U.S. GOVERNMENT PUBLISHING OFFICE

35–261 WASHINGTON : 2019

VIEWS AND ESTIMATES OF THE SMALL BUSINESS 

COMMITTEE FOR FY 2020 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED SIXTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

MARCH 6, 2019 

Small Business Committee Document Number 116–008 

Available via the GPO Website: www.govinfo.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA VELA ́ ZQUEZ, New York, Chairwoman 

ABBY FINKENAUER, Iowa 

JARED GOLDEN, Maine 

ANDY KIM, New Jersey 

JASON CROW, Colorado 

SHARICE DAVIDS, Kansas 

JUDY CHU, California 

MARC VEASEY, Texas 

DWIGHT EVANS, Pennsylvania 

BRAD SCHNEIDER, Illinois 

ADRIANO ESPAILLAT, New York 

ANTONIO DELGADO, New York 

CHRISSY HOULAHAN, Pennsylvania 

ANGIE CRAIG, Minnesota 

STEVE CHABOT, Ohio, Ranking Member 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member 

TRENT KELLY, Mississippi 

TROY BALDERSON, Ohio 

KEVIN HERN, Oklahoma 

JIM HAGEDORN, Minnesota 

PETE STAUBER, Minnesota 

TIM BURCHETT, Tennessee 

ROSS SPANO, Florida 

JOHN JOYCE, Pennsylvania 

ADAM MINEHARDT, Majority Staff Director 

MELISSA JUNG, Majority Deputy Staff Director and Chief Counsel 

KEVIN FITZPATRICK, Staff Director 

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C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Nydia Vela ́zquez ............................................................................................. 1 

Hon. Steve Chabot ................................................................................................... 2 

APPENDIX 

Additional Material for the Record: 

Committee’s Views and Estimates .................................................................. 4 

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MARKUP OF: VIEWS AND ESTIMATES OF THE 

SMALL BUSINESS COMMITTEE FOR FY 2020 

WEDNESDAY, MARCH 6, 2019 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The committee met, pursuant to call, at 10:50 a.m., in Room 

2360, Rayburn House Office Building. Hon. Nydia Vela ́zquez 

[chairwoman of the committee] presiding. 

Present: Representatives Vela ́zquez, Finkenauer, Kim, Davids, 

Golden, Crow, Veasey, Evans, Delgado, Houlahan, Chabot, 

Radewagen, Kelly, Balderson, Hern, Hagedorn, Stauber, Burchett, 

and Joyce. 

Chairwoman VELA ́ ZQUEZ. Good morning. The Small Business 

Committee will come to order. 

Today’s order of business is to consider the Views and Estimates 

of the Committee on Small Business for fiscal year 2020. These resources are a critical first step in helping entrepreneurs start and 

grow their business and in aiding established businesses to leverage their experience to invest in their business and employees. 

I will admit that we are again considering our views and estimates before there is a proposed budget provided from the Administration. Unfortunately, this is becoming all too common. Nevertheless, we are here to set our priorities and expectations for fiscal 

year 2020 to ensure the Small Business Administration has the 

necessary resources and funding to modernize and strengthen its 

core programs on behalf of America’s entrepreneurs. 

While the economy is healthy, much uncertainty remains. As a 

recent GDP report from the Commerce Department suggests, the 

economy is slowing. In fact, there is consensus among many economists that the forecast for this year is growing dim. Rising interest 

rates, increasing tariffs, market volatility, and a depressed global 

economy have led consumer confidence to fall. 

With fears of a recession growing, and a Harvard economist and 

former Treasury secretary estimating a 50 percent chance by 2020, 

more entrepreneurs and small business owners are looking towards 

the Small Business Administration and its many programs for 

help. 

That is why it is imperative that such critical programs are properly funded and at robust levels. The SBA’s core programs ensure 

small employers and budding entrepreneurs have the financing, 

training, counseling, and access to the Federal marketplace they 

deserve as they work to strengthen our economy. 

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Today’s Views and Estimates reiterates the Committee’s longstanding position to prioritize core programs, like the Small Business Development Centers and Women’s Business Centers, rather 

than expanding critical funding on untested, agency-initiated programs. 

In order to support the SBA in its mission and to leverage the 

success of current programs, such as the SBA’s flagship 7(a) lending program, the agency requires our commitment to provide the 

requisite resources and funding levels. 

Today’s proposal carries forward this commitment, but at the 

same time recognizes where improvements and increased oversight 

are needed. It is a priority for this Committee to take a renewed 

look at the entrepreneurial development programs to maximize 

their effectiveness by modernizing the programs. 

