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








  NAVIGATING REGULATIONS: ALTERNATIVE PATHWAYS TO INVESTING IN SMALL 
                               BUSINESSES

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

                                HEARING

                               before the

       SUBCOMMITTEE ON OVERSIGHT, INVESTIGATIONS, AND REGULATIONS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             MARCH 12, 2024

                               __________







    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







                               

            Small Business Committee Document Number 118-044 
             Available via the GPO Website: www.govinfo.gov 
             
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                 U.S. GOVERNMENT PUBLISHING OFFICE 
                 
54-984                   WASHINGTON : 2024 
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
                   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
                          CELESTE MALOY, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                  MARIE GLUESENKAMP PEREZ, Washington
                        SHRI THANEDAR, Michigan
                       MORGAN MCGARVEY, Kentucky
                       HILLARY SCHOLTEN, 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. Beth Van Duyne..............................................     1

                               WITNESSES

Mr. Parag Shah, Co-Founder & Chief Technical Officer, Vemos, 
  Washington, DC.................................................     3
Ms. Mary Kennedy Thomposon, Chief Operating Officer, Neighborly, 
  Waco, Texas....................................................     5
Mr. Jeremy Kress, Assistant Professor of Business Law, University 
  of Michigan, Stephen M. Ross School of Business, Ann Arbor, MI.     7

                                APPENDIX

Prepared Statements:
    Mr. Parag Shah, Co-Founder & Chief Technical Officer, Vemos, 
      Washington, DC.............................................    19
    Ms. Mary Kennedy Thompson, Chief Operating Officer, 
      Neighborly, Waco, Texas....................................    25
    Mr. Jeremy Kress, Assistant Professor of Business Law, 
      University of Michigan, Stephen M. Ross School of Business, 
      Ann Arbor, MI..............................................    33
Questions and Answers for the Record:
    Questions from Hon. Velazquez to Mr. Jeremy Kress and Answers 
      from Mr. Jeremy Kress......................................    42
Additional Material for the Record:
    Engine Letter................................................    45

 
  NAVIGATING REGULATIONS: ALTERNATIVE PATHWAYS TO INVESTING IN SMALL 
                               BUSINESSES

                              ----------                              


                        TUESDAY, MARCH 12, 2024

              House of Representatives,    
               Committee on Small Business,
                         Subcommittee on Oversight,
                           Investigations, and Regulations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:04 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Beth Van Duyne 
[chairwoman of the Subcommittee] presiding.
    Present: Representatives Van Duyne, Alford, Crane, Bean, 
and Gluesenkamp Perez.
    Chairwoman VAN DUYNE. I will now call the Subcommittee on 
Oversight, Investigations, and Regulations 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 statement.
    I want to welcome all of you here today. This hearing will 
highlight how small businesses across the nation are struggling 
to access capital because this administration continues to 
impose undue restrictions. Access to private credit is more 
critical today than it has ever been, and I want to thank our 
witnesses for joining us to have a robust conversation on this 
topic. I am eager to hear from you and to discuss how we can 
empower our job creators to access the investment sources they 
need to grow.
    Small businesses across America are continuing to navigate 
economic challenges in a post-pandemic world, alongside the 
repercussions of reckless government spending that has given us 
decades high inflation and crushing interest rates. Coupled 
with stifling regulations implemented by this administration, 
it is now more expensive and strenuous to do business than ever 
before. Our job creators rely on access to capital to keep 
their doors open, and without stable access to capital, our 
small businesses don't have the certainty that they need to 
grow, or in some cases, just to survive. Along with limited 
access to small business investment options, bank lending 
standards have grown stricter and loan growth has slowed 
significantly, making it much harder for mom and pops shops to 
stay afloat.
    Instead of lenders being able to make decisions based on 
business models and risk assessment, this administration is 
forcing them to base investment decisions on demographic 
quotas. Entrepreneurs, job creators, and employees at small 
businesses are much more than demographic boxes to check. Small 
businesses are critical to communities across our country and 
are the result of innovation and hard work. And as I have heard 
from a constituent who is a community banker, capital is 
sitting there unused and her hands are tied. Our small 
businesses are getting left behind because this administration 
continues to impose new regulations and direct investment where 
they think is best, rather than allowing meritocracy to 
prevail.
    Over the next decade, compliance with President Biden's 
regulations will cost Americans more than $1.5 trillion. Since 
the day President Biden took office, he has burdened our job 
creators with more than 287 million hours in additional 
paperwork. As regulatory complexity grows, so do costs to do 
small business that are already burdened by this 
administration. As we've heard time and time again, over 
regulation can shutter the doors of any small business. These 
regulations make it difficult or even impossible for businesses 
to comply, to compete and survive, let alone make a profit.
    Private credit, which comes from nontraditional investors, 
has long been a lifeline for entrepreneurs across the country. 
But it is especially important now given this administration's 
agenda. As the federal government attempts to regulate our 
small businesses out of existence, private investment is 
stepping up to fill the void. More than 80 percent of 
investments made by private equity support small businesses. In 
my district, more than 130,000 jobs are supported by private 
equity. The bottom line is private financing has grown because 
it is needed, useful, and is successful at helping American 
businesses in every sector, from healthcare and biosciences to 
energy production and consumer services.
    I am grateful to our small businesses and I am grateful 
that they have this option. I am also glad to be able to hold 
this hearing today to put the needs of our job creators first 
and push back on the Biden Administration's destructive 
regulatory environment.
    We are going to go ahead and move forward to introducing 
our witnesses that are here today. I want to thank each and 
every one of you. Our first witness is Mr. Parag Shah. Mr. Shah 
is the Co-Founder and CTO for Vemos, which is located in 
Minneapolis, Minnesota. Vemos is a mobile payments and 
analytics company that serves the hospitality industry by 
creating personalized digital experiences. Prior to founding 
Vemos, Mr. Shah founded Fidelity LLC, bringing technology ideas 
to the market, working with him and working with creating other 
technology companies. While still in college, he found MX app 
building a product called Lunchbox, allowing customers to order 
from restaurants using their phones. He was named a finalist in 
the 2009 Global Student Entrepreneur Awards. Mr. Shah graduated 
from the University of Minnesota's Carlson School of 
Management, where he earned his degree in entrepreneurial 
management. Thank you for joining us today and we look forward 
to the conversation ahead.
    Our next witness here today is Ms. Mary Kennedy Thompson. 
Ms. Thompson is the Chief Operating Officer for Neighborly, a 
holding company of 29 brands focused on home services located 
in Waco, Texas. At Neighborly, Ms. Thompson oversees all 
business operations within the company and works with 17 brand 
presidents, leading the execution of strategies and 
initiatives. Prior to being appointed COO, she served as 
Executive Vice President of Neighborly and President of Mr. 
Rooter. Prior to her experience franchising, Ms. Thompson 
served 8 years in the U.S. Marine Corps as a logistics officer. 
She is the recipient of the International Franchise 
Association's Bonnie Levine Award. The highest award for women 
who have made an impact on franchising. Ms. Thompson graduated 
from the University of Texas at Austin with a Bachelor of Arts 
in English. She then went on to complete the Mini MBA Program 
in franchise management from the University of St. Thomas 
College of Business. Thank you for your service and thank you 
for being with us today.
    Our final witness is Professor Jeremy Kress. Professor 
Kress is an Assistant Professor of Business Law, at the 
University of Michigan's Stephen M. Ross School of Business. 
Before entering academia, Professor Kress was an attorney in 
the banking regulation and policy group at the Federal Reserve 
Board of Governors here in Washington. He served as counsel to 
the Assistant Attorney General for Antitrust at the U.S. 
Department of Justice, focusing on bank merger policy. 
Professor Kress is an expert on banking policy and capital 
formation issues and has previously testified before Congress 
on these matters. Professor Kress graduated cum laude from 
Harvard Law School and from the Harvard Kennedy School, where 
he was a presidential scholar. He holds a BBA from Michigan 
Ross. Professor Kress, thank you again for being here today.
    Before recognizing the witnesses, I would like to remind 
them that their oral testimony is restricted to 5 minutes in 
length, and if you see the lights turn red in front of you, it 
means your 5 minutes have concluded, and you might hear a 
little bit of a gavel. But you should wrap up your testimony. 
So I now recognize Mr. Shah for his 5 minutes opening remarks.

