[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
DRIVING ECONOMIC GROWTH: SBA LENDING
PROGRAMS AND THE VITAL ROLE OF
COMMUNITY BANKS
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
FEBRUARY 12, 2025
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 119-002
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
58-899 WASHINGTON : 2025
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HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
JAKE ELLZEY, Texas
MARK ALFORD, Missouri
NICK LALOTA, New York
BRAD FINSTAD, Minnesota
TONY WIED, Wisconsin
ROB BRESNAHAN, Pennsylvania
BRIAN JACK, Georgia
TROY DOWNING, Montana
KIMBERLYN KING-HINDS, Northern Marina Islands
DEREK SCHMIDT, Kansas
NYDIA VELAZQUEZ, New York, Ranking Member
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
LAMONICA MCIVER, New Jersey
GIL CISNEROS, California
KELLY MORRISON, Minnesota
GEORGE LATIMER, New York
DEREK TRAN, California
LATEEFAH SIMON, California
JOHNNY OLSZEWSKI, Maryland
HERB CONWAY, New Jersey
MAGGIE GOODLANDER, New Hampshire
Lauren Holmes, 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............................................. 2
WITNESSES
Mr. Justin B. Hooper, Chief Executive Officer and Chairman, First
Financial Bank, Weatherford, TX................................ 4
Mr. Michael Sims, Chief Commercial Banking Officer, Georgia's Own
Credit Union, Alpharetta, GA................................... 6
Mr. Frank Wetegrove, Owner and Operator, Camp Bow Wow, San
Antonio, TX.................................................... 7
Ms. Heidi DeArment, President, Montana Community Development Corp
dba MoFi, Missoula, MT......................................... 9
APPENDIX
Prepared Statements:
Mr. Justin B. Hooper, Chief Executive Officer and Chairman,
First Financial Bank, Weatherford, TX...................... 41
Mr. Michael Sims, Chief Commercial Banking Officer, Georgia's
Own Credit Union, Alpharetta, GA........................... 48
Mr. Frank Wetegrove, Owner and Operator, Camp Bow Wow, San
Antonio, TX................................................ 59
Ms. Heidi DeArment, President, Montana Community Development
Corp dba MoFi, Missoula, MT................................ 66
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Defense Credit Union Council (DCUC).......................... 74
National Association of Development Companies (NADCO)........ 83
National Association of Government Guaranteed Lenders (NAGGL) 77
Small Business Investor Alliance (SBIA)...................... 81
DRIVING ECONOMIC GROWTH: SBA LENDING PROGRAMS AND THE VITAL ROLE OF
COMMUNITY BANKS
----------
WEDNESDAY, FEBRUARY 12, 2025
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:04 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams
[chairman of the Committee] presiding.
Present: Representatives Williams, Stauber, Meuser, Alford,
LaLota, Finstad, Bresnahan, Jack, Downing, King-Hinds,
Velazquez, McGarvey, Scholten, McIver, Cisneros, Latimer, Tran,
Simon, Olszewski, Conaway, and Goodlander.
Chairman WILLIAMS. Good morning to everybody. And I now
call the Committee on Small Business to order. Without
objection the Chair is authorized to declare the recess of the
committee at any time. I now recognize myself for my opening
statement.
Welcome to today's hearing, Driving Economic Growth, SBA
Lending Programs, and the Vital Role of Community Banks.
I want to thank our witnesses again for being here today
and we, our witness is going to be Zoom I believe and so she is
trying, we are trying to get her on there.
I want to know that we also know many of you have traveled
along to, a long way to share your experience and perspectives,
and we deeply value your time, and we deeply value your voice.
Now I strongly believe that starting a small business
captures the true meaning of the American Dream. Part of what
makes America so great is that anyone from any background can
go out on a limb with a dream or an idea to provide a new
service or product to the marketplace.
Our economy is dependent on small businesses, as they are
our nation's largest job creators. It is our job here in
Washington to be main street's biggest advocate and ensure they
have the tools to succeed. In today's hearing, we will be
exploring the triumphs and challenges of small businesses and
the community lenders that provide this support.
Under the Biden Administration, Main Street America endured
stifling regulations, record inflation, and high interest rates
that hindered the ability of small employers to hire workers,
increase wages, and reinvest back into their businesses to spur
growth.
Thanks to the return of President Trump, a wave of pro-
business optimism swept over the small business community. This
new administration has committed to not only cutting
regulations across the board for small businesses and community
banks alike but also reducing taxes and preserving the Tax Cuts
and Jobs Act.
Failing to renew the small business provisions of the 2017
Tax Cuts and Jobs Act would impact all small employers in every
corner and limit their ability to stay competitive and preserve
countless community jobs.
Throughout this Congress and alongside the Trump
Administration, we will once again prioritize policies that
support Main Street America by creating an environment where
small businesses can thrive, and the full potential of
community banks can be unleashed.
Finally, due to travel and weather delays the witness that
we said Democrats have invited to the table is unable to attend
in person today. We have received permission from Leader
Scalise to allow her to appear remotely. And I ask unanimous
consent for the letters between letters, Leader Scalise and I
noting that this exception be entered into the record. So
moved. So without objection as so ordered.
So with that I will yield to my distinguished Ranking
Member from New York, Ms. Velazquez.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. I want to thank you
and your team for working with us on utilizing remote authority
to enable our witness to testify today due to weather-related
flight cancellations.
Small businesses fuel the American economy. They account
for more than 40 percent of U.S. GDP, create approximately two-
thirds of new jobs, and employ nearly half of all private
sector workers. Yet, entrepreneurs and small businesses
consistently tell me that access to capital and investment
remains a pressing priority.
The SBA operates multiple capital access and investment
programs to ensure entrepreneurs and small businesses have
access to the financing and investment they need to grow and
scale their operations. These programs are essential to small
employers and entrepreneurs, especially those in our rural and
underrepresented communities as they struggle to obtain
conventional loans and investment from a financial institution
or private fund.
The SBA's largest program, the 7(a) program, encourages SBA
authorized lending partners to provide loans by guaranteeing a
significant portion of the loan-encouraging lenders to extend
credit to small businesses that might not typically be able to
obtain financing. 7(a) loans strengthen local communities,
create jobs, and move our economy forward. In fiscal year 2024,
the 7(a) program supported a substantial volume of lending
nationally with over $31.1 billion across more than 70,000
loans. A variation of the 7(a) program is the Community
Advantage Program delivered by mission focused lenders. The
Community Advantage Program facilitates smaller 7(a) loans to
small businesses and new businesses located in an underserved
community. I am particularly excited to hear from one of our
witnesses this morning about how the Community Advantage
Program is being utilized in our rural communities. Another
program, the 504 CDC loan guaranteed program, which is
administered through nonprofit CDCs, provides long term fixed
rate financing for major assets such as land, buildings, and
equipment. Last year the 504-program delivered almost $6,000
valued at more than $6.6 billion. I look forward to discussing
how we can better utilize and improve all of these programs.
The SBA programs are worth protecting, especially lending
programs which have proven effective and efficient in how they
operate while building up main street in our communities. I
will call on the SBA to work with us to strengthen those
programs. Thank you, I yield back.
Chairman WILLIAMS. The lady yields back, and I now will
introduce our witnesses. The first witness here with us today
is Mr. Justin Hooper. Mr. Hooper is the CEO and Chairman of
Cross Timbers Region of the First Financial Bank located in
Weatherford, Texas. Mr. Hooper has more than 30 years of
banking experience and began his career as a loan officer and a
review analysis in Abilene, Texas in 1997. Mr. Hooper moved to
Weatherford as a commercial leader in 2004 and was named
executive vice president and senior lender for the Weatherford
region in 2012. He was promoted to president of the region in
2017. Mr. Hooper serves a Board Member for the Weatherford
College Foundation and Trinity Christian Academy, and as a
board president for the court appointed special advocates for
children in Parker County. Mr. Hooper holds a bachelor of
business administration and finance from McMurry University and
attended the graduate school of banking at Louisiana State
University. I want to thank you, Mr. Hooper for being here with
us today and look forward to our conversation.
Our next witness here with us today is Michael Sims. Mr.
Sims is the chief commercial banking officer of Georgia's Own
Credit Union located in Atlanta, Georgia. Mr. Sims has well
over two decades of experience in the banking industry serving
as an executive vice president for Vinings Bank, and State Bank
and Trust Company and SunTrust Bank. He is skilled in portfolio
management, risk management, commercial lending, banking, and
credit analysis. Mr. Sims serves as a Board Member for the
Waypoint Ministry, as well as a Committee Member for Promise
686, an organization that mobilizes church communities to care
for vulnerable children. Mr. Sims earned a master of business
administration at the Brock School of Business at Sanford
University. He also holds a bachelor of science and finance
from the University of Alabama and a bachelor of science
account from the University of Alabama at Birmingham. I want to
thank you for joining us today and I am looking forward to the
important conversation ahead.
Our next witness here with us today is Mr. Frank Wetegrove.
Mr. Wetegrove is an owner and operator of the Premier Dog Care
Service, Camp Bow Wow. Mr. Wetegrove and his wife, Tamara own
five Camp Bow Wow franchises from Austin to San Antonio, Texas.
Mr. Wetegrove is a former senior intelligence officer with over
30 years of experience for the United States Army. He has
assisted with numerous programs during his interview, during
his service including the command critical survivability
program for the renovation of the Pentagon and the Air Force
Intelligence, Surveillance, and Reconnaissance agency as an IT
specialist. Mr. Wetegrove also has worked as a network engineer
at the San Antonio water system, a client services engineer at
Lumeta Corporation and an enterprise security engineer for
information assurance at MacAulay-Brown, Inc. Mr. Wetegrove is
a graduate of TMI Episcopal, formerly the Texas Military
Institute in San Antonio, Texas. I want to thank you for your
years of service and joining us today and I am looking forward
to the important conversation ahead. And I now recognize the
Ranking Member from New York, Ms. Velazquez to briefly
introduce our next witness appearing before us today.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. I would like to
recognize Ms. Heidi DeArment who has been with Montana Finance
for over 17 years. She is an experienced small business lender
and community development professional. MoFi is committed to
helping businesses launch and create jobs in rural communities.
I recognize and respect her for the work with businesses,
communities and community banks throughout Montana, Idaho,
Wyoming, and Utah. Thank you, Ms. DeArment. It is a pleasure to
have you here.
Chairman WILLIAMS. Okay. Thanks again for all of you being
here and before recognizing the witnesses I would like to
remind them that their oral testimony is restricted to 5
minutes in length. If you see the light turn red in front of
you it means your 5 minutes is up. You are done and conclude as
you quickly can and wrap it up. I also want to say that you
will periodically see Members of this committee leaving, coming
back, going back and forth. We all have other committees that
we are involved in so if the Ranking Member gets up and leaves
or I get up and leave we are not mad at anybody. We will be
back. Okay? All right. So with that now I would like to
recognize Mr. Hooper for his 5 minute of opening remarks.
STATEMENTS OF JUSTIN B. HOOPER, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN, FIRST FINANCIAL BANK; MICHAEL SIMS, CHIEF COMMERCIAL
BANKING OFFICER, GEORGIA'S OWN CREDIT UNION; FRANK WETEGROVE,
OWNER AND OPERATOR, CAMP BOW WOW; HEIDI DEARMENT, PRESIDENT,
MONTANA COMMUNITY DEVELOPMENT CORP DBA MOFI
STATEMENT OF JUSTIN B. HOOPER, CEO AND CHAIRMAN, CROSS TIMBERS
REGION OF FIRST FINANCIAL BANK
Mr. HOOPER. Thank you, Mr. Chairman.
Chairman Williams, Ranking Member Velazquez, and Committee
Members, my name is Justin Hooper. I currently serve as the CEO
and Chairman for the Cross Timbers Region of First Financial
Bank comprised of 14 branches in the Fort Worth area and
further to the west. In total, First Financial, which was
founded in 1890 in Abilene, Texas has total assets of just
under $14 billion. Many of our locations are in rural areas
just outside, or outside larger metropolitan areas of the
state. As community bankers, our customers rely on the bank for
working capital, equipment purchases, or potentially a mortgage
or construction loan. Before turning to the broader small
business lending market, I am pleased to say that during the
COVID pandemic our bank participated in the PPP program in the
form of almost 10,000 loans with total originations of $1.1
billion. While difficult to navigate at times the program was
very successful and allowed us to support the businesses in our
community at a time in which there was much uncertainty. First
Financial Bank, like many lenders enjoys a preferred lender
status with SBA. This is likewise a very positive federal
program but over the years we have found that due to the
complexities of navigating all of the standard operating
procedures with the SBA programs that it was necessary to form
a specialized department in Abilene to manage our SBA loans.
Nonetheless in 2024 we originated 4 million of SBA's 7(a)
general purpose loans and 40 million of 504 SBA loans which
provide long-term, fixed rate financing for major fixed assets.