In doing so, we can deliver better results for the millions of entrepreneurs utilizing the SBA’s resources and that of its resource 

partners. 

Finally, we all must work together to level the playing field in 

lending and Federal procurement opportunities for socially and economically disadvantaged business owners all over the country. We 

can achieve this through a greater emphasis on hiring more contracting personnel and providing them with adequate training in 

order to effectively assist small contractors competing in the $500 

billion Federal marketplace. 

The budget we are proposing will breathe new life into the SBA. 

More importantly, it will provide tangible benefits to small businesses and make sure taxpayers get a positive return on their investment. 

At this point, I will yield to the Ranking Member, Mr. Chabot, 

for any comments he may have on the Committee’s Views and Estimates. 

Mr. CHABOT. Thank you, Madam Chairwoman. And good morning to everyone who is here. I want to thank the Chair and her 

staff for working in a bipartisan manner on the Budget Views and 

Estimates. I appreciate her willingness to work collegially as we 

meet our responsibilities to small businesses all across the country. 

According to the latest economic numbers, the U.S. economy is 

continuing to improve and economic forecasts are strong. In our 

congressional districts back home and in hearings in Cincinnati 

and here in Washington and all over the country we hear from 

small business owners that they are optimistic about the future. 

There are fewer regulations from Washington, and they have more 

money to invest in their business because of the Tax Cuts and Jobs 

Act. 

However, small businesses are still finding it difficult for access 

to capital. The Small Business Administration (SBA) and its programs are key to helping small firms expand, create jobs, and grow 

our economy. These programs help small businesses to access capital, provide counseling and training, and link entrepreneurs with 

mentors. 

The SBA, in short, is vital to their success in many instances. 

Our job is to ensure that the SBA’s programs are working efficiently and effectively. We must insist that they are transparent 

and making the best use of taxpayer dollars. 

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I often say that every small business starts as an idea. America 

is a Nation of creators, inventors, and risk-takers. Our economy 

was structured to be driven by entrepreneurs, and in fact, most net 

job growth is from startups and new businesses. Under Administrator Linda McMahon’s leadership, the SBA has made progress in 

delivering its services and ensuring that it is offering the services 

that small businesses need. She has traveled across the country 

visiting all 68 SBA district offices, and she listens to the SBA employees and she listens to small businesses. 

Again, I want to thank the Chairwoman, and I yield back the 

balance of my time. 

Chairwoman VELA ́ ZQUEZ. The gentleman yields back, and I 

thank him for his remarks. 

Are there any other members who wish to be recognized for a 

statement on the Views and Estimates on the priorities of the Committee for fiscal year 2020? 

Seeing no members, the Committee now moves to consideration 

of the Views and Estimates. The clerk will read the title of the document. 

The CLERK. Views and Estimates of the Committee on Small 

Business on matters to be set forth—— 

Chairwoman VELA ́ ZQUEZ. I ask unanimous consent that the 

Views and Estimates be considered as read and open for amendment in its entirety. 

Does any member seek recognition for the purpose of offering an 

amendment? 

Seeing no amendments we will move on. 

And the question is on adopting the Views and Estimates on the 

priorities of the Committee for fiscal year 2020. 

All those in favor say aye. 

Those opposed no. 

In the opinion of the Chair the ayes have it. 

The ayes have it, and the Views and Estimates are agreed to. 

I will now recognize the Ranking Member for the purpose of 

making a motion. 

Mr. CHABOT. Thank you, Madam Chairwoman. 

I would move that the minority members of the Committee be 

permitted to offer additional views and estimates on the budget for 

fiscal year 2020. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Without objection, so ordered. 

And the Committee is authorized to make technical and grammatical corrections to the Views and Estimates. And I believe that 

concludes the business before the Committee today. 

So if there is no further business to come before the Committee, 

we are adjourned and the Committee will stand in recess for a few 

moments to prepare for the Committee hearing. Thank you. 

[Whereupon, at 10:57 a.m., the committee was adjourned.] 

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A P P E N D I X 

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Views and Estimates of the Committee on Small Business on Matters to be set forth in the 

Concurrent Resolution on the Budget for Fiscal Year 2020 

Pursuant to clause 4(f) of Rule X of the Rules of the House and§ 301(d) of the Congressional 

Budget Act of 1974, the Committee on Small Business is transmitting herein: (I) the views and 

estimates on the priorities within its jurisdiction or functions to be set forth in the concurrent 

resolution on the budget. 

The Committee on Small Business has legislative jurisdiction over the Small Business 

Administration (SBA) and this letter accordingly focuses on the FY 2020 budget request for this 

agency and the programs it operates under the authorizations contained in the Small Business Act 

(15 U.S.C. 631 et seq.) and the Small Business Investment Act (15 U.S.C. 661 et seq.). 