  STATEMENTS OF MR. PARAG SHAH, CO-FOUNDER & CHIEF TECHNICAL 
  OFFICER, VEMOS; MS. MARY KENNEDY THOMPSON, CHIEF OPERATING 
OFFICER, NEIGHBORLY, AND MR. JEREMY KRESS, ASSISTANT PROFESSOR 
OF BUSINESS LAW, UNIVERSITY OF MICHIGAN, STEPHEN M. ROSS SCHOOL 
                          OF BUSINESS

        STATEMENT OF PARAG SHAH, CO-FOUNDER & CTO, VEMOS

    Mr. SHAH. Thank you. Chairwoman Van Duyne, and Members of 
the Subcommittee, thank you for inviting me to testify today 
regarding the experience of alternative financing for small 
businesses. My name is Parag Shah and I am the Co-Founder of 
Vemos, a Minnesota based company that creates personalized 
experiences between hospitality businesses and their guests. 
Using our app, consumers can view a personalized menu tailored 
to their allergies and dietary needs, quickly view and pay 
their bill, and get rewarded from their favorite spots. Simply 
put, our software helps restaurants better understand their 
customers and provide more personalized guest experiences, 
which in turn allows them to grow their business.
    I have spent my entire career dedicated to starting and 
scaling businesses. Prior to Vemos, I have been the founder of 
several technology companies, many of which have failed, but a 
few have succeeded. I am also a mentor for rising tech 
entrepreneurs and I am a proud member of ACT, the App 
Association, a trade group for representing small tech 
companies like mine.
    When most people hear the words entrepreneur or tech 
startup, they think of successful unicorns featured in the 
media. But the reality is, building a company is extremely 
difficult and the outcomes are not guaranteed, no matter the 
background, the effort of the team, or funding received. And 
for those of us that are crazy enough to choose this, it is 
vital for there to be an opportunity to succeed, not just for 
the founders, but for every single person involved in the 
journey.
    While there are many types of small businesses, my 
entrepreneurial story has centered around technology and 
software, where some level of funding is typically necessary to 
grow. The funding can come in many forms and isn't limited to 
venture capital. Although we have raised venture capital, I 
have more experience with widely used investment rounds such as 
friends and family, angel, and seed. The reality is most 
entrepreneurs don't have connections to investors and capital, 
while businesses like ours struggle with traditional options 
like bank loans, even ones backed by the SBA, because we don't 
have traditional assets. Therefore, outside private capital is 
very important to us.
    One of the best parts about being in software is how 
quickly you can build and test an idea with limited upfront 
capital. It is scaling the business that comes with the funding 
hurdles. In 2007, when I started my first company while 
attending the University of Minnesota, this is exactly what 
happened. A few of us came up with an idea, started writing 
code, and tested our product with real customers. It turned out 
that we had a winning product on our hands. That is when the 
real work started, and that is when the funding was necessary. 
At the time, there weren't as many resources for founders as 
there are today. Plus, much of the capital was concentrated on 
coasts. Even after gaining traction, we struggled to raise 
capital locally, and as first-time founders and students, we 
had no capital ourselves and a resume that did not help 
investors. We were fortunate to close a small round of angel 
investors to grow our business, but at the time we were not 
educated to find additional capital elsewhere. After a lot of 
struggle and sweat equity, we were able to exit, but far less 
than what I believe we should have achieved if we were given 
the right resources.
    Today, early stage tech entrepreneurs are fortunate to have 
more funding resources at their disposal. Another funding 
option that has gained recent popularity is crowdfunding, which 
can be a means of distributing equity or essentially a donation 
with a promise to provide a product or service later. For us, 
dealing with a large number of shareholders, as well as the 
time and cost to raise this round, was far too high to be worth 
it, and this is generally why we've raised capital from 
accredited investors. However, I want to see more options for 
access to capital rather than fewer. In that vein, it might be 
worth seeing if the accredited shareholder threshold could be 
reworked to be more flexible depending on the cost of living.
    I understand that some regulation is important to make sure 
investors and entrepreneurs are held accountable. However, 
overregulation leads to stagnation, decreases in new company 
formations, and limits deployment of new capital. We have seen 
that play out over the past few years as regulations have made 
it harder for businesses to exit. For a company like ours, 
being able to exit is fundamental to our business plan and 
affects everything from raising capital to hiring great people. 
An exit, whether it be a merger, acquisition, or IPO, allows 
employees to be rewarded for their hard work, investors to be 
compensated for taking a risk, and founders to capture the 
capital they need to build the next great company. But most 
importantly, it is one of the keys to sustainable economic 
growth.
    Early stage investment is critical for building a highly 
competitive economy. Entrepreneurs already face long odds and 
we need to avoid adding unnecessary costs and overburdensome 
government rules. You are in a key position to make sure 
America continues to be a place for new ideas and innovation. 
Ensuring the path is clear for entrepreneurs to access 
alternative financing options is an effort I am honored to be a 
part of. Thank you for this opportunity and I look forward to 
your questions.
    Chairwoman VAN DUYNE. Thank you very much. I now recognize 
Ms. Kennedy Thompson for her 5 minute opening remarks.