Even though we have preclearance being on the preferred lender
list, the typical turn around time on SBA loans within our
department ranges from 45 to 75 days. Of course we make many
loans to large and small businesses that are not associated
with any SBA programs. This typically allows for much quicker
processing and in many case loans that can be closed in days or
weeks rather than months. It also allows for greater
flexibility in our product offerings that we can tailor to the
customer's needs. In 2024, the bank originated $294 million in
commercial real estate loans, $376 million in loans to schools,
municipalities, and other taxing entities and just over $825
million in commercial and agricultural loans.
The biggest problem for community banks is the increased
regulatory burdens to keep pace with new and ever-changing
regulations. Since 2021 our personnel costs in this area have
doubled and we anticipate that they will continue to rise. That
number sits at a staggering estimated $7.1 million per year. In
addition to the personnel to support our audit and compliance
function we also incur legal, technology and outside audit
expenses which are estimated to be another $3.8 million. This
brings our total annual cost to manage an ever-growing
compliance burden to an estimated $11 million annually, not
counting the massive amount of time invested by bank personnel
such as loan officers who are not categorized as compliance
staff. 2025 will bring additional regulatory burdens. Most
notably would be those associated with the implementation of
the CFPB, small business data collection rule, Section 1071
from personnel cost, training costs and software enhancements
necessary to achieve compliance we are estimating annual cost
of $2.1 million for 1071 alone. We appreciate your leadership
on that issue, Mr. Chairman to see that that regulation going
back on judicial hold. Additionally with the rise of internet
reliance and other technology-oriented developments we are
continuing to see rising fraud losses. In 2024 we incurred
debit card losses due to fraudulent activity of $1.5 million,
check fraud losses of $735,000 which were typically forgeries
and counterfeits. To combat this we incurred personnel cost of
$2.6 million annually as well as $3.3 million annually in
software and technology expenses. The personnel and technology
expenses are necessary and have resulted in the bank stopping
additional fraud that would be far in excess of the expense we
actually incurred. Therefore between the actual fraud
perpetrated and the cost to combat this it comes with a price
tag of estimated $8.3 million annually. There's not doubt that
the rapid increase in interest rates in 2023 has resulted in
much higher borrowing costs for our customers that is lingering
into 2025 despite a few rate cuts over the last year. This
strain coupled with inflationary pressure that is driving up
labor costs and other items for businesses is causing some to
see cashflow diminish. In conclusion we are fortunate to live
in a portion of the state that's welcoming new residents every
day and there is a lot of optimism in the area in which we live
and many of our customers are contemplating new projects and
new opportunities. Thank you.
Chairman WILLIAMS. Thank you. Great timing and now I
recognize Mr. Sims for his 5 minute opening remarks.
STATEMENT OF MIKE SIMS, CHIEF COMMERCIAL BANKING OFFICER,
GEORGIA'S OWN CREDIT UNION ON BEHALF OF AMERICA'S CREDIT UNIONS
Mr. SIMS. Good morning, Mr. Chairman, and thank you very
much, Ranking Member Velazquez and Members of the Committee. My
name is Mike Sims, and I am testifying today on behalf of
America's Credit Unions. I currently
serve as the chief commercial banking officer at Georgia's
Own Credit Union headquartered in Atlanta, Georgia. Georgia's
Own is a community credit union serving over 240,000 Members
across Georgia with $4.3 billion in assets. At Georgia's Own we
pride ourselves on small, being a small business lender. We
currently have over $571 million outstanding member business
loans including both SBA 7(a) and SBA 504 program. In 2024,
Georgia's Own was the number 1 ranked credit union in terms of
7(a) loan production in the State of Georgia. We currently have
153 7(a) loans outstanding totally about $153 million. We also
make SBA 504 loans and currently have 5 loans outstanding
totally over $17 million. Like many community lenders we saw a
dip in interest in member business loans and over 2023 and 2024
as inflationary concerns caused many small businesses to pull
back on capital access. However we have seen a noticeable
uptick in interest and applications in the three months since
the election and expect 2025 to be a stronger year. The MBL and
SBA loan options at our credit union allow us to work with our
small businesses, small business members to get them into a
product that meets their needs. A great example of this is the
work that we did with Radiant Solar, a woman-owned small
business specializing in solar powered development and
construction, also headquartered in Atlanta, Georgia. We were
able to provide the owners with a $5 million SBA 7(a) cap line
to fund their working capital needs and have helped them earn
recognition as one of the nation's top producers in the solar
industry and we are currently working with them on a potential
SBA 504 loan to help meet their needs. One of the most pressing
challenges facing credit unions is the complexity of the SBA
program requirements. While credit unions are eager to grow
their SBA loan portfolios, many report the administrative
burden make it extremely difficult to do so. Lack of internal
expertise and high cost associated with participation also
remains a significant barrier. Even our very experienced SBA
lending staff at Georgia's Own, we see these challenges as
well. We may hear the right messages from SBA leadership about
their desire to help community lenders and small businesses but
many times it does not always translate to the field. Our day-
to-day experience in contacting the SBA with questions about
loans can often be cumbersome and frustrating. It is common for
answers to take questions, questions to take days or weeks or
for us to experience delays while the SBA works to verify
information about our borrowers. As a preferred lender under
the SBA's delegated authority we believe we should be given
greater leeway to operate so we can get capital to our small
business members. We also believe that the SBA should provide
more targeted training and technical assistance to community
lenders and credit unions have expressed a strong interest in
working with the SBA to enhance their operational capabilities
in this space. Regular webinars, workshops, and on demand
training resources could address gaps in expertise and empower
more credit unions to participate in the SBA's lending
programs. We also would encourage the SBA to better use
regional office to engage existing program lenders and
potential new lenders as well. Having the regional SBA offices
more fully engaged in the day-to-day operational issues faced
by lenders will ultimately help streamline inefficiencies and
enable quicker access to capital for the small business members
that we serve. Without a full engaged SBA regional offices,
lenders are left to themselves to navigate a very challenging
and often complex SBA process. Finally we would encourage
congress to continue to review recent regulatory efforts that
hinder small businesses, small business lending from community
institutions. We are also concerned about the efforts to bring
more fintech into the SBA lending space which we believe would
create more risk int eh system. Additionally, the overly broad
1071 rule from the CFPB stands to greatly increase burden on
community lenders and we applaud the efforts of Chairman
Williams to repeal this rulemaking. In conclusion, small
businesses are the driving force of our economy, and the key to
its success. It's important that congress and the SBA ensure
that credit unions have the right regulatory environment to
meet the needs of their small business members. I thank you for
your time and the chance to testify before you today and
welcome any questions.
Chairman WILLIAMS. Thank you. I now recognize Mr. Wetegrove
for his 5 minute opening remarks.
STATEMENT OF FRANK WETEGROVE, OWNER AND OPERATOR, CAMP BOW WOW
ON BEHALF OF INTERNATIONAL FRANCHISE ASSOCIATION
Mr. WETEGROVE. Good morning, Chairman Williams, Ranking
Member Velazquez, and distinguished Members of the Committee.
My name is Frank Wetegrove, and I am a franchise owner of Camp
Bow Wow, a dog care services company that my wife and I became
franchisees of 18 years ago and have since grown our operation
to include four locations in San Antonio, Texas, and another in
Austin. At Camp Bow Wow, we offer everything from dog daycare,
boarding to grooming, and training within the communities that
we operate. Our team consists of roughly 100 employees. I'm
also happy to share that we plan on opening of a 6th location
within our Texas footprint.
It's an honor to be here today to give my perspective on
the impact that the U.S. Small Business Administration's loan
programs have on small businesses especially franchisors,
franchisees, and their employees. Its impact to me is near as I
utilized SBA's 7(a) loan program when I decided
to become a franchise owner in 2007. As a retired colonel
with 34 years of service in the Army Reserve along with 8 years
in active duty, I'd like to say my skillset came in handy when
considering starting a franchise, and SBA's 7(a) loan program
was the access to capital that gave me the opportunity to put
it to good use.
Throughout my military career I held leadership positions
at every level, including Platoon Leader, Officer in-Charge,
Commander of Detachments, Companies, a Battalion, and a Group.
More importantly, I became a husband, a father of five, and now
a proud grandfather of four. As you can see sitting still is
not in my nature nor the word, retirement in my vernacular.
In 2005, about 20 years into my Army mostly Reserve career,
I was mobilized to work at the Defense Intelligence Agency.
During my first summer in Washington, my wife and I discussed
the possibility of our family spending a month there with me.
However, one major challenge arose, what would we do with our
dog? He couldn't join us in our temporary living arrangements
and around that time my wife suggested I log into AOL, and of
course I'm dating myself, to explore a business opportunity
she'd come across. That business was Camp Bow Wow, a franchise
that emphasized in doggy day care, something I'd never heard
about, but I was immediately intrigued. This opportunity became
a true family affair. Since I was still advancing in my career
my wife took on the brunt of running the business. I
contributed after hours, on weekend, during the holidays and
this was all while we were raising our toddlers which came to
Camp Bow Wow every single day. Ultimately I knew this endeavor
would teach my family the difference between working for
someone and working for one's self. I believe 100 percent in
giving back. I have been awarded franchisee of the year several
times. I speak to many of my peers daily. Every chance I get I
speak to people in general. I explain to them about my success
story, the conversation starts with getting to know them, the
possibility of owning their own business and future and remind
them of great opportunities that this country provides us
including the government assistant programs available. None of
this would have been possible without the support of the
federal government's SBA program. The SBA's assistance was
instrumental in getting my business off the ground. I know for
a fact that many of my fellow franchisees and countless other
small businesses would not exist without these critical funding
programs. The SBA and access to capital and its' lending
programs provided an essential part of the instrument--part of
the franchise success story. In the fiscal year 2024, the SBA
guaranteed $31.1 billion dollars in 7(a) loan volume, $6.7
billion in 504 loan volume. Historically franchises have
represented about 20 percent of the SBA's loans by dollar
volume. Finally I'd like to highlight a regulatory issue that
has the potential to not only strengthen the franchise business
model but also supplement SBA lending practices to further
support franchise business performance for the years to come.
That is to permanently extend the 2020 NLRB's joint employer
rule, recognizing the harm this would bring, both the House and
Senate voted to overturn the joint employer rule on a
bipartisan basis in early 2024 using the Congressional Review
Act, which I and other Members of the IFA commend. In March of
2024, a U.S. District judge struck down the 2023 NLRB rule and
the joint employer standard reverted to 2020 rule. While a
reprieve from the previous NLRB's joint employer rule has been
welcome news, I wanted to stress the importance of the current
common sense standard and federal law, labor law has on
franchisees like mine and state that any actions toward
permanently preserving the current NLRB rule would only protect
both businesses and workers but also create the regulatory
conditions that allow both franchisors and franchisees to
thrive, grow, and create jobs and opportunities in the
community that they serve. Mr. Chairman and distinguished
Members of the committee, thank you again for the opportunity
to testify and I'm happy to answer any easy questions you might
have.
Chairman WILLIAMS. Dogs or Pentagon, much harder. Thank you
very much.
Mr. WETEGROVE. Thank you. Now Ms. DeArment, is she
available?
Ms. DEARMENT. Can you hear me? I am here.
Chairman WILLIAMS. Okay. Great. Well, all right. We will
now recognize Ms. DeArment for her 5 minute opening remarks?
There she is.
STATEMENT OF HEIDI DEARMENT, PRESIDENT, MONTANA COMMUNITY
DEVELOPMENT CORP DBA MOFI
Ms. DEARMENT. Chairman Williams, Ranking Member Velazquez,
and Committee Members, thank you for having me here today and
thank you for accommodating the travel problems. My name is
Heidi DeArment. I'm the President of MoFi. We're a
nonprofit, rural, CDFI that provides small business loans
and free advisory services to people in Montana, Idaho, Utah,
Wyoming, Oregon, Washington.
