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S. HRG. 112–882 

THE SBA IN YOUR COMMUNITY: A REVIEW OF 

SBA FIELD OPERATIONS 

ROUNDTABLE 

BEFORE THE

COMMITTEE ON SMALL BUSINESS AND 

ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JUNE 30, 2011 

Printed for the Committee on Small Business and Entrepreneurship 

( 

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

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED TWELFTH CONGRESS 

MARY L. LANDRIEU, Louisiana, Chair 

OLYMPIA J. SNOWE, Maine, Ranking Member 

CARL LEVIN, Michigan 

TOM HARKIN, Iowa 

JOHN F. KERRY, Massachusetts 

JOSEPH I. LIEBERMAN, Connecticut 

MARIA CANTWELL, Washington 

MARK L. PRYOR, Arkansas 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

KAY R. HAGAN, North Carolina 

DAVID VITTER, Louisiana 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

SCOTT P. BROWN, Massachusetts 

GERALD W. MORAN, Kansas 

DONALD CRAVINS, JR., Democratic Staff Director and Chief Counsel 

WALLACE K. HSUEH, Republican Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS

Page 

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana .................. 1 

Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire ............................ 2 

Ayotte, Hon. Kelly, a U.S. Senator from New Hampshire ................................... 23 

WITNESS TESTIMONY

Cadena, Edward J., from the Los Vegas, Nevada, District Office ....................... 3 

Douthett, Lynn, District Director for North Carolina .......................................... 3 

Dickson, Dave, District Director for Eastern Pennsylvania for the SBA ............ 3 

Goldberg, Gil, District Director in Cleveland ........................................................ 3 

Johansson, Greta, District Director of New Hampshire ....................................... 4 

Lopez, Greg, District Director for Colorado ........................................................... 4 

Nelson, Linda R., District Director in Arkansas ................................................... 4 

Umberger, Stephen D., District Director in the Baltimore District Office ......... 4 

Raghavan, Pravina, District Director for New York Office .................................. 5 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Ayotte, Hon. Kelly 

Opening statement ........................................................................................... 23 

Cadena, Edward J. 

Testimony .......................................................................................................... 3 

Biographical sketch .......................................................................................... 42 

Dickson, Dave 

Testimony .......................................................................................................... 3 

Douthett, Lynn 

Testimony .......................................................................................................... 3 

Biographical sketch .......................................................................................... 43 

Goldberg, Gil 

Testimony .......................................................................................................... 3 

Johansson, Greta 

Testimony .......................................................................................................... 4 

Biographical sketch .......................................................................................... 44 

Landrieu, Hon. Mary L. 

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

Lopez, Greg 

Testimony .......................................................................................................... 4 

Nelson, Linda R. 

Testimony .......................................................................................................... 4 

Biographical sketch .......................................................................................... 45 

Raghavan, Pravina 

Testimony .......................................................................................................... 5 

Biographical sketch .......................................................................................... 47 

Shaheen, Hon. Jeanne 

Opening statement ........................................................................................... 2 

Umberger, Stephen D. 

Testimony .......................................................................................................... 4 

Biographical sketch .......................................................................................... 46 

(1) 

THE SBA IN YOUR COMMUNITY: A REVIEW OF 

SBA FIELD OPERATIONS 

THURSDAY, JUNE 30, 2011 

UNITED STATES SENATE, COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, Washington, DC. 

The committee met, pursuant to notice, at 2:44 p.m., in Room 

428–A, Russell Senate Office Building, Hon. Mary L. Landrieu 

(chair of the committee) presiding. 

Present: Senators Landrieu, Shaheen, and Ayotte. 

OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, 

AND A U.S. SENATOR FROM LOUISIANA 

Chair LANDRIEU. Well, thank you all for joining me today, and 

the members of our Committee. 

This is an informal, but important, roundtable, one of about two 

dozen that I have conducted as Chair since becoming Chair of the 

Small Business Committee. We are expecting several members of 

our Committee to stop in and be with us this afternoon, but we 

find these roundtables to be very, very valuable in bringing to our 

Committee ideas and policy areas that we should focus on as a 

committee. And I have long wanted to have a meeting of some of 

our directors, and that is what today is about. 

I am going to do just a very brief opening statement and then 

ask each of you to introduce yourselves. And again, as members 

come in, we will recognize them as they do. 

I want to thank all of the district directors for joining us today. 

I believe we have 10 of our district directors out of 68 districts in 

the country. And I think there are over 100 locations, so we are excited to have a good number represented here. 

I would also like to recognize, although he is not here, Eugene 

Cornelius who helped to organize this event. Unfortunately, I think 

he has been assigned jury duty today. And as one of my staff says, 

while he is a good talker, he was not good enough to talk himself 

out of jury duty. So he is not with us today. 

We understand that you are district directors. We are so thrilled 

that—we just started, Senator Shaheen—to be joined by Senator 

Shaheen from New Hampshire. We appreciate her extraordinary 

leadership. 

And we have asked you all to come together today as district directors who are literally on the front lines of our SBA operations. 