OVERVIEW 

America's 30 million small businesses are the key component to continued job creation and 

economic growth in this country. In 2018, there were 30.2 million small businesses in the United 

States, accounting for 99.9 percent of all businesses and employing nearly 59 million employees. 1 

Throughout history small businesses have touched the lives of so many in perceptible ways. Nearly 

half the country's workers are employed at small firms, helping to reduce the unemployment rate 

to 4.1 percent in February 2018.2 Not only do they create jobs, entrepreneurs support local 

communities and towns through innovation, trade, and business reinvestment. As a result, more 

small businesses than ever are counting on the SBA and its programs to deliver assistance with 

access to capital, counseling, and other services. 

Since 1953, the U.S. Small Business Administration (SBA) has held the responsibility to ensure 

that these businesses have the tools and resources they need to start and expand their operations 

and create jobs that support a growing economy and a strengthened middle class. Entrepreneurs 

continue to depend heavily on these programs not only to provide capital, but also advising, 

mentoring and training. 

The SBA meets its statutory mission through three major components: 1) assisting small 

businesses obtain capital; 2) helping small businesses navigate the federal procurement 

marketplace; and 3) offering managerial counseling and assistance. Each component is carried out 

through Congressionally-mandated programs, sometimes in conjunction with private sector 

partners. Specifically, the SBA provides loans and loan guarantees to credit-worthy small 

businesses; entrepreneurial counseling and technical assistance; and disaster services to disaster 

survivors. The majority of these services are delivered, either by SBA or one of its partner 

organizations, through SBA's district offices throughout the United States. 

1 SBA Office of Advocacy, 2018 SMALL BUSINESS PROFILE (2018), 

https://www .sba.gov /sites/default/files/advocacy /20 18-Smaii-B usiness-Profiles-US.pdf. 

2 !d. 
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On October 11, 2018, SBA's Office of the Inspector General (!G) released a report outlining 

SBA's most significant challenges.3 The report cited ongoing weaknesses in small business 

contracting programs and inaccurate procurement data;4 technology capabilities;5 human capital,6 

and risk management and oversight practices.' The report also noted that SBA needs to improve 

its loan programs to reduce improper payments8 and that disaster assistance should balance 

competing priorities to deliver timely assistance.9 Finally, the report found that SBA must more 

effectively manage the needs of8(a) program participants, ensure only eligible firms are admitted, 

and justify relevant standards. 10 The Committee trusts that the agency will make progress in 

addressing its challenges in Fiscal Year 2020. 

SBA released its FY 2018-2022 Strategic Plan wherein SBA summarizes the strategies that SBA 

intends to use to accomplish its four strategic goals. 1 1 The goals are: (I) increase the number of 

loans by 5 percent to small businesses in socially and economically disadvantaged urban and rural 

areas; (2) maximize the percent of federal contracts set aside for small businesses; (3) increase the 

number of unique 8(a) small business contracts awarded by 10 percent; and (4) increase the 

average number of disaster loan applications processed from three to six applications per loan 

specialist. 12 The Committee will closely follow SBA's efforts to accomplish its goals during the 

upcoming five year period. 

The Committee reiterates its ongoing concerns about SBA-created initiatives. Many of these 

efforts have not been reviewed, approved or sanctioned by this Committee and often duplicate 

longstanding small business outreach efforts funded through SBA 's annual appropriation. In 

addition, often these SBA-created initiatives have not been adequately assessed by SBA prior to 

or after their implementation. In the Committee's view, this funding could be eliminated without 

hindering outreach to small businesses, and the funds saved could be reallocated to technology 

improvements, hiring appropriate SBA employees to assist small businesses gain their fair share 

of federal government contracts, or implementing the priorities that Congress has mandated for 

SBA. 

ACCESS TO CAPITAL 

When testifying before the Committee, small business owners consistently cite the lack of 

available capital as a significant problem. SBA administers four major capital financing programs: 

(I) 7(a) Guaranteed Loan Program; (2) Certified Development Company Loan Program; (3) Small 

3

SBA, OFFICE OF INSPECTOR GENERAL, REPORT ON THE MOST SERIOUS MANAGEMENT AND PERFORMANCE 

CHALLENGES FACING THE SMALL BUSINESS ADMINISTRATION (Oct. \1, 20!8). 4 !d. at I. 5 /d. at4. 6 /d at6. 1 /d. at 7. 8 /d. at !4. 9 !d. at !7. 10 Jd. at 21. 11 SBA, STRATEGIC PLAN FOR FY2018-2022, available at 

https://mnv .sba.uovisitesldcfllultltilesiaboutsbaariicle!SUI\ FY 20 18-2022 Strateuic Plan.puf. 12 !d. SBA stated that the goals were developed through the Administrator and in consultation with the Office of 

Management and Budget and SBA's committees in Congress. !d. 