MoFi partners with 126 bank and credit union systems across
that six-state region that refer thousands of their loan
denials to us annually. Between all of those denials and our
Board Members who are commercial lenders we know a lot about
who banks aren't funding today. And that's where we come in. We
provide loans to entrepreneurs and businesses that don't
qualify for financing at a bank or credit union. Last year MoFi
lent $40 million to successful applicants all of whom had been
denied. This is a less profitable venture than banking, but it
works. The businesses we fund build assets, they build track
record, and they ultimately go back to the bank that referred
them to us. MoFi has done this successfully for decades and we
maintain a loss rate of less than, of 1 percent over the last
ten years. That 1 percent I think tells us that these loans
aren't risker. They're just simply harder and longer to
underwrite so they are less desirable for a profit motivated
back or a credit union. To do this work we rely on two
essential SBA programs, the microloan program, and the
Community Advantage Guarantee program. I thought it might be
easier to explain how we use these programs using one of the
businesses from my home town, Missoula, Montana. The businesses
called Betty's Devine and it's a women's clothing store
downtown. When the owner came to she was working in retail and
people were coming in, asking for clothing that they didn't
sell and that you couldn't buy in Missoula, which I think is
the perfect start to a business, seeing an opportunity and then
figuring out how to build a business around that. She wrote a
business plan, she contacted a bunch of vendors, she found a
lease space, she built great financial projections that made
sense she took that all into her back and they said, you don't
have any assets, you don't have any collateral, you don't have
outside income, you don't have business history. She was
denied. She did qualify for an SBA microloan through us and
like most of ours she became successful and then her back
refinanced her. A few later her banker came back to us and said
that business is doing really well and now she wants to buy a
bigger space, her own building but she doesn't have the down
payment, would you do a partnership loan with us where the bank
does 70 year or 75 percent, and we will fill in the gap. We do
about 40 percent of our loans annually as a partnership with
banks or credit unions. She was able to buy the building and
today she is still there. That's 20 years later. She's a huge
success. She's a household name. She's a bit of community force
where we live and she's just one of many thousands of SBA
microloans that have been funded across the country over the
past 20 years that create jobs, revitalize our main streets,
and fuel our economies. The Community Advantage program is just
as important to us. MoFi uses the CA guarantee for clients who
have been denied bank financing, need up to $350,000 and they
are usually start ups. We like using them on startups because
the CA program is an amazing onramp to bankability. If you can
show as a small business owner, a new business owner that
you've been able to make your payments on a CA loan, your
banker sees a future 7(a) client. These are also not risky
loans. Since the start of the program in 2011, our losses have
been, I think this is right, .065 of a percent. I heard the
other witnesses talk about the challenges with some of the SBA
programs and how long they take. That's not the case with CA.
It's a fast, efficient program that allows us to get capital to
borrowers very quickly. Today the U.S. financial system
operates on two tiers, one for those with established wealth
and one for those still building towards that future success.
We need these SBA programs for entire generation of low wealth
entrepreneurs who are going to be successful tomorrow,
especially in the rural areas we serve. Thank you for your time
and for supporting the SBA tools.
Chairman WILLIAMS. Thank you very much. And we will now
move to the Member questions under the 5 minute rule. I
recognize myself for 5 minutes.
Mr. Hooper, community banks are an essential resource for
small businesses providing a large shares of small business
capital and offering a more tailored approach to small business
lending than larger financial institutions. Unfortunately, the
Biden administration added $1.7 trillion dollars in regulatory
costs, disproportionally impacting small business and small
lenders. So my question is, how has the increased regulatory
burden impacted your ability to lend to small business?
Mr. HOOPER. Thank you for that question. You know I think
probably the simplest answer is to say that due to ever
increasing budgets that we have for audit and compliance, as I
mentioned that's almost $11 million is what we're estimating
for this next year, it takes away from our ability to reinvest
in new loan programs, effectively market those to our customers
and roll out new programs that would benefit our clients.
Additionally, other regulatory issues such as like the Durbin
Amendment that reduced some of our debit card interchange
income also takes away from our ability to offer low cost or
free business deposit service to our customers in many cases.
You know, from a very basic perspective the more time that we
have to spend on compliance and regulatory oversight just takes
away from our time that we can spend with our customers and in
tailoring products to their needs.
Chairman WILLIAMS. Under the Biden administration the SBA's
flag ship 7(a) loan program was altered with rule changes that
stripped away prudent lending standards that had preserved a
programmatic integrity for decades. While many of these changes
were said to simplify the 7(a) lending program, they are
instead confusing the lending community and impacting the
services that community lenders provide to borrowers. So in
your testimony you described that credit unions have expressed
a strong interest in working with the SBA to enhance their
operational capabilities in the SBA lending space but that
there is a great deal to be desired in that area. So
opportunities do you see for the SBA to better work with credit
unions?
Mr. HOOPER. Thank you for the question, Mr. Williams,
Chairman Williams. I think immediate area where we can focus
our concentration on with the SBA is through their regional
district offices. If we have them as a resource to help us
navigate the processes, policies, and procedures that are ever
changing inside the SOP it will help us to deliver more
efficiently and more effectively to the small businesses that
we serve in our communities. The program itself, the loan
program, the 7(a) and the 504, the structures that those
programs allow are very good and very flexible. It's the
process and the procedures and the policies and the regulation
that has dampened the effectiveness of those really good
programs in getting into the hands of the business community
that needs them.
Chairman WILLIAMS. With portions of the Tax Cuts and Jobs
Act set to to expire, you are aware, small businesses across
America are concerned that their taxes will go up. If you were
able to keep more of your cash on hand and not pay it to the
government how would you use that money?
Mr. WETEGROVE. I would definitely use it for improvements
to my business, I would also like to, you know, pay my
employees a little bit better. I think that I can only bring
home so much money these days and I would love to pass that on
to my employees and provide, you know, enriching lives to dogs
to be honest.
Chairman WILLIAMS. In other words the money can be used
better by you than by the federal government?
Mr. HOOPER. Yes, sir.
Chairman WILLIAMS. You can create more taxpayers with it?
Mr. HOOPER. Yes, sir.
Chairman WILLIAMS. Okay. I now recognize the Ranking Member
for 5 minutes of questions.
Ms. VELAZQUEZ. Good morning, and thank you, Mr. Chairman. I
have been a member of the small business committee--Ranking
Member and Chair. I have also been a member of the Financial
Services Committee and to say that regulations are impacting
financial services institutions and that the Biden-Harris
administration hindered small business formation doesn't hold
water. The Biden-Harris administration oversaw the fastest rate
of new business applications on record with entrepreneurs
filing an average of over 440,000 applications every month, a
rate that was over 90 percent faster than from the pre-pandemic
averages. Importantly the small business boom of the last four
years was equitably distributed among multiple segments of the
population. Business ownership doubled among Black households,
hit a 30 year high for Hispanic households, new businesses
created rates hit a 30 year high for Asian Americans, and women
owned business, a higher share of businesses than before the
pandemic. I thought that the topic here today was about small
business lending and the different programs under SBA, not
making a case about tax cuts. But I know that that is the
agenda here.
Ms. DeArment, can you explain how MoFi is utilizing the
Community Advantage SBLC program to provide capital to small
businesses in the rural communities you serve?
Ms. DEARMENT. Yes, absolutely. Thank you. We use the
Community Advantage program much like banks use 7(a) but we use
it for a different segment of the market. Borrowers who are
credit worth but who are denied at banks or credit unions. Our
clients aren't seeing a CA loan. They're referred to us from a
bank after the bank says, no. I think it's really challenging
in the rural areas right now that we serve. Over time banks
have consolidated and closed some of the branches and even in
the rural areas that do still have a bank, the commercial
lending officer usually isn't there. They're in large cities.
They don't know the area very well and decisions can be made
elsewhere.
Ms. VELAZQUEZ. What segment of the market does the
Community Advantage program reach that a traditional 7(a) loan
might not?
Ms. DEARMENT. Yes. It reaches people who don't have wealth,
assets, prior experience in a bank or high cash flow. I don't
think you need those things. I think we've proven you don't
need those things to be successful in business and be
successful in paying back a loan. But we underwrite for
repayment the say way a bank does. We just don't use factors
like wealth, assets, or prior year cash flow. Instead we use
potential industry viability and sort of hard work and
determination, and it works.
Ms. VELAZQUEZ. Thank you. Mr. Sims, as you know I have been
supportive of raising the member business lending cap in the
past, but we need to do it in a responsible way. I also just
want to say for the record that the MBL cap is an issue for the
financial services committee and in which this committee
doesn't have jurisdiction. As a member of the financial
services committee I have made the case in terms of raising the
cap. Mr. Sims, I understand you participate in both the 7(a)
loan program as the primary lender and the 504 loan program as
a partner working in conjunction with certified development
companies. With a lens on the process of both programs would
you agree with the following statements, 1, the 504 program has
a unique economic development mission and, 2, at times the 504
program can be overly complex? If so, do you have any
recommendation to streamline the program and more efficiently
get capital into the hands of small businesses?
Mr. SIMS. Yes, ma'am. Thank you for the support of the
member business lending cap very much. Appreciate that. And I
would agree with your statements. I certainly do agree with
your statement, 1, the program provides small businesses with a
very solid financing vehicle for owner occupied commercial real
estate. As you know the 504 is best used in that environment.
If you're looking for cash flow--or excuse me, operating
capital, and other elements of the financing, it's not part of
that program, but it is a very good program, nonetheless. And
as you know on the other side we do work local, not-for-profit
CDCs to provide the debenture on the sell out once the loan has
met its term.
Chairman WILLIAMS. Lady's time is up.
Ms. VELAZQUEZ. Thank you.
Mr. SIMS. Thank you.
Chairman WILLIAMS. Next I would now recognize Mr. Alford
from the great state of Missouri for 5 minutes.
Mr. ALFORD. Thank you, Mr. Chair and thank you Ranking
Member Velazquez. Today small business are working to recover
after four years of inflation, supply chain issues, workforce
shortages, and burdensome over regulations. But I want to let
you know, I want to let main street know that help is on the
way with President Trump in office and Republicans in control
of both chambers of congress, we will work for you to make sure
that your business thrive. And we will cut the red tape and for
you to spend more time actually building your businesses, not
just filling out paperwork to satisfy some bureaucrat down the
street. We will codify the Trump tax cuts to protect the 199A
passthroughs and to keep more of your dollars in your own
pocket and we will work with the SBA to make sure that existing
businesses have the access to capital and counseling that they
need to ensure that Americans can continue to found more small
businesses in America.
Mr. Hooper, I have heard some of the same issues from our
community bank where I bank in Raymore, Missouri from Bill
McDaniel, the president, that the burdens of these over
regulations among the most harmful regulations implemented
during the Biden administration are the 1071 rule implementing
by the Consumer Financial Protection Bureau. And thank goodness
that Chairman Williams introduced last February 5th, H.R.976
which would repeal the CFPB's implementation of the 1071 rules.
Fin Cen's implementation of the beneficial ownership reporting
rule has been paused by federal courts though there are
additional pending actions in court. So my question to you is,
number 1, do you believe the CFPB is constitutional?
Mr. HOOPER. I do not.
Mr. ALFORD. I do not either. Thank you. What happens if the
1071 rules are put back into place? What effect will that have
on lending to people who need this money, the capital to start
and maintain a small business?
Mr. HOOPER. Sure. Thank you for the question. There's a
couple of points there with 1081. There's 81 data points that
have to be collected at the time we would take an application
and then some of those, some of that data is then published by
the CFPB annually and so that raises all kinds of privacy
concerns and things of that nature especially relative to if
there were denials and things like that included in some of
those data points. And so, you know, just simply managing it
and then also on our side the cost to implement it is
astounding. As I mentioned we're estimate prior to it being
stayed we were looking at over $2 million in cost potentially
to do the training and everything necessary. But I will tell
you most of our customers would find that the questioning very
troublesome and difficult as well.
Mr. ALFORD. Mr. Sims, do you believe that the CFPB is
constitutional?
Mr. SIMS. I do not, sir.
Mr. ALFORD. Thank you. I want to continue with you, Mr.
Sims. You reached, you mentioned about regional offices, they
needed to be more proactive. I agree with that. Senator Joni
Ernst introduced a bill to relocated SBA workers in part from
the office down here in D.C., which we were at a year and a
half ago and they all scurried to show up when they knew we
were coming and on any given day even if the building is
staffed with 100 percent of the employees in the building it is
only 67 percent full. It is a waste of money basically. We need
to get these SBA regional offices out into rural America where
we have business deserts if you will so they can get the
capital and counseling they need in a lot of these areas where
we have the rural broadband to operate businesses and the
people wanting to relocate out into communities of rural
America. What are your thoughts on that and how would credit
corporations, or not credit corporations but credit unions play
a vital role in that?
Mr. SIMS. Yes, sir. Thank you for the question, Mr. Alford.
I think simply levering the expertise that you would have
inside of an SBA district office and from a credit union's
perspective my focus is on the business member and how do I
figure out what's the best product set for that business member
and to have an advocate that has the inner working, the
knowledge of the SBA process, policies, and procedures to help
us when we hit a roadblock and we have a question that has
arisen as a result of a particular request they would be able
to help us navigate that process.
Mr. ALFORD. Thank you very much. And again thank you for
being here on this snowy day coming here on your own time and
your own dime. I appreciate. And I yield back.
Chairman WILLIAMS. Gentleman yields back. I recognize Mr.
McGarvey from the great state of Kentucky for five minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman. I appreciate that. I
will start with a question for the panel. Are any of you all
Supreme Court justices?
Mr. HOOPER. No, sir.
Mr. SIMS. No, sir.
Mr. WETEGROVE. No, sir.
Mr. MCGARVEY. Fantastic. I just want to point out last year
in CFPB, Community Financial Services Association of America
the Supreme Court upheld in a 7-2 decision the CFPB's funding
as constitutional. If we do get to take back the Supreme Court
ruling in this committee, I would like to start with a few
myself, maybe with Dobbs and Citizen's United. But for the
moment it is constitutional so we will keep it there.
