[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                 OVERSIGHT OF THE SMALL BUSINESS ADMINISTRATION

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                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

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                              HEARING HELD
                             MARCH 23, 2023

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[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


            Small Business Committee Document Number 118-005
             Available via the GPO Website: www.govinfo.gov
             
                              __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
51-442                       WASHINGTON : 2023                    
          
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                       MORGAN MCGARVEY, Kentucky
                  MARIE GLUESENKAMP PEREZ, Washington
                       HILLARY SCHOLTEN, Michigan
                        SHRI THANEDAR, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director
                           
                           
                           C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Roger Williams..............................................     1
Hon. Nydia Velazquez.............................................     3

                                WITNESS

Hon. Isabella Casillas Guzman, Administrator, United States Small 
  Business Administration, Washington, DC........................     4

                                APPENDIX

Prepared Statements:
    Hon. Isabella Casillas Guzman, Administrator, United States 
      Small Business Administration, Washington, DC..............    37
Questions and Answers for the Record:
    Questions from Hon. Williams to Hon. Guzman and Answers from 
      Hon. Guzman................................................    42
    Questions from Hon. Van Duyne to Hon. Guzman and Answers from 
      Hon. Guzman................................................    55
    Questions from Hon. Bean to Hon. Guzman and Answers from Hon. 
      Guzman.....................................................    56
    Questions from Hon. Velazquez to Hon. Guzman and Answers from 
      Hon. Guzman................................................    60
Additional Material for the Record:
    FTA - Financial Technology Association.......................    74
    NADCO - National Association of Development Companies........    78
    NAFCU - National Association of Federally-Insured Credit 
      Unions.....................................................    81
    SCORE for the Life of your Business..........................    83
    Documents Submitted by Hon. Scholten.........................    86

 
             OVERSIGHT OF THE SMALL BUSINESS ADMINISTRATION

                              ----------                              


                        THURSDAY, MARCH 23, 2023

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:30 p.m., in Room 
2360, Rayburn House Office Building, Hon. Roger Williams 
[chairman of the Committee] presiding.
    Present: Representatives Williams, Luetkemeyer, Alford, 
Stauber, Meuser, Bean, Van Duyne, Ellzey, Mann, LaLota, 
Velazquez, Golden, Mfume, Phillips, Landsman, McGarvey, 
Gluesenkamp Perez, Scholten, Thanedar, Chu, Davids, and Pappas.
    Chairman WILLIAMS. Good afternoon. Sorry for the lateness. 
I want to thank everybody for being here.
    And before we begin, I am going to take a moment to ask for 
Dan Meuser to lead us in opening prayer and the Pledge.
    Mr. MEUSER. Thank you, Mr. Chairman.
    If you all would just please bow your heads. Dear Lord, we 
appreciate you bringing us all together here today to discuss 
the important matters facing our wonderful country. We 
appreciate the administrator of the Small Business 
Administration being here with us, and we ask your blessings as 
we try to bring wisdom and intelligence and just simply doing 
for our small businesses and our country. Amen.
    Stand for the pledge. Join me in the Pledge of Allegiance. 
I pledge allegiance to the flag of the United States of 
America, and to the republic, for which it stands, one nation 
under God, indivisible, with liberty and justice for all.
    Chairman WILLIAMS. Okay. I now call the Committee on Small 
business to order.
    Without objection, the Chair is authorized to declare a 
recess of the Committee at any time.
    I now recognize myself for my opening statements.
    Today's hearing will focus on the much needed oversight of 
the Small Business Administration. And first, I want to thank 
our witness, Administrator Guzman, for joining us today, a 
fellow Texan. Thank you. And as someone with ties to the great 
State of Texas, it is a pleasure to have you here today. I hope 
this is the first of several productive hearings we will have 
with you at this Congress. So I appreciate you making the trip 
to speak with us today.
    This hearing could not come at a more important time for 
Main Street America. And our nation's small businesses are 
facing unprecedented levels of inflation, interest rates that 
are being raised at the fastest pace since the '80s, and a 
labor shortage that have windows plastered with help wanted 
signs across our country. As a small business owner, I have 
been working with these economic headwinds. This Committee must 
ensure that the Small Business Administration is focusing their 
attention on ways to help them get through these daunting 
challenges.
    During the COVID-19 Pandemic, the SBA was asked to step up 
in ways that they had never had to do before. While they were 
able to get money out the door quickly, the After Action report 
showed there were serious problems within the Agency. A 
disorganized management structure and a lack of basic 
guardrails to prevent fraud led to unacceptable amounts of 
waste of taxpayer dollars. And in the Economic Injury Disaster 
Loan Program, that office, the Office of Inspector General, 
found potentially $78 billion in loans and grants were 
fraudulently obtained. Criminal opportunists took advantage 
when the SBA was overwhelmed with the sheer volume of work they 
were asking to do, and the taxpayers were the ones left holding 
the bag, as usually happens.
    While there were many past findings that showed what could 
have been done to prevent fraud, there are other 
recommendations that were made in the last few months that 
could have remedied some of these crimes. And unfortunately, it 
looks like the SBA is not taking these recommendations 
seriously. For example, against the OIG's advice, the SBA has 
decided to end their collection, forgive all PPP loans with an 
outstanding balance of $100,000 or less. While I support 
ensuring that the forgiveness process is as seamless as 
possible for small business owners, you cannot help but wonder 
how many illegitimate entities were able to walk away with tens 
of thousands of taxpayer dollars because of this decision.
    Given all the problems the SBA had during the pandemic, we 
must have a serious discussion on the role the SBA should be 
playing in the future.
    The President's budget proposal and some rules currently 
being developed by the Agency make it very clear that this 
Administration thinks the SBA did a great job over the past few 
years and deserves more responsibilities. I completely disagree 
with that assessment. With such high levels of fraud that 
occurred during the pandemic and the most recent failures of 
large banks in California and New York, I have serious concerns 
about expanding the government backed 7(a) loan program and 
increasing the SBA's role as a regulator.
    Additionally, I am very concerned that the President's 
budget request diverts resources away from the programs that 
have bipartisan support and a proven track record of helping 
main street to duplicate programs with unclear performance 
metrics.
    And finally, we continue to hear how the customer service 
of the Agency continues to fail our constituents. We must 
ensure the Agency is capable of handling their current task 
before they expand into more areas.
    Main Street America has been forced to endure profound 
challenges over the last couple of years, and I hope this 
hearing can serve as the starting point to get the SBA back on 
track. Too much is at stake for America's small businesses to 
be not taken seriously.
    And I want to thank you all again for being here with us 
today. And I am looking forward to today's conversation.
    And with that, I want to yield our distinguished Ranking 
Member from New York, Ms. Velazquez. I now recognize the 
distinguished Ranking Member for her opening remarks.
    Ms. VELAZQUEZ. Thank you, Administrator Guzman, for 
testifying before the Committee today.
    It has been 2 years since you were confirmed as SBA 
Administrator. In those years, SBA delivered more than a 
trillion dollars in pandemic relief, saving countless jobs and 
small businesses from permanent closure. There have been a 
record number of small business applications, thanks in large 
part to an historic investment in not just the nation's 
economic recovery, but also its future. This effort unlocked 
opportunities for Americans, leading to a surge in 
entrepreneurship, which is vital to our economy. Small 
businesses have the power to spark economic growth and create 
good paying jobs in our local communities. They can turn main 
street into a vibrant destination, where retailers, 
restaurants, and personal service businesses can thrive. 
Entrepreneurship can spark innovation, bringing new ideas and 
solutions to the marketplace.
    Looking ahead to the next 2 years, I hope to learn more 
about your vision for the Agency, in particular, how SBA's 
fiscal year 2024 budget plan will nurture our nation's 33 
million entrepreneurs and innovative startups while creating a 
landscape that will be ripe for local economic growth. Part of 
that discussion will inevitably include SBA's IG and GAO's 
reports and recommendations on the pandemic relief programs. 
Their investigations have identified billions of dollars in 
potential fraud, and it is important for the Committee to hear 
the steps you have taken to address fraud and save taxpayers' 
dollars.
    Finally, I want to hear from you about the two proposed 
rulemakings, which could lead to major changes in how the 7(a) 
program operates. The stated intent of the two rules is to fill 
a gap in underserved markets, and it goes without saying that 
ensuring support for minority owned small businesses and 
entrepreneurs from underserved communities is a top priority of 
mine.
    With that said, I have been disappointed with the SBA's 
initial lack of engagement on the proposed rulemakings. 
Questions remain that I hope can be answered prior to 
finalizing the rules. Put simply, the Agency should slow down 
and address issues with fraud in the Paycheck Protection 
Program before moving forward with major policy changes to the 
7(a) program.
    As you know, the IG identified 70,000 potentially 
fraudulent PPP loans totalling more than $4.6 billion, and a 
disproportionate share of these loans were made by FinTechs. 
These entities are not subject to the same prudent lending 
rules as traditional banks and credit unions, and lifting the 
moratorium on SBLCs to allow non-regulated entities to 
participate in SBA flagship lending programs may not be the 
best way to reach under bank communities.
    Congress put the moratorium in place 40 years ago to 
safeguard the 7(a) loan program and make sure the Agency had 
the resources to supervise lenders effectively. We do not have 
any assurances that SBA has the bandwidth to manage these new 
unregulated entities, even though we have been asking.
    Major policy changes cannot be made hastily. The Agency 
should be working with this Committee and stakeholders to 
improve the program while still protecting its integrity.
    Let me finish by stating there may be areas of disagreement 
throughout this hearing, but that is part of the legislative 
process. Today's hearing will give us an excellent opportunity 
to closely examine the achievements we have made for small 
businesses, but also to discuss the challenges they face and 
learn how best to support them through our bipartisan efforts.
    I look forward to our discussion, and I yield back, Mr. 
Chairman.
    Chairman WILLIAMS. Thank you, Ranking Member.
    And it is my honor today to introduce our witness, Small 
Business Administrator Guzman. Administrator Guzman is a 
graduate of the University of Pennsylvania Wharton School of 
Business. In March 2021, she was confirmed as the 27th 
Administrator of the Small Business Administration. Prior to 
being becoming SBA administrator, Ms. Guzman served in various 
capacities in the Agency for 9 years, including as deputy chief 
of staff and senior advisor at the SBA. Ms. Guzman also served 
as a small business advocate for the State of California. 
Administrator Guzman is tasked with ensuring that the SBA's 
programs and services are available to all small businesses, no 
matter who or where they are, so they can have access to 
capital, revenue growth opportunities and support networks all 
entrepreneurs need to start, grow, and lead our economy.
    As the person tasked with the leading the SBA during such 
an important time for America's small business, we have brought 
Administrator Guzman here to address growing concerns, as you 
have heard of the Agency's effectiveness, priorities, and 
issues facing Main Street America.
    Administrator Guzman, thank you for joining the Committee 
today, and I am looking forward to your important conversation 
with you. And so I now recognize Ms. Guzman for her 5 minute 
opening remarks.

