[Congressional Record Volume 152, Number 105 (Wednesday, August 2, 2006)]
[Senate]
[Pages S8626-S8628]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE:
  S. 3778. An original bill to reauthorize and improve the Small 
Business Act and the Small Business Act of 1958, and for other 
purposes; from the Committee on Small Business and Entrepreneurship; 
placed on the calendar.
  Ms. SNOWE. Mr. President, as chair of the Senate Committee on Small 
Business and Entrepreneurship, I rise today to introduce a bill, The 
Small Business Reauthorization and Improvements Act of 2006, that was 
reported by the committee on a vote of 18 to 0.
  I strongly believe we must do everything possible to sustain 
prosperity and job creation throughout Maine and the United States. To 
achieve that goal, I have long fought to expand the reach of Small 
Business Administration programs that have helped millions of aspiring 
entrepreneurs and existing small businesses.
  Today is a pivotal time for the SBA. A new Administrator, Steven C. 
Preston, has been sworn in, and I have held hearings on the 
reauthorization of the agency's programs that are set to expire 
September 30, 2006. The reauthorization and funding of SBA programs is 
vital to the continued growth of the economy and the small business 
community. My goal is for the process to conclude with a renewed SBA 
that is completely dedicated to fostering small business ownership and 
job creation in America.
  The SBA's fundamental purpose is to ``aid, counsel, assist, and 
protect the interests of small-business concerns.'' The methods for 
carrying out this congressional mandate include a wide array of 
financial, procurement, management, and technical assistance programs 
tailored to encourage small business growth and expansion. As the 
economy continues to grow, it is essential that Congress affirms long-
term stability in the programs the SBA provides to the small business 
community. The American economy needs a strong and vibrant SBA because 
small businesses represent 99 percent of all employers, create nearly 
75 percent of all net new jobs, and employ 51 percent of the private-
sector workforce.
  There is no doubt that SBA's technical assistance programs have 
demonstrated impressive growth. During fiscal year 2005, the SBA 
provided 56,739 small businesses with technical assistance. That was an 
astounding 46.4 percent increase from the 38,754 small businesses 
assisted in fiscal year 2004.
  If there is truth in numbers, the SBA has numerous ``truths'' it can 
and should tout. Its record of achievement for fiscal year 2005 alone 
includes:
  Counseling 1.5 million entrepreneurs through the agency's Small 
Business Development Centers, Business Information Centers, SCORE and 
Women's Business Centers;
  approving over 89,000 business loans through the 7(a) and 504 lending 
programs;
  funding 74,307 7(a) program loans to small businesses for a total of 
more than $l4 billion; and
  a doubling of small business lending since 2001, with nearly a third 
of SBA-backed loans being made to minority-owned small businesses.
  Despite a drastically declining share of the Federal budget, the data 
clearly indicate that the SBA's programs have created or retained a 
significant number of jobs over the last several years. Between fiscal 
year 1999 and fiscal year 2004, the SBA's Offices of Advocacy and 
Legislative Affairs report that the SBA's lending and technical 
assistance programs enabled participating small businesses to create or 
retain 4.4 million new jobs. In addition, the SBA's programs have 
helped to create or retain more jobs during each passing year. In 
fiscal year 2004, the SBA's programs created or retained 51.2 percent 
more jobs than they did in fiscal 1999.
  Our goal is to build on these tremendous successes. The building 
blocks for a successful reauthorization are a bipartisan bill: The 
Small Business Reauthorization and Improvements Act. It is cosponsored 
by Ranking Member Kerry, Senator Vitter, Senator Landrieu, Senator 
Cantwell, Senator Lieberman and Senator Isakson. This legislation will:
  Reform the SBA's largest small business financing program, the 
section 7(a) loan program, which provided almost $15 billion in loans 
to small businesses last year, by increasing the maximum size of a loan 
from $2 million to $3 million.
  Require the SBA to implement a more efficient test for loan 
eligibility that measures businesses' revenues, rather than merely 
their number of employees.