I want to agree with something that was said earlier, the
American dream is alive and well and powered through our small
businesses. So is the American economy powered through our
small businesses. But let us zoom out and take a macro look at
what is happening right now because even though Donald Trump
came into office campaigning on lowering costs and lowering
inflation what we are seeing right now in the number coming out
today is an incredible rise in inflation, 3 percent over last
year. In fact not just take last year, it is the fastest
growing month for inflation since August 2023. We are seeing
the cost rise in everything from gasoline to groceries to the
things that our consumers use, which of course has an impact on
our small business community. This inflation is driven at least
in part by the tariff policies of the Trump administration.
I want to read you something. In Kentucky, local store
owners are already hearing about their suppliers prices going
up. One estimate suggests the president's tariffs could cost
the average Kentuckian up $1,200 each year and it is not just
about rising prices here at home. During the last Trump
administration retaliatory tariffs from trade partners set off
a broader trade war that hit wide swaths of American industry
from agriculture to manufacturing to aerospace and motor
vehicles to distilled spirits. I am not quoting from some
liberal publication here. I am quoting from Senator Mitch
McConnell's op-ed to the Courier Journal today. On top of the
rising prices and rising cost to consumers and our small
businesses are making we are seeing the Fed not cut the
interest rate, which is going to again have an impact on our
small businesses and if that is not enough, the Trump
administration last month froze funding at every single SBA
capital access program, which we have heard time and again on
this committee that our small businesses to succeed, to grow,
to start use that capital access provided by the SBA as such a
lifeline. So I think we have to zoom out and look at what is
happening to our small businesses and make sure that we are
going in the right direction where there costs are indeed
lowered so the consumers can buy things, our small businesses
can grow, and our economy can continue to thrive.
I have a question for Ms. DeArment. Where you conduct
business in rural Montana, just like in my state, farmers and
ranchers are going to see their market shrink thanks to Trumps
tariffs. They will force manufacturers in my district to make
the hard choice between swallowing increased in put costs and
cutting jobs or passing them along to their customers. Could
you briefly explain about why these SBA capital programs are
important alternatives for small business in this kind of
restricted lending environment that we find ourselves?
Ms. DEARMENT. Yes. One of the best things about the SBA
programs that we use is that they provide capital to CDFIs and
SBA lenders like us to use in rural areas. That capital is very
limited, and it is one of the only sources we have to reach
into some of the most rural or most depressed land values,
building values, depressed areas. Without them fewer businesses
would get funded in rural America.
Mr. MCGARVEY. And we know that community lenders support
veterans, rural Americans, other traditionally underserved
groups. Just briefly because we've got a little less than a
minute left, what would happen if rural communities lost access
to these SBA resources? What would it mean for farmers and
ranchers in your state?
Ms. DEARMENT. I think the biggest thing we would see is
fewer business starts. Most of the businesses we fund using
these SBA programs are business starts and banks and credit
unions are funding these businesses, so these programs are what
they have.
Mr. MCGARVEY. Thank you so much. Mr. Chairman, I yield
back.
Chairman WILLIAMS. The gentleman yields back. And I now
recognize Mr. LoLota from the great state of New York for 5
minutes.
Mr. LALOTA. Thank you, Mr. Chairman. Thanks for hosting
this important hearing today for the witnesses for traveling
here to be with us.
Ensuring America's small business have access to capital is
fundamental to America's economic success and that starts by
empowering community banks and credit unions not just as
lenders but as trusted partners that fuel local economies,
create jobs and drive growth. For too long burdensome
regulations, inflation and misguided policies have restricted
the flow of capital making it harder for small business's to
expand. Fortunately, community banks and credit unions remain
steady fast allies of America's small business offering
personalized lending solutions and building relationships that
big banks simply can't. Through vital federal programs like
7(a) and 504 loan programs, the Small Business Administration
partners with these lenders to create jobs, drive economic
grown and strengthen our communities. But for these programs to
truly help small businesses we must cut red tape, reduce costs,
and ensure access to affordable capital. With the right
policies we can unleash the full potential of America's small
businesses allowing them to thrive, innovate, and power
America's economy moving forward. This leads me to my first
question. Mr. Hooper, thank you for being here today, sir.
You're the CEO and Chairman of a regional bank and in your
testimony you highlighted how compliance costs at your bank
have doubled since 2021 with an estimated $10.9 million
annually spent on regulatory compliance. This committee
understands, sir, that regulations like the CFPB's 1099 rule
adds significant reporting burdens making it harder for
community banks to compete with larger institutions. So my
question is this, Mr. Hooper, how has the 1099 rule and the
broader regulatory environment impacted your ability to provide
capital to small businesses?
Mr. HOOPER. So I would say generally speaking the
regulatory environment that we have in general we spend a lot
of time on that and so a lot time, resources and frankly the
1099 rule, are you referring to the 1,099 pages of the
legislation relative to, that came from the Dodd-Frank Act?
Mr. LALOTA. Yes.
Mr. HOOPER. Okay. So, you know, we had to form an entirely
new department after the implementation of that so that we
could make sure we were compliant and could do it well and so
it is incredibly burdensome. It's tough on our customers
especially our small business customers who want to get a
mortgage. You can just sense when they walk in if they own a
business that they know, you know, the reporting requirements
for them is elevated and frankly getting a mortgage is much
harder for them in many cases than it is, you know, sometimes
our other, our other types of businesses.
Mr. LALOTA. And Mr. Hooper, if you didn't have to spend
those resources doing that burdensome, onerous regulator
compliance, could you use those resources to increase the wages
of your employees, decrease the cost for your consumers and
otherwise invest that money in better areas?
Mr. HOOPER. Absolutely.
Mr. LALOTA. Awesome, sir. Mr. Sims, you're the chief of
commercial banking officer of Georgia's Own Credit Union. You
have been the leading SBA lender with a strong record in both
the SBA's 7(a) and 504 loan programs. However, sir, you noted
in your testimony that administrative complexity and slow
response times from the SBA often create challenges for credit
unions trying to efficiently serve small businesses. So my
question is this, what specific or forms to 7(a) and 504 would
help credit unions expand access to capital while at the same
time ensuring these programs remain sustainable and effective,
sir?
Mr. SIMS. Thank you, Mr. LaLota for the question. Again go
back to the programs. The programs themselves are very good.
The processes are not as good. I can point to specific examples
within our organization where we've seen a decline in our SBA
production from 2022 to 2024 to the tune of about 25 percent.
The vast majority of that has to do with burdensome regulatory
environments and process and procedures associated with moving
applications through the SBA process. So it's a time drain.
Money does not get to your business member as quickly as they
would like it and quite frankly the, really the first reaction
that I get when I talk to business members about using SBA
tools as a vehicle for their financing is I have to sell
through the reputation that the SBA has for inefficiency and
the time to take a loan from soup to nuts.
Mr. LALOTA. Great, sir. And I only have a few moments
remaining, but Mr. Wetegrove I read in your bio, 34 years in
the Army, retired as a colonel. Appreciate your service, sir.
Real quick with about 15 or 20 seconds, how would you reducing
unnecessary costs and regulatory burdens impact your ability to
expand, hire more employees, make more loans, sir?
Mr. WETEGROVE. Yes. Thank you for providing the question.
It would of course allow me and others to be able to expand
more aggressively and be able to employ additional people and
service the community.
Mr. LALOTA. Thanks for your time, sir. Appreciate it. I
yield.
Chairman WILLIAMS. The gentleman yields back. I now
recognize Ms. Scholten from the great state of Michigan for 5
minutes.
Ms. SCHOLTEN. Thank you, Mr. Chairman. I just want to
clarify that there is no CFPB 1099 rule. You know, I think that
was testimony that was getting a little muddled and it is
important to get that into the record. You know, also earlier
this week we extended Fin Cen's beneficial ownership
requirements through Mr. Nunn, a bill that passed on suspension
in this house. I want to turn to some critically important
things here for West Michigan. Ms. DeArment, I understand that
your organization is an SBA certified community advantage
lender. My district in West Michigan is home to many hub zone
areas which are historically under-utilized business zones. The
hub zone program establishes a goal of awarding 3 percent of
federal contracting dollars to hub zone certified businesses
each year. Ms. DeArment, your testimony points out that the
community advantage program was designed to enable lenders to
reach into communities that might otherwise have trouble
accessing the capital that they need. Can you explain how this
program can boost HUBZones like the ones that we have in West
Michigan?
Ms. DEARMENT. Absolutely, HUBZones like other low-income
communities don't have the same asset value and they are harder
to lend in. When you go into look--for us in our experience
when we go into lend there we often have expenses going into
buildings or revitalizations that don't then pan out in
appraisals. The SBA Community Advantage can right that ship
when you're underwriting a loan and get capital to borrowers
who don't qualify for a bank loan or a credit union loan that
are absolutely credit worthy to build the business, be
successful, get a CA loan and eventually graduate back into
bankability.
Ms. SCHOLTEN. Thank you so much. Mr. Wetegrove, first and
foremost I want to thank you for your service to our nation and
your accomplished career in the Armed Forces. As a Co-Chair of
the congression franchise caucus, I also appreciate your story
of how you came to be and grow Camp Bow Wow. We have a number
in our district and our beloved family dog, Smokey, has
utilized those services as well. So, you noticed, you noticed
the importance of acquiring 7(a) loan to start your business.
Can you explain how this program was critical to the long-term
success of your business?
Mr. WETEGROVE. Yes, absolutely. Thank you for the question.
I don't think I could have gotten any other type of financing
at the time. And, you know, even though some of the
requirements were, they're not as strict as the conventional
type process so I, you know, greatly appreciated that. There's
a more flexible structure in the SBA program other than the
convention process. Even though the underwriting was very
comprehensive, it was manageable at the time. The partner that
I was utilizing to give me the loan, you know, provided me
counseling along the way and was very instrumental in the
lending process. And I just really appreciated everything that
kind of came to the table because I just think that there's so
much more background in the SBA lending program. Thank you.
Ms. SCHOLTEN. That is true. Yes. Absolutely. Thank you. And
one more for you, Ms. DeArment. The microloan program provides
up to $50,000 to help not only small businesses but certain
nonprofit childcare centers to grow. As a mom of two I know all
too well how critical childcare services are in bolstering our
economy especially to those trying to grown their small
businesses. Can you speak to how the microloan program
addresses the growing need for childcare services in our
country?
Ms. DEARMENT. Yes. One of the great things about the
microloan program is it provides technical assistance dollars.
We see a lot of, especially women come in and say I'd like to
start a childcare business, but they don't know where to start.
They don't know how to put together a financial projections,
find a facility or use their home. These TA dollars allow us to
bring an advisor in to help write a business plan, create
financial projections, find a lease, get legal services, and
get them set up for success. Once they're set up for success
and have a microloan in place those businesses do really well.
It's a perfect program because it combines those two
components.
Ms. SCHOLTEN. Thank you. I yield back.
Chairman WILLIAMS. The gentlelady yields back. I now
recognize, Mr. Jack from the great state of Georgia for 5
minutes.
Mr. JACK. Well thank you very much, Mr. Chairman, and I'd
be remiss if I didn't start by acknowledging one of my guests
in the audience today, the Chairman of Georgia's Small Business
Development Committee in the House of Representatives, Mr. Mike
Cheokas. Chairman, thank you for being here today. And likewise
to our witnesses. Thank you very much for testifying before our
committee. As we continue to navigate the complex and evolving
challenges facing small businesses it is crucial that we
recognize the vital role credit unions and community banks plan
in providing accessible, affordable financial services to
entrepreneurs, particularly those in our underserved and
economically disadvantaged communities. I would like to of
course because we have a Georgian in the audience today, I
would like to direct my questions to Mr. Sims who leads
Georgia's Own Credit Union in my home state. And first and
foremost I would like to start by asking you, and I think in
your testimony you note that over 240,000 members are served
across our state of Georgia. How many employees do you have in
our state of Georgia?
Mr. SIMS. Yes, sir. We have currently over 700 employees
working at Georgia's Own Credit Union.
Mr. JACK. And with my district if I'm not mistaken I think
you've got two Branches. You have one in Douglas County and one
in Fayette County. Is that correct?
Mr. SIMS. Yes, sir.
Mr. JACK. So what I find interesting particularly within
your testimony is just how successful Georgia's Own Credit
Union has been, recognized throughout the state, and the, you
know, the impact that you have on our community is evident. I
mean one of the areas of Georgia that is booming in growth is
Fayette County, Douglas County, as you get a little further out
from Atlanta we are seeing enormous economic growth in large
part fueled by small businesses and those small businesses are
often dependent on the credit unions much like your own. So I
would like to ask, I think in your testimony you noted that you
were recognized as the number 1 credit union in the state of
Georgia. You know, what are some helpful tips and practices you
would advise our committee to engage upon to help continue to
have business thrive especially in my home state and district?