      STATEMENT OF MARY KENNEDY THOMPSON, COO, NEIGHBORLY

    Ms. KENNEDY THOMPSON. Good morning, Chairwoman Van Duyne, 
and distinguished Members of the Committee. My name is Mary 
Kennedy Thompson and I am the Chief Operating Officer of 
Neighborly, a family of home services companies with more than 
5,800 franchises serving 12 million customers across six 
countries. We specialize in repairing, maintaining, and 
enhancing people's homes and properties worldwide. It is my 
honor to be here today to give you my perspective on the impact 
alternative areas of financing can have on small businesses, 
especially franchisees, franchisors, and their employees.
    I appear before you today on behalf of the International 
Franchise Association, or IFA. IFA members include franchise 
companies in more than 300 different industries and individual 
franchisees that support nearly 8.7 million direct jobs. Today, 
I will tell you more about Neighborly and franchising in 
general. I will also share how some of the ways non traditional 
financing, such as through private equity, helps grow brands 
and companies faster and smarter. I believe franchising is the 
greatest democratization of wealth creation that exists today.
    I have spent more than three decades in franchising, both 
as a franchisee and a franchisor. Before my career in 
franchising began, I served 8 years in the Marine Corps as a 
United States Marine Corps Officer, including being the first 
female Platoon Commander for my unit. When I returned home to 
Texas after serving time in the Marine Corps, I wanted to own 
my own business. I wanted to take control of my own destiny and 
serve my community. But I had no business experience and I knew 
I needed help if I was going to make my dream come true. In 
1994, I got my start as a franchisee in the Cookies by Design 
system and I have grown in franchising ever since. The 
franchise model empowered me, someone with no business 
experience, to start my own business with the guidance, 
resources, and assistance I needed to be successful. With that 
success, I was able to create hundreds of jobs in my community.
    With my role in Neighborly, I now help new franchisees 
under all 30 of our brands achieve their business dreams of 
owning their own destiny, just as I did 30 years ago. Our 
mission at Neighborly is to teach our principles and systems of 
personal and business success so that all people we touch live 
happier, more successful lives. We do that by teaching the 
franchise system, including how to run a business well, how to 
take care of customers, serve the community, and create jobs. 
Now, we don't employ, hire, or fire our franchisees employees. 
It is not the role of the franchisor to get between a 
franchisee and their employees. Rather, our role is to share 
with franchisees our knowledge and experience to ensure that 
they are doing it the best possible way and that they are 
growing their businesses.
    I have lived the American dream of being an entrepreneur 
and helping grow and scale businesses, but it would not be 
possible without alternative forms of capital. Private equity, 
for me, has been a catalyst for growth and for many of our 
franchisees and Neighborly. In the past years, small business 
owners like me, when I was wanting to franchise, we could 
depend on our local bankers and community banks to be a willing 
partner, providing capital at reasonable interest rates and an 
ally throughout the many steps of growing a business.
    But in the era of consolidation and mega mergers, this 
breed of bankers faded away, and they are less concerned with 
growing their local neighborhood Glass Doctor, for example. 
Many of our franchise owners don't speak the language of high 
finance. They are small business owners. Many without college 
degrees. There is a divide in the business world between the 
elite and these small business owners who are important part of 
their communities. They may not know where to go to get 
financing, to grow their businesses, or to secure favorable 
rates.
    This is where private equity has become an asset to our 
franchise owners. Private equity brings their experience across 
various sectors to help franchise owners make informed 
decisions and stay ahead of the curve. Most importantly, 
private equity can serve as an effective liaison to the banks, 
to financing, and to other investors. They give our franchise 
owners instant credibility and connections. Private equity 
shops can serve as translators for our owners, connecting those 
with capital to those who need it. The benefits of private 
equity networks also extend well beyond financial backing. They 
open doors for our franchise owners and help them connect to 
potential clients, suppliers, and other businesses within the 
portfolio. These relationships can supercharge in terms of new 
partnerships, joint ventures, and new market opportunities. 
They are effective thought partners helping grow these small 
businesses.
    Now, private equity nor additional working capital isn't 
the silver bullet. I tell all my franchise owners they need a 
strong foundation and a vision for the future to maximize what 
private equity can do in their business. When a franchise owner 
gets the right thought partner, private equity can be the 
rocket fuel that takes their business into the stratosphere. 
And with that growth comes increased jobs in their communities. 
Madam Chair, thank you again for the invitation to speak on 
behalf of small business owners everywhere. I look forward to 
answering any questions you may have.
    Chairwoman VAN DUYNE. Thank you very much. I now recognize 
Mr. Kress for his 5 minute opening remarks.

