    [Senate Hearing 119-170]
    [From the U.S. Government Publishing Office]

                                                          S. Hrg. 119-170

                         USING THE 504 PROGRAM TO BUILD
                         AMERICA'S MANUFACTURING FUTURE
    =======================================================================

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON SMALL BUSINESS
                              AND ENTREPRENEURSHIP

                                     OF THE

                              UNITED STATES SENATE

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 17, 2025

                                   __________

          Printed for the use of the Committee on Small Business and
                                Entrepreneurship

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.govinfo.gov

                                  __________

                          U.S. GOVERNMENT PUBLISHING OFFICE
    61-659                        WASHINGTON : 2026
    =======================================================================

                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                        ONE HUNDRED NINETEENTH CONGRESS

                                  ----------

                            JONI ERNST, Iowa, Chair
                EDWARD J. MARKEY, Massachusetts, Ranking Member
    JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington
    RAND PAUL, Kentucky                  JEANNE SHAHEEN, New Hampshire
    TIM SCOTT, South Carolina            CORY A. BOOKER, New Jersey
    TODD YOUNG, Indiana                  CHRISTOPHER A. COONS, Delaware
    JOSH HAWLEY, Missouri                MAZIE K. HIRONO, Hawaii
    TED BUDD, North Carolina             JACKY ROSEN, Nevada
    JOHN R. CURTIS, Utah                 JOHN W. HICKENLOOPER, Colorado
    JAMES C. JUSTICE, West Virginia      ADAM B. SCHIFF, California
    JON HUSTED, Ohio
                    Meredith West, Republican Staff Director
                     Sean Moore, Democratic Staff Director

                               C O N T E N T S

                                  ----------

                               SEPTEMBER 17, 2025
                               Opening Statements

                                                                       Page
    Joni Ernst, U.S. Senator from Iowa...............................     1
    Edward Markey, U.S. Senator from Massachusetts...................     2

                                   Witnesses

    Mr. Karl E. Swanson, President, PCT Ebeam and Integration, LLC,
      Davenport, IA..................................................     5
        Prepared Statement...........................................     7
    Mr. David P. Raccio, Senior Vice President and Director of SBA
      Lending, CDC New England, Wakefield, MA........................    13
        Prepared Statement...........................................    15
    Ms. Jean Wojtowicz, Executive Director, Indiana Statewide CDC,
      Indianapolis, IN...............................................    23
        Prepared Statement...........................................    25
    Ms. Hilda Kennedy, Founder and President, AmPac Business Capital
      Ontario, CA....................................................    34
        Prepared Statement...........................................    36

                  Additional Letters/Statements for the Record

    TMC Financing
        Testimony Dated September 17, 2025...........................    60

                            Questions for the Record

    Mr. David P. Raccio
        Responses to questions submitted by Senator Hirono...........    64
    Ms. Jean Wojtowicz
        Responses to questions submitted by Senator Young............    66

         USING THE 504 PROGRAM TO BUILD AMERICA'S MANUFACTURING FUTURE

                                  ----------

                         WEDNESDAY, SEPTEMBER 17, 2025

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 2:31 p.m., in
    Room 428A, Russell Senate Office Building, Hon. Joni Ernst,
    chair of the committee, presiding.
        Present: Senators Ernst [presiding], Hawley, Husted,
    Markey, Shaheen, Coons, Rosen, and Hickenlooper.

                   OPENING STATEMENT OF SENATOR ERNST

        Chair. I call the Committee on Small Business and
    Entrepreneurship to order. We are here today to discuss the
    role that the Small Business Administration's 504 Certified
    Development Company, or CDC, loan guarantee program can play in
    supporting investment in America's small manufacturers.
        Over the course of this year, the committee has examined
    the staggering decline of America's manufacturing sector. 40
    years ago, factories across the country roared with activity,
    towns thrived, and America felt unstoppable. We were truly
    unrivaled as a nation. Today many of those same factories stand
    idle, communities that once depended on them fade and struggle,
    and millions of jobs have vanished.
        Today, we're seeing some of the lowest levels of
    manufacturing employment that we've seen in nearly a century.
    Sadly, we're losing more than just jobs. We're losing America's
    knowledge, talent, innovative edge, and tradition of industrial
    excellence.
        By neglecting our manufacturing sector and infrastructure,
    we've crippled our own ability to scale new technologies,
    leaving us less competitive on the international stage. Simply
    put, we've let our guard down, and it's our adversaries like
    China who stand to benefit.
        To restore our economic resilience and global dominance, we
    must empower our small manufacturers to lead the way. That
    starts by providing them with the resources they need to
    reverse this decline and rebuild our domestic productive
    capacity.
        In prior hearings, we have explored how we can channel more
    capital into American manufacturing, whether through private
    capital committed as part of the Small Business Investment
    Company program, or through 7(a) loans guaranteed by the SBA.
        Today, we're focused on one program that is uniquely suited
    to helping small manufacturers build and expand: the 504 Loan
    Program. The 504 Loan Program is the primary way that SBA helps
    small business owners buy major fixed assets like real estate
    buildings, equipment, and machinery, and even construct
    facilities from the ground up. It gives borrowers long-term
    fixed rate financing of up to 25 years. That kind of
    predictability is exactly what small manufacturers need to
    establish or modernize their operations.
        Thanks to the work of participating CDCs, the 504 Program
    has been able to maintain a low default rate of under one
    percent per year. In the last five years, it has been under
    half a percent. That is the hallmark of a loan program that is
    safe, reliable, and deeply impactful.
        But it isn't perfect. Stakeholders have made clear that
    improvements can be made to eliminate red tape in the closing
    process and provide more flexibility to borrowers, especially
    for rural businesses.
        This committee has continually looked at ways to build upon
    the program's success, including consideration of legislation
    introduced by Senator Young aimed at streamlining the Office of
    Credit Risk Management's oversight of CDCs.
        Another way to strengthen our manufacturing future is by
    passing the Made in America Manufacturing Finance Act, which I
    introduced in April alongside Senator Coons. The committee
    reported out the bill in July. This bipartisan legislation
    would double the 504 loan limit from $5 million to $10 million
    for small manufacturers who need that capital to modernize,
    grow, and train a new generation of American workers.
        I know from the countless conversations I've had with small
    business owners, that this makes a real difference. Many
    companies could have expanded faster, hired more workers, and
    invested in new technologies if only the loan limits had
    allowed it. CDCs tell us the same thing. Clients are forced to
    slow their growth or seek outside funding on less favorable
    terms simply because their needs couldn't be met by what is
    currently allowed.
        I'm grateful that we're joined today by our panel of CDC
    lenders and program participants. I look forward to hearing
    from them about how Congress can improve the 504 Program and
    give American entrepreneurs what they need to build a stronger,
    more resilient manufacturing future.
        And I now recognize Ranking Member Markey for his opening
    statement.

