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81–797 2002

SUGGESTIONS FOR IMPROVEMENTS IN

SBA PROGRAMS: VETERANS AND

DISASTER LOANS SALES

HEARING

BEFORE THE

SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT, 

AND GOVERNMENT PROGRAMS

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

WASHINGTON, DC, MAY 21, 2002

Serial No. 107–59

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS 

DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas 

JOEL HEFLEY, Colorado 

ROSCOE G. BARTLETT, Maryland 

FRANK A. LOBIONDO, New Jersey 

SUE W. KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

JOHN R. THUNE, South Dakota 

MICHAEL PENCE, Indiana 

MIKE FERGUSON, New Jersey 

DARRELL E. ISSA, California 

SAM GRAVES, Missouri 

EDWARD L. SCHROCK, Virginia 

FELIX J. GRUCCI, JR., New York 

TODD W. AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

NYDIA M. VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

DANNY K. DAVIS, Illinois 

BILL PASCRELL, JR., New Jersey 

DONNA M. CHRISTENSEN, Virgin Islands 

ROBERT A. BRADY, Pennsylvania 

TOM UDALL, New Mexico 

STEPHANIE TUBBS JONES, Ohio 

CHARLES A. GONZALEZ, Texas 

DAVID D. PHELPS, Illinois 

GRACE F. NAPOLITANO, California 

BRIAN BAIRD, Washington 

MARK UDALL, Colorado 

JAMES R. LANGEVIN, Rhode Island 

MIKE ROSS, Arkansas 

BRAD CARSON, Oklahoma 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

DOUG THOMAS, Staff Director 

PHIL ESKELAND, Deputy Staff Director 

MICHAEL DAY, Minority Staff Director 

SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT, AND GOVERNMENT PROGRAMS

JIM DEMINT, South Carolina, Chairman

FRANK A. LOBIONDO, New Jersey 

MICHAEL FERGUSON, New Jersey 

FELIX J. GRUCCI, JR., New York 

DARRELL E. ISSA, California 

EDWARD L. SCHROCK, Virginia 

SHELLEY MOORE CAPITO, West Virginia 

JUANITA MILLENDER-MCDONALD, 

California 

DANNY K. DAVIS, Illinois 

STEPHANIE TUBBS JONES, Ohio 

CHARLES A. GONZALEZ, Texas 

MIKE ROSS, Arkansas 

DONNA M. CHRISTENSEN, Virgin Islands 

NELSON CROWTHER, Professional Staff

(III)

C O N T E N T S 

Page 

Hearing held on May 21, 2002 ............................................................................... 1

WITNESSES 

Elmore, William, Associate Administrator, Veterans Business Development, 

U.S. Small Business Administration .................................................................. 5

Soares, Frank, Chairman, Board of Directors, National Veterans Business 

Development Corporation .................................................................................... 6

Henry, Major General Charles, President & CEO, National Veterans Business 

Development Corporation .................................................................................... 8

Gatewood, Wayne, President & CEO, Quality Support, Inc. ............................... 10

Lopez, John, President, Association of Service Disabled Veterans ..................... 11

Eiland, Tony, National Office of Veterans Employment, Veterans of Foreign 

Wars of the United States ................................................................................... 12

Weidman, Rick, Director, Government Relations, Vietnam Veterans of America .......................................................................................................................... 14

Bew, Ronald, Associate Deputy Administrator For Capital Access, U.S. Small 

Business Administration ..................................................................................... 31

APPENDIX 

Opening statements: 

DeMint, Hon. Jim ............................................................................................. 35

Millender-McDonald, Hon. Juanita ................................................................. 37

Prepared statements: 

Elmore, William ................................................................................................ 42

Soares, Frank .................................................................................................... 49

Henry, Major General Charles ........................................................................ 55

Gatewood, Wayne ............................................................................................. 65

Lopez, John ....................................................................................................... 69

Eiland, Tony ...................................................................................................... 72

Weidman, Rick .................................................................................................. 78

Bew, Ronald ...................................................................................................... 85 

(1)

SUGGESTIONS FOR IMPROVEMENTS IN SBA 

PROGRAMS: VETERANS AND DISASTER 

LOANS SALES 

TUESDAY, MAY 21, 2002 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT, 

AND GOVERNMENT PROGRAMS, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:05 p.m., in Room 

2360, Rayburn House Office Building, Hon. Jim DeMint [chairman 

of the Subcommittee] presiding. 

Chairman DEMINT. Good afternoon, everyone. Let’s get our hearing started again. 

Thank you, all of our witnesses, for being here. 

We will probably have a few more members come from the last 

vote. We wanted to get started, get your comments on the record. 

I do appreciate everyone being a part of this hearing for the Subcommittee on Work Force, Empowerment and Government Programs. Very special welcome to some of you who have come from 

very great distances. I appreciate that. 

The Small Business Administration is required by statute to provide special consideration to veterans in the administration of its 

programs. There have been various complaints in the past that 

SBA and other agencies were not addressing the needs of veterans, 

especially when it comes to starting, financing and growing small 

business. This hearing will provide a forum to evaluate the performance of SBA and the National Veterans Business Development 

Corporation. 

The Corporation was created by Public Law 106–50 and is an example of how this Committee can work in a bipartisan effort to 

help veterans and small businesses in this country. I am happy to 

say that special emphasis is given in the law to providing entrepreneurial and procurement assistance to small businesses owned and 

controlled by service disabled veterans. 

Also, this hearing will provide an opportunity to entertain comments concerning H.R. 3263, a bill introduced by Congressman 

Pascrell, a member of this Committee. 

A second panel will provide information concerning the sale of 

disaster loans commercially. 

Basic to the hearing is remembering our veterans and the sacrifices that they made for this Nation throughout our past. MemoVerDate Sep 04 2002 09:14 Oct 03, 2002 Jkt 081797 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\A797.XXX A797
2

rial Day is a day of remembrance. I can assure you that we in Congress will not forget you. 

I look forward to a lively and informative discussion of the issues 

presented. Again, welcome to this hearing; and now I recognize the 

ranking member for her opening statement. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. 

I, too, would like to apologize to the gentlemen who sit before us 

today who waited patiently for us to do the people’s business on the 

floor. We thank you so much for your being here; and we thank 

you, Mr. Chairman, for convening this very needed hearing. 

Today, this Subcommittee meets in its oversight capacity to review two important programs and their effect on our Nation’s entrepreneurs. Memorial Day is a time when we as a Nation take a 

break from our routine to remember, honor and thank those who 

have made the ultimate sacrifice for the freedom we enjoy. Therefore, it is fitting that we review the programs that work on behalf 

of our veterans who have taken the next step toward the American 

dream of starting a small business. 

Today more than 5.5 million veterans are small business owners. 

These men and women are facing new challenges. Their new battlefield is the American economy. To assist these veterans our 

Committee passed the Veterans Entrepreneurship and Small Business Development Act of 1999. This Act created the National Veterans Business Development Corporation to improve veterans’ access to financial and technical assistance. This program is also 

meant to give special assistance to service disabled veterans. While 

it holds great promise in aiding a whole new class of entrepreneurs, its full potential has yet to be realized. 

The other program that we will review today is the Disaster 

Loan Program. While SBA has many successful programs, the Disaster Loan Program is the pinnacle. The last thing going through 

anyone’s mind in the wake of a disaster should be, how I will ever 

rebuild? This program makes rebuilding a reality. Through the Disaster Loan Program, small businesses, homeowners and nonprofits 

can receive low-cost loans, enabling them to rebuild and restart 

their lives. 

Rebuilding from the tragic events of September 11th would have 

been impossible without the assistance of the Disaster Loan Program. SBA had people on the ground in New York and Virginia 

helping small businesses to start over as the fires still burned, allowing America to begin the healing process. 

On October 22nd, the administration took the extraordinary step 

to open the EIDIL program nationwide, ensuring recovery of those 

small businesses in the travel, air and tourism industry affected by 

the events. We should commend the administration and, more importantly, the SBA employees for their tireless work. 

In today’s hearing we will look at what happens to those small 

businesses once they receive an SBA disaster loan. Assessing the 

small business recovery process to ensure their continued success 

is as important as the distribution of the loan in the first place. 

There needs to be flexibility in these companies meeting the conditions of the loan. 

By way of background, problems began in the late 1990s when 

SBA started selling loans to private agencies. Once the loan moved 

3

from SBA to the private sector, the level of small business assistance decreased dramatically, removing all flexibility. Often, these 

private-sector institutions engaged in an overly aggressive practice 

of the collection of those loans, sometimes to the point of harassment. 

While it is clear that these companies should repay their loans 

in a timely fashion, it is questionable if receiving the money on 

time for the lender is worth the bankruptcy and harassment those 

businesses experienced. It was this concern that led the Democrats 

on this Committee to introduce H.R. 3011, the Small Business 

Emergency Relief Act, that, in addition to providing greater flexibility in the Disaster Loan Program, would also prohibit the sales 

of these loans. 

This issue was raised during our markup of H.R. 1499, the 

American Small Business Emergency Relief and Recovery Act of 

2001, when an amendment prohibiting the resale of those loans 

were offered. Today’s hearing will explore this policy and look for 

ways to ensure small businesses will not face a second round of 

devastation after a disaster at the hands of creditors.

Mr. Chairman, I again want to thank you for holding today’s 

hearing and allowing us to investigate these very critical and timely issues facing our Nation’s small business. I would like to thank 

the witnesses for testifying today and look forward to hearing their 

testimony. Thank you. 

Chairman DEMINT. I thank the gentlelady and call on Mr. 

Pascrell, who would like to make some comments about his bill. 

Mr. PASCRELL. Thank you, Mr. Chairman. 

I would like to just thank you and Ranking Member MillenderMcDonald for holding this important hearing; and, Mr. Chairman, 

you have assembled quite a blue ribbon panel. I don’t recall us ever 

having, in the larger Committee or any of the Subcommittees, 

without exception, an as outstanding panel. I commend you for 

that. 

We are going to focus on two different issues, Mr. Chairman, if 

I may, members of the Small Business Committee find practically 

relevant. That is, veterans assistance and disaster loan asset sales. 

Veterans issues have been a priority for a long time. As a former 

veteran myself, I know veterans have sacrificed a great deal to 

safeguard America’s freedoms in our future. Just think about all of 

the men and women who are currently deployed in Afghanistan as 

we sit here today. 

I consider my own service in the Army as a life-building experience which has given me the necessary perspective when considering issues important to those who have and continue to serve this 

great Nation. 

I introduced H.R. 3263, the Veterans Small Business Relief Act. 

My legislation is pretty simple, Mr. Chairman. It would provide 

that servicemen and women who have left the military within 5 

years would be exempt from paying any guarantee fee for using the 

7(a) loan program, probably our most significant program in the 

Small Business Administration. 

We all know that the 7(a) loan program is one of the SBA’s primary lending programs. It provides loans to small businesses that 

4

are unable to secure financing on reasonable terms through normal 

lending channels. 

However, to offset the cost of the program, SBA charges lenders 

a guarantee and a servicing fee for each loan approved. These fees 

are passed to the borrower. Currently, when a loan amount is 

$150,000 or less, the fee is 2 percent of the guaranteed portion. For 

loans between 150 and $700,000, a 3 percent guarantee fee is 

charged; and for loans greater than 700,000, a 3.5 percent guarantee fee is charged. 

