[Senate Hearing 117-211]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 117-211

                               REVIEW OF
                           THE SMALL BUSINESS
                       INVESTMENT COMPANY PROGRAM

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP

                                 OF THE

                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 9, 2021

                               __________

    Printed for the Committee on Small Business and Entrepreneurship
    
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        Available via the World Wide Web: http://www.govinfo.gov
        
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-000 PDF                 WASHINGTON : 2022                     
          
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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                    ONE HUNDRED SEVENTEENTH CONGRESS

                              ---------- 
                              
                 BENJAMIN L. CARDIN, Maryland, Chairman
                  RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington           MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire        JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts      TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey           JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware       JAMES M. INHOFE, Oklahoma
MAZIE HIRONO, Hawaii                 TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois            JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada                  JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado          ROGER MARSHALL, Kansas
                 Sean Moore, Democratic Staff Director
              William Henderson, Republican Staff Director
                           
                           
                           C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland.     1

                               Witnesses

Wittelsberger, Mrs. Stacey R., Principal, Patriot Capital, 
  Baltimore, MD..................................................     4
Rodriguez Simon, Mrs. Ivelisse, Managing Partner, Avante Capital 
  Partners, Los Angeles, CA......................................    13

          Alphabetical Listing and Appendix Material Submitted

Cardin, Hon. Benjamin L.
    Opening statement............................................     1
Rodriguez Simon, Mrs. Ivelisse
    Testimony....................................................    13
    Prepared statement...........................................    15
    Responses to questions submitted by Senators Hirono and Rubio    44
Wittelsberger, Mrs. Stacey R.
    Testimony....................................................     4
    Prepared statement...........................................     6
    Responses to questions submitted by Senators Hirono, Rubio, 
      Inhofe, and Young..........................................    36

 
                               REVIEW OF
                           THE SMALL BUSINESS
                       INVESTMENT COMPANY PROGRAM

                              ----------                              


                        WEDNESDAY, JUNE 9, 2021

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m. in Room 
215, Dirksen Senate Office Building, Hon. Ben Cardin, Chairman 
of the Committee, presiding.
    Present: Senators Cardin, Cantwell, Duckworth, Rosen, 
Hickenlooper, Scott, Ernst, Inhofe, Young, Hawley, and 
Marshall.

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S. 
                     SENATOR FROM MARYLAND

    Chairman Cardin. The Small Business and Entrepreneurship 
Committee will come to order. I have checked with Senator Paul 
and he will be here shortly, and he has asked that we start the 
hearing, so we will start the hearing, with Senator Inhofe here 
in person, Senator Ernst here in person. I think I saw Senator 
Young on the Webex. We are still doing these hybrid hearings 
between the Webex and in person, and I take it we have one of 
our witnesses that is going to be also by Webex.
    So today's hearing involves the small business investment 
companies, the SBIC. I want to thank Senator Paul for his help 
in allowing us to put together this hearing. The SBICs were 
created in 1958, and to date have been responsible for 
investing over $100 billion into small businesses, to tens of 
thousands of small businesses that have benefited through the 
SBIC.
    The companies that have benefited from small businesses, 
many have gone on to become even global brands, such as Intel, 
Apple, FedEx, so good things happen when we can find a way to 
finance creative ideas.
    I have my own experience with the SBICs. Before I was in 
Congress, I represented small businesses and had the 
opportunity to help manage an SBIC that provided help to 
independent groceries that were struggling to get started. I am 
proud to say that some of these small, independent grocers are 
now regional chains that have grown as a result of being able 
to get financing to start, and the SBIC helped make that a 
reality.
    The 2020 numbers are extremely impressive--$4.8 billion was 
invested to over 1,000 companies, without any cost to the 
taxpayers whatsoever. I know that is going to make a lot of my 
colleagues on this Committee very happy to know that this is 
one in which there has been no cost to the taxpayers. It 
actually is a benefit to our small businesses and it allows our 
economy to grow.
    It is our Committee's responsibility to find ways to make 
this program even more effective, particularly coming out of 
COVID-19, considering the impact it has had on small 
businesses. So we have challenges. We have challenges in all of 
our programs. We have the historic problems of women-owned 
businesses, black, Hispanic, rural, and other underserved 
communities that existed before COVID-19, that was made more 
difficult as a result of COVID-19 in attracting capital.
    This is particularly acute in venture capital, startup 
companies. The numbers there are shocking. Ninety-three percent 
of venture capital is controlled by white male ownership. A 
majority of our venture capitalists are located in three 
communities: Boston, New York City, and Silicon Valley. When we 
look at venture capital and the availability of venture capital 
today, less than 1 percent goes to black-owned businesses, 2 
percent to Hispanic-owned businesses, and 3 percent to women-
owned businesses. We can and must do better, and the SBIC can 
play a very important role in making that a reality.
    Consider, for example, CSS Antenna, a women-owned business 
founded in Edgewood, Maryland. Founded in 1997, CSS was a 
designer and manufacturer of telecommunications products such 
as antennas and filters. Between 1999 and 2005, the company 
increased revenue by more than 2,000 percent, from $2 million 
to $44 million.
    By 2007, due to the slowdown in cellular technology 
development and the growing economic crisis, CSS experienced a 
significant decline in sales, and was in desperate need of 
capital. The company's primary lender at the time was not 
willing to provide capital during the downturn, but through an 
investment from Patriot Capital, which is being represented 
here today by our witness, Stacey Wittelsberger, CSS was able 
to bounce back.
    After being forced to lay off employees due to lack of 
funding in 2008, the company grew from $8 million in revenues 
that year to $19 million in 2009, and were able to rehire their 
workforce. By 2013, annual sales at the company were once again 
more than $40 million. A clear example of where the SBIC really 
came in to serve our small business community. When the company 
was eventually sold to competitors based in Liverpool, New 
York, in 2013, all of their employees, which at the time 
numbered more than 100, kept their jobs. That success story 
would not have been possible without SBIC funding.
    Our focus today must be on how we can take SBIC from a good 
program to a great program, a more inclusive program, that 
reaches underserved communities frozen out of traditional 
venture capital markets.
    I want to thank our colleagues, Senator John Hickenlooper 
and Senator Jim Risch for their leadership on this issue. This 
is bipartisan support in our Committee. They have introduced 
the MicroCap Small Business Investing Act, legislation to 
authorize the SBA to create a MicroCap SBIC license that would 
encourage more underrepresented investment managers to 
participate in the program. The bill is important because we 
know that racially and gender-diverse SBIC funds invest more 
frequently in minority- and women-owned businesses.
    We must also create an on-ramp for fund managers from 
underrepresented communities to get into existing SBIC 
programs. One of our witnesses, Ivelisse Rodriguez Simon, of 
Avante Capital Partners, has spearheaded an excellent 
internship program at her firm that could serve as a model as 
we continue our work to diversify the SBIC program, and I look 
forward to her testimony and explaining that program.
    We also need to explore ways to restore one of the pillars 
of the program, equity investing. After the collapse of 
participating securities 15 years ago there has been a gap in 
the program's ability to deliver patient capital to startups 
and small manufacturers.
    And we must also explore policies that will create strong 
innovation ecosystems in underserved communities. In January, 
Senator Hirono and I introduced the UPLIFT Act, which would 
nurture innovation ecosystems in minority, low-income, rural, 
and other underserved communities by providing HBCUs, minority-
serving institutions, and community colleges with the resources 
to establish and expand incubators and accelerators for 
underserved entrepreneurs.
    Because while SBIC is able to support innovation to small 
businesses ready to take on investment, it is also vital that 
we fund growth accelerators and incubators that could help 
innovators turn their ideas into a startup.
    So I am looking forward to a robust discussion with our 
witnesses today about what the Federal Government can do to 
better support these programs. The months and years ahead will 
provide us an opportunity to reshape our Nation's economy. We 
should also improve the SBIC, invest in it, and make it more 
equitable so we can build back better. We have a unique 
opportunity, and this hearing will help us in what we should do 
in order to improve that program, that very important program.
    With that, I will interrupt our witnesses when Senator Paul 
arrives so he can have a chance to make opening statements, but 
at this point we will proceed with our witnesses. Our first 
witness--I have already alluded to our two witnesses today, but 
our first witnesses is Stacey Wittelsberger, who is the 
Principal Partner at Patriot Capital. Patriot Capital is an 
SBIC located in Baltimore, and she has been there since June 
2010. She is responsible for originating, underwriting, 
execution, portfolio management, and investor relations, and 
she lives in the Fells Point neighborhood of Baltimore, 
Maryland, one of my favorite places to go in the city of 
Baltimore.
    Our second witness is Ivelisse Rodriguez Simon, Managing 
Partner of Avante Capital Partners. She is a managing partner, 
which is based in Los Angeles. She currently manages the fund's 
portfolio and new deal activities. Ms. Rodriguez Simon joined 
Avante in 2009, as a founding member of the firm.
    So we have two individuals who are intimately involved in 
the management of SBICs, so they can tell us how it works and 
hopefully ways in which we can innovate to make the program 
work even better as we look at ways to improve the program.
    We still start with Stacey.
    By the way, your full statements will be made part of the 
record, and you may proceed as you choose.