                      STATEMENT OF SENATOR MARKEY

        Senator Markey. Thank you, Madam Chair. [Technical
    issue.]--manufacturers faring in the Trump economy. Well, the
    Institute for Supply Management reported that the manufacturing
    sector shrank for the sixth consecutive month in August as
    supply prices continue to rise.
        According to a July survey from the National Association of
    Manufacturers, small manufacturers' positive outlook for their
    companies has dropped to the lowest level since the height of
    the COVID-19 pandemic. And since Trump's so-called ``tariff
    liberation day'' in the beginning of April, the United States
    has lost more than 42,000 manufacturing jobs. They've
    disappeared.
        And we've seen this before. During President Trump's first
    administration, 200,000 manufacturing jobs were lost. And to
    hide the failing state of his economy, President Trump is
    following the three Ds; divert, distract, and deceive. Instead
    of taking responsibility, President Trump has fired the Bureau
    of Labor Statistics Commissioner and called to end quarterly
    earnings reports.
        But no matter how hard President Trump tries to hide the
    data, it is crystal clear that it is his policies that are
    hurting small manufacturers across our country. President
    Trump's tariffs are pushing up prices, making it difficult for
    our small U.S. manufacturers to compete. For too many small
    U.S. manufacturers, MAGA stands for ``manufacturers are going
    abroad''. In May, our committee heard from Julie Robbins, CEO
    of EarthQuaker Devices in Ohio. She told us that she had faced
    tariffs as high as 185 percent forcing her to consider moving
    production overseas.
        President Trump's attack on clean energy is also fueling
    America's manufacturing decline. Trump's SBA ended their Green
    Lender Initiative, and the big ugly bill rolled back many of
    the clean energy incentives in the Inflation Reduction Act of
    2022. These incentives and programs contributed to the almost
    700,000 manufacturing jobs added during the Biden
    Administration.
        And now, President Trump's sweeping attacks on immigrants
    are crushing the manufacturing workforce from the largest
    manufacturers to the smallest of the small manufacturers in our
    country. And to add to the small business' paying, President
    Trump's SBA is adopting draconian requirements. These
    requirements bar small businesses with any amount of foreign
    investment and small businesses, partially owned by people who
    are lawfully here, including DACA recipients, assignee, and
    refugees from getting an SBA loan.
        This breaks from at least a quarter of a century of SBA
    policy that allowed small businesses, including manufacturers,
    51 percent owned and controlled by U.S. citizens, nationals,
    and green card holders to receive SBA loans. These changes are
    creating a chilling effect. In Massachusetts, one small
    business owner with a green card who was likely an eligible SBA
    borrower decided not to apply for an SBA loan because they
    feared their legal immigration status would be used against
    them in President Trump's America.
        If President Trump were serious about growing American
    manufacturing, he would be investing in our future not burning
    it down. So, I agree with raising the loan limits on SBA's 504
    Loan Program, or as I'd like to have it be called, the Economic
    Development Loan Program.
        And I appreciate Chair Ernst and Senator Coons' leadership
    on this issue, and the intent of the Made in American
    Manufacturing Finance Act. However, we should work to ensure
    that the larger loans allowed under this legislation lead to
    good-paying jobs. We should raise SBA loan limits specifically
    for our clean energy manufacturers to supercharge our economy,
    make our communities cleaner, and to create jobs.
        We must return to the historic SBA lending rules that
    supported immigrant entrepreneurs, and we must break down
    barriers and create programs that are tailored to help our
    minority entrepreneurs access capital. So, today, I look
    forward to hearing from our witnesses about how we can
    accomplish these goals. I thank you Madam Chair for calling
    this hearing and the legislation which you and Senator Coons
    have put together.
        Chair. Wonderful. Thank you, Ranking Member Markey. And,
    again, I want to extend a warm welcome to all of our witnesses.
    I will now introduce our witnesses who are testifying today. I
    am thankful that you-all took time out of your busy schedules
    to join us here in DC and share your expertise on SBA's 504
    Loan Program and access to capital through Certified
    Development Companies, or CDCs.
        First, we have Mr. Karl Swanson. He is the president of PCT
    Ebeam and Integration, which is a small manufacturer of
    electron beam systems in Davenport, Iowa. Mr. Swanson
    previously served as director of sales and marketing at PCT
    Engineered Systems and began his career as an automation sales
    specialist at Industrial Engineering Equipment Company.
        He received his bachelor's degree in electrical engineering
    from University of Illinois Urbana-Champaign, and his MBA from
    St. Ambrose University. And thanks for making the trip again
    from Iowa. Thank you, Karl.
        Ms. Jean Wojtowicz is the executive director of the Indiana
    Statewide CDC. She is also the founder and president of
    Cambridge Capital Management Corporation, an Indianapolis-based
    manager of non-traditional sources of capital for businesses.
    She previously served as the lead independent director on the
    board of directors of Vectren Corporation, a New York Stock
    Exchange energy holding company serving Indiana and Ohio.
        Ms. Wojtowicz who holds two bachelor's degrees in finance
    and real estate from the University of Wisconsin-Madison. I now
    recognize Ranking Member Markey to introduce his witnesses.
        Senator Markey. Thank you, Madam Chair. Mr. David Raccio
    has been with CDC New England located in Wakefield,
    Massachusetts since 2017, and is currently the senior vice-
    president and director of SBA lending. CDC New England is one
    of the most active 504 lenders in Massachusetts. He brings deep
    expertise in helping small businesses grow. He's also a proud
    U.S. Air Force veteran serving six years on active duty and in
    the reserves. And we thank you so much for being with us today.
        And Ms. Hilda Kennedy is the founder and president of AmPac
    Business Capital based in Ontario, California. AmPac
    participates in several SBA lending programs, including the 504
    Program. She is a board member of the National Association of
    Development Companies, or NADCO, and she previously worked as
    the director of economic development for the City of Inglewood.
    And we look forward to hearing of all of the testimony that's
    going to be presented today. Thank you, Madam Chair.
        Chair. Wonderful. Thank you, Ranking Member Markey. And
    briefly, I'd like to take a moment just to explain our lighting
    system that is there on the boxes in front of you. There are
    three lights in front of you. Green means go. Yellow means
    you're running out of time. And red means to please wrap it up.
        I ask unanimous consent that the witness's full statements
    be included in the record. Without objection, so ordered. As
    your written testimony has been made part of the record, the
    committee asks that you limit your oral remarks to five
    minutes. And with that, Mr. Swanson, you are now recognized for
    five minutes for your testimony.