     STATEMENT OF THE HONORABLE ISABELLA CASILLAS GUZMAN, 
   ADMINISTRATOR, UNITED STATES SMALL BUSINESS ADMINISTRATION

    Ms. GUZMAN. Thank you so much, Chairman Williams, Ranking 
Member Velazquez, as well as the distinguished Members of this 
Committee. Thank you so much for giving me the opportunity to 
come and discuss the U.S. Small Business Administration and the 
impact that we have on the entrepreneurial community, as well 
as the continuous improvements that we have made in helping 
small businesses start and grow.
    The entrepreneurial spirit of the American people, as you 
have seen, their trademark grit, determination, and agility 
have really made small businesses in our nation the most 
important driver of job growth, competition, and innovation. 
America's entrepreneurs have not only helped deliver an 
incredible economic expansion, but they are also powering a 
surge in new businesses--'21 to '22, 10.5 million new business 
applications were filed, the most in any 2 year span on record.
    Our nation's small businesses continue to need support as 
they position to grow their businesses and pivot to continue to 
adapt to remaining supply chain challenges, inflationary 
pressures, and the tight labor market. They consistently share 
that funding is one of their biggest challenges, especially as 
we see they are facing rising interest rates and tightening 
credit standards. Access to affordable capital is one of my key 
priorities at the SBA. In 2022, SBA delivered more than $43 
billion across our capital programs and finally reversed a 5 
year decline in small dollar lending, but we continue to see 
large gaps in this space, especially in loans under $150,000. 
This funding gap truly limits entrepreneurial growth, 
especially for the smallest of the small, as well as for 
minority, veteran, rural, and other historically underserved 
small businesses.
    To effectively address this market gap, the SBA must 
streamline its regulations and its capital programs. First, we 
need more competition and capacity in small business lending. 
That is why we propose expanding our distribution networks by 
revitalizing the existing Small Business Lending Company or 
SBLC program. The SBLC Rule will make the Community Advantage 
Pilot program permanent and provide certainty to the over 100 
nonprofit mission lenders who have been effectively lending to 
underserved communities through this program in the 7(a). With 
permanence, the SBA can expand the number of these mission 
lenders serving the hardest to reach small businesses through a 
new Community Advantage License.
    We will also lift the cap on regular SBLC licenses, 
enabling SBA to admit new non depository lenders aligned with 
the Agency's mission in the 7(a) program.
    Second, we will modernize our loan products and meet our 
businesses where they are by cutting red tape and complexity 
that exists in our 7(a) and 504 programs through our proposed 
affiliation rule. Based on extensive feedback from our lending 
partners over the past decade, we will streamline affiliation 
roles which lenders have shared are burdensome. We will also 
align with existing lender best practices on credit 
underwriting. As we implement, we will prioritize maintaining 
the core integrity and oversight of SBA's lending programs. 
Based on past oversight performance and existing structures and 
processes, we can both improve our support for underserved 
communities and fill capital gaps, as well as ensure program 
integrity at the same time.
    Third, we will add a provision to help owners with business 
transitions to employee ownership, an issue many of the Members 
of this Committee have supported. SBA is finding ways for its 
products to help finance partial buyouts so that an owner can 
sell their business to employees, for example, for a successful 
exit.
    Finally, a bipartisan interest of this Committee has been 
to attract more private investment capital to innovative 
startups critical to our national economic competitiveness and 
our national defense. Our proposed rule, Modifying the Small 
Business Investment Company, or SBIC program, will add a new 
accrual SBIC license to incentivize patient and growth capital. 
It will also expand investment in rural and underserved 
communities by ensuring a diversified portfolio across the 
nation and streamlining and improving the licensing process.
    These three rules will help the SBA more effectively 
address capital gaps so we can power entrepreneurship. As we 
move forward with these updates to our capital programs, we 
will continue to build on the lessons learned through managing 
the biggest disaster response in our Agency's history. Our 
COVID relief helped millions of small businesses navigate the 
pandemic and preserve jobs recover quickly. However, while 
these programs have ended, the SBA's portfolio has changed and 
we continue to support small businesses through ongoing loan 
servicing, grant reporting, and PPP forgiveness processing. We 
will work with Congress to ensure the Agency has the necessary 
resources to serve these small businesses.
    The SBA has implemented the Biden Harris Priority effort to 
combat fraud and pandemic relief. Aligned with the Inspector 
General and the GAO recommendations, we have instituted 
standard fraud protections to deliver funds with not just 
speed, but also certainty. We also improved SBA operations by 
implementing the GAO recommended fraud risk framework, and we 
continue to collaborate with the Inspector General to recover 
stolen funds. The SBA is more strongly positioned than ever to 
combat fraud, waste and abuse, and this strengthened position 
enables us to better serve the 33 million small businesses and 
disaster survivors into the future.
    So I appreciate your time, and I do look forward to diving 
into more detail with your questions regarding all of SBA's 
critical programs around capital and technical assistance.
    Chairman WILLIAMS. Thank you for being here.
    Now we will now move to the Member questions. And I 
recognize myself for 5 minutes.
    Businesses need long-term certainty. I am a small business 
owner, and you have to deal with certainty as they make 
decisions on where to invest in their operations. In the next 
few years, some major components of the Tax Cuts and Job Act 
will be expiring. Specifically for small businesses organized 
as pass through entities, there will be a large increase for 
their tax liability because these businesses pay individual 
income tax rates instead of the corporate tax rate. 
Administrator Guzman says now 80 percent of all small 
businesses are organized as pass throughs. Will you commit to 
working with the President to make sure that these small 
businesses won't have their taxes increased when this provision 
expires?
    Ms. GUZMAN. The President has demonstrated that he is 
committed to lowering costs for families and small businesses. 
And we recognize the Trump tax cut did not make permanent the 
small business tax assistance, only the corporate. So as a lot 
of small businesses, of course, are not corporations, we remain 
committed to providing the advice and being that voice of small 
business.
    Chairman WILLIAMS. You are recommending to him that he keep 
that component, ma'am?
    Ms. GUZMAN. You know, obviously, Congress makes the tax 
policy.
    Chairman WILLIAMS. Right.
    Ms. GUZMAN. And I know the President has----
    Chairman WILLIAMS. He supports----
    Ms. GUZMAN.--committed to working with Congress to ensure 
that we can help ensure that--a vibrant economy okay.
    Chairman WILLIAMS. Okay. There has been bipartisan concerns 
over the proposed changes to the SBA's flagship 7(a) lending 
program. Now, given the recent failures of some large banks in 
California and New York, it does not seem wise to change some 
of the prudential underwriting standards of this lending 
program while simultaneously opening up to more companies, 
whose sole federal regulator will be the SBA. The 7(a) 
portfolio is backed by the government, so if something goes 
wrong, the taxpayers are on the hook.
    And so, Administrator Guzman, how do you justify relaxing 
the underwriting standards of this program when we just 
experienced the second largest bank failure in our country's 
history? And secondly, does the SBA even have the authority to 
transition pilot program participants into full time 7(a) 
lenders without an act from Congress, as the rule does?
    Ms. GUZMAN. So the SBLC program is an existing program. It 
is been four decades long, and we have 14 SBLCs currently. We 
have passed over those licenses multiple times. They have had 
different 60 different licenses as well. Across those licenses, 
there was a moratorium put in place. We are recommending 
lifting the moratorium so that we can allow for more 
competition and a broader distribution network, as we saw with 
PPP.
    You know, with this, we plan to implement strong controls 
within this program, as we have been doing for the past 4 
decades. We have strong credit risk management processes and 
controls in place to ensure that these SBLCs, as well as our 
Community Advantaged lenders can perform. And that includes in 
credit underwriting as.
    Chairman WILLIAMS. Well, you want to make sure you tighten 
up the overseers. That is important.
    Before any business makes an investment decision, they must 
have a general understanding of the return they will see on 
dollars spent. And I think it is responsible for the government 
to do the same thing. So kind of return on investment.
    So I want to go over some numbers in the Office of the 
Budget request to see if they make sense in terms of ROI for 
the taxpayers.
    In the SBA's budget request, it states, the Community 
Navigators program spent $131,000,000 in fiscal year '22, which 
started 422 new businesses and serviced 16,312 new clients. 
This means it cost the taxpayers over $300,000 for each new 
business started and over $8,000 per client serviced. During 
the same period, the SBDCs performed similar services at a cost 
of $7,064 per new business started and $319 per client 
serviced. The numbers don't lie. It is very obvious which one 
of these programs is a much better return on investment ROI for 
the taxpayers.
    However, the budget request seeks a 400 percent increase 
for Community Navigators and a 10 percent budget decrease for 
the SBDCs.
    So, Administrator Guzman, I will be sending you a letter to 
get more information on this program, but I wanted to ask, why 
are you looking to transfer funds from a program that is more 
effective and has a bipartisan support to an ineffective 
program that was passed along party lines?
    Ms. GUZMAN. At the SBA we try to look holistically at the 
entire entrepreneurial ecosystem. We are increasing by $14 
million our entrepreneurial development programs, you know, 
leaning into supporting our veterans, as we just launched this 
successful Vet Certification program, leaning into contracting 
and capital assistance. We provide grants to organizations to 
help get businesses capital ready and contract ready, as well 
as all of our incredible resource partners. They all serve a 
different function.
    During the pandemic, we saw huge gaps in the initial rounds 
of PPP. For example, businesses that were the smallest of the 
small or underserved were unable to access relief. They didn't 
know how to navigate the system. And so, clearly, we need to 
ensure that we have a strong ecosystem that works together.
    The purpose of the Community Navigator program, and we are 
happy to share more data to demonstrate that it has strong 
results, they have been working with existing businesses to 
fortify them. We see that there is less performance because of 
a lack of investment across women and minority founders, as an 
example. We want to make sure that they can deliver for the 
economy, just as all our businesses.
    So it is a comprehensive approach. And I welcome further 
discussion in your letter.
    Chairman WILLIAMS. Invest money, make money.
    My time is up. I am sorry.
    And I now recognize the Ranking Member for 5 minutes of 
questions.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Administrator Guzman, I have a lot of questions, so please 
try to be brief.
    Associate Administrator Kelly assured us that SBA was 
working to improve lending to ESOPS and co-ops. However, last 
December, we heard testimony that the SBA proposed rule does 
nothing to improve lending to ESOPS. When will the Agency 
finally implement changes to expand 7(a) loans to ESOPS and co-
ops?
    Ms. GUZMAN. We have implemented some changes, but clearly 
we need to continue to go further. And so we are hoping with 
this affiliation rule, with the partial buyout, that will help 
assist. We have also launched an SBIC that is focusing on ESOPS 
in particular. So we are continuing to try to work with the 
industry to address issues.
    Ms. VELAZQUEZ. And what is that? The proposed rule doesn't 
provide anything.
    Ms. GUZMAN. The affiliation rule allows for partial buyout. 
So, for example, if an owner wanted to transition to some of 
their employees right now, they would not be able to do that. 
It calls for a full exit. And so with this, it allows for an 
owner to stay in place, transition to employee ownership as a 
potential exit strategy, since it is difficult to sell your 
business, and then that way, you know, allow for more employee 
ownership.
    Ms. VELAZQUEZ. Okay, thank you.
    I just need a yes or no answer on these questions. Is it 
true SBA intends for FinTechs to participate in the 7(a) 
program when the SBLC moratorium is lifted?
    Ms. GUZMAN. We intend for non depository, so that could 
include FinTech, along with others.
    Ms. VELAZQUEZ. Okay. Have you heard concerns with allowing 