STATEMENT OF JEREMY KRESS, ASSISTANT PROFESSOR OF BUSINESS LAW, 
   UNIVERSITY OF MICHIGAN, STEPHEN M. ROSS SCHOOL OF BUSINESS

    Mr. KRESS. Chairwoman Van Duyne, Members of the 
Subcommittee, thank you for inviting me to testify at today's 
hearing. By way of background, I am an Assistant Professor of 
Business Law at the University of Michigan, Stephen M. Ross 
School of Business. My research focuses on bank regulation. 
Prior to entering academia, I was an attorney at the Federal 
Reserve Board, where, among other things, I worked on 
implementing the Dodd-Frank Act and the initial Basel III 
capital rule.
    Small businesses are the lifeblood of the American economy. 
Indeed, small businesses create more than two thirds of new 
jobs in the United States and account for almost half of U.S. 
GDP. On a personal note, one of the things I love most about my 
hometown of Ann Arbor is the thriving community of small 
businesses like Zingerman's Deli and Argus Farm Stop that give 
the city its unique college town feel. In light of the 
essential role small businesses play in local communities and 
the national economy, it is critical that policymakers ensure 
that entrepreneurs have access to funding to establish and grow 
their businesses.
    I will make four points in my testimony today. First, 
policy responses to the 2008 financial crisis have helped 
promote small business credit availability by enhancing the 
resilience of the banking system. Since Dodd-Frank and Basel 
III were enacted, small business lending has grown at a robust 
pace. Indeed, the implementation of these new safeguards 
coincided with the longest U.S. economic expansion on record. 
This experience confirms that strong bank capital requirements 
are consistent with long term credit creation, economic 
expansion, and small business growth.
    Second, the Basel III Endgame capital rule, proposed last 
year by the Federal Banking Agencies, will further bolster the 
banking system and will not impair small businesses access to 
credit. There are two specific reasons why Basel III Endgame 
will not harm small businesses. First, the proposal applies to 
only the 37 largest U.S. banks with more than $100 billion in 
assets. These banks focus far less on small business lending 
than local community banks, which tend to specialize in small 
business lending and which are unaffected by the Endgame 
proposal. Second, most of the capital increase in the Basel III 
Endgame proposal is associated with large banks' trading and 
fee generating business lines, not their lending activities. 
The rule could, in fact, encourage large banks to put 
relatively greater emphasis on small business lending as they 
reorient toward less capital intensive activities.
    Third, when small businesses have trouble obtaining bank 
financing, bank consolidation and lax merger oversight often 
are to blame. The U.S. banking system has experienced dramatic 
consolidation over time. Regrettably, small businesses suffer 
when banks consolidate. Since larger banks tend to favor larger 
borrowers, bank mergers create barriers to entry for new 
entrepreneurs. Numerous empirical studies have documented a 
reduction in small business lending associated with bank 
mergers. For small businesses that are able to obtain loans 
following a bank merger, credit becomes more expensive, average 
loan size declines, and non-price loan terms, such as 
collateral requirements, become more onerous. Despite the 
harmful effect bank mergers have on small businesses, 
policymakers have to date done little to stem the tide of bank 
consolidation.
    Fourth, alternative sources of small business financing, 
such as private equity, private credit, and venture capital may 
benefit certain small businesses, but they also pose potential 
risks and must be overseen accordingly. When structured with 
appropriate guardrails, private capital can create new pathways 
for small businesses to grow. However, policymakers and small 
business owners should approach private capital with caution.
    Based on the minimal data available, private investors 
appear to focus on the same types of businesses that already 
have access to capital. Thus, private markets may be ill suited 
to reduce barriers to financing for underserved small 
businesses, including minority- and women-owned companies. In 
addition, the interests of private investors are not 
necessarily aligned with those of a small business's owners, 
its employees, or its community. Since private investors 
typically have a limited time horizon, they may pursue short 
term profits by liquidating a business's assets, reducing long 
term capital investments, loading up the company with debt, or 
paying out profligate dividends. While these strategies may be 
detrimental to a small business's long term prospects, they are 
often profitable for the private fund that intends to exit its 
investment after just a few years.
    In closing, I am grateful for the opportunity to discuss 
these important issues with you today. Thank you, and I look 
forward to your questions.
    Chairwoman VAN DUYNE. Thank you very much. We will now move 
to the Member questions under the 5 minute rule, and I will now 
recognize myself for 5 minutes.
    Mr. Shah in the private equity space, merger and 
acquisition transactions are a vital tool to help businesses 
expand into new geographic markets. They also help fuel 
innovation and lower prices. While most mergers do not require 
additional information once a premerger notice is filed with 
the FTC and DOJ, a small percentage are subject to additional 
review out of fear of possible antitrust harm. In your 
testimony, you mentioned that you are concerned with one of the 
newer FTC proposals that would subject every premerger notice 
to additional review, which would force small businesses to 
spend a lot more time and money on providing likely unnecessary 
documentation. So do you believe that this will affect one's 
ability to find alternative financing, and if so, how and why?
    Mr. SHAH. Thank you for that question. Yes, I do. I believe 
that because when you are starting a business, specifically 
small businesses that are in technology and software that are 
very high fast growth companies, and it is required to go after 
private financing, such as, like I said, angel investing, 
venture capital, it is important that we have an exit strategy. 
And if that exit strategy by any means is compromised or could 
be compromised even the eyes of an individual, a fund, society 
in general, then it definitely impacts us for the ability to 
raise that capital.
    Any additional regulation--we don't know as entrepreneurs 
when this exit is going to happen. We can't predict that. I 
wish I could. And we don't know where it is going to come from. 
And if we have the opportunity for an exit that meets the 
requirements of all of our shareholders as well as our 
employees, and it is then come to where additional paperwork is 
required. And from that additional paperwork, it may even mean 
that we are not allowed to merge or allow to be acquired due to 
antitrust laws. It can have a ripple effect in our business 
plan and the ability for us to continue to raise additional 
capital to run our business.
    Chairwoman VAN DUYNE. What I have heard over and over again 
is that businesses are happy to play by the rules, but they 
need to know what they are.
