and reports directly to me.
In addition, my Special Counsel for Enterprise Risk will sit as
an advisor on the Fraud Risk Management Board to ensure that
there is a constant tracking of their activities. And
importantly, we embedded fraud risk management into the
performance of all the key members of the Fraud Risk Management
Board, which I think also goes a long way to ensuring that they
know that the agency takes this seriously.
Ms. DAVIDS. Thank you.
Chairwoman VELAZQUEZ. Time has expired.
Ms. DAVIDS. I yield back.
Chairwoman VELAZQUEZ. The gentleman from New York, Mr.
Garbarino, is recognized for 5 minutes.
Mr. GARBARINO. Thank you, Madam Chair. Administrator
Guzman, thank you for being here today.
We have already heard a lot of questions about the fraud,
dealing with the EIDL. And when they say possibly $86 billion,
that was the last report, and I think a new report is going to
come out which is probably going to raise that number. I do not
think you can talk about it enough, about how bad this fraud
was with these programs, with the COVID-programs.
I am hearing in my office people who have still had
applications in over a year. We have had to deal with a couple
of cases where people have had EIDL applications in for COVID
over a year and you said before you are getting some
applications done with another program with maybe 2 weeks to a
month. Why is it taking over a year for some of these
applications to be processed? I understand that not everyone is
back to work yet? Career employees are still working from home
or have the option. Could that be leading to it? I mean, why
are these taking over a year to get them?
Ms. GUZMAN. Actually, the COVID-EIDL program is the program
I was referencing in which the average turnaround time is 2 to
3 weeks for $500,000 and under. And it is about a month for
those above. And that is the one that we are processing about
$700 million a day and have been on average since the summer, a
billion dollars a day. Within COVID EIDL, I was not happy with
the way it was and I actually moved it to my Office of Capital
Access to streamline processes. In the fall, we also changed
the customer service contractor so that we could improve
customer service to the small businesses.
With those borrowers that you are finding, who have been in
the system for that long, they are under multiple
reconsiderations. In other words, they have been denied and
have come back for further reconsideration. In many cases, the
majority of their cases, they did not have their 2019 taxes
filed or reported or needed a modification. And so that adds
some additional time but it should not be a full yar.
So, what our district offices are doing, we have also
empowered them to access the information about the EIDL
program. We are happy to work with you and your team to
investigate any specific cases that we can unstick in the
process.
Mr. GARBARINO. I would appreciate that.
The teams have been helpful when we reach out but everybody
does not call their congressman every time, so it moves once we
call but small businesses are dealing with a lot of other
things that having to get in touch with us.
Ms. GUZMAN. If I could add, we have added a lot of
resources to those pending applications so that we can continue
to get them down as we close out this program.
Mr. GARBARINO. I appreciate that. Thank you.
Now, are all the SBA employees back to work or are you
still having people work from home?
Ms. GUZMAN. We have had a return to work stance in February
and we are still transitioning with our union employees but we
are, you know, a majority of our headquarters have returned to
work. But that has not impacted. Obviously, we have scaled to
put out $1.2 trillion in relief and have been very productive
over these past 2 years.
Mr. GARBARINO. What would you say a majority is, 51
percent? How many people are back to work and not working from
home anymore?
Ms. GUZMAN. In the headquarters area, it is over 70
percent.
Mr. GARBARINO. Okay. Thank you.
I notice as part of the budget, also, the administration is
requesting authority to transfer $320 million from the targeted
COVID-EIDL Advance account to support loan servicing and other
related programs. I think there has already been over $4
billion has been used for salaries and whatnot for servicing.
Why do you need another $320 million?
Ms. GUZMAN. The COVID-EIDL program is, of course a 30-year
loan. And so, we will now be servicing $3.9 borrowers. And the
SBA anticipates needing additional funding to continue to
manage this portfolio into the future and make sure that they
have the resources and the customer service that is expected.
Mr. GARBARINO. How much has been put, I mean, it has been
over $4 billion though, has it not, that has been put towards
the program already and you are transferring another $320
million?
Ms. GUZMAN. The program has disbursed nearly $4 billion in
funding correct loans to small businesses.
Mr. GARBARINO. I am just going to switch to one more
question since I have a little bit of time left. From small
business, what is the top issue that you are hearing? What is
their biggest concern?
Ms. GUZMAN. Across the board, we need small businesses. And
note that we have also had a surge of new entrepreneurs as
well.
Mr. GARBARINO. Just top issue. I have got 20 seconds.
Ms. GUZMAN. The top issues are multiple though. So Capital
Access is always one of the top issues. And in addition, when
managing their business----
Mr. GARBARINO. Anybody talking, sorry to interrupt, but
anybody----
Ms. GUZMAN.--supply chain, inflation----
Mr. GARBARINO. Inflation. That is what I am hearing.
Ms. GUZMAN.--and workforce issues across the board.
Mr. GARBARINO. Inflation.
Ms. GUZMAN. So I would put all of those four.
Mr. GARBARINO. But inflation is what I am hearing a lot
from all different businesses. And I am running out of time but
what does this budget do to address inflation?