While 7(a) loans are often critical to business start-ups, charging 

a fee effectively levies a tax on businesses at a time when they can 

ill afford to pay. The salaries of those in our Armed Forces are 

often less than sufficient to obtain a loan through normal lending 

channels. For example, some sergeants in the Air Force are making 

around $1,500 a month. 

Let’s face it. No one signs up with Uncle Sam to become rich. We 

are indebted to those who serve, and I think my legislation is a 

small gesture that we on this Committee can support. 

We should permanently change the 7(a) loan program to ensure 

that recent veterans do not have to pay fees. We should make sure 

that veterans who return to civilian life, want to start a business, 

do not have to pay fees now or potentially increased fees in the future. 

Let’s be real. The fee waiver for veterans will not bust the bank. 

The Congressional Budget Office has stated that the impact of 

this legislation would be, quote, unquote, absolutely minimal. That 

is different. 

In my State of New Jersey, there will be an estimated 4,000 people returning home from active duty this year. I just think that we 

should help them any way we can. I am always up for suggestions 

not just for my legislation but for anything we will discuss here 

today; and I thank you again, Mr. Chairman, sincerely for bringing 

us together on these critical issues for our vets. Thank you. 

Chairman DEMINT. Thank you, Mr. Pascrell. 

Now, I would like to introduce our panel, if there are not any additional opening remarks. I don’t believe there are. 

Starting to my left, Mr. William Elmore, Associate Administrator, Veterans Business Development, U.S. Small Business Administration; Mr. Frank Soares, Chairman, Board of Directors, National Veterans Business Development Corporation; Major General 

Charles Henry, U.S. Army, Retired, President and CEO of the National Veterans Business Development Corporation; Mr. John 

Lopez, President, Association of Service Disabled Veterans; Mr. 

Tony Eiland, National Office of Veterans Employment, Veterans of 

Foreign Wars of the United States; and Mr. Rick Weidman, Director of Government Relations, Vietnam Veterans of America. 

And I think I missed Mr. Wayne Gatewood, President and CEO 

of Quality Support Incorporated. 

Now I would like to ask unanimous consent that all testimony 

will be made part of the record, and each witness will have 5 minutes to explain your testimony to us as well as to——

We will keep those lights going on green when you are in good 

shape. When you see the yellow, you know you have only got a few 

5

seconds left. When it is red, we are going to start encouraging you 

to stop. 

Okay. Mr. Elmore, we will begin with you. 

STATEMENT OF THE HONORABLE WILLIAM ELMORE, ASSOCIATE ADMINISTRATOR, VETERANS BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION 

Mr. ELMORE. Thank you. 

Chairman DeMint, Ranking Member Millender-McDonald and 

members of the Subcommittee, I am William Elmore, Associate Administrator for Veterans Business Development at the U.S. Small 

Business Administration. On behalf of Administrator Barreto, I 

thank you for this opportunity to discuss SBA’s accomplishments 

and commitment to better serving our Nation’s veterans by helping 

them to start, run and grow their own small businesses. 

We are not only committed to increasing veterans participation 

in our programs but also to ensuring that we achieve better results. It is fitting that we meet today, just 6 days before our Nation 

celebrates Memorial Day, to discuss SBA’s support for our veterans. 

It was in 1866 that Henry Wells, a small business owner in Waterloo, New York, suggested that all the shops in town close for one 

day to honor the soldiers who were buried in the Waterloo Cemetery. One hundred years later, Congress and President Lyndon 

Johnson declared Waterloo, New York, the birthplace of Memorial 

Day. 

I can assure you that we are committed to improving veterans’ access to all of our financial, technical and management assistance 

programs. SBA seeks to reach out and serve all of America’s 25 

million small businesses, including those owned by veterans. 

Though veterans are eligible and do use all of SBA’s variety of finance, technical assistance and contracting programs, the administration wants to ensure active veteran participation in all of SBA’s 

programs. 

In an effort to better serve our customers, including veterans, we 

have been reviewing the effectiveness and, where needed, modifying all of our programs in an effort to make sure they keep pace 

with market trends, remain relevant and meet our customer’s 

needs. 

There are many aspects to this much-needed effort, including restructuring and modernizing the agency’s delivery system to best 

serve clients in the 21st century. I started these efforts by personally visiting with each program manager in the agency to discuss 

ways in which their particular programs could increase veteran 

participation and better serve the veterans who do use their programs. 

We have provided training to and enhanced the responsibilities 

of the Veterans Business Development Officers stationed at each 

SBA district office. These are the people on our front line who personally meet with veterans seeking business assistance and provide 

referrals to our resource partners. 

Additionally, SBA designated a full-time veterans coordinator in 

our Office of Government contracting and enhanced that office’s 

web page to better assist veterans with procurement. 

6

We have also taken aggressive steps to partner with other Federal agencies and the National Veterans Business Development 

Corporation to increase resources available to veteran entrepreneurs. This past year we asked the Corporation and the Departments of Veterans Affairs and Labor to participate in our National 

Conference for Veterans Business Development Officers; and, in 

turn, DOL has asked us to make a presentation on SBA’s veterans 

programs at their National Conference. 

We have also entered into discussions with both DVA and DOL 

to explore efforts to coordinate small business assistance for service 

disabled veterans participating in DVA vocational rehabilitation 

and to enhance outreach and training for DOL field staff regarding 

entrepreneurship opportunities for veterans. Additionally, we have 

worked with the Corporation on all of their efforts thus far and will 

continue to do so. 

In fiscal year 2002, SBA renewed our cooperative agreements 

with our Veterans Business Outreach Program Centers. We are 

pleased that the number of veterans served by this program doubled in fiscal year 2001. 

Also, in fiscal year 2001, SBA conducted special veterans and 

service disabled veteran outreach events through seven SBA district offices. In fiscal year 2002, SBA is increasing this number to 

a minimum of 17 district offices. 

SBA’s Office of Government Contracting included veterans’ procurement information in approximately 400 procurement conferences in fiscal year 2001. Every agency, including SBA, has been 

given a statutory 3 percent service disabled veteran Federal procurement goal for 2002. To help meet this goal, training was provided to all SBA government contracting staff. Additionally, government contracting area directors have been tasked to develop ongoing programs to emphasize, publicize and promote the 3 percent 

procurement goal for service disabled veterans. 

Before I conclude today, I would like to report some important 

information to you on the Advisory Committee on Veterans Business Affairs. After reviewing the backgrounds of over 50 highly 

qualified candidates, there are now seven candidates awaiting final 

clearance to serve on the Advisory Committee on Veterans Business Affairs. 

This concludes my testimony. Once again, thank you for this opportunity to discuss SBA’s business development program for veterans. I am pleased to answer any questions you may have. 

Chairman DEMINT. Thank you, Mr. Elmore. 

[Mr. Elmore’s statement may be found in appendix.] 

Chairman DEMINT. Mr. Soares. 

STATEMENT OF FRANK SOARES, CHAIRMAN, BOARD OF DIRECTORS, NATIONAL VETERANS BUSINESS DEVELOPMENT 

CORPORATION 

Mr. SOARES. Mr. Chairman, distinguished members of the Subcommittee, it is a pleasure to speak before you this afternoon about 

our progress in servicing the service disabled veterans through The 

Veterans Corporation. I was privileged to receive one of the initial 

presidential appointments to our Board of Directors in October of 

2000. For almost a year I have served as its chairman. 

7

Although Public Law 106–50 was passed in August of 1999, I 

think it was more accurate to date the Corporation’s progress from 

the date it received its initial funding in 2001. Once a temporary 

staff was hired, we began an extensive search for the strong leadership necessary to meet and exceed the law’s mandates to expand 

and improve access to technical assistance regarding the entrepreneurship for the Nation’s veterans and to assist veterans, including 

service disabled veterans, with the formation and expansion of 

small business concerns by working with existing organizations. 

With that as our mission statement, we conducted a nationwide 

search identifying six high-quality, top government and military 

leaders that had the experience, skills and abilities to make The 

Veterans Corporation successful. 

We carefully considered each candidate and selected Major General Chuck Henry. He is absolutely the right choice to ensure the 

Corporation’s success. His distinguished service to our Nation combined with his shrewd business sense and strong leadership will 

give our veterans a real champion they so richly deserve. His efforts during the short period he has served as the Corporation’s 

CEO and president have been remarkable for the significant 

progress he has made in creating a viable business operation devoted to accomplishing the mission that you have given us. 

To achieve our mission, the Board of Directors and I have created both a vision and goals for the Corporation. Our vision is that 

The Veterans Corporation will be the premier organization in the 

world assisting American veterans, including service disabled veterans, in creating and expanding their entrepreneurial endeavors 

in veteran-owned small business enterprises by providing access to 

knowledge, tools and resources necessary for success. 

We have numerous goals which I won’t recite here but I did include in my written testimony. 

One of my goals is to establish and oversee the Professional Service Advisory Board, PCAB, which is provided for in Public Law 

106–50. The Board is intended to create uniform guidelines and 

standards for the professional certification of the members of the 

Armed Forces. This will aid in their efficient and orderly transition 

to civilian occupations and professions and remove potential barriers in the areas of licensure and certification. 

This is an extremely difficult area that involves a complex web 

of certification standards and barriers that are nationwide at the 

Federal, State and local levels. At each level there is a multitude 

of organizations and interest groups involved in testing, licensing 

and certifying a vast array of civilian positions from welders to 

medical technicians. 

Seventy percent of the Army’s enlisted military occupational specialties have civilian job equivalents that are subject to licensure 

or certification. I am sure the other services have similar statistics. 

So you can quickly see the challenges the Board faces in researching, identifying and, most importantly, creating and attempting to 

implement nationwide standards that allow our service members to 

transition their skills smoothly into a level obtained by their civilian counterparts. 

We will attempt to fund this effort through fund-raising but 

question whether this approach will work. The President of the 

8

United States appointed our Board of Directors. They were selected 

on the basis of their personal achievements and for the knowledge 

and expertise they provide our organization and our partners. All 

of our board members are also veterans. 

General Henry will detail the bold initiatives he has taken with 

the creation of several strategic business units to generate both 

services for the veterans and revenue for the Corporation. Those 

business units are just the beginning of many more complex business arrangement to support our veterans. 

I strongly suggest that future nominations to the Board be individuals who have a solid background in veteran service organizations and/or considerable strong business experience that can help 

guide the Corporation during this dynamic and difficult period of 

growth to fiscal independence. 

I thank you for the opportunity to speak before you today, and 

I personally wish to thank the Subcommittee members and their 

staffs who were instrumental in the creation of the successful passage of this legislation into law to help veterans establish and expand small businesses. It is good for the Nation and well-deserved 

assistance for our veterans. 

Thank you. I am prepared to answer any questions. 

Chairman DEMINT. Thank you, Mr. Soares. 

[Mr. Soares’s statement may be found in appendix.] 

Chairman DEMINT. Major General Henry. 

STATEMENT OF MAJOR GENERAL CHARLES R. HENRY, U.S.A. 