unregulated companies, some associated with significant fraud, 
into a federally guaranteed program?
    Ms. GUZMAN. I don't share those concerns because I know 
that the SBA has a rigorous application process for the SBLC 
program and intends to hold any business that wants to 
participate to account to their performance, to their 
underwriting standards, to transparency, to borrower 
protections, and to extreme oversight.
    Ms. VELAZQUEZ. That is what we heard from the big banks and 
here we are with two banks going underwater.
    I have been telling you that you have got to do due 
diligence, and I hope that you are doing so. Can you tell me 
what are the type of steps that you are taking to protect the 
integrity of the 7(a) program?
    Ms. GUZMAN. Most definitely. I mean, obviously, that is our 
first and foremost priority. We deliver a zero subsidy. That is 
true for this rule as well. And we will be able to continue to 
provide fee relief across our loan products. You know, we hold 
ourselves to a high count in terms of ensuring performance. 
That is why we do quarterly reviews of our entire portfolio. We 
have great technology and great systems to do so.
    Ms. VELAZQUEZ. Thank you.
    Four years ago, the director of the Office of Credit Risk 
Management testified that the Office was increasing its 
personnel to 42 FTEs to better fulfill its mission. Currently 
there are 29 FTEs in OCRM. How does the Agency plan to conduct 
oversight over the new SLBCs with fewer employees in OCRM? How 
much of your budget will be dedicated to hiring more OCRM 
personnel?
    Ms. GUZMAN. Yes, we have 29 individuals, but we also have 7 
contracts that support our Office of Credit Risk Management 
with personnel and with technology. We did a thorough analysis 
to see what our capacity for growth and competition would be 
and we assessed that we would do no more than 30 nonprofit 
lenders, an additional 3 non depository institutions.
    Ms. VELAZQUEZ. So you are telling me that the 29 FTEs will 
be enough with the contractors that you are bringing in?
    Ms. GUZMAN. Based on our analysis of what the Office would 
have capacity to deliver, yes. And we are committed to 
continuing to, you know, review our resources and support our 
OCRM because obviously it is a critical function at the Agency.
    Ms. VELAZQUEZ. I understand late last year, the Agency 
abruptly cancelled a public briefing on the issuance of new 
SOPs that detailed lender responsibilities. When do you intend 
to issue this SOP?
    Ms. GUZMAN. We are working right now to finalize our three 
rules for capital access and investments. And we alongside 
obviously are wanting to put in all the processes in place, so 
the SOP as well. So hopefully as soon as we can get through all 
that internal review.
    Ms. VELAZQUEZ. Will you commit to briefing the Committee on 
the details of the SOP and any other proposed rules that make 
significant changes to the SBA program in a timely manner?
    Ms. GUZMAN. Yes.
    Ms. VELAZQUEZ. I yield back, Mr. Chairman.
    Chairman WILLIAMS. Okay.
    Ms. VELAZQUEZ. Thank you.
    Chairman WILLIAMS. Thank you very much.
    And I now recognize Mr. Luetkemeyer from Missouri for 5 
minutes.
    Mr. LEUTKEMEYER. Thank you, Mr. Chairman.
    Ms. Guzman, welcome.
    We have had a lot of discussions over the last couple of 
years, and one of them last term was about your employees 
showing up for work. So today, how many people that work for 
the SBA are working from home?
    Ms. GUZMAN. We have about 1 percent of our full-time 
employment, our full-time employees in remote stance. However, 
we do have a mission based, mission aligned remote work policy 
overall. And so I believe I shared with you that, you know, we 
have employees working up to 2 days per pay period. And while 
many more come in more frequently and obviously I said mission 
based remote status, some offices are 5 days a week, some 
offices are 3 days a week, we still are trying to position----
    Mr. LEUTKEMEYER. No offense, that is not acceptable. 
Everybody should be back at work. COVID is over. President 
himself said COVID's over. We don't need people working from 
home. We need people in the office so you can oversee them to 
make sure we get the job done.
    How many applications are you behind right now?
    Ms. GUZMAN. Applications behind?
    Mr. LEUTKEMEYER. For loan applications.
    Ms. GUZMAN. The SBA's performance has been remarkable over 
the years that we have been----
    Mr. LEUTKEMEYER. I am not looking at how remarkable it was 
over the years. I was asking you how many are past due right 
now.
    Ms. GUZMAN. Now, even today we have been able to streamline 
services around our certifications to increase the rate of 
certification during this this time.
    Mr. LEUTKEMEYER. Ms. Guzman, I sit on the Financial 
Services Committee. I have to put up with the Federal Reserve 
Chairman coming in every so often. And I have listened to three 
or four of them. You are really good at, just like they do with 
the Fed, two step. You don't answer my question. I ask you how 
many people today are at home working? Can you give me an 
answer, or do I need to write you a letter about this?
    Ms. GUZMAN. No. We have just over 2,800 full-time 
employees. And as I said, 1 percent are fully remote. The rest 
of them are in this flexible, remote position.
    Mr. LEUTKEMEYER. Okay.
    Ms. GUZMAN. And so, as the President's Declaration of the 
pandemic expires in May, we continue to work towards solutions 
for the future of----
    Mr. LEUTKEMEYER. Okay. Next question.
    A minute ago the Ranking Member asked you a question with 
regards to FinTechs. You are looking to do FinTech expansion, 
or expand into FinTech's ability to access your programs. Who 
was the biggest problem with regards to fraud in the PPP 
program?
    Ms. GUZMAN. Studies have shown that, you know, FinTechs and 
banks were high performers as well as some----
    Mr. LEUTKEMEYER. Oh, Ms. Guzman, come on now. We had the IG 
report from the guy sitting in your chair. And most of the 
problems in the PPP program were the FinTech companies. Why are 
you denying that? Because what you are doing is expanding to 
the very people who are the problem children. They do not 
perform the kind of auditing and oversight over themselves that 
the banks do. Why do you want to expand into the very people 
who are the problem children in the programs that we have 
already gone through?
    Ms. GUZMAN. Again, as shared, those three SBLCs that I 
would have available when lifting the moratorium would have to 
go through a rigorous review process at the SBA. We would not 
be aligning with anybody that was identified during the 
Oversight Panel, which included banks and FinTechs.
    Mr. LEUTKEMEYER. So Anybody who has had a PPP problem in 
the past will now be somebody who can't access the program? Is 
that what you just said?
    Ms. GUZMAN. I am sorry, could you repeat that?
    Mr. LEUTKEMEYER. So any FinTech company that had a problem 
with the PPP program would be somebody who can't access these 
programs, the rest of your programs? Is that correct?
    Ms. GUZMAN. In fact, we have banned the two FinTechs that 
were identified within the climate report from ever 
participating with SBA.
    Mr. LEUTKEMEYER. Very good.
    SBA's fiscal year '24 request is $10 million for climate 
change administrative expenses so the SBA can hire experts to 
update policies on climate issues. Money that could be used to 
address your vast amount of fraud and servicing needs is 
instead going towards climate change experts. Not only that, 
according to Job Creators Network poll from last month, small 
Businesses across the nation are most concerned about over 
regulation, cutting taxes, foreign competition, of course, 
inflation. I don't see climate change on the list.
    Explain to me how $10 million for climate change expenses 
will help a small business in Missouri address 6 percent 
inflation or any other real concerns they have.
    Ms. GUZMAN. The $10 million will be used within our Office 
of Capital Access programs to help get out effectively capital 
access for businesses to position themselves for resilience. We 
know from FEMA, their data shows that if a business is impacted 
by a natural disaster and they don't reopen within 5 days, they 
will close within a year. And so we are working hard to build 
up their resilience.
    Mr. LEUTKEMEYER. That's not climate change, you are talking 
about a FEMA responsibility there.
    Ms. GUZMAN. I am talking----
    Mr. LEUTKEMEYER. That has nothing to do with what I--the 
question I just asked.
    Ms. GUZMAN. I can respond to the question.
    Mr. LEUTKEMEYER. I got one quick question before my time 
runs out here. I have asked you this question before. Do you 
talk to the President very much?
    Ms. GUZMAN. The President has been remarkable by ensuring 
that the Cabinet Member----
    Mr. LEUTKEMEYER. Do you talk to the President at all?
    Ms. GUZMAN. Yes, I do.
    Mr. LEUTKEMEYER. Okay. How many times have you talked to 
him in the last--since the beginning of the year?
    Ms. GUZMAN. The President convenes his cabinet regularly 
and participates in--and is prioritizing small businesses----
    Mr. LEUTKEMEYER. How many times have you talked to the 
President since the beginning of the year?
    Ms. GUZMAN. Again, my conversations with the President are 
private, as are any frequency or----
    Mr. LEUTKEMEYER. So my question is, have you explained to 
him about the problem that we are having with taxes right now 
with his proposal?
    Ms. GUZMAN. This proposal is focused on lowering costs for 
small businesses and families----
    Mr. LEUTKEMEYER. So you haven't talked to him about it 
then. You just told me that you did not do that. That is 
dereliction of duty, madam. You are advocate for small 
businesses from everything, from all the rules and regulations 
to the tax policy.
    I yield back.
    Chairman WILLIAMS. Thank you.
    I now recognize Mr. Phillips from Minnesota for 5 minutes.
    Mr. PHILLIPS. Thank you, Mr. Chairman.
    Administrator Guzman, I want to thank you for what you are 
trying to do to help small businesses after 3 terrible years 
for all of us, for small business owners. And I know nothing is 
perfect, but I know your head and heart are in the right place 
and I want to thank you. I want to thank you for coming to 
Minnesota just last week, spending time with me, did an on the 
job with Dean at Tierra Encantada, had lunch at Duke's on 7, a 
recipient of PPP loans, and then had a great roundtable where 
you heard directly from a number of stakeholders, and 
particularly about my personal mission to help expand employee 
ownership of enterprises.
    So I would like to begin by simply asking you about your 
perspective on employee ownership, what the SBA and you are 
doing to promote it. I believe it is an extraordinary 
intersection between Democrats and Republicans to build wealth 
for hardworking people who contribute to economic success. And 
as all the evidence indicates, it actually is accretive to 
business performance. So just love your thoughts on the subject 
and what the SBA is doing, and most importantly, what we can do 
to help you do more to incentivize, promote and support 
employee ownership.
    Ms. GUZMAN. Well, thank you for that.
    The employee owners ownership, for sure, is definitely a 
benefit to small businesses who will deploy it. Studies have 
shown that they have a stronger performance as the employees 
are vested and committed to the mission in a whole new way. I 
would say that on employee ownership, from the SBA's 
perspective, you know, we view that it is a very effective 
succession plan, as well as businesses look to exit. So from 
multiple fronts, we help to help support small businesses in 
this regard.
    We have done it both on the technical assistance side, 
trying to provide knowledge and assistance, sharing information 
about employee ownership, and ESOPS through our network of 
resource partners to small businesses directly who are seeking 
alternatives.
    In addition, within our lending program, it has been 
challenging for employee owners to access the program, so we 
are constantly looking for ways to improve the program, not 
only on the lending side, but on the investment vehicles as 
well. And so I am hopeful, with the changes that we are making, 
as well as with the new interest in our SBSC program, to see 
progress on the capital access front.
    Mr. PHILLIPS. To that end, I mean, access to capital is the 
foremost challenge, as the Chair and Ranking Member ably 
pointed out. You know, the main street program, the 2018 
program, I think, has only resulted in 17 7(a) loans to 
conversions. I think that is too few. I think the SBAS 
acknowledge that. Would love to see incremental support for 
that. I am also hearing from some that losing preferred 
contracting status, which is something that came up in 
Minnesota, is an impediment. The fear that if they convert to 
an employee ownership model or a co-op, that they might lose 
preferred status. Can you speak to that? And are there some 
ways, perhaps, that we might work together to eliminate that 
risk and ensure to promote that we can promote employee 
ownership?
    Ms. GUZMAN. Most definitely after flagged by the 
constituents in your district I am looking into it further in 
terms of the contracting and certification side of SBA, the 
entry point for contractors. And then, in addition, interested 
in observing and tracking the pilot the Department of Defense 
has deployed to try to be more inclusive of employee ownership 
in contracting specifically.
    Mr. PHILLIPS. Is there something you might need from us to 
accomplish that?
    Ms. GUZMAN. At this point, I don't believe it is any 