Ms. GUZMAN. for SBA in particular or broadly? The
president----
Mr. GARBARINO. SBA.
Ms. GUZMAN. For SBA, specifically, we are leaning in to
entrepreneurial support, to help small businesses navigate the
issues that they have had to face. Obviously, we look towards
helping them with strategic planning, and financial management,
supply chain management, and our centers offer specific
targeted support and technical assistance in those areas.
Mr. GARBARINO. I am out of time. Thank you very much.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
The gentleman from Louisiana, Mr. Carter, is recognized for
5 minutes.
Mr. CARTER. Madam Chair, thank you very much for the
opportunity to address, and Administrator Guzman, I would like
to personally thank you for touring my district and having the
kind of attention to deal that my constituents certainly
deserve and certainly appreciate that you undoubtedly provide,
and the care that you give. We know that you have a very tough
job but we certainly appreciate the hard work that you and the
Members of your team are providing for the people of American.
One observation and two questions. First observation is
that there were comments that were made earlier that suggest
that somehow climate change was not a part of SBA and it should
not be a part of the discussion. I would like to very
respectfully challenge that premise.
In my district, we have had substantial impacts from
climate, whether it is hurricanes, floors, or tornadoes that
have incredibly impacted our small businesses to the tune of
people having to borrow money. To only have to come back and
borrow money again from SBA because of natural disasters that
were no doing of their own. So, climate change is very much a
part of the world that SBA plays in helping businesses,
particularly small businesses, stand back up after these
horrific natural disasters.
So, I thank you. I thank your administration. The
administration, the Biden administration, and certainly your
administration, Ms. Guzman, for being very attentive.
So, one quick question. Is a real life issue that happened
in my district. There was an individual that applied for an
EIDL grant, received notice that she had been approved, and
that money had been transmitted to her account.
Now, I have been in communication with a number of your
staff people. But I want to bring this to your attention
because we have not gotten a positive result yet, but I think
one should be in order. She applied for an EIDL grant. Was
approved for the EIDL grant, was notified by SBA that the funds
were being transferred to her account.
Several days go by. She realized the money has not. It was
determined by SBA that there was a glitch and that the money
was supposed to have been transferred but never made it to her
account. By the time she brought that to their attention to the
time that they attempted to correct the glitch, meaning to then
send the money to the proper account, she was told that, oh,
the program rules have changed and you are no longer eligible
for the funds that you previously, only a week earlier, had
been approved for.
Well, listen, that seems terribly wrong. If the person was
approved and then somewhere in the process there was a rule
change, I think it is only reasonable that some exception be
made to assist this individual. I will not give her name or any
of that information on an open line, but your staff is well
aware of this and I will share it again to your office.
Can you talk about that very briefly? And I suspect that
this is not a one-off. This may have happened to other people
throughout the country, but certainly, it is a travesty and it
is no fault of the applicant but they should be made whole.
Ms. GUZMAN. Thank you so much for the time that you spent
with me in your district. It was very informative, especially
with the businesses impacted by repeat natural disasters.
I will say on the COVID-EIDL program, as well as the
Advance program, we obviously, you know, those programs closed
December 31. We continue to administer funding on any
modifications for the EIDL program. I am happy to explore this
further. My team will follow up immediately with your staff on
this constituent request in particular. I am not pleased with
the EIDL program overall and obviously made some significant
changes over the summer to move it, reposition it, add new
processes and procedures, and in the fall, changed the customer
service support.
Mr. CARTER. And I am sorry to cut you off, Madam, because
my time is going to go up. I want to be very clear and
complimentary of your staff. The Region 6 administrator has
gone as far as he could with trying to explore this. Your
people have looked at it and have been extremely helpful,
albeit not getting it over the goal post. So, your extra
attention to this would be critically important, particularly
to my constituent in Louisiana who has been very patient but
has clearly been wronged.
And with my final 10 seconds, I want to just once again
make a play for something that I have spoken to you before and
others, and again, I want to thank you. And that is individuals
who have had to apply for SBA loan each time there is another
natural disaster. I would ask again that you would consider
some loan forgiveness.
Chairwoman VELAZQUEZ. Time has expired.
Mr. CARTER. And I thank you.
I apologize for overrunning.
Could she at least answer that, ma'am, speak to that?
Chairwoman VELAZQUEZ. Time has expired so if you could
answer in 5 seconds.
Ms. GUZMAN. We do not have forgiveness authority on the
disaster programs so we will continue to follow up with your
office on any specific requests.
Mr. CARTER. Thank you.
Chairwoman VELAZQUEZ. Now we recognize the gentleman from
Florida, Mr. Donalds, for 5 minutes.
Mr. DONALDS. Madam Administrator, it is good to have you
back. Thank you for being here. I will say in all honesty,
Administrator Guzman, I do appreciate you coming. We are still
waiting for Secretary Yellen to materialize in the halls of
Congress. Not quite sure where she is. I see her on CNBC. I see
her on TV randomly. She somehow finds her way to the Senate but
she has not appeared in this Committee, which she actually has
responsibility to do. But I do appreciate you taking this
responsibility being here, answering questions from the
Committee.