  Establish a national preferred lender program to increase small 
businesses' access to capital by reducing duplicative administrative 
burdens on small business loans.
  Restructure the Small Business Investment Company Program, an 
innovative public-private venture capital partnership that has provided 
more than $25 billion in financing to small businesses.
  Expand the SBA's capability to assist disaster victims by allowing 
private lenders to make loans at lower interest rates.
  Increase Federal authority to prosecute, suspend, and debar large 
corporations which obtain government contracts by misrepresenting 
themselves as small businesses.
  Create a stronger system of SBA size standards to ensure that Federal 
agencies respect SBA decisions on whether a company that receives a 
government contract is truly a small business.
  Address the small business health insurance crisis by creating a 
competitive pilot grant program for Small Business Development Centers, 
SBDCs, to provide counseling and resources to small businesses about 
health insurance options in their geographic areas.
  The legislation also rejects new loan fees. I strongly oppose SBA's 
proposal to increase fees for these programs. The fees would be charged 
against every loan that is greater than $1 million. In the 7(a) 
program, this is 3 percent of loans; in the 504 program, it is 15 
percent of loans; and in the SBIC program it's 100 percent of the 
loans. A fee increase is not the way to balance the budget and it 
remains wholly unacceptable, to put it mildly.
  Increasing fees charged to small businesses end up hurting--not 
helping our Nation's small businesses. When we consider that the SBA's 
budget represents less than 3/100ths of a percent of the total Federal 
budget, is this really the place for the administration to find 
additional savings? Congress must always strive to ensure that all 
small businesses are able to access SBA's financing programs without 
additional penalties.

  In 2005, SBA programs disbursed recordbreaking totals of loans to 
small businesses, both in the number of loans and total dollar value 
provided to small businesses. During the last fiscal year, the SBA 
guaranteed over $24 billion in loans and venture capital for small 
businesses, the highest level of capital ever provided. This included 
over $1 million in 90 loans to Mainers through the Microloan program, 
which is an inexpensive program the Bush administration has targeted 
for elimination.
  The SBA's programs demonstrate how Congress can play a positive role 
in enhancing private-sector financing

[[Page S8627]]

for start-up companies. Since 1953, nearly 20 million small business 
owners have received direct or indirect help from one of the SBA's 
lending or technical assistance programs, making the agency one of the 
government's most cost-effective instruments for economic development.
  SBA loan and investment programs have produced success story after 
success story, which include assisting the founders of Intel, Staples, 
and Federal Express, as well as thousands of other successful 
businesses. This bill will build upon these past successes and make the 
SBA even more effective.
  The American economy needs a strong and vibrant Small Business 
Administration. This committee is here to help improve the SBA in any 
way possible to ensure the success of tomorrow's entrepreneurs. Of 
course, the agency has been subjected to criticism, including my own. 
We can move beyond criticism and find solutions to the problems that 
have plagued the SBA and transform it into an agency that is led with 
the same dedication to excellence found in the entrepreneurs it serves. 
The Small Business Reauthorization And Improvements Act will help us 
achieve that goal.
  Mr. KERRY. Mr. President, I rise today as ranking Democrat on the 
Committee on Small Business and Entrepreneurship, in support of a 
bipartisan bill being reported out of our committee, the Small Business 
Reauthorization and Improvements Act of 2006. This bill, which 
originated in our committee and which is the product of many Senators' 
work, was voted out unanimously, 18 to 0. While there are no official 
cosponsors of the legislation because it is an original bill being 
reported out of committee, I would have been pleased to be added as an 
original cosponsor, and Senators Landrieu, Cantwell, Lieberman and 
Vitter also asked to be added as cosponsors. I would like to thank my 
colleague from Maine, Senator Snowe, for making this a bipartisan 
process. This is the fourth Small Business reauthorization bill I have 
worked on, having been a member of the committee for 21 years. Our 
committee has the reputation for working across party lines to put what 
is important for small businesses first, and I appreciate that the 
Chair and her staff have worked with us on reauthorization with that 
goal in mind. The result is a comprehensive approach to reauthorizing 
the SBA for the next 3 years that includes not Republican or Democratic 
priorities but instead the priorities of America's small businesses.