      STATEMENT OF MR. KARL E. SWANSON, PRESIDENT, PCT EBEAM AND
                   INTEGRATION, LLC, DAVENPORT, IOWA

        Mr. Swanson. Chair Ernst, Ranking Member Markey, and
    members of the committee, I'm humbled by the responsibility to
    represent the interest of the hundreds of thousands of small
    manufacturers that fuel the American economy.
        As you said, my name is Karl Swanson, and I grew up on my
    family's farm near Rio, Illinois. Today I'm the President of
    PCT Ebeam and Integration located in Davenport, Iowa, which was
    founded in 1986.
        When the original majority owner was looking to retire, the
    most attractive option was to be acquired by a Swiss company.
    The integration was unsuccessful, and when the business was
    getting ready to close, I found eight of my long-term coworkers
    willing to join me and buy the company back.
        In November of 2018, we reached an agreement to make this a
    reality and embarked upon what has been a challenging and
    rewarding journey. We have experienced firsthand the advantages
    of, once again, being an American owned small business. In
    seven years, we have grown from 45 to 65 employees and have
    also reacquired many of the critical manufacturing capabilities
    that were divested by the previous owner.
        PCT is both a systems integrator and a manufacturer of
    industrial electron beam systems. Our ebeam machines are used
    in a variety of different industries where they enable energy
    efficient production of prepainted steel, are used in the
    manufacturing of advanced medical materials, and can be used to
    achieve more sustainable production of lithium-ion batteries.
        Building these specialized machines requires a skilled
    workforce and specific manufacturing capabilities. 50 percent
    of the ebeam systems we build are exported. Our foreign
    customers often require their advanced payments to be secured
    by local bank guarantees. The options for a small U.S.
    manufacturer to comply with these requirements are limited. For
    PCT, it is critical that we have access to funds to support our
    material and labor expenses throughout the lengthy production
    schedule.
        The Small Business Administration has been a major source
    of support for our business. From purchasing our commercial
    real estate to expanding our export efforts following our
    purchase of the business, we have the opportunity to also
    purchase our building and thus secure our company's long-term
    future.
        The SBA 504 Loan Program was recommended by our local bank
    and made this purchase possible. Following further success, we
    decided to expand our manufacturing shop. Once again, the SBA
    504 was critical in helping us finance this expansion and add
    more production capabilities, facilitate better material flow,
    and increase our capacity to assemble and test more ebeam
    systems each time we look to invest in our long-term future.
    The SBA 504 gave us a financing solution that was both
    accessible and affordable. Our experience shows how central the
    SBA 504 is to long-term business growth and competitiveness.
        But as that growth leads to bigger opportunities and our
    business takes on larger and more complex projects, we have
    experienced limitations in SBA's financing programs that impose
    undue constraints on the organic and profitable growth of
    manufacturing firms like ours.
        The biggest limitation we faced was when our financing
    needs intersected with SBA aggregate program caps. For example,
    we received a multimillion-dollar order from a customer in
    Brazil. We needed to provide bank guarantees equal to the value
    of advance payments received before shipment.
        The SBA 7(a) Export Working Capital Program would've been
    the ideal solution, but after securing $2.956 million in SBA
    504 financing, only $794,000 remained available under the SBA
    7(a) guarantee cap. These limitations create constraints not
    only for our business, but also for lenders who want to support
    U.S. manufacturers competing in global markets.
        The Made in America Manufacturing Finance Act of 2025
    introduced by Chair Ernst to increase the maximum total loan
    size to $10 million would directly address our situation.
    Having access to this additional loan capacity would provide
    PCT with a cost-effective means of supporting more export
    business, which in turn improves our competitiveness in foreign
    markets, enables us to accelerate further investments in
    additional staff and production equipment domestically.
        Another limitation we experienced was SBA loan approval
    times. The pace of business is fast, and America's small
    businesses must be able to move quickly to remain competitive.
    An agile SBA, equipped to scale staffing in response to loan
    volume and deliver timely approvals is essential to supporting
    the growth and success of our nation's entrepreneurs.
        I respectfully request that you continue your efforts to
    strengthen and simplify the SBA 504 Program to ensure that
    growing manufacturers can expand capacity, compete
    internationally, and create more U.S. jobs.
        Thank you for considering these requests to improve the
    valuable support the SBA provides to American manufacturers
    through the 504 Loan Program.
        [The prepared statement of Mr. Swanson follows.]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chair. Thank you. And now, Mr. Raccio, you are recognized
    for five minutes for your testimony.

      STATEMENT OF MR. DAVID P. RACCIO, SENIOR VICE PRESIDENT AND
         DIRECTOR OF SBA LENDING, CDC NEW ENGLAND, WAKEFIELD,
                             MASSACHUSETTS

        Mr. Raccio. Chair Ernst, Ranking Member Markey, and
    distinguished members of the committee, thank you for the
    opportunity to testify today. I am honored to join my
    colleagues from the CDC industry to discuss the SBAs 504 Loan
    Program.
        My name is Dave Raccio and I serve as the Senior Vice
    President and director of SBA lending at CDC New England, which
    is located in Massachusetts. We provide SBA 504 loans across
    five New England states, which include Massachusetts,
    Connecticut, Rhode Island, Vermont, and New Hampshire. And we
    are consistently ranked in the top 15 CDCs nationwide. Since
    our funding in 1982, we have delivered more than 1,600 loans
    totaling over $1 billion in SBA financing, helping to create
    and retain more than 25,000 jobs.
        The SBA program is unique. It provides small businesses
    with long-term, fixed rate capital for real estate and major
    equipment purchases while requiring measurable economic impact.
    In short, the program fuels growth, creates jobs, and
    strengthens communities, all while operating at zero subsidies
    to taxpayers, and a remarkably low one-year charge off rate of
    0.08 percent.
        As an industry, CDCs are proud of these accomplishments.
    That said, modernization is needed. I'd like to highlight four
    key areas where immediate reforms could expand impact. Number
    one; clean energy. In June, 2025, the SBA reimplemented an
    arbitrary $16.5 million cap on energy projects and provided no
    data to support the need for such a cap. I recommend this cap
    be lifted to meet growing demand. We often have repeat
    customers, and we want to make sure they have continued access
    to capital to continue to grow their businesses.
        A prime example of a business we assisted with the 504
    energy efficiency program was the SBO Sports Center in
    Massachusetts. This company has been an outstanding corporate
    partner, not only providing free clinics for children of all
    ages, but also generating significant economic activity and
    local jobs.
        To date, they have received three separate 504 loans and
    continue to grow their business. Today, in recognition of these
    contributions, the company was honored as a 2024 Massachusetts
    family-owned business of the year.
        Number two; manufacturing and standard 504 limits. As an
    industry, we support increasing the SBA 504 loan maximum from
    $5 million to $10 million for manufacturers. If we are serious
    about revitalizing U.S. manufacturing, we must provide the
    capital tools needed for expansion. We also must address
    inflation in the loan limits for traditional 504. The current
    statutory caps have not been raised in more than 15 years. I
    recommend increasing these limits to $7.5 million for standard
    504 loans and $10 million for manufacturers and renewable
    energy projects. This will account for inflation and continue
    to provide businesses with the capital they need to grow and
    create jobs.
        Number three; citizen verification. New SBA rules require
    businesses to be 100 percent owned by U.S. citizens, nationals,
    or long-term lawful permanent resident. This change is already
    shutting out otherwise strong businesses.
        We recently saw a stone importer, which was 85 percent
    owned by a female U.S. citizen denied financing because 15
    percent of the ownership was held by her father from Brazil who
    provided the original startup capital. This policy unfairly
    blocks U.S. citizens from accessing growth. Capital SBA should
    revert to its longstanding more reasonable guidance.
        Number four; down payment assistance. Our CDC provides down
    payment assistance designed to reach underserved borrowers and
    businesses in low to moderate income areas. For example, we
    recently helped an African American women-owned business secure
    $100,000 down payment to purchase her building for her school
    serving children with autism.
        With this support, she was able to move forward, and today
    her school is thriving, expanding, and providing stability and
    jobs for the families who depend on it. We also worked with a
    business owner in East Boston whose project qualified as both
    minority-owned and located in a low to moderate income
    community. With down payment assistance, he was able to expand
    his business and successfully repurpose a mixed-use property.
        These stories show just how powerful targeted support can
    be with the 504 Program. Small businesses don't just grow, they
    build stronger, more resilient communities.
        In conclusion, the SBA 504 Program is one of the most
    effective federal tools for supporting small business, creating
    jobs, and strengthening communities without taxpayer subsidy.
    By lifting outdated loan limits, restoring fair citizenship
    rules, and expanding down payment support, we can ensure the
    program continues to serve America's entrepreneurs for decades
    to come.
        I thank the committee for your leadership on small business
    issues and look forward to your questions.
        [The prepared statement of Mr. Raccio follows.]
       [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chair. Thank you very much, Mr. Raccio. And now, we will
    recognize Ms. Wojtowicz. And you are recognized for five
    minutes for your testimony.