    Mr. SHAH. Absolutely.
    Chairwoman VAN DUYNE. When they are continuously changing, 
it is very difficult to have an exit strategy or build a 
business model around that. Can you kind of expand a little bit 
on what you are seeing in that industry, in that area?
    Mr. SHAH. Yes. I think a lot of people might think we're a 
lot smarter than we are and the reality is we're not. We find a 
problem in the world, we go out and solve it, and sometimes 
that solution works and sometimes it doesn't. But when that 
solution works, we need the ability to go after it with all of 
our might and power to see if it is successful. And because of 
that, we don't know where that financing is going to come from.
    We know how to grow the business. We know the right talent 
to bring on a lot of times, but we don't know how to get that 
exit. And that exit is critical, again, to the way that we 
raise capital. A lot of the private markets require us to have 
an exit because that is how that capital goes back into the 
economy and grows more small business owners. And I include 
employees in this, and I think a lot of people forget employees 
because, especially in the tech sector, employees have stock 
options and they are tied to the business. And when the 
business exits, they are able to also get a substantial reward 
and help new small businesses.
    Chairwoman VAN DUYNE. Thank you. Ms. Kennedy Thompson, in 
April last year, the SBA under the Biden Administration made a 
number of rule changes to some of its biggest lending programs, 
including the 7(a) and 504, which franchises heavily utilize. 
Among those changes was the elimination of the franchise 
directory in an effort to simplify affiliation determinations. 
Can you speak to how the SBA's rules change to eliminate the 
franchise directory has or could impact access to capital for 
franchisers?
    Ms. KENNEDY THOMPSON. Yes. Well, anytime--you talked about 
this earlier, anytime there is change, and it creates 
uncertainty. And the first thing it does is it makes the 
business owners decide maybe not to grow anymore where they 
are. They think, you know what? There is so much work, I have 
taken so much work to get to here, to get to the next place. I 
am not sure I understand it, and I am not sure I am willing to 
take that risk. And so, change puts this uncertainty in the 
business owner, especially the small business owner's mind, 
that causes them to not grow, to not create more jobs, to not 
be able to serve the customer in the best possible way. So that 
is the first thing.
    The second thing is that when it changes, it is not like 
there is a big edict that goes out to everybody and says, this 
is how it is changed. This is what you need to do. This is how 
you get here. This is what you need to do next. They do not 
understand it. They do not know who to talk to. They do not 
know what to do next. And it just slows down growth completely. 
And for what I look at, and I grew up in a very small 
community. Every small business we have in that community, 
every franchisee in that community, is an important part of 
creating jobs for what we do. And if we cannot grow them, 
because they do not know with the changes in how the SBA is 
lending, one of the things that we see is SBA is pretty good at 
getting somebody the funding when they are just opening. But 
when they go to expand, the rules are so onerous, they cannot 
figure out how to get more funding to expand.
    Chairwoman VAN DUYNE. Thank you very much for that. We are 
now going to go on and recognize some of our other Members 
who've got questions. And I now recognize representative Crane 
from Arizona for five minutes.
    Mr. CRANE. Thank you so much for holding this hearing 
today, ma'am. Thank you guys for coming. Ms. Thompson, thank 
you so much for your service. We appreciate it. Have you guys 
noticed that because of the uncertainty of some of the 
regulations that have been coming down from this 
administration, a lot of entrepreneurs will just completely go 
around or forego even talking to some of your more traditional 
resources for gaining capital? You were talking about seed 
investing, angel investing. Have you noticed that a lot of 
entrepreneurs will just go straight to those sources instead of 
going to banks and the SBA?
    Mr. SHAH. Yes, I have definitely noticed a lot more of 
that. I can say from my perspective and the type of businesses 
that I have run in the technology sector, where it is software 
based, it is extremely difficult, if not almost impossible to 
go get traditional lending because we do not have physical 
assets, such as a physical location, physical assets, they do 
not really deem software as something that is able to be 
collateralized. So, it is very, very difficult. And so 
therefore, private equity, whether it is angel investors, seed 
rounds, or venture capital, is just the route you have to take, 
and there isn't really a lot of other financing options.
    Mr. CRANE. Yes. Thank you. Ms. Thompson, how is it in the 
record high inflation that we are seeing right now? How is that 
affecting your franchises that you represent?
    Ms. KENNEDY THOMPSON. It is affecting them on just about 
every single level. Their supplies have gone up dramatically. 
They cannot pass those costs on to the customers in the right 
price increases that they need to access to capital is costing 
them more. That is why I am here talking to you about private 
equity, because it is proven to be a good source of finding 
capital for our franchisees. It is costing them more on how 
they are engaging and hiring employees. It is costing them on 
what their rent is.
    Mr. CRANE. Yeah.
    Ms. KENNEDY THOMPSON. And in every way, it is affecting 
their profitability.
    Mr. CRANE. Have you seen it stopping growth within the 
franchises that you represent?
    Ms. KENNEDY THOMPSON. Yes, I have. I have seen it in people 
wanting to expand because the interest rates are too high or 
the cost of the supplies are too high for them. And so right 
now they are holding. They are holding and waiting to see what 
is going to happen next.
    Mr. CRANE. So a lot of people do not understand the 
trickle-down effect in a business because they have never owned 
a business. When business owners start to feel pinched, how 
does that affect the people that many of us here represent, you 
know, the average American citizen. Does it mean they do not 
get raises anymore? Does it mean they get laid off? How does 
that affect the little guy out there?
    Ms. KENNEDY THOMPSON. Well, when you see things like the 
inflation we are seeing now, first of all, it means fewer jobs, 
because probably one of the best job creators out there are 
small businesses, and they stop hiring. And then if the costs 
get too much and they think they have to pull back, then they 
actually do layoffs as well, and they cannot do the raises for 
everyone the way they would need to, and they cannot put money 
back in their community. Small businesses are probably some of 
the best groups of individuals that give back to their 
communities, both philanthropically and in other ways, and they 
cannot do that either. But I think the biggest thing is it 
means fewer jobs out there.
    Mr. CRANE. What about crime, Ms. Thompson? Have you seen 
crime heavily influence and affect the franchises that you 
represent?
    Ms. KENNEDY THOMPSON. Yes, we have. It is interesting. Most 