I want to start here. Obviously, the president's entire
budget has come out. Yes, we are focused on the small business
budget. But the small portion of the president's budget
obviously impacts businesses, large and small, Americans,
whether they are rich, whether they are middle income, whether
they are poor. Under the president's tax proposals, he is
calling for rises in the top marginal tax rate back to, I
believe, 39.6. He is calling for tax rate increases from 21 to
28 percent on the corporate income tax side. Essentially,
undoing the Tax Cut and Jobs Act. Is it the opinion of the
Small Business administration that these tax increases are
going to be to the betterment of small businesses in the United
States.
Ms. GUZMAN. Thank you so much for your comments and
question. I will say that we know from Treasury's analysis that
97 percent of small businesses would not be affected by any tax
increases. And the president has been committed to ensuring
that nobody under 400,000 would be impacted. And so, we
continue to try to support our small businesses with all their
bottom line impacts at the SBA and providing the technical
assistance and capital access and market access to help them
thrive in any economy.
Mr. DONALDS. I am glad you mentioned Treasury because once
again I will say, where is Secretary Yellen? Because this
actually falls right into her wheelhouse. It will be great to
have this dialogue with her, somebody with an economic mind. We
can have that jujitsu, if you will. But what I would ask is,
obviously, maybe small businesses, they incorporate many
different ways. Some of them are C corporations. Obviously,
they would be directly hit by a raise in the corporate income
tax rate. A lot of them are S corporations. Or they are sole
proprietorships. So, the business income actually falls to
their personal income taxes. So, I go back to my time in
banking. A lot of small business owners, their business income
actually flows through their personal income taxes which would
put them in the window of paying higher taxes because the top
marginal rate would increase.
The only other thing I would add to that is even under the
president's budget, the $400,000 number is for a couple. But if
it is individuals, you are talking more than $215,000. If you
are somebody who is single and runs a small business and you
are earning more than $300,000, your taxes are going up. And
typically, if you are earning over $300,000, you are probably
employing maybe less than 10 people. So, we are talking about
the smallest of the small businesses who operate a sole
proprietorship, maybe partnerships, that are going to be hit by
rising taxes. Do you think that is problematic?
Ms. GUZMAN. Well, again, I mean, those 3 percent of the
businesses that would be affected, 4 percent are C corps, and
of course, those pass-through entities as well. But again, only
3 percent would be impacted, and my position is to continue to
try to support small businesses with the programs that SBA has
available for them--capital access, as well as market access,
and technical assistance.
Mr. DONALDS. Well, I think it is important to understand
that we can quibble on what the percentages are. I think it is
obviously more than 3 percent. I would love for Secretary
Yellen to actually dig into this a lot more for us. But let's
be also very clear. Some of those businesses in that 3 percent,
I am going to use your number, they employ the vast majority of
people in the United States.
I am going to move on.
Obviously, inflation is a big issue dealing with everybody,
whether you want to talk about individuals or the fact that the
producer price index, the thing that does not get talked as
nearly as much about is up around 12 percent year over year
which is catastrophic for businesses across the United States.
Have you and your administration had a conversation with
President Biden, Chief of Staff Klain, VP Harris, or the
Council of Economic Advisors? Have you had conversations with
them about the impact inflation is having on small businesses
in the United States and on the ability for businesses to repay
the EIDL loans that have been actually executed by SBA?
Ms. GUZMAN. Whenever I engage with those individuals, as
well as the White House, we continue to share insights on small
businesses and the impacts that they are having around
inflation and supply chain. That is why we focus on----
Mr. DONALDS. I have got 23 seconds left. I do not mean to
cut you off. But let me ask you this question. This is a better
question. What do they say? What do they say the remedies are?
What do they say they are going to do to help small businesses?
I would like to know what the president's opinion is on this.
Ms. GUZMAN. The president has expressed concern with the
rising costs on American families, as well as small businesses,
and he is taking actions to try to address those pocketbook
issues, as well as supply chain----
Mr. DONALDS. What actions?
Ms. GUZMAN.--to expand our productive capacity with----
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Mr. DONALDS. All right. Thank you again, ambassador--
Administrator. I gave you another promotion. Thank you,
Administrator Guzman.
Chairwoman VELAZQUEZ. The gentlelady from California, Ms.
Chu, is recognized for 5 minutes.
Ms. CHU. Administrator Guzman, I would like to make a
statement about the 504 program and then ask a question about
SBICs and then Community Advantage.
We know that SBA's 504 loan program is so critical to
helping small businesses with startup costs like purchasing
commercial buildings or expensive equipment. And in fact, last
year, SBA saw a 41 percent increase from the previous year.
Unfortunately, that same year the program exceeded its $ 7.5
billion lending authority in September and was forced to pause
lending for the remainder of the year, meaning that eligible
small businesses were left without funding.
This year, the 504 program is again going to run out of
funds by summer. And that is why I strongly support the
president's budget for 2023, which includes a $1.5 billion in
lending authority. And SBA's request for flexibility and the
authority to raise the 504 program's cap by up to 15 percent,
which is the same flexible authority for SBA's 7(a) loan
program. I think it is so important to make sure that everyone
can get the loans that they need and that there is not a
disruption in dispensing them.