(RET.), PRESIDENT AND CEO, NATIONAL VETERANS BUSINESS DEVELOPMENT CORPORATION 

General HENRY. Mr. Chairman, distinguished members of the 

Subcommittee, I want to thank you for the invitation to come and 

testify today. 

I want to also thank you for your outstanding legislation, Public 

Law 106–50. That is what brings us together. It honors our veterans by assisting them. It is a noble effort. It is deeply appreciated. 

Let me tell you a little bit, of what we have accomplished over 

the past 200 days at The Veterans Corporation. More detailed information is in my written testimony which is submitted, but I will 

try to summarize it, with your permission, Mr. Chairman. 

The law gives us five goals. One is to increase business opportunities for veterans and service disabled veterans. The second one 

is to raise matching funds, develop information centers, privatize 

the Corporation, get it so that it is successful on its own, and create 

the certification board for standards. 

Mr. Soares has spoken to you about the certification standards, 

but what I would like to do is to tell you that The Veterans Corporation has established itself as an umbrella for business development operations. Below the line we have created strategic business 

units, and we have created four of those. The first one is a venture 

capital fund called the Veterans Venture Capital Fund, and 

through the help of Mr. Elmore it is working its way through the 

SBA. We envision this to be a $120 million venture capital fund of 

which The Veterans Corporation will have a 10 percent carried inVerDate Sep 04 2002 09:14 Oct 03, 2002 Jkt 081797 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 E:\HR\OC\A797.XXX A797
9

terest, 10 percent stake, if you will, and that will provide us the 

opportunity to make investments to veteran-owned businesses. 

The second one is an electronic marketplace for veterans and 

service disabled veterans’ businesses who wish to buy and sell. 

This marketplace is operated with our strategic business partner 

eScout of Kansas City. It is up and running. It is in its very infancy 

at this point, but we have 26,000, not all veteran businesses, on it. 

Our goal is to have over 1,000 veteran businesses posted on the 

electronic marketplace by the end of this fiscal year. This allows 

veterans to go from regional to national in scope, overnight. 

The electronic marketplace is dynamic. It is growing very fast. $5 

billion a month is being consumed within the Internet marketplace 

as we speak. 

The third is access to capital. To provide access to capital, we 

have established relationships with banks, and we have two of 

those established to provide micro loans to veterans. Our goal is to 

have, within the next 18 months, the entire country covered with 

banks that will make loans to veterans, speed up the process, if 

you will. 

The last one is providing training for business owners with the 

Kaufman Foundation out of Kansas City, a very respected entrepreneurial organization. They have provided us with Entre-World, 

which is a respected web site to tell business owners how to deal 

with businesses, how to create their business plans, how to do the 

intricacies of building and running their own businesses. 

Additionally, the Kaufman Foundation has given The Veterans 

Corporation Fast Trac, which is a program of training. The statistics say that, for those who have taken it, 70 percent are still in 

business 5 years later. 

Wrapped around those two combinations we feel that we can provide a delivery of services that will be second to none for veterans 

in building their corporations. 

Matching funds. With the help of the Kaufman Foundation and 

with the help of pro bono work from legal services and some others, 

we report today that we have met our $2 million in matching funds 

for this fiscal year; and we project that that will be ongoing in the 

out years. 

Our efforts to privatize are making good progress. I have in the 

past 2 weeks received commitments for $550,000 in cash from two 

sources to date. Our direct mailing was launched last week. Our 

business will ramp to meet the revenue goals. 

We are now telling the story, and that story is good. We were 

featured in an article in the Chicago Tribune’s Small Business Section. We have been reported in the American Banker. CBS 

Marketwatch, Dallas News, NBC, and Kipplinger. AOL Time Warner has offered us public service spots. We will shoot those next 

week. Saturday, I will be on a veteran radio talk show to be broadcasted in Hawaii, talking about veterans in businesses; and on 

Sunday I will be speaking with Secretary Principi at Rolling Thunder. 

Sir, my time is up. It is a real pleasure to come. I think that we 

are on a marathon, not a sprint. We are building the company 

around two principles: Build a solid, self-sufficient company on 

10

business principles and provide for the delivery of quality services 

to the veteran community. 

Subject to your questions, sir, I stand by. 

Chairman DEMINT. Thank you, General Henry. 

[General Henry’s statement may be found in appendix.] 

Chairman DEMINT. Mr. Gatewood.

STATEMENT OF WAYNE M. GATEWOOD, JR., PRESIDENT AND 

CEO, QUALITY SUPPORT, INC. 

Mr. GATEWOOD. Good afternoon, Mr. Chairman and distinguished Subcommittee members. 

First of all, I am proud to be here. I am a retired Marine Master 

Sergeant who served 21 years in the Marine Corps, retired 15 

years ago, and I receive a 20 percent disability from the Veterans 

Administration. This is what America is all about. I am just so 

proud to be here before you. Thank you so much. 

For the past 12 years I have owned and operated Quality Sup- port, Inc., starting the business in my home with $600. Today 

Quality Support employs nearly 100 people. It was largely because 

of the SBA 8(a) program that Quality Support developed as a successful firm, and I thank the SBA for the opportunity to have been 

a member of the 8(a) Business Development Program. It is a wonderful program. 

I was very pleased to see the signing of Public Law 106–50. Unfortunately, I personally do not believe much progress has been 

made since the signing of this law. 

The National Veterans Business Development Corporation has 

yet to compile a concise database of veteran- and disabled-veteranowned business. If the Corporation does not know who we are, 

where we are and what we do, there is little chance of veteranowned firms receiving mandated assistance and guidance. 

I have seen little, if any, evidence of interaction between the Corporation and the average veteran-owned firm such as my own. 

Since the signing of Public Law 106–50, my firm has yet to be invited to any type of corporation gathering, nor have I received 

mailings that outline progress made by the corporation and/or discuss current services and/or opportunities available to my firm. 

The law requires an Advisory Committee on Veterans Business 

Affairs be established not later than 90 days after the date of the 

enactment of the Act. The duties of this Committee are very important, and this Committee is absolutely essential to the success of 

Public Law 106–50. However, it has been 2 and a half years since 

the signing of the Act, and the Advisory Committee has yet to be 

established. 

The law states government-wide goals for participation by small 

business concerns owned and controlled by service disabled veterans shall be established at not less than 3 percent of the total 

value of all prime contract and subcontract awards for each fiscal 

year. Again, I have seen little, if any, progress in this area and do 

not believe any government agency is making the 3 percent subcontracting goal. 

I have some recommendations: 

Immediately establish the Advisory Committee on Veterans Business Affairs as required by law. 

11

Ensure the inclusion of all veteran-owned and service disabled 

veteran-owned firms in a comprehensive and current database to 

facilitate actions consistent with the spirit and intent of the law. 

The Corporation should identify prime contractors who are seeking to do business with veteran-owned firms, and a listing of these 

prime contractors should be made available to all veteran-owned 

business. 

Also, bring veteran-owned firms together with prime contractors 

and government procurement officials so these groups can discuss 

potential contracting opportunities. 

Make an assessment of the policies and procedures now in place 

at Federal Government agencies and ensure there is an active promotion of the 3 percent subcontracting procurement goal. 

Subsequent to contract award, assess and monitor the subcontracting progress or lack thereof made by Federal Government 

agencies and their prime contractors. Those prime contractors that 

fail to make their goals should be precluded from participating in 

further Federal Government procurements until such time as they 

have rectified their deficiencies. 

The SBA Corporation Advisory Committee and the Department 

of Veterans Affairs need to work closely with one another to ensure 

they are all working for the same goals under agreed-upon procedures and that turf battles do not take place at the expense of the 

American military veterans. 

Also, illegitimate, unofficial, for-profit organizations that promote 

so-called veterans rights need to be identified and our veterans 

made aware of and warned of their existence. 

Finally, and most importantly to me, sir, the Federal Acquisition 

Regulations, FAR, and similar regulations need to be revised to authorize set-aside procurement opportunities for veteran and service 

disabled veteran-owned firms. 

Federal law currently precludes contracting officers from offering 

veterans and disabled veteran-owned firms the same set-aside advantages offered socioeconomic groups, hub zone businesses and, to 

some degree, women-owned businesses. Unless procurement regulations are modified to include a degree of set-aside authority for 

veteran and service disabled veteran-owned firms, it will be extremely difficult if not impossible for government contracting officials to reach specified goals. 

In closing, I would like to say that Public Law 106–50 can only 

be effective when it is taken seriously by all concerned. Laws without clear accountability do very little to motivate people into action 

and to achieving desired results. Results need to be continually assessed and measured, and people in positions of authority and applicable Federal Government agencies need to be held accountable. 

Thank you, sir. 

Chairman DEMINT. Thank you, Mr. Gatewood. 

[Mr. Gatewood’s statement may be found in appendix.] 

Chairman DEMINT. Mr. Lopez. 

STATEMENT OF JOHN LOPEZ, PRESIDENT, ASSOCIATION OF 

SERVICE DISABLED VETERANS 

Mr. LOPEZ. Good afternoon, members and Chairman DeMint. 

12

Without objection, I shall summarize my testimony and submit 

written testimony for the record. 

I have focused my testimony on the provisions for Federal procurement participation by businesses owned and controlled by service disabled veterans. 

Although the United States Congress in its Public Law 106–50 

findings and legislative language stated clearly that the intent of 

the Congress was to ‘‘increase the participation of service disabled 

veterans businesses to a goal of not less than 3 percent of the total 

value of all prime contracts and subcontract awards for each fiscal 

year,’’ this has not happened. In fact, there is little credible evidence that the intent of the U.S. Congress was even considered. It 

is now nearly 3 years since the enactment of Public Law 106–50, 

and available data show little progress towards the goal. There is 

only the traditional bureaucratic mumbling regarding coming efforts and other priorities.

America’s veterans are dying at the rate of 1,200 per day, and 

the mounting frustration with broken promises and bureaucratic 

manipulation is becoming a major disgrace and embarrassment of 

our Nation’s government, because rehabilitation assistance delayed 

and manipulated is rehabilitation assistance denied. 

The United States Congress must take action to provide to service disabled veterans businesses those mandatory requirements afforded to other special groups. The denial of equal assistance to 

those who sacrificed and enabled prosperity for all our citizens is 

an unmitigated disgrace and an unadulterated abuse. 

I would be pleased to answer any of your questions. 

Chairman DEMINT. Thank you, Mr. Lopez. 

[Mr. Lopez’s statement may be found in appendix.] 

Chairman DEMINT. Mr. Eiland. 

STATEMENT OF TONY EILAND, NATIONAL OFFICE OF VETERANS EMPLOYMENT, VETERANS OF FOREIGN WARS OF 

THE UNITED STATES 

Mr. EILAND. Thank you, Mr. Chairman, ranking member and 

members of the Subcommittee. Thank you, Mr. Chairman, for inviting the Veterans of Foreign Wars here today to testify before the 

Subcommittee to comment on H.R. 3263, the Veterans Small Business Relief Act of 2001, and to express our evaluation of the Small 

Business Administration’s programs and services for veterans as 

well as The Veterans Corporation. 