While policy is made here in Washington, you are the ones actually 

assisting many of our entrepreneurs, or trying to assist entre-
2 

preneurs, in extremely difficult and challenging economic times. So 

we want to hear from you what is working, what is not working, 

what we should potentially be focused on here that we are not, and 

we are hoping to get some good information from you today. 

I am particularly interested to meet with you. And I think Senator Shaheen already knows this, but in preparation for this roundtable I was shocked to know that the SBA has gone from 1,800 employees under the Bush Administration to less than 900 today. This 

agency has taken a greater reduction in funding and personnel 

than any agency or department of the Federal Government. 

My goal as Chair of the Committee, and I think my Ranking 

Member shares this view, but she will have to speak for herself 

and her team, but I know that the Democrats feel very strongly 

that this is an important agency of the Federal Government, that 

we take a small amount of money and leverage it substantially to 

create jobs and opportunity at a time when our country could not 

need them anymore. So while we do have budget constraints I just 

want our group here to understand that this agency has already 

taken substantial reductions, that we are building up from a deep 

trench that we are currently in, and I am going to be interested 

in hearing from you all as directors how your offices have responded to such a reduction in personnel and are you able to maintain your same level of service and, if so, how are you doing that. 

I also want to put into the record the Louisiana District Office 

in New Orleans had 21 employees in 2001. Now there are only 11. 

With those things in mind, I want to make sure today that we 

learn about the structure of district offices and how they are operating, discuss how the district offices coordinate with State, Federal and local agencies, discuss how the economic downturn is impacting your community, talk about the Small Business Job Act to 

see if you are feeling any impacts from that major piece of legislation that we passed just recently, discuss how your SBA on the 

ground is identifying and preventing fraud, and hear from your 

small businesses on success stories that you are hearing from entrepreneurs as they receive access to credit, et cetera. 

Let me just end with the rules of this roundtable. They are very 

few and simple. I am going to ask of you to identify yourself. When 

you want to be called on to speak in response to questions, just put 

your name card—up like this, and I will be happy to recognize you. 

We really want this to be a free-flowing exchange of information. 

And that is basically it. 

So let me say that I am joined by Bryan van Hook, my Policy 

Director on my side, Diane Dietz of Senator Snowe’s staff. I am 

going to stay for at least 45 minutes. 

And I would like to ask Senator Shaheen if she wanted to make 

just any brief opening statements, and then we will call on each 

of you to introduce yourself. 

OPENING STATEMENT OF HON. JEANNE SHAHEEN, A U.S. 

SENATOR FROM NEW HAMPSHIRE 

Senator SHAHEEN. Thanks very much, Chair Landrieu, and 

thank you for holding the roundtable today. 

SBA and the work that you do is very important in New Hampshire, and I am so pleased that Greta Johansson is here. It is nice 
3 

to be able to welcome her. She is relatively new to the New Hampshire office, and so we are delighted that she is there. 

We were talking about the change in the number of employees 

within the agency. I think during the 90s the SBA office in New 

Hampshire, which virtually kept business afloat in New Hampshire 

because five of our seven largest banks failed, so you could not get 

access to credit as a small business unless you went through the 

SBA. I think at that time we had about 21 employees in the field 

office in New Hampshire. I know when I took office in the Senate 

we were down to about 7. I do not know where we are today, but 

that is a reflection of what the challenges that everyone is facing. 

And it is particularly important because for us in New Hampshire—I know the same is true in Louisiana—we have a small 

business economy, and the work that you do, providing resources 

to those businesses, is absolutely critical. 

So I want to thank you all very much for being here, for having 

this discussion with us today, and again, thank Chair Landrieu for 

her leadership. 

Chair LANDRIEU. Thank you, Senator. 

Well, let’s start with you, Mr. Cadena, to just introduce yourself 

briefly and maybe just a 30-second background. 

Mr. CADENA. My name is Edward Cadena. I am from the Los 

Vegas, Nevada District Office. We cover the whole State. I am 

originally from New Mexico. I have got 32 years with the Federal 

Government, 18 years with the Federal Deposit Insurance Corporation and 14 years with SBA. 

Chair LANDRIEU. Thank you so much. 

Lynn. 

Ms. DOUTHETT. I am Lynn—— 

Chair LANDRIEU. You have to press your button and speak fairly 

close to the mic for it to be picked up. 

Ms. DOUTHETT. I am Lynn Douthett, the District Director for 

North Carolina. We cover the whole State as well. I have been with 

the Federal Government for 13 years, with SBA specifically. My 

previous background was banking for 15 years and own my own 

small business for 6. 

Chair LANDRIEU. Okay. 

Mr. DICKSON. My name is Dave Dickson. I am the District Director for Eastern Pennsylvania for the SBA. I have been in the SBA 

for about five and a half years. Prior to that, I was a plant manager for Stanley Tools Corporation, a plant manager for Cirrus Design Corporation, building airplanes, an assistant general manager 

for a defense company and an Army officer for 11 years, 4 months 

and 27 days. 