statutory block, but I will, you know, definitely follow up to 
see if there is a pathway on the certification specifically 
that could be more specific and give us language that would 
help power a more inclusiveness around our certification 
programs for government contracting.
    Mr. PHILLIPS. Okay, I appreciate that.
    And I just extend an invitation, a warm invitation to my 
colleagues on both sides to look for ways that we can use this 
platform of ours and the SBA to encourage more ownership. I see 
no reason why it shouldn't be a mutual goal, one to which we 
can work in unison. And I simply extend that invitation.
    Ms. VELAZQUEZ. Will the gentleman yield?
    Mr. PHILLIPS. I will surely yield.
    Ms. VELAZQUEZ. I don't know for how long--since we passed 
my legislation, we have been working hard to get more lending, 
because this is the problem. If we don't provide access to 
capital----
    Mr. PHILLIPS. Exactly.
    Ms. VELAZQUEZ.--it is not going to work.
    Ms. GUZMAN. And if I could add on that, and we did discuss 
this, but one of the big issues flagged is the personal 
guarantee.
    Mr. PHILLIPS. Yup.
    Ms. GUZMAN. And SBA, you know, cannot move forward on 
removing a personal guarantee that is core to our program. So 
that would be something that would need to be statutory.
    Mr. PHILLIPS. So, most of all, thank you for listening. 
Thanks for coming to Minnesota. I know you are traveling the 
country. I encourage other Members of the Committee to extend 
that invitation to you, too, and hear the same thing.
    Thank you. I yield back.
    Chairman WILLIAMS. Thank you.
    I now recognize Mr. Stauber, who also is from Minnesota, 
for 5 minutes.
    Mr. STAUBER. The northern part of Minnesota.
    Thank you, Mr. Chair.
    Administrator Guzman, thanks for being here again. And, you 
know, as a former small business owner, I remain extremely 
concerned about the nearly $320,000,000,000 of additional 
regulations this Administration has put on small businesses and 
our farmers. This number is set to only get worse when the 
disastrous WOTUS Rule takes effect.
    Last year, as you know, you and I spoke about the need for 
agencies to consider the negative impacts that this rule would 
have on American small business owners, farmers and 
manufacturers. And I asked you to ensure that a SBREFA panel 
was held to better understand their concerns and the 
significant economic negative impacts of the WOTUS Rule. Did 
this happen?
    Ms. GUZMAN. No. The----
    Mr. STAUBER. In fact, to make matters worse, the EPA and 
Army Corps made the claim WOTUS wouldn't have significantly 
impacted small businesses and the entities without even talking 
to them. Did you have conversations with them, as the 
administrator, the protector of small businesses across the 
United States?
    Ms. GUZMAN. Within the SBA, actually, the Office of 
Advocacy, which is an independent office within the SBA, is the 
one responsible for ensuring regulatory compliance and that 
they can assess the small business impacts.
    Mr. STAUBER. So SBREFA wasn't--a panel wasn't put together 
on the WOTUS Rule. You allow the EPA and the Corps to make that 
decision?
    Ms. GUZMAN. The Office of Advocacy is the entity 
responsible by statute for implementing SBREFA. Again, I 
respect their independence, but in talking to the Office of 
Advocacy regarding this, they did do a couple of roundtables, 
and we are in constant contact with EPA, but a SBREFA panel was 
not done.
    Mr. STAUBER. I can tell you that. I have had roundtables 
across northern Minnesota, and their biggest concern is the 
regulations, including WOTUS. And so we needed you to be the 
protector. And I gave you a heads up last year on protecting 
the small businesses and the farmers. That was one of the 
biggest pieces of conversation that I took from those meetings.
    So tell me the reason why SBREFA panel was not held before 
the WOTUS Rule was finalized as required--as required by law.
    Ms. GUZMAN. As I believe you stated within your earlier 
statement that the SBREFA panel was not implemented because EPA 
had certified that there was not significant impact. And Office 
of Advocacy----
    Mr. STAUBER. Do you agree with that?
    Ms. GUZMAN. I am not the one who and analyzes it, oversees 
it, so----
    Mr. STAUBER. You can't do the Texas two step here, although 
Mr. Williams would love you to do the Texas two step. Do you 
believe that the WOTUS Rule does not affect small businesses 
and farms?
    Ms. GUZMAN. I have not done the analysis myself.
    Mr. STAUBER. Extremely concerning that we are witnessing 
federal agencies implement this rule without the protection--
rather protecting our small businesses, and you are at the 
point to protect them. And I think in this instance, on the 
WOTUS rule, you failed at protecting the small businesses.
    I am also extremely concerned that we are witnessing 
federal agencies implement ESG policies under this 
Administration. As you know, the SBA is responsible for the 
licensing and regulating SBICs. In 2022 the SBA licensed 29 
SBICs. That is supporting over $2 billion--that is with a 
``B'', $2 billion in capital. My question do any SBICs consider 
ESG factors when choosing small businesses to invest in?
    Ms. GUZMAN. As all of the large financial institutions 
recommend, and as Wall Street has supported, not considering 
ESG is a mistake and something that could lead to financial 
risk. So, you know, I am sure that many of my SBICs responsible 
for their fiduciary responsibility to their investors are 
looking all risk.
    Mr. STAUBER. So you agree putting forth ESG factors are 
important when choosing--SBICs choose small business to invest 
in. Do you agree with that?
    Ms. GUZMAN. I agree with the Wall Street experts who have 
determined that that is a financial risk and it is something 
that all fiduciaries should be looking at, yes.
    Mr. STAUBER. Can you tell me for a fact that the SBA does 
not consider ESG factors when determining what SBICs to 
license?
    Ms. GUZMAN. We do not restrict any SBICs who do not 
consider ESG. And so we have 300 SBICs today, and we are 
continuing to look at to expand our SBICs across the country. 
And so----
    Mr. STAUBER. My last question, because I am running out of 
time, do you think $320,000,000,000 in new regulatory costs on 
American small businesses is good or bad?
    Ms. GUZMAN. Look, much of the regulation, especially the 
over 60 regulations that we are putting forward, are about 
simplification. So just because regulations are being put out 
there, that doesn't mean that it isn't about cutting red tape 
and simplifying our current system.
    Mr. STAUBER. Yeah, with all due respect, I disagree with 
your assessment on the $320,000,000,000 is good for small 
businesses, because it is not.
    And I yield back.
    Chairman WILLIAMS. I now recognize Mr. Golden from Maine 
for 5 minutes.
    Mr. GOLDEN. Thank you.
    Administrator Guzman, in the past, some of us on the 
Committee have held hearings and also expressed concern that 
the Community Navigators program should not be duplicative of 
the work of Small Business Development Centers, Women's 
Business Centers, SCORE, or the Veterans Business Outreach 
Centers. And obviously a lot of testimony we received was that 
they would act more as a force multiplier than being in 
competition with these existing resource partners that are out 
there and have been out there for a long time working with 
small businesses around the country.
    The President's budget directs a $30 million increase to 
the Community Navigator program, but also makes cuts to the--
would make cuts to the Small Business Development Centers, 
roughly a 14 percent cut, as well as a 40 percent cut to the 
SCORE program. When you add these two together, it almost 
equals the amount that you are proposing an increase to the 
Community Navigators.
    The most recent metrics that we have available to us 
demonstrate that both the SBDCs and SCORE are over performing. 
They are more than meeting their stated targets when it comes 
to job creation, number of people assisted, amount of capital 
that they have brought into the business community. And we are 
really lacking in any kind of data or metrics as it relates to 
the Navigators.
    So I guess my question is why would, at this point, the 
President propose cutting funds from partners who we can see 
are meeting their targets and even over performing their 
targets, who have long standing relationships out in the 
business community, particularly the SBDCs, which we see from 
the metrics enjoy 93 percent satisfaction rating from the 
clients that they do provide services to. It is almost as if 
they are getting punished for succeeding. And we are being 
asked to make a big shift here in putting such a large increase 
into a program for which we are lacking similar data. What is 
the justification for both the cuts and the increase?
    Ms. GUZMAN. And again, we see an increase overall in our 
entrepreneur development, but we are faced with the challenge 
of having evolved----
    Mr. GOLDEN. I am interested in shifting of funds rather 
than the top line of----
    Ms. GUZMAN. Yes. So as we are trying to evolve and 
prioritize inclusion in a way that reflects that. At the 
beginning of the pandemic, as I mentioned, many communities 
were left behind. And so we do an incredible job reaching small 
businesses through our resource partners, over 750,000, but we 
have 33 million small businesses with constant births and 
deaths. It is an insurmountable challenge. If I had enough 
resources--you know, obviously I feel strongly that the SBDCs, 
the WBCs, the VBOCs, all of them are doing incredible job 
reaching small businesses. But there are gaps that we are 
trying to fill and create a more cohesive ecosystem that is 
inclusive.
    And so I would also state that the Navigators program has 
also outperformed. And we have seen incredible work from the 
Institute for IVMF, the Institute for Veteran Military 
Families, the Ethnic Chambers, the LISC that focuses as well on 
rural. So we have seen incredible performance in building trust 
and building bridges, and great referrals and collaboration 
amongst the network as well.
    So the hope is to increase the amount of reach that we have 
across our network, work in new ways to build trust in 
communities so that we don't leave people behind.
    Mr. GOLDEN. Thank you.
    Well, I haven't seen any metrics in front of the Committee 
in regards to how the Navigators are performing, but are you 
not worried that by shifting resources into this program to 
fill any gaps that you see, that you are going to create gaps 
amongst those communities that are working very closely with 
SBDCs or VBOCs or Women Business Centers?
    Ms. GUZMAN. Clearly, I mean we are obviously working with 
limited resources. You know, these are all great programs that 
I would love to see funded, but I do need to continue to 
prioritize some of the other elements as well. Like I said, the 
veterans, the contracting, as well as the access to capital, 
and the Navigators as a new source of building an ecosystem. We 
incentivize and provide a base structure for a lot of these 
resource partners who are able to then get additional support 
in the community. And I hope to see them all continue to 
thrive.
    Mr. GOLDEN. Well, this just recalls for me a hearing that 
we had in the last Congress in this Committee where we 
expressed concern about how the Community Navigators may draw 
away from our existing resource partners. And I think that is 
unfortunate to see that reflected in the budget and, of course, 
have an interest in working with my colleagues on the Committee 
to try and address that in a way where we don't have to take 
from one successful program in order to try and address a gap 
within a new program.
    Ms. GUZMAN. Thank you.
    Chairman WILLIAMS. All right, thank you.
    And I now recognize Mr. Meuser from Pennsylvania for 5 
minutes.
    Mr. MEUSER. Well, thank you very much, Mr. Chairman. Thank 
you, Administrator, for being with us.
    So less than 2 years ago--I am going to go back to the non 
federally regulated lenders and related to the SBLCs--but less 
than two years ago the SBA stated they do not have the 
administrative resources needed to oversee non federally 
regulated lenders with the nationwide 7(a)a lending platform in 
addition to the 14 SBLCs it currently regulates. What has 
changed?
    Ms. GUZMAN. I am not familiar with those statements that 
you are referencing, but we have now a strong system in place 
with the 7 contracts that I referenced, as well as the 29 
employees. Just in 2020 to 2021, we have done over 2,200 risk 
assessments in the portfolio. And again, we assessed what our 
capacity would be and limited our expected growth based on that 
to just 3 non depositories.
    Mr. MEUSER. So you don't think there is going to be a so 
called subsidy rate impact as a result of this expansion for 
non federally regulated SBLCs?
    Ms. GUZMAN. No. In fact, the rules are baked in to the 
current subsidy modeling. And so as a result, they will not 
have an impact on subsidy.
    Mr. MEUSER. If there are, will anybody get terminated? Will 
anybody be accountable for making bad decisions that cost 
taxpayers?
    Ms. GUZMAN. We do. The lenders are held accountable to, 
obviously, giving loans with a strong ability to repay. And so 
we have an opportunity to continue to track performance, as we 
do on a quarterly basis and throughout the year. And if we 
identify problems, we have the power to revoke a license at any 
time.
    Mr. MEUSER. I am sorry, it has been as we stated, because 
that was the history, certainly, with the EIDL and the PPP, so 
you could understand the level of concern.