     STATEMENT OF MS. JEAN WOJTOWICZ, EXECUTIVE DIRECTOR, INDIANA
                  STATEWIDE CDC, INDIANAPOLIS, INDIANA

        Ms. Wojtowicz. Thank you, Chair Ernst, Ranking Member
    Markey, and distinguished members of the committee. Thank you
    for inviting me to join you today. I'm honored to represent the
    Certified Development Company industry to discuss the 504 Loan
    Program, which is firmly focused on economic development and
    job creation.
        My name is Jean Wojtowicz, I am the executive director of
    Indiana Statewide CDC. Through this entity, we have funded more
    than $750 million in 504 loans, and leveraged more than $2.2
    billion to over 1,500 Indiana companies, many of them
    manufacturers and companies located in rural areas. I'm also a
    past chair of NADCO, the trade association that advocates for
    the 504 Loan Program, and serve on the board of Eagle
    Compliance, which is the fiscal agent that sells the debentures
    that fund these loans.
        CDCs are SBA-certified organizations dedicated to creating
    jobs and growing local businesses by delivering the 504 Loan
    Program. Many CDCs also deliver other federal, state, and local
    lending products and must invest in economic development beyond
    the 504 Program. This highly successful public-private
    partnership is structured with 50 percent provided by a private
    lender, 40 percent through the SBA backed CDC debenture, and 10
    percent by the borrower.
        This structure supports liquidity, retention and working
    capital preservation as a result of the low down payment, with
    terms conventional lenders rarely provide. The structure and
    terms provide certainty and help borrowers manage cash flow
    fluctuations that come with expanding a business and employing
    more citizens in their communities.
        On March 10th of this year, Administrator Loeffler, along
    with Senator Young, and others, kicked off the Made in America
    tour in Indianapolis at Aerodyne Engineering, who utilized the
    504 Loan Program four times to support their growth and
    expansion. It is companies like Aerodyne that are the backbone
    of growth, innovation, and the creators of jobs for citizens
    all over our country.
        The CDC lending industry is proud of the work we're doing
    to support these companies, and we know the 504 Loan Program
    can do more. We have several recommendations that would enhance
    the program and allow us to serve more growing businesses.
        Number one; pass the Made in America Manufacturing Finance
    Act. The CDC industry supports increasing the manufacturing
    loan size for borrowers to $10 million. This statutory change
    would support the scaling of domestic manufacturing since a $10
    million 504 loan could support a total project cost of up to
    $25 million.
        Number two; reduce the equity contribution from
    manufacturers from 10 percent to 5 percent. Manufacturing is
    capital intensive, and reduced equity requirements will
    encourage investment and job creation while preserving critical
    working capital. These companies need to expand.
        Number three; modernize the 504 loan size limit for all
    borrowers. We would ask you to consider raising the cap for all
    borrowers to $7.5 million and index it to inflation reflecting
    the growth since the last adjustment was made in 2010.
        Number four; eliminate the extra 5 percent borrower equity
    injection requirement for special purpose properties. This
    requirement negatively impacts borrowers and SBA's charge off
    data shows that these properties do not present a higher credit
    risk.
        And number five; continue separating the 504 and 7(a) loan
    programs as they have separate purposes. The 504 Program is
    focused on fixed asset financing, supporting job creation, and
    economic development. The ``credit elsewhere test'', which is a
    7(a) program requirement, should not apply to the 504 Program.
        In conclusion, since 1986, the 504 Program has assisted
    over 200,000 small businesses with nearly $140 billion in
    loans, and a total investment of almost $400 billion and the
    creation of 3.3 million jobs. And it has done so with a charge
    off rate of only 0.08 percent for the most recent year.
    Enacting these recommendations will make the program more
    effective and accessible, allowing more small businesses to
    grow, create jobs, and strengthen our economy.
        Thank you for your leadership on small business issues and
    the opportunity to testify today. I look forward to your
    questions.
        [The prepared statement of Ms. Wojtowicz follows.]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chair. Thank you very much. And finally, we will hear from
    Ms. Kennedy. You are recognized for five minutes.