Chair LANDRIEU. Thank you for your service in all of those areas, 

particularly the Army. 

Mr. DICKSON. It has been an honor. 

Chair LANDRIEU. Thank you. 

Mr. Goldberg. 

Mr. GOLDBERG. My name is Gil Goldberg. I am the District Director in Cleveland, and the Cleveland District covers the northern 

28 counties of Ohio from the Pennsylvania line to the Indiana line. 

It is probably heavily industrial, old industry. And I have been 
4 

with the Federal Government for 19 years, most of which have 

been at the SBA. 

Chair LANDRIEU. Thank you. 

Ms. JOHANSSON. Hi. Good afternoon. I am Greta Johansson. I am 

currently the District Director of New Hampshire, which is the 

SBA office for the State of New Hampshire. Prior to that, I just 

passed my 29-year mark with the SBA, and those 29 years were 

split roughly half and half between the Connecticut District Office 

and the disaster side of SBA’s operations. 

And the Connecticut Office also went from—I watched it go from 

a high of 34 employees down to its current low of 9 employees. 

Mr. LOPEZ. My name is Greg Lopez. I am the District Director 

for Colorado. We cover the entire State of Colorado. 

I am a former elected official and former mayor in Colorado. I 

was former President of the Denver Hispanic Chamber of Commerce, also former Executive Director for the Minority Supplier Development Council, and I am a disabled veteran, served four years 

in the United States Air Force. 

Chair LANDRIEU. Thank you so much for your service. 

Ms. NELSON. I am Linda Nelson, the District Director in Arkansas. I have been with the agency since 1967 except for 13 years, 

having 4 kids. I came back in 1984 as a file clerk to start paying 

for those kids, and I am still doing that. 

And I have kind of done things backwards, got my education 

late, thanks to SBA which gave me a basis for that and a place to 

move up. The only other place that I have served was in Herndon, 

briefly. Thank you. But it was a good lesson. 

Chair LANDRIEU. Thank you so much, and very, very impressive 

resume. 

Mr. NELSON. Good afternoon. My name is Bob Nelson. I am the 

State Director for Massachusetts. It covers the entire State of Massachusetts. 

I have been the State Director for about three and a half years. 

July 1st, I will have my 20 years in with the Federal Government. 

I have been with the SBA for 14 years. Prior to that, I was with 

the FDIC, and then prior to the FDIC I was a commercial bank, 

a small business lender. 

Chair LANDRIEU. Great. 

Mr. UMBERGER. I am Steve Umberger, District Director in the 

Baltimore District Office. Do not ask me how it got to be named 

Baltimore and not Maryland, but we serve the State of Maryland 

outside of Prince Georges and Montgomery Counties. 

I grew up in a family owned small business. My father was a 

food distributor outside of Philadelphia, all those cheesesteaks and 

hoagie places, that I grew up from a very early age. So I understood the customer service and things like that, and some of the 

issues, the fundamental issues that the small businesses should 

have, if they do not. So we make sure that they get that information. 

But I spent 17 years in Cleveland with SBA. I thought I would 

be with the agency for 3, I would get a little government experience, and this is my 30th year. So I worked for Gil Goldberg for 

a little bit, came to D.C. and took a transfer to the Office of Field 

Operations which actually oversees the district and region offices. 
5 

And then subsequent to that, I was able to take advantage of an 

opportunity to become the District Director in Maryland. 

Chair LANDRIEU. Excellent. Wonderful story. 

Ms. RAGHAVAN. Good afternoon. It is an honor to be here with 

you. My name Pravina Raghavan. I am the District Director for 

New York Office. I actually have the southern part of the State, the 

lower 14 counties which includes New York City, Long Island and 

then the Mid-Hudson Valley. I will be two years with the Federal 

Government, starting in September. I recently joined. 

I am a former President/Vice President for MTV and BET networks, and I am also a former investment banker in technology, 

and I own my own strategic advisory firm for nine years. 

Chair LANDRIEU. Excellent. Well, it is very impressive to see the 

range of experiences and backgrounds that you all bring, and it is 

just a terrific opportunity for our Committee to hear directly from 

you because one of our goals, of course, is to have the best and 

most effective, creative, innovative offices doing all sorts of things 

inside and outside the box—of course, all within the law—to help 

our small businesses. 

So I want to start with this question for those of you, and all of 

you have been with the government for so long. What do you actually see right now as your greatest challenge to the communities 

that you are trying to serve? And it could be one, two, three or 

more challenges to the small business community. 

I do not want to venture to say what it might be. But what are 

the challenges that you are seeing in your job today that might be 

a little bit different, or somewhat different, than you saw it 5 years 

ago or 10 years ago? Who wants to kind of start out? 

Go ahead, Lynn. 

Ms. DOUTHETT. For the State of North Carolina, I can speak to 

the issue that we have shed so many manufacturing jobs from tobacco, furniture and textiles. And we just recently held a small 

business roundtable, on Monday actually, and four of the manufacturing firms that were participating were very clear in two areas. 

One was highly skilled labor and also those in vocational and technical trades. 