Mr. SIMS. Yes, thank you, Congressman Jack. Appreciate the
question very much and recognition of the performance of
Georgia's Own from an SBA lending perspective inside of the
state and that is a record that we're very proud of and we've
been ranked number 1 credit union over the last 5 years, always
in the top 5 from an in-state production level as well. And
again I think I would get back to the conversation that we had
a little bit yesterday and also with Chairman Williams is
leveraging our local district offices. I think there's a great
role for them to be able to play in supporting both those of us
that are in SBA lending, and you heard Mr. Hooper talk about
having to build the infrastructure to be able to do that
appropriately and it takes a lot of investment to do that. It
can be that investment can be mobilized and amplified with help
from our regional offices.
Mr. JACK. And for my colleagues across the committee and
for everybody watching there is a lot of debate right now over
tax reform and some of the taxes that are coming up, can you
illustrate to all of us what the consequences would be and for
not just consumers, people dependent on the credit union but
the broader economy if the tax exemptions currently afforded to
credit unions were to be reduced or eliminated this fiscal
year?
Mr. SIMS. Yes. Thank you for that question. As you know
credit unions would turn over $36 billion to the economy
annually thanks to that tax exemption at a cost of just under
$3 billion to our taxpayers. And so there's a multiple return
on that. I think a eliminating or changing the credit union tax
exemption would change the nature of how we do business and
what we're trying to accomplish with our business members and
quite honestly I think you would see a fewer, you would see
fewer credit unions in specially rural markets which would lead
to fewer, just to deployment of capital even underneath the
SBA's program and so I think that would be a detriment quite
frankly to small business members as well as consumers in the
market place.
Mr. JACK. Well I appreciate that. I am not going to take
much more time but I just want again illustrate as all of us
are working across this distinguished body to advance agenda
that we all were elected to advance, I think it is critical
that we remember the impact of some of the tax provision we are
considering visa vie reconciliation at the same time, too. I
think we were all elected to advance pro-growth, economic
policy, that is one of the reasons why President Trump earned
the historic victory that he did and why more Americans voted
for house Republicans this time than ever before. So I am
grateful for your testimony. I am grateful for all the
witnesses being here today and Chairman thank you very much for
letting me bring my own Chairman from Georgia Small Business
Committee in the House of Representatives of Georgia to our
hearing today. Thank you.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Mrs. McIver from New Jersey for 5 minutes.
Mrs. MCIVER. Thank you Chairman and Ranking Member for
having this hearing today and to each of our witnesses, thank
you so much for joining us on a very snowy day and making your
way here.
Accessing capital is a critical early step that our nation
entrepreneurs must take to turn their business ideas into
reality and a much-needed push for businesses fighting to
expand. As our Ranking Member said, we all know the critical
investments into small businesses made by the Biden-Harris
administration helped millions of business owners to start
small businesses and last four years, in the last four years.
Many of whom come from underserved communities. We saw business
ownership rates double and reach a 30 year high among
communities of color. My district alone in the great state of
New Jersey in the 10th congressional district, home to nearly
2,000 minority owned business. They definitely benefitted from
the efforts of the last administration. As we continue through
this congress we must be mindful to protect the progress made
by these communities.
With that I would like to throw my first question to Mr.
Sims and Mr. Hooper. Each of you represent a different and
critical part of how the SBA can help small businesses access
capital. This is especially critical to protecting the gains
made by underserved communities in recent years. In your view
what more can congress do assist small businesses in accessing
capital from institutions like yours?
Mr. HOOPER. Thank you for that question. I think a couple
of ways. One is, you know, we can continue to expand the SBA
resources which can be a benefit for some of our customers and
I think just make the system less cumbersome. Additionally if
we reduce the cost due to regulatory changes because it's an
ever-evolving landscape. That would allow us to then spend some
of those same dollars on bankers who actually can go and work
with clients again rather than, rather than us investing large
sums in oversight of compliance side.
Mrs. MCIVER. Thank you.
Mr. SIMS. Thank you, Ms. McIver, Congressman McIver. I
would suggest that again the programs are really good. They are
very flexible. You heard Mr. Wetegrove talk about the
flexibility of the program that allowed him to put his business
together. So I would encourage congress to encourage the SBA to
focus on their core competency and that is how can we eliminate
the burden of excess policies, processes, and procedures in
order for us as the distributed lending force that's in the
marketplace that are talking with business members on a day-to-
day basis, and we understand what they're looking for in the
structure and how do we capital into their hands more quickly
and more efficiently.
Mrs. MCIVER. Thank you for that. I would also like to ask
the panel about their thoughts on the Consumer Financial
Protection Bureau. The CFPB has recovered over $21 billion for
consumers who have been victims of abusive and illegal activity
with a budget of less than $700 million. How do you propose the
government protect consumers from crooks in the open market if
it no longer exists? That is to each panelist?
Mr. HOOPER. I think if the CFPB did not exist there are
other regulatory agencies that can provide similar services. We
already have several, you know, that oversee the financial
industry and so I think you could easily push some of those
same, some of those same oversight activities to some of those
other agencies that already exist?
Mr. SIMS. And I would agree. I would suggest that credit
unions believe in the importance of consumer protection laws
and then having an entity to regulate otherwise unregulated
entities is critically important. Don't have a position on the
CFP elimination but the industry has long advocated for change
to make consumer bureau a bipartisan commission. Unfortunately
under that current structure the Bureau has to become overly,
or has become overly political, and I think the focus needs to
be on those unrelated entities that would be regulated.
Mrs. MCIVER. Okay. Any feedback from you, Mr. Wetegrove?
Mr. WETEGROVE. I would just agree with them since I don't
know much about your question. Sorry.
Mrs. MCIVER. Okay. And I know we have, I am not sure if she
is still on, Ms. DeArment who is on?
Ms. DEARMENT. Yes.
Mrs. MCIVER. Oh okay. Would you like to chime in in the
couple of seconds that I have left?
Ms. DEARMENT. The one thing that I would say is that
working with low wealth borrowers they fall victim to predatory
online lenders and so we would want to make sure that that
protection is extended to people regardless of whether or not
they have resources.
Mrs. MCIVER. Thank you. I am out of time. Thank you.
Chairman WILLIAMS. The lady yields back. I now recognize
Ms. King-Hinds from the Northern Mariana Islands for 5 minutes.
Ms. KING-HINDS. Thank you Mr. Chair and thank you to all
the witnesses who braved the storm today. I am from the
Marianas where it is about 75 degrees right now. So this
weather it not in the business for me.
It is very encouraging to hear about the optimism and
resilience among small business across the United States. But
as we have heard optimism--as we have heard optimism alone is
not enough. It must be backed by a financial system that
empowers small businesses with the capital that they need to
thrive. We have seen how entrepreneur respond to the economic
optimism, taking risks and investing in growth. But that
optimism along does not drive lending decisions. It is the
outlook of financial institutions that determines whether
capital flows into communities and businesses. When banks see
potential for secure returns they invest. When uncertainty
looms a vicious cycle takes hold. Businesses struggle, lending
slows and economic recovery stalls. Right now my district is
caught in that very same exact cycle. In an economy where banks
see no path to recovery, even the brightest most promising
entrepreneurs find their potential stifled. Lenders hesitate,
investments dry up, and businesses are left to fend for
themselves. Small businesses in my district aren't giving up.
They are fighting for recovery. But in speaking with business
owners more and more they are being forced to rely on high
interest credit cards and personal loans just to say afloat.
Unlike the rest of the U.S. where consumer debit is 69 percent
of the size of commercial and industrial loans, in the Northern
Mariana Islands consumer debt is 180 percent of commercial
lending. That is just unstainable. Small businesses should not
have to shoulder the burden of economic recovery alone and so,
you know, I wish we had a credit union back home from where I'm
at. We only have, we have, we are down to two banks right now,
three banks and so this is more of a broad question for Mr.
Hooper. How can the federal government help small businesses in
communities where industries have collapsed or remain in
decline? So basically in these economic conditions where we are
caught in this vicious cycle, how can the federal government
assist to be able to allow for access to capital?
Mr. HOOPER. You know, I think as Mr. Sims noted the SBA
programs that exist are good programs. And so I think
continuing to make those more manageable for the consumer as
well as the banks that are putting those programs into place
with the customer I think is one way, just to make it less
burdensome. You know that I would say that's probably one of
the primary ways. Additionally if interest rates come down a
little more I know many of our customers would appreciate lower
borrowing rates, which also make it more manageable from a
small business perspective as far as them managing their
budgets with other inflationary pressures they already have.
Ms. KING-HINDS. All right. Just a quick follow up question.
In your written testimony you spoke about the fact that it is
just not just the beginning of the application process but the
bank's ability to go and recover those SBA guarantees. Can you
speak us to the challenges with regards to that particular
issue?
Mr. HOOPER. Sure. I'm actually in the middle of one right
now. We're in our second year of trying to do the recovery.
Part of the dilemma is once you go down that road and you start
through liquidation you have to liquidate everything that you
had as collateral as well as pursue all other opportunities for
recovery and it could be a variety of different things. You
have to do all of that before you can go back to the SBA to get
the SBA to honor the guarantee that they gave at the inception
of the loan. So the other difficulty that exists within that is
like others had mentioned getting communication from SBA can
prove difficult and some of the answers we get at times are
vague and so which also puts us in a precarious position
because if we don't make the right choices as we go through
that liquidation process and that recovery process it has the
potential for the SBA to claw back potentially some of that
guarantee when we get to that stage of the process.
Ms. KING-HINDS. Which would I presume discourages lending?
Mr. HOOPER. It certainly makes it harder if we don't have
clear, you know, expectations and understanding of how the SBA
is going to respond.
Ms. KING-HINDS. All right. Thank you. I yield the rest of
my time, Mr. Chairman. Thank you.
Chairman WILLIAMS. Gentlelady yields back. I now recognize
Mr. Cisneros from the great state of California for 5 minutes.
Mr. CISNEROS. Thank you, Mr. Chairman. Mr. Sims, you noted
in your testimony the legislative purpose of Section 1071 is to
facilitate enforcement of fair lending laws and to enable
communities, governmental entities, and creditors to identify
businesses and community develop needs and opportunities of
women-owned, minority-owned, and small business. We all seem to
want loans that are more transparent and more equitable and
more responsive to the needs of all borrowers. You know, in my
community a lot of our community banks have kind of been eaten
up by the bigger banks. There really aren't too many here in
California. Credit unions have kind of helped to kind of fill
that void. But I feel there is a need to kind of protect those
banks. How do we protect those? Beside a regulatory questions
what are other steps that we on the committee can take to
ensure that community lenders are strong and competitive to
support small businesses, and I will open that up to the panel
to see whoever wants to answer?
Mr. SIMS. Thank you Congressman Cisneros. Again I get back
to the similar comments that you've gotten from Mr. Hooper
here. Products are good and SBA in particular products are very
good. Process is not good and the 1071 rule adds to the burden
associated with that and in many cases it's going to be an
increased cost for us to comply, also increased cost for the
business member to comply. And I truly believe that you will
see many business members, business owners not seek capital to
inject into their business because of the reporting
requirements that we're asking for them as they come into to
try and access capita.
Mr. CISNEROS. Anyone else care to respond? You want
nothing? Oh.
Mr. HOOPER. No. I was going to say I think Mr. Sims had a
great answer, so.
Mr. CISNEROS. Okay. Sounds good. But what other steps, I
will say in order to protect these community banks who are the
lenders to our small businesses, big banks don't like to do
small loans. What steps can we take to make sure that we
protect your interest to ensure their survival, and they don't
get gobbled up by bigger institutions?
Mr. HOOPER. Well I can tell you I've been a community
banker my entire career and I love it. It's something that I
hope never changes and something I can do for the remainder of
my career. You know, being a community banker means that it's
the business owners and the customers we work with are the same
people I see at church, the same people I see in the grocery
store, the same people I see at a restaurant on Friday night.
It's the people we live with and are part of the fabric of the
same community in which we live and so their success means
success for the community and, you know, we are part of that
community and success for the bank. And so I think, you know,
community banking is a necessary tool because it starts with at
the very personal relationship level. And we walk hand and hand
with our customers and are a proven financial partner over the
years for them.
Mr. CISNEROS. All right. Thank you. Ms. DeArment out there
on the Zoom. Thank you for supporting women-owned small
businesses across the Northern Rockies and according to the SBA
summary report last report last year, 73.8 percent of total
dollar amount for 7(a) loan approvals went to male owned
businesses as did 71.2 percent of total dollar amounts for the
504 program. The Montana Community Development Corporation had
23 approved microloans in fiscal year 2024 in Montana alone.
SBA microloans offer funding to traditionally underserved
businesses such as women-owned business, SBAs also fund
business development centers, loan programs, federal contract
opportunities among others to focus on women and minority owned
businesses. Last month the SBA awarded $26.5 million to create
13 new women business centers and support 17 existing centers
across the country. If President Trump isn't stopped and
doubles down these programs funded by the SBA are at risk to be
effected by a freeze in federal funds. What would the impact
for access to capital for the women-owned businesses have for
you?
Ms. DEARMENT. Well I think what we've seen is that women
have some special challenges. Their credit scores often go down
when they have kids and leave the workforce. Their assets go
down when they leave the workforce. And so just like everybody
else who's low wealth or low income they have a very hard time
getting a bank loan especially when they're starting out. The
SBA programs allow us to wrap services around these people to
help them create business plans and financial projects and get
legal help and start their business and then within a couple of
years become bankable. Without those programs the on-ramp into
bankability will not exist.