of my franchise owners will have between three and seven vans 
that go out and service customers. We used to see, per 
franchise owner, maybe one van every couple of months that 
would be broken into. It is a weekly occurrence for our 
franchisees now. They have to have extra security, which, of 
course, costs them. They come in and their van is broken into, 
all their equipment is gone, and then the new equipment they 
have to buy costs even more than what they originally had.
    Mr. CRANE. Yeah. Besides imposing regulations that prevent 
access to capital, what other regulations are you guys seeing 
out there on the ground from this administration that are 
affecting small businesses?
    Ms. KENNEDY THOMPSON. The one that really worries me is the 
Congressional Review Act. It has the potential to completely 
undermine the franchise business model. The National Labor 
Relations Board, or the NLRB, has issued a final rule on a 
joint employer standard that would reverse this course back to 
the harmful 2015 version. This takes away the equity and the 
independence of the small business owners. And I would like to 
remind most that many of our small business owners are women, 
people of color, and veterans. While the average business, 
small business in the United States has 17 percent, people of 
color running that or owning their business in franchising is 
26 percent.
    Mr. CRANE. Thank you for bringing that up, ma'am. I 
appreciate it, and I yield back.
    Chairwoman VAN DUYNE. All right, we are going to go ahead 
and go into a second round of questions I wanted to ask you, 
Ms. Kennedy Thompson, if you would mind just, kind of, 
following up a little bit. You have talked about some of the 
experiences that you are seeing in general. But specifically 
for your experience, how has private equity helped grown your 
business, your franchise? What have you seen?
    Ms. KENNEDY THOMPSON. Yes. So, on the franchisor level, we 
also have private equity sponsorship. And I can tell you, when 
I started in this company, we had six brands, and today we have 
30 brands. We went from doing 400 million to 4 billion. And it 
is a direct relationship to the sponsorship, thought-
partnership, and help that we have gotten from private equity. 
They put the right resources to help us find great talent; the 
right resources to get us the right capital to be able to 
acquire companies and grow and better serve our customers. 
Because you can imagine in the home services, I might not 
always need a plumber, but I do need a plumber, and a maid, and 
I need my sidewalks cleaned, and I need my windows cleaned. And 
so, it allowed us to better take care of our customers by being 
able to build this company that has all the things to repair, 
maintain, or enhance their home or property. And then for us, 
you are only as good as the people that you have on your team. 
And they have helped us really find great talent to be able to 
serve our franchisees in the best possible way to support them 
and help them grow their businesses.
    Chairwoman VAN DUYNE. Thank you very much. Mr. Shah, have 
you had to make any adjustments to your business operations or 
strategy to comply with regulatory requirements, either with 
private equity or with private credit?
    Mr. SHAH. We haven't done too many adjustments yet. 
However, because of new regulation, we have seen a number of 
new types of private financing occur. Different types of debt 
financing, convertible note financing, just different type of 
private markets to make it easier to raise capital in the 
financing markets without having to potentially provide all of 
the information at the level we are at. Providing a lot of this 
information and data, it is a lot of cost early on to a small 
business, a lot of legal fees that we cannot afford. And so, we 
have had to have, kind of, become smart and raised capital in 
different ways.
    Chairwoman VAN DUYNE. We have heard from business owners 
that geographic location is a major limiting factor when trying 
to access venture capital financing. Have you encountered this 
issue, and if so, what do you think can be done to expand these 
options outside of Silicon Valley?
    Mr. SHAH. Absolutely. I have faced these issues lots of 
times. I lived in the Midwest my whole life, and I love the 
Midwest. But it is very difficult to raise capital for software 
tech companies there compared to the coast, especially in 
Silicon Valley. We have, thankfully, successfully raised 
financing from Revolution Rise of the Rest here in D.C., and 
their entire mission is around making it more accessible for 
venture capital throughout the non-Silicon Valley, Boston, New 
York, sort of hotspots.
    One of the things that we can do is by making it--adding 
regulation that allows for more credits to occur or matching 
programs to occur between investors and entrepreneurs that are 
starting businesses. As I mentioned earlier and in my written 
testimony, it is very difficult for us to get traditional 
financing, whether it be SBA or via a traditional bank. And so, 
to offer alternatives to allow for that to be easier and risk 
to occur to start these small businesses, I think would be a 
long way forward in helping more cities gain exposure.
    Chairwoman VAN DUYNE. Excellent. Thank you very much. I now 
recognize Rep. Gluesenkamp Perez from Washington for five 
minutes.
    Ms. GLUESENKAMP PEREZ. Thank you, Chairwoman, and thank you 
to our witnesses for being here today. Professor Kress, we know 
that 40 percent of the nation's small business lending 
originates from community banks. These banks are an incredible 
asset for our communities. They know their customers 
inherently. They know the people around them. But I hear from 
the small community banks in my district that they can no 
longer compete given the competition from the big guys. You 
mentioned that these community banks, which we know serve our 
small businesses very well, have borne the brunt of banking 
consolidation trend. You also note that research from the 
Federal Reserve Bank in Philadelphia has documented that large 
acquiring banks divert small business lending from their target 
communities to the acquirers communities, leaving the target 
communities worse off. So, I wondered if you could talk about 
the impact of banking consolidation on our small businesses and 
what should be done to stave off these effects.
    Mr. KRESS. Absolutely. Thank you for the question. And I 
note that Ms. Kennedy Thompson mentioned in her testimony that 
she and her businesses have felt the effects of bank 
consolidation as well, because, as you noted, community banks 
tend to focus much more heavily on small business lending. They 
engage in what is known as relational lending because small 
community bankers know their communities. They know the 
businesses in those communities, they know the local business 
environment, and so they have the soft information that they 
are able to use to more accurately underwrite small business 
loans.
    I attribute a lot of the problem to bank consolidation and 
lax merger oversight; 7500 community banks disappeared due to 
mergers between 1984 and 2011. Those are 7500 community banks 
that are no longer able to provide small business loans to 
entrepreneurs in their areas. The White House issued an 
executive order on competition in 2021, urging the Department 