    Ms. GUZMAN. And what I would share is that the PPP was such 
a different program, I can't even cross-reference the 
performance on PPP or COVID EIDL----
    Mr. MEUSER. But 85 percent came from the FinTechs. And I 
don't have a problem necessarily with FinTechs. I really have 
the problem with that they are not federally regulated. Why not 
have a federally regulated FinTech and invite them into the 
7(a) program once that got established? Once it gets 
established?
    Ms. GUZMAN. Well, we have demonstrated results on our SBLCs 
as well as in our SBA Express program that gives us data to 
know that we can move forward with expanding access to capital. 
And main street I don't think can wait for us to try to figure 
out capital. I would argue that by inserting the SBA programs 
into any FinTech operation, you are actually going to get 
stronger oversight and regulation because they are going to 
have to meet the SBA's programs of terms and----
    Mr. MEUSER. No, no, there seems to be a strong leniency 
towards this, and I am just trying to figure out why. Now, the 
OCRM--you testified yesterday in the Senate, stated that the 
capacity to take on more--well, regarding the capacity to take 
on more lenders, but the OIG, the SBA OIG publicly disagrees, 
stating in a report released just this past Tuesday that the 
OCRM resources are threadbare with 38 percent vacancies. That 
doesn't build confidence.
    Ms. GUZMAN. Well, my understanding is that report too is 
based on 2015 to 2017. So a lot has happened at the SBA. We 
have scaled dramatically to meet the needs of small businesses 
during the pandemic. And obviously, those learnings, the GAO 
risk framework that we have put in place at the SBA, all the 
controls that we put in place, position the SBA to be much 
stronger, to be able to strengthen----
    Mr. MEUSER. Seems to be a bit of an irrational exuberance 
for heading into added players such as FinTechs that are not 
federally regulated. So we will continue to watch that.
    So the SBDCs, which just came up by one of my colleagues, 
they have been performing so well and yet, as he stated, they 
are being punished by their budget being reduced. I have got 
several in my district. Why?
    Ms. GUZMAN. This is not a punishment. I think the SBDCs are 
strong performers within the ecosystem, to be clear. And 
obviously working within limited resources, we wanted to ensure 
that we were investing where small businesses have shared 
concerns around capital access, around----
    Mr. MEUSER. I would like you to try to look into that, 
because that would really be unfortunate for a lot of 
businesses and certainly for those organizations themselves and 
for many parts of my district, frankly.
    Back to the WOTUS question. The SBA's mission is to protect 
the interests of small business. And the SBA Office of Advocacy 
say that the EPA should withhold this rule and other rules that 
do not properly consider their effect on small businesses. I 
mean, will you consider advocating against this WOTUS Rule that 
every one of my farmers has serious issues with? Family farms.
    Ms. GUZMAN. I value the Office of Advocacy deeply. And 
obviously, their independence is really important. That is the 
way they were structured, to report to me, Congress, as well as 
the President. They are continuing to do SBREFA panels across 
the board, including multiple----
    Mr. MEUSER. My time has run out.
    Thank you, Administrator.
    I yield back, Mr. Chairman.
    Chairman WILLIAMS. Thank you.
    Next. I recognize Mr. Mfume from the State of Maryland.
    Mr. MFUME. Thank you very much, Mr. Chairman.
    Administrator Guzman, I want to go back to this matter of 
fraud. I can't get away from it because there are so many 
people who believe, rightly or wrongly so, that we don't do 
enough to protect the government and taxpayer dollars from the 
vicious people who come up with schemes to defraud the 
government. And in May of last year, the Office of your 
Inspector General found that the SBA didn't have adequate fraud 
protection prevention and the mechanisms were not there. Their 
assessment was that some of it had to do with the speed of the 
rollout of PPP, and that some of it had to do with what is 
unfortunately, a continuous and rapid discovery of new and 
different fraud schemes.
    So I was listening when the Ranking Member asked the 
question about full-time employees, with the assessment being 
that there should be at least 42, reality being as it is that 
there are 29. So I don't understand that gulf. If the 
recommendation was made, it seems to me there was adequate 
justification for it. And if we are not there, what is the 
adequate justification for being not there?
    Ms. GUZMAN. The Office of Credit Risk Management does not 
oversee fraud at the SBA. They strictly monitor our portfolio 
of loans within the Office of Capital Access. More broadly than 
that, we have hundreds of people working on fraud on an ongoing 
basis. And so we have a fraud risk management framework that 
was implemented during the Biden-Harris Administration, as 
recommended by the GAO. We have also taken efforts to implement 
all IG recommendations across the board. We have strong 
performance in terms of complying with those.
    Mr. MFUME. Including the recommendations against self-
certification?
    Ms. GUZMAN. On the contracting programs?
    Mr. MFUME. Mm-hmm.
    Ms. GUZMAN. We continue to try to evolve our contracting 
programs to meet----
    Mr. MFUME. Is that a yes or a no?
    Ms. GUZMAN. Not across the board. We continue to try to 
work through what exactly we can do to ensure that our self-
certification program, the Women Owned Small business program 
specifically, I believe----
    Mr. MFUME. It just seems to me that self-certification in 
and of itself begs for misuse. And since that has been a 
problem with a number of Inspector General reports, why is it 
the SBA won't move to eliminate that?
    Ms. GUZMAN. We always look for technology and solutions to 
improve our programs, as we have done with the Vet Cert program 
is our gold standard now in terms of performance, which the IG 
has agreed is a strong system of controls. And so we are 
focused on making sure that we can translate those learnings 
across our certification programs.
    Mr. MFUME. But the IG also considers self-certification the 
wrong way to go about doing things. So if we are implementing 
their suggestions, why aren't we implementing that one?
    Ms. GUZMAN. Specifically on that one, first, to be clear 
that we still look at size standards. We have them attest to 
their size within that program, but we still are able to look 
at some controls for size. Obviously, 99.9 percent of all 
businesses are small. We are talking about a very small 
fraction of businesses that we have to ensure do not get into 
our programs.
    Mr. MFUME. I don't have a lot of time, but seems to me if 
all I have to do is self-certify to cross the hurdle, I am 
going to continue to do it. That is the worst thing that I have 
ever heard of, particularly now in light of how much fraud has 
come about.
    Can you provide an update on the operations of the Risk 
Management Board, briefly?
    Ms. GUZMAN. Sure. The Fraud Risk Management Board was put 
into place--it is a GAO recommendation across the federal 
government and the SBA deployed that it includes ensuring that 
cross collaboration across our program offices, that senior 
leadership sit on this Fraud Risk Management Board so that we 
can share best practices around the Agency, but ensure controls 
are put in place from our CFO, SCO----
    Mr. MFUME. And it is a very important board, it is a very 
important board.
    I understanding there is a detailee that is running the 
board. Is that correct?
    Ms. GUZMAN. A detailee that is running the board?
    Mr. MFUME. Mm-hmm.
    Ms. GUZMAN. Our CFO is Chairing the Board, that is a Senior 
Executive Service Member. And so----
    Mr. MFUME. The program manager.
    Ms. GUZMAN. The program manager position was open for 
filling, and it might have already been filled at this point, 
and in the meantime----
    Mr. MFUME. My information is that it has not been filled. 
But why is it taking--if it ha not been filled--so long if we 
consider this a priority?
    Ms. GUZMAN. Is a priority, and that has not been 
questioned. The GAO comptroller general, who I meet with 
quarterly, as well as the IG, who I meet with bi-weekly, have 
recognized the work that we have done. Obviously, in setting up 
a new program at the SBA, we have to take the resources, the 
best and the brightest all across the Agency.
    Mr. MFUME. My time is expired.
    Administrator, I hope that the seriousness of these 
questions goes beyond just this hearing.
    Ms. GUZMAN. Thank you.
    Mr. MFUME. I am not going to let go of this one.
    Chairman WILLIAMS. All right.
    Mr. MFUME. That is a very important position
    Ms. GUZMAN. Thank you. Yes.
    Chairman WILLIAMS. I now recognize Ms. Van Duyne from Texas 
for 5 minutes.
    Ms. VAN DUYNE. Thank you very much, Mr. Chairman.
    And I really appreciate my colleagues questioning on the 
fraud, the amazing amount of fraud that we have seen.
    Administrator Guzman, you are painting a picture that small 
businesses across the country are thriving, but I don't see 
that being any farther from the truth. Every single small 
business that I talk to in North Texas is struggling from high 
inflation and an overburdensome regulatory environment. Mr. 
Leutkemeyer's questioning, are you talking to the President, it 
wasn't sarcastic. He asked that question because we 
legitimately want to know who is talking to the Administration, 
who is the voice of small businesses in the President's ear. 
Because what I am seeing, at least in my district, and I'll 
tell you, we have had a lot of people who have come to these 
small business hearings and have told us the exact same thing, 
their wishes, their concerns, their priorities are not being 
reflected in this Administration's priorities or their agenda. 
In fact, they are being immediately hurt.
    Inn your testimony, you said under your leadership that you 
put guardrails to stop fraud, and yet the SBA decided to stop 
collecting PPP loans that exceeded a balance of $100,000. Not 
grants, but loans that led to $4.6 billion in potentially 
fraudulent PPP loans. We have seen $78.1 billion in potential 
fraud in EIDL loans and then $1.1 billion in SBA loans. And you 
are refusing to collect on that. Do you think that should stop 
fraud?
    Ms. GUZMAN. I can address that last part first. Those 
loans, $100,000 and under, first off, would separate fraud from 
those $100,000 and under any loan, whatever size, will be for 
fraud. And we continue to flag all of those loans for the IG. 
for pursuit?
    Ms. VAN DUYNE. How do you know?
    Ms. GUZMAN. We have actually reviewed all of our 12 million 
loans within the PPP program to ensure that we identify----
    Ms. VAN DUYNE. Since you looked at every single one of them 
and you know which ones are fraud and which ones aren't, how 
much is fraudulent?
    Ms. GUZMAN. We are still continuing to flag loans and refer 
them over to the IG. We have so far to date referred tens of 
thousands. But just because a loan has an indicator of fraud, 
that does not mean that it is going to be fraud. And so there 
is a lot of work and analysis that has to go in play. And so we 
will know as time moves on.
    Ms. VAN DUYNE. But how do you know if you are not even 
going back? If you are counting them as grants and not loans, 
how do you even know?
    Ms. GUZMAN. They continue to have a flag so they are not 
forgiven, they are not removed until we can identify whether or 
not they are fraud.
    Ms. VAN DUYNE. Okay.
    Ms. GUZMAN. And I will speak, though, to the $100,000 and 
under and just let you know that obviously we take fraud 
seriously, as well as those who misuse the program. We also 
have to be good prudent----
    Ms. VAN DUYNE. And I appreciate that.
    Do you think you are ever going to get this money back?
    Ms. GUZMAN. We have been able to successfully----
    Ms. VAN DUYNE. How much of the nearly $85 billion in fraud 
have we gotten back?
    Ms. GUZMAN. Overall, inclusive of all clawbacks, is $29 
billion that the IG reports----
    Ms. VAN DUYNE. So the $85 billion we have received $29 
billion back?
    Ms. GUZMAN. I don't know the $85 billion and what 
specifically that includes, but what the IG reports----
    Ms. VAN DUYNE. $4.6 billion PPP loans, $78.1 billion in 
EIDL, and $1.1 billion in SBA loan.
    Ms. GUZMAN. What the IG says is that we have been able to 
recover $29.5 billion across PPP and EIDL in collaboration with 
the banks as well as the Secret Service.
    Ms. VAN DUYNE. So what are they what are they doing with 
that service?
    Ms. GUZMAN. The funds either initially went back to the SBA 
or to the Treasury, but of course, all those funds, as the 
program has been closed for quite some time, have been 
returned.
    Ms. VAN DUYNE. So we have got $29 billion that we need to--
--
    Ms. GUZMAN. No, that actually has already been clawed back, 
and I know that it has been used and already either redirected 
to another program or taken back to Treasury. So there are more 
funds at the SBA to use.
    Ms. VAN DUYNE. Okay. So the SBA received $3.4 billion at 
the beginning of the pandemic that was to be in assistance for 
COVID relief programs, right. When you took office, half of 
that hadn't even been spent yet.
    So, as of January 21, right before you took office, SBA had 
hired 6,000 temporary employees for the office that runs the 
EIDL program, they had hired an additional 400 for the PPP 
program. How are we looking at $85 billion worth of fraud when 
we hired all of those people and we are still trying to get 
