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S. HRG. 114–455 

MINORITY ACCESS TO CAPITAL 

FIELD HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MARCH 16, 2015 

Printed for the Committee on Small Business and Entrepreneurship 

( 

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

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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED FOURTEENTH CONGRESS 

DAVID VITTER, Louisiana, Chairman 

BENJAMIN L. CARDIN, Maryland, Ranking Member 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Carolina 

DEB FISCHER, Nebraska 

CORY GARDNER, Colorado 

JONI ERNST, Iowa 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

MARIA CANTWELL, Washington 

JEANNE SHAHEEN, New Hampshire 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

CORY A. BOOKER, New Jersey 

CHRISTOPHER A. COONS, Delaware 

MAZIE K. HIRONO, Hawaii 

GARY C. PETERS, Michigan 

ZAK BAIG, Republican Staff Director 

ANN JACOBS, Democratic Staff Director 

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C O N T E N T S 

OPENING STATEMENTS

Page 

Cardin, Hon. Benjamin L., a U.S. Senator from Maryland ................................. 1 

Edwards, Hon. Donna, a U.S. Representative from Maryland ............................ 89 

WITNESSES

Castillo, Alejandra Y., National Director, Minority Business Development 

Agency (MBDA), U.S. Department of Commerce, Washington, DC ................ 10 

Doss, Antonio, District Director Washington Metropolitan Area, U.S. Small 

Business Administration, Washington, DC ....................................................... 74 

Hairston, Carl L., Administrative Vice President, M&T Bank, National Capital Business & Professional Banking Regional Manager, Washington, DC .. 79 

Tucker, Stanley W., President and CEO, Meridian Management Group, Inc., 

Baltimore, MD ...................................................................................................... 82 

Gross-Wade, Shelly, President & CEO, FSC First, Largo, MD ........................... 89 

ALPHABETICAL LISTING

Cardin, Hon. Benjamin L. 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 5 

Castillo, Alejandra Y. 

Testimony .......................................................................................................... 10 

Report titled ‘‘Disparities in Capital Access’’ ................................................. 11 

Prepared statement .......................................................................................... 69 

Doss, Antonio 

Testimony .......................................................................................................... 74 

Prepared statement .......................................................................................... 76 

Edwards, Hon. Donna 

Opening statement ........................................................................................... 89 

Gross-Wade, Shelly 

Testimony .......................................................................................................... 89 

Prepared statement .......................................................................................... 92 

Hairston, Carl L. 

Testimony .......................................................................................................... 79 

Prepared statement .......................................................................................... 81 

Tucker, Stanley W. 

Testimony .......................................................................................................... 82 

Prepared statement .......................................................................................... 85 

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MINORITY ACCESS TO CAPITAL 

MONDAY, MARCH 16, 2015 

UNITED STATES SENATE, COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, Bowie, MD. 

The Committee met, pursuant to notice, at 10:04 a.m., at the Picard Center/Bowie State University Student Center-Wiseman Ballroom, Bowie State University, Bowie, Maryland, Hon. Ben Cardin, 

presiding 

Present: Senator Cardin. 

Also present: Representative Edwards. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, A U.S. 

SENATOR FROM MARYLAND 

Senator CARDIN. Good morning, everyone. Let me welcome you 

all to this hearing for the Small Business and Entrepreneurship 

Committee. 

I, first, want to thank Bowie State University for their hospitality. Dr. Brown has always been open to us. 

We are very proud of the work that is done at Bowie. This is an 

incredible institution that provides an extremely important function for our community, as I think President Obama has recognized 

the importance of this particular campus. So we thank you for allowing the hearing to take place at Bowie State University. 

I want to thank Senator David Vitter, the Chair of the Committee on Small Business and Entrepreneurship, for agreeing to 

allow this field hearing to take place on access for minority businesses to capital. I am the senior Democrat, the ranking Democrat, 

on the Small Business Committee, and he has authorized this 

hearing and for me to chair this hearing. 

We will be joined by my colleague, Congresswoman Donna 

Edwards. She will be here, we believe, in about 30 minutes. When 

she gets here, I will recognize her and allow her to make some 

opening comments and join us in this very, very important hearing. 

I want to acknowledge Kevin Wheeler, who is staff of the Small 

Business and Entrepreneurship Committee. I think she is around 

here, right there. 

Kevin has been with the Committee for a long time, and if I get 

into trouble she is going to make sure I get back on track. So I appreciate that very much. 

I also want to introduce Ann Jacobs, who is the Democratic Staff 

Director for the Small Business Committee, over there, on the corner. 

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Steven Umberger is here, who is the Maryland Director for the 

Small Business Administration, and has the State of Maryland except for the Washington suburban areas. And we have Mr. Doss 

here, who represents that part of the territory for the Small Business Administration, plus Northern Virginia and the District of Columbia. 

The Small Business Committee is a committee that I wanted to 

serve on. 

I also would like to recognize—I know Michele is here representing my colleague in the United States Senate, Senator Barbara Mikulski. I am going to be joining Senator Mikulski in a few 

minutes, in about an hour or so, in Baltimore with Vice President 

Biden, but Senator Mikulski is an incredible partner on the small 

business issues. 

And Terrance is here representing Congressman Steny Hoyer. 

So we have the full Federal delegation from Prince George’s 

County. All four of us who represent will be participating in this 

hearing either through staff or through, Donna Edwards, in person. 

So I do appreciate all their help. 

When I was elected to the United States Senate, the majority 

leader asked which committees I want to serve on. And there are 

obviously committees that are what we call the top-tier committees, 

such as the Finance Committee and the Foreign Relations Committee, Environment and Public Works Committee, and I am proud 

to serve on those committees. 

But I asked the majority leader if I could serve on the Small 

Business and Entrepreneurship Committee. That was one of my 

top choices because I recognize that the economic engine of America is basically our small businesses. That is where you are going 

to get job growth. That is where you are going to get innovation. 

And, new ideas are going to come from small businesses. 

And particularly in Maryland, I understand how important small 

businesses were to our state economy. 

So the majority leader recommended my appointment, and I have 

been on the Small Business Committee now for eight years and am 

now the lead Democrat on the Committee. 

So I wanted to take a look at how we can do things that are better, what we can do to help small business growth in our community. We need to do a better job for small businesses. 

When I was first elected, I recognized the SBA needed additional 

resources. With President Obama’s elections, I supported an 

amendment during the budget process that increased the funds 

going to the SBA so that they could have the capacity to help. 

I brought the people in from the SBA when I was first elected 

and looked at the numbers as to how much aid was going, how 

many loans were being made to minority businesses, and I was 

pretty shocked by the low numbers. And we set out to do something about it, and we have improved those numbers. 

And they are better today, but they are still not where they need 

to be. When we take a look at the numbers, we see that we could 

be doing a better job. 

And, I had a chance to talk to Alejandra before we got on the— 

before we started the formal hearing. 

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But this is a matter of the values of America. We believe that 

everyone should have the opportunities of this country. So, therefore, it is a matter of our values that we make sure that those minority businesses and disadvantaged communities have the tools 

necessary to achieve our values, our opportunities, in this country. 

It is a matter of basic fairness, but it is also a matter of our economic growth. If we deny a segment of our community its full potential, we lose the strength in our economy. 

So we must do a better job, and that is one of the reasons for 

this hearing—is to take a look at how we can do a better job in 

allowing those creative individuals the opportunity to have the financing necessary to achieve their dream but at the same time to 

achieve the dream of America—the strength of our economy. 