  This reauthorization could not have came at a more opportune time to 
tackle some of the issues that are eating away at our small business 
programs and at the core mission of the SBA--which is to foster small 
business growth and bridge the gaps left by the private sector.
  One of the most important things we are here to do today is to 
address the shortcomings and failures of the SBA's disaster loan 
program. Nearly a year has passed since Hurricanes Katrina, Rita and 
Wilma battered the gulf coast, and in that year I have visited New 
Orleans on three occasions. I can tell you that many of the streets are 
still covered in debris, and that many of the region's small businesses 
are barely keeping their doors open. The SBA needs to be prepared to 
handle an emergency of this magnitude. Thanks in large part to the hard 
work of Senator Landrieu and her dedicated staff, this bill provides 
the tools to respond swiftly and effectively following future large 
scale disasters.
  Through federally guaranteed bridge loans, States can offer small 
businesses short-term access to capital so that they can remain open 
while they wait for other sources of assistance to come through. We 
provide the President with the authority to declare a new category of 
disaster--a catastrophic national disaster--which triggers nationwide 
economic injury disaster loans for businesses located outside the 
immediate geographic disaster area. And we improve the way SBA and FEMA 
coordinate disaster assistance. A greater importance needs to be placed 
on serving the victims, by making the process of applying for and 
receiving Federal assistance as painless and user friendly as possible. 
That is why we give the SBA the authority to work with private lenders 
to get disaster loans out quickly--an idea that members of our 
committee tried to get SBA to embrace last year. This will only work if 
we can ensure that these loans do not come at a high cost to disaster 
victims. We are hopeful that our approach will keep interest rates 
down.
  This bill also addresses the effects that the energy crisis is having 
on America's small businesses. Gas prices are once again approaching 
record highs, and for the small businesses that depend on fuel to put 
food on the table, rising prices mean more than having to decide 
whether or not to drive to work. Included in the bill is the bipartisan 
Small Business Energy Emergency Relief Act, a bill which has passed the 
Senate before, which provides low-interest loans to small businesses 
dependent on fuel. The loans are triggered when oil prices increase 
significantly over the average price from the previous two years. This 
proposal is complemented by Chair Snowe's 7(a) express loans for small 
businesses that are willing to invest in renewable energy solutions.
  In looking at our core programs, this bill makes a strong statement 
about the need for the SBA to fill the lending gap in our minority 
communities. It is unacceptable that since 2001, while numbers of 7(a) 
loans have gone up for African Americans, the actual dollars loaned 
have remained stagnant. In the Microloan program, African Americans 
received 28 percent of the total number of microloans made in 2001 as 
compared to only 21 percent of the total number of loans made in 2005. 
Native Americans went from 2 percent of the total number of microloans 
made in 2001 to less than 1 percent--a mere .93 percent--in 2005. If 
this trend continues--Native Americans alone will be completely cut out 
of the Microloan program. The stagnant lending in these communities 
represents a failure of this administration to expand access to capital 
to our underserved communities, communities where conventional lending 
is not meeting the need.
  The bill provides an incredible framework for the SBA to reverse this 
trend. It creates an Office of Minority Small Business Development at 
the SBA, similar to offices devoted to business development of veterans 
and women and rural areas, and, it creates a grant program to develop a 
cross campus curriculum at Historically Black Colleges and 
Universities, Tribal Colleges, and Hispanic-Serving Institutions to 
encourage minority students in a wide range of fields to consider 
entrepreneurship. There is much to be done to bridge the wealth gap in 
minority communities and this is one approach worth pursuing. Finally, 
the bill incorporates legislation from my colleague, Senator Johnson, 
to provide financial assistance to tribal governments, tribal colleges, 
Native Hawaiian organizations, and Alaska Native corporations to create 
Native American business centers.