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Business Investment Company (SBIC) Program; and (4) Microloan Program. Through the SBA 

7(a) and 504/CDC programs, entrepreneurs are provided with greater access to capital through the 

extension of federal guarantees on long-term loans. The 7(m) micro loan program provides loans 

and technical assistance to traditionally underserved borrowers, including women, minorities, and 

veterans. Finally, the Small Business Investment Company (SBIC) program leverages public and 

private capital to assist small high-growth firms. 

In these programs, SBA does not lend funds directly to small businesses, but through government 

guarantees, SBA works with private-sector and non-profit partners and intermediaries on the 

repayment of issuance of credit and equity. The SBA must operate its capital access programs 

within the Federal Credit Reform Act13 (FCRA). Under FCRA, the budget records the federal 

government's estimated long-term cost (its subsidy cost) in the year the direct loan or loan 

guarantee is made. Agencies generally update these subsidy costs annually to reflect loan 

performance. To the extent that the President's budget states the need for appropriations to cover 

the cost of loan programs, the Committee believes that the budget resolution should provide 

sufficient funds to do so. 

SBA 7(a) Program 

SBA's flagship lending program, the 7(a) Program, provides small businesses with comprehensive 

financial assistance including working capital, fixed, and intangible asset financing, as well as 

refinance and export support through term and revolving loans. The original mission of the 7(a) 

program was to provide entrepreneurs who could not access traditional capital markets with an 

affordable source of loans. During FY 2018, the 7(a) program supported substantial lending 

nationally, more than $25.34 billion across over 60,300 loans. This amount nearly matches the 

record-high set in FY 2017. The Committee recommends the FY 2020 authorization level for the 

7(a) program be set at a robust level to take into account natural growth in the program, but no less 

than $30 billion, as was enacted tor FY 2019. 

SEA Oversight and Cap Flexibility 

In its annual reports, the SBA OIG has repeatedly pointed to lender oversight and loan agent fraud 

as management challenges that the agency has faced. 14 Relatedly, questions have been raised about 

whether the loans being made are reaching the small business borrowers the program is intended 

to serve, and whether participating lenders are taking on appropriate levels of risk. Additionally, 

although lending remained under the $27.5 billion authorization cap set by Congress in FY 2017, 

SBA has run out of authority to make loans twice recently. 15 Furthermore, SBA has underestimated 

the level of 7(a) lending for at least the last seven years. 16 For example, actual lending volume 

exceeded SBA's estimates by 30 percent in FY 2014,56 percent in FY 2015, and 15 percent in FT 

2016. 

13 2 u.s.c. §66l-66lf. 14According to the SBA OIG, with limited resources, SBA's Office of Credit Risk Management manages credit risk 

for a nearly $120 billion loan portfolio originated by over 2,400 active lenders and Certified Development 

Companies that have various degrees of expertise regarding SBA loan program requirements. See SBA OIG, Report 

on the Most Serious Management and Performance Challenges in Fiscal Year 2017. 15 SBA required and additional $1 billion FY 2014 and more than $4 billion FY 2015. 16 See SBA FY20 18 Congressional Budget Justification, table 1.1 d. 

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The Committee recognized that some of the challenges presented may be best addressed through 

legislation. As such, H.R. 4743, the Small Business 7(a) Lending Oversight Reform Act of201817 

was enacted into law with the primary goals of strengthening the ability of the SBA to conduct 

lender oversight, increase transparency of the oversight process, provide Congress with regular 

updates of SBA's oversight actions and the performance of its portfolio, and establishing a 

notification-and-approval process by which SBA can request an increase of the 7(a) lending cap 

(up to 15%). The Committee expects SBA to work with Members and staff to address and correct 

identified deficiencies in the oversight functions of the Agency, closely monitor loan volume and 

provide Congress with regular reports, and coordinate efforts in the implementation ofP.L. 115-

189. 

7(a) Secondary Market Re-estimate and Changes to SBA Procedure 

The 7(a) secondary market program allows lenders participating .in the 7(a) loan program to sell 

the guaranteed portion of their loans on to investors. Similar to the process of packaging and 

securitizing mortgages, SBA works with financial institutions known as "assemblers" to package 

SBA loans into a "pool" that is sold off fractionally to investors in shares known as Pool 

Certificates. Holders of pool certificates are entitled to receive a proportionate share of the 

principal and interest payments made by the borrowers of the underlying loans. 