So since becoming ranking member of this Committee, I, along 

with other members of this Committee, have made it a top priority 

to focus on removing the barriers that still affect minority-owned 

small businesses. In some cases, those barriers are not unlike the 

barriers which plague all businesses, but in some cases the obstacles that minorities and small business owners face are very 

unique. 

Minority businesses represent 35 percent of the population but 

only 22 percent of the businesses. This achievement gap results, in 

part, from the significant obstacles that minority business owners 

face in accessing capital. 

If minority-owned businesses had a rate comparable to their 

share of their population, that would mean 2.3 million more minority-owned firms and 11.7 million jobs. You can see the impact it 

has on our economy. 

Minority-owned businesses are two to three times more likely to 

be denied credit, more likely to avoid applying for loans based on 

the belief that they will be turned down, and more likely to receive 

smaller loans and pay higher interest rates on the loans that they 

do receive. 

The recession hit all small businesses hard, but it hit minorityowned small businesses especially hard, and recovery has been uneven for different minority groups. 

The Small Business Administration and the Minority Business 

Development Agencies have created various programs to improve 

access to capital. 

I want to just, before I start with our panel—we will obviously 

focus on the tools we have in government and what we can do in 

government to make those tools more effective, but we also need 

to look at the private sector and what we can do to make sure that 

the private sector participation is open to minority businesses. 

In many cases, it is a matter of just education and a matter of 

outreach, but we need to do a better job because it is not just the 

tools that are available in government. We have to make sure that 

all the partners that are important for economic growth are sensitive to the potential and fairness of our country. 

Well, we have an excellent panel with us today to talk about 

these issues, and I thank each of them for being here at Bowie. 

I will introduce the four witnesses that are here. We are still 

waiting for Shelly Gross-Wade. She indicates she will be here in 

about a half an hour. 

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But I think we will start with our witnesses: 

Alejandra Castillo, who is the National Director of the Minority 

Business Development Agency. She works directly with minority 

businesses, and I thank her very much for being here. 

Mr. Antonio Doss, who is the District Director Washington Metropolitan Area of the U.S. Small Business Administration representing Maria Contreras-Sweet, the Administrator of the Small 

Business Administration, who has been to Maryland several times 

and one of the most aggressive leaders I have ever seen on small 

business issues. 

Mr. Doss, it is a pleasure to have you here. As I indicated earlier, 

you represent the area that we are here, Bowie, and the Washington suburbs as well as Northern Virginia and the District of Columbia. 

Mr. Carl Hairston, the Administrative Vice President for M&T 

Bank, the National Capital Business and Professional Banking Regional Manager, which is one of the preferred lenders in the SBA 

programs and has been actively engaged—the bank actively engaged—in loans to small businesses. 

And, Mr. Stanley Tucker, who is President and CEO of Meridian 

Management Group—30 years of experience in the business field in 

this area. He is a friend and an adviser and extremely active in minority business issues. 

So we have an excellent panel, and Ms. Castillo, we will start 

with you. 

[The prepared statement of Senator Cardin follows:] 

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STATEMENT OF ALEJANDRA Y. CASTILLO, NATIONAL DIRECTOR, MINORITY BUSINESS DEVELOPMENT AGENCY (MBDA), 

U.S. DEPARTMENT OF COMMERCE 

Ms. CASTILLO. Thank you very much. 

Good morning, Chairman Vitter, Ranking Member Cardin, and 

members of the Committee. I am Alejandra Castillo. I serve as the 

National Director of the Minority Business Development Agency, 

MBDA, at the U.S. Department of Commerce. 

For the purpose of this hearing, I will focus on the continued 

challenges minority business enterprises, or MBEs, face in accessing a broad array of capital during their life cycle. My testimony 

highlights our research findings and underscores the actions we 

have taken to create a more robust and sustainable economic ecosystem for minority businesses to grow and thrive. 

MBDA is the only Federal agency tasked to help MBEs realize 

their full economic potential through technical assistance, public 

and private contracting opportunities, advocacy, research, education, and strategic partnerships. This work is accomplished 

through our nationwide network of 44 business centers. Each center provides services that offer access to capital, access to contract, 

and access to new markets. 

Since 2009, MBDA has assisted clients in accessing nearly $26 

billion in contracts and capital while creating and retaining 87,000 

jobs. Celebrating 45 years of service, MBDA has been working aggressively to expand the economic footprint of MBEs. 

According the U.S. Census Bureau’s 2007 Survey of Business Owners, MBEs contributed more than $1 trillion in total economic 

output and employed nearly 6 million Americas. These findings 

highlight the direct and significant contribution of minority firms 

to the national economy. 

In addition, we know that the face of America is changing. We 

only need to look at the demographic changes occurring throughout 

the country. By 2020, more than half of the nation’s children are 

expected to be part of a minority group or ethnic group. By 2043, 

the minority population will be the majority group in this country. 

This data translates equally in the business community, with 

over 5.8 million MBEs, and growing, delivering goods and services. 

It is, therefore, important to note that if the U.S. hopes to remain globally competitive engaging MBEs is no longer a moral or 

civic imperative, it is a strategy, economic, and business imperative, too. 

Opportunity abounds for the development, growth, and diversification of industries for MBEs. MBEs are sources of job creation 

and economic development for many communities around the country. However, they continue to encounter barriers in accessing capital, contracts, and export markets. 

In 2010, MBDA released a report titled ‘‘Disparities in Capital 

Access.’’ Here are just two of the many key findings: Minorityowned firms received lower loan amounts than non-minority-owned 

firms by almost 50 percent. Minority-owned firms are three times 

more likely to be denied loans than nonminority firms. 

Chairman Vitter and Senator Cardin, I ask that MBDA’s ‘‘Disparities in Capital Access’’ report be added to the written testimony 

at this time. 

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Senator CARDIN. Without objection, it will be included. 

[The information follows:] 

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Ms. CASTILLO. Thank you. 

The good news is we are making significant inroads. In 2014 

alone, MBDA helped secure over $2 billion in capital and financing. 

The creation of MBDA’s new Access to Capital Team is helping us 

introduce our clients not only to traditional lending sources but 

also to alternative ones. 

Our work is twofold—to educate and prepare our MBE clients 

and firms about the type of financing available, and to advocate 

and educate a broad array of capital and lending institutions about 

the growth potential of MBEs. 

While debt capital, bank lending, continues to be the primary 

source of financing for small and minority-owned firms, we also 

know that in order for these firms to grow they need to explore equity capital as well. Once again, MBDA is focused on finding ways 

to unleash a broad spectrum of capital opportunities. 

This past October, I spoke at the Minority Finance Forum hosted 

in partnership with the Association for Corporate Growth in Chicago. I addressed over 800 investment bankers, private equity 

groups, bank fund managers, family offices, mergers and acquisitions companies, and encouraged them to look at MBEs as possible 

partners. 

We are making inroads here in Maryland. One success is that of 

our Baltimore Business Center and their work with M. Luis Construction, Inc., the only minority and woman-owned asphalt manufacturer in the nation. The Baltimore Business Center’s consulting 

services led to $27 million in procurement and $21 million in surety bonding for M. Luis Construction. We are pleased to be part of 

their success. 

Our mission is to champion minority businesses nationwide. We 

are unyielding in this pursuit. 

On behalf of MBDA and the U.S. Department of Commerce, 

thank you, Mr. Chairman and the Committee, for the opportunity 

to testify. 

Understanding that the changing role of minority businesses in 

our nation’s economic future is mission-critical and supporting 

their growth through access to capital is paramount. Now, more 

than ever, our nation’s diversity translates into economic advantages in domestic and global marketplaces. 