So what we are seeing is that—— 

Chair LANDRIEU. They are seeing a lack of skilled labor? 

Ms. DOUTHETT. Yes. 

Chair LANDRIEU. And a lack of graduates coming out of—— 

Ms. DOUTHETT. Highly technical skilled labor, so on one side the 

vocational trades. A lot of folks have gone on to college, so they do 

not necessarily have the vocational trades. 

And then the other side is that many of them need the engineering and science backgrounds because we are big in biotech and 

pharma, as well as innovative and research through RTP and Gateway over in the Winston-Salem area. 

So what we are really seeing is a gap that is occurring. So that 

was the first thing that we heard was the qualified workers. 

And then the second thing we heard was the access to capital, 

specifically in that the credit box has tightened and folks are having difficulty being able to reach the higher bar that the lending 

community is expecting. And the other area of that would be that 

real estate, many of our lenders in North Carolina were very big 
6 

into real estate, and the value has gone down significantly. So that 

combination has made it difficult for some of our companies to get 

access to capital. 

Chair LANDRIEU. Excellent. 

Mr. Dickson. 

Mr. DICKSON. I will reiterate what Lynn was talking about. We 

hear basically the same things in Eastern Pennsylvania, with one 

addition—a lot of our businesses do not have the demand that they 

had several years. 

With the economy as is, people’s 401Ks, the health care—I mean 

it goes on and on and on—they are not spending the discretionary 

income. As they are not spending the discretionary income, it is affecting our small businesses in Eastern Pennsylvania because they 

do not have the demand on their product or service, so they are 

projecting lesser gross revenues. As they project less gross revenues, and they have less collateral because of the real estate market, for instance, they are less credit-worthy. 

I always tell businesses in Eastern Pennsylvania if they have 

been in business for five years and they are doing business today 

the same way they were five years ago, they probably will not be 

in business in five years because they have got to reduce costs; 

they have got to get higher quality, better products, higher services, all the mom and apple pie things that we always preach and 

we teach about. A lot of businesses are not there. 

That is a really good thing about our Resource Partner Network, 

the SBDCs, SCORE and Women’s Business Centers. They help 

those businesses that do not have the overhead structure to be able 

to have those professional engineers or those professional quality 

people or the materials managers, et cetera, on their staff because 

they just do not have enough business to support that. These businesses can go to these resource partners as well as the SBA district 

offices and get assistance where they would not get assistance any 

place else. 

For instance, when I was a plant manager for Stanley Tools Corporation, going along with what Lynn was saying, we could not 

find the heavy welders. We could not find machinists, CNC machinists, and things like that. So I actually started my own welding 

school, to teach people that had a little bit of welding school how 

to actually do heavy welding, so that I could supply my own workforce because we could not find them. 

Chair LANDRIEU. This is so troubling to me, and I do not know, 

Senator Shaheen, if you find it the same here as our country, 

struggling to create jobs. And sort of what would seem to me to be 

rather simple investments to be made in technical schools or in 

special training that could create the workers that could fill the 

jobs that go without seems to me to be just a real puzzlement as 

to how we cannot seem to manage. 

You have to turn your card back around. I cannot read it. 

[Laughter.] 

All right. There you go. Go ahead, Ms. Raghavan. 

Ms. RAGHAVAN. I was going to agree with both of what they have 

said. 

The other two things that we have seen, which have been particularly in New York, is high credit card debt. So we have a lot 
7 

of businesses that actually went through, got through the recession 

and now are looking at 22 to 25 percent interest credit card debt, 

and we are trying to help them retool their cash flows and financials, so that they can stay in business. 

And the other thing that we have a lot of is the immigration population. We have a lot of new United States citizens. We have a 

lot of immigrants who actually have high technical skills, but the 

language barrier and just understanding what we do is difficult for 

them. And so, we spend a lot of time actually in their native languages, such as Mandarin, Korean, Japanese and also Spanish, to 

actually teach them about our services because what we realize is 

our Small Business Development Centers, SCORE and Women’s 

Business Centers handle a lot of what they do, but not having that 

language causes a disability for them to get to our services. 

Chair LANDRIEU. That is a very, very interesting point. I had not 

thought about that. 

Ms. Nelson. 

Ms. NELSON. We have the same problem with the skilled workforce. But our 2-year colleges, we have 22, and there is an association of them. And they had developed some curriculum around different skills—catering, aerospace repair and so forth. 

The one in West Memphis was recognized nationally for what 

they have done. A company puts in a robotics piece of equipment, 

trains a few students on how to use that. When they have a customer, they bring the customer over. The student demonstrates it, 

and often they buy the machine and the student a pretty nice paying job. 

But they had asked us—after doing that, they had asked us, myself and the Director of our Small Business and Technology Development Center, to be advisors to them on introducing an entrepreneurship study within these colleges. 

And many of them are doing that, so that if they—well, not only 

for those who might want to start their own business, but for those 

who are working, to understand the running of a business would 

make them a better employee, and working for someone then might 

lead to the creation of additional small businesses. 