   STATEMENT OF STACEY R. WITTELSBERGER, PRINCIPAL, PATRIOT 
                     CAPITAL, BALTIMORE, MD

    Mrs. Wittelsberger. Thank you. Chair Cardin and members of 
the Committee, thank you for inviting me to testify today on 
behalf of the Small Business Investor Alliance. My name is 
Stacey Wittelsberger. I am a principal with Patriot Capital, 
headquartered in Baltimore, with offices in Chicago, Dallas, 
and Atlanta.
    Patriot Capital is a multi-strategy middle market 
investment manager that is a five-time licensee in the program. 
Additionally, we are an active member of the SBIA. Our firm 
focuses on investment opportunities in small and medium-sized, 
privately held companies. We typically invest $3 to $25 million 
in each of our portfolio companies. According to internal data 
from our three most recent funds, representing a portfolio of 
about 84 small businesses, either current or exited, our 
companies employ approximately 33,100 employees, which 
represents a 27 percent increase in jobs from the time in which 
we made the initial investments.
    One example of a portfolio company investment, previously 
discussed by Chair Cardin, with strong job creation right in my 
home State of Maryland and also women owned, was a telecom 
manufacturing business called CSS Antenna. At the time of our 
investment in 2008, the company employed approximately 40 
individuals. Our capital helped the business survive as the 
industry was transitioning from 3G to 4G technology development 
buildout, causing a lull in customer demand. CSS further grew 
to over 150 employees at the time of our exit in 2013.
    SBICs are an American success story, an example of 
successful Federal public policy that aligns the power of 
private markets with the public interest of job creation and 
expanding economic growth and opportunity. The SBIC program is 
largely working well, but targeted improvements would help. I 
would like to discuss some potential recommendations for 
improvement.
    First, SBA Administrator Guzman has inherited an agency 
operating an unprecedented number of new pandemic trigger 
programs, set up in an inconceivably short amount of time. The 
SBA, however, continues to be chronically understaffed, with 
outdated technologies and a limited budget to secure new 
technology tools. The SBIC program, in particular, needs an 
appointed leader to serve as the Associate Administrator for 
the Office of Investment and Innovation.
    The OII staffing shortages are also not conducive to 
capital access or healthy oversight of the program. For 
example, frontline SBIC regulators typically monitor and 
regulate only about 10 to 12 funds per regulator, because of 
the unique nature of each of the funds. Today, however, the SBA 
is so short-staffed that the ratio between OII regulator and 
regulated SBIC fund is at an impossible level of about 45 or 
more funds per operations analyst. We encourage Congress to 
provide the necessary resources, both human and technological, 
to ensure that the SBA is able to run this successful program 
and provide necessary oversight.
    The SBIA also supports the Investing in Main Street Act, a 
bill introduced during the last Congress session by Senators 
Duckworth and Young. The bipartisan bill, which passed in the 
House by a vote of 403-2, but was not considered in the Senate, 
would fix a drafting discrepancy between small business and 
banking law, and permit banks to invest up to 15 percent of 
their surplus capital in SBICs.
    Next, the SBIA supports a bipartisan bill, introduced 
recently by Senators Hickenlooper and Risch, the MicroCap Small 
Business Investing Act of 2021. It would authorize the SBIA to 
create a new pathway to license newer, smaller funds within the 
existing parameters of the current SBIC program. The goal of 
the legislation is to expand the pool of qualifying fund 
managers in the SBIC program by providing broader access for 
talented, underrepresented, diverse people, in potentially 
smaller geographies, where there is currently limited access to 
participating in the SBIC program, with the goal of directing 
much needed capital to smaller markets. The SBIA encourages the 
Senate to pass the Hickenlooper-Risch bill.
    Finally, small businesses need more access to equity, which 
is the most patient form of capital. Equity investments are 
typically less of a cash constraint than debt, allowing for 
more money to be reinvested into a business, fueling growth. 
Equity is also typically more appropriate for earlier-stage 
businesses, not yet generating significant revenue. Equity 
capital, however, can be the hardest for small businesses to 
access, especially many early stage businesses which tend to be 
composed of a younger, more diverse demographic than prior 
generations.
    The SBIA supports empowering SBICs to provide more equity 
investments than currently allowed by the SBA. This would also 
help create economic opportunity in parts of the country that 
are undercapitalized compared to the three regions previously 
mentioned that receive an estimated 75 percent of early stage 
capital investments today.
    In conclusion, the SBIC program is well positioned to 
provide much-needed capital to domestic small businesses, and 
Patriot Capital is proud to be one of the growing numbers of 
SBIC's licensees, helping U.S. small businesses, stimulate the 
economy, and create jobs.
    Thank you again for the opportunity to testify on behalf of 
the SBIA.
    [The prepared statement of Mrs. Wittelsberger follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Cardin. Mrs. Wittelsberger, thank you very much 
for your testimony. We will now turn to Mrs. Rodriguez Simon, 
via Webex.