those dollars back? And what are you doing to make sure that 
doesn't happen again?
    Ms. GUZMAN. Yeah. And unfortunately, in 2020, when those 
programs were deployed, there were not the same controls that 
we implemented in 2021, including on the EIDL program. Not 
checking and validating tax returns, not checking the Treasury 
Do Not Pay list. We implemented those controls. So when you 
hear records of fraud, it is the entire portfolio. We don't 
separate from administration to administration.
    Ms. VAN DUYNE. But you would have dates on the fraud?
    Ms. GUZMAN. I am sorry, what?
    Ms. VAN DUYNE. You would have dates on the fraud?
    Ms. GUZMAN. Correct, correct. And we have implemented----
    Ms. VAN DUYNE. You can provide this Committee of the $85 
billion potential in fraud when that was committed?
    Ms. GUZMAN. I don't know what the $85 billion is, but we 
are happy to work with you closely to figure out----
    Ms. VAN DUYNE. I yield back my time.
    Chairman WILLIAMS. Thank you.
    And I now recognize Ms. Chu from California for 5 minutes.
    Ms. CHU. Administrator Guzman, first, I want to thank you 
so much for joining me in my district last month to visit with 
the small business owners that surrounded the Monterey Park 
shooting site in California. Eleven people died last month, and 
you visited those businesses. Your visit and your ability to 
provide resources for them was appreciated by the businesses so 
much. So thank you so much for that.
    And I commend you on your focus on increasing access to 
capital for hard to reach underserved small businesses just 
like this. I share this focus, and I look forward to continuing 
to work together on this important goal.
    And that is why I have worked on legislation to codify the 
Community Advantage pilot program, which is, I believe, one of 
the strongest tools for reaching underserved businesses. In 
fact, SBA's own data shows that in 2022, Community Advantage 
reached significantly more women and minority-owned businesses 
than the traditional 7(a) program. I believe that codifying it 
is the best way to make the program work for the people and 
also to make sure that no future administration can dismantle 
it.
    In November, the SBA issued the proposed rulemaking for 
SBLC and said that lifting the SBLC moratorium is needed to 
make sure that persistent gaps would be met, especially in 
Community Advantage. However, just last April, SBA made changes 
to the Community Advantage pilot program, including allowing 
new lenders to join the program and increasing the loan limit. 
So why is SBA not waiting to assess the impact of those changes 
before declaring that the Community Advantage pilot program 
needs to be changed?
    Ms. GUZMAN. The Community Advantage program has been 
successful for 12 years. We are committed to making sure that 
it can scale. They do about 500 loans a year, we do typically 
50 to 60,000 loans total. We would really like to see, 
especially these community based lenders who reach underserved 
markets, expand in our program. And so clearly it is important 
that they have permanence because their ability to raise 
capital, to grow their program really depends on that 
certainty, as any business would face. And so with this 
program, we feel that the 12 years with us are strong. We also 
have implemented improvements by extending the program, as you 
have mentioned, as well as agreeing to expand it within the 
pilot environment. But a pilot is not permanent, and a pilot 
really limits their ability to scale and grow, which is so 
needed right now with huge gaps in small dollar lending, 
persistent and unmovable.
    So we hope to continue to serve the needs of those 
underserved businesses by expanding it immediately by moving 
them into a special Community Advantage SBLC program that would 
give them the exact same features.
    Ms. CHU. Right. Well, that is actually why--I wanted to ask 
another question about that. I understand that you would create 
this new Community Advantage or mission based SBLC license and 
it would make the Community Advantage program permanent, which 
I applaud you for doing, however, I am very concerned that the 
proposed rule does not establish a minimum threshold of 
underserved lending for the new Community Advantage SBLCs. 
Right is 60 percent that they have to make sure that they serve 
underserved markets, certain specific ones at 60 percent of 
their loans. Well, I am very concerned if we don't have a 
specific goal, that that threshold will not be met. And also if 
we don't specify underserved markets the types of markets that 
they have to serve.
    Are you considering changing this in the final rule and 
using the same underserved lending requirements already used in 
Community Advantage within this new Community Advantage SBLC 
model?
    Ms. GUZMAN. I am happy to work with your office and discuss 
it further. The entire 7(a) portfolio doesn't have any specific 
requirements on it. 58 percent of our loans do go to 
underserved communities women, veterans, rural, LMI. We are 
committed to ensuring that the Community Advantage partners, 
who are CDFIs, who are CDCs, they are mission lenders, continue 
to perform not only for their mission and achieving their goals 
with the CDFI Fund at the Treasury as an example, but that they 
continue to focus on these marketplaces. So I am happy to talk 
to you further about that.
    At this time, we were not imposing anything across the 7(a) 
portfolio.
    Ms. CHU. But we can continue work on that and make that 
possibly in the final rule then.
    Ms. GUZMAN. Exactly. And we actually can prioritize the 
types of licenses we bring in, again focusing on the 30 
nonprofits, but ensuring that they are filling gaps in the 
marketplace.
    Ms. CHU. Okay. Thank you.
    I yield back.
    Chairman WILLIAMS. Thank you.
    And I now recognize Mr. Alford from Missouri for 5 minutes.
    Mr. ALFORD. Thank you, Mr. Chairman and Ranking Member for 
holding this important hearing today. I appreciate that. And 
thank you, Administrator Guzman, for being here today.
    I have a strong affinity for small business, having been a 
small business owner back in my district. It is really the 
fabric, as you know, of our society, rich fabric of America, 
small business, creating prosperity, I think patriotism, unity, 
things that our country needs right now. I think we can agree 
on that. But small businesses also need some things. They need 
clarity, they need certainty, and they need a government and an 
SBA that works with them and not against them.
    Small businesses certainly do not need an SBA that is more 
interested in promoting the far left Biden agenda and 
wastefully spending, taxpayer dollars.
    So looking at the summary of changes in the President's 
budget, we see a request for $1 million to transition the 
federal vehicle fleet to zero emissions, we see $10 million in 
climate change administrative expenses, and the SBA will 
continue to support Executive Order One 14057 to minimize 
greenhouse gas emissions. How is this helping small businesses 
flourish in America and prosper as Americans?
    Ms. GUZMAN. We know that small businesses are affected by 
the increasing number of natural disasters as a result of 
climate change. Our focus as the SBA, who comes into play after 
disaster to provide financial relief to not only small 
businesses, but the nonprofits, the individual renters who are 
their consumers and their employees, we see it as a priority to 
help businesses prepare for and become more resilient to 
natural disasters and climate change. And so that $10 million 
allotment will help us, across our capital programs ensure that 
businesses can leverage those tools to build resilience in 
their business, fortify, physically their building, if that is 
the case. And we hope that this will inure to our overall 
disaster lending portfolio.
    Mr. ALFORD. Well, I disagree with the whole notion of that, 
but I know that is going to be a difference that we are not 
going to agree on here today.
    I want to get back to this fraud, the PPE. Last year, NBC 
reporters really got rich from the theft, as much as $85 
billion, a little more than 10 percent of the paycheck 
protection program. This story really hasn't gotten the 
attention it deserved. I think it is starting to catch on. We 
have been talking about here in this Committee, and you have 
talked about some about how we are going to recover it. There 
is still $59 billion--I am trying to do the math here, I am not 
great at math--$59 billion left out there that you think that 
was flagged for fraud. Is that correct? That has not been 
recovered?
    Ms. GUZMAN. No. If I could clarify that.
    Mr. ALFORD. Yes.
    Ms. GUZMAN. Because I didn't have an opportunity to 
respond. But the IG has reported that he has been able to 
recover $29.5 billion.
    Mr. ALFORD. Right.
    Ms. GUZMAN. And that might have been businesses who gave it 
back early on in PPP, you recall some of those reports. And so 
we do not have a final number yet on fraud.
    Mr. ALFORD. So you don't know how much money out there is 
ripped off from the American taxpayers?
    Ms. GUZMAN. We are still finalizing those numbers.
    Mr. ALFORD. Can you put a guess on it? A guesstimate here?
    Ms. GUZMAN. At this point, I cannot. And I continue to work 
with the IG to work towards a final on this. But clearly, we 
have done the work to identify fraud indicators, which is what 
that report is----
    Mr. ALFORD. So when an account or a person who has gotten 
these grants or loans has been flagged, the indication has been 
put on them, are their accounts frozen? Is that money frozen so 
they can't spend what they didn't rightfully get?
    Ms. GUZMAN. Correct. A fraud flag is an indicator to us 
that we need to do further analysis. And so we have steps 
following the fraud indicator to analyze the full portfolio and 
ultimately leading to a manual review and a referral to the IG.
    Mr. ALFORD. How long is this going to take?
    Ms. GUZMAN. It was a massive portfolio, a huge scaling of 
the SBA, obviously, from--we do about $50 billion a year to 
$1.2 trillion in relief. And so, clearly it is a large 
portfolio, but we are committed, which is why the President 
asked for another $100 million in the budget for the IG. W have 
stepped up the increase for the IG as well as our enforcement 
arm to pursue fraud.
    Mr. ALFORD. All right.
    Last question on the SBLC. This moratorium, is it going to 
be lifted this week? I know it is been proposed. I know there 
is a lot of consternation about it. When is my moratorium being 
lifted?
    Ms. GUZMAN. I don't have a final time yet because the team 
internally is still working through the comments. We had 60 
days for public comment and quite a bit to work through on both 
the pro and----
    Mr. ALFORD. What is the need for this? Because I have 
talked to a lot of community bankers and credit unions, they 
said we have got people covered that want the money. We are 
there for them. Why is this needed? Spreading the risk out for 
the SBA in a regulatory fashion?
    Ms. GUZMAN. Well, Federal Reserve will-report that two 
thirds of businesses do not get the funding at all or complete 
their full request. And so there is a huge gap.
    Mr. ALFORD. All right.
    Ms. GUZMAN. $10 billion of the funds at the SBA were unused 
last year, so there are clearly more----
    Mr. ALFORD. I appreciate that.
    Ms. GUZMAN.--opportunities.
    Mr. ALFORD. Thank you.
    I yield back.
    Chairman WILLIAMS. I now recognize Ms. Gluesenkamp Perez 
from Washington State.
    Ms. PEREZ. Thank you, Mr. Chair. And thank you, 
Administrator Guzman, for being here and for your visit to my 
district. It was really meaningful to small business owners.
    I am a small business owner. I own auto repair and a 
machine shop work, an independent shop. We work in the trades. 
And I actually have a degree in economics. I have an undergrad 
in econ. And it literally took me a year to fill out the SBA 
504. And it is concerning that it is at times overly onerous, 
that the capital may not be going to where it is going to, but 
it is also clear that this is a vital avenue of funding for 
many of us who work in the trades who don't have access to 
traditional capital.
    But I actually had a conversation with Michael Larry of 
Source Climbing Center, who you met with when you visited our 
district. And Michael was having issues with Pay,gov and CAFS 
to manage his loan. So I know that you guys have created a new 
website, MYSBA.gov, and I have heard it is definitely an 
improvement over the old website, but he says there is still 
some room for improvement. So I was wondering, what are the 
opportunities for feedback you have created for small 
businesses? How is that feedback being incorporated and what is 
the timeline for launching the new website?
    Ms. GUZMAN. Yes. And I will say on the 504 program that the 
regulatory reform that we are embarking on is supported by the 
NADCO, which is the National Association of Development 
Corporation. So I am hopeful that we will be able to streamline 
the 504 program as well.
    Within the MYSBA structure, we are trying to streamline and 
give a single point of entry for businesses to come and perform 
the services that they need. Only half of the loans from EIDL, 
obviously it is an enormous amount, have been transitioned to 
date, but we have had over a million supported at this point. 
There is a strong customer service element, and hopefully this 
business owner has been able to reach out. But we are 
continuously taking those customer service issues and 
translating them into continuous improvement as technology must 
be.
    Ms. PEREZ. Thank you.
    And like so many people in rural America, I do not have 