And then my question about SBIC. I am a big supporter of
the Small Business Investment Company. I am proud that my
legislation to allow more capital to be invested in SBICs, the
Invest in main street passed the house in December and that
this Committee included these provisions in the reconciliation
package that passed the House in December.
Certified SBICs are one of the government's lowest risks,
highest impact tools to grow the businesses, but it is not
doing enough to reach our most underserved small businesses. In
2021, in fact, only 6.9 percent of the companies receiving SBIC
financing were women, minority, or veteran owned.
So, could you talk about how the 2023 budget request would
diversify the SBIC so that there would be greater
representation?
Ms. GUZMAN. Thank you, congresswoman. And I agree with your
earlier statements on 504. It is an important program that we
continue to try to focus. And to an earlier question that was
asked as well, we are looking to promulgate rules on the
Express 504. We have implemented that already.
On the SBIC program, I agree wholeheartedly that we want to
make sure that that capital is accessible across the country,
whether that is rural communities, diverse communities, as well
as veterans. We want to see capital spread equally across the
nation. The SBIC program, we are looking at from an outreach
perspective, as well as the actual rules and regulations and
the SBICs themselves to diversify and ensure that they are
diversifying across not only the types of borrowers that they
are supporting across the country but as well in the types of
funding. We want to make sure that at all stages of a
business's development, that they are able to access capital.
And so, we have been working closely with the industry to
make sure that we can support an expansion of the servicing and
offerings to the SBICs across the country.
Ms. CHU. Well, if I may, I also wanted to ask about
Community Advantage, which has been very powerful in reaching
significantly more female and minority small businesses than
traditional lending programs. So, I introduced legislation to
make this program one of SBA's core lending program which the
House passed last year.
Earlier this month, SBA noticed that it would be extending
the pilot for another 2 years, opening up the program to new
lenders and making some reforms to the program. However, there
is currently still no official notice or new Community
Advantage participant guidance reflecting these changes.
So, can you tell us when Community Advantage lenders should
expect to see reviewed participant guide and what the content
would be?
Ms. GUZMAN. That is in process. Of course, we put the
federal registered notice about, you know, less than 30 days
ago and we will be putting out those rules so that we can
expand the program as soon as possible.
Ms. CHU. Do you know when that will be?
Ms. GUZMAN. That is in the coming weeks. We are working on
that and prioritizing that now.
Ms. CHU. And how about there was also an evaluation on
whether the program should remain permanent. And I thought that
the program had proven itself
Ms. GUZMAN. I know that there was a statutory proposal to
make it permanent. We have extended it within the priority of
the pilot.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Now, we recognize the gentlelady from New York, Ms. Tenney.
Ms. TENNEY. Thank you, Madam Chairwoman and Ranking Member
Luetkemeyer. We are grateful, Administrator. Thank you for
being here in person.
As a small business owner for many years, I know what I
hear from my own employees, from my own colleagues, and from
other small business owners. Inflation, labor shortages,
subsidies by big government to other big companies, high
regulations, high taxes, particularly coming from a state like
New York are what we see as small business owners really
hurting us. And so, when we see these items coming from
government and this huge spending and we look to the Small
Business Administration for help to rescue us because we cannot
afford compliance costs. We cannot afford to manage the big
business advantages that they have. We look to the Small
Business Administration, and sometimes I hear today in this
meeting things that look like mission creep away from small
businesses and helping large businesses, and businesses that
may not even be considered a small business. And I worry about
that because of how vitally important it is as you, as an
administrator, and all of us to really be careful in how we
spend taxpayer dollars, particularly in inflation and small
businesses have to scrimp and save for every penny, just to
survive in this situation.
So, administrator, I want to jump to something really
important right now in terms of a small business looking at a
big business, gaming and getting advantage in the system. Would
you say that Planned Parenthood affiliates are in the same
category as a hotel or a restaurant?
Ms. GUZMAN. You know, with Planned Parenthood, I am
assuming you are talking about the Paycheck Protection Program.
Ms. TENNEY. Right. Would you say that a Planned Parenthood
operation, an affiliate, is in the same business and same
relationship as a hotel or a restaurant?
Ms. GUZMAN. My understanding is that Planned Parenthood
affiliates are independent and are individual entities within
that community.
Ms. TENNEY. Right. And you know why I am asking this
question because obviously we sent you a letter in February.
Thank you, we got it yesterday, so we appreciate at least
finally getting an answer. Because, as you know, under the
Paycheck Protection Plan created by the CARES Act, Congress
specifically stated that companies could not, particularly SBA,
could not issue forgiveness for PPP loans to any entity with
over 500 employees unless that affiliate was a hotel or a
restaurant. So that is why I asked you the question. So, I
think we can agree that Planned Parenthood is not a hotel or
restaurant. And the question is whether or not they are
considered an affiliate. But 34 individual loans, totaling over
$67 million, were given to affiliates of Planned Parenthood,
the Planned Parenthood Federation of America. And as you know,
Planned Parenthood is not just an innocent bystander. They are
the nation's largest abortion provider with over 16,000
employees, well beyond the 500 employee threshold established
by Congress for this PPP eligibility.