We salute the Committee, the Committee’s work in addressing 

obstacles to capital faced by minority businesses. 

I welcome the opportunity to discuss further MBDA’s efforts to 

encourage the full spectrum of financing and capital access. I am 

happy to answer any questions. 

Thank you very much. 

[The prepared statement of Ms. Castillo follows:] 

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Senator CARDIN. Thank you very much for your testimony. 

Mr. Doss. 

STATEMENT OF ANTONIO DOSS, DISTRICT DIRECTOR WASHINGTON METROPOLITAN AREA, U.S. SMALL BUSINESS ADMINISTRATION 

Mr. DOSS. Good morning, Ranking Member Cardin and Congresswoman Edwards. 

Administrator Contreras-Sweet sends her regards and regrets as 

she could not attend today’s hearing. 

I am Antonio Doss, and I serve as District Director of the U.S. 

Small Business Administration’s Washington Metropolitan Area 

District Office. 

I am joined today by my colleague, Steve Umberger, the District 

Director of SBA’s Baltimore Office, which supports entrepreneurs 

and Maryland’s small business owners who reside outside of Prince 

George’s and Montgomery Counties. 

As you know, SBA’s mission is to strengthen the nation’s economy by enabling the establishment and vitality of small businesses. 

Underpinning all of our efforts is this notion of inclusive entrepreneurship. By this, I mean we work to ensure that SBA products 

and services are available to small business owners regardless of 

age, race, gender, geography, or socioeconomic status. 

My testimony today will focus on our lending programs, but I 

would be remiss if I did not mention government contracting because of the essential role it plays in the Capital Region and 

throughout Maryland. 

SBA programs, like the 8(a) Business Development Program and 

HUBZone, help ensure that underserved small businesses receive 

their fair share of the Federal pie. Last year, we were pleased to 

join Senator Cardin and the NASA administrator to announce that 

the Federal Government met our statutory goal of awarding at 

least 23 percent of all Federal contracts to small businesses. 

But on the topic of today’s hearing, providing more capital to underserved and minority small businesses, this has been a particular 

focus of Administrator Contreras-Sweet. 

In fiscal year 2014, we made loans more affordable by waiving 

fees on all 7(a) loans under $150,000. As a result, minority lending 

under $150,000 increased 23 percent in fiscal year 2014. We are 

encouraged by these results and plan to continue the fee waiver in 

fiscal year 2016. 

The micro loan program is another key piece in our underserved 

strategy. It helps ensure that borrowers have the support and technical assistance they need. The micro lending program provides 

funding for loans up to $50,000 through nonprofit lenders. 

Over half of all micro loans have been awarded to minorityowned businesses. Nearly 30 percent of all micro loans were awarded to African-American business owners. 

Another effective program for underserved borrowers is our community advantage program. This program allows our micro lenders, 

CDCs, and other non-bank lenders to offer 7(a) loans up to 

$250,000. The program also helps meet the credit management and 

technical assistance needs of small businesses in underserved markets that might not quality for traditional financing. 

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SBA approved a record $19.2 billion in lending under the 7(a) 

program last year. We are on track for another record-breaking 

total this year. 

Maryland small businesses received $245 million in SBA-supported loan approvals under the 8(a) program. Maryland’s minority-owned businesses accounted for 38 percent of the number of 

7(a) guaranteed loans by SBA in the State and 44 percent of the 

dollar value. 

We have made progress on underserved lending, but we know 

more must be done to achieve our vision. We are taking steps to 

do more by making SBA loans easier to access, quicker to process, 

more affordable, and less cumbersome to originate. 

This spring, we will roll out SBA One, a revamped lending platform that will serve as a one-stop shop for all steps of the loan 

process, from determining eligibility through closing out the loan. 

In another effort to streamline the SBA process, last year we 

rolled out a new SBA predictive credit scoring model for loans 

$350,000 or less. It puts greater emphasis on a borrower’s business 

score. 

Finally, we are making it easier to connect with SBA lenders. 

Just last month, we introduced a new web-based tool called LINC. 

It allows prospective borrowers to fill out a simple online form and 

get connected with interested SBA lenders within 48 hours. 

LINC began by connecting small business owners with micro 

lenders and nonprofit lenders. Later this year, we plan to add 

banks and conventional commercial lenders. 

SBA remains committed to helping current and aspiring entrepreneurs secure the financing and the support they need to start, 

sustain, and grow their businesses. The new tools we have implemented are designed to get more credit in the hands of small businesses from all walks of life. We are committed to innovations that 

will allow us to serve and assist minority-owned businesses in 

Maryland and across America. 

Thank you for the opportunity to provide this testimony, and I 

welcome your comments and questions. 

[The prepared statement of Mr. Doss follows:] 

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Senator CARDIN. Thank you very much for your testimony. 

Mr. Hairston. 

STATEMENT OF CARL L. HAIRSTON, ADMINISTRATIVE VICE 

PRESIDENT, M&T BANK, NATIONAL CAPITAL BUSINESS AND 

PROFESSIONAL BANKING REGIONAL MANAGER 

Mr. HAIRSTON. Good morning. Thank you, Senator Cardin, for 

hosting this meeting, and as well to Congresswoman Edwards in 

her absence. On behalf of our Chairman and CEO, Robert Wilmers, 

of M&T Bank, we appreciate the opportunity to testify this morning. 

We are very committed as a bank to small business lending 

throughout all of our geographies. We continue to be committed to 

small business lending. We are one of the 20th largest banks in the 

country, but we are the 6th largest Small Business Administration 

lender in the country. So we continue to be very committed. 

When you look at—and I will speak on both our commitment to 

the Baltimore District Office of the SBA as well as the Washington 

District Office of the SBA. And just to share some figures, we continue to be the number one SBA lender in volume in both districts. 

So when you look at the Maryland area, we continue to drive the 

most small business lending volume through the SBA in these geographies. 

One thing that I wanted to highlight in addition to the written 

testimony that I already provided, when you look in the Baltimore 

District, of the SBA loans that we issued, 29 percent of those loans 

were issued to minorities in the Baltimore District. 

When you look at the Washington District Office, 45 percent— 

of the loans that we extended in the most recent fiscal year ending 

September 30, 2014, 45 percent of those loans were extended to minorities. 

When you look and include females, white females in that number, in the Washington District, it actually totals 56 percent, and 

in Baltimore it totals almost 45 percent. 

So our commitment is very sound. 

With that, we still continue to see challenges in working with minorities, and that is why we have partnered with organizations 

such as the Bowie BIC here in Prince George’s County, to further 

strengthen opportunities to work with minority businesses, as well 

as other organizations across the region. 

To highlight some of the challenges we continue to see when we 

look at some of the lending volume, both SBA and non-SBA, many 

of the challenges surround equity injection challenges, with minority borrowers being able to meet equity injection requirements. 

And then also, when we think about the most recent downturn 

and some of the regulatory changes that many financial institutions have to address and have to speak to with borrowers, is liquidity. So even after a minority borrower has brought forth the required equity injection, we also look at what resources do they have 

to fall back on should they encounter a challenge or difficulty with 

either their startup or their existing business. 

And the biggest thing that we see is really collateral shortfalls. 

When you look here in Prince George’s County, prior to the downturn, we saw minority businesses making even greater strides prior 

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to the downturn. What many lenders were able to leverage towards 

lending to minority borrowers then was the equity that existed in 

their residences. 