broadband at home. I get it from a radio tower. It is not good. 
And I am just wondering, how is the SBA keeping programs 
accessible for people who don't have internet or who have bad 
internet, like we do?
    Ms. GUZMAN. Clearly, we are looking forward to broadband 
for everyone as the investments in the broadband infrastructure 
are implemented over the coming years. But in the interim, 
obviously, the SBA tries to make an effort to distribute 
resources around the country. Our district offices try to go 
into different regions, even if for a few hours, to have some 
sessions and try to connect with small business owners. And it 
is partially why we also deployed the Community Navigator pilot 
program to try to focus on an expansion into communities that 
are underserved, including rural communities. So it is a 
constant challenge. I have shared that we have limited reach, 
obviously, but important reach to those businesses, and we hope 
to grow it.
    Ms. PEREZ. Yeah. And so many, many small businesses like 
mine choose to bank with our small regional banks because we 
know those bankers, we trust them, we believe in keeping our 
dollars local. And these past few weeks have put an incredible 
amount of stress on small regional banks. When people have 
trust in their bank, they keep their money in the bank, and the 
bank remains solvent. But I think it is important we remember 
how critical small banks are in delivering SBA assistance to 
their communities. So, for example, 67 percent of PPP relief 
was provided through small community banks, credit unions, and 
small financial institutions, not the big guys.
    So I would like to hear from you what impact, if any, the 
recent Silicon Valley bank collapse has had on small business 
broadly. Do you see credit conditions tightening for small 
businesses going forward?
    Ms. GUZMAN. Credit was tightening before, and obviously 
with challenges in liquidity across lending institutions, we 
are seeing it tighten further. I will share that 4,000 of the 
4,500 community banks, when doing PPP hadn't done an SBA loan 
in the last 2 years. And that is what this regulatory reform is 
about, is trying to make it simpler to navigate our programs, 
removing the most onerous elements of our regulation to ensure 
that the lending institutions can start to use SBA products as 
guaranteed products. They sit in their books in a preferable 
light and that is a benefit to trying to ensure that limited 
liquidity doesn't limit our lending as well.
    So government guarantees are more important now than ever 
before. And I have heard from multiple community banks 
expressing confidentially concern as people were concerned 
initially about their deposits. But I think after repeated 
actions by the Treasury and the regulators, people are starting 
to feel confident as well. And we know that community banks 
serve their businesses and their individuals well, and people 
will go back for that customer service.
    Ms. PEREZ. Thank you so much for your time here today.
    I yield back.
    Chairman WILLIAMS. Thank you.
    I now recognize Mr. Bean from Florida for 5 minutes.
    Mr. BEAN. Mr. Chairman, thank you so much. And good 
afternoon, Small Business Committee. It is good to see you. And 
Secretary Guzman, we are glad to have you here today.
    Do you have any indication by business code? I know we 
track business codes. Is there any business that is failing or 
any sector that is failing against the historical rate?
    Ms. GUZMAN. Well, the only thing that I could share is that 
obviously some of the industries hit really hard. The travel 
and tourism restaurants continue to face more challenges with 
credit access, as they obviously had a lot of debt during that 
time that their revenues dropped. They are starting to recover 
and seeing those revenues come back up, but obviously facing 
continued challenges with inflationary pressures and tight 
labor markets. So I would say those are the industries that I 
have heard most concerns from in terms of their continued 
challenges coming out of the COVID programs.
    Mr. BEAN. Very good. And I have traveled around and on our 
off days, including the auto repair shop in northeast Florida 
that I have visited, several--nine out of ten small businesses 
right now are struggling getting people to work. What is our 
plan? Do you have a plan? Or is the SBA saying, this is what we 
need to do to help small businesses get the labor that they 
need? What are we doing?
    Ms. GUZMAN. Yeah, I mean, the workforce issues are a 
challenge. We always try to provide the technical assistance, 
the referrals to local workforce development programs, et 
cetera. So an immediate support for our businesses, but it is a 
larger issue. The President's budget includes strategies to 
increase pre-K, increase childcare. These things are 
challenging for small businesses whose workers can't come 
because of children at home or other issues as well. So as much 
as we can get more participation in the workforce that will 
also help our small businesses.
    Mr. BEAN. Well, that is the challenge, because as we enter 
this budget year, we are going to tighten our belt. Is there 
things that SBA do you think that we could reduce or cut 
spending on? Is there something that you should offer up now, 
say this is where if you are going to cut SBA or cut there some
    fat, this is what I recommend. Is there anything that you 
could give us today?
    Ms. GUZMAN. We hope that the proposed budget gets approved. 
I know that in the past couple of years, there have been 
additional funding put on top of it for specialized district 
support. As much as we can continue to support the core 
programs of the SBA, that is what we prefer.
    Mr. BEAN. Is SBA still working from home?
    Ms. GUZMAN. Not fully, no. We have 1 percent of our 
workforce, our full-time employees, permanent staff are in full 
remote, the rest of them are admission based remote. So that 
means a minimum of 2 days per pay period, so 1 day per week. 
However, other offices have started to move or had already 
moved throughout the whole process to 3 to 5 days. So 
obviously, with the end of the pandemic in May, we continue to 
work through strategies to ensure that we are delivering our 
mission.
    Mr. BEAN. Very good.
    Just a few minutes ago, the gentleman from Maryland, Mr. 
Mfume----
    Ms. GUZMAN. Mm-hmm.
    Mr. BEAN.--was outraged over the fraud. And there is so 
much of it. And I think you have noticed a theme here, because 
we are getting reports. Your report card shows how much fraud 
has walked out the door and how little it is recovered. So you 
could say it is bipartisan outrage over the amount of fraud, 
including the EIDL program, $78 billion were fraudulently 
obtained. That is according to the inspector. What are we 
doing?
    And here I have got a minute and a half left, and I will 
yield to you the remainder of that. Can you give us assurances 
that you are making changes? I don't have it yet. I don't have 
the assurance. I know it is bad, and you have said it is bad, 
and you said you are trying, but what are we doing to change 
the culture? Can we stop these programs to begin with because 
we have lost control of them? But can you give us assurance 
that things are being changed? That is what frustrates the 
American people. You can see we are all frustrated up here 
because everybody else follows the rules and we look at people 
cheating the system. There are so many other things that we 
could do. And I have got 50 seconds left. Can you make me or 
this Committee inspired knowing that there are big changes? 
That this isn't going to happen anymore.
    Ms. GUZMAN. All COVID relief programs are closed.
    And in terms of the fraud implementation that we have been 
able to successfully do, we have implemented controls across 
the program. As you know, early efforts focused on----
    Mr. BEAN. So we have stopped it. Has anybody gone to jail? 
Has anybody----
    Ms. GUZMAN. Oh, yes. Oh, yes.
    Mr. BEAN.--gone to jail?
    Ms. GUZMAN. There have been multiple convictions----
    Mr. BEAN. And we have gotten--we have?
    Ms. GUZMAN. Yes, multiple convictions, multiple funds 
recovered directly from fraud, multiple indictments----
    Mr. BEAN. But still billions out the door, though, that is 
the thing.
    Ms. GUZMAN. Still billions out the door that is being 
assessed clearly. I mean, we do not have a final number on 
fraud. Again, all these are reports of indicators or fraud. 
They may have checked one database and said, these could be 
your potential fraud, but they haven't cross referenced it. You 
know better than others that small business owners may not 
always check all the right boxes and have alignment. And so you 
got to check multiple data sources.
    Mr. BEAN. And we are counting you to do that.
    Thank you so much.
    I yield back, Mr. Chairman.
    Chairman WILLIAMS. Thank you.
    And I now recognize Mr. Pappas from New Hampshire for 5 
minutes.
    Mr. PAPPAS. Thank you very much, Mr. Chairman and 
administrator, it is great to see you again.
    Thank you again for visiting my district this past January. 
We had you in Derry and Manchester. We were at the Palace 
Theater talking with a number of business owners who, almost to 
a person, said without the support from SBA, they are not sure 
they would be open today. So we are grateful for that 
commitment and all the work that is gone on the last few years.
    Of course, we are in a new phase in terms of this pandemic, 
and I think the work that the Agency does is as important as 
ever to provide businesses the support they need in a really 
uncertain climate. Members have mentioned a number of critical 
issues to businesses, but I want to build on what 
Representative Bean was asking in terms of cuts.
    You said, we hope the proposed budget gets approved, but I 
have a concern. Included in this budget is a 14 percent cut to 
the Small Business Development Center. Other Members have 
mentioned this, but I want to stress how important SBDC is to 
our frontline businesses in New Hampshire. SBDC is the boots on 
the ground. They have increased and expanded their mission 
since the pandemic. They have gone from seeing roughly 862 
businesses to about 1,500 businesses a year. That is a more 
than 70 percent increase since the pandemic began. And so that 
work continues. But the concern is that they are going to lose 
about $105,000 of the roughly $778,000 that they receive in a 
federal allocation. That means they would have to cut two full 
time advisors. So that would have a direct impact on the ground 
in terms of the support that is out there for a critical 
resource partner.
    And I just want to give you another opportunity to respond 
to this. Why are we cutting a successful program that provides 
such important assistance to our small businesses at a time 
where they need it more than ever?
    Ms. GUZMAN. And again, what I would re-emphasize is that we 
are trying to diversify our entrepreneurial ecosystem to be 
inclusive of all types of providers. The SBDCs do a remarkable 
job, as does our SCORE partner, as does the Women's Business 
Centers. And we want to make sure that we are able to 
incentivize support for these great institutions across the 
board.
    And so we do need additional types of support to be more 
inclusive and make sure nobody's left on the sidelines. And 
ideally, we have enough resources to continue to support all of 
our great resource partners at scale, but there has to be some 
change to reach out to more of these micro small businesses 
around the country and serve them effectively.
    Mr. PAPPAS. I appreciate that, but just getting back, one 
of the important functions of SBDC is disaster assistance. 
Wouldn't cutting SBDC impact that critical function and other 
things that we rely on them to do?
    Ms. GUZMAN. The SBA actually has a full field operation for 
disaster assistance, which we scale in the events of the 
disasters. And so, clearly, we need to work on the ground with 
partners, those are chambers, those are local economic 
development agencies. Our SBDCs are great partners on the 
ground as well. And we hope to continue to support a strong 
field outreach within our disaster programs and expect to 
continue to partner on the ground with great organizations like 
the America's SBDC.
    Mr. PAPPAS. Well, one thing I want to note is that New 
Hampshire's SBDC participates in the Community Navigator 
program, but this isn't necessarily the case across the country 
in terms of what other SBDCs do.
    So can you provide some additional clarity around the 
proposal to give more money to the Community Navigators versus 
initially funding the pilot program at $175,000,000? And will 
only those tier one national level funding programs be 
receiving funding moving forward? And is ensuring that 
resources will be effectively distributed as partners work to 
continue this program?
    Ms. GUZMAN. And for clarity, we are requesting $30 million 
for Navigators, dropping down from that original $175 million, 
not an additional $30 million on top. So that we intend to 
ensure that all of our great programs, our Navigators, are 
successful in connecting all of our resource partners on the 
ground. They are there to build trust and build lines of 
communication to all of the entrepreneurs who could benefit 
from the full suite of SBA's resources on the ground.
    So I am committed to continue with that effort.
    Mr. PAPPAS. One final question. I have heard this feedback 
from a number of small businesses in my district, and it is the 
frustration around federal procurement policies. And we have 
seen a sharp decline in the number of small businesses that are 
participating in federal procurement in that space. And so 
about what SBA is doing to reverse that trend in the limited 