Mr. Chairman, concerning our views on H.R. 3263, the Veterans 

Small Business Relief Act of 2001, we support its timely enactment. We see it as a welcome measure to ensure that disabled veterans small business owners have an additional opportunity towards success in today’s challenging economy. 

Mr. Chairman, when assessing and analyzing the role the SBA 

has played with assisting future as well as present veteran entrepreneurs, we must look at the SBA with a proper perspective and 

understand exactly what it is we as veterans want from them. 

Then we must define how we expect to hold them accountable for 

what they can control and measure those things that can be measured and reasonably obtained. 

13

We see the SBA is making headway in this process through a cooperative effort with both the Department of Veterans Affairs’ Center for Veterans Enterprise and with The Veterans Corporation. 

The VFW has enjoyed a productive relationship with the Assistant Administrator for Veterans Affairs, William Elmore, and his 

staff within the SBA’s Office of Business Development. Two staffers 

primarily have stood out, Mr. Ajoy Sinha and Mrs. Audrey Moore. 

They have both been very helpful providing direct personal assistance to veterans from our organization on a one-to-one basis by offering a strong hands-on approach. 

We have had members directly contact our office commenting on 

the superior service and assistance they were provided in either developing particular details for their business plans or simply looking for specific information to answer unique questions. 

Another item that deserves to be mentioned is the U.S. Business 

Advisor Website that has been sponsored by the SBA. It has been 

an effective tool in providing general business assistance that promotes small business within our membership and have received 

free assistance in expanding their business and removing obstacles 

that could lead to potential disasters. 

While the SBA has performed an adequate job with the funding 

they have been provided with, there is still more that can and must 

be done. Unfortunately, their ability is severely limited because of 

minimum funding levels that have been placed upon them by the 

Administrator. This does have a direct impact on the scope and 

quality of the veterans’ programs and services that can be of use 

for outreach, be it either through mailings, promotional campaigns 

or seminars. 

Another critique is the involvement of the SBA with the veterans 

groups themselves. For example, our relationship with the Office of 

Veterans Business Development has improved. The VFW remembers the promise was made about wanting to expand the relationship with the Veterans Service Organizations. Unfortunately, we 

have only seen limited examples outside of the Office of Veterans 

Business Development. We have yet to meet with the Administrator, let alone speak with him directly to voice our desires and 

concerns. 

In addition, we are also disappointed in how long it has taken 

the Administrator to complete the SBA Advisory Committee and 

seeming overall lack of overall commitment towards our concerns 

for disabled veterans as a whole. The VFW is very disappointed 

that this issue has not been treated with the sense of urgency that 

it deserves. While we understand that we are not the only programs that the SBA oversees, we still desire to be treated with a 

balanced, even-handed approach. 

At this critical point in time, veterans’ programs are essentially 

here to serve as a good-faith gesture between the government and 

the people whom they serve to be guaranteed the opportunity to 

maximize any small Business Development Program. The VFW 

does not view the programs of the SBA as simple entitlements to 

be given out but as investment in the long-term economic growth 

and stability of the U.S. Economy. 

We want to be completely frank. The VFW does not want a giveaway program mentality or anything for that matter that would diVerDate Sep 04 2002 09:14 Oct 03, 2002 Jkt 081797 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A797.XXX A797
14

lute the credibility of the veteran or disabled veteran business 

owner. Whether black, white, Hispanic or Asian, male or female, 

service disabled or economically impoverished, veterans have 

earned, through their dedicated service commitment to their country, the right to be offered an opportunity to compete on an equal 

playing field with every other group that has been provided a service by the SBA for long-term solutions for establishing business 

ventures. 

Mr. Chairman, we believe that the SBA can only be successful 

in its mission of assisting veterans if it has the following components: the full support of the Congress through maintaining strict 

implementation of existing laws and provisions that will enable the 

SBA to be effective and adequate funding of the Office of Veteran 

Business Development. 

There also has to be a clear understanding of where the veteran 

community belongs within SBA. Be it through a realistic goal-setting measurement that is obtainable, taking into account the service disabled veterans’ individual situations or creating a Small Disadvantaged Business, an SDB, status for a disabled veteran-owned 

business that will allow them to compete on equal ground within 

the SBA as a disadvantaged business enterprises is a must. 

Mr. Chairman, the opinion of the VFW is that The Veterans Corporation, in its present form, has only been in effect for approximately 200 days, not enough time to make a credible assessment 

of their progress. Yet the VFW does see the potential for The Veterans Corporation and are committed to assisting and working 

with them to achieve a source of answers for our veterans’ small 

business questions and also putting them in a position to find 

sources of financial revenue. 

We understand that anything worth having is worth setting up 

correctly from the beginning. Mr. Chairman, we need to maintain 

a focus that everything we are doing here today is for the one purpose and one purpose only, to assist veterans, especially disabled 

veterans, establish successful, independent small businesses and 

become as self-sufficient as possible to add to the continuing economic growth of our country. 

Mr. Chairman, this concludes my statement. I would be pleased 

to answer any questions you or the members of the Subcommittee 

might have at this time. 

Chairman DEMINT. Thank you, Mr. Eiland. 

[Mr. Eiland’s statement may be found in appendix.] 

Chairman DEMINT. Mr. Weidman. 

STATEMENT OF RICK WEIDMAN, DIRECTOR, GOVERNMENT 

RELATIONS, VIETNAM VETERANS OF AMERICA 

Mr. WEIDMAN. Thank you very much, Mr. Chairman. I would 

like to echo the sentiments of my colleagues in tremendous thanks 

to this Committee. This is where Public Law 106–50 began, with 

this Committee; and we thank you for your oversight hearings, two 

of which were held last year and, of course, this hearing today. 

I would point out also that the impetus for the original legislation came from Mr. Roscoe Bartlett’s Committee, a joint hearing he 

had with the House Veterans Committee, which was a bipartisan 

hearing. That got the ball rolling. So we owe you a great debt, sir. 

15

Now we have to make it a reality. The struggle over regulations 

went on for over a year before we got some regulations that were 

substantially correct, published in early January of 2002 after several false starts. It was the kind of woeful ignorance that really 

cannot be explained, only by incompetence, although I keep in my 

office the old saying that ‘‘never attribute to malice in Washington 

that which can be explained by sloth and by incompetence.’’ . 

But finally we do have regs that are fairly accurate, but we don’t 

have an impetus from the executive branch overall, from the President, from OMB, and from the Cabinet level in order to make sure 

that the 3 percent procurement goal happens. 

Secondly, in regard to a number of comments that were already 

offered today, the Small Business Development Corporation or the 

National Veterans Business Development Corporation, also known 

as The Veteran Corporation, was created to fill in some blanks and 

not to do everything that SBA with its almost billion dollar budget 

is doing. 

Public Law 106–50, we would refer every single employee of the 

Small Business Administration back to the black letter law; and I 

would refer all of the distinguished members who have made it 

here today and your staff back to the black letter law, which says 

that veterans, particularly disabled veterans, service-connected disabled veterans shall be given priority and given a high status within every single program operated by the Small Business Administration. 

In fact, almost no programs at the SBA have revamped as a result of this law which took effect immediately and was enacted on 

August 17th of 1999. In fact, it changes everything right throughout the agency, or it is supposed to. That is clear that that is the 

congressional intent, not just from the letter—black letter law but 

also from the Committee report from the House that went forward 

with it. 

So we would ask the Committee to look carefully at that and to 

urge the new Administrator, Mr. Barreto, to issue an administrator’s order and regulations, where necessary, in order to bring the 

pattern, practice and policy of SBA into accordance with what is in 

fact black letter law under Public Law 106–50. 

I would also just commend many of the fine activities that have 

happened at SBA. Many of the activities are, in fact, well done; and 

the only problem we have from the veterans’ community, the 24 

million veterans in this country and those who are disabled and 

their families, is that our folks are left out if they identify as a vet. 

And I think that that is just the key to look at throughout this 

thing. 

We have gotten very good cooperation, I might add, and tremendous leadership out of the new small business advocate. Mr. Sullivan has met with us and is setting up a series of seminars and 

roundtables with the Task Force on Veterans Entrepreneurship 

over the next year and a half. We are proceeding on that and will 

keep the Committee posted, sir. 

There are a number of things that we would ask you for. 

Firstly is we have not received a single official report since August of 1999 which was mandated in the law. 

16

Secondly, the study that was the mandated in the fall of 1997, 

SBA has been keeping in camera ever since that time. It was formerly delivered to the agency in the fall of 1998, and we would ask 

that the Committee demand that it be turned over to the Congress. 

It was a major study of veterans, a $400,000 study which has still 

not been supplied to the Hill nor made public. 

Last, but by no means least, in that regard there is a study that 

is under way now that we urge be brought forth and the last two 

annual reports of SBA. 

I have attached as an attachment to my statement, Mr. Chairman, a list that is the beginning of legislative goals. A task force 

which consists of all of the major veterans organizations participating in one way or another in the Task Force on Veterans Entrepreneurship will be coming together on June 11th. 

We ask the leave of the distinguished members of the body, the 

Chair and the ranking Democrat in order to work with staff to put 

together legislation that would fine tune the intent of this Committee that was expressed in Public Law 106–50 over 3 years ago. 

There is no better time to take that step. 

I would add that I mentioned this before an oversight hearing, 

chaired by Mr. Bartlett jointly with Mr. Quinn and strong participation with Lane Evans, 4 years ago this week, and that is what 

started the ball rolling on this. There is no better time than this 

week to determine, as we reflect on those who did not come home 

from every war our Nation has ever fought, and those young men 

and women who will not return from Afghanistan, from East Africa, from Iraq or wherever they are defending all of us, the American people, against those who would do us great harm and destroy 

us as human beings and our way of life—there is no better time 

to take the steps in order to fine tune what we have learned over 

the last 3 years since enactment of 106–50 and move forward. 

Mr. Chairman, I thank you for the opportunity and for the privilege of presenting the views of Vietnam Veterans of America here 

today and sharing at least some of the general views of the task 

force and our distinguished and fine colleagues there. 

Thank you, sir. 

[Mr. Weidman’s statement may be found in appendix.] 

Chairman DEMINT. Thank you, Mr. Weidman. I will start with 

a few questions, and I know our committee members have some 

too. 

Mr. Elmore, I will begin with you. Just a quick question. Is there 

any reason that this veterans report that was just referenced cannot be delivered to this committee in the next week? 

Mr. ELMORE. In fact, the report itself was delivered. I am not 

sure of the date. I believe it was last summer or last fall; I would 

have to check with staff. What Rick has referenced was a study by 

the SBA Commission that was a part of that report, but it wasn’t 

the report itself. 

Chairman DEMINT. Right. But the report does exist—— Mr. ELMORE. Yes. The report was forwarded to Congress last 

year. 

Chairman DEMINT. Well, we would like the complete report, and 

if it has been delivered before, I would appreciate it if you would 

deliver it again so I can get a look at it myself. 

17

Mr. ELMORE. We absolutely will, sir. Thank you. 

Chairman DEMINT. Just a few questions. 