So when you look at this geography, many of the businesses tend 

to be more service business-oriented. So they are not capital-intensive. They do not really have the fixed assets that you can typically 

fall back to serve as collateral. Being that they are more serviceoriented, the collateral challenges with lending to those types of 

businesses are even greater. 

We absolutely leverage the Small Business Administration, but 

even leveraging the Small Business Administration, we still typically do not have enough collateral to shore up what that gap may 

be between what the guarantee will be provided by the SBA versus 

the assets that a minority borrower has to fall back on for collateral purposes. 

So when we look, we see those as some of the challenges we continue to try to overcome when we are lending to minority borrowers. 

We are very committed in working with all of the partners in addition to the SBA to find ways to extend more loans to minority 

borrowers, and we are interested in continuing the dialogue and 

being a part of any further discussions to support minority business lending in this region. 

Thank you. 

[The prepared statement of Mr. Hairston follows:] 

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Senator CARDIN. Thank you very much for your testimony. 

Mr. Tucker. 

STATEMENT OF STANLEY W. TUCKER, PRESIDENT AND CEO, 

MERIDIAN MANAGEMENT GROUP, INC. 

Mr. TUCKER. Senator Cardin, thank you so much for being—inviting me here to testify. 

I am actually wearing two hats this morning. I am wearing the 

hat as President of Meridian Management Group, where we manage several funds, but I am also representing the National Association of Investment Companies, which is a trade association that focuses on providing equity capital to minority- and women-owned 

businesses. 

Meridian Management Group—actually, at one point, I was a 

state employee, but then we privatized. 

We manage actually several funds. We manage the Maryland 

Small Business Development Financing Authority. We manage Invest Maryland, which is an equity capital for early stage funds. We 

manage another fund called Maryland Casino Business Investment 

Fund, where we can provide debt and equity. And, we also manage 

Community Development Ventures, Inc. 

And our strategy, Senator, over the years was that we wanted 

to be able to provide a continuum of financing products, if you will, 

where we can actually birth a company and be involved with them, 

taking them all the way public, and we have done that for several 

years. 

What is important is what is the return. I am specifically talking 

about the State of Maryland. When you look at the kind of investments in lending that we are involved with in Maryland, you look 

at the economic impact that we are providing. And we do an economic impact every five years. In the last five years, the deals that we did generated about $3.4 billion in sales, about $1.04 billion in income, generated and created about 3,007 full-time jobs, and also created and generated 

about $109 million in state and personal income taxes and about 

another $31 million in other income taxes, which totaled about 

$140 million in taxes. 

And if you look at the investment that the State made over that 

period of time, it is about $21 million they invested in the Maryland Small Business Development Financing Authority. 

However, if you look at the return, they are getting 8 to 1 return 

on investment. If you factor in a loan loss, it becomes a 6.6 to 1 

return on investment. So, a tremendous investment that the State 

is realizing as a result of investing in the Maryland Small Business 

Development Financing Authority. 

Also, if you look at the demographics, as we know, demographics 

drive everything. In Maryland right now, as we speak, K through 

12 is majority minority. So if you project out, Senator, you will see 

that the employment, the jobs, the workers, etc., school-age, college-age, it is going to be majority minority. 

And so what we have found is that if we can, in fact, grow these 

minority- and women-owned businesses because there is a direct 

correlation between the growth of these businesses and who they 

are, minorities hire minorities; women hire women. 

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And particularly, what is a very key point that we found in our 

analysis is that minority businesses are more susceptible to hiring 

ex-offenders, and that is very, very important because we know the 

challenge ex-offenders have once they are released. I mean, they 

are literally cut off from everything, if you will. 

But we have found that they are, in fact, really more susceptible. 

Why do they do it is because most of them have relatives and 

friends and neighbors, and what not, that they know that they 

need a job. They are good people. They have made a mistake, but 

they need to have a second chance. 

I have been testifying in the legislature this year and last year 

about second chance, expungement, etc., because it is very, very 

important. 

So the growth of these businesses is very, very important. So we 

are developing this strategy and have been developing this strategy 

to grow these businesses. 

Obviously, access to capital is a critical, critical part of not just 

debt but also equity. 

Changing hats for a minute, the National Association of Investment Companies is a trade association that provides particularly 

equity financing for small minority, and particularly minority, and 

women-owned businesses. 

Senator, this is very, very important. I have several reports here, 

if you will, and with regard to the returns that these funds that 

focus on minority businesses provide to their investors. And their 

returns are actually superior to the general private sector market, 

if you will. 

But there was this kind of opinion that because we were investing in minority- and women-owned businesses that our return 

would not be as high. That is absolutely not the case. We have 

independent studies here that were done by KPG and others, showing the return. 

However, even with those returns, obtaining funds from the pension funds around the country is challenging. Why? Well, pension 

funds have these consultants which they call gatekeepers, if you 

will. 

And the gatekeepers do not want to get out of their comfort zone, 

if you will, because, to be quite candid with you, there is this bias 

because they feel as though that if they are investing in minorityand women-owned businesses the returns are not going to be the 

same. Well, the studies absolutely show that is not the case. 

And so we do these studies so we can talk with the gatekeepers 

but also talk with those that are making the decisions at the board 

levels as well as to really what can happen if, in fact, these funds 

can go into these firms that are investing in minority- and womenowned businesses. 

If you look at the size of the funds, the average minority-owned 

venture capital fund or private equity fund is about $150 million; 

the average fund in the other areas is close to a half a billion dollars. And so there is a huge disparity there in terms of the capital 

that is needed to invest in these. 

But we have shown that we have given the returns. We have 

shown that we are taking companies public. We do not know what 

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else to do, and so we really need some assistance in making that 

happen. 

I will stop there and be happy to answer any questions. 

[The prepared statement of Mr. Tucker follows:] 

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Senator CARDIN. Let me acknowledge that I am joined by my colleague, as I indicated earlier, Donna Edwards. She is an incredible 

effective, active person in the House of Representatives on these 

issues. She has been fighting for minority financing and for economic development in distressed areas as one of the national leaders on the Transportation Committee and in the leadership of the 

House of Representatives. 

Congresswoman Edwards, would you like to make a comment. 

OPENING STATEMENT OF HON. DONNA EDWARDS, A U.S. 

REPRESENTATIVE FROM MARYLAND 

Representative EDWARDS. Well, first of all, thank you very much, 

Senator Cardin, for being here, and particularly in Prince George’s 

County, and to our witnesses today. 

Several of our witnesses I have had an opportunity to work with 

over the course of several years on these very issues, both with minority-owned businesses at large but also women-owned businesses, Hispanic-owned businesses, where we know, as Mr. Tucker 

has already stated, that there clearly is a demonstrated record of 

success of these businesses. And so we have to get—we have a 

challenge of getting over the hurdle that does not enable minorityowned businesses to thrive in the same kind of robust way. 

And how fitting, Senator Cardin, that we are here in Prince 

George’s County because we know that there is robust small business development and entrepreneurship going on here in this county, and if we can figure out the way that we can take some of those 

businesses from the place that they are and really provide the kind 

of robust resources, technical development, that they need and that 

they want, and expose them to business opportunities that others 

of our businesses face, we know that that will double and result in 

a benefit both to our local economy, to our State’s economy, and of 

course, to the national economy. 

And so I want to thank you very much for bringing these important issues, and I look forward now to joining in some questions 

with Senator Cardin at the lead of our witnesses today. 

Thank you very much. 

Senator CARDIN. Well, thank you. I appreciate those comments. 