To ensure timely payment of pool payments to holders of certificates, SBA established the Master 

Reserve Fund (MRF) and contracted with Colson Services Corp. to act as Fiscal and Transfer 

Agent (FTA) to collect and disburse payments in and out of the MRF. 

In FY 2018, SBA indicated the secondary market guarantee program required a $511 million 

upward reestimate to cover deficiencies in the MRF dating back to FY 2004. At the same time, 

SBA issued a notice in the Federal Register making a change to how the pass through of principal 

payments in the MRF would be made. Both the upward reestimate and the procedural changes 

have raised concerns in Congress about SBA 's oversight of the secondary market guarantee 

program. Therefore, the Committee recommends additional Congressional oversight and 

investigation during FY 2019, and FY 2020 if necessary, into the events that led to the reestimate, 

the reasons why over 12 years elapsed before the underlying causes were identified, and what 

effect, if any, the policy changes made by SBA in October 2017 will have on the secondary market 

guarantee program. 

Access to Capital in Underserved Markets 

SBA 7(a) lending in underserved communities, including to minority and women-owned 

businesses must be improved. In FY 2017, 27 percent of7(a) loans went to minorities, and only 

18 percent to women-owned firms. 18 While the overall number of loans has increased, the 

percentage going to minority and women-owned firms has remained fairly consistent since 2010, 

and is lower than before or during the recession (2006-2009). Women-owned business used to 

account for about 40 percent of7(a) lending activity while the average loan size going to a womanowned business is roughly 30 percent less than SBA loans going to businesses owned by men. 

Similarly, minority owned firms used to receive 35 percent of all 7(a) loans. The Committee 

17 P.L. No. 115-189. 

"A woman-owned firm is defined as a one that is more than 50 percent female-owned. 

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recommends SBA improve outreach to borrowers and lenders in underserved communities and 

funds should be made available to the agency to boost access to capital for these firms. 

7(m) Microloan Program 

The SBA Micro loan Program provides loans to intermediaries, which are nonprofit communitybased organizations with experience in lending as well as management and technical assistance. 

The intermediaries in turn help the smallest of small businesses and startups access capital to help 

new businesses get off the ground. The program plays a critical role in the small business economy, 

providing credit to those unable to secure traditional bank-based financing. In FY 2018, SBA 

approved 58 loans to intermediaries totaling over $37.3 million. Micro loan intermediaries, in turn, 

provided 5,459 loans totaling $76.8 million. Due to the success of the program in traditionally 

underserved communities, the Committee recommends robust funding be made available to 

operate the program at or above a program level of$45 million. It should be noted that this program 

level can be accomplished with less funding than years past due to a steady decline in the subsidy 

rate since FY 2014 when it was nearly double today' s rate. 

Additionally, the technical assistance provided under the microloan program helps 

microentrepreneurs succeed. Therefore, the Committee recommends at least $32 million in grant 

funding should be provided related to technical assistance to meet the demand associated with 

proposed lending activity. 

504/CDC loan Program 

The 504/CDC program provides permanent, fixed rate financing for businesses to acquire 

industrial or commercial buildings or heavy equipment and machinery. The program is delivered 

by local Certified Development Companies (CDCs) working in partnership with private lenders 

and the SBA. During FY 2018, the program experienced over $4.753 billion in loans approved. In 

FY 2016, FY 2017, FY 2018, and FY 2019 SBA requested no subsidy appropriation. Regardless 

of fluctuations in the overall economy, the Committee recommends SBA administer the program 

such that it remains zero-subsidy in FY 2020, with any fee increases being borne by CDCs and 

lenders participating in the program. 

Small Business Investment Company Program 

The Small Business Investment Company (SBIC) Program is an investment program that increases 

access to capital for high-growth start-up businesses. Specifically, with a $4 billion authorization 

per year, the SBIC program provides long-term loans and equity capital to small businesses with 

potential for substantialjob growth and economic impact. SB!Cs are privately owned and managed 

investment funds, licensed and regulated by SBA, that use their own capital plus funds borrowed 

with an SBA guarantee to make equity and debt investments in qualifYing small businesses. SBA 

provides funding to qualified investment management firms with expertise in certain industries. 

From FY 2014-2018, the program has channeled over $28 billion of capital to more than 5, 700 

small businesses in a variety of sectors across the country. In FY 2018, the program provided over 

$5.5 billion in financing to I, 151 small businesses. However, only 7.9 percent of those companies 

were women-, minority-, or veteran-owned. Therefore, the Committee recommends SBA prioritize 

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expanding outreach to increase minority-led and women-led funds, and to increase the number of 

women-, minority-, and veteran-owned businesses that benefit from the program. 