I know you have heard a lot expressed in appreciation of the 

SBA’s role for veterans, but one of the major reasons for this hearing is to figure out how to improve what we are doing, particularly 

how to comply with 106–50; and you have heard a number of concerns expressed. The concerns that have been expressed that bother me the most are just the lack of adherence to law, the lack of 

the reports that were required, the advisory committee not being 

appointed, the 3 percent procurement mandate. These things that 

have been brought up obviously are of concern because our hope is, 

if we pass a law, that it will be implemented as we had asked. 

Do you have any comments before the members ask questions 

about what is going on? 

Mr. ELMORE. I can try to address those three, sir. 

The advisory committee, I will start there. We were asked by 

Congress in—I believe this was either before or just after I came 

to the agency—in 2000, to hold off on the naming of the advisory 

committee until the nine members of the board of directors of the 

corporation had been named. 

The ninth member of the corporation was named last October by 

President Bush. Up until that point, we had gathered approximately 50 candidates and background information on those candidates; and those are the candidates that are now being evaluated, 

but we did not as an agency begin to move on that until after the 

ninth member was named. 

Now, on the reports, we did submit the 1997 report, and that 

was a report that after I came to the agency we caught up, we put 

together and we sent to Congress. The 1999 and 2000 reports were 

not completed before I got there. We have completed those in my 

office and they are going through final clearance in the agency 

now. So as soon as they are cleared, they will be provided up here. 

My staff is presently working on the fiscal year 2001 report. 

Now, on the 3 percent goal—and I will give you my take on the 

history of this—when I came to the agency in the summer of 2000, 

that goal was not being acted on by the FAR Council. As I dug into 

that, within literally the first 30 days on the job, I went to others 

in the agency, including the Administrator, and urged that we implement what I perceived to be a misinterpretation of the intent of 

Congress by the FAR Council to go ahead and establish the 3 percent goal at the prime contracting level and a 3 percent goal at the 

subcontracting level. But there was an interpretation by the council 

that included service-disabled veterans and veterans at the subcontracting level. That was not what Congress intended, I did not believe. 

So I worked with Congressional Affairs at the same time that we 

implemented that bad rule—and I will tell you why I did that and 

why I urged that—and the Administrator agreed was that if we 

waited until we got technical amendments from Congress to change 

that interpretation so that FAR couldn’t, in my view, misinterpret, 

we would have put procurement for disabled veterans another year 

later. 

So I moved—implemented the bad rule, sought the technical 

amendment. We secured the technical amendment. We then 

18

amended the rule, and that’s why it took until January, 2002, to 

finally get what I think is an appropriate and an accurate rule. 

Now, I can’t speak to all the reasons why all those implementations and interpretations of what Congress intended happened. I 

can tell you what it is we did, though; and I moved as aggressively 

as I could, and the agency has assisted me and supported me in 

trying to do that. 

Now, I will readily admit the level of success of Federal procurement for service-disabled veterans—and I would point out, for veterans as well—in fiscal year 2001 was not good. It was nowhere 

near the 3 percent goal for service-disabled veterans. There is no 

goal for veterans, but there is a best efforts clause; I was disappointed in that. 

All I can say, for a variety of reasons, is that I think from data 

collection problems to perhaps lack of information out in the field 

with the thousands and thousands of procurement officials, et 

cetera, et cetera, we obviously didn’t achieve the 3 percent goal the 

first year. We are going to do everything we can to try to get that 

done. 

Chairman DEMINT. We would like that as well, and we would 

like to know from you if the obstacles are internal or external, if 

there are things we can do from our side of the desk here to help 

open the door to make these things happen; because I think everyone who is at the table has agreed today that we have a good law, 

a good law that would work if it gets implemented; and we need 

to make sure we know why it is not. 

I have got more questions, but I will allow some of the other 

members. 

Mr. Pascrell, do you have questions? 

Mr. PASCRELL. Thank you, Mr. Chairman. 

The whole issue, as you know, Mr. Elmore, of procurement is one 

that bugs this committee for many, many years. We seem to be 

going backwards and not forward. We don’t seem to be getting any 

action, and the chairman, the committee as a whole threw its arms 

up in the air at data that we have been presented. 

And I don’t think this is any mystery; I don’t think it is any secret that we are spinning our wheels and we want to see a breakthrough. I would hate to see the next set of questions about it go 

unanswered, or no improvement because we do not have improvement. You know that as well as I do. 

In terms of 3263, do you believe that waiving the 7(a) fee requirements for recent veterans would cost the SBA a substantial 

sum of money? 

Mr. ELMORE. It is a difficult question to answer because we don’t 

know how to determine how many veterans would have been discharged in the last 5 years that are 7(a) loan recipients. That question certainly has not been asked thus far from the——

Mr. PASCRELL. We do know how many would be eligible that are 

leaving the service, and we have a good idea——

Mr. ELMORE. We know how many are discharged approximately 

each year, yes, sir. The concern from the agency’s perspective is 

that under the Federal credit rules if we decrease fees for one 

group then we would have to increase fees for other groups of borrowers. So while I am certainly a veterans’ advocate and will be 

19

until the day I am done, for us to turn and increase costs for other 

groups of Americans so that veterans get a special benefit—we 

have concerns about taking that approach. 

Mr. PASCRELL. Why? Do you think it is unconstitutional? 

Mr. ELMORE. No. I think just to extend the cost that veterans 

would save, if you will, to other Americans is not perhaps the appropriate way to approach it. 

Mr. PASCRELL. I don’t think you are going to get any complaints 

from whoever those other groups are and I would suspect, because 

I use the numbers we know of in New Jersey, what is going to happen over the next year. 

I think that, from what I see—and I am asking you to correct 

me if I am wrong—the SBA could afford a fee waiver for all veterans within the scope and within the reasonableness of the problems we are having with the budget at this particular time, because everything has become a priority and that is why nothing is 

a priority. And as far as I am concerned, and I would hope in your 

position as far as you are concerned, veterans are a priority, correct? 

Mr. ELMORE. Veterans are certainly a priority. I can tell you as 

we go through and evaluate all of the agency’s programs, one of the 

programs we are looking at is all of our lending initiatives and, in 

that context, if there are ways that fees can be reduced and restructured. And I think, as you are aware, sir, the agency is trying 

to move toward smaller loans in a number of arenas, and I think 

that would be important to veterans. 

Now, that doesn’t impact the fees necessarily, but I can tell you 

that, historically, about 60 percent of the loans that veterans receive guarantees on from the agency are below $150,000. So that 

is obviously where the majority of the veterans market is in that 

smaller arena. 

I am not sure what else I can tell you, sir. 

Mr. PASCRELL. Well, it seemed to me, first of all, we have to support 7(a) loan program. Right, Mr. Chairman? I think that would 

be the first step. We can’t afford to have any finagling with that 

number, any reduction of that number. 

Americans have spoken out on—we pound our chests about veterans, and if we are not willing to step up to the plate, it becomes—and you heard these gentlemen say—‘‘empty words.’’ I am 

sure you don’t want to be in front of the march that provides simply empty words, Mr. Elmore. 

You have got a big job on your hands. 

Mr. ELMORE. Yes, sir. 

Mr. PASCRELL. And we want to be of assistance here. We don’t 

want to make things more difficult for you. I think it is important 

that we do what we have to do, and if you think we have to do this, 

you have got the support, I think, of the folks at this side of the 

table. 

One more quick question, Mr. Chairman, to Mr. Gatewood. 

Mr. GATEWOOD. Yes, sir. 

Mr. PASCRELL. Your statement was very short and concise. You 

are obviously not a Member of Congress. But you said a lot in a 

very short period of time. 

Mr. GATEWOOD. Thank you, sir. 

20

Mr. PASCRELL. When you retired from the military, what were 

the main hardships you faced while adjusting to civilian life? 

Mr. GATEWOOD. Other than the psychological challenges after 21 

years in the Marine Corps, it was—to start my company, was getting money. I could get no loans from no bank. There was no traditional bank or institution that was ready to give us money at all. 

I started with $600 and received loans from my dad, and I think 

I took on about 17 credit cards at 20 percent interest; that was it. 

The other issue which was very difficult was to get work, and although the Veterans Administration is not here today, I would like 

to say that in the 12 years I have been in business I have had very 

little, if any, help from the United States Veterans Administration. 

I have been in business for 12 years, and I have never seen an opportunity available to firms such as myself in the procurement 

area. 

I have spoken to people at the Veterans’ Administration, asked 

them to look very closely at the policies and procedures they have 

in place. Unless the people in these agencies reach out and touch 

the grunt—I call us ‘‘the grunts’’—in the field, us small business 

people, unless you reach out and actually touch us and tell us what 

you are all about, we cannot avail ourselves of your services. 

It is very important that there is dialogue between us folks out 

here in the field and the corporation and the SBA. 

Mr. PASCRELL. Thank you Mr. Gatewood. 

Thank you, Mr. Chairman. 

Chairman DEMINT. Thank you, Mr. Pascrell. 

Mr. Bartlett. 

Mr. BARTLETT. Thank you very much, and I am very pleased to 

be here. As you know, I also serve on the Armed Services Committee, chair the panel on Morale, Welfare and Recreation and 

have been a big supporter of veterans for all of my life. My father 

was one in World War I. 

Mr. Chairman, we are now discharging our constitutional responsibility in oversight. We are here today some 3 years after enactment of law; it is unfortunate today that what we are hearing is 

that the results of this law have not been as anticipated, because 

it has really not been implemented as it should have been implemented. 

I thought we had in place a Chair, a position in the Office of Advocacy that was focused specifically on veterans’ issues. That person or persons ought to have been telling SBA and whomever else 

is involved in compliance with the law, you really need to be doing 

this, or there is going to be a day of reckoning when you sit before 

a congressional committee; And they are going to be asking you, 

why haven’t you complied with the law? 

I thought also that we had kind of isolated the Office of Advocacy 

from the Small Business Administration so it wouldn’t be a case of 

the guard in the cabbage patch; that the Office of Advocacy would 

really be free to be advocates for small business people relative to 

the Small Business Administration, as well as to the other government agencies where it has a prime responsibility. 

Were any of you in contact with the veterans’ Chair in the Office 

of Advocacy, and if so, what response did you get from them? 

21

Mr. Weidman, you mentioned the Office of Advocacy in your testimony. 

Mr. WEIDMAN. I did, sir. There is not a specific person within the 

Office of Advocacy. We work most closely with Joe Sabota and with 

the new chief economist; and as I mentioned before, last week, we 

met for over an hour with Tom Sullivan, who is the small business 

advocate today, who was appointed by President Bush. He has 

committed to doing a round table regularly with the veterans’ organizations, trying to find out what do we need and at least substantive—sponsoring four substantive events, as well as holding an 

event to get us together with NSBU, with NFIB, et cetera, the 

mainstream business organizations, to find out where we can plug 

together common ground. 

The problem has to do with the other entities within the SBA, 

the role you described, sir, as I understand the law anyway, is the 

role that the Office of the Associate Administrator for Veterans’ Business Development plays. And they are supposed to have that 

far-ranging kind of authority, which is why this committee saw fit 

to have that person for Veterans’ Business Development report directly to the Administrator. 