     STATEMENT OF MS. HILDA KENNEDY, FOUNDER AND PRESIDENT, AMPAC
                 BUSINESS CAPITAL, ONTARIO, CALIFORNIA

        Ms. Kennedy. Thank you, Chair Ernst, Ranking Member Markey,
    and distinguished members of the committee. I'm delighted to be
    here as well to represent the CDC industry and is to discuss
    the 504 Loan Program, the agency's premier economic development
    program.
        This year, AmPac proudly celebrates 20 years of service
    committed to serving small businesses and targeting those who
    control, own, and control little productive capital. As stated
    in the Small Business Act of 1953, through our partnership with
    SBA, AMPAC has leveraged the SBA 504 Program to provide more
    than $2 billion in loans and creation of over 7,700 new jobs.
        I want to focus my comments on three primary areas; energy
    efficiency, down payment assistance, and citizenship. The
    Congressionally authorized energy policy goals signed into law
    by President Bush in 2007 are delivering significant results.
    In California, where we serve Dahdoul Textile, a family-owned
    wholesaler and retailer of consumer goods, is a shining
    example.
        They've used the SBA financing multiple times and have
    created new jobs with each expansion. In the last two years,
    they acquired two locations using the 504 energy public policy
    goal. They installed solar panels, and benefited from greater
    cost savings. With these two recent projects, Dahdoul created
    33 new jobs, and revitalized two vacant stores.
        SBA's current $16.5 million cap on energy-related 504 loans
    limit businesses like Dahdoul from additional SBA financing to
    expand, reduce energy costs and create jobs. Eliminating the
    cap would ensure that small businesses can fully leverage
    energy efficiency and long-term growth and sustainability.
        As noted, the 504 Program follows a basic structure. 50/40/
    10. 10 percent represents borrower equity. However, many small
    businesses, especially first-generation entrepreneurs and
    first-time commercial real estate buyers, may have 10 percent
    down, but the working capital is not there for growth. At
    AmPac, we launched our first ``It Is Possible'' down payment
    assistance loan program to help small businesses.
        And I want to tell you about Jerry. He's the owner of
    Riggins Urban Barber College. He's a Navy veteran who's
    dedicated his life to giving young men and women a second
    chance by training them in barbering. As a first-generation
    entrepreneur, when he bought his building, AmPac's down payment
    assistance helped him to restore cash to support his expansion
    and add for new jobs.
        I recommend establishing a pilot program under the 504 loan
    program for first-time commercial real estate buyers to qualify
    with 5 percent down, which would act as a floor and not a
    ceiling, and allow CDCs' flexibility to make credit decisions
    that also maintain our 0.21 percent default rate as noted in
    Fiscal Year 2024.
        I want to also highlight recent changes in the SOP
    regarding citizenships. That's limited to 100-owned by U.S.
    citizens, U.S. nationals, and lawful permanent residents. I
    fully support SBA resources going to U.S. citizens, but this
    change has negatively impacted some majority-owned and
    controlled U.S. citizen businesses.
        One such business is a private school in Orange County,
    founded by three partners, two U.S. citizens, and a minority
    partner with 6.5 percent stake. The schools were looking for a
    504 loan, but we were not able to help them because of this
    change.
        I recommend restoring the SOP language that allowed SBA
    financing for businesses that were majority-owned and
    controlled by U.S. citizens by addressing citizenship, clean
    energy, and down payment assistance, as well as a thoughtful
    adjustment such as increasing 504 size limit and for
    manufacturing businesses.
        The SBA can fulfill its Congressional mandate to fill
    market gaps for America's entrepreneurs and build on the
    economic development mission of the 504 loan program.
        Thank you so much for the invitation, and we welcome your
    questions.
        [The prepared statement of Ms. Kennedy follows.]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chair. Wonderful. Thank you very much. And now we will go
    into our question and answer portion of today's hearing, and I
    will recognize myself for five minutes for questions.
        And I'll start with Mr. Swanson. So, Mr. Swanson, thank you
    for making the trip to Washington, and for representing Iowa
    small businesses. In your testimony, you describe how you
    bought your business from an international owner and then used
    the SBA's 504 loan program to both purchase your business'
    building, and then expand your operation in Iowa.
        Can you describe the investments that the 504 Program has
    enabled you to make, and how the program helps small
    manufacturers secure the capital they need to expand operations
    and maintain a steady pace of modernization?
        Mr. Swanson. Thank you, Senator Ernst. In our case, the
    structure of the 504 Program was essential for us as a
    relatively new ownership group to afford even considering the
    purchase of the building. And what that enabled us to do is
    secure the future of our business in that location within a
    purpose-built structure that, that met our needs very well.
        The expansion following behind that, again, with the 504
    Program was a very attractive way that we could do that while
    still maintaining enough working capital continue to hire the
    staff that we were building back.
        As I indicated in my comments, additionally we were in need
    of bringing in more production equipment. And so, again, by
    having the capacity to continue to make those in incremental
    investments over the growth of our business, that is the end
    result of how we use that, the program, and how it benefited
    us.
        Chair. Wonderful. I appreciate that. And then
    modernization, continual modernization. Really appreciate that.
        Mr. Swanson. Constantly. And we've made more investments
    this year in some new capabilities, a laser welder, plasma
    table, all things that we didn't have the internal capacity to
    do before. And it just all helps drive more of our capabilities
    internally.
        Chair. Fantastic. Thank you. And Ms. Wojtowicz, over the
    last five years, we have seen demand for larger loans within
    this 504 Program. They've steadily increased. In Fiscal Year
    2021, only four percent of loans reached the program maximum
    compared to over nine percent in Fiscal Year 2025. Over that
    same period, the share of these large dollar projects for
    manufacturers has grown at an even faster rate, nearly
    tripling.
        My Made in America Manufacturing Finance Act in conjunction
    with Senator Coons--and thank you for partnering; really
    appreciate that--would double the loan limits for small
    manufacturers. So, if you could explain for us, what are the
    benefits of expanding the 504 loan program's limits for small
    manufacturers, and how can we do that while also mitigating
    taxpayer risk?
        Ms. Wojtowicz. Thank you, Senator Ernst, and thank you for
    introducing that bill. We think it's going to be extremely
    impactful to manufacturers. Indiana is a very high level of
    manufacturing state. In fact, 45 percent of our 504 loans that
    we've made have been to the manufacturing sector. So, clearly
    important to our state and to the employees that work at those
    companies.
        If you think about the cost of manufacturing, much of this
    equipment is multimillion dollar pieces of equipment. And for a
    company to expand, like Mr. Swanson's has expanded, and having
    to continue to bring current equipment in that will increase
    efficiencies and keep those companies competitive, is extremely
    important.
        And so, not only do we use the higher loan limits so that
    they can build larger buildings and employ more people, but
    certainly also to purchase and put into production the very
    large pieces of equipment that are necessary for those
    companies to remain competitive and to continue to grow. So,
    it's extremely important to see those loan limits increased.
        Chair. Oh, we appreciate the feedback very much. And just
    very briefly, Ms. Kennedy, I've always prioritized ensuring
    that the SBA programs provide that meaningful support to rural
    small business owners who often face substantial challenges in
    getting adequate access to capital. We hear about that all the
    time. Could you just briefly walk us through any efforts you've
    made to support rural small business owners?
        Ms. Kennedy. Thank you so much, Chair Ernst. We have
    actually made a number of loans to rural businesses. In fact,
    about $70 million in 504 lending to rural businesses as well as
    loans to businesses for Microloans and Community Advantage
    loans. 2.3 million residents in California are rural, or 5.8
    percent of the population. So, it's a very important part of
    the business that we do in the state. So, thank you for the
    question. Really appreciate that.
        Chair. Thank you. And now I recognize Ranking Member Markey
    for five minutes.
        Senator Markey. Thank you, Madam Chair, very much. And as I
    said in the opening, Senator Ernst and senator Coons'
    Manufacturing Act is one step forward. But as I also pointed
    out, President Trump's policies are four steps backwards for
    manufacturers at the same time, which is still hurting our
    economy.
        And as I mentioned in my opening, Trump's SBA new severe
    citizenship verification requirements are cutting off small
    business access to capital. These requirements specifically bar
    small businesses with any amount of foreign investments or
    ownership through individuals lawfully in the United States of
    America, including DACA recipients and refugees from receiving
    a loan.
        Now, to qualify for an SBA loan, small businesses must be
    100 percent owned by U.S. citizens, nationals, or green card
    holders. Not even one percent can be owned by someone with a
    different legal immigration status. Let's just say your father
    from Brazil, one percent, you're up.
        Mr. Raccio and Ms. Kennedy, I'm concerned about the
    chilling effects that these requirements will have on
    entrepreneurs looking for an SBA loan. Can you expand on how
    U.S. small businesses and local communities are hurt by these
    new requirements? Mr. Raccio.
        Mr. Raccio. Thank you for that question, Senator Markey. It