Disaster Assistance Program 

The SBA's Disaster Assistance program was implemented for the purpose of providing timely 

financial assistance in the form of low interest loans and working capital for businesses and 

homeowners devastated by a disaster. During FY 2017 and FY 2018, the SBA Office of Disaster 

Assistance responded to several major disasters across the country, including the aftermath of 

hurricanes Harvey, Irma, Maria, Florence, and Michael. As of February 22, 2019, SBA has 

approved 170,506 homeowner and business applications worth more than $8.484 billion for these 

storms. SBA' s disaster loans are the primary form of federal assistance for the repair and rebuilding 

of non-farm, private sector disaster losses. In light of the critical need for funding to help homeowners and small businesses following devastating natural disasters, the Committee supports 

appropriating amounts necessary to support the SBA's disaster loan-making functions. 

Although the SBA Disaster Loan program continues making loans during a short-term continuing 

resolution, SBA may require additional appropriations to make such loans in the form of a funding 

anomaly. In the absence of securing an anomaly, SBA may exhaust its disaster subsidy, which has 

not occurred since 1988. The continued ability of SBA to make disaster loans available to victims 

in disaster areas is of utmost importance to the Committee. Therefore, the Committee recommends 

sustained coordination between the Committee, appropriators, and the agency during FY 2019 and 

FY 2020 if necessary to ensure adequate disaster funding is in place, particularly during continuing 

resolutions. 

ENTREPRENEURIAL DEVELOPMENT PROGRAMS 

Each year, more than one million entrepreneurs come through SBA's resource partner network of 

small business development centers (SBDC), women's business centers (WBC), SCORE chapters, 

and veterans business outreach centers. 19 They provide free and low-cost counseling services and 

training to entrepreneurs for every stage ofbusiness growth and development. Research has shown 

a direct correlation between counseling and the profitability, longevity and growth of small 

businesses. Providing sufficient levels of funding for counseling and training programs to support 

small businesses is a prudent use of taxpayer dollars. These providers deliver vital services to small 

businesses and, as more entrepreneurs seek their counseling, SBA should ensure that these 

partners, specifically those highlighted below, are provided robust levels of funding to serve small 

businesses. 

SBA's entrepreneurial development programs provide the foundation for the agency's small 

business development efforts. In the past, the SBA has repeatedly funded unproven pilot programs 

19 Small business development centers provide technical assistance to small businesses and aspiring entrepreneurs. 

Women's business centers assist women in starting and growing small businesses. The SCORE Association is a 

nonprofit association comprised of over 13,000 volunteer business counselors located in 348 chapters throughout the 

U.S. and its territories. SCORE members are trained to serve as counselors, advisors, and mentors to aspiring 

entrepreneurs and business owners. Veteran business outreach centers provide entrepreneurial development services 

for eligible veterans. 

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that lack a specific authorization at the expense of proven core programs. Concerns that have been 

raised repeatedly include a lack of demonstrated need and the absence of robust controls. In 

addition, given the deficiency of performance data SBA should establish metrics for its pilot 

programs to understand if these initiatives are successful or not. More importantly, the agency 

should focus on strengthening its existing network of entrepreneurial development service 

providers, rather than continuing to establish and operate untested and unproven initiatives. The 

Committee will continue to work with SBA to ensure priority is given to Congressionallymandated initiatives. 

Small Business Development Centers 

The SBDC program provides SBA grants to small business development centers and leverages a 

unique mix of federal, state, and private sector financial resources. This funding model enables 

SBDCs across the country to foster the economic growth of small businesses that generates 

business revenue, creates and retains jobs, and enhances local and regional economies. SBDCs 

deliver management and technical assistance to small businesses through an extensive business 

education network comprised of 63 lead centers managing more than 900 outreach locations 

throughout the country. SBDCs deliver professional business advising and training focused on 

strategic planning, business development, financial planning, and cash flow management to 

hundreds of thousands of business clients annually. In FY 2017, SBDC professional business 

advisors helped clients start more than 14,000 new businesses; provided training and advising to 

more than 430,000 entrepreneurs including 62,000 long-term clients; helped clients obtain $5 

billion in capital for their businesses; and helped clients secure $1 billion in federal government 

contracts. 

Despite these efforts, there have been concerns that SBA has undervalued the SBDC program. To 

improve the quality and quantity of services provided by the primary source of entrepreneurial 

development assistance at the SBA, the Committee requests robust funding in the FY 2020 budget 

for the SBDC program to meet the rising and urgent demands for business development assistance 

from entrepreneurs throughout the country and the growing areas of assistance provided by 

SBDCs. The Committee expects to lead legislation in the 116'h Congress to improve the program. 