STATEMENT OF IVELISSE RODRIGUEZ SIMON, MANAGING PARTNER, AVANTE 
               CAPITAL PARTNERS, LOS ANGELES, CA

    Mrs. Rodriguez Simon. Good afternoon, Chairman Cardin, 
Ranking Member Paul, and members of the Committee. It is my 
sincere honor to be speaking with you all today. My name is 
Ivelisse Rodriguez Simon. I am originally from Puerto Rico, and 
I grew up in a low-income neighborhood on the south side of 
Chicago. I was the first person in my family to attend college, 
and I started my career in the mid-1990s in investment banking 
on Wall Street. I have more than 20 years of experience in 
investment management and an MBA from Harvard Business School. 
I am a managing partner and one of the founders of Avante 
Capital.
    Avante is a 100 percent women-owned firm with close to $900 
million of capital under management. Our firm was founded in 
2009, and has been a proud member of the SBIC program ever 
since. In 2018, we were selected as the SBIC Fund of the Year 
for our strong track record of performance and our commitment 
to job creation. Over the last decade, we have invested more 
than $500 million in both debt and equity in over 100 
companies, and we have never had a cash loan loss.
    Of our 16 team members, 12 are women, minorities, or both. 
We are passionate about supporting women and underrepresented 
communities in this industry, and we fundamentally believe that 
diversity is not only a social imperative, it is also good 
business that drives better returns and incremental job 
creation.
    There are two questions I would like to discuss with the 
Committee today. First, how could we better utilize the SBIC 
program to drive additional job creation and innovation across 
the country? And second, how do we increase diversity within 
the program to spur investments in underserved communities?
    The existing SBIC debenture program is, by all accounts, a 
huge success. As mentioned by Senator Cardin, SBIC funds have 
provided more than $100 billion of funding across 200,000 
financings to small businesses, creating more than 3 million 
jobs in just the last 20 years. Last year alone, SBIC funds 
facilitated more than $4.8 billion in investments to more than 
1,000 companies across the country, at no cost to American 
taxpayers.
    Despite the success of the SBIC program, it is 
underutilized. While the SBA is authorized to provide up to $4 
in leverage to SBICs annually, SBIC funds are only drawing 
about $2 billion in SBA leverage each year. We should expand 
the program and fully utilize it to get more capital invested 
in small businesses, especially now when those businesses will 
be key to our economic recovery and growth.
    One way to do this is by providing more capital and human 
resources to the Office of Investment and Innovation at the 
SBA. They are a highly competent, committed group of 
professions. However, they are under-resourced. Providing them 
additional resources would allow them to process and manage 
more license, and as a result, SBICs will deploy more capital 
to small businesses.
    Another way to inject more capital into small businesses is 
to establish an SBIC equity program. An equity program would 
broaden access to capital for small business that are prime for 
growth but unsuited for the current debenture program.
    Broadening the impact of the SBIC program, however, does 
not just mean adding resources and new types of financing. It 
also means deploying capital in a more fair and equitable way. 
Each year, SBICs provide only 5 percent of the total financing 
to minority-owned businesses, and about 3 percent to women-
owned businesses. This lack of diversity in investments stems 
directly from the lack of diversity among SBIC fund managers. 
This is no more than a handful or two of women and minority-
owned investment managers in the 300-plus SBIC licenses 
outstanding. Yet we know that SBIC managers, diverse SBIC 
managers, invest more frequently in minority and women-owned 
businesses. To invest more equitably, we need more diverse 
managers in the existing program.
    When I talk about diversity in this industry I often hear 
that there is not a robust pipeline of qualified diverse 
managers. I am here to tell you that is just not true. There 
are many experienced women and people of color with proven 
track records, who are amply qualified to manage a successful 
SBIC fund. We need to reach out to these diverse managers and 
recruit them to benefit from their experience and their diverse 
networks.
    To further facilitate the growth of diverse SBIC managers, 
we should also establish an official Mentor-Protege program. We 
should provide incentives for established funds to invest in 
and support new, diverse manager funds and guide their 
development within the SBIC program.
    Lastly, diversity efforts work best when everyone is 
involved. We should create a diversity task force or working 
group charged with implementing and tracking initiatives that 
drive meaningful diversity of manager and investments. And we 
should work closely with private industry. As Senator Cardin 
mentioned, my firm launched the first-ever internship program 
in the SBIC industry. This summer, we will welcome 30 interns, 
all women and people of color, who will work at 25 SBIC funds 
across the country. We are very excited about growing the 
program.
    In closing, I would like to offer my continued support to 
work with any of the members of the Committee in our collective 
efforts to expand the SBIC program and drive diversity within 
it.
    And thank you for allowing me to participate virtually. I 
actually had a baby eight days ago, and so while I may be sleep 
deprived, I am very honored to be here today.
    [The prepared statement of Mrs. Rodriguez Simon follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Cardin. Well first, congratulations on your child. 
A boy, I understand?
    Mrs. Rodriguez Simon. A boy. Yes, sir.
    Chairman Cardin. He is doing well?
    Mrs. Rodriguez Simon. He is doing very well. He is baby 
number four, so it is old hat by now.
    Chairman Cardin. So you are used to this. You are a real 
pro at this. Well, congratulations to you, and thank you very 
much for your testimony.
    I want to first cover a point that both of you have talked 
about, and that is equity funding and how we need to deal with 
this. It is interesting that we have provided help to large 
industries during economic downturns. During the Great 
Recession we provided substantial help to major industries. We 
took back notes that gave us the ability to take some of the 
profits, based upon what happens in the future. So the 
government has been involved in ways in which we can provide 
help to industries.
    The SBIC has traditionally not been involved in that 
particular field, so you are suggesting perhaps a separate fund 
that would deal with equity investment or startup. Is that what 
I understand the recommendation? I think, Mrs. Rodriguez Simon, 
you specifically mentioned that, and Mrs. Wittelsberger, you 
said we have to do something in regards to equity funding. Are 
there specific recommendations you have in that regard?
    Mrs. Rodriguez Simon. Yes, sir.
    Mrs. Wittelsberger. Go ahead.
    Chairman Cardin. Go ahead, Mrs. Rodriguez Simon.
    Mrs. Rodriguez Simon. Yes. There is a very significant 
opportunity for us to continue to support small businesses 
through equity investing. Currently, the debenture program 
invest primarily debt, which is a very effective way to help 
companies grow. However, not all companies are suited for debt. 
There are businesses that are either too small, too new in 
their cycle, do not generate enough cash-flow, that really 
could utilize equity.
    And so my suggestion would be that we create a program very 
similar to the debenture program but that allows for equity, 
allows for SBIC funds to invest equity rather than debt. They 