Mr. CISNEROS. All right. Thank you for the answer. I yield
back.
Ms. KING-HINDS. I now recognize Mr. Downing from Montana
for his 5 minutes.
Mr. DOWNING. Thank you, Madam Chairwoman. Community banks
are the economic life blood in rural communities across the
nation providing tailored relationship-based banking services
for small businesses. In Montana's 2nd District, which I am
proud to represent, community banks help businesses like small
farms and local stores access the capital that they need to
thrive. Regulatory red tape and inflationary policies
particularly under the Biden administration have crippled
community banks. In my home district we have seen the number of
community banks drastically decrease hurting the ability of
local employers to hire workers and reinvest in their
businesses. The Trump administration is how championing bold
reforms to how the government functions promising to cut
unnecessary regulations that have hindered entrepreneurship,
and I am incredibly optimistic about our economic future under
President Trump's leadership. And I look forward to seeing what
incoming Small Business Administrator Kelly Loeffler will do to
reinvigorate support for our communities banks. So to start off
I am going to start with Mr. Hooper.
Through your operations in Texas to what extent do you
provide services to rural businesses such as small farms?
Mr. HOOPER. Thank you for that question. That's one of the
unique things about the company I work for. First Financial is
spread all across the state. We have 79 locations. Many of
those locations are in Far West Text and up in the panhandle
and those are predominantly agricultural, you know,
communities. And so last year alone we originated $54 million
in agricultural loans, many of those are going to be probably
in the South Texas and then up in the panhandle in West Texas.
So and a lot of those are smaller communities that we're able
to partner with those businesses owners for those Ag loans.
Mr. DOWNING. What do you see are the biggest challenges in,
you know, small farms, accessing capital?
Mr. HOOPER. Well I live in Texas. The weather is always the
biggest challenge but we can't fix that one and so but I would
say just again if we are more accessible through the reduction
of some of the burdens we have on a regulatory side I think
that it allows us to be better bankers.
Mr. DOWNING. And how do you see your business and, you
know, how your rural business and your partners or your small
farms, et cetera, compared to, you know, larger national banks?
What do, how do you compare those?
Mr. HOOPER. Again I think back to my comments earlier those
are the same people we live with in the community. Those are,
and that's why we're hand and hand with them because their
success is our success.
Mr. DOWNING. Right.
Mr. HOOPER. And so, but I think that's something you only
get when you're part of the same fabric of the community that
they are.
Mr. DOWNING. Yes, I agree. What in your experience are the
most effective SBA programs in promoting access to capital in
rural communities, especially local farms?
Mr. HOOPER. The 7(a) program is very good. It provides
longer terms than we might normally have on conventional
financing and the 504 program we've used extensively is great
as well.
Mr. DOWNING. Great. Since the 2008 recession, the federal
government has implemented numerous regulatory reforms that
have disproportionately burdened community based financial
institutions. So to Mr. Sims, how have these regulatory burdens
hurt your institutions?
Mr. SIMS. Thank you Mr. Downing for the question. I think
it principally manifest itself in additional staff and
resources and infrastructure that we have to put in place in
order to comply and appropriately comply with that regulation.
And honestly it takes us away from what we do best, which is to
be out in the marketplace and trying to serve our business
members in finding the right capital vehicle for them as
they're seeking to either grow, expand, buy new businesses.
Mr. DOWNING. All right. Thank you. Mr. Hooper, anything to
add to that?
Mr. HOOPER. No, sir.
Mr. DOWNING. So to actually either one of you, how can
congress and the Trump administration, you know, fix this?
Mr. HOOPER. Again I think reducing the regulatory burden.
It's just such a huge piece of what we deal with on a daily
basis and so I think that's first and foremost one of the
things that needs to be tackled to allow us to be bankers
again.
Mr. DOWNING. Appreciate that. And thank you for you
answers. I think your responses have demonstrated how important
community banks are in thriving rural economies. And I look
forward to the Trump administration eliminating unnecessary
regulatory burdens and empowering local banks, credit unions
and other financial institutions. And on that I yield back.
Thank you, Madam Chairwoman.
Ms. KING-HINDS. Thank you. I now recognize Mr. Tran from
California for 5 minutes?
Mr. TRAN. Thank you, Madam Chair. I want to welcome and
thank the witnesses for being here. Ms. Dearment, I probably
represent the largest and oldest Vietnamese community in the
United States known as Little Saigon. This community is a
symbol of resilience and entrepreneurial spirit and serves as a
thriving center for Vietnamese Americans and small business and
a key part of our Orange County's economy. Little Saigon is a
successful because Vietnamese people are tenacious and
resourceful. However this can only get you so far and time and
time again I hear from the Vietnamese community that because of
limited language capacity and lack of understanding of the
financial system they are unable to access capital and make
that leap of faith to start a small business. In fact we know
that minority-owned businesses are less likely to be able to
obtain a bank loan and often start out with just half as much
capital as their White owned businesses. My question to you is
how does your loan underwriting process differ to accommodate
applicants with limited credit history or limited English
proficiency and what impact has that flexibility had had on
increasing loan access in underserved communities?
Ms. DEARMENT. Thank you for the question. We rely on the
microloan program to reach communities that often don't start
at banks or banks aren't the first place they go. They might go
to friends and family limiting their capital. The microloan
program comes with technical assistance dollars so we can get
out in the field, meet with business owners, meet with
community leaders, pastors, find folks that are in the exact
situation that you talk about. We also bring in outside folks
to help them through the loan application process in whatever
language they need. And with the flexible underwriting
standards that a CDFI has we don't rely on wealth or assets or
prior business experience. So we're able to provide these wrap
around services long proceeds as well as any type of process
they need to enter the financial mainstream. And once they're
in one of the nice things about those microloan TA funds is
that once they're in we are instantly trying to find a banker
or a commercial lender at a credit union that can pair with
that small business owner and overtime build a relationship to
onboard them back into the financial system. When we do that
then we see their friends and family start going to that bank
and it creates a system where we become less needed overall in
that community.
Mr. TRAN. Thank you for that answer. Mr. Wetegrove, Orange
County's economy thrives thanks to the hard work of committed,
dedicated and resourceful small business owners. As a small
business owner myself before coming to congress I can say that
it is not easy owning and running a small business and we face
issues that are uniquely different from large corporations. And
issue that I have faced and have commonly head about from small
business owners from Orange County is limited access to
capital. My question to you is on this side of the aisle we are
always looking for ways to improve awareness of SBA's capital
access programs and the benefits they provide. As a small
business owner now did you become aware of SBA's capital access
program and how do you think we can help improve awareness of
these programs for borrowers.
Mr. WETEGROVE. Thank you for the question. So when I first
started with Camp Bow Wow I was introduced to certain parties
that made me more aware of, you know, these opportunities for
seeking financial assistance. My father was an onion farmer in
South Texas, and he was always borrowing money, and I always
remember him, you know, contemplating on the terms and stuff
like that. So but to answer your question specifically I know
that there's small business development center. It's at the
University of Texas in San Antonio. And I think that's critical
because I meet a lot of people that are, that want to start
their own business because they want the entrepreneurial story.
Right? And so I was pushing them to that entity in particular
because I know that they're there for, you know, the assistance
and the SBA help. But anything that would advertise in a
entrepreneurial magazine or something like that would be
extremely beneficial.
Mr. TRAN. Thank you for your answer. Mr. Sims, credit union
member business lending cap is limited by statute. The statue
limits both the aggregate amount of lending and lines of credit
for a commercial purpose. A credit union can make up to a
specific borrower as well as the aggregate amount of commercial
lending a credit union can make. Can you briefly explain the
member business lending cap and how does this affect veterans
who are looking to start and grow a small business?
Mr. SIMS. I'm sorry. Thank you, Congressman Tran. The MBL
cap has really two limitations on my business lending activity.
One, it is set at 12.25 percent of assets of my organization.
So as I approach that number I have to modify my business
activities in the marketplace, which might mean for example for
a veteran-owned business I may be unable to make that loan
because I have approached that cap. I think there's a couple of
things that also go into that. The number of loans, the amount
of loan that counts underneath that cap is $50,000. It was
established in 1998. I see your face reacting to that. It
hasn't adjusted since that time. An example or recommendation
that I might have would be to put that at the SBA, small
business level which would be 350, so how you would have two
loans that are out there that mirror up with each other?
Chairman WILLIAMS. Gentleman's time is up.
Mr. TRAN. Thank you, Mr. Sims. I yield back, Mr. Chairman.
Chairman WILLIAMS. Now I would like to recognize Mr.
Finstad from the great state of Minnesota for 5 minutes.
Mr. FINSTAD. Thank you Chairman Williams for holding this
important hearing today and thank you to our witnesses for
braving this weather although I find it laughable being from
Minnesota that this is a weather event. This is dusting back
home. So as a small business owner myself I understand the
important role our rural lenders play in allowing individual to
pursue the American dream. We have great opportunity in the
119th Congress to make meaningful changes that revitalize main
street businesses, ensure new business owners have access to
capital. I look forward to working with the Trump
administration and the Members of this committee and our local
financial institutions to reform the small business
administration into a transparent and accountable entity that
strengthens rural communities and drives economic growth across
our nation. With that being said I year quite often from small
business across my district and across rural America that
sometimes feel like the SBA treats them like flyover land and
really a lot of times where small businesses have interfaced
with the SBA is through our lenders. You are the face of the
programs to our small businesses and so you know the programs
well. So my question is for Mr. Sims. As you know small
business across rural American rely heavily on the 7(a) and the
504 lending programs. Over the past four years what changes
have you seen to the 7(a) and the 504 program and what impacts
have your customers felt on these changes.
Mr. SIMS. Thank you for the question Congressman. The vase
majority of the changes that we have seen over the past four
years have to do with the standard operating procedures of the
SBA lending program so the SOP. The programs themselves, the
loans themselves, the structure and the terms are very good.
The process associated with engaging with the SBA and helping
our business members navigate that, those processes is the most
cumbersome piece of the equation.
Mr. FINSTAD. Would you say those changes have made it more
usual for our small businesses to access those programs or
really burdensome and created another roadblock?
Mr. SIMS. Much more burdensome and it comes in two
fashions. One is from an SBA lender, if you recall it from
Georgia's Own specifically, we're the number one credit union
producers in the state of Georgia so we have a really
experienced staff. And as the SOP changes on an annual basis we
have constantly got to go back in and figure out what those
changes look like and in many cases they don't make a lot of
sense. And what that does is slow down the process. And hen we
have to translate those changes to our business members as we
engage them in capital access.
Mr. FINSTAD. Do the small business that you work with have
a stable full of lawyers, compliance officers and regulation
folks that can navigate this?
Mr. SIMS. That's probably a better question for Mr.
Wetegrove over there when he was----
Mr. FINSTAD. Do you got a stable full of lawyers and
regulators and compliance officers?
Mr. WETEGROVE. You're looking at him I'm sure.
Mr. FINSTAD. So there poses an opportunity and a challenge
for I think this committee and this congress is to, you know,
clean up some of the stuff that just doesn't make some sense
and make these programs again good, solid, historical programs
that we know have worked.
Mr. SIMS. Very good.
Mr. FINSTAD. but if they are sitting on a shelf because we
can't get out of the way of ourselves then it is just a good
program sitting on a shelf. So I will turn this a little bit
here to Mr. Hooper. I have heard from several organizations
across Southern Minnesota regarding the confusion around the
beneficial ownership rule. And what impact has this rule had on
your bank and what have you heard from your customers on the,
on the ground regarding the limitation of this rule?
Mr. HOOPER. So I would say many of our customers just find
it intrusive because we're digging into work through all of the
different business owner, or the different owners of that
business. I know our new account staff spends a tremendous
amount of time making sure that they complete all the
beneficial ownership forms as well as our lending staff and so
it's just a, it's cumbersome process and customers are not
always appreciative of the process either.
Mr. FINSTAD. So Mr. Hooper, I would assume that your
designating staff to that all pro-bono, it is all free, you
don't have any, I mean you're just going to eat all that,
right?
Mr. HOOPER. Absolutely.
Mr. FINSTAD. Yes. So the, you know, the cynical, I guess
point is that there is time, money and effort that is put into
this and again we have to ask ourselves in this congress, you
know, who are we afraid of in this scenario? What problem are
we trying to fix? And at the end of the day it is access to
capital that's the most important thing for rural America to
thrive right now and if we continue to put roadblocks in
between a good, intended government program and the customer at
the end day we will see less jobs created, not more. I
appreciate your time and Mr. Chair, I yield back.
Chairman WILLIAMS. Gentleman yields back. I know recognize
Dr. Conaway from the great state of New Jersey for five
minutes.