    has been challenging for many small businesses. As I alluded to
    in my testimony, we did have the Brazilian family that was
    unable to obtain a loan. We also had a more recent example in
    your home state of Massachusetts with a 80 percent American
    citizen, a 10 percent two-year green card holder, as well as
    someone on a work visa owning the other 10 percent. That
    project was not able to move forward based on an ownership. So,
    that was difficult.
        While we won't be able to completely quantify who is not
    applying, we are confident that we are seeing businesses not
    applying due to the lack of 100 percent ownership of a U.S.
    citizen or lawful permanent resident. We would urge the
    committee to return to the previous rules that allowed 51
    percent ownership.
        Senator Markey. Right. And 30 percent of all companies in
    Massachusetts are started by immigrants. So, that's a story
    across the whole country, too. So, it gets complicated. Ms.
    Kennedy.
        Ms. Kennedy. Senator Markey, we too. That matter regarding
    100 percent citizenship, especially in the state of California,
    has been significant. And one of the examples that I included
    in my written testimony was a returning SBA 504 customer that
    we had served a local winery. Really a beautiful business,
    family-owned business in the community.
        And they have a partner that is a 30 percent owner that is
    a Canadian native, a Canadian citizen. And when that first loan
    was done, we were able to serve that business because it's
    majority-owned and controlled by a U.S. citizen. When they came
    back to us, we were not able to serve that business because of
    the new citizenship rule.
        And I agree with my colleague that if we rolled back to the
    requirements in the SOP that this change, we would be able to
    serve locally-owned, majority-owned and controlled U.S.
    citizens who are creating jobs here in America.
        Senator Markey. Okay, thank you. So, small businesses are
    required to use the loans to accomplish certain goals,
    including to reduce energy consumption, increase the use of
    sustainable designs that reduce greenhouse gas emissions and
    use renewable energy.
        These energy goals were passed on a bipartisan basis,
    signed into law by President Bush in 2007. I know because I
    stood over his shoulder when he signed it because I was the
    Democratic author of the bill. So, Mr. Raccio, can you explain
    how loans used to meet the clean energy goals have helped small
    businesses and their communities?
        Mr. Raccio. Absolutely. Thank you, Senator, for that
    question. We have had a lot of good success stories. One, as I
    mentioned earlier in testimony, was SBO Sport that was able to
    do multiple projects utilizing renewable energy.
        As a matter of fact, they've had such success with the
    solar project they've done that they're able to feed
    electricity back to the grid. So, it's been a very nice project
    where they're able to provide other small businesses energy at
    peak times, all while creating jobs and growing their own
    business by being able to sell some of this energy back.
        We also see many hotels that are doing this as well.
    They've got large flat rooftops. They are traditionally capped
    at the traditional 504 loan amount. So, by utilizing a
    renewable energy project, they're able to put solar panels on
    the roof, save themselves energy usage, and also move forward
    and obtain the financing that they're looking for.
        Senator Markey. Thank you, Mr. Raccio. Thank you, Madam
    Chair.
        Chair. Thank you, Ranking Member Markey. And now, I
    recognize Senator Jon Husted for five minutes.
        Senator Husted. Thank you, Chair Ernst. I want to just
    reflect a little bit on some of the conversations I've had with
    Ohio businesses over the past few months because they were
    grateful that they have a more stable environment to operate in
    this country since the passage of President Trump's budget
    reconciliation bill, which passed here and was signed into law
    on July the 4th, which included expanded pass through income
    deductions, a hundred percent immediate expensing of business
    investments, an R&D expense and deduction for domestic R&D
    costs so that we can invest through the private sector in
    advancing innovation, employer-provided childcare credits and
    other employee benefits.
        And I know that in talking with them. Like, what does this
    mean to you? What does it mean? It means more cash flow. It
    means more liquidity, lower compliance costs, greater
    incentives, and incentives to hire people. And because they can
    provide additional benefits to their employees and it
    encourages them to invest so they can compete with people
    around the globe.
        And I know that's hard for small businesses, but we've done
    a great deal, and we can do more to create a better business
    environment in this country. But I was reflecting on Ms.
    Wojtowicz's testimony here. You said something that struck me.
    Indiana, Ohio, we have a lot of manufacturing in our respective
    states, and I know Chair Ernst touched on this as well, that we
    want to do Made in America.
        We say we want more manufacturing jobs in this country. We
    know that all states are not made the same. Some have a high
    amount of manufacturing in their respective states as a part of
    their economy. And you said one of your recommendations--I want
    to give you a chance to just explain why you believe this is so
    important.
        Because I agree with you that Congress should expand access
    to the 504 loan program to enable manufacturers to retain more
    capital by reducing the borrowing equity injection from 10
    percent to 5 percent. It's almost a penalty to be a
    manufacturer even though those sites are coveted in states like
    ours where people want to have access to those facilities. And
    just talk about how you think that this will help boost
    manufacturing in your state and the country.
        Ms. Wojtowicz. Certainly, Senator, thank you for the
    question. And manufacturing is critically important to our
    country in every state. And those states like ours that are
    heavy manufacturing-focused states, it's even more important in
    the manufacturing sector.
        Again, buildings and equipment are extremely expensive, and
    often, those companies have working capital needs that are
    extreme as well. So, by limiting their down payment from 10
    percent to 5 percent, they'll be able certainly to have more
    working capital.
        But let me take one other step on there, because many of
    these manufacturing sites have rail access, which is critical
    to them to be able for them to deliver goods. If a rail site is
    on that property, it is currently classified as a special
    purpose property and they have to put another 5 percent down as
    equity.
        So, instead of in a typical manufacturing project being 50
    percent bank, 40 percent CDC, 10 percent equity, if there's a
    railroad spur on that property, the borrower has to put down 15
    percent and only get 35 percent of the very attractive SBA 504
    financing with a long-term fixed rate.
        So, we're looking for all companies that are special
    purpose, and there are many, to not have to have that 5 percent
    penalty. And specifically, for manufacturers, to be able to
    reduce their equity contribution from 10 percent to 5 percent.
        Senator Husted. And if you talk to a manufacturer, they
    need to compete because we have higher wage rates in our
    country. So, to compete, they have to have the capital to buy
    the new machinery and equipment that they can to up their
    productivity gains so that they can actually compete. This is
    an important part of them having the capital to do that in the
    big scheme.
        Ms. Wojtowicz. Extremely important. So, they not only have
    to invest in that capital, and having a 10 percent down payment
    pulls some of the working capital out of the business.
        Senator Husted. I see Mr. Swanson smiling and shaking his
    head. I think he wants to say something here. Would like to
    add?
        Mr. Swanson. Oh, Senator, I was just nodding in agreement.
    There's only one pool of capital we have available as a
    company. We have to elect where to deploy that, whether it's on
    equipment purchases and modernization, or hiring more staff, et
    cetera. So, my colleague's point is exactly on target with
    that.
        Senator Husted. Great. Thank you.
        Chair. Thank you. Senator Coons.
        Senator Coons. Thank you, Chair Ernst, Ranking Member
    Markey. And thank you to our four great witnesses today.
        Not everybody finds manufacturing capital needs riveting,
    but I do. I'm excited about this hearing. I think this is
    interesting. We all find manufacturing exciting. Some of you
    know I spent a decade in manufacturing before I ever ran for
    office, and then as county executive, and now as Senator, work
    closely with the CDCs in Delaware and with those who help with
    capital lending, and who compete globally as small and medium
    sized American manufacturers.
        So, Mr. Swanson, Mr. Raccio, Ms. Wojtowicz, and Ms.
    Kennedy, thank you for what you do as small manufacturers, as
    CDC lenders, to help deploy the resources of the 504 Program.
    And thanks for helping us understand how the 504 Program helps
    bridge the gap, and CDCs help originate and put together and
    secure these.
        I am proud to work with Chair Ernst on the Made in America
    Manufacturing Finance Act, recently approved by this committee
    and its corollary in the House by voice vote to increase the
    loan size available to small manufacturers.
        Mr. Swanson, in your prepared testimony, you discussed the
    challenge of competing in foreign markets. I think you spoke
    earlier about competing in Brazil. How does the guaranteed
    lending offered by the 504 Program allow small manufacturers to
    successfully compete globally?
        Mr. Swanson. Well, thank you, Senator Coons. The starting
    point I would refer to would be as was discussed by allowing us
    to continue to invest particularly in the kinds of capital
    equipment. That can be extremely useful for us to offset the
    challenges of labor supply, and with allowing us to, in our
    case, the specific requirements to produce the high-tech
    equipment that we're manufacturing. We leverage those
    advantages in, in terms of the international markets that we
    pursue.
        Senator Coons. I remember meeting with Miller Metal in