would go through a very similar process for licensing, and they 
would be managed in a very similar way.
    My additional suggestion, though, is that we need to be 
very intentional about making sure that we recruit diverse 
managers into that equity program, so that we do not face the 
same challenges we face in the debenture program, which is the 
large majority of investment managers are not diverse, and so 
the majority of the capital goes to businesses that are not 
diverse.
    And so if we can start the program off in a good way, and 
make sure that a number of those managers are also diverse, I 
think that we would be able to significantly increase the 
amount of capital and the amount of jobs that we can create 
through that equity program.
    Chairman Cardin. I want to come back to the diverse fund 
managers. In startup capital, the numbers are even much worse 
than general capital, when it comes to opportunities from 
underserved communities. So having a mechanism to deal with 
equity capital, under our supervision, would certainly be a 
tool that could help deal with that.
    Mrs. Wittelsberger, in regards to equity capital?
    Mrs. Wittelsberger. Yes. Thank you, Chair Cardin. As I 
mentioned in my testimony, I think the program is largely 
working, and I am not sure that we entirely need a new equity 
program, and my main issues there are things that I mentioned 
in the testimony, of the SBA being short-staffed right now and 
not having the technology tools to run the existing program in 
its volume.
    So I think that it is set up appropriately and that we 
could potentially add a subset or equity tools to the existing 
program that would address some of the issues and concerns that 
you have, with the primary focus really being that we make sure 
that the subset and the tools work for small business 
participants, and that it works for the taxpayer as well.
    Chairman Cardin. Let me drill down on the resources at SBA. 
We provided substantially more resources to SBA during COVID-
19, not just in the trillion dollars of relief it provided to 
small businesses, but in their administrative support. We did 
give them more help.
    Both of you have mentioned a need for additional personnel 
and technology. Personnel, I understand. Talk a little bit 
about technology. Where is the SBA lacking in providing the 
technical support necessary to process the SBIC applications?
    Mrs. Wittelsberger. Sure. I am happy to speak on that. So 
the SBA is running about a $33 billion program today on very 
antiquated tools, including Microsoft Access and Excel, and we 
are a $315 million fund and have better technology and 
resources than the SBA, and we only have 30-some companies to 
manage. You know, key challenges like getting something out of 
the SBA's Access and Excel tools can take a week or days for 
them to reformat in order to be able to review the data, which 
just really is not good for the program overall or the 
taxpayer. So upgrading the technology tools that are available 
to the SBA would be a huge add.
    Chairman Cardin. Thank you. I have some questions in 
regards to the diversity managers, but I am going to yield to 
my other colleagues that are here, and I will come back on a 
second round.
    Senator Marshall?
    Senator Marshall. Thank you, Chairman. It is great to be 
back here and talk small business issues. Certainly every trip 
back home, access to capital is a question I get and a riddle 
we have not been able to solve.
    These SBICs, there is only one in Kansas, and it is 
currently listed as not likely investing. The passage of the 
Spurring Business and Communities Act of 2017, the SBA gave 
first priority to companies in an under-licensed or under-
financed State. Kansas was not included on either list. Are 
there moneys that are not being used and Kansas was too far 
down, or pretty much are you able to utilize all the capital 
that you have available to us? Stacey, Mrs. Wittelsberger, if 
you want to go first. Wittelsberger--I am going to get that 
right. If you want to go first, if you can help me out.
    Mrs. Wittelsberger. Yes. So I think Chair Cardin mentioned 
this in his remarks as well, but we have about $4 billion in 
accessible capital to the program. We expect to be over $3 
billion of that this year, so there are certainly more funds to 
be used. And I think to address your concern, Senator Marshall, 
that the MicroCap bill is a potential outlet for that to bring 
new managers to the program, potentially, in your State, that 
maybe through the existing SBIC program would not be licensed. 
So, you know, bringing more capital to your State and the small 
businesses there.
    Senator Marshall. So help me understand. Is the reason 
nobody in Kansas has applied for it is because they just have 
not applied, or they have applied for it, you think, and they 
are just not high enough on the list then?
    Mrs. Wittelsberger. Potentially within the existing 
requirements for the SBIC program it is just too daunting or 
they do not think that they will be able to get a license so 
they do not attempt to do it.
    Senator Marshall. Okay. Mrs. Rodriguez Simon, anything to 
add? It sounds like we covered it pretty good.
    Mrs. Rodriguez Simon. I think she covered it. One thing I 
would say is, you know, if we are intentional about recruiting 
either rural or from a specific State, and it is the same 
comment I have about recruiting diverse candidates, I think 
that there are many, many investment professionals out there 
that could be recruited to this program. However, we have not 
been intentional. We have not made that a priority and a goal. 
And so I think we can certainly include making sure that we 
have investment managers from states that are not represented.
    Senator Marshall. Okay. And I will start with Mrs. 
Rodriguez Simon and go backward, to give you both a chance at 
first shot. My next one is, like I mentioned, this company in 
Kansas is not likely investing. Is that a common thing, and why 
are people, I guess, dropping out or not active? Is that common 
for people to become not likely investing now?
    Mrs. Rodriguez Simon. I have not heard that that is common. 
I think that there are a number of us that have been in the 
program for a very long time, like Avante has been. We have 
four licenses. So I do not have a good answer on that, sir.
    Senator Marshall. Yes. Mrs. Wittelsberger, any further 
comment?
    Mrs. Wittelsberger. Yep, I do not have the specifics.
    Senator Marshall. Okay. What are the barriers to more firms 
being licensed as an SBIC and participating in this program? Or 
are there any barriers to be licensed as an SBIC and 
participate? Mrs. Wittelsberger, I will let you go first.
    Mrs. Wittelsberger. Sure. Thank you. The licensing process 
today is very subjective. There is a lot of uncertainty around 
the time related to the licensing process. It can be very slow. 
It can cost hundreds of thousands of dollars. So for a first-
time fund manager that is pretty daunting and risky to leave 
your existing job. For repeat managers like Patriot Capital and 
Avante, we have been through it so we have some level of 
certainty in getting through the program.
    Senator Marshall. Okay. I will go to Mrs. Rodriguez Simon 
for my last question. I am going to hate to admit this, 
Chairman, but I did not know about this program until today. 
And, I was a Congressman for four years, ran multiple small 
businesses, party of a community bank, and this is the first 
time I have heard of this program. What can we do to raise 
awareness?
    Mrs. Rodriguez Simon. Senator, that is such an excellent 
question, because I think that that is one of the reasons why 
we do not have diverse or rural participants, because there is 
really a lack of education across the investment industry about 
this program.
    It is an amazing program. I mean, it is compelling for the 