Mr. CONAWAY. Thank you, Mr. Chairman. And thank you to the
witnesses who have presented themselves here today to offer
information on the SBA program. I want to start my time here
with some remarks. I have to say I'm most distressed to hear
America talk down and we have heard about how terrible things
are in the economy and yet some of our Ranking Members here
have quite rightly noted that we have had during the Biden-
Harris administration over the past four years entrepreneur
filed more than 20 million new business applications and saw
the fast rate of new business applications on record with
entrepreneurs filing an average of 440 applications every
month, a rate that is over 90 percent faster than the pre-
pandemic averages. And as we've head we have seen the number of
Black households and Hispanic households, and Asian households
hit new highs in terms of their business ownership. Again all
greater than pre-pandemic. In New Jersey, we are very pleased,
and I have some experience with the SBA process. We have seen
an average of, we have 28,771 approved 7(a) loans with an
average loan size of 700--I'm sorry, 430,422. And as you know,
these are essential for small business to grow and to thrive,
to advance the economic vitality of their communities. We have
heard today and in our previous hearing a lot of concern about
the 1071 program. And I have to say when I particularly as you
just heard me talk about these important improvements that we
have seen and the business ownership by a person of color and
minorities, other minorities, which I take as a sign of a vital
and America, America that includes everybody in our economic
growth and yet we hear that this program which is designed to
actually find out what is going on lending activities in the
banking sector is being, we're being asked not to collect data.
Now I am a physician. I thrive on data and taking data and
producing that data and understanding that, and using that data
to make, to made help patients make decisions. This is across
all businesses whether you're sending somebody to the moon or
building a bridge, data analyzing it and using it to make good
decisions, which is important that society has decided that it
is important that fair lending take place and that all people
in our country irrespective of their color or where they're
from have access to capital. So explain to me without giving
the data to understand whether or fair lending rules are being,
and laws are actually working and that there is compliance with
those laws that recognizes that we're all part of a great
country. If we take away the data collecting process to find
out how the laws are working and how you in the lending
community are actually, whether you're actually in compliance
with the law or not. How do we ensure that everybody has a
stake in our economy and has a chance to start their own small
business? And that's for Mr. Hooper and Mr. Sims.
Mr. HOOPER. Thank you for that question. You know, I would
say, you know, in my opinion it's our responsibility as good
bankers to make loans everyone we can in our community and
support the community at large. You know, not specifically
talking about 1071 but speaking about from a fair lending
perspective, you know, I'm very proud of the products that we
offer now only to, you know, specifically we have better
products for those customers that live in majority, minority
Census tracks. We also have programs that are, you know, I live
in Texas and so we have people who are there on work visas and
they have an I-10 and so we're able to provide different home
ownership options for them with lower amounts down and
additionally we try to have bilingual personnel in just about
every office that we can.
Mr. CONAWAY. I need to reclaim my time because I see the
clock is ticking. I don't think we can make good decisions
without getting data. Data should drive our policy decisions
and if we pass a law we're going to find out whether or not it
is working. I'll just leave with the time I have remaining to
talk about the Serve Act that I'm a lead on with Ms. Davis and
Mr. Alford. I am a veteran myself and serve a lot of veterans
in my community. I live near a base and served on that base.
But in the time remaining and I'll leave it for a later answer
off line but tell me how the SBA is working to ensure that
veterans are getting a fair shake and accessing the lending
process. Thank you, Mr. Chairman for your forbearance.
Chairman WILLIAMS. Gentleman yields back and now I
recognize Mr. Stauber from the great state of Minnesota for
five minutes.
Mr. STAUBER. Thank you very much, Mr. Chair, for holding
this meeting. And thank you to our witnesses for taking time
out of your busy schedules to provide insight into the
challenges and opportunities in small business lending. Access
to capital is critical for the success of small business and in
rural America. small businesses depend on relationship banking,
a personalized approach to lending where community banks and
credit unions excel. These institutions and the SBA backed
loans programs they provide must remain a reliable source of
funding for entrepreneur. However concerns have been raised
about recent changes to SBA-backed programs including weakened
guardrails in the 7(a) program which could increase lending
risk and lead to higher cost for taxpayers. Mr. Sims, you have
seen first hand the impact of SBA lending policies on small
business borrowers. How have the SBA policy changes affected
small business loan default rates and what reforms are needed
to prevent taxpayers from being left on the hook?
Mr. SIMS. Thank you for the question, Congressman Stauber.
first and foremost in support of the SBA platform with every
SBA loan that is originated the borrower is charged an
origination fee for their guarantee, for the SBA's guarantee of
that loan. So that guarantee then goes into the coffers of the
SBA. Those funds are then used for any defaults that occur
underneath that program, so from a taxpayer perspective it's
actually not a taxpayer funded organization. It's self-
sufficient with regard to the premiums that are collected
associated with new origination loans.
Mr. STAUBER. The origination fees are adequate in your
mind?
Mr. SIMS. Yes, sir, they have been since the inception of
the program.
Mr. STAUBER. Mr. Wetegrove, your story is exactly what the
7(a) program is meant to do, help aspiring entrepreneurs
across--access rather the capital they need to make their dream
of owning a business a reality. Had you explored non-SBA loan
options before turning to the 7(a) program?
Mr. WETEGROVE. Yes, sir, I did.
Mr. STAUBER. And can you share a little about the process
you went through?
Mr. WETEGROVE. You know in one particular process it was a
little annoying. I asked for the SBA, I mean, sorry, the
lending and the loan and I did all my homework, I did the
procedure to get my business plan done and then all of a sudden
they came back to me and said, I'm sorry, you don't have seven
years in business. So I spent like a month doing all this extra
work and it was extremely unfulfilling and so that is when I
basically went with the SBA program.
Mr. STAUBER. And the 7(a), briefly tell us about that, how
it went?
Mr. WETEGROVE. You know, it went very well. I mean the
lender, the lender itself just had so much information for me
and, you know, I talked to other Camp Bow Wow owners in my
organization, and this is what they had done as well. So again
just having that expertise in the lending institution was
phenomenal. And a guy like me who didn't have all that business
acumen just, you know, devoured it.
Mr. STAUBER. Your Honor, hose entrepreneur's out there that
are across this great nation that want to take that risk
sometimes they don't know where to go on the 7(a) with the,
your local community banks or credit unions are given them that
opportunity and their the ones that change the world,
literately.
Mr. WETEGROVE. Yes, sir.
Mr. STAUBER. Literally. You know, improving government
efficiency is a big topic around here these days. And there's
changes the SBA could make to improve entrepreneur access to
this loans. I want to just thank you all for being here. I will
tell you that the last administration, I have been on small
business since I have been a Member of, privileged to serve as
a Member of Congress. And I tell you what, the last
administration was devastating to small business owners. I mean
we're looking at over 11,000 rules and regulations and the
money's that small business had to put forward just to get
started or rather 11,000 regulations, rather. Not 11,00
regulations that are spread out, $20 here, $40 here. that's
real money to real Americans that are trying to make it, and we
need to make sure that these loans are giving out with as you
said, Mr. Wetegrove, with the information and how to do, not
spend a whole month and then they tell you you haven't been in
business seven years. You know, your life experience matters
too, right? What you did in your life matters and it should be
considered in allowing these loans to go forward. But I can
tell you that under President Trump's leadership the optimism
amongst small business owners is growing. He is prioritizing
tax relief, regulatory reform, and access to capital. Small
businesses are the backbone of our country, and they will
continue to be the engine of our economy. Mr. Chair, I yield
back.
Chairman WILLIAMS. The gentleman yields back. I now
recognize Mr. Olszewski from the great state of Maryland for 5
minutes.
Mr. OLSZEWSKI. Thank you all for being here today. I will
just open with an invitation. I joined many of my colleagues on
this side. We want to be in conversation about regulations that
might be burdensome. I certainly don't have the time here but
if you want to provide for the record for the committee's
benefit, specific regulations, instead of wholesale changes.
Maybe with specific example so how that could be helpful. I
would very much welcome the opportunity to have that
information given to us. So I guess my question would be it
wouldn't be something that would be viewed favorably by
customers or your clients if I were to day I want to bring 20
people and look at some of your most sensitive systems. Like I
want to have access to your systems tomorrow. I'm going--I mean
that's not something that is good business practice or
something that your customers would take kindly to, is that a
fair assessment? Yes, okay. And if you wanted to be processing
loans fast or opening a new franchise, if you wanted to provide
more training you wouldn't tell your employees to stop working?
You wouldn't stop processing loans, is that also a fair
assessments? Yes. So I actually again agree. I think we want to
find ways to help SBA do more training, help work through some
of the regulations that might slow down these processes. But I
just want to point out that that is in fact what is happening
with the SBA. We have someone who without vetting our
transparency is in there, has access to some of the most
sensitive data that your partners in this work share and, you
know, just concerned about instead of finding ways to work
through these regulations we re instead telling people across
this government to stop working, to not come to work and I
think that is at odds with some of the testimony we heard
today. So but very much look forward to those specific examples
and hopefully allowing our professionals at SBA to work through
those to partner with you and again really appreciate you
making the time to be here today. And with that I will do a
rare thing, Mr. Chairman and actually yield back some time.
Chairman WILLIAMS. The gentleman yields back. I now
recognize Mr. Meuser from the great state of Pennsylvania for 5
minutes.
Mr. MEUSER. Well thank you very much Mr. Chairman. Thank
you all for being here and as mentioned before braving the
weather and providing some important testimony. It makes a
difference so thank you. You know, Mr. Hooper, you had stated
in your opening testimony since 2021 personnel costs related to
compliance and risk have doubled and we anticipate that they
will continue to rise, the number sits at a staggering $7.1
million. You went on to say 2025 will bring on additional
regulatory burdens. That is nice to look forward to most
notably those associated with implementation of 1071 directly
obviously from the SBA, personnel costs, training costs, and
software enhancements necessary to achieve compliance. We're
estimating now it will cost over $2 million. So we had a
financial service committee hearing a few days last week and it
was about making community banks great again and without a
doubt the biggest take away was the regulatory burdens, the
compliance burdens, the problems. I mean just basically the
weights being put on your backs to allow small business to have
access to capital. And it just, you know, thank goodness we've
got an administration in here and a new SBA administrator and
the majority that understand small business, is going to work
on doing things that are positive for you and not negative and
not deny it. It is incredible in light of the evidence and
everything else that those who sit here and want to say how,
actually how wonderful things should be for you as opposed to
what your evidentiary testimony, not just implies but clearly
states. So, you know, this, the 1071 rule, you know, we've
talked about it so many times with the 81 separate data fields,
has that helped anyone in any way, shape, or form? I'll ask
you, Mr. Hooper?
Mr. HOOPER. No.
Mr. MEUSER. Mr. Sims?
Mr. SIMS. No, sir.
Mr. MEUSER. No. No consumers helped. No businesses helped.
Mr. Wetegrove, I'm sorry, I forgot how to pronounce your name,
Wetegrove, any positives coming out of that extensive amount of
data?
Mr. WETEGROVE. No, sir.
Mr. MEUSER. Yes, private data? Yes. Well we didn't think
so. That's why we want to eliminate it. Can you, the privacy
concerns that come with it, do your small business's have grave
concerns surrounding the privacy as well as the costs and the
uncertainty and everything else that comes with it?
Mr. WETEGROVE. Absolutely.
Mr. MEUSER. Okay. Well that's as well. Okay. So Mr. Sims,
the 7(a) program, the Biden-Harris change the existing credit
elsewhere test the self-certification exercises. We know what
happened there. What degree of concern that you have that this
is affected, which it clearly has the integrity of the program?
Mr. SIMS. Yes, sir. A great example of that is the credit
elsewhere test. As an example of a borrower, a business member
wanted to come to me and move their SBA loan from one
institution to another, let's say they got tired of Mr.
Hooper's friendly fast over here and they wanted to come to me,
for me to refinance that existing 7(a) loan. Underneath the SBA
policy I actually have to go to Mr. Hooper and seek is his okay
in order to refinance that and ask him to provide for me a
letter that says that I cannot provide the financing that the
borrower has requested. So from a competition perspective it
doesn't seem like a really good thing plus the borrower has
indicated that as nice as Mr. Hooper is, they want to find a
different relationship and they can't do that without his
approval.
Mr. MEUSER. Thanks. And Mr. Wetegrove, and I am pronouncing
it right, I hope? My apologies. I did come in late, and I hate
doing that. We did have Chairman Powell in our other, my other
committee so I had to pay some attention over there. But the
small business provisions the tax cut and job act, 199A, the
bonus appreciation, the R&D tax credits, how significant is
that to your clients, your customers, the small businesses that
you serve?
Mr. WETEGROVE. I could not elaborate on that. I don't know
the answer.
Mr. MEUSER. Okay. Mr. Sims or Mr. Hooper?
Mr. SIMS. Would you repeat the question? I'm sorry.
Mr. MEUSER. The tax cut and jobs act provisions, bonus
depreciation, R&D tax credit, 199A, and the carried interest
and such, how significant a blow will it be if we don't
complete that and continue those tax relief?
Mr. SIMS. Yes.