Let me turn to Shelly Gross-Wade, the President and CEO of 

FSC First. FSC First is a preferred alternative lender under the 

SBA 504 Commercial Real Estate Loans, the Small Business Community Advantage Loan Program, the State of Maryland Microenterprise Loan Program, City of Bowie Revolving Loan Fund, and 

the Prince George’s County $50 million EDI Fund. 

It is a pleasure to have you with us. 

STATEMENT OF SHELLY GROSS-WADE, PRESIDENT AND CEO, 

FSC FIRST 

Ms. GROSS-WADE. Thank you, Senator, and my sincere apologies 

for being a little bit late. 

I am indeed happy to be here to, first of all, as Congresswoman 

Edwards, welcome and thank you for bringing this opportunity to 

Prince George’s County. 

Secondly of all, I am very close to the grassroots businesses in 

Prince George’s County. As a quasi-government agency, FSC First 

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has just within the last week or so conducted a focus group of small 

businesses within Prince George’s County. We extended the invitation to business owners who were familiar with, and unfamiliar 

with, the plethora of services that we offer at FSC First. 

So I am happy to share with you some real-world feedback that 

we have just gleaned from these businesses based on where they 

are at this point in their business operations, as well as what they 

would like to see as resources available to them, so that they can 

continue and thrive and grow not only in Prince George’s County 

but globally. 

FSC First, as I have mentioned and as you have already noted, 

is a 37-year-old nonprofit organization in Prince George’s County. 

We have had the distinct designations of being a CDFI through 

Treasury as well as a community development, or certified development, entity participating in the SBA 504 program. 

When we look at the profile of businesses that we have assisted 

in their development, we have loaned funds to companies that are 

both startups as well as growing and expansion companies. We 

have helped those that are attracted to the county as well as those 

that are in a rapid growth mode and may be facing some challenges. 

The difference between us and other lenders is that we spend a 

lot more time with these business owners, providing them with access to technical assistance as well as access to alternative sources 

of capital. 

And one of the things that has become very evident to us is the 

business community, in particular, is in need of increased and enhanced business acumen. Our business owners know their products 

and services very well. They struggle with taking their business to 

the next level of growth, and that suggests to us that they are in 

need of technical assistance, more in-depth technical assistance. 

And so we are familiar with, and have utilized, the SBA’s funded 

small development services, center services. We also use other resource partners like the Maryland Women’s Business Center, 

which is also federally funded. We have referred business to the 

Bowie Business Incubator. 

And, however possible, we try to attract and partner with those 

technical assistance providers to make sure that businesses have 

access to subject matter experts that can help them delve a little 

bit deeper into connecting the dots from ‘‘I have a product or service to offer that generates revenues’’ to ‘‘How do I generate the next 

level of revenues and growth strategies for my company.’’ 

Interestingly enough, in the focus group, a couple of businesses 

mentioned that what they want and need more than anything else 

is business coaching, preferably from subject matter experts like 

the Service Corps of Retired Executives, SCORE, but more one-onone type of assistance as opposed to classroom training. They really 

emphasized that coaching and mentoring is something that they 

feel very strongly would be the level of technical assistance that 

would help get them to the next level. 

So where are we as far as providing access to capital? At FSC 

First, we make loans that range from $5,000 to $5.5 million, using 

the SBA 504 program. 

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However, the average loan that we have seen in our portfolio has 

been at $178,000, which suggests to us that we are meeting people 

at their point of need. We rarely see businesses that come to us 

that cannot meet the definition of small business as defined by 

SBA. 

However, I would suggest that about 75 percent of those businesses that come to us on an annual basis would not be prepared 

to gain access to capital. They really do not understand the depth 

of capacity that they need to calculate the amount of funding that 

they need nor to calculate their ability to repay. 

And so while we might have many, many different types of financing sources available—my colleague, Stanley Tucker, talked 

about making sure that there is equity funding available and making sure that the sources of venture capital are more—have a 

broader perspective on what they invest in. 

We also see that those businesses that come to us could benefit 

from additional funding sources but are not yet prepared. And so 

the step for FSC First is to prepare them so that we can take advantage of where they are now and prepare them for greater funding as they move on to traditional lenders. 

And I will stop there and save the rest of my remarks for the 

question and answer period. 

[The prepared statement of Ms. Gross-Wade follows:] 

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Senator CARDIN. Well, thank all of you for your comments. I 

think it has been extremely helpful. 

And, as you know, the hearing record will be available to all the 

members of the Congress. So this will be part of the work of our 

Committee and part of the work of the House and the Senate. 

Last Friday, I was at the Census Bureau. I was there to support 

the President’s request for the resources necessary that we have an 

accurate census and it is done in a most cost-effective way. You 

need information in order to be able to make the right decisions in 

not only our government but in our country. So the census work 

is critically important. 

I say that because I was listening to your testimonies. 

Ms. Castillo, you mentioned the fact that the private sector lending is equally important and, in some cases, more important than 

what is happening in the government sector. 

Mr. Hairston, your comments sort of connected the dots for me 

about why our minority businesses are harder hit in recessions. 

And you pointed out—and I did not realize—that they are more dependent upon their personal residence equity for loans than the 

nonminority community. 

Ms. CASTILLO. Right. 

Mr. DOSS. Absolutely. 

Senator CARDIN. And I wonder if we have really good data to 

show that. 

And then, Mr. Tucker, your point about reentry really hit home. 

I mean, that is one of the high priorities of our country, and if we 

had that data to show, we may be able to get additional resources 

to minority businesses because of their activities in hiring ex-offenders. 

So it seems to me having adequate useful information on minority businesses and small business activities is critical to make the 

right decisions. 

And I know we have a lot of material that is made available, and 

I get a lot of reports. But is the data we currently have in the most 

useful form in order to help minority businesses gain access to the 

type of capital that they need? 

Ms. CASTILLO. So if I may, Senator, as you know, the U.S. Department of Commerce Census Bureau, we do the survey of business owners. That is done every five years. The new data will be 

coming out in June, which is critical. 

And the Department is working very diligently to see how we can 

actually roll out the data more quickly and is also partnering with 

the Kauffman institute in making sure that the data is provided 

in much more real time, if you will, because you are absolutely 

right. You can only—as the saying goes, you can only manage that 

which you measure, and measuring and being able to actually have 

much more robust information. 

Now I will tell you that MBDA, as we commission different reports, it is precisely because of that—because we want to bring that 

data in a way that is more digestible and that really tells the story. 

So, when I talked about our disparity in access to capital report, 

that is the type of information that is gleaned through that type 

of much more in-depth research. 

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We are developing a three-year agenda, a research agenda that 

will help provide more information to all of these practitioners, if 

you will, and have more data that is more compelling. We know the 

information kind of instinctively, but when you see it, when you 

can actually see the charts, see the economic impact that this has, 

it is very persuasive. 

Senator CARDIN. I think the more—I mean, showing how many 

minority businesses have to put their homes up for collateral, to 

me, would be a very telling situation. 

Mr. TUCKER. Could I speak to that for a minute, Senator? You 

will find that is pretty high. 

Ms. GROSS-WADE. Yes. 

Mr. TUCKER. But let’s talk about the data. I think the data is 

critical. 

The data that Ms. Castillo talked about, the census data, etc., is 

very, very good data and what has been used over the years. But 

what happens with that data also is by the time they collect it and 

they actually publish it, there is an extensive period of time. 

Let me suggest this: It is something that we are trying to do, and 

we have been working with Dr. Timothy Bates, who is probably the 

top person in the nation in this minority business piece. He has 

done extensive research in this area. 