funds. It does a lot of good for our country. I think, again, 
we have to be intentional about it. We have to give the SBIC 
the resources to be able to go out and convince other people, 
or convince more of the investment managers to join the 
program.
    Senator Marshall. Again, we invite you all to participate. 
You know, some of my urban areas, the Chambers there, I think 
my Hispanic Chamber in Kansas City is one of the best Chambers 
in the country, and this would be one more tool that they could 
put in their toolbox. So thank you so much.
    Chairman Cardin. Senator Marshall, I agree with you 
completely. That is one of our real challenges. We only have 
300 managers in the country and it is not diverse at all. And 
from the point of view of not just minority and underserved 
communities but also geographically. So it is an area that we 
really need to improve, and that is going to be one of the 
goals of this. So thank you for raising those issues.
    Senator Duckworth is available through Webex.
    Senator Duckworth. Thank you, Mr. Chairman. Already the 
discussion is very interesting.
    My first question is for Mrs. Wittelsberger. As part of the 
President's fiscal year 2022 budget, the Small Business 
Administration recently identified expanding access to capital 
for small businesses as Strategic Objective 1.1, and I could 
not agree more. My top priorities to assist small businesses 
are to increase access to capital and to double down on proven 
in-demand programs that already work.
    The SBIC program meets both priorities. First, we know it 
is popular, especially in times of recovery, and after the 
Great Recession the SBA witnessed a significant uptick in SBIC 
applicants, and the agency expects a similar uptick during this 
recovery. And we know that it works, right? Not only is it 
popular, it works, because over the past six years it has 
supported an average of more than 100,000 jobs per year, and 
that is why we must increase funding available to SBIC 
participants.
    Last Congress, I worked with Senators Young and Risch to 
introduce the Investing in Main Street Act, legislation that 
would allow banks, particularly small ones, to provide more 
money to SBICs. The bill passed the House, 403-2, but it did 
not receive a vote in the Senate.
    Mrs. Wittelsberger, I know that was a long preamble. You 
mentioned this bill in your testimony. Can you describe how 
this simple initiative could spur even greater investments into 
SBIC funds, and how vital this capital would be as we emerge 
from the pandemic?
    Mrs. Wittelsberger. Thank you, Senator Duckworth, and yes, 
we are totally supportive of the Investing in Main Street Act. 
As you mentioned, it seems pretty simple to us. There is a 
mismatch today between the banking laws and the small business 
laws. Banks are allowed to invest more dollars in SBICs than 
SBICs are allowed to accept today. You know, a lot of this is 
mainly impacting smaller banks.
    So cleaning up the mismatch between the 15 and 5 percent we 
think is an easy fix, and we are supportive of the act.
    Senator Duckworth. Thank you. My second question is for 
Mrs. Simon. Mrs. Simon, I know you live in Los Angeles, but I 
know that you are a native Illinoian, with Chicago roots, and 
as you said, you just gave birth last week. Now I brought my 
baby to the floor of the Senate to vote at 10 days, so you have 
beat me in terms of time. You are a true inspiration.
    I appreciated your testimony about the importance of 
mentorship programs, and in Illinois we have seen this 
importance firsthand. Commissioner Jamie Rhee at the Chicago 
Department of Aviation is spearheading a mentorship program 
between large and small businesses for projects at the O'Hare 
and Midway airports, with the goal being to create a more 
diverse set of participating company owners and to give the 
smallest of small businesses more prime contracting 
opportunities.
    I want our recovery to include more initiatives like the 
one at the Chicago Department of Aviation. Mrs. Simon, can you 
describe why having a mentorship program is crucial for 
promoting opportunity for new and diverse business owners 
within the SBIC program?
    Mrs. Rodriguez Simon. Absolutely. Thank you so much for 
your question, Senator Duckworth. It is an honor to speak to 
you. I have admired you for a very long time.
    The mentorship program, I think, is instrumental in 
increasing the number of diverse investment managers, and also 
can be used to increase the number of investments in diverse 
businesses. This is an industry of very talented investment 
managers. The existing SBIC funds, while not diverse, include a 
number of really, really great, talented investors. And if we 
can connect them with first-time managers, like funds that may 
have diverse investment professionals that may already have 
track records but that have never run a fund before, if we 
could connect them with established funds it will have a 
significantly higher chance of success.
    And this program has always been a public-private 
partnership. It has been since its very beginning. And so if we 
continue that strategy, where we are continuing to partner 
together with all of the incumbents within the existing 
program, I think that we can make really very significant 
change.
    I think it is an easy program to implement. I think that 
talking to my colleagues, a large number of them would be 
interested, and again, I think it would make a very significant 
difference in making sure that we get more diverse managers and 
more capital to diverse companies.
    Senator Duckworth. Thank you. And I know that our Chairman, 
Senator Cardin, is working on this very program with President 
Biden, and I look forward to joining them in this endeavor. 
Thank you so much to both of you for being here today.
    I yield back, Mr. Chairman.
    Chairman Cardin. Thank you, Senator Duckworth. Senator 
Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman. Carrying on that 
same line, Mrs. Rodriguez Simon, this issue of--in my State we 
had SBICs invested $204 million in small businesses between 
2016 and 2020. So that could have been more if we looked at our 
215,000 women-owned businesses. So as you pointed out, we need 
to do more. We are only financing about 5 percent of those 
minority-owned businesses.
    So I know you just elaborated, and know the Chair, I so 
appreciate Chairman Cardin exploring this issue as well. So 
what is that we need to do? I want you to speak more about what 
increasing diversity at the SBIC investment team or management 
teams, what we could do to help the teams look more like the 
women and minority businesses that they are taking a look at? I 
know there is a fund in my State that was started by a group of 
women for this very reason, but what else could we do? What 
else should we be doing to make sure these investment teams 
look more like the people that we are trying to attract, or 
fund, I should say.
    Mrs. Rodriguez Simon. I appreciate the question. It is 
really a passion of my team and I to recruit more diverse 
managers into this program. So first, I want to start by saying 
that they exist. People of color exist as investment managers. 
We already are out there, working outside of the SBIC, in a 
large number.
    The NAIC, which is an organization that supports diverse-
owned managers, there are 120 members that that have under 
management $225 billion. They are out there, a lot of them. I 
am not a unicorn, right? Even though I am one of the very few 
in the SBIC fund, the SBIC program, there are many out there. 
We need to recruit them.
    And it is not as hard, I think, as we expect it to be. In 
fact, I started a few months ago with a small panel connecting 
diverse managers to the licensing team at the SBIC, which, by 
the way, they have been incredibly collaborative and just 
fantastic partners. We connected 11 diverse managers to this 