The other thing that we have had a problem with is getting retail establishments, like banks, to carry our product. I tell people: 

We are a tool dealer, and we have a few good tools, and like my 

dad said, you need to know how to use the right tool for the right 

job. 

And so getting lenders, we are a State with a lot of very small 

banks. They are in small markets. They do not have a lot of opportunity, and they do not feel that they can stay up with our changing regulations, changing because they need to change, because everything is changing. 

We came up with a sort of designated driver approach. We have 

a State nonprofit, quasi-State chartered entity that has one entity 

that does 7(a) loans, one that does 504, one that has an SBIC license, and then they do some very other creative things including 

rural broadband. 

And since they are not competing with banks—they are regulated like banks—they offer these banks, if you have got a customer that you would really like to help but you are afraid that you 
8 

do not know enough about SBA to do this securely, then bring it 

to us. We will sell you a participation, and you have helped a customer. We are still involved. They are the boots on the ground, 

servicing the loan. So that has brought some loans to us that would 

not have been there. 

One in particular, during the Recovery Act funding, the Administrator came to Arkansas for the anniversary. This was a sawmill, 

and she is familiar with all things related to flooring and wood and 

stuff. She put her boots on, was about to go slogging through the 

pits, and the owner said, no, the press is here. I do not want a picture of you sinking in our sawmill. 

But he said, you saved my business, and my family has been in 

this business for 100 years. And getting it refinanced, using a designated driver lender was what made the difference. 

And the other thing we have done is increase—we are recruiting 

the national top leader in microlending into the State because part 

of the problem is small loans are hard to get. 

Chair LANDRIEU. And we have increased our microloan limits 

from what? 

Ms. NELSON. Thirty-five to fifty. 

Chair LANDRIEU. Thirty-five to fifty. Is that still in effect, or did 

it go out? 

Ms. NELSON. Yes. 

Chair LANDRIEU. Okay, it is still in effect. 

Ms. NELSON. That is a permanent one. 

Chair LANDRIEU. And that is a permanent fix that we hope will 

help. 

Those are very interesting. I want to come back to your designated driver concept, and I will throw this out, but I want to hear 

from this same comment, answers to my first question. 

But you know one of our goals; we have 8,000, approximately, 

community banks in America. When I took over this chairmanship, 

I think there were less than 500 that were engaged in regular 

small business lending. That number has now doubled to over, I 

think, about 1,300. 

But in my mind, if we do not have at least half of the banks in 

America participating with the SBA, Senator, I am not sure that 

we are really maximizing the effects of our programs. 

But you are right; in some of these communities the banks are 

so small that they do not feel like they can put the back office investment necessary because they may only be processing a dozen 

loans a year, I think. 

Ms. NELSON. Oh, not even that. 

Chair LANDRIEU. Not even that, maybe six loans or four loans a 

year. I think you have got to process several dozen to make it 

worth your time. 

Ms. NELSON. Exactly. 

Chair LANDRIEU. So we want to really push out, Jeanne, a strategy here, to get some kind of designated driver program for some 

of these smaller regions in the country. They are out there, but just 

encouraging the banks to use them, so anyone that walks through 

the front door of any bank does not get a no, gets either a yes or 

we cannot help but we know of some group that can, that we can 

share some of the risk with, et cetera. 
9 

We do not want a no. 

Ms. NELSON. Right. 

Chair LANDRIEU. We want a yes, or we want a we can do it partially. 

So I want to come back to that, but go ahead, Mr. Lopez, on the 

same. What are the two or three things that you have seen that 

are very different than what you saw a couple of years ago? 

Mr. LOPEZ. You know, I have been—I am fairly new to the agency. I have been with the agency three years, but echoing all the 

issues of capital, getting access to capital is what I hear in Colorado. 

However, the other things that I am hearing are there are 26 

Federal agencies in the State of Colorado that do procurement. 

Hopefully, a good thing for us is last year we were able to do $1 

billion in Federal contracting to the 8(a) program for the State of 

Colorado. 

But here are the things I am hearing from the small businesses 

as it pertains to getting Federal contracts: Contracting officers are 

not necessarily returning back phone calls as it pertains to trying 

to build relationships. Contracting officers are not necessarily interesting in utilizing small business. They feel that it is a little bit 

easier to go large. 

A perfect example, in the building that I am in, they are doing 

a renovation of the building. I got a phone call from the agency 

that is overseeing it, informing me that they believe that there 

were no small businesses that could do the renovation. I had a conversation with them, philosophical meetings. After six meetings of 

going back and forth, and trying to make sure that I understood 

what they were looking for, I am proud to say that that building 

has gone now 100 percent small business. It is $23 million. It is 

creating more jobs in Colorado. 

But I think there is a tendency to believe that small business, 

perhaps it is the title, perhaps it is something else, but they are 

more inclined to go large. 

Chair LANDRIEU. Isn’t it ironic that the Small Business Office 

would be renovated by a large business, or a major business? I 

mean that would have been a headline. 