I have no direct knowledge of this, one way or another, but it 

would appear from the outside, those who have had a chance to 

meet the Administrator—who seems to be a very bright, intelligent 

guy—during Small Business Week last week—was that last week; 

it seems like about 2 years ago, given the pace of the Congress this 

spring—that he is not familiar and not involved in day-to-day running of the veterans’ program. 

Perhaps it might be different if, in fact, that were the case. It 

would certainly be different if it was brought to the Administrator’s 

attention, all of the things that are requirements—not cute ideas, 

requirements, legal requirements—of the Congress as recommended to the full body by this committee in regard to changing 

each and every program offered by the Small Business Administration. 

So it seems to us it is not the Office of Advocacy, sir; we are getting good cooperation from there and from at least the association, 

ASBDC, and it looks like we are finally going to get some cooperation from SCOR. We would like to see more done by the Office of 

the Associate Administrator for Veterans’ Business Development. 

It is useful to remember that thanks to the efforts of this committee and your distinguished colleagues on the Appropriations 

Committee, as I recall, $986 million went to this agency this year; 

and Mr. Elmore has a budget of 750,000. 

In terms of the range and impact on the rest of the agency, that 

falls with the Administrator and the Chief of Staff to make it happen throughout that agency, and for the Administrator to take it 

to the White House to make it happen in the other agencies, when 

it comes to procurement, as Mr. Pascrell so eloquently described. 

And I might add one last thing. There has been discussion 

among the veterans’ group at the recent task force meeting about 

how can we work with this committee and the Appropriations Committee to get the attention of the heads of those other agencies, 

whether it be the Secretary of Defense or whether it be, you name 

it, from XYZ Federal entity, and perhaps working together with a 

22

petition or a letter that would be signed by every Member on a bipartisan basis from this committee and the Appropriations Committee to the SECDEF, that the particular problem that we are 

having is with the Secretary of Transportation—which is shocking 

to some of us, because we thought Mr. Mineta was a veterans’ advocate when he was in the Congress. But the Department of Transportation, including hiring air marshals, has been awful; and they 

are terrible on road transportation contracts and subcontracts, and 

are basically telling veterans, that law doesn’t apply to you here. 

Chairman DEMINT. Excuse me. We need to cut—— Mr. WEIDMAN. I beg your pardon, Mr. Chairman. That was just 

the tip of the iceberg, and there is a lot of frustration out here because all the good you all set in place is not becoming a reality, 

and yet—— Chairman DEMINT. We have got you. Thank you. 

Mr. WEIDMAN [continuing]. Yet they get bonuses down at the 

agency. 

Chairman DEMINT. I am sure we will get back to you. 

Ms. Christian-Christensen. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

Most of us are up here feeling your frustration and your pain, 

and we appreciate the fact that the corporation has just been in effect for a short period of time. But you have a lot of catching up 

to do, a lot of catching up to do. 

Let me ask the corporation my first question. You, like SBA and 

other Federal agencies, have initiated some programs that involve 

outreach and information sharing through the Internet. 

Do you have any idea how many veterans have access to the 

Internet? In my district, I would imagine they are very few. 

General HENRY. That is true. 

Mrs. CHRISTENSEN. And how would you address that? 

General HENRY. That is a good issue, and the question is the 

database that we have been asking for, if I may talk about the 

database, we have been through the agencies, DOD, to pick up the 

databases. 

But the question is, we have no real database in order to answer 

the question how many veterans are there? We believe there are 

24 million veterans out there, but when I start looking through the 

Federal Government to say, where is the database of all veterans, 

where can I find it? It doesn’t exist, ma’am. 

So what we have done is, we have gone to the VSOs, we have 

gone to the various people here. We have asked Mr. Elmore, we 

have asked VA. We are tapping into fragmented databases, and we 

are building one database as we go. 

The answer to your question will be determined, though, by some 

type of focus groups that we give those questions to. 

Now, we do know that what is happening—is this not working? 

Mrs. CHRISTENSEN. I can hear you, but for the recorder——

General HENRY. It does appear that if we go to the focus groups 

and pick this up, we will be able to determine a little bit more with 

specificity on this line. 

What we do know is that the Internet service, though, is growing 

very rapidly and that we have tied our future to what we are doing 

by setting up the electronic marketplace, going out and asking vetVerDate Sep 04 2002 09:14 Oct 03, 2002 Jkt 081797 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HR\OC\A797.XXX A797
23

erans to register. The question is, do we charge veterans for it? 

And the answer is, no, we are not going to do that. 

What we want people to do is to come to our Web site, sign on 

to our Web site, become identified. We are tied into SBA, we are 

tied into VA. We will then be able to drive that information back 

to. 

Mrs. CHRISTENSEN. But my concern is that if the veterans don’t 

have access—and maybe to some of the vet centers as a beginning 

because we can pretty much assume that a lot of veterans don’t 

have access. 

But before my time runs out, Mr. Lopez, in your statement you 

said the procurement policies of our government are like a Tower 

of Babel, unintelligible to most businesses. 

Do you have any specific suggestions as to how to quiet the 

noise? 

Mr. LOPEZ. I believe that the Federal Procurement Council and 

all the constituent agencies or parts of that should provide concise 

information in total. All of them should speak and say to the public 

at large, the business public at large, this is what we mean, this 

is what we intend. What you have now is this fragmented mess 

where you can go from one agency to another and get a different 

answer——

Mrs. CHRISTENSEN. You need a one-stop—like Labor is doing, a 

one-stop center with all the information——

Mr. LOPEZ. That would be a fine suggestion, but the problem is, 

you would have to get them to do it. 

If I may depart for a second, Mr. Chairman, I would like to 

apologize for this, somewhat, whining that we do to you folks. We 

are talking to the choir. You folks have been great for us. 

Mrs. CHRISTENSEN. But it gets on the record, and it is important. 

Mr. LOPEZ. You have always been good to us and always agreed 

with us, and you have always understood us. It is the bureaucracy 

which stands there like a big stone wall and says, we don’t care 

what Congress says, we are going to do what we want to do. 

Mrs. CHRISTENSEN. We understand, and Congressman Pascrell 

and I were saying that in three scorecards we haven’t gotten them 

to respond. 

I guess this is to Mr. Gatewood. In your testimony, you stated 

that they didn’t have a database. Is the ProNet system, did you 

consider that one of the questions——

Mr. GATEWOOD. I have been on ProNet for some time, and I consider it a very viable system. I think what the corporation needs 

to do first of all is utilize ProNet to identify those veterans and disabled-owned veteran firms that are already in business; and for the 

most part, I know that many are. 

I have been on ProNet since its start. 

Mrs. CHRISTENSEN. It is a good start? 

Mr. GATEWOOD. Yes, ma’am. And those businesses that are about 

their business will find a way to get on ProNet and make themselves known. 

But you had a very good point about Internet. I visited the corporation Web site, and it is put together well in terms of design, 

but a lot of it is just information, information dissemination, much 

24

of which most of us already know. I would like to see names, telephone numbers, progress made. 

And if I might depart from your question just briefly, back to the 

advisory committee, if you read Public Law 106–50, ma’am, and I 

am sure you are aware of it, this advisory committee is absolutely 

necessary to the operation of the corporation and Public Law 106–

50. Without this advisory committee, you have no Public Law 106–

50 and you don’t have an advisory committee. 

Mrs. CHRISTENSEN. Thank you. Two questions and one thanks. 

Chairman DEMINT. Mrs. Capito. 

Mrs. CAPITO. Thank you, Mr. Chairman. 

And thank you for your testimony. I would like to go to Mr. 

Gatewood. 

In your response to the first question, asking how you got started, your financing, you talked about your credit cards and all these 

kinds of things. I notice that the corporation is going to be developing a venture capital fund. What suggestions would you give to 

them to be most effective at the frontline loan? 

And I will give General Henry a chance to respond to this as 

well. 

You mentioned in here that you will be using that venture fund 

for mezzanine-level businesses. Well, I remember a mezzanine is 

kind of between one and two, isn’t it? Yes. So what is going to be 

on the ground floor, Mr. Gatewood, if you had some suggestions; 

and General Henry, if you want to respond. 

Mr. GATEWOOD. First of all, I think, in all honesty, the SBA has 

their job cut out for them. When I started my business I started 

as a minority firm, an SBA Section 8(a). And it took me a long time 

to get certified as an SBA firm, and one of the reasons I couldn’t 

get certified was, I didn’t have any capital or revenue from which 

to start a company. Well, hello, that is why I am coming to the 

SBA. 

But secondly, I think the most important thing to the veteran 

that is getting out is to be educated as to how you move in and 

about the community, particularly retirees, people that have been 

in some time, how you move in and about the Federal Government 

procurement arena. It is a very interesting community, and given 

that knowledge, then they can set about getting contracts through 

the Federal Government. 

To that end, I would like to see a set-aside program set up for 

veterans, a program that allows us to get—disabled veterans—3 

percent of the subcontracting dollars of all the primes. We are talking billions of dollars that these prime contractors get. And I will 

tell you now when that law was put into effect, I sent out over a 

hundred letters to prime contractors and over 40 letters to Federal 

Government agencies announcing to them that the law had been 

signed and our company was available to do business with them. 

I have received two responses in 2 years. 

Mrs. CAPITO. Thank you. 

General Henry. 

General HENRY. May I respond, Congresswoman, to his last 

point? 

Mrs. CAPITO. Yes. 

25

General HENRY. In my other life, I was the senior procurement 

guy for DOD, and what you heard here today on this 3 percent is 

absolutely true. You folks passed the 1984 Competition in Contracting Act that precludes anyone from giving the sole source unless you had a justification and approval; and there are seven exceptions. 

If you really want to mandate 3 percent goals to service-disabled 

veterans, then you make it a set-aside because nothing else is 

going to work. The contracting officers out there will not be able 

to reach out and say, I have got this goal, it is a target; what I 

want to do is be a good guy, and I am going to do it because as 

soon as you do, you are going to have everybody else that was on 

that procurement list coming in and filing a protest, and now you 

have got it all messed up into the courts. 

The only way it will work is as a set it aside. Otherwise, we are 

wasting our time on the issue of trying to meet a goal, and I think 

it is unanimous on this panel that it is something that is laudable 

and should be achieved. 

Ms. MILLENDER-MCDONALD. Will the gentlewoman yield? 

Mrs. CAPITO. Yes. 

Ms. MILLENDER-MCDONALD. Thank you so much. The Co-Vice 

Chair of the Women’s Caucus, thank you. 

When you talk about set-asides, a red flag goes up as to the constitutionality of that, and yet I can certainly sympathize, 

empathize with what you are saying. 

How do we get around this, given that there is no constitutional 

protection for individuals except based on race and gender? So how 

do we accomplish this and yet be within this constitutionally? 

General HENRY. I believe this body could pass legislation that 

would require the Federal acquisition regulation to set aside 3 percent of Federal procurements for the support of service-disabled 

veterans. 

Ms. MILLENDER-MCDONALD. Will you be the first in line to help 

us advocate for that? 

General HENRY. Yes, ma’am, I will. 

Ms. MILLENDER-MCDONALD. Thank you. 

Mr. LOPEZ. Congresswoman, may I, with your permission? 

Mrs. CAPITO. Yes. 