team, and 3 are already interested in applying. So it is a 
matter of being very intentional about recruiting these 
managers, about helping them through the process, creating a 
Mentor-Protege program so that they are positioned to succeed, 
and making it a clearer path to getting into the program.
    I hope that answers the question.
    Senator Cantwell. It does. We are dealing with the same 
issue as it relates to science, engineering, and math, what we 
need to recruit more women into the sciences. And we have 
studied it, actually. NSF studied it. They said we needed to be 
aggressive, that it cannot be passive. It has to be aggressive. 
So what you are saying is the same thing.
    And I am just thinking about this group that did a fund in 
the Pacific Northwest. It really did not take them long to get 
the resources. It is almost like there was a ready-made group 
of people that were waiting for them to form so they could give 
them the funds. So they came up with funds very quickly. And 
then by doing that, you can then attract--and people can say, 
``Oh, I can go to them. I can go to them to talk about my 
business idea because of who they represent.''
    And they did target more mentoring. I think that is the 
other thing, too. Once you create a more representative group, 
they focus in on those things that you think are important, and 
in this case these women knew that mentoring, in a certain 
particular way, was going to be more important, and that they 
would have to spend more time with people looking at that 
particular fund.
    So I just feel like part of our challenge, right, is to 
have a distributed network of opportunity throughout the United 
States, and we should really think about what we can do, Mr. 
Chairman, in this area. What can we do, almost like incenting 
people to set up these funds that look more diverse.
    Mrs. Rodriguez Simon. If I can just add, I think the words 
``being aggressive'' is exactly right. It is really making it a 
top priority, putting resources behind it, having a diversity 
task force that really keeps all stakeholders accountable, and 
that reports back to this Committee on progress. It will 
happen.
    I mean, at our firm everybody told us we would never be 
able to hire as many women and people of color as we thought we 
could. Well, 12 of our 16 people are women or people of color, 
because we have been intentional about it. People say there are 
none of us. There are tons of us. We are out there, and we are 
excited and ready to help.
    Senator Cantwell. Well, I think, to me, Mr. Chairman, 75 
percent of job growth comes from small business, and 50 percent 
of our population are women. And so if you are not encouraging 
the job growth to happen within 50 percent of the sector of 
your population, you are limiting your job growth. So, to me, 
we should figure out a way to, as you said, accelerate or be 
aggressive on this and figure out how to get that distribution 
across the United States. Or, I do not know, even it was just 
to learn from the ones that are already out there.
    But I almost feel like there are a lot of women who are in 
these business positions that probably--I am not saying they do 
not think they are ready. I think if you said, ``Please take up 
the mantle, and here is a little bit of resource so that you 
can start doing that,'' I think we would see a response.
    Mrs. Wittelsberger. Senator Cantwell, if I could add, we 
have talked about this today, but the MicroCap program that is 
part of the discussion I think would address some of these 
concerns. It is really growing the on-ramp of potential fund 
managers, which would be most likely first-time fund managers. 
So people are not as scared to risk leaving their current job 
to enter the program. We would have a clear path, and likely a 
clear path to a smaller first-time fund, which would allow 
these funds to invest in smaller companies, smaller dollar 
amounts, and, you know, covering more diverse companies, and 
them themselves being more diverse.
    Senator Cantwell. Thank you. Thank you, Mr. Chairman.
    Chairman Cardin. Just to underscore Senator Cantwell's 
point. According to information I have, only 5 percent of the 
funds go to companies owned by women, veterans, or minorities. 
I mean, we are talking about a very small amount of SBIC funds 
actually getting into the minority community or women-owned 
businesses. And then you look at the geographical division, we 
have some states where there is zero activity on SBIC. So we 
have a geographical problem and we have certainly a problem of 
reaching the underserved community. And as I said, this is a 
good program that can be made much better.
    Senator Rosen via Webex.
    Senator Rosen. Well, thank you, Chairman Cardin and Ranking 
Member Paul. I appreciate you holding the hearing on the SBIC 
program, and I want to thank everyone for being here today. I 
know we are on the topic of women and working women, and so, 
Mrs. Simon, I hear you just had a baby, so congratulations to 
you for being one of those working moms that we are talking 
about, and congratulations on your new addition.
    Mrs. Rodriguez Simon. Thank you.
    Senator Rosen. And, you know, I just want to talk a little 
bit about what others have been talking about, that lack of 
SBICs. We have them in Nevada, and Nevada is home to more than 
280,000 small businesses, which make up over 99 percent of all 
businesses in my State. Unfortunately, there are no SBA-
licensed small business investment companies located in Nevada, 
meaning that Nevada small businesses seeking private capital 
need either to pursue funding from SBICs located in neighboring 
states, like California, or look elsewhere around the country 
for access to capital.
    So given that most SBICs, they focus on investing in very 
specific geographic areas, small businesses in Nevada, and of 
course in other states without SBICs, they really may be 
missing out on these types of impactful, private capital 
opportunities that really uplift their business, especially 
those that simply just need additional streams of capital to 
grow.
    So, Mrs. Wittelsberger, as a member of the Small Business 
Investor Alliance, what barriers in the SBIC program do you see 
for states like Nevada that currently lack SBICs, and then I 
would like to go over to Mrs. Simon, and say coming from a 
western State, obviously bordering Nevada, I would like your 
take on that as well.
    Mrs. Wittelsberger. Thank you, Senator Rosen. I think the 
key barriers today are the uncertainty around the licensing 
process, and, you know, previously discussed, the MicroCap 
bill, I think, would be a perfect solution for your concerns 
around the lack of SBICs in the State of Nevada. Nevada is a 
perfect place for SBICs to set up shop, and I think the 
MicroCap would address focusing on these areas outside of the 
SBIC epicenters.
    And it would provide, as we mentioned before, a wider on-
ramp for bringing new fund managers into the program, given 
that there would be a change in the licensing process as 
compared to the overall SBIC program for these new fund 
managers who would be looking to set up funds in the State of 
Nevada.
    Mrs. Rodriguez Simon. I agree, although I imagine that in 
your great State of Nevada there has to be at least somebody 
that is qualified to join the existing program and would not 
need to on-ramp through a MicroSBIC program. And I probably 
sound like a broken record, but it is really all about being 
intentional about recruiting where you need and want more 
capital available.
    It all starts with investment managers. The investment 
managers decide what investments they are going to make. And so 
if there is nobody in the program that cares about Nevada, 
well, then Nevada is not going to get any capital. If there is 
nobody in the program that really has a network within women or 
diverse companies, then those companies do not get capital.