Mr. MEUSER. The business tax incentive, sur.
Mr. SIMS. I think it changes the platform and the go
forward marketplace for those small businesses and they will
react accordingly which would be, I'm going to stop investment.
I'm not going to seek additional capital for me to go advanced
my business opportunities.
Mr. MEUSER. Thanks, well the calvary is here and we are
going to be on the side of small business. I yield back, Mr.
Chairman.
Chairman WILLIAMS. The gentleman yields back. I now
recognize Ms. Simon from the great state of California for 5
minutes.
Ms. SIMON. It is a great state. I'm sorry.
Chairman WILLIAMS. That's what I said.
Ms. SIMON. Thank you. You sure did. I appreciate it. Thank
you, Mr. Chairman. Thank you Ranking Member. I am actually
super excited to speak with you all today and to our witness on
Zoom. I have learned so much and there is so much more to
learn, and I love that I have background music. Listen I am in
agreement with so much of what has been said today and in fact
I'm here to actually speak on behalf of the community banks and
the beautiful 12th District of California. We have over 19
community banks and, you know, I've worked with these banks and
the job training programs that I have developed over the past
30 years for young people coming out of the foster care system
seeking to shift their generational poverty. I have worked with
folks coming out of incarceration. The community banks and our
district from Beneficial Bank, you know, to Summit Bank, they
have done such incredible work. So one I want to acknowledge
them. You know, Mr. Wetegrove, I don't have a question for you,
but I just want to thank you so much because I actually went
down a rabbit hold last night learning about Bow Wow, and I
have got to tell you as someone with a disability who has been
very linked to guide dogs from the blind I saw the work that
you have been doing with disabled folks and their pets. Folks
don't realize when someone is going in for long hospital stays
or for surgeries they need somewhere to keep their animal that
actually keeps them alive when they are well. I want to thank
you for that. I also want to acknowledge that as a vet, we are
talking about SBA. As a veteran and again I come from a family
of veterans on my maternal side, SBA should be doing everything
in its power to streamline resources, folks, who are leaving
and retiring from the service many in my district are left in
poverty. They don't deserve the bureaucracy. I 100 percent
agree. If we want to do right by our veterans SBA needs to
expand its services, making sure that you don't have to spend
six months, not even two days getting to a representative. Just
last week I was in my district, visiting our SBA lead and they
are so wonderful. Wonderful folks who are working in community.
There are, I mean I have got the stats here. Over 26,000 small
businesses in California's 12th District. Less than two hours
after I left the meeting with the SBA lead these staff members
who are working with low-income business owners, business
owners from technology, again to your dry cleaners, your auto
repair shops, two of these members got lay-off notices in this
time where we are talking about building up the nations
economy, particularly the backbones of our community. I agree,
Mr. Wetegrove, we need a robust system with regulations that
keep us from waste, fraud, and abuse but frankly as we cut the
federal workforce we will find less opportunities for our
business owners to get the resources that they need to thrive.
I want a bustling downtown. I want a transportation system that
brings folks from the suburbs to the city. We can get there.
But SBA, my God, we need to expand it. I want to say one more
thing, our small business pay local taxes. We know and those
taxes support our police, our fire, in fact our school systems,
while some of that comes from the state and the feds. Our small
business, when we say life blood they keep our cities alive. So
as we cut, which is on the table, our SBA staff, we cut public
safety, we damage public schools, we prevent our vendors from
accessing the resources that they need to escape poverty once
for all. We take from single mothers trying to create a beauty
shop, or a local consulting opportunity. We take time and
resource for them, and we leave them at the whims of the public
dole. So in terms of community banks they do what I know a lot
of the big banks can't do they support folks, right, front, and
center. They are at the desk every single day. So I just have a
quick question for, DeArment. People mispronounce my name all
the time. That's why I ask. I have a brief question, you know,
for you. You know, your organization works on the ground to
finance small businesses, local small businesses that are often
underserved. And it sounds like community banks and non-profit
lenders, we only have a couple of seconds are filling in the
gaps. Name three gaps that they are filling in?
Ms. DEARMENT. Low wealth, low income, no business
experience.
Ms. SIMON. Say that again, we have a couple of seconds.
Ms. DEARMENT. Low wealth, low income, no business
experience.
Ms. SIMON. Low wealth, low income, no business experience,
the foundation of this country is built on those three
demographics being able to lift themselves up. Let's fund, fund
an SBA and community banks. Give them all the resources that
they need to lift up populations from urban to rural. I yield
back.
Chairman WILLIAMS. The gentlelady yields back. I now
recognize Mr. Bresnahan from the great state of Pennsylvania
for 5 minutes.
Mr. BRESNAHAN. Thank you, Mr. Chairman. I appreciate the
opportunity here and to the witnesses for braving the inclement
weather and making it out to glorious Washington D.C. Before
this in my prior life something that brought me a lot of
pleasure was working with entrepreneurs. I was a real estate
developer, and nothing would bring me more joy than someone
taking the leap, trying to make it out on their own. And
something that was unanimous with every conversation was how do
we have accessibility of capital and what do I need to do? Is
it work with a community bank? But there was always a barrier
to try to get off the ground. Either there wasn't prior
experience, they didn't have the collateral to secure a certain
loan. And people would always suggest, well what about the SBA?
And what they found was it was absolutely impossible to try to
navigate. And there were some earlier questions relevant to the
team of lawyers and accountants. I mean at my company even, you
know, we grew to 175 people and would struggle to meet the
SBA's requirements sometimes to procure the capital necessary.
I couldn't imagine a young entrepreneur trying to hurdle these
boundaries to really make a difference. What could we do to
lesson the bureaucratic red tape to really get dollars into the
hands of these entrepreneurs and young businesses that
ultimately will make a difference. And I guess my first
question would be for Mr. Sims.
Mr. SIMS. Thank you congressman. I honestly think the place
to start is with the SOP, the standard operating procedures of
the SBA. Again I go back to the products are good. The
structure of the products are good. The terms are very flexible
and in particular as you compare them to a traditional
commercial type product set. And so I think going through the
thousands of pages of the SOP and streamlining how a small
business is able to engage with the SBA through their local
banker whether it be a community bank or a credit union, there
is where your expertise lies. We are going to ask them
questions to understand what it's going to take for them to be
able to qualify underneath the SBA requirements. So even Ms.
DeArment said a few minutes ago, let's go to low wealth, low
income, low business experience. The SBA has requirements for
that. So you must meet minimum debt service coverage
requirements. You must meet minimum business experience
requirements. And you must meet minimum collateral
requirements. So even if the, you wanted to use the SBA vehicle
as an opportunity for the type businesses that she's providing
services too, you could not because they would not qualify. All
right. So when she talks about turning, the banks turning those
down, the credit unions turning those down, we're following the
SBA procedures. So the place to start is to create opportunity
for the type of businesses that she's serving where there might
be a special program. For example, we talked about an area
where there may be disadvantages or issues that are going on in
that particular community, you could create a program where
those requirements were lessened, still safe, still prudent but
they're not set at the levels that they are today.
Mr. BRESNAHAN. So whose responsibility would that fall
under? Would that be more in the lane of the community bank
itself?
Mr. SIMS. It would not. It would be the lane of the
administrator of the SBA and the SOP.
Mr. BRESNAHAN. And sometimes what I have noticed is we were
super involved with the community bank. It was our primary
lender for many years. And sometimes the community banks though
have availability of resource concerns and, you know, trying to
get staff analysts or being able to keep up with the demand to
supplement the applications with the actual raw material is a
challenge and it becomes a pitch point and then our young
business or our entrepreneur need to find a way to get around
the blockage there in the artery and try to make a difference
and ultimately it stops them from opening their doors. May last
question would just be by a quick show of hands. Have any of
you individually had to fill out any of the beneficial
ownership forms for any of your own entities? You did? I had to
fill out a 11 of them and it took me from Harrisburg to
Washington D.C. for about two and a half hours and I did it on
the online portal after it would crash more times than I care
to admit it was frustrating. And, you know, I felt that I
wanted to go through the process knowing that I was going to be
serving on this small business committee, and I thought the 87
data fields that Mr. Meuser had referenced earlier were
incredibly redundant. If you have a single member LLC you're
asked to provide the same information on three separate pages,
and I think it will again be one of those barriers for that
small business to get up and running and off of the ground. So
with that I yield back. Thank you.
Chairman WILLIAMS. The gentleman yields back. Okay. We have
one more, here she comes. Now recognize Ms. Goodlander who made
a grand entrance here so from the great state of New Hampshire
for five minutes.
Ms. GOODLANDER. Thank you, Mr. Chairman and my apologies.
This is my first day with two hearings at the exact same time.
So I have gotten my steps into today. But I want to thank you,
Mr. Chairman, for bringing this hearing together and to our
witnesses for coming from all across the country to talk about
this really important set of issues. I am so excited to be
serving on this committee. New Hampshire is a great state and
the overwhelming majority, more than 99 percent of our
businesses are small businesses. We are also the home of the
birth of the credit union, which is very exciting. So Mr. Sims,
I wanted to ask you from your perspective how, what priorities
you would really point this committee towards in the days
ahead? You had mentioned the importance of regional SBA staff.
We are getting a lot of really unsettling reports about SBA
staff who have received termination notices and who aren't sure
about their fate within that important government agency. And I
just want to ask you about if you could say a bit more about
your partnerships with SBA staff and the role that the SBA has
played?
Mr. SIMS. Yes, thank you for the question and I'm said to
hear that as well. Those folks in our Georgia region district
office play a vital role in my opinion can play even a greater
role, play even a greater role in helping community banks and
credit unions navigate the SBA process. Again you have heard me
say this a number of time. The products are very good. They are
very good. The process leaves a great deal to be desired and
often we are faced with elongated time frames in which we would
pose a question to 7(a) questions and waiting for that question
for come back. Well there is a business member that is impacted
by that time frame as well that's on the other end of that
answer and it would really be nice if we had a regional
district office members that we could go to and say, hey, can
you help us navigate this? Here's what we've done. Here's the
questions we asked and we sure could use some assistance with
this. Is there someone that you could pick up inside the phone
that calls up the chain to be able to help us with that?
Ms. GOODLANDER. Well thank you for that. You know, some of
the most exciting stories that I have heard from small business
owners across New Hampshire have been the stories of microloans
that have really made all the difference across my state. You
know, one in particular, and SBA supported program that we have
been following is the Grafton Regional Development Corporation.
They have a microloan program that has really helped to bring
about what we all want on this committee which is the
realization of the American dream for hard working people. This
program it has been amazing to read the stories from hair
stylists to plumbers. This program has supported business
owners all across my state. I wanted to ask and open it up to
our witnesses if you could share a bit more about your
experiences with SBA microloan programs and what you have seen
work well and any reforms that you would point us to here in
congress.
Mr. SIMS. I'll jump in if it is okay. I'm in embarrassed to
say that I'm not familiar with many of the microloan programs
and then I would also go back to what a great conversation that
that could be with our district offices who probably are very
familiar with that. Most of my organization's focus is on the
7(a) product and the 504 product and as I have learned today
quite frankly through the conversation there are a lot of other
different products that I'm not currently utilizing to day so a
little education for me. And again I think we could lean on
those district offices in order for us to get more involved in
those type of lending programs.
Ms. DEARMENT. I would like to jump in on
Mr. HOOPER. I would say am not----
Ms. DEARMENT.--on the microloan? Is that all right? May I
jump in on the microloan program
Ms. GOODLANDER. Please.
Mr. HOOPER. I was just going to note that I'm not familiar
with the microloan programs as well. Our primary focus has been
on the 7(a) and the 504 programs.
Ms. DEARMENT. I would be happy to jump in on the microloan
program.
Ms. GOODLANDER. Thank you. That'd be great.
Ms. DEARMENT. Yes, we do a ton of microloan programs, a ton
of microloans. One of the really interesting things about
lending is if you think about someone who is getting a business
loan, an small business loan, when we look at them I think from
bank or credit union perspective you think if that business
fails what are we going to do to get repaid? We're going to
have some outside income, some outside wealth, some collateral.
Micro loaners often don't have that when they look at the
clients that we serve and we think about that as a safety net,
those family resources, assets, the microloan program provides
technical assistance and that allows us to go in and make sure
that they have good business planning, an asset plan, a credit
building plan, and an onramp to bankability. It replaces that
safety net by providing a loan that is wrapped in technical
assistance services, so you don't need wealth as your answer.
Chairman WILLIAMS. The gentlewoman's time is up.
Ms. GOODLANDER. Thank you. Thank you, Mr. Chair. I yield
back.
Chairman WILLIAMS. Okay. The lady yields back. I would like
to now thank our witnesses for your testimony today and for
your appearing before us. Without objection Members have 5
legislative days to submit additional materials and written
questions for the witnesses to the Chair which will be
forwarded to the witnesses. So I ask the witnesses to please
respond promptly. If there is no further business without
objection the committee is adjourned and thank you again for
being here.
[Whereupon, at 12:17 p.m., the committee was adjourned.]
A P P E N D I X
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