So, I wanted to clarify that assessment that you have about
Planned Parenthood because they clearly are not an affiliate
like a hotel or restaurant. They do not fit within that
exception. And so, you sent me a letter indicating, it was very
vague, actually, about whether or not this affiliation status
indicated that there was control by the national affiliate for
Planned Parenthood. And so, Planned Parenthood did have
exercise and control over its affiliates. And let me give you a
couple of examples.
First, becoming a Planned Parenthood Federation of America
affiliate requires a certification by the PPFA corporate board.
That is the national affiliate controlling the 16,000 jobs.
Second, each affiliate is governed by written bylaws which must
conform to the PPFA's corporate policies nationally. That looks
like control to me. And finally, the PPFA's corporate
headquarters imposes affiliation mandates on local affiliates.
Anyone who is looking at this control statute, and I have
it in front of me, clearly talks about the power to control has
to exist. It does not necessarily mean that it exists but there
are numerous examples of this happening with Planned Parenthood
and its affiliation where they exert that control, not just
that the control exists, where they exert it.
So, would you not agree that it is inappropriate for the
SBA to issue these exemptions and forgiveness for loans for the
Planned Parenthood Federation affiliates?
Ms. GUZMAN. I can share with you that the Trump
administration issued a preliminary determination letter. Any
of those borrowers, there were multiple, beyond Planned
Parenthood, only Planned Parenthood received that specific
attention. Anyone within that hold code, I put back into the
normal processing. And so, of course, our review teams
thoroughly reviewed all of those loans with those specific hold
codes, not just Planned Parenthood, all of them in order to----
Ms. TENNEY. Right. This is my time. You are mincing words.
I mean, this looks like we are doing an end run around a law to
fit a political agenda, not actually good stewardship of
taxpayer dollars. And specifically, prohibiting a law in place
that prohibits the ability of these types of national entities
with 16,000 employees to be able to take precedence over small
business community members who were left without the resources
because we prioritized a political agenda.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Ms. TENNEY. Thank you.
Ms. GUZMAN. I will be happy to follow up with your office.
Ms. TENNEY. Thank you. I would appreciate that.
Thank you. I yield back.
Chairwoman VELAZQUEZ. The gentlelady from Minnesota, Ms.
Craig, is recognized for 5 minutes.
Ms. CRAIG. Thank you so much, Madam Chair. And thank you in
particular to Administrator Guzman for your testimony today and
for your dedication to America's small businesses.
I would be remiss if I did not mention how proud I am of
the work of several Members of this Committee in long overdue
passage of the Relief for Restaurants and Other Hard-Hit Small
Businesses Act. I hope to see the Senate act in short order on
this necessary bill.
Administrator Guzman, I have been hearing from several of
my constituents who have been waiting for months, some nearly a
year, to see their COVID-EIDL applications approved. These are
everyday small business owners like Donald Wineland of DRW,
Inc., an Air Force Veteran from Prior Lake, and John Huseth of
Clay View Dairy from Dennison. In total, my constituents are
waiting on nearly $2.2 million worth of decisions from the SBA.
Can you give us a little bit of an update as to when COVID-EIDL
funds may run out? And how many applications remain under
review? These are vital dollars to my constituents, their
businesses, and the communities that they serve.
Ms. GUZMAN. Thank you so much for that question. We have on
COVID-EIDL, obviously, it is a program that we are heightened,
our attention is on as we round out this funding. There still
is funding remaining that we are using for loan modification
requests as well as any reconsiderations. It sounds like the
constituents are in the fold of reconsideration. We have just a
few thousand that remain in that bucket of reconsideration that
we are working through urgently every day just to make sure
that funding gets into the hands of the businesses that are
eligible for this funding. And we are happy to follow up with
your office on the specific constituent requests to make sure
that we are tracking them.
Ms. CRAIG. Thank you. I really appreciate that. And again,
anything you and your staff can do to help expedite these
applications I would be grateful.
As a Member of the Oversight Subcommittee, I would also
appreciate if you could provide the Committee with an update on
SBA's current anti-fraud efforts, especially with respect to
PPP and EIDL. All of us here have deserting constituents and
businesses in our district in need of these loans. And of
course, we all need to know that our taxpayer dollars are not
going to bad actors.
Ms. GUZMAN. Yes, I am happy to do so. From day one, we have
implemented strong controls in the Biden-Harris administration
to make sure that we could avert fraud. We have been working
collaboratively with the IG and the GAO to ensure that their
recommendations are implemented and that we continue to track
best practices as our response to fraud is iterative.
With the framework that we have recently solidified,
strengthened by replacing the Fraud Management Council with the
Fraud Risk Management Board, we have launched a strong
leadership approach to fraud for the years ahead. We are
ensuring that our senior leaders within our program offices
have accountability as well as can share insights, as well as
implement best practices across the agency. I really value the
leadership of my career team that has been working on this
issue for the past year and ensuring that we have been
implementing the strongest controls, as well as leveraging
technology to assess our platform and continually report fraud
to the IG and collaborate with them to ensure that we can
support their recovery.