  One of the keys to ensuring access to capital is making sure that 
SBA-backed financing remains affordable to the small business 
community. As we all know, the administration insisted on eliminating 
all funding for 7(a) loans and shifting the cost to borrowers and 
lenders by imposing higher fees. The President's budget reveals that 
borrowers and lenders already pay too much in fees, generating more 
than $800 million in overpayments since 1992 because the government 
routinely overestimates the amount of fees needed to cover the cost of 
the program. This bill seeks to address overpayments by requiring the 
SBA to lower fees if borrowers and lenders pay more than is necessary 
to cover the program costs or if the Congress appropriates money for 
the program.
  The bill also reauthorizes the PRIME program through 2009 and 
includes a provision that Senator Bingaman and I worked closely to 
develop that will expand PRIME with a separate $2 million authorization 
to provide technical assistance and counseling to disadvantaged Native 
American small business owners. The bill also includes technical yet 
important changes in the Microloan program such as making loans to 
persons with disabilities as one of the statutorily enumerated 
``purposes'' of the Microloan program and changing the average smaller 
loan size in the Microloan program from $7,500 to $10,000.

  In reauthorizing one of our other core programs, SBA's 504 loan 
program, I am pleased that we were able to come

[[Page S8628]]

up with a bipartisan approach to preserving the local economic 
development focus of the program. The ability of our certified 
development companies, CDCs, to expand operations into multiple States, 
in conjunction with the growing demand for 504 loans, required that we 
put in place accountability measures. The 504 program was not created 
for CDCs to expand operations and simply create revenue from one state 
to another. CDCs are more than lenders and should not act like for-
profit banks. This bill allows CDC board members to serve on another 
CDC board, but institutes safeguards to prevent control of multiple 
boards.
  The bill also incorporates legislation I have introduced to create a 
Child Care Lending Pilot Program to expand the availability of 
affordable, quality childcare in this country by using the 504 loan 
program to spur the establishment and expansion of childcare providers. 
Right now only for-profit childcare businesses are eligible for 504 
loans, yet in some States a majority of affordable childcare is 
delivered through nonprofit providers and in the neediest communities 
nonprofits are often the only provider.
  I am pleased that our bill reauthorizes the Women's Business Centers 
and makes permanent the Women's Business Center Sustainability Pilot 
Program through the creation of 3-year ``renewal'' grants for centers 
with sustainability grants, and 4-year ``initial'' grants for new 
centers across the country. We should not be abandoning our existing 
centers--many of which leverage Federal dollars to do excellent work in 
our communities--to run and create new ones. Senator Snowe and I have 
been fighting for this for a long time, since I first introduced 
legislation in 1999: It is time we get this adopted. Our bill also 
reauthorizes Small Business Development Centers and builds on this 
excellent resource by creating a pilot program to provide regulatory 
assistance to small businesses, in addition to the role SBDCs play in 
the minority entrepreneurship initiative.
  One area of our bill which does not deal with reauthorizing SBA 
programs is just as critical to small businesses--Federal contracting. 
Earlier this month, we heard the new SBA inspector general Eric Thorson 
testify about the largest impediments to small businesses receiving 
their fair share of prime and subcontracting opportunities. He 
explained how many of the problems in applying and enforcing small 
business contracting statutes are simply due to contracting officer 
error. Contracting officers do not know or do not care about small 
business requirements, and small businesses suffer the consequences. 
This bill seeks to do something about the disregard that is shown to 
small businesses with respect to federal procurement policy.
  Procurement center representatives, or PCRs, are responsible for 
advocating on behalf of small businesses in cases affecting Federal 
contracting, such as the bundling or consolidation of contracts. 
Unfortunately, there are not enough of them to effectively get the job 
done. By requiring the SBA to assign no fewer than one PCR per major 
procurement center, this bill takes steps to limit the incidence of 
contractor error referred to by Mr. Thorson. We can no longer tolerate 
the level of neglect that is currently the norm. It is time for the SBA 
to staff up and fulfill its responsibility as a watchdog for small 
businesses.