Mr. LOPEZ. Supreme Court Justice Rehnquist has already stated 

that veterans and especially service-disabled veterans, who are essentially workmen’s compensation cases of this government, are entitled to special consideration in all legal applications; and this was 

made in reference to a challenge relating to Public Law 209 and— I am sorry, with the constitutional change 209 in California, which 

you are familiar with. That is why they exempted service-disabled 

veterans from 209 because the Supreme Court had already spoken. 

We consider these people to be unique and our direct—— Ms. MILLENDER-MCDONALD. Indeed——

Mr. LOPEZ [continuing]. Direct responsibility—not theoretical, 

not philosophical, but direct. We did this to them and we have to 

fix it. 

Ms. MILLENDER-MCDONALD. Mr. Chairman, you and I have legislation to introduce. Thank you. 

Chairman DEMINT. We do. 

26

Mrs. Capito, do you have any more questions? 

General HENRY. Can I go back and address——

Mrs. CAPITO. Venture capital, yes. 

General HENRY. The venture capital at the mezzanine area, you 

are absolutely right. It is those start-ups who have run out of capital, but who still have a good product which the venture capital 

world would see as moving forward. And either we are dealing specifically with a veteran who is at that mezzanine area or we have 

imparted into that the requirements that they subcontract to veteran businesses. 

It has a larger element on it, but I think more to your issue what 

we are looking for, as in the case of Mr. Gatewood, is for those 

small businesses who come out, who need to get the micro loans, 

that would allow him to get into business—$600. 

We have set up an operation with Southern Financial Bank. This 

came on the heels of September 11. The mayor of the city went to 

them and said, we need a process that will speed up the loan process. Now, to those that were otherwise creditworthy, when we came 

along with Southern Financial, we said, if we can do that for September the 11th victims, we can do that for veterans. We took that 

and we put together the plan with Southern Financial. We hit the 

news wires on it with Bloomberg. 

Our phones have been ringing off the hook. We have got about 

eight proposals that we are evaluating at the present time. That 

is why I am saying our goal is to blanket the country so that any 

person similarly situated with Mr. Gatewood in the future will be 

able to walk in, under our sponsorship, to the bank and say, I need 

a loan, and get that loan timely processed and granted. 

Mrs. CAPITO. Thank you. 

I would like to make one closing statement, and I will use Mr. 

Gatewood’s term about who gets to see the grunts. We see the 

grunts as Members of Congress. I have folks coming into my office 

all the time trying to find seed money for small businesses, veterans, disabled veterans and anybody. And it is difficult for us to 

know how to direct if we, even as Members of Congress, are not 

sure what is really out there. So you can imagine the next layer 

down, the difficulties. 

So I think it is important that while you are blanketing the veterans, you blanket us as well with all of the information, your venture capital initiative and the rest of the things, so that we know 

how best to direct our constituents. Thank you. 

General HENRY. We will be happy to. May I make one other comment on it? 

I think your legislation, the reception—that is, being out in the 

public—is well received; and for veterans, maybe it is because of 

the time right now, we have an opportunity that if we can leverage 

the combined effects of what this body can give to us with what we 

have been able to do and the members on this panel, I think that 

we can create some very nice things for the veterans of this country. 

Chairman DEMINT. Thank you very much. 

Mrs. Tubbs Jones. 

Mrs. JONES. Thank you, Mr. Chairman. 

27

Associate Administrator Elmore, how many of the groups that 

are seated at the table this morning have you or your designee met 

with? 

Mr. ELMORE. I think all of them, numerous times. Not only have 

I known and worked with the gentlemen to my left, all of them—

some for better than 20 years—there have been ongoing meetings. 

I participate in most of the Task Force meetings, for example. 

When it comes to the Corporation, SBA put together and hosted 

their first board meeting at SBA headquarters in September, 2000, 

and I have been involved, I believe, in every board meeting representing the Administrator since then, and virtually all of the 

strategic planning and many of the initiatives that, in fact, they 

are working on and moving forward on. 

Mrs. JONES. So what is the holdup? 

Mr. ELMORE. What is the holdup? 

Mrs. JONES. Usually it is that you are not communicating with 

the people that you ought to be dealing with. Here you just told 

me that you spent 20 years working with these organizations. 

What is the holdup? 

Mr. ELMORE. I don’t know that there is a holdup per se. There 

are certainly some parts of the law that have not been completely 

enacted yet. The Advisory Committee is one of those, and we talked 

about that earlier. 

I can tell you that in fiscal year 2001 the number of veterans 

that received services from the SBA exceeded 100,000. Now, in my 

review of SBA data, all the way back to 1990, we never exceeded 

100,000 veterans receiving services from the agency in at least the 

last 11 years. 

I am proud of the fact that we went over 100,000. It reflects the 

good work of my office, my friends in the veterans community, the 

Corporation and lots of dedicated SBA employees who have done 

their best to ensure that veterans——

Mrs. JONES. Is it that you don’t have enough staff? 

Mr. ELMORE. My new office was created in January of last year, 

and we had a 75 percent increase in staff since that office was created. So we have moved on virtually every initiative——

Mrs. JONES. Mr. Elmore, don’t take it so personally. I am talking 

about SBA as an agency. These gentlemen have sat here—and I 

was late, but I sat here for 45 minutes and listened to a dilemma 

that these veterans claim they are having; and I have sat here and 

listened to you say what a great job SBA is doing. But the links 

aren’t quite making it; they are not linking together. 

There is a problem here, and versus a slap at one another on the 

back saying how great we have done, what else can we do? What 

is the next step? What is the problem? 

Mr. ELMORE. I don’t know that I can tell you exactly what the 

problem is. I think my responsibility at the agency is to increase 

outreach and encourage veterans to participate. 

Mrs. JONES. And how you are going to do that? 

Mr. ELMORE. I have already been doing that through a number 

of initiatives, as detailed in my testimony, including this outreach 

poster. 

Mr. Gatewood——

28

Mrs. JONES. Let me suggest this, seeing how you have such a 

wonderful relationship with these fine gentlemen at the table, and 

you have met with them on more than one occasion, and we have 

sat here for 2 hours listening to dilemmas that are presented: that 

you call together a meeting very soon with these gentlemen. 

And maybe you would get a hold of their mailing list and their 

meeting dates. And you send a person from SBA out to their 

places, as well as send a communication to the members of their 

organization to get something going. That is what I suggest. 

Mr. ELMORE. I will do that, ma’am. 

Mrs. JONES. I appreciate it very, very much. 

Have you got a suggestion, Mr. Lopez, Mr. Gatewood, Mr. Eiland, 

Mr. Weidman, of what else we could do? It is nothing personal, but 

I am about getting it done. 

Am I out of time already? No. Okay. 

Mr. LOPEZ. Congresswoman Jones, you are so perceptive. The 

record should state very clearly, what SBA has done for veterans, 

the task force and this body made them do. None of it was offered; 

none of it was their initiative. We had to pressure, and you had to 

pressure with us to get everything that we have accomplished to 

date, which is woefully little.

And you are very, very accurate and very perceptive; that is precisely the problem. They can talk about services to veterans, but 

what is a service? A man comes in one door, you give them a piece 

of paper and shove them out the other door, that is recorded as a 

service; and then they play number games, but our particular position in this society does not change. That is the evaluation, not how 

many noses you count. 

Mrs. JONES. Mr. Weidman. 

Mr. WEIDMAN. Yes. 

Bill doesn’t have the power, and he is proactive, but the Associate Deputy for Management, the Associate Deputy for Capital 

Formation, on and on, don’t work for him. And so what is the Administrator doing, what is the Chief of Staff doing? 

It is not that we are against the current administrator. Most of 

them have met him only at a cocktail party during Small Business 

Week, because we have never been brought in to talk turkey. And 

we are certainly willing to do that. General Henry has brought us 

in. He meets with us regularly, and we offer him suggestions and 

offer him help. 

We will do the same with Mr. Elmore, but the problem is, you 

have this little $750,000 operation over here on the side and you 

have got a billion-dollar agency where nobody who can make anything else happen in that agency is willing to meet with us or willing to meet with this committee and follow through on implementing the law. 

So the problem with the rest of the agency, with that proactive 

stuff, reminds me, Ms. Jones, when my dad was in Korea and we 

lived with my grandparents and we didn’t have very much money. 

We used to have those old gas stoves with the painted ceramic 

thing that looked like a flame——

Mrs. JONES. I understand. 

Mr. WEIDMAN. But if you didn’t run any gas over it, there was 

no heat. So all I am saying is that SBA, despite the fact that 25 

29

of those folks got bonuses to the tune of $400,000 a year last year, 

those SES folks—you guys turn off the gas, and there ain’t no fire 

down there. 

Mrs. JONES. Mr. Elmore, I want to come back to you and this is 

not a personal attack; this is just encouragement. 

I would appreciate—and maybe the better move is to ask my 

staffer to send a letter to Mr. Baretta detailing some of the things 

that we have talked about today to encourage that the agency and 

other departments make it a priority. 

I always make the discussion, when they talk about minority and 

women’s events, that it is a second thought versus when all the big 

planning is done, versus being at the table when everything else 

is being done; and then all of a sudden, by the way, we have got 

to get those veterans, by the way, we have got to get those women, 

by the way, we have got to get those other minorities. 

Can that be part and parcel of the overall discussion, and accomplishments of the agency; and that other SBA procurement officers, 

or in other departments, that would be a goal they would have to 

reach in order to get the bonuses that are being considered by Mr. 

Weidman. 

I guess I am out of time, Mr. Chairman. 

Gentlemen, thank you for your testimony. We just did a small 

business conference with the Federal Reserve on Monday, but my 

next one, I am going to do veterans. So maybe I will have to call 

upon you. 

General HENRY. I would like to——

Mrs. JONES. You would like to come? 

General HENRY. I would. 

Mrs. JONES. Oh, get that note, Patrice. Very good. 

Mr. LOPEZ. We will all come. 

Mrs. JONES. You will all come? Cleveland, Ohio. I promise, it will 

be warm by the time you get there. 

Chairman DEMINT. Thank you. Thank you Ms. Tubbs-Jones. 

Ms. Millender-McDonald. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman, and 

again thank you for convening such an impressive panel today. 

I have read part of your testimony, having to run out to put a 

bill on the floor and come back. I think what you said and what 

I am going to say is clear. 

H.R. 3011, I think, the Small Business Emergency Relief Act 

that was introduced by Congressman Pascrell, and H.R. 1499, the 

American Small Business Emergency Relief and Recovery Act of 

2001 that was introduced by Congresswoman Donna ChristianChristensen were pieces of legislation that we thought would move 

things. They have not, and so if we cannot identify the problem, 

then we need an inspector general to come in and look at this department and see just what is impeding the forward motion; and 

I am going to, as the ranking member, make that happen. I think 

it is time for us to do the due diligence for our veterans that is 

sorely needed. 

And, Mr. Chairman, with that, thank you very much. I think you 

and I have a lot of work cut us out for us. 

Chairman DEMINT. We do. 

30

This is great information, and I think we have some very specific 

ideas to follow up on. I am going to dismiss this panel, and if the 

members who are still here can stay for one statement from an additional witness, that will be wonderful. We are running out of 

time, but I think we can still—— Ms. MILLENDER-MCDONALD. I am here for the long haul. 