of Justice and the banking agencies to develop a plan to 
revitalize bank merger oversight. Progress on that front has 
been slow, but there are encouraging signs. I think Assistant 
Attorney General Kanter has outlined a framework for how he 
might think about promoting competition and focusing in 
particular on small business lending and protecting that as 
part of the bank merger oversight process. But maintaining a 
robust community bank system is absolutely critical to ensure 
small businesses access to credit.
    Ms. GLUESENKAMP PEREZ. Thank you. I am also interested in 
hearing directly from our small businesses about the options 
available to both of you. Ms. Kennedy Thompson and Mr. Shah, a 
question for both of you. You have chosen private equity, 
venture capital, and other private investment strategies over 
the course of your career rather than utilizing an SBA 
structured product. And I wondered, why did you choose a 
private investment over SBA's guaranteed loans? What barriers 
or difficulties did you see in working with the SBA?
    Mr. SHAH. Thank you for that question. For us, it was 
simple. We didn't have the collateral that the banks or the SBA 
required. You have to be either individually wealthy and 
provide those assets, or you have to have a business that has 
assets for it to work. And we didn't have either. And 
therefore, it wasn't an option for us.
    Ms. KENNEDY THOMPSON. And for us, it was the speed to 
market. How fast could we move? How fast could we take care of 
our franchisees, and how fast could we take care of our 
customers? And private equity, frankly, allowed us to move 
faster.
    Ms. GLUESENKAMP PEREZ. Hmm, okay. How can the SBA process 
be improved so more small business owners choose to utilize and 
view it as a viable option?
    Mr. SHAH. I think Ms. Thompson just said it as well, is 
speed for businesses. Small businesses do not have the time and 
the luxury to wait, you know, years to figure this out and go 
through a process of denial where private investors are giving 
you responses pretty immediate. Even if it is no, it is still 
pretty immediate. And I think that, again, we need to change 
the collateral requirements to be more in line with the new 
economy versus the old economy.
    Ms. KENNEDY THOMPSON. One of the reasons that speed is so 
important as a small business owner is you have to be able to 
pay yourself. There are three things you have to do. You have 
to pay yourself. Pay down debt. Put it back in the business. 
And if you cannot pay yourself, you are not going anywhere. And 
so, if it takes months and months, you end up having to go do 
something else.
    Ms. GLUESENKAMP PEREZ. Mm-hmm. Yeah, I bought a building. I 
own an auto repair shop with my husband, and we bought a 
building with a 504 loan. The only reason it worked was because 
the sellers, they were committed to seeing that property remain 
in the trades. And so, you know, God bless them for that. But 
that is so rare. And we shouldn't--we cannot let our small 
businesses be at the mercy of someone's good intentions. So, 
thank you both so much for being here. I yield back.
    Chairwoman VAN DUYNE. Thank you. I now recognize Rep. Bean 
from Florida for five minutes.
    Mr. BEAN. A very good morning, Madam Chair. And good 
morning, Small Business. To our witnesses, welcome. We are glad 
to have you here. How bad is it on a scale from 1 to 10, 10 
being atrocious, zero, not at all a problem, the regulatory 
environment? Madam Chair, in her brilliantly debated opening 
statement, really nailed it with the amount of the regulations 
that are, that she says strangling small business. Is she on, 
or is that just made up, all the regulations? So, give me--is 
it really bad, a scale from 1 to 10, how bad is it, new 
regulations on small business? Mr. Shah?
    Mr. SHAH. I think it is different for every type of small 
business. We work with a lot of independent restaurant owners, 
bars, breweries, and I think it is extremely bad for a lot of 
them.
    Mr. BEAN. You would say over what number?
    Mr. SHAH. Probably over seven.
    Mr. BEAN. Okay.
    Mr. SHAH. They are absolutely feeling it right now. For 
tech companies like ourselves, we also, I would say, are 
probably a little bit lower just because we have access to 
different financing options.
    Mr. BEAN. Yeah.
    Mr. SHAH. But in the last few years, as I have said in my 
testimony, that has also shrunk. The access to capital has 
shrunk. With interest rates being as high as they are, there is 
less capital being deployed in the private markets as well.
    Mr. BEAN. Seven.
    Mr. SHAH. And so----
    Mr. BEAN. Seven.
    Mr. SHAH.--that is affecting us a lot----
    Mr. BEAN. Ten-four.
    Mr. SHAH.--at the moment.
    Mr. BEAN. Ms. Thompson, what say you?
    Ms. KENNEDY THOMPSON. Well, I was thinking a seven.
    Mr. BEAN. Seven.
    Ms. KENNEDY THOMPSON. And I say the only reason it is not 
an eight is because we found other ways to work around it. 
Otherwise, it would be an eight-plus to a nine.
    Mr. BEAN. Ten-four.
    Ms. KENNEDY THOMPSON. We have got to find ways to get them 
to move faster.
    Mr. BEAN. Gotcha. Mr. Jeremy, what do you say?
    Mr. KRESS. I would just note from an access to capital 
standpoint, that from a data driven perspective, and with all 
due respect to colleagues who run small businesses, but Fed 
data show that the growth of bank loans to partnerships and 
proprietorships has been positive for every year from 2011 to 
2021, and it only dipped negative as a result of the pandemic.
    Mr. BEAN. What does that mean in a number? On our Bean 
scale from 1 to 10.
    Mr. KRESS. The Fed researchers characterize small business 
loan growth as robust.
    Mr. BEAN. Yeah.
    Mr. KRESS. So, looking at it solely through the lens----
    Mr. BEAN. Taking that number----
    Mr. KRESS.--of that data, I would put it below five.
    Mr. BEAN. Below five. All right. Ten-four. I will accept 
that answer. Why not just go to the bank? Mr. Shah, why can't 
you just go to the bank? There is a bank on every corner. Is a 
bank an option or not an option for capital?
    Mr. SHAH. For us, it is not an option because we don't have 
the traditional capital required. We don't have physical 
assets. Our assets are code written on a computer. They don't 
deem that as worth it in terms of loaning against it. Also, in 
our business, there is a lot of private companies that will 
loan against revenue or cash flow. But businesses 
traditionally, or banks traditionally, do not loan against 
that; they loan against collateral. So, for us, it is really 
never been an option.
    Mr. BEAN. Ten-four. Now, Ms. Thompson, you are in the 
franchise. I see a hater behind you. You are in the franchise 
world.
    Ms. KENNEDY THOMPSON. I am.
    Mr. BEAN. Why can't you go to a bank? Is it, Mr. Shah on 
that?
    Ms. KENNEDY THOMPSON. No. Sometimes we do go to a bank. 
Sometimes, especially when they are beginning out. What 
happens, though, is with the mega mergers, those relationships 
that the local community that we just talked about earlier, 
they are just not there anymore. And so, they do not go because 
they do not know where to go and they do not know who to talk 
to.
    Mr. BEAN. Mm-hmm.
    Ms. KENNEDY THOMPSON. And they have to find a way to have a 
relationship with somebody that will help them build their 