    And so, again, it is about really being aggressive and 
recruiting diverse managers, and I do not mean diverse just 
women and minorities but also geographically, and expanding 
those programs so that there is room for additional managers. 
As I just discussed in my testimony, we only use about half of 
the leverage available. It is just such a wasted opportunity. 
This is such incredible capital that should be going to our 
small businesses. We should be using every last dollar of it. 
And in order to do that, we have to have more licenses. In 
order to do that, the very hardworking team at the OII needs 
more resources. They need more people to process licenses and 
to manage it.
    Senator Rosen. Well, thank you. I could not agree more. I 
would love to see it expand in Nevada, because we also need to 
invest in our minority-owned businesses, and in Nevada we have 
one of the Nation's largest Latino populations per capita, and 
one of the fastest-growing AAPI communities in the country. We 
are the proud home of more than 70,000 minority-owned 
businesses. However, SBA reporting says only 5 percent, just 
like you are saying, of total businesses, investments go to 
minority-owned businesses.
    So again, Mrs. Simon, in your experience, what else besides 
attracting people to the table, how would we get them to see 
us? I know we are a small State, 3 million people, but we have 
a lot going on--99 percent small business, 50, 60, 70 million 
tourists through our State every year. We are prime opportunity 
to grow our small business.
    Mrs. Rodriguez Simon. It certainly sounds like it, and it 
sounds like I need to spend a little bit more time in Nevada, 
as a fund ourselves.
    You know, I think, Senator, it is recruiting people that 
have the network and sources in Nevada. It is making it a 
priority, pushing that agenda. I wish I had additional--I 
really think if we start there--if we get two investment 
managers in Nevada in the next two years, it will make a 
significant difference. We have zero now. Let's get one or two.
    Senator Rosen. Well, I am going to maybe reach out with you 
and see how we can set up some roundtables to make some of 
those things happen for my great State.
    My time is up. Thank you, Mr. Chairman.
    Chairman Cardin. Well, thank you, Senator Rosen. I believe 
shortly we will be joined by Senator Hickenlooper, but let me 
ask a question, or just make an observation and then sort of 
bring us together. We have talked about this at great length.
    The SBIC allows a lender to be able to leverage private 
sector investment, low-interest loans, affordability. It gives 
you all that flexibility. And most of the SBIC funds will 
concentrate in certain industries or certain locations. They 
have a strategy. And as has been pointed out by both of you, if 
you do not have diversity in the management and location, you 
are not going to have diversity in where these loans are made. 
And I think that is absolutely a certainty.
    So whether we are looking at underserved communities or we 
are looking at the geographic distribution of these loans, it 
is critically important to have management that recognizes and 
has, as you said, Mrs. Simon, the connections to the different 
communities.
    So your mentorship program that you have talked about, I am 
interested in that, because whether you are mentoring future 
managers that will connect to an existing SBIC or perhaps 
initiate a new license, by giving a person that represents 
diversity that opportunity we are creating the next generation 
of leaders that will represent opportunities in more diverse 
communities.
    So what has your experience shown? It looks like you have 
gone through this for a while. Tell us a little bit about the 
experiences of your mentorship program, and how you got it 
started.
    Mrs. Rodriguez Simon. So our internship program?
    Chairman Cardin. Yes, I meant internship.
    Mrs. Rodriguez Simon. Internship program. Sure. Absolutely.
    So we started our Avante internship program just at our 
firm to help support women in nontraditional backgrounds get 
access to this industry. It is a very difficult industry to 
enter. Typically you have to have a business degree from just a 
certain type of business school, and you have to have the 
network to enter into this industry. That is really the key.
    And I understand how we got here. You know, 50 years ago, 
sir, women and minorities, we were not in the place to be 
successful in investment management--we did not have the 
education, we did not have the access. The great news is, 50, 
60 years later, we have made a lot of progress. Many of us have 
been in education. Many of us are able to access the industry.
    And so we started to just create opportunities for interns 
to break into the industry, and we have grown that program. We 
established the first-ever diversity internship program for the 
SBIC. It is called the ``Small Business Investment Scholars,'' 
and we have 30 interns, all women and people of color, that 
will be working at 25 SBIC funds. And to the credit of my 
colleagues, my colleagues were very willing, very 
collaborative, and very excited about getting a diverse intern 
on their team.
    And so they are going to be working with this intern, 
giving them incredible exposure to the industry, and putting 
them on a path so that they can eventually join their firm and 
eventually launch their own funds.
    But these internships are incredibly important to build a 
pipeline, and the mentorship programs are incredibly important 
to provide guidance from established funds to funds that may 
have track records but have never run a fund before. And so 
that collaboration between existing funds, you know, that are 
willing to collaborate, and bringing on new, diverse managers 
is what we are pretty excited about.
    Chairman Cardin. We might be asking you specifically if 
there is something we can do in Congress as far as legislation 
is concerned to assist in this type of program. We would 
welcome your suggestions in that regard, because we are very 
much interested in workable programs to improve diversity among 
fund managers. So we are going to be working with you to try to 
see how we can advance that.
    Now in Maryland we are blessed with having great leadership 
in our community on women-owned businesses and on minority-
owned businesses. We have now three Women Business Centers in 
Maryland. We are very proud about that. And the SBIC 
penetration is pretty strong in the State of Maryland.
    So let me take it from a State that already has an 
established record here. What more can we do to reach 
underserved communities in a State like Maryland that has a 
rich number of minority small businesses and women-owned small 
businesses, and are still not getting the same percentage of 
help as the demographics would want to indicate?
    Mrs. Wittelsberger. You are right, Chair Cardin, that we do 
have three existing, strong SBICs in the State of Maryland. I 
keep going back to the MicroCap program, but there has been 
discussion of this mentorship concept, which actually already 
exists in the MicroCap program proposal, which would expand the 
requirements, or not loosen the requirements but allow for new 
fund managers into the program at smaller amounts, and set them 
up for success, pair them with existing SBIC fund managers who 
have already been successful in the program.
    So, you know, expanding the program through the MicroCap 
bill I think would allow for more diverse fund managers, even 
in the State of Maryland, which has a strong SBIC community.
    Chairman Cardin. Mrs. Wittelsberger, that is the best 
introduction you could give to Senator Hickenlooper, who is now 
joining us, who is the sponsor of that legislation. So Senator 
Hickenlooper.
    Senator Hickenlooper. Thank you, Chairman Cardin, and I had 