Mr. LOPEZ. It would have, and I told the committee that—— 

Chair LANDRIEU. So thank you for stopping that headline from 

being printed. 

Mr. LOPEZ [continuing]. They were not going to do large in my 

house. You know. They might be able to do it somewhere else. But 

yes, the Small Business Administration, as far as where offices 

were, we had to be able to find the—and we were. You know. 

And I can tell you right now everyone is pleased with the schedules. Everything is moving forward. So there are no concerns anymore as it pertains to how that works. 

But I visit with a lot of the Federal agencies, talking about small 

business and the importance of them. I think we have a long ways 

to go in educating the procurement officers of the importance of 

using the small business programs because that creates jobs, which 

then creates access to capital, which then creates an economic engine, which then creates the quality of life that everybody is seek-
10 

ing. So when we are not being able to give contracting opportunities to small business, it causes a problem. 

The other thing I am hearing is corporate America. You know, 

corporate America is not necessarily interested in paying their bills 

on time. So they are asking small businesses to accept a 60-day 

pay, a 90-day pay. And of course, cash flow is the heart and blood 

of a small business. So when corporate America is asking them to 

delay their payments because they need to balance, increase their 

balance sheets, it causes some real strain within the communities. 

So we are working very closely with all the community leaders. 

We have a new governor. We have a new mayor. We are all kind 

of in sync with what we need to do as it pertains to being strong 

in the message of small business, but those are the things that I 

am hearing. 

Chair LANDRIEU. Okay. Mr. Cadena, and then I will get Mr. Nelson and then Mr. Goldberg. 

And I am sorry. Wait. Let me see. Senator Shaheen had a followup question, I think. 

Senator SHAHEEN. Well, actually, it was just a comment. I do not 

know if any of you have seen the New York Times today. They had 

an article about the State of Connecticut. Nobody here is from Connecticut. Greta used to be. 

Ms. JOHANSSON. Sort of. 

Senator SHAHEEN. So I do not think I am stepping on anybody’s 

toes. 

But what got my attention; it was about the economic challenges 

that the State is facing today, and it pointed out that one of the 

challenges is that the economic strategy had been focused very 

much on large corporations as opposed to small business and that 

most of the jobs, new jobs that are being created, are being created 

in small business. So it bears out what everybody has been saying 

about the importance of the work that you do, and your story about 

who was renovating the building brought it to mind. 

Chair LANDRIEU. Thank you for sharing. We will make sure we 

get that article circulated, but continue. 

Mr. CADENA. I wanted to echo what Mr. Lopez was saying. The 

8(a) procurement program is very good. Our 8(a) contractors are 

really very good contractors, and they do struggle trying to get procurement. 

As far as in Nevada one of the biggest issues we have is—I have 

sat down and have talked to almost all the lenders—we have the 

highest foreclosure rate in the country; we also have the worst 

economy in the country. And one of the things that is happening 

is we have businesses that most of the homes that they live in are 

worth half of what they paid for them. 

So when they go to your friendly neighborhood banker, even 

though their loan may cash flow. You know, we ask three things 

at the SBA: How much money do you need, what are you using it 

for, and how do you pay it back? So we are cash flow lender. 

However, having come from 18 years of being with the FDIC, I 

understand conceptually that you need to have usually from a prudent man theory, that you have collateral. Well, if your collateral 

was a $225,000, only worth $125,000, all of a sudden now you do 

not have any collateral. 
11 

So the loan, even though it may cash flow, the lenders are concerned. Two things happen; we have foreclosures or short sales. 

And if they have not foreclosed or short-saled, they are concerned 

that that is what is going to happen. 

Chair LANDRIEU. I think this is a very serious issue. We actually 

had a whole roundtable on the specific issue of the deflation, or the 

devaluation, of commercial real estate. But it is also commercial 

and residential, and when you think of that commercial real estate 

and residential real estate being the collateral that is funding the 

small businesses in this country. 

And Senator Shaheen, we have got to find a way forward on this. 

It has got to be a major policy shift because if we do not give the 

banks some relief, the regulators some guidance about how to do 

this, I do not see how this recovery ever gets its footing because 

it just becomes a self-fulfilling prophecy. 

I know that this is heresy in some financial circles, but we 

should all become cash-flow lenders for right now, to get ourselves 

moving, because if you are trying to lend on the value of real estate 

we are just not going to be lending. And then the recession gets 

worse. 

You have got to lend on good ideas, on hope, on cash flow and 

not on the value of the house you live in, or the shopping center 

that you are occupying. There has got to be some policy shift at a 

major level. And it is going to be a battle between those of us that 

are promoting this more aggressively, but a risk worth taking because in my view, without taking some of these steps, we just cannot get ourselves out of the hole. 

And we just keep digging deeper and deeper and deeper. You 

cannot get the loan. You cannot expand the business. You cannot 

create the job. Therefore, then no one has the money to buy the 

house. The house then stays on the market for another year and 

goes down another 13 percent. 

I mean do you see what I am saying? It is just never-ending. 

And people do not realize, I think, what real estate has become 

for the United States in terms of everybody’s net worth, your equity, what you use to leverage. 