Chairman DEMINT. Thank you and thank all of our witnesses for 

coming forward. 

Mr. Bew, we need to move ahead so we won’t lose your statement, and there are very specific questions I think we have; and 

I apologize for the lack of members, but we have been pulled away. 

Believe me, you will be on the record and we will be responding 

to your comments. 

But this is Mr. Ronald Bew, Associate Deputy Director for Capital Access for the U.S. Small Business Administration. And before 

we allow your testimony, I would like to allow Ms. ChristianChristensen to make an opening statement. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. I am going to be 

very brief, but this is an issue that is of critical importance to my 

district, and it has been brought to our attention, to other districts 

as well. 

When the disaster loans began, when the program began in 

1998, my constituents came running to me. They were very concerned about their loans being sold. At that time, we were assured 

by SBA that the terms of the loan would not change; and with 

some hesitation, I think my constituents decided to accept and 

trust in that. 

And in August of 2000 the loans were bought by Beal Bank of 

Texas, and this happened a little over a year after my community 

rejected an agreement that the governor made with the owner of 

Beal Bank to build a rocket company. So you can imagine the 

alarm in our community when we found out that over 3,000 loans 

were bought by Beal, with whom we had just had a bitter battle, 

and of those, 605 were business loans, about 2,500 were home 

loans. But 605 business loans in a small community like the U.S. 

Virgin islands is a lot, and we attempted to have SBA buy back the 

loans. 

They looked into it and investigated how the bid was made and 

found that it was done fairly and equitably, and they didn’t feel 

they had any recourse to do that. We have tried to have them put 

on hold. That has, to date, not happened, but we continue to get 

complaints from companies because the flexibility that we could 

have with the SBA does not pertain. 

One issue is the subordination of the loans and the fact that Beal 

Bank just does not subordinate the loan. It has created problems 

with companies wishing to expand and that has happened in several instances. 

So I know we are really strapped for time, but I want to stress 

the importance of this issue and I especially, in light of the fact of 

the new disaster loan program following September 11, where businesses across the country are now able to access these loans, but 

they are accessing them with the understanding that SBA is making these loans, that they are coming under certain terms, that 

there is some flexibility—not in terms of paying back the loans, but 

31

in terms of working out issues with SBA when their circumstances 

change, in reaching equitable agreements that do not occur when 

you are working with a for-profit bank. 

So with that, Mr. Chairman, I will yield. 

Chairman DEMINT. Thank you very much. 

Mr. Bew, we will turn to you for a 5-minute testimony 

STATEMENT OF RONALD E. BEW, ASSOCIATE DEPUTY ADMINISTRATOR FOR CAPITAL ACCESS, U.S. SMALL BUSINESS ADMINISTRATION 

Mr. BEW. Thank you, Mr. Chairman, ranking member, and members of the subcommittee for inviting me here today. 

SBA’s Asset Sales Program was initiated in fiscal year 1998. It 

is designed to sell loans by SBA to private sector investors, and is 

part of an effort to more efficiently manage the government’s credit 

portfolios. Since the first of five sales in August of 1999, SBA has 

sold over 111,000 loans for over $2.5 billion. SBA plans to continue 

to conduct the program with two to three asset sales per year. 

Through the program, SBA has maximized sales proceeds of selling loans to the private sector at a value that exceeds the agency’s 

expected hold value. The program helps future borrowers by freeing up scarce resources to be used for loan subsidy and frontline 

delivery of services. The purpose is to allow SBA to focus on inherently governmental functions, i.e., making the loans rather than 

servicing loans. 

By selling these loans and freeing servicing staff to perform other 

functions, such as loan origination, lender monitoring and risk 

management, the program has provided SBA much-needed flexibility in an ever-tightening budget environment. In addition, the 

sale of assets has allowed the agency to continue providing essential loan servicing while maintaining capacity for future major disasters. This is in spite of staff loss through attrition in the servicing centers and field offices. 

Bidders in these sales have included Wall Street investment 

banks, large national banks, regional banks, loan servicing companies and small investment companies. SBA has provided these bidders abundant, accurate and easily accessible loan information by 

remote access over the Internet at a nominal cost in order to expand the potential bidding community and maximize gross proceeds. 

Doing so particularly assists small bidders who frequently do not 

have the resources to invest the time and expense in traveling to 

a central location to view the due diligence materials. SBA includes 

small businesses in its assets sales program management by using 

the services of small minority-owned and women-owned businesses 

to perform some of the work. 

SBA will also continue to apply the lessons it learns from each 

individual sale, and it requires its contractors during each sale to 

note and record all policy and process improvements. 

Another benefit of the program is that SBA has been able to reduce its outstanding loan portfolio. For a variety of reasons, many 

borrowers pay off their loans or enter into compromise agreements 

when SBA informs them that their loans have been selected for 

sale. 

32

While undertaking the program, SBA has been able to protect 

borrowers both before and after sales. Disaster loans are held for 

at least 2 years and thereafter SBA gives special consideration before selling loans when another disaster occurs in the same area. 

Additionally, terms and conditions remain the same unless the borrower chooses to change them. 

SBA has recently changed its borrower notification process to ensure that all borrowers with a loan scheduled for an asset sale are 

fully aware of the pending actions and their options. The written 

notice of the sale is sent to the borrower approximately 4 months 

before each scheduled sale and includes a series of frequently asked 

questions based on previous issues raised by borrowers, including 

questions regarding the types of servicing actions the sale process 

might affect. 

SBA also frequently updates the field offices and servicing centers regarding the status of each sale so that these offices can work 

with any borrower who has a situation that requires special handling. 

SBA has managed the program while successfully limiting customer complaints. Of the approximately 111,000 loans sold since 

the first asset sale, SBA has received less than 300 complaints. 

However, when SBA does receive a complaint, SBA acts upon its 

commitment to follow up on each complaint by contacting the loan 

purchaser and asking the purchaser to attempt to resolve the borrower’s concerns. 

Thank you for the opportunity to appear here. I will be happy 

to answer your questions. 

[Mr. Bew’s statement may be found in appendix.] 

Chairman DEMINT. Thank you, Mr. Bew. 

Ms. Christensen, would you like to ask a question? 

Mrs. CHRISTENSEN. Thank you. 

That notice time doesn’t really help a community that has a very 

low income level. They are not able to buy out. You can give them 

a year’s advanced notice, and they will not be able to buy the loans 

before you can sell them; and I guess that is when they come to 

complain to us. 

When the loans are sold, do you give the purchaser any notice 

or guidelines if the loans are different or should not be viewed as 

a conventional loan, or is that how you look——

Mr. BEW. In 2001, we started putting notice in the loan agreement to make borrowers aware that their loans are subject to sale. 

Mrs. CHRISTENSEN. For example, does Beal Bank get any kind of 

a notice or guidelines that this loan is different from their conventional loans and should be in keeping with the original terms that 

SBA provided at the time the loan was taken out? 

Mr. BEW. Yes. Beal Bank is a 7(a) lender and knows the program 

very well. And we go through a bidders’ qualification process. 

Mrs. CHRISTENSEN. And we are talking about the disaster 

loans—I mean when a person loses their business and has no place 

else to turn but to SBA, and is continuing to make payments, 

sometimes struggling, because our economy is not good; and then 

it is being sold, they can’t buy out the loan and the terms of the 

loan now change. 

33

Mr. BEW. Beal, as any other purchaser, would have to adhere to 

the note. It cannot change unless the borrower requests a change, 

such as subordination, et cetera. They have to adhere to the terms 

of the note. 

Mrs. CHRISTENSEN. Do I have time for more questions? 

Chairman DEMINT. Go ahead. 

Mrs. CHRISTENSEN. You had said that through the asset sales 

you are able to deploy staff that would otherwise be used for portfolio management. Would the bulk of loan execution for the 7(a) 

and 504 loan regulation be lending, monitoring and risk management, which are already done by the private sector? What other 

areas do you deploy those people to? 

Mr. BEW. What has happened as the loans were sold and the 

loan volume and the servicing centers declined, attrition took hold, 

so it was able to equal—to have an equal balance of people and 

servicing. 

What we have done since, I might add, is that there was an emphasis—and someone else, earlier, mentioned that—on small loans. 

What we are doing now is proposing increasing the SBA express 

loan, to increase that from 150 to 250, and open it up to many 

banks. Particular emphasis is on that program for the 50,000-andunder loan, to touch more small businesses in the smaller loans. 

Mrs. CHRISTENSEN. I am—Mr. Chairman, I would like to submit 

some questions in writing and, if I could, ask one more question. 

The mission of the Disaster Loan Program is to assist the borrower to return to predisaster conditions. Doesn’t this conflict with 

the profit-driven mission of a financial institution, making it impossible to really service the loans? 

Mr. BEW. We do give a 2-year waiting period before we sell a disaster loan. That recognizes that most changes occur in the first 2-

year period after a loan is made. It allows these businesses to get 

back up on their feet. 

Mrs. CHRISTENSEN. Unless you get hit with a hurricane the next 

year. 

Mr. BEW. If it does, we can pull those loans out of that sale if 

there is a disaster in that same area. 

Mrs. CHRISTENSEN. Within what period of time? 

Mr. BEW. Two years. 

Mrs. CHRISTENSEN. Not as long as the loan is in effect? 

Mr. BEW. No. Because many disaster loans have maturities of 25 

to 30 years. 

Mrs. CHRISTENSEN. I would just like, through the Chair, to submit further questions in writing. 

Chairman DEMINT. And I would like to suggest, if you can, if Mr. 

Bew is agreeable, to perhaps meet with the Congresswoman in her 

office to come up with specific suggestions that the committee can 

follow up on, whether it be legislation or regulatory, if that is possible. Because I know that is her particular interest. 

Mr. BEW. I read some of your earlier correspondence. I hear you. 

I understand exactly where you are coming from. I would be happy 

to meet with you. 

Chairman DEMINT. We would very much like to hear from that. 

Ms. Millender-McDonald. 

34

Ms. MILLENDER-MCDONALD. Mr. Bew, what I would like to ask 

is, what are the specific procedures or criteria for the repurchase 

of loans, especially disaster loans you have put in place, if at all— any? 

Mr. BEW. For the repurchase? 

Ms. MILLENDER-MCDONALD. For the repurchase of loans, especially disaster loans. 

Mr. BEW. Let’s see. I am not sure that I can answer that. 

Ms. MILLENDER-MCDONALD. I will tell you what. I will submit 

that question to you and perhaps you can research that, along with 

those questions that Ms. Christensen—— Mr. BEW. If you are talking about SBA repurchasing sold loans, 

we could repurchase them during the first 6 months after the 

sale—we could only do this, however, if there is something faulty 

in the documentation, something we warranted and it is not true. 

That is basically it, because once we have sold that loan, it belongs 

to private sector investors. 

Ms. MILLENDER-MCDONALD. I do understand that. 

Thank you, Mr. Chairman. 

Chairman DEMINT. Thank you. And thank you, Mr. Bew. I appreciate your comments and look forward to some additional recommendations. 

This meeting is adjourned. 

[Whereupon, at 4:25 p.m., the subcommittee was adjourned.]

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