  In addition to mandating adequate staffing levels, this bill takes 
many significant steps to enforce subcontracting and bundling laws 
already on the books. Firms bidding for small business contracts are 
required to certify annually as small businesses so we do not have 
large businesses taking small business contracts, and large prime 
contractors are required to certify that subcontracting goals will be 
met. If subcontractors are not paid on a timely basis, Federal agencies 
are permitted to withhold payments and to pay subcontractors directly. 
We must stop fraudulent misrepresentation by large firms, and require 
the administration to start looking out for the interests of small 
firms that want to do business with the Federal Government.
  The time has also come to implement the women's procurement program. 
The administration has postponed implementing a women's procurement 
program that became law 6 years ago. This bill tells SBA to get it done 
within 90 days. It also makes clear that America's service disabled 
veteran small businesses deserve the same advantages as other subgroups 
with respect to sole source contracting. Our veterans are returning 
from Iraq and Afghanistan, and we owe it to them to give them every 
opportunity at fulfilling the dream of entrepreneurship.
  Another program sorely needing our attention: The 8(a) program was 
created to assist socially and economically disadvantaged small 
businesses, but the financial threshold for inclusion in the program is 
out dated and too restrictive. This bill allows for an inflationary 
adjustment to be made so that businesses that belong in this program 
aren't being shut out.
  Finally, let me say a few words about SBIR, the Small Business 
Innovation Research Program. The Small Business Committee had a hearing 
on SBIR earlier this month, and at that time, I made clear my concern 
that we were being premature in going ahead with reauthorizing SBIR 
when the program's authorization doesn't expire until 2008. There is a 
$5 million National Academy of Sciences study due to come out at the 
end of this year that I am certain will give us much to consider. Yet, 
this bill does reauthorize SBIR, making it permanent, and it includes 
some strong provisions to protect SBIR companies' intellectual property 
and to reign in excessively large awards--which are a particular 
problem at NIH. While SBIR Phase IIs are supposed to be $750,000, NIH 
Phase II are often larger. One Phase II award reportedly equalled $6 
million. While the firms getting these large awards may be doing 
important work, we need to keep in mind that if one firm receives $6 
million, there are many firms that are not getting Phase IIs at all. 
That is why I am glad that we have adopted Senator Bayh's proposal to 
increase the overall share of SBIR funds from 2.5 percent to 5 percent 
of Federal research budgets, so that more small businesses will have a 
chance to compete in this program. I also support several provisions in 
the bill to encourage commercialization, one of the biggest challenges 
facing the program.
  There is one provision in this bill that was added during our 
committee markup which concerns me, a provision which gives Federal 
agencies the option to direct 25 percent of SBIR funds to firms which 
are majority backed by venture capital investment. The firms which will 
benefit from this provision are primarily biotechnology firms and no 
one disagrees that they are doing critical work and should receive 
Federal support. I am committed to finding a way to help biotechnology 
firms but I am concerned that this set-aside may crowd out small firms 
that are not blessed with venture capital. SBIR is the only Federal 
research and development program devoted to small business and it has 
been universally praised for fostering innovative technologies and 
lifesaving therapies and medical devices that may never attract the 
support of venture capital firms. SBIR serves as seed funding for the 
companies that are willing to take on these research and development 
projects. It is important to retain the integrity of this program, and 
I look forward to working with my colleagues to find a way to strike a 
balance so that we can continue to support cutting edge research that 
is at so early a stage it has yet to attract the private sector.
  Mr. President, before I close, I want to note that while this bill is 
truly bipartisan, so was our last reauthorization bill back in 2003, S. 
1375. However, the reauthorization bill that was finally adopted back 
in 2004, was a notably partisan product, attached to an omnibus 
appropriations bill, with almost all Democratic provisions dropped. I 
urge the Senate to maintain today's spirit of bipartisanship as we move 
forward, so that the final reauthorization bill truly reflects all of 
our efforts.




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