Women's Business Centers 

The WBC program provides grants to more than I 00 non-profit organizations that provide quality 

advising and training services primarily to women entrepreneurs, many of whom are socially and 

economically disadvantaged. The program is a competitive grant program, where WBCs compete 

for federal funding. This differs from the SBDC program where each state is allotted funding based 

on a federal funding formula. SBA provides grants to eligible private, non-profit, and communitybased organizations to operate WBCs. Participating organizations must match the federal funding 

with one non-federal dollar for every two federal dollars during the first two years and on a oneto-one basis thereafter. The Administrator selects a grantee or grantees and then enters into a grant 

agreement covering a five-year period specifying how the grantee will deliver the services to be 

provided at a WBC. Unlike any other SBA entrepreneurial program, WBCs are also required to 

serve disadvantaged communities in underserved areas. In FY 2017, the WBC program reached 

more than 140,000 small business owners and helped nearly 17,500 entrepreneurs launch small 

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businesses. For FY 2019, the SBA received $18.5 million for WBCs. Last year WBC opened nine 

new centers in order to cover more areas of the country and are in the initial stages of the grant 

and building clientele to leverage this expansion. Furthermore, the SBA conducted a survey of 

WBC clientele to cover both advising and training to better understand the value and impact of 

WBC program services. 

To effectively target business assistance to women entrepreneurs, one of the fastest growing small 

business sectors, the Committee recommends robust levels of funding for the WBC program to 

ensure these entrepreneurs have access to the tools that promote their growth. The Committee 

recommends raising the authorization and the cap to expand the reach of the program and to 

increase opportunities for women-owned small businesses. Further, the Committee intends to lead 

legislation in the 116'h Congress to modernize the program. 

The SCORE Program provides face-to-face counseling by over 300 chapters with more than 

11,000 SCORE volunteers. SCORE volunteers provide a full range of business consultation 

services, such as business plan development; strategic marketing; and financing ideas. SBA's 

SCORE database enables small businesses to find SCORE volunteers that best match the needs of 

the business. The Committee remains focused on improving mentorships and requests reasonable 

levels of funding for this program. 

Veteran's Business Outreach Centers 

To meet the growing number of separating service members and reservists seeking new economic 

opportunities, the Veteran Business Outreach Center (VBOC) program provides entrepreneurial 

development services such as business training, counseling and mentoring, and referrals for 

eligible veterans owning or considering starting a small business. This program is the only program 

operated for veterans that is statutorily authorized. It is designed to assist the thousands of veterans 

returning home with skills, experience, and leadership to pursue entrepreneurship and create jobs. 

There are currently 22 VBOCs responsible for ensuring veterans' access to capital through 

marketing and outreach efforts as well as promoting veterans for federal procurement opportunities 

to ensure three percent of federal prime contracts and subcontracts go to service-disabled veteranowned small businesses.20 The VBOC program is critical to addressing the high unemployment 

rate among veterans, service members, and reservists. VBOCs serve nearly 49,000 veteran small 

business owners each year.21 · 

The Committee requests robust funding for the Veterans Outreach program, which includes the 

Boots to Business program that the Committee plans to authorize during the 116'h Congress. This 

program will modernize and streamline the federal governments core veterans' entrepreneurial 

development training initiative and provide returning service -men and -women with the tools they 

need to start a business. 

20 Small Business Administration. (2016). Six New Veterans Business Outreach Centers Open [Press release]. 

Retrieved from https://V~ww.sba.gov/about-sba!sba-newsroom/press-releases-media-advisories/six-new-veteransbusiness-outreach-centers-open. 

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GOVERNMENT CONTRACTING PROGRAMS 

The primary purpose of the SBA's Government Contracting and Business Development programs 

is to assist small businesses increase their access to the federal marketplace. Through federal 

contracts, small businesses are able to increase their capabilities and capacity thereby improving 

their competiveness. To assist small businesses that want to contract with the federal government, 

Congress created a number of programs designed to increase their contracting opportunities. 

However, the creation of these programs has not expanded the number of contracts awarded each 

year. Rather, many agencies are awarding fewer contracts worth higher values. Thus, while some 

agencies and the government have been able to meet their small business goals, the participation 

of small firms has declined. This trend coupled with a system that has become complex and 

countless management problems continues to raise concern as to whether the SBA is effectively 

and efficiently advocating for small businesses in the marketplace. 