time you have?
    Ms. GUZMAN. Yes, we have seen a 40 percent decline in small 
businesses participating in federal contracting. So the whole 
of government approach that the Biden-Harris Administration has 
deployed means including our small businesses in procurement 
opportunities, creating more small dollar contracts basically 
for small businesses to participate by giving them category 
management status. But there is more to do at the SBA. We have 
simplified our certification program so we get more small 
businesses in the door, and are increasing our grants, our 7(j) 
grants, which help small businesses get contract ready to 
participate in federal procurement.
    Mr. PAPPAS. Thank you.
    I yield back.
    Mr. BEAN. Thank you very much.
    We have got three questioners left, Davids, Scholten, and 
Thanedar.
    So let's go to Kansas, where Ms. Davids is standing by. She 
is recognized for questions for 5 minutes.
    Ms. DAVIDS. Thank you. And thank you, Administrator Guzman, 
for joining us.
    As we have heard, oversight of the SBA is one of the most 
important functions that our Committee here serves. And given 
the unprecedented last few years, it will continue to be very 
important. And I completely agree, the PPP and EIDL programs 
were enormously successful at helping to sustain millions of 
small businesses during the worst months of the COVID-19 
pandemic. And it is also unfortunately true that these programs 
saw high rates of fraud, including in the district that I 
represent. And just one example is that a business owner in 
Overland Park, Kansas, had to deal with fraud due to identity 
theft. And obviously, that was through no fault of their own. 
And I also want to just highlight and thank your team for 
helping with some of my constituents to quickly close out their 
cases, just recently, ensuring that they wouldn't be held 
liable for these fraudulent loans.
    But, of course, there is still work to do and we are 
hearing about that. And so, Administrator Guzman, I was just 
hoping to hear maybe a broader description of some of the anti 
fraud efforts, whether it is the PPP or EIDL programs, because 
I know that that is an area that you all are working on. And I 
just want to make sure that we have a good understanding of 
what the anti fraud efforts look like.
    Ms. GUZMAN. Sure. On the PPP program, there were more 
limited controls when launched for speed. And so we tried to 
add certainty to the process and added, of course, the Do Not 
Pay system review to both COVID, EIDL, and PPP, as well as, of 
course, on the EIDL program, added the collection of tax 
returns. We want to ensure, of course, in the Biden-Harris 
Administration that we limit fraud and abuse. And so we have 
been following the recommendations of the IG and the GAO around 
our capital programs to ensure that we implement a fraud risk 
management framework. Again, we have hundreds of people working 
on fraud at the Agency, but the collaboration across program 
offices is key to ensure that they receive the support and 
structure that is recommended by the IG and the GAO.
    So we think that the controls, combined with the management 
framework is what positions the SBA for stronger success 
outcomes on fraud. And we have seen that come to fruition. The 
IG has personally commented to the committees that SBA's 
culture from the top has shifted. We have been implementing, 
against recommendations, at a steady pace to ensure that we 
solve for some of the pandemic relief program holes and can 
deliver certainty and speed at the same time. We have 
demonstrated that now with the EIDL program reforms.
    Ms. DAVIDS. Yeah. And speaking of the OIG recommendations 
related to the SBA's pandemic relief programs, I know you 
mentioned including tax returns and beefing up the certainty of 
the programs and the collaboration that has been happening. Can 
you speak to the number of recommendations that OIG made to 
address some of the anti fraud efforts that you have been 
implementing? How many are still pending? And then do you have 
a timeline for the implementation of those recommendations?
    Ms. GUZMAN. It is a continuous process. On the GAO side, we 
have closed six of the eight high risk list items and eight of 
the fifteen priority, and obviously continue to try to drive 
towards successful outcomes with GAO. On the IG, we have done 
14 of the 21 management challenges and over 100 of their 
regular enforcement actions.
    And so we know that obviously, the pandemic relief was a 
huge portion of all of those findings. We continue to try to 
drive through that portfolio, identify fraud, and work 
collaboratively with the IG to ensure that those individuals 
are prosecuted and those funds collected.
    Ms. DAVIDS. Thank you.
    I have limited time left, so I do just want to take a 
moment to highlight the work that has been going on around 
Women's Business Centers. It is a very successful program. It 
is something that I have worked in a bipartisan way with others 
on this Committee to make improvements to the program and make 
sure that it can continue to be successful. And I know SBA has 
recently expanded the number of WBCs across the country, and I 
would love to do a follow up conversation about the ways that 
we can be supportive of that effort from the perspective of 
this Committee.
    Thank you so much for your time.
    I yield back.
    Mr. BEAN. Thank you very much.
    Let's go to Michigan, where Ms. Scholten is standing by. 
She is recognized for 5 minutes of questions.
    Ms. SCHOLTEN. Why, thank you so much, Mr. Chair. I really 
appreciate that.
    And first of all, thank you again to Administrator Guzman. 
Good to see you again. Appreciate your time today, and just 
want to echo the sentiments of my colleagues in thanking you 
for leading your Agency through part of the global pandemic, 
among other extraordinary events.
    As the Ranking Member for the Small Business Committee on 
Contracting, I know the importance of the 8(a) program for 
business development and how much it helps minority small 
businesses to compete in the federal marketplace.
    Administrator Guzman, could you please elaborate on some of 
the ongoing challenges that small businesses face in federal 
contracting and how the 8(a) program in particular is helping 
to level the playing field?
    Ms. GUZMAN. In addition to the decline of citizens 
participating in government contracting by 40 percent, there 
has also been a decline of new entrants by 60 percent. So the 
challenges are on the outset when they are trying to get 
certified and start to learn about how to participate in 
federal contracting. And that is where the SBA steps in with 
its certification program. So the streamlining of our 
certification programs is really key, including across the 8(a) 
program.
    Vet cert is now our gold standard. We just transitioned 
that successfully from the Veterans Administration. It is 
unfortunate that less people heard about it because it was such 
a success. And our veterans are very happy with the program and 
want to see those reforms implemented across all of our 
certifications. But it is also about how the agencies source 
contracts.
    And so we worked diligently in the Biden-Harris 
Administration to ensure that we fought for all of our 
socioeconomic firms, including the 8(a) firms, to have access 
to category management status, as we call it, tier two. That is 
our strategic sourcing. So it is often times sometimes large, 
bundled actions. And so we continue to try to advocate for 
opportunities for small businesses to have entry contracts and 
participate in federal contracting. And we believe that will 
help ensure that more small businesses can participate.
    But the President took very strong action by creating a 15 
percent goal for small disadvantaged businesses, which includes 
8(a), a 15 percent goal by 2025. So that is tens of billions of 
dollars. We are trying to ensure that we ready our 8(a)s with 
the proper grant funding to support a network of technical 
assistance providers to position them for success. And we have 
increased the number of procurement center representatives who 
connect small businesses to contract opportunities in our field 
offices.
    Ms. SCHOLTEN. That is excellent. Thank you so much for your 
work there.
    I have three reports here on the 8(a) program, and Mr. 
Chairman, I would like to request that they be entered into 
into the record.
    Mr. BEAN. Without objection, they are so entered into the 
record.
    Ms. SCHOLTEN. Thank you so much, sir.
    I yield back the remainder of my time.
    Mr. BEAN. Very good. And thank you so much.
    But let's stay in Michigan, where Mr. Thanedar is standing 
by. He's got 5 minutes and he is recognized.
    Ms. SCHOLTEN. Thank you, Chairman, and thank you, 
administrator, for being here and working with us.
    I am a firm believer in small businesses and advocate for 
them at every chance, being a serial entrepreneur myself. 
Establishing, expanding, and sustaining a business is a 
difficult job, as I know from my own experience running 
different companies. Despite obstacles, such as lack of 
capital, I was able to achieve my American dream. However, the 
largest corporations received the utmost attention--99+ percent 
of the businesses in our nation are small businesses. 
Additionally, small businesses contribute significantly to the 
economy by hiding, investing, and supporting their respective 
committees. Nonetheless, the disparity in accessing capital 
remains silent. Salient for business owners, particularly 
disadvantaged communities.
    In my district, Detroit, I have witnessed the challenges 
presented to business owners seeking capital to grow and 
sustain their operations. Most of the small businesses in my 
district make less than $150,000 annually and have limited 
access to financial advisors and banking relationships, which 
adversely impact their bottom line.
    To remedy the inequities, we must look no further than 
history. Minorities have historically faced steep challenges as 
business owners. The infamous Tulsa Massacre is one of the 
numerous examples. On the fateful day of May 31, 1921, an angry 
mob descended upon the once thriving Greenwood District and 
unleashed a wave of terror on the black community, destroying 
businesses and assets worth millions of dollars, without 
reparations to this very day. Similarly, the Black Bottom 
neighborhood of Detroit, an area I represent, once possessed a 
formidable business infrastructure. However, policies such as 
the National Housing Act of 1949, decimated businesses by 
constructing Interstate 375.
    To this end, the business environment is extremely 
challenging for minorities. During the COVID-19 pandemic, 
minority business owners lost a disproportionate amount of 
business and revenues in comparison to their white 
counterparts. Moreover, SBA relief programs, such as the 
Paycheck Protection Program, also highlighted stark 
disparities. According to Harvard University data, black-owned 
firms were 8.9 percent less likely to receive PPP loan than 
similar white-owned firms.
    Small business owners are willing and able to grow our 
economy, and my goal is for them to reach their entrepreneurial 
dreams, as I did. The goal of SBA should ensure a cohesive 
environment to grow access to capital for all.
    An article in Boston Globe on racial equity stated that 
eight out of every ten black businesses failed within the first 
eighteen months. As you know, the first year as a business 
owner is crucial and capital intensive. The goal of the SBA 
lending company rulemaking is to help reach the smallest of the 
small businesses women, minority, and veterans.
    Administrator Guzman, with that said, what type of gaps 
would you like to see any new SBLCs fill in small business 
lending?
    Ms. GUZMAN. Thank you for that.
    And non depository lending institutions, as well as our 
Community Advantage nonprofit lenders during PPP were the 
institutions that were able to fill gaps. I mean, we know that 
more than half of black businesses go straight to online 
services to get capital, skipping the banking system 
altogether. And there is no protection or set terms and 
condition product out there until the SBA can expand 
competition in its marketplace.
    And so we know that the licensing process for our SBLCs, 
whether they are Community Advantage SBLCs or regular SBLCs, 
will be thorough and critical. And we will make sure that we 
are mission aligned, that they will be filling gaps. That will 
be one of the key areas. Attract some lenders out there. 
Obviously, anybody could have bought an SBLC over the last 4 
decades, and so the program is open to all now, but we hope to 
attract some lenders who want to focus on this very important 
issue, and we think the time is now, based on our strong 
performance across similar programs.
    Ms. SCHOLTEN. Thank you.
    And I yield back.
    Mr. BEAN. Thank you very much.
    Members, what a great day it is been in small business. I 
want to thank all the Members on behalf of Chair Williams for 
coming prepared. I think we all had a great deal. Everybody 
here did their homework.
    I want to thank Ms. Guzman. Administrator, thank you so 
much for being here. Over 2 hours, 15 minutes.
    Members, a reminder we have 5 days, if there is no 
objection, 5 legislative days to submit additional materials, 
written questions to the Chair, which will be forwarded to the 
witness, and then she will do her homework and bring it back.
    So on behalf of Chair Williams, thank you so much.
    And there is no other business before us.
    [Whereupon, 4:13 p.m., the committee was adjourned.]
                           
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