And when it is pulled out from underneath you and then the 

banks will not lend on your smart idea, they will not lend on the 

fact that your product actually has a very bright future, and they 

are only lending on your real estate and your collateral, you can 

see where we are—not going very fast, very far. 

Go ahead, Mr. Umberger. 

Mr. UMBERGER. Some comments along those lines—sorry. 

We saw the downturn. We saw the numbers, the loan numbers 

go down. We see them start to creep back. And then we see, because of the Jobs Act, the first quarter of this fiscal year 2011, tremendous growth, and we continue. There was a little bit of a dip 

in January, but it is coming back. 

So the lenders are using us more and more. They are using us, 

I believe, to get over some of this risk adversity or risk-adverse nature of their analysis. But we are obviously seeing a lot more community lenders coming back into the game. 

So when the large nationals dropped out, and they were basically 

doing credit scoring and a lot of that stuff that was producing, in 
12 

my district, a couple hundred loans a year for one particular lender 

that did one last year. You know. And a lot of that has gone away. 

The community banks have stepped up, but there is still a huge 

gap. 

And it is tough to find, other than a community lender, somebody 

that is willing to come in and look at a deal that has been kicked 

to the curb because the other banks want to get their cash back, 

and now they have a technical default because of some ratio issue. 

And we all know sales are down and those kinds of things. But 

they can only do it to a certain extent. 

In our district, a small community lender beat out and in January 2011 was the number one lender. The number one lender who 

had been in first place for five years prior to that held a team 

meeting and said do not ever let this happen again. You know. So 

they wound up one and two. 

But that small community lender produced about $11 million in 

loans to deals that would have otherwise, possibly, just been let go 

for a need for cash. 

So I think when all is said and done we have a good—we were 

seeing some positive signs, a lot of it because of the Jobs Act, in 

the numbers of lenders that are coming back and the number of 

loans that are produced, but there is still a large gap in the microlending Main Street arena. 

Chair LANDRIEU. Mr. Goldberg. 

Mr. GOLDBERG. I would like to discuss the issues that we are seeing in Northern Ohio. 

Chair LANDRIEU. Try to speak a little bit closer. Yes, the two or 

three things that you are seeing. 

Mr. GOLDBERG. But before I do, there are two issues that were 

raised, and I would like to address those real quickly. 

One was that designated driver that Linda brought up and the 

issue with community banks. Community banks do not do 50 percent of all the loans in Cleveland, but as Steve had mentioned, they 

are the ones that take the time to do the due diligence, kick the 

tires. They do not do the credit scoring. 

So the question is how do you get them to use the program since 

they are the ones that have the time and the inclination to do the 

real due diligence, the old-fashioned credit due diligence that the 

large banks used to do, but the large banks now have shifted to 

credit scoring, a very quick and easy way of proving or declining 

a loan. 

What has happened in Ohio; a number of former bankers from 

large banks have left these banks and become very entrepreneurial 

and developed their own company to be the back-room provider for 

these community banks. 

Chair LANDRIEU. That is a great concept. That is exactly what 

we want to talk about, Jeanne, is that back-room entrepreneurship 

opportunity. 

Mr. GOLDBERG. It has worked very well. It has brought on a 

number of community banks as well as credit unions that never 

used our programs before. The community bank makes the credit 

decision and does the due diligence, but the back room with regard 

to our regulations and making sure the loan is booked properly, et 
13 

cetera, is handled by these former bankers that formed the company and know our business. 

Chair LANDRIEU. What is the name of their company? Do you 

know? 

Mr. GOLDBERG. Well, there are about two of them. I am sorry I 

do not have the name. I could let you know. 

Chair LANDRIEU. You could get that to our staff, please, so we 

want to maybe use them as a model. 

Mr. GOLDBERG. Definitely, I will do that. 

So that was my quick comment on that designated driver community bank issue. 

Senator Shaheen mentioned economic strategy. Typically, in 

Northern Ohio, communities have economic strategies to bring in 

large corporations, and they forget about the small business. 

We went out to a number of communities, and the one that 

stands in mind is Youngstown. And it has gone through a number 

of mayors, in Youngstown, where we approached them. And 

Youngstown traditionally has been a fairly depressed area, hard hit 

by the economy, not just this recession but traditionally. 

We went out and talked with the mayor and city council, their 

economic development director, and developed a program where 

they would offer similar things that they do for large business to 

small businesses, for small businesses, with one exception. They 

added a real sweetener to this. 

We told them that the problem a lot of small business have of 

qualifying for an SBA loan is an equity issue—where do I get 

enough equity, so my leverage is not too high and scares the 

bank—because they could look at cash flow and get cash flow, but 

equity is very important. So we discussed the issue of supplemental 

equity. 

So the city came up with the funding for what they call a performance grant, that if they take technical assistance from the 

Small Business Development Center in Youngstown, develop their 

business plan, their business model, then take that to a bank that 

has joined our initiative here for Youngstown, the bank reviews it 

and approves it. Then the city will provide supplemental equity in 

the form of a performance grant that is forgiven over a three-year 

period. 