Procurement Staffing Levels 

Currently, there are less than sixty Procurement Center Representatives (PCRs) responsible for 

overseeing over $500 billion in federal contracting. However, the shortage of personnel is not 

limited to PCRs. To date, there are approximately a limited number of Commercial Market 

Representatives assisting small businesses with subcontracting opportunities. Similarly, staffing 

for the Service-Disabled Veteran-Owned Small Business Program, one of the set-asides discussed 

below, has decreased. The lack of resources available to review contracting actions has prevented 

small businesses from receiving the maximum practicable opportunities available to them and as 

a result fewer of these firms have been able to participate in the marketplace. Therefore, the 

Committee recommends funding be made available to increase the overall number of small 

business advocates. 

Small Business Set-Aside Programs 

Government contracts can be set-aside for classes of small businesses, such as socially and 

economically disadvantaged firms, whose members might not otherwise be considered for award 

in full and open competition. There are government-wide statutory contracting goals for small 

businesses as well as sub-goals for small business categories.22 SBA has several set-aside programs 

including the 8(a) Business Development, Historically Underutilized Business Zone (HUBZone), 

Service-Disabled Veteran-Owned, and the Women-Owned Small Business (WOSB) programs 

designed to promote small business participation in federal contracting. Traditionally, SBA has 

broken out the funds for these programs in its budget; instead, the funds are subsumed in SBA's 

general salaries and expenses accounts. Given that the SBA OIG has identified small business 

22 The federal government has the following statutory goals for small business procurement: 23 percent of prime 

contracts for small businesses; 5 percent of prime and subcontracts for women-owned small businesses; 5 percent of 

prime and subcontracts for small disadvantaged businesses; 3 percent of prime and subcontracts for service-disabled 

veteran-owned small businesses; and 3 percent of prime and subcontracts for IIUBZone-certified small businesses. 

These goals are tracked based on the dollar amount of contracts awarded. A business may qualitY for more than one 

socioeconomic category. 

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contracting as a serious management ehallenge since FY 2005, SBA should have adequate 

resources to improve these programs. 

8(a) Business Development Program and 7(i) Technical Assistance Program 

The 8(a) program was created to provide business development assistant to eligible small 

disadvantaged businesses seeking to participate in federal contracting. A major benefit of the 

program is that 8(a) firms can receive sole source, as well as set-aside competitive federal contracts 

so that small businesses do not need to compete with large businesses that may have an industry 

advantage. In addition to receiving contracts, 8(a) participant firms are eligible for business 

training funded by the SBA's 7(j) program, which provided management and technical assistance 

to 8(a) businesses. The number of businesses that have sought assistance through this program has 

continually increased. 

The number of participants has continually declined from about 7,000 in 2010 to about 3,421 in 

FY 2017, and this trend has been seen in the number of new applications to the program as well. 

Similarly, the number of businesses that have sought assistance through the 7(j) program, which 

supports 8(a) firms, is now also experiencing a decline after several years of growth and a decline 

in dedicated administrative resources. In FY 2012, 3,272 small businesses were assisted with the 

number peaking in FY 2015 at 5,360. Much of this increase was due to an effort by the agency to 

refocus efforts in this area. However, since then the number has dropped to 4,100 in FY 2017 with 

agency resources dedicated to the program near a record low. If the number of businesses seeking 

assistance does, indeed, rebound with improved agency outreach, small firms may see a reduction 

in the amount of funds spent per business. 

The Committee requests any funding increase within the 8(a) program to be spent to help reverse 

the declining trend of participants by providing outreach to those businesses that may be eligible 

for the program, implementing controls to ensure only eligible firms are admitted, and developing 

a system to identify and address business development needs and monitor progress within the 

program. SBA must also begin to plan for higher numbers of firms to ensure the current level of 

service continues. As a result, the Committee recommends funding for the 8(a) and 7(j) programs 

be increased to escalate the levels of outreach to reverse the decline of program participants. 

HUBZone Program 

The HUBZone program aids urban and rural small businesses that are located in designated 

distressed areas in accessing federal procurement opportunities. There have been many reports 

detailing fraud and abuse that has resulted from lack of eligibility verification by SBA of program 

participants. While the required information was requested to support the applications, SBA failed 

to verify that the firms had legitimate principle places of business in HUBZones. While the 

administration has made efforts to combat fraud by increasing site visits and reviewing firms that 

had previously been certified under the new review guidelines, doubts still remain as to whether 

enough has been done to ensure that only eligible firms receive contracting dollars from this 

program. 

In addition, SBA has yet to provide metrics that would show whether or not the program is meeting 

its mission of increasing employment opportunities and stimulating capital investment in 

designated HUBZones. Furthermore, although the HUBZone program continues to recruit new 

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