Ms. CRAIG. Madam Administrator, I just want to end my
comments by saying thank you. I know that the SBA has been
asked to step up and perform under enormous pressure during a
public health crisis. And as much as we sit here and we say
let's make sure there is no fraud, absolutely, let's make sure
that our taxpayer dollars are being used appropriately,
absolutely, I do not want any of us to not think about every
single day just the extraordinary effort your team over the
last couple of years has gone to starting in the previous
administration, into this administration, we have asked a lot
of you in a short amount of time, and I, for one, as I travel
my district and I see so many of my small businesses that would
otherwise be out of business still going strong and expanding
and creating jobs, I just could not be more proud. So, I want
to say thank you for the work that your team has done,
especially here locally. I want to call out Brian McDonald here
from our region who has just been an extraordinary partner
during a very difficult time.
And with that, Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize Ms. Salazar from Florida, Ranking Member
of the Subcommittee on Contracting and Infrastructure.
Ms. SALAZAR. Thank you. And wonderful to see you again,
Isabelle Guzman. And thank you for your visit to my District
No. 27, City of Miami. It was a highly productive visit I
should say and I am sure that from now on my small business
owners are going to be enjoying the best service that SBA can
provide. So, thank you for that. Thank you for taking the time
and catching a plan and going to Miami. Very grateful.
I just want to share a few small glitches that we have. One
of them, for instance, is $140 billion problem. And what is
that? It is the COVID testing. Every time someone comes to this
country, an international tourist, that person needs to get
tested 24 hours before getting on that plane and that measure
is killing the tourism industry in Florida. Specifically, in
Miami. And you know, Miami is the hub of international tourism
in Florida.
So, could you please tell the president next time you see
him in one of those Cabinet meetings that we need to do away
with that measure? Will you be able to do that?
Ms. GUZMAN. I will definitely relay your concerns to the
White House and our team will continue to flag this issue and
work with you to see what we can do to help better support our
travel and industry small businesses which we know have been so
impacted by so many factors.
Ms. SALAZAR. Because, you know, Florida is open for
business and my small business community is eager to be selling
those services. But if you do not have people, then you cannot
make the payroll at the end of the month. So, you understand
that. So, since you are there with the president, I would very
much appreciate it if you can tell him that this is killing us.
Ms. GUZMAN. I continue to advocate for our small businesses
and I appreciate that in particular.
Ms. NEWMAN. But will you do that? Could you, will you able
to tell the president in one of those cabinet meetings that
this is happening and it is crushing our small business
entrepreneurs?
Ms. GUZMAN. I will definitely flag for the White House the
issue.
Ms. NEWMAN. Thank you. All right.
So, you have a pretty good budget, over $1 billion, and it
is getting bigger probably next year. But we discovered
something that is troubling, Madam Guzman, is that the budget
assigned for salaries, for regional and district offices is
going down, not up. But in the meantime, your decision has been
to increase the money in the hands of the Washington
bureaucrats.
I believe that someone who is sitting in D.C. cannot serve,
understand, or care as one of your guys sitting in one of those
district offices that the budget is getting cut for the
salaries in those. And even more, I am going to share with you
what is happening in Miami, or in Tampa, is that we only have
one district office in South Florida for 2 million small
businesses. We do not even have a permanent district director.
So, any reasoning behind cutting money at the regional
level and giving it to D.C.?
Ms. GUZMAN. Over time as we have had to increase salaries
and benefits and decrease some of these positions, you know, I
understand that all of our offices have been impacted. This
budget would allow us to retain some of those positions across
the agency, and we have continued to try to empower the field
to make sure that we gather those key insights that our team on
the ground can share with us.
Ms. NEWMAN. But you empowered them by hiring more people
and paying them good salaries. But right now, you know, you are
cutting those budgets.
Ms. GUZMAN. We are, you know, committed to making sure that
we can help improve our staffing plan across the field. And
that includes trying to ensure that their positions are
maintained and that they are receiving the benefit of our
expansion.
Ms. NEWMAN. Finally, I have 1 more minute. I just want to
ask you a personal question. You are one of the most prominent
Latinas in this administration so we have the same cultural
code. Your parents are Mexicans. You understand the border. You
know what is happening down there. Are you not concerned? That
is the concern that I have. That what is happening at the
border is giving a very bad rap to the Hispanics, to the
Latinos, because we do not have any type of legality down
there. And my concern is that it could be changing the
favorable perception that other groups have of us, the largest
minority in the country. So, when you sit with the president,
do you not express that from a very personal point of view
because your parents are of Mexican descent? Mine are Cuban.
So, we belong to the same minority. Please give me your
personal thoughts if you want to share them with us.
Ms. GUZMAN. Well, what I would share is that I continually
advocate and make clear that the face of entrepreneurship is
changing and I would like to portray Latinos as the ones who
are leading on that because they are starting businesses at the
highest rates and across most states according to McKinsey
studies. And so that entrepreneurship and that face of
entrepreneurship is what needs to be important.