business. And the megabanks, they are not looking at how your 
profitability and how you are growing. They are just looking 
at, are you paying the loan down? Whereas private equity, it 
matters to them where your profitability is because they are 
not going to be able to exit without a strong profitability. 
So, there is high alignment.
    Mr. BEAN. Gotcha. Is it much more expensive, private 
equity, Mr. Shah, would you say, is it much more expensive or 
you just need the capital? We got to go. You got a great idea, 
you are ready to go. And I sense that time is money to you. Is 
that correct?
    Mr. SHAH. Yeah, but I don't think it is actually more 
expensive because there is a lot of things, if you choose the 
right partners in the private equity world, they can actually 
accelerate your business. Banks, for the most part, aren't 
going to provide you with advice, expertise, access to other 
capital, connections in your industry to grow your business. 
They are just going to provide you the capital, typically.
    Mr. BEAN. So it is kind of like Shark Tank. You get 
somebody that is going to be there and they are going to 
hopefully work with you.
    Mr. SHAH. Exactly. They understand us. A lot of them are 
former founders. They get that we are going to go through ups 
and downs, and they are going to be there for us the entire 
way. Again, you have to find the right partners, but those 
partners exist.
    Mr. BEAN. Gotcha. Ms. Thompson?
    Ms. KENNEDY THOMPSON. Mr. Shah said something earlier about 
how you can also help your employees. What I like about private 
equity is every single time they have helped us help our 
employees as well. When we exit, they exit with a strong exit, 
too. So, we actually get to transform lives.
    Mr. BEAN. Ten-four. No, I appreciate that. As a small 
business owner, formally, it is hard enough when in a perfect 
environment, let alone when the government continues to put new 
and harder regulations. So, thank you for being here today. 
Madam Chair, I yield back.
    Chairwoman VAN DUYNE. Thank you. I now recognize 
Representative Alford from Missouri for five minutes.
    Mr. ALFORD. Thank you, Chairwoman Van Duyne, good to see 
you. Thank you all for being here on your own time and own 
dime, as I like to say. It is a great investment in Main Street 
America for you to be here. Small businesses are the fabric of 
America, and I am proud to be a part of this committee where we 
are trying to make sure that people have the capital and the 
resources needed to not only start new businesses, but to 
maintain them in America.
    As you well know, today, businesses are already struggling 
under rampant inflation, ongoing supply chain issues, workforce 
shortages, burdensome regulations. On top of these issues, the 
Biden administration is pursuing antigrowth policies such as 
Basel III, further shrinking access to capital. President Biden 
also vetoed partisan legislation that would undo the CFPB's 
Section 1071 reporting requirements that would further burden 
small businesses' ability to access capital. With the shrinking 
availability of capital from the banking industry, small 
businesses have turned to alternative sources of capital, such 
as private equity. Private equity is an essential tool for 
small businesses looking to access capital and actually grow. 
In our district alone, there was $1.4 billion of private credit 
investment in 2022.
    Unfortunately, the Biden administration cannot abide any 
pathway for main street to grow and has released a new merger 
guidelines through the FTC and DOJ that curtails private 
equity's ability to invest. By the FTC's own estimate, the new 
merger guidelines would lengthen the process for filing by 300 
percent. I feel that is unacceptable.
    Over the next decade, compliance with President Biden's 
regulations will cost Americans more than $1.5 trillion. Let 
that sink in. Ms. Kennedy Thompson, thank you for being here 
today, and I like your pink.
    Ms. KENNEDY THOMPSON. Thank you.
    Mr. ALFORD. Can you please speak about how securing capital 
from private equity impacted your business?
    Ms. KENNEDY THOMPSON. Certainly, I would be most happy to. 
There is many levels that has impacted us so from the 
franchisor side. We are in our fifth hold period with private 
equity. When I came into the company, we were doing 400 million 
with six brands. Today we are doing 4.1 billion with 30 brands. 
And it is a testament to the private equity investment that our 
PE sponsors have made with us and helped us. And along the way, 
as we have grown, we have been able to grow our franchisees as 
well because we have had the right resources at the right time 
to bring in the right talent to be able to have the right 
access to capital, so we could buy some of those companies to 
be able to provide our customer the right and best experience.
    And then to our franchisees, we have many that are ready to 
grow, and they are finding access to capital quite difficult. 
And the smaller PE companies are coming in and being thought 
partners to them. Introducing them to the right partners, and 
to the right suppliers, and helping them grow their businesses 
as well.
    Mr. ALFORD. Very quickly, where would you be today if it 
weren't for those investments?
    Ms. KENNEDY THOMPSON. That is a great question. I certainly 
don't think we would have 30 brands doing 1 billion. I don't. I 
was there at the early days, and we are a completely different 
company with really great resources at our fingertips. And what 
is most important is it is helping us grow our franchisees.
    Mr. ALFORD. Mr. Shah, in your remarks, you spoke about how 
SBA loans are a key avenue for many businesses to access 
capital. However, you noted that the majority of these loans 
require some form of physical asset to secure. How can the SBA 
better support small businesses in the tech space, such as your 
own?
    Mr. SHAH. That is a great question. I think something needs 
to change on that side. What they can do is, I think they can 
use the private markets to understand collateral. So, for 
example, if you do receive private equity, the SBA can come in 
and provide additional capital on top of the private capital to 
further grow that business. There are also ways that we can 
look at collateral differently today than what historically has 
happened. You can use revenue growth or traction or other 
metrics that are not physical assets in the eyes of what I 
would say is a traditional physical asset. So, I think a lot of 
those avenues need to change as well.
    So, I would say the biggest part for us is the private 
markets, and allowing us to use the private markets to help 
with the SBA loans.
    Mr. ALFORD. Thank you so much. Thank you again to our 
witnesses, and with that, I yield back, Madam Chairman.
    Chairwoman VAN DUYNE. Thank you very much. I would also 
like to thank our witnesses for your testimony and for 
appearing before us today. Without objection. Members have five 
legislative days to submit additional materials and written 
questions for the witnesses to Chair, which will be forwarded 
to the witnesses. I ask the witnesses to please respond 
promptly. If there is no further business, without further 
objection, the committee is adjourned.
    [Whereupon, at 11:01 a.m., the subcommittee was adjourned.] 
    
    
    
    
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