    Bridgeville, Delaware, my first year as a Senator and seeing
    how both SCORE, which is an organization founded in Wilmington,
    Delaware of business executives who volunteer and consult, and
    the Manufacturing Extension Partnership Program helped this
    small, family-owned metal pressing and bending company figure
    out what capital investments they needed to make to get a
    cutting-edge bending, and welding, and punching machine. And
    then, they successfully competed against a Chinese manufacturer
    for a small part that went into thousands of assembled, what I
    would call a Hi-Fi system, but a stereo system. It was amazing
    to me a company from Bridgeville could compete directly with a
    Chinese manufacturer and win.
        I was concerned to hear that their funding had been held up
    for months, and they were beginning to lay off people
    federally. They have 10,000 volunteer mentors. It's the most
    cost-effective federal program known. I was relieved to find
    out today that those withheld funds are now being released and
    flowing. You mentioned SCORE and other resource partners in
    your written testimony. How do they help reinforce your work
    delivering capital to manufacturers?
        Mr. Raccio. Thank you, Senator Coons, for that question.
    They help on almost a weekly basis. SCORE has been a monumental
    partner in helping our small businesses, whether it's finding
    access to certain SBA programs, helping them with business
    plans, is often critical for our small business partners.
    Whether they're looking to expand or simply start and they're
    not sure how to go about it.
        Specifically, in New England, we have a lot of retired
    executives that have an extreme amount of industry knowledge,
    so it's been a really good partnership with SCORE. They'll also
    pair up with SBDC as well and work with them. So, they're out
    at events. They are a great product. Great set of people. I'm
    glad the funding was released. But they are out there and
    working with our businesses every day.
        Senator Coons. Last question for anyone on the panel, if I
    might. There have been proposals to cut the SBA workforce by as
    much as 40 percent. At least in Delaware, I've seen how having
    the SBA office and staff with connections, and resources, and
    experience helps facilitate access, particularly to
    manufacturers who tend to be overextended, and overstretched,
    and only know about these programs because there's staff
    available to help with the outreach.
        What sort of impact do you think we would see if they
    actually carry through with dramatic cuts to the total SBA
    staff? Anybody jump ball? Ms. Kennedy.
        Ms. Kennedy. Senator Coons, thank you very much for the
    question. You know the SBA staff is so resilient. We've just
    found them to be so committed to getting the work done and
    partnering with other economic development organizations like
    CDCs that we would all have to jump in because small businesses
    are that important to our local economies and to creating jobs.
        And so, certainly, cuts always hurt, but the rally for
    small businesses is absolutely there in our local communities,
    and we want to make sure that those employees are there for
    serving our community, but as well as having those partners
    like SCORE. So, that was really good news to hear. So, thank
    you for delivering that, too.
        Senator Coons. Thank you. And thank you, Madam Chair, for
    the chance to work with you to help provide more capital to
    America's small business manufacturers.
        Chair. I'm so glad to partner with you. Thank you. And,
    Senator Shaheen.
        Senator Shaheen. Well, thank you, Madam Chair, and thank
    you to all of our witnesses today. We're really delighted to
    have you here and to have your experience to share with us.
    Just following-up on Senator Coons' question about staffing
    shortages. One of the things that I've heard from some of my
    constituents in New Hampshire is that 504 approvals are taking
    longer in large part due to staffing cuts, and the loss of some
    of the experienced staff that have been working on these kinds
    of loans for a long time.
        Can any of you speak to what difference it makes when it
    takes longer to get a 504 loan approved? What does that mean
    for the small businesses who are affected?
        Mr. Raccio. Thank you for that question, Senator.
    Absolutely, it impacts our businesses and their ability to
    close on loans, whether it's real estate that needs to be
    purchased. For example, we had a recent deal where there was a
    1031 real estate exchange which is a federally-timed product
    where we have to close. And we're waiting, and the business is
    very nervous if they're going to get the approval.
        So, that's just one example of where when there are time
    delays it's very sensitive to the businesses, and it often
    leaves them feeling anxious, noticeably so. So, anything we can
    do to increase turnaround time, and have that accountability
    and predictability for the small businesses that they know,
    whether it's 5 days or 10 days, that would be immeasurable to
    the small business to know when they start their loan
    application with us, in this certain amount of time, they're
    going to have a decision.
        Senator Shaheen. Thank you. Does anybody want to add to
    that?
        Ms. Kennedy. Senator, it's a great question. And again, I
    would say to you that SBA staff is so resilient in terms of
    trying to make sure they serve small business. They're
    committed to that. But I agree with my colleague, time matters,
    and time kills deals. And so, it's really important to have
    that level of certainty when they submit a loan that we can get
    that approved in a timely manner.
        Senator Shaheen. Thank you. I appreciate that. And I would
    agree with you, the SBA field staff in New Hampshire is
    tremendously resilient and do a great job. And my experience is
    that all of the other SBA folks that we've worked with are in
    that category.
        I know that Senators Young and Klobuchar have worked
    together on some improvements to the 504 Program. One change in
    particular that they've proposed that I think is really
    important is shifting the occupancy rates to make it easier to
    use a 504 loan for mixed use building.
        New Hampshire, like so many states is really an affordable
    housing crisis. There are a lot of New Hampshire towns that
    have main street buildings that are no longer occupied that
    could really benefit from investment to allow them to be used
    as housing, as well as commercial space.
        So, I know, Mr. Raccio, or at least I understood, that you
    may have looked into this issue and maybe others have as well.
    Do you think that changing those occupancy requirements would
    be helpful as we're looking at how do we address both small
    business issues but also some of the housing challenges that we
    have in states?
        Mr. Raccio. Thank you, Senator, for that question. Yes, we
    would absolutely love to be able to change the occupancy
    requirements to a 50 percent owner-occupied versus 51 for
    existing and 60 for ground up new construction. What that would
    really do is it would allow more SBA borrowers to get access to
    these capital funds to purchase real estate.
        We're often involved as a panel with customers that are
    buying much like you mentioned, Senator, buildings that may
    have two floors, you know, might have some investment space to
    it, which is great for our borrower to have some of that
    accountability.
        And believe it or not, sometimes, especially in New England
    where I lend, we have a lot of buildings that are identical up
    and down. So, you're stuck at 50 percent. Yes, we understand
    that can't move forward. So, it would be really nice to be able
    to have it be 50/50, and be able to have more access for
    capital to borrowers.
        Senator Shaheen. So, you said 50/50 on existing buildings,
    but what did you say about new buildings?
        Mr. Raccio. Same. 50/50.
        Senator Shaheen. Do others want to address that? Ms.
    Wojtowicz.
        Ms. Wojtowicz. Thank you, Senator. I would like to just add
    a little bit of clarification, because the current SOP also
    requires that even if it's at 51 percent, that over a period of
    time, they occupy up to 80 percent. So, that would not allow
    those kinds of projects to go forward unless we address both
    sides of that issue.
        Senator Shaheen. Oh, that's a really good point. Thank you
    very much for that. Thank you-all very much for your testimony.
        Chair. Thank you. Senator Rosen.
        Senator Rosen. Well, thank you. Thank you, Chair Ernst,
    Ranking Member Markey, for holding this hearing. I love to see
    everyone is smiling and agreeing. And this is a--you know, this
    committee, small businesses, the backbone of our country. And
    in Nevada, we have 280,000 small businesses. That's 99 percent
    of businesses in Nevada are small businesses. And right now, we
    have almost 100 approved 504 loans for, I think, over $120
    million total. And we want to keep that going. So, thank you
    for all being here.
        And I know supporting clean energy businesses has been
    brought up by Senator Markey. I want to build on that a little
    bit because we know a little something about that. Nevada and
    some more, supporting small business in the clean energy SEC
    sector is beneficial for local national economies. Seeing these
    benefits firsthand.
        Nevada is a leader in clean energy with the most solar jobs
    per capita of any state. We got plenty of Sun. We farm the Sun,
    Iowa, you've got the corn. Nevada, we've got the Sun, right? We
    farm what we can, and we're still growing. Last year, Nevada
    had its greatest expansion of solar capacity in a decade, which
    will create even more economic opportunity for clean energy
    small businesses.
        So, this means a cancellation for funding streams like
    solar for all program and cuts to the clean energy tax credits
    in the recently enacted reconciliation bill. Well, it's going
    to have a devastating impact on the small businesses. We have
    tons of small businesses that make all the pieces and parts
    that go into building solar panels, a solar field, and all that
    support. And it's really important. We have a lot of businesses
    for our broader clean energy economy. So, due to these cuts,
    businesses in Nevada, they're uncertain. Will they close? Will
    they stay? Will they go? And it's a very, very stressful time
    for us.
        So, Ms. Kennedy, you mentioned in your testimony a