Ms. NEWMAN. And we know that. But we create, probably we
are the highest creators of jobs. But when it comes to the
border, that could be harming the rest of our plans and wanting
to live the American dream. Yes or no, do you not think that
that is happening right now?
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Ms. GUZMAN. I agree that I would want everyone to know that
small businesses, the face of the Latino community is
entrepreneurship.
Chairwoman VELAZQUEZ. The gentleman from New Jersey, Mr.
Kim, is recognized for 5 minutes.
Mr. ANDY KIM. Thank you, Madam Chair. And thank you,
administrator, for taking the time to be able to come before
us.
As we had a conversation before in pervious hearings about
the path and the trajectory of SBA, coming out from this
pandemic and talking through what comes next, one thing that I
wanted to relay is as I have talked to different businesses
that engaged in the Paycheck Protection Program, and honestly,
that was their first time engaging with the SBA, engaging with
government services when it comes to small businesses, I have
asked them, are you going to be able to continue with SBIR? Are
there other types of support that you need? Have you been able
to learn about some of the other offerings? And many of them
said that they still do not know too much about what SBA has to
offer about different avenues that they might be able to
benefit going forward beyond just the Paycheck Protection
Program.
So, I guess I wanted to ask you as we are coming out from
this pandemic, SBA has been in touch and connected and helped
so many more businesses than ever before, has there been a
formal process in following up with those businesses that
engage in the Paycheck Protection program or EIDL and others in
terms of informing and educating and working with them, if
there are other needs that they might have that might be
serviced by other aspects of what SBA does?
Ms. GUZMAN. Yes. And on the eve basically of National Small
Business week which starts next week, I want to say that the
SBA has tried to leverage this moment to better serve small
businesses, that awareness of SBA and its offerings is higher
than any other time in history. And I think that we do need to
leverage this moment. So, across our resource partners, our
Community Navigators, as well, we have charged them with trying
to make sure that the small businesses are aware of the capital
programs, the technical assistance, and the market access
resources that we have at the SBA to support businesses. And I
would welcome the opportunity to partner with you on that to
ensure that more businesses in your district are aware of SBA
resources and it is critical that they build awareness. Of
course, we do not have a CMO or huge funding for that type of
outreach, but we can leverage our district office, leverage our
partners, leverage our lenders to better connect to those small
businesses. And we have started to systematically focus on
these new businesses that we have served through PPP and COVID-
EIDL.
Mr. ANDY KIM. So I am glad that that kind of outreach is
happening and that, you know, if there is additional funds or
resources needed for that, please let me know. I would like to
work with you on that.
But just more specific, I did want to just follow up. So,
there has been formal follow up, like has there been an email
or what to businesses that had the Paycheck Protection program
about like laying out some of the other aspects? I am just
trying to get a sense if there has been something of that
nature so I can flag it for these businesses in case they
missed it?
Ms. GUZMAN. Within the EIDL program, which is our direct
program, of course, we have had extensive outreach to our
businesses. Our new portfolio on PPP, we work with our lenders
on a regular basis to make sure that they are providing all of
SBA insights. They are familiar with our programs but PPP was
administered through the lending network. And so, our direct
contact is not there. So, as we do forgiveness and support
those businesses, of course, we have those contacts and will
reach out.
Mr. ANDY KIM. Okay. That is helpful context in terms of
understanding. And like I said, I would like to try to see if
there are some creative solutions for this, especially for
those paycheck protection plan ones dealing with lenders and
maybe getting towards the businesses.
But that raises the other aspect of this, is that, you
know, I saw recently a really extraordinary statistic about how
prior to the pandemic there were about 1,900 different lenders
participating in different SBA programs but that during the
pandemic, over 5,000 lenders were participating in the Paycheck
Protection Program.
I guess I wanted to as a similar type of question. When it
comes to the lender side, has there been ability to grow the
number of lenders participating in more forma SBA programs?
Drawing from that pool that was working on the Paycheck
Protection program. I am curious if this has been sort of a
forced multiplier and whether or not there has been a sizeable
increase already in terms of the lenders that are at the
disposal of the SBA.
Ms. GUZMAN. Our goal across our network is to increase the
number of lenders. We have seen a decline in small dollar
lending. We want to expand the number of lenders in our network
to make sure that we can get more capital to businesses. And so
formally, of course, we are expanding to the Community
Advantage lenders, so more CDFIs who participated in PPP can
participate in SBA's programs. Those new to SBA lenders, we
want to try to bring in and provide technical assistance. But
more importantly, we need to simplify our capital access
programs so that it is easy for a lender to come in and access
SBA guarantees. And so that is what we are aiming to do is to
replicated the successes of PPP and the simplicity.
Mr. STAUBER. Time has expired.
Chairwoman VELAZQUEZ. Now we recognize the gentleman from
Minnesota, Mr. Stauber, for 5 minutes.
Mr. STAUBER. Thank you, Madam Chair. Thank you to Ranking
Member Luetkemeyer for holding this hearing. And I know this
hearing is about the budget. But I would like to use my time to
talk about WOTUS, the Waters of the United States.