And Tim—I mean Dr. Bates—has said, and what we have been 

trying to do, is that the data that is collected nationally in the census, with regard to minority businesses and small business as well, 

that same data is actually collected annually at the state level. 

Okay? 

And so what we are trying to do is get access to that data at the 

state level, and Dr. Bates is trying to get access to that data at the 

state level. They are looking at California and Maryland. I know 

because Tim and I go way back. 

And so we are trying to modify the law in Maryland at the state 

level so we can get that same data annually, okay, because what 

happens is, and the challenge is, that these various minority business and women business programs—they are being challenged. 

And we must have the data, up-to-date data, okay, to beat back the 

challenges. 

The census data is good. However, sometimes it is dated. Okay? 

But if we could get this data—in Maryland, it is called ES–202. 

Okay? And we want to modify that language so we can get this 

data to the researchers. 

As a matter of fact, Senator and Congresswoman Edwards, we 

were having some challenges and still have some challenges in 

Maryland, trying to modify this data. 

So what happened—there is a gentleman at the Department of 

Labor, Bureau of Statistics who said—because they have so much 

confidence in the research of Dr. Bates and his team, said that they 

will cover the costs. It would not cost Maryland a dime to collect 

this data. That is how important they feel it is that we get access 

to that data. 

This really needs to be done nationally. Okay? But we want to 

have some pilot projects. 

And we need some assistance on that so we can get that language modified at the state level so that that data can be collected 

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annually and then use that data to undergird, if you will, the minority business programs in Maryland but also use it as a model 

for the nation. 

Representative EDWARDS. Senator Cardin, if I could follow up. 

Senator CARDIN. Sure. 

Representative EDWARDS. Let me just follow up with that because I remember when we passed the American Recovery and Reinvestment Act and a lot of that money went into research, went 

into transportation. One of the challenges that I found on our 

Transportation Committee is getting reports back about how much 

of those significant Federal dollars went down and out to minorityand women-owned businesses. 

And one of the big challenges was that there was not a required 

reporting mechanism from the state to the Feds so that they could 

report back to Congress. And as a result, it was very difficult, except in some ways with states that were better at reporting than 

others, about where those resources went and how we could better 

direct some of them to minority-owned businesses. 

And so I want to ask you, especially in some untraditional sectors, like transportation, like research and technology, how it is 

that we could function as a Federal Government in our oversight 

capacity in the Congress and try to tease out some of that data so 

that it becomes more useful for doing the right thing. 

Mr. DOSS. If I could add just a moment on the same topic with 

data, at the Small Business Administration, of course, we have our 

Office of Advocacy, which works very closely with the Department 

of Census and collects and uses a lot of the information that is provided by the Census Department. It is valuable information for us, 

for our business owners, for the general public and our agency in 

terms of understanding what the needs are, what the situations 

are that exist with businesses, and we use that data on a regular 

basis. We have an annual update even to our small business profile. 

We always will welcome the opportunity to have more data, particularly as it relates to minority and small businesses, as we try 

to better understand the impact of both of those groups on the 

economy because we are interested in growing the economy very 

much locally, whether it is here in Bowie or somewhere in Prince 

George’s County or at the state level. 

But being able to see what the impact of those small businesses 

is in terms of helping to drive the small business sector and the 

economy in general is something that we are interested in. 

Representative EDWARDS. Because wouldn’t it help if, for example, the SBA knows that we are doing a lot of job creation in the 

areas of research and technology, but our small business loans that 

are coming are in some of the service sectors? 

Would it help you to be able to make an argument to an M&T 

Bank, for example, or to a venture capital investor that it makes 

sense to make loans in those sectors where we are growing the 

economy and we are growing resources so that we can then spread 

out some of those opportunities into the future? 

And I would ask that of M&T Bank. 

Mr. HAIRSTON. Sure. 

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Representative EDWARDS. What would you need to know to make 

a better business decision about making a loan to a small business? 

Mr. HAIRSTON. Absolutely. We are fortunate now where we are 

able to get a sufficient amount of information from the Small Business Administration because we are literally able to see, by various 

minority categories and groups, what percentage of our lending is 

actually being directed to those respective groups. 

To go back to one of the questions and the points prior, I think 

one of the pieces that it seems that the SBA would be able to provide is what percentage of those minority borrowers did we have 

to lever their personal residences. All that information is absolutely 

available. 

When I look at this geography, I would definitely say whether it 

is minority borrowers or majority borrowers, having worked for 

M&T and other parts of our footprint where the businesses are 

more capital-intensive manufacturing, this geography—I will tell 

you, having been in the Mid-Atlantic with M&T, both in Baltimore 

and now in the National Capital area, it is absolutely a higher proportion, both minority and majority, where you have to lever their 

residences just based upon the larger percentage of the businesses 

being more professional services-oriented, whether they are government contractors or non-government contractors, because you do 

not really have other collateral that you can rely upon. 

With that being said, I absolutely believe there are opportunities 

as you think about the technology. We have struggled with the 

technology piece because when we look at technology companies we 

sort of look at them on a continuum and many technology companies do not fall into that category in the early stages where they 

are targets for debt capital. They are largely looking for equity capital. 

We challenge—we are challenged, you know, to really understand who are all the providers out there that can work with them. 

Being a highly—being in a highly regulated industry, you know, 

we have to be able to—as Shelly referenced, we have to be able to 

show that—whether we are going to try to get an SBA guarantee, 

we still have to be able to show that they have got a track record 

or, if they do not have a record, that they have the ability to immediately generate revenue that will turn and provide an ability to 

pay whatever that debt is. That is typically a challenge for most 

of your technology-oriented companies in this geography. 

So partnering and working with the types of organizations that 

can fill that equity gap is really still an area that is still not—and 

especially in the State of Maryland, I think there are some strides 

that have been made, but there are still significant challenges 

there. 

Senator CARDIN. So let me follow up on these issues. 

Mr. Doss mentioned many of the tools that the SBA has implemented in order to try to help minority businesses gain access to 

capital. So I particularly would be interested in, Ms. Gross-Wade 

and Mr. Hairston, since you work directly with borrowers, whether 

these tools are working as well as they could and the priorities. 

Mr. Doss mentioned the fact that the SBA loans under 250—no. 

The SBA loans under—was it $150,000 where there is no fee? 

Mr. HAIRSTON. Correct. 

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Senator CARDIN. Where the fees are actually subsidized by the 

other borrowers because this is a zero-sum game, if I understand 

correctly, but that that has increased the volume. So the initial 

costs being a little bit less has had an impact. 

The micro loan program, which has a very high concentration 

within minority businesses. 

The SBA Community Advantage Loan Program, which was a 

pilot initiation for loans. 

The simplifications procedures through the internet, whether it 

is the LINC program or the SBA One that is going to be initiated 

this year and has not started yet. 

The credit rating simplification. 

And I have not mentioned the 504, the SBIC, and the other programs we have available. 

Could you handicap for us whether—how effective these programs are and whether they could be more effective? 

One of the things we have to talk about in government is that 

we just cannot layer program upon program upon program. We 

have got to make sure that we have the most effective use of the 

government tools to deal with the issues. 

Which are worth further investments here? 

Ms. GROSS-WADE. If I may, I think the Community Advantage 

Program is one of the best financing tools that have come out of 

the SBA in a very long time. It allows for us to put the money out 

on the street at a much faster pace than the traditional SBA products. 

I think that the ability to know going into the deal that you are 

going to have an SBA guarantee at a certain level helps you in 

structuring the deal, as a non-bank lender. 