to jump out there so I missed about 15 minutes of your 
testimony, and I apologize for that because it sounds like I 
missed some of the best parts.
    Certainly, as a former entrepreneur--I refer to myself 
frequently as a recovering entrepreneur--the willingness, and 
actually the desire and the healthiness of mentoring a young 
entrepreneur once you have already become established and 
successful, it is not only healthy and pleasurable but it 
really does create a healthy ecosystem. And one of the things 
we did in Colorado, intentionally, was to try and take some of 
those mentorships out into the rural parts of the State and try 
and do kick-starts by kick-starts I mean trying to recreate the 
network that can provide that kind of mentoring, in rural 
Colorado as well as urban Colorado.
    I want to ask both of you, Mrs. Wittelsberger and Mrs. 
Rodriguez Simon, to answer this, because you talked in the 
beginning, and I am sure you have continued to talk about it 
while I was out of the room, you mentioned the concentration of 
venture capital and investment in Silicon Valley, in Boston, 
and New York City. I think you could probably include Seattle 
these days.
    The question is, could a MicroCap SBIC really jump-start 
capital in rural and other underserved areas, and by jump-
starting I mean create an expansion and a follow-on effort. The 
SBIC program is credited with leading the way and, in essence, 
jump-starting or kick-starting the broader venture capital 
industry. How can we use the SBIC program to have that same 
impact and spur increased diversity in private equity and in 
the venture capital space, as well?
    Mrs. Wittelsberger. I can start on that, Senator 
Hickenlooper. As we have talked about today, these individuals 
do exist that have the capability to run a first-time fund. So 
I think through the MicroCap bill that you have introduced this 
would allow us to reduce the potential time, which is a hurdle 
for a new fund manager, potentially change the cost structure 
for them--it is very expensive for a first-time fund manager to 
take that risk and jump to raise a new fund, with a lot of 
uncertainty, and the overall licensing process, and the time 
that it is going to take. And then existing restrictions on the 
specific background that you need to have between you and your 
other partners in raising a fund. A lot of first-time fund 
managers may not have that.
    So the slight tweaks to the program, as it relates to the 
MicroCap program, I think--and we are supportive of the bill--
we think that it would attract new people to the program, 
especially in smaller markets that you have identified.
    Senator Hickenlooper. Great. Mrs. Rodriguez Simon?
    Mrs. Rodriguez Simon. Thank you, Senator. You know, I 
support and I commend all efforts to increase diversity in the 
SBIC program, and I certainly think that there is a place for 
the MicroCap SBIC. However, I would really caution this 
Committee on relying solely on those types of programs, and the 
reason I say that is that they have historically been 
challenging to administer. The investment restrictions, the 
fund size limitations, investment committee mandates, they make 
these funds inherently more challenging than the existing, 
successful fund. It is harder for these smaller funds to 
compete. It is harder for them to fundraise. It is harder for 
them to recruit teams, because they are smaller funds.
    So there are some challenges with them. However, as I 
mentioned, I do support all diversity efforts, and I do think 
that there is a place for them. I just would hope that we do 
not rely solely on them, and that we really focus on the large 
program and attracting diverse managers to that program, which 
is already established. It is already successful. We already 
know it works.
    And so that is my honest opinion, sir.
    Senator Hickenlooper. No, that is why you are here, is for 
that honest, candid appraisal. And I applied for an SBA 504 in 
1991. I am on the Hall of Fame in the Denver SBA offices. But 
the truth is, it drove me nuts. There was so much red tape and 
so much more bureaucracy. And it is pretty clear that that is 
because taxpayers do not want us to risk their money. So there 
are these extra layers of what they believe is security for the 
investment, which, in the end, really, I think, in many cases, 
drives away the better candidates who are more deserving and 
would be more successful, create more jobs, create better 
businesses if we got them the resources when they needed it.
    You both talked a little bit about the importance of 
patient capital. And I struggled for a long time because I was 
in business four years before I could use the SBA 504, before I 
had enough wherewithal, and there was nobody. I had to do all 
friends and family, which took me two years, at $5,000 here and 
$10,000 there. It is a long story. I am sure you have each got 
your own long stories.
    But the truth is, there is no reason why we cannot make the 
processes of the Small Business Administration more efficient.
    Mrs. Rodriguez Simon. Absolutely.
    Senator Hickenlooper. Isabel Guzman, the new Administrator, 
was out in Colorado last week, and so I got to spend several 
hours with her, going and talking to small businesses in 
northern Colorado. And I think we share that recognition, that 
this is a time where making sure we protect the taxpayers' 
dollar, we can make it easier and more efficient for small 
businesses, truly small businesses, to get that.
    I just used up my own time giving a speech, so I apologize. 
I will pass along my questions and make sure that you get them 
for the record and get to answer them separately. Thank you. I 
yield back to the Chair.
    Chairman Cardin. Thank you, Senator Hickenlooper, and we 
appreciate your leadership on this issue, and to sort of help 
us reach some of the states where we have not had as much 
participation. So thank you very much for your help on that.
    President Biden's American Jobs Plan, the Build Back 
Better, includes a provision to help small businesses, and his 
charge to all of us is to figure out how we can get capital 
into underserved communities, and to do that particularly as it 
relates to startup capital, venture capital equity. So that he 
recognizes that historically we have had a challenge in 
reaching underserved communities, whether they are rural 
America, whether it is minority communities, women-owned 
businesses, veteran, disabled veteran communities. We have all 
these target communities, hub zones, and we recognize that we 
have programs to try to deal with that, but the President is 
challenging us to do better as we build back better.
    So I think this hearing has been extremely helpful as to 
how the Small Business Investment program can really help us in 
achieving what President Biden has challenged us to do, in 
building back a better and fairer America that provides 
opportunity for entrepreneurship in all communities.
    So we are going to certainly use the information you all 
presented as we try to work with President Biden on the 
American Jobs Plan. I know there are a lot of groups meeting 
and negotiating. We are going to make sure that small 
businesses are properly represented in those negotiations.
    Let me thank both of our witnesses for your contributions 
today. We may be coming back to you with more specific requests 
for help as we craft the congressional response.
    The record of this Committee will remain open for two 
weeks. If questions are asked for the record we would ask that 
you respond in a prompt manner. And with that the Committee 
will stand adjourned. Thank you all for your attendance.
    Mrs. Wittelsberger. Thank you.
    [Whereupon, at 3:40 p.m., the Committee was adjourned.]

                      APPENDIX MATERIAL SUBMITTED
                      
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                                  [all]