As everyone well knows, small business owners, farmers and
ranchers, were very negatively impacted by the Obama Waters of
the United States rule. It expanded federal jurisdiction far
beyond what was authorized by Congress and resolved it in the
burdensome requirements and widespread certain for Americans
across this nation and small businesses.
The Trump administration rightly chose to heed the concerns
of these small businesses and entities and created the
Navigable Waters Protection Rule.
Unfortunately, the EPA is back to interpreting the waters
rule and actually announce their intention to revise the waters
rule and make it even worse.
Administrator Guzman, given that you are supposed to be the
leading champion for small business, can you give me specific
examples of what you have done to speak with small businesses
on this topic. And furthermore, can you give me an example, of
an incidence where you have heard a comment from a small
business owner and actually conveyed that concern to another
agency like the EPA in this case as they look to review their
role?
Ms. GUZMAN. Thank you. We do have our ombudsman office that
works regularly with small businesses through regulatory
fairness boards across the country. And they have received
concerns about this and continue to work with small businesses.
So not directly. I have not spoken to any of those businesses
directly.
Mr. STAUBER. Madam Administrator, so you cannot give me an
example?
Ms. GUZMAN. I have not spoken directly to a business on
this issue but know that my ombudsman office has connected with
small businesses. In addition, as you know, the Office of
Advocacy tracks our regulations.
Mr. STAUBER. Have you reviewed the small business Office of
Advocacy's numerous concerns with the EPA's handing of the
Waters Rule?
Ms. GUZMAN. I am familiar with Office of Advocacy's work
and have seen some of their statements and have spoken to our
acting advocate, Major Clark.
Mr. STAUBER. And are you aware that they have yet to
convene an official small business panel in accordance with the
Regulatory Flexibility Act?
Ms. GUZMAN. I am not aware that he has not yet done that
but we connect regularly with the Office of Advocacy. I have a
regular meeting and so I will make sure that I can relay your
concerns.
Mr. STAUBER. And then you will have them hold an official
business panel?
Ms. GUZMAN. I will talk to them about that. Yes. And follow
up with your team as well to find out that timing.
Mr. STAUBER. I appreciate that.
And then can you explain for the Committee, as Mr. Clark
from the Office of Advocacy did for our Subcommittee a few
weeks ago, why going through an official SBREFA panel is so
important to understanding the significant economic impacts the
Waters Rule will have on small businesses and small entities?
Ms. GUZMAN. I can follow up with you on that and provide
more specifics but I would not be able to comment further on
it.
Mr. STAUBER. Do you believe that a SBREFA panel is
important to recognize the small business concerns?
Ms. GUZMAN. I am not familiar. I need to follow up with you
on that. And I definitely will.
Mr. STAUBER. Okay. Will you commit to working with the EPA
to ensure the SBREFA panel is held?
Ms. GUZMAN. On this issue specifically, now that you have
flagged it for me and I know it is an issue that Advocacy
continues to track and it is a significant one for small
businesses, I will definitely follow up as well.
Mr. STAUBER. Thank you.
And then, Madam Chair, I would like to enter into the
record the comments of the Office of Advocacy submitted to the
EPA regarding the proposed rule revisions to Waters.
Chairwoman VELAZQUEZ. Without objection, so ordered.
Mr. STAUBER. Thank you very much.
I have a little over a minute yet. Congressman Donalds
asked you a question and he ran out of time so I will just ask
it again. What has the Biden administration taken to help the
middle class and small businesses reference the inflation?
Ms. GUZMAN. The president has taken action on energy costs,
as well as trying to focus on pocketbook issues within this
budget.
Mr. STAUBER. Tell me what energy costs.
Ms. GUZMAN. He has made available the million dollars a day
to try to control some of the gas costs which we know are
affecting our small businesses.
Mr. STAUBER. Right.
Ms. GUZMAN. But there is also pocketbook issues, and the
budget directly addresses some of those such as child care.
Mr. STAUBER. Is strategic petroleum reserve what you are
referring to?
Ms. GUZMAN. Correct.
Mr. STAUBER. One hundred eighty million barrels?
Ms. GUZMAN. A million barrels a day, I believe, through
June.
Mr. STAUBER. One hundred eighty days?
Ms. GUZMAN. Correct.
The strategic petroleum reserve really should be held for
national emergencies, not failed policies. I think you
recognize that.
So my concern right now is the administration is not acting
quick enough with the inflationary costs going up on small
businesses. And I think that we need to, we are really looking
for your leadership when you are in the meetings with President
Biden and his cabinet to really support small businesses. So I
look forward to the hearing.
Mr. STAUBER. And my time is up, Madam Chair. Thank you.
Ms. GUZMAN. Thank you.
Chairwoman VELAZQUEZ. I want to thank Administrator Guzman
for appearing before the Committee again today, and for all the
work you do every day for our nation's small business
community.
Small firms are the backbone of the economy and the
communities they operate in. By empowering the SBA, we empower
entrepreneurs to thrive and grow.
Without objection, Members have 5 legislative days to
submit statements and supporting materials for the record.
If there is no further business to come before the
Committee, without objection, we are adjourned.
[Whereupon, at 12:16 p.m., the committee was adjourned.]
A P P E N D I X
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