And we are one of your CDFIs that is a Community Advantage 

Lender. We are just now getting ourselves up on the learning curve 

with how best to deploy that tool. We are striving to become a dedicated or designated Community Advantage lender, which would 

give us some unilateral authority in the types of loans that we underwrite and use the SBA guarantee on. 

But is it efficient? Yes. 

Is it effective? Absolutely. Everything that we are looking at now 

we are looking at first to see if it is going to qualify for Community 

Advantage. 

I will also tell you that while you have standards for evaluating 

those credits there is a great deal of latitude given to the lenders 

on how to defend the request for the borrower. 

So I am particular, both personally and professionally. I am a 

strong proponent of Community Advantage. 

The range is from $5,000 to $250,000, and that seems to be our 

sweet spot, with us being a revolving loan fund. 

Senator CARDIN. And that is so valuable because it streamlines 

and makes it faster and more predictable. 

Ms. GROSS-WADE. Yes, yes. And the turnaround time for us has 

improved significantly. I mean, we are able to get those deals underwritten and transmitted electronically to the SBA so that we 

have a credit that is well-packaged, underwritten, approved, and 

received the SBA guarantee in less than two weeks, which means 

we can go to closing and fund in a much shorter period of time. 

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Mr. HAIRSTON. And I would add the complement to the Community Advantage Program, which is a program that the SBA rode 

out in the most recent fiscal year, is the Small Loan Advantage 

Program, which is designed for financial institutions, for credit requests as well, $5,000 up to $350,000. 

I have to tell you we are huge fans of the Small Loan Advantage 

Program and the benefits, the efficiency of it, not just from the 

process time. The reality is we want to get the loans closed as 

quickly as we can. 

And what you would see—and the data would show that many 

of the minority borrowers really fall into that space—— 

Ms. GROSS-WADE. Right. 

Mr. HAIRSTON [continuing]. From a traditional lending standpoint, where the Small Loan Advantage Program really does adequately meet their borrowing needs under that program. 

And when they do not, we can then go to the traditional 7(a) program, which—you know, they have streamlined it. With that being 

said, they continue to look for more opportunities to make that program even more efficient. 

We are fortunate because we are a preferred lender. So we have 

the unilateral authority to act on behalf of the SBA. 

But I would definitely tell you the Small Loan Advantage Program has been very beneficial. Our average loan size at M&T is 

about $148,000. So we really cater to your average, typical small 

business that has been in existence typically for three years or 

more, and that program really does meet the needs from that 

standpoint. 

The challenge, once again, that even under that program that we 

still have is when there is a collateral shortfall and how do we fill 

that. 

So, if we can work to partner with other organizations where we 

may have that collateral gap and fill those needs, I think that is 

an opportunity to really drive more of that minority lending, which 

is really necessary. 

Representative EDWARDS. Let me just ask whether—on the 7(a) program, because those are loans that are under $150,000, how 

much the fee waiver provisions contributed to the increase in those 

loans and the ability to get those loans out. 

Mr. HAIRSTON. Yeah. When it first rode out, during that initial 

fiscal year, we saw a 21 percent increase in volume in the space 

of $150,000 and under. 

So we are absolutely proponents of it. We are strongly in favor 

of continuing the waiver because the reality is in the way that we 

manage this; those loans that are extended to those borrowers that 

are $150,000 and under, they are more like consumers. They think 

more like consumers. 

So, when you approach them—and that guarantee fee under the express program could be, you know, I say as little as $750. But 

when you are talking to somebody who thinks more like a consumer and they can get a credit card where there is no up-front 

fee, it does not matter that the rate could be 18 percent all in. 

And even on the SBA side, you can do prime. 

And even, let’s say on the high end as prime plus 5. Prime plus 

5 would be 8 and a quarter. 

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Because they do not have to pay that up-front fee of $750, they 

will go with the credit card instead of going with the express loan. 

Ms. GROSS-WADE. Right. That is an interesting point, if I may 

piggy-back on that. 

Out of the focus group session that we had over a week ago, it 

was very insightful to us that most of the business owners were not 

at all adverse to having a higher interest rate. They wanted to 

know that the funds would be available at the time that they needed. 

Mr. HAIRSTON. Yes. 

Ms. GROSS-WADE. There was no criticism or concern at all about 

the cost of money. 

And so that was a new reality for us, if I may put it that way, 

because the perception as a lender is that we try to be very cognizant of the fact that we are making loans to businesses that are, 

in most cases, pre-bankable. So we want to be very sensitive about 

what interest rate we give them. 

And they are saying, we do not care what the interest rate is; 

we just need to have access to the money. 

And the other reality is whatever the interest rate is that we 

propose to them as an SBA lender, as a government-backed lender, 

it is still going to be a lot less costly than a credit card rate. Yet, 

many of the businesses that we see come in with exorbitant credit 

card debt that they would like to have refinanced. 

And those rates are almost prohibitive—— 

Mr. HAIRSTON. Yes. 

Ms. GROSS-WADE [continuing]. For us to even take that debt out. 

Representative EDWARDS. Thank you. 

Ms. Castillo. 

Ms. CASTILLO. I would like to join in and maybe broaden the conversation as well because MBDA focuses on growth. How do we get 

businesses, not just at the small end of the spectrum but also getting them, moving them, through the growth spectrum. 

So going back to what Ms. Wade was saying, the lending tools 

are critical but making sure that these businesses are ready, that 

they understand all the financial that they need to have available. 

I will also submit to you that lending also depends on the industry that you are in. Transportation, construction, for example, a 

surety bonding is a huge issue. 

On the exporting side, we work very closely with Ex-Im Bank to 

make sure that we are getting more minority businesses, who, by 

the way, are twice as likely to export than nonminority firms, to 

access the opportunities that exist either through Ex-Im Bank, 

OPIC, or others. 

So I just want to make sure that as we talk about minority businesses that we are looking at minority businesses just not at the 

small level but how do we help them grow. That is where the job 

creation comes in play. That is where the tax revenues are going 

to grow. And that is really where the future of the country is going. 

It is making sure that we have all of those tools at every life— 

at every point of their life cycle. 

Senator CARDIN. It is the reason why the SBA administrator is 

so much in favor of Ex-Im Bank reauthorization. 

I was at a small business in Baltimore that is absolutely vital. 

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And your point about minority businesses and exports is a very 

good point. As we talked earlier, a lot deals with the fact of the diaspora community. They have contacts and can get—make those 

contacts work for commercial ties. And it is an area that is certainly underutilized and one that we need to move forward. 

I have one last question, and then I will let Congresswoman 

Edwards talk about her issues. 

That was a Freudian slip—— 

[Laughter.] 

I better—for the sake of Chris Van Hollen, I better correct the 

record or I am going to get in trouble with my other colleagues. 

There is—as you know, there is a desire to increase the cap on 

the 7(a) loans. It does not cost any money because they are offset 

with the cost. But it would go from about $18 billion to $23 billion, 

and I think all of us support that. The volume needs are there. 

Why don’t we meet those needs? 

I was just interested as to whether we have an indication whether by raising that cap it will be more beneficial to minority businesses than the general population of small businesses or whether 

it would probably have no major impact on how the allocations are 

being made between minority and nonminority small businesses. 

Mr. HAIRSTON. I would immediately add, you know, if we look at 

the data for M&T just in the most recent fiscal year. So 45 percent 

of the loans that we extended in fiscal year 2014 went to minority 

borrowers. So, even if we just looked at that data. 