    successful clean energy project in Reno. Thank you very much.
    It utilizes 504, maybe one of these nearly 100 programs. Can
    you speak to the importance of directing investment to emerging
    industries like clean energy and the ways we can make it
    easier, especially for those? We have wind, water, solar,
    geothermal, that's what Nevada has, our geography and geology
    and we want to be able to leverage that 504 funding.
        Ms. Kennedy. Well, thank you so much, Senator. And we
    certainly agree with that. When we think about that Somerset
    Reno project where we were able to assist a business that had
    gotten multiple SBA loans in California and moved into Reno. To
    do another Memory Care facility that included some senior
    housing as well, being able to get access to the SBA energy
    public policy goal and open up another location, creating over
    70 jobs, a very significant project in Reno.
        And so, being able to eliminate that cap, which was already
    in place in the previous administration, it really will make a
    difference for clean energy and energy cost, or increasing in
    states like California with all of the fires. And so, being
    able to sell back to the grid, as my colleague mentioned, being
    able to create that clean energy at solar and reduce energy
    costs is such a win-win for small businesses already dealing
    with so many additional costs.
        Senator Rosen. I agree. Thank you. And I want to move on.
    You talked about affordable housing, but I'm going to move on
    about expanding SBA loans for affordable housings because our
    nation is facing a severe shortage of affordable housing. It's
    forcing families into housing insecurity. It's creating
    challenges for small businesses. It's dragging down our local
    economies.
        And in order to address the housing crisis, we must support
    small businesses in the housing industry working to tackle this
    issue; home builders, contractors, all the support businesses
    that do that to ensure they have the capital that they need to
    contribute to their communities.
        And so, I recently sent a letter to SBA and HUD urging them
    to work together to better support small business in the
    housing industry, including by opening up SBA capital to home
    building those developers. Affordable housing, it really makes
    a difference.
        So, Mr. Raccio, can you give us any stories here, discuss
    how you're working with small businesses in the housing space,
    and any stories that you want to share in this time I have
    left?
        Mr. Raccio. Thank you, Senator, for that question. As I'm
    sure you're aware, the SBA 504 isn't able to directly provide
    assistance for housing. But we do on a daily basis provide
    financing for some of those businesses to purchase their own
    real estate and expand.
        I recently had a project up in Cape Cod, Massachusetts with
    a large contractor where we were able to utilize the SBA 504
    refinance program and help that contractor out to refinance 19
    pieces of heavy-duty equipment such as excavators and
    bulldozers.
        So, while we might not be able to directly provide funds to
    the end user as of today, we're certainly involved with the
    industry helping them out on a daily basis.
        Senator Rosen. That's fantastic. Thank you. Well, it's an
    all of be above approach. So, thank you all for being here.
    Thank you, Madam Chair.
        Chair. Absolutely. Thank you. And now I'll recognize
    Senator Hickenlooper for five minutes.
        Senator Hickenlooper. Thank you, Madam Chair. This is a
    treat. We're watching you on TV. You don't see us all here, but
    we're watching, and really appreciate. There are not that many
    of us left, but I'm one the--I'm an entrepreneur in my own
    right. I started out as a geologist, and then in the big long
    kind of inflation--what'd you call it? The stagflation epics of
    the '80s, our company got sold and we all got laid off. And I
    was out of work for a couple years, but ended up opening a
    restaurant that brew its own beer.
        And our lending parameters where no one--I went to 33
    banks, and they turned me down every time. I was only trying to
    borrow 50 grand because the city would give us 125 grand,
    because we were at an abandoned warehouse district so they
    wanted to stimulate the area.
        And so, we finally got open after all these banks--
    actually, the Women's Bank was the only bank that would give us
    a loan. And we had to put up about literally $150,000 worth of
    collateral, stock certificates, and house deeds to get a
    $50,000 loan.
        Got going and things took off, and we needed--we had all of
    a sudden everyone copied us, and we had all these competitors.
    And we had to expand, and we were going to take this big old
    five story warehouse and put affordable housing up on top.
    Minor detail was, I didn't have any money still. We had a
    business that was doing great and cash flowing like crazy.
        Anyway, the 504 program was what we used, and it allowed us
    to take the cash flow we have and then the asset. And we were
    gambling. If we put these millions of dollars into it, it would
    be worth this much more money. And it worked and really was--no
    one else would've talked to us, no one else would've given us
    that chance.
        And I think if you look at so much of the good ideas and
    innovations that come out of this country, it's people that are
    not that smart. They're just about to lose their business, and
    they're fretting every hour, lying awake at night figuring how
    you're going to make payroll, how can you get more customers,
    how can you get a better margin on those customers?
        And that's what creates that devotion to trying to solve
    your problems. It's is really what leads to solutions that a
    lot of other people benefit from. It turned out we ended up
    making a whole bunch of money out of it, but I never intended
    that. You know, the only reason I was a small business person
    was because I didn't want to have a boss. [Laughter.]
        Anyway, I appreciate very much all of you and what you've
    done. And let me start off with Ms. Kennedy. You know, as I
    said, major investments in things where you've got fixed
    assets. It's amazing resource for our businesses. And I think
    the renewable energy, obviously, we've seen a bunch of that.
    One of our first bills that we introduced was going to allow us
    to use 504 programs to invest in energy efficiency or clean
    energy projects.
        Sometimes it's hard to get that improvement in cash flow to
    be monetized. Now more than ever, we're seeing them use these
    investments to navigate the increasing costs and the new energy
    sources that will lower energy costs.
        But in this past June, the SBA put a cap on 504 financing
    that a business could receive for energy projects just as it
    were at that point where suddenly we had a bunch of projects
    lined up and ready to come through that ultimately, I think,
    were those small businesses that were so neurotic and driven
    that they would've come up with the innovations and the great
    ideas.
        So, Ms. Kennedy, I'd ask, how have small businesses used
    504 to invest in clean energy, and what does the cap do, in
    candid terms?
        Ms. Kennedy. Thank you so much, Senator. As I mentioned in
    my written and oral testimony, this 504 cap will hinder small
    businesses from continuing to use the energy efficiency public
    policy goal by no longer being able to do multiple projects.
        Dahdoul Textile is one of the businesses I mentioned. In
    Somerset, Reno, is another business I've mentioned. And we have
    a number of businesses in California, in particular, who could
    benefit from removal of that cap so that they can continue to
    grow using the energy public policy goal. It's really critical.
    In California, energy costs continue to go up because of the
    fires, and we need to have access to this particular public
    policy goal without those limitations.
        Senator Hickenlooper. Great. Thank you. And can I steal
    another minute?
        Chair. I suppose. [Laughter.]
        Senator Hickenlooper. I told too long a story, and I
    apologize. Mr. Raccio, and I'll get rid of all the flowery
    preamble. But how do you describe how lenders can combine
    different types of financing to support businesses, and is
    there something we should be doing in Congress? Or is there
    something that we can kind of put our shoulder to the wheel,
    and try and get the SBA to do in terms of being innovative?
        I ended up with four different loans to get that project
    done. And one of the great things about the 504 was it really,
    it would go below like the city loan, which just had a--it made
    all the difference.
        Mr. Raccio. Thank you, Senator. We have an amazing tool box
    set of products, whether it's the 504 for a fixed capital asset
    or it's the 7(a) to help out with working capital, a lot of the
    tools that the everyday business owner is going to need. We
    have, I think, being able to increase some of those limits.
        And also, having some accountability with regards to
    timeframes will really help to boost where we go with those
    products. So, I would think the panel would agree. We've got a
    really good tool set. Just listening to your story, listening
    to Karl's story, at the end of the day, when we're able to do
    these loans, we can see the excitement in your face. We really
    do make small business owners dreams come true. And it's not
    every day we can say that, but we really have clients like
    yourself that really love what they do and are excited about
    taking the opportunity to purchase real estate.
        Senator Hickenlooper. Yeah. I appreciate that, and thank
    you-all. It's funny, I came very close to doing a brew pub in
    Indianapolis, and came very close doing one in Davenport. Rock
    Island actually is where we were looking, but in that Quad City
    stuff. So, anyway, thank you-all. I yield back.
        Chair. Okay. If there are no further questions, I want to
    thank our witnesses for being here with us today. I ask
    unanimous consent that the record of today's hearing remain
    open for two weeks for members to submit questions, revise and
    extend their remarks, and submit additional information into
    the record.
        Without objection, so ordered. And with that, the Committee
    on Small Business and Entrepreneurship stands adjourned. Thank
    you all very much.
        [Whereupon, at 3:44 p.m., the hearing was adjourned.]
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