And those city funds are put on standby and subordinated because that way, according to our regulations, if they are subordinated and put on standby with no payments made we can consider 

that as equity. So that is why it is called supplemental equity. 

Chair LANDRIEU. Very interesting. 

Mr. GOLDBERG. And it is forgiven a third, a third, a third, and 

there are job creation requirements. 

Chair LANDRIEU. Very interesting idea. And for cities that have 

very limited options, that would be a very attractive model because 

these cities, they look at themselves, and the mayors: Where are 

our jobs going to come from? 

They are not going to come like Superman flying in. We have got 

to create them here. And so, you have got to sort of believe in your 

city to kind of get things started again. 

I could actually see this model working. So please send us the 

details on that as well. 
14 

Mr. GOLDBERG. Oh, I will do that. 

Chair LANDRIEU. And then I want to get everyone. So you have 

one more thing? 

Mr. GOLDBERG. Okay. Oh, on this economic model, the city lever- aged their $5 million that they put in over the course of time to 

a $20 million investment in small business in the city, with our 

funds and the small businesses were required to put funds in, and 

in Youngstown we only had a 2 percent default rate per year on 

those. 

Chair LANDRIEU. That is terrific because it is modeled with not 

just giving money out to a small business, but the small business 

has taken the technical advice; they have gotten the training, et 

cetera. So there is a good reason to believe that they will be successful. 

In fact, if my staff will help me, did we not put a billion dollars 

in this Jobs Bill to start or to support programs at the State and 

city levels, like this? Who knows about that? 

Why don’t you just sit up there and say something about this? 

Mr. GILLERS. This is the—in the Small Business Jobs Act—— 

Chair LANDRIEU. Tell them who you are, David. 

Mr. GILLERS. David Gillers, and I work for Senator Landrieu, 

Chair Landrieu. 

The State Small Business Credit Initiative, which is part of the 

Small Business Jobs Act, it is a very similar idea. It basically allows States that have either collateral enhancement programs, 

which is similar to the equity piece you were talking about, or capital access programs, and it actually provides a grant from the 

Treasury Department to individual States. Every single State who 

had filed an intend-to-apply has now actually applied to the Treasury Department for this program. About 11 States have already received funding for it, and Ohio has already applied. 

Chair LANDRIEU. So while the money went to the States under 

the way we designed it, there is absolutely no reason that the cities 

within those States could not be working. 

Do any of you all have a model? 

Okay, Lynn, and then I want to get to Pravina. Okay, go ahead, 

Lynn. 

Ms. DOUTHETT. In the State of North Carolina, we received $46 

million through that program, and the NC Rural Development was 

the State’s program that had actually utilized this same model in 

a previous life. And right now we—— 

Chair LANDRIEU. Right. They testified before our Committee. 

Ms. DOUTHETT. Right. They have over 15 banks participating, 

and I think to date they have probably—I think there is an estimate in terms of like $1.4 million that has actually been leveraged 

right now out in the marketplace, which has been in a very short 

window of time. So they have recruited a lot of lenders who had 

utilized a program similar to this in the past. So it is very well received. 

And in addition to that, the State also is using a Biz Boost program that SBA and the UNC network have fostered. So they hired 

these Biz Boost counselors, and as a result, we have actually funded $48 million in new lending. There have been over 5,100 jobs created and over $213 million—— 
15 

Chair LANDRIEU. And what are Biz Boost counselors? 

Ms. DOUTHETT. Biz Boost counselors, this was a concept that the 

State actually came up with, and they were working with businesses who actually had the potential to create a large, significant 

number of jobs in a short period of time because the funding. When 

you all raised the program limit as a permanent, that really addressed a demand need in the marketplace, and so they wanted to 

work with those businesses that were going to be able to create 

jobs quickly, and that is what they targeted as their market. 

So there were over 1,300 small businesses that were immediately 

assisted in this 16-month period of time, with the net effect of 

5,100 created/retained over this period. It is a very good model to 

consider, going forward, in how to leverage. 

Chair LANDRIEU. That sounds very interesting and very well coordinated in how to leverage the Federal action to get something 

really going on the ground. 

Mr. Nelson, you had—— 

Mr. NELSON. I was going to address your initial question regarding the three challenges. You know, Massachusetts is fortunate, 

where the economy is healthier than most of the States, but we are 

still experiencing issues similar to what was mentioned by my 

counterparts. 

I wanted to specifically address two separate spectrums where I 

see challenges in Massachusetts, and one is on loans to underserved markets and loans to minority entrepreneurs. In Massachusetts, we have done a phenomenal job with our 7(a) loan program 

and our 504 loan program. We are one of the top States in the U.S. 

with delivery. We are probably fortunate because we have 150 

banks that do business for us in Massachusetts, but when we look 

at the loans to minority entrepreneurs and loans to underserved 

markets, it is half of what it used to be. 

The SBA, through a couple new loan programs—the Small Loan 

Advantage and the Community Advantage