And I remember when there was the potential for a delay with 

our SBA processing, and we literally, four weeks prior, sort of sent 

a message out throughout the institution. You know, try to push 

these loans through as fast as you can because, potentially, we may 

have a delay and we do not necessarily know how long that will 

last. 

The reality is if we were consistent and we ran into an issue with 

the cap you could say that 45 percent of our borrowers would not 

be able to access capital. 

Senator CARDIN. That is helpful. 

Mr. TUCKER. Let me—two things, two points I want to make because we manage state funds. 

And one of the things we did, it was somewhat—it is actually 

still unique in the country. We wound up privatizing the management of the fund, and when we privatized the management of it, 

it gave us a lot more flexibility in terms of bringing different kinds 

of capital to the table. 

Then we were able to leverage some of our dollars, to leverage 

our specialized small business investment company. 

We were able to—we came up with the idea of putting language 

in the gaming bill where 1.5 percent of the gross revenues would 

go to a fund to invest back into small minority- and women-owned 

businesses. 

So we were able to do a number of things. 

Actually, I made a recommendation to the SBA administrator 

about maybe 10 or 15 years ago. I said, you know what I think 

would be interesting? If you privatize SBA and see what happens 

and if folks have to really, really pay their own way, if you will, 

in terms of what they do. 

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But also, in terms of dealing with your question, one of the challenges minority- and women-owned businesses have is capacity, 

and the quickest way to get that capacity is to buy it. People do 

it every day. 

Over the next 10 years, all the baby boomers in the country are 

going to sell their businesses. The question is, who are they going 

to sell them to? 

So, in Maryland, we are looking at introducing legislation that 

says this: 

If someone sells his or her business to a minority or a woman, 

one, the profits they make off of that sale, they would not have to 

pay state taxes, one. 

Two, if someone makes an equity investment in the transaction, 

they will be able to get an investment tax credit up to a half a million dollars. 

Three, if the owner hangs around and helps with the transition, 

whatever salary they receive, they will get a special tax treatment 

on that. 

And, four, if the owner helps finance the transaction, they will 

get a special tax treatment on that. 

So what are we trying to do? We know these businesses are 

going to sell because their wealth is tied up in these businesses. 

The question is, who are they going to sell them to? 

So we want to create an environment where they will sell them 

to minority- and women-owned businesses. So now they get back 

a pass—and here’s the other thing that’s very important. 

One, we keep those businesses in the State of Maryland. The 

sellers, usually when they sell, what they will do is they will go to 

Florida, establish residence, come back to Maryland, sell their business, and get the first plane back to Maryland—back to Florida. 

So we want to keep them here. We want to keep those businesses 

here. And now as they become owned by minority- and womenowned businesses, they get the minority- and women-owned status. 

They can grow their businesses. 

We have done several economic impact analyses which show that 

if, in fact, this legislation was in place it would be a net positive 

to the State of Maryland. 

And SBA in acquisitions, SBUs and SBA with guarantees to 

banks and what not, help with financing these businesses. So access to capital, again, becomes a critical part of these acquisitions. 

We are very excited about it. We think we are going to be able 

to get it through. We did not introduce it this year, but next year 

we probably will. 

Senator CARDIN. Good point. Well, before I make some final comments, let me turn it over to the Honorable Donna Edwards. 

[Laughter.] 

Representative EDWARDS. Thank you very much, Senator Cardin. 

And I really do appreciate your being here today because I think 

over the course of my, you know, last several years of service in 

the Congress we have had a number of events in my congressional 

district that are really targeting various sectors of our widespread 

minority-owned business community and small business community. 

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And I think some of the challenges that I have heard are clearly 

the businesses that are on the smaller end. They are start-ups. 

They are the ones that Mr. Hairston referred to as sort of consumer-oriented. And so we have a set of programs that are important for those. 

But I want to go back to Ms. Castillo’s point, and it is that we 

have to also figure out a way that as we get these businesses, you 

know, started and they are growing and they are developing, what 

is the thing that we can do—what are the things that we can do 

that jumpstart those businesses, that take them to the next level, 

that makes them both regional and transnational competitors but 

also makes them global competitors? 

And I have in my mind one small business that I—what started 

out to be a small business that I know really well. A couple of guys 

working in the space industry, who decided that they were going 

to jump off and start their own little firm, and they did. And so 

they became 8(a)-qualified, which was really great. 

And then the challenge—and Mr. Doss knows this—was how do 

you go from there to competing in a wider marketplace and growing your business? And this business did that. 

And I am not going to name the names because I think I am 

looking at him right outside my right eye. 

But then they grew, and now they are transnational competitors, 

and they are global competitors. And they are minority-owned businesses—businesspeople. And they started out at the ground level, 

just with an idea of how to go to that next level. 

That is what I would like to see for all of our small businesses. 

And I think, you know, Senator Cardin—I know that Senator 

Cardin shares this. 

And I know that here in this county and across our state we 

have, you know, people out there who have some great ideas. And 

they just need us to figure out ways to invest in those ideas, not 

to do the work for them, as you indicated, but to provide the tools, 

the mechanisms, the mentorship, Mr. Doss, that these businesses 

need, the investment that they need, whether it is equity, capital 

and venture funds, or it is an under $150,000 loan so that we can 

grow them. 

This is the tool for our new economy. Senator Cardin knows this. 

We know that in a world that is becoming increasingly diverse— 

and that is true for our state—that our job creation and our business creation is going to take place with these entrepreneurs. 

And so I just want to thank Senator Cardin and thank each of 

you for being here today to help us figure out how we can 

jumpstart some of those businesses. 

Thank you, Senator Cardin. 

Senator CARDIN. Well, thank you very much. I really do appreciate that. 

And I appreciate each of your participations here today, and I 

look forward to working with each of you as we try to sort out what 

we can do a better job on, helping minority small businesses. 

Mr. Doss pointed out this is the—access to capital is the critical 

part of the equation; it is not the only part of the equation. We 

have government procurement, which is clearly an area that we 

have worked very, very hard on. We have technical assistance to 

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help, regulatory relief, the tax code. And we go and on and on, on 

the different issues that affect small businesses and minorityowned businesses. 

So the issue, though, of capital is a critical issue because, as has 

been pointed out by all of you, there have been extreme difficulties 

of minority businesses to get access to equity capital, to get access 

to capital during tough times, the options that they have that they 

can exercise. All that makes it a real challenge. 

And as a result, we have not reached anywhere near our potential in this country for minority opportunity, which is a key value 

of our country, and we have denied our economy its full strength. 

And for those reasons, we have to pay greater attention to it. 

I am encouraged by the testimonies today, and I am encouraged 

by the leadership at the SBA and Department of Commerce in providing where we can. 

And in the private sector, Mr. Hairston, you were kind of modest 

when you said that you are the largest lender for small businesses. 

You are the dominant lender for small businesses in our State, and 

we appreciate that very much. 

We want to take your best—I know you would like competition. 

So I know you want to get the other banks out there doing better; 

I know. 

Mr. HAIRSTON. They are welcome. 

Senator CARDIN. Yes, I understand. But we would like to take 

the best practices and share that so that we can get more activity 

and get more opportunity for small businesses and minority businesses to be able to take advantage of the opportunities of this 

country. 

So this hearing was to explore ways that we can do that. I think 

it has been extremely helpful, and we will be following up to figure 

out how we can implement policies that can lead to the proper results for minority businesses in our community. 

Thank you all. 

With that, the hearing will stand adjourned. 

[Applause.] 

[Whereupon, at 11:20 a.m., the hearing was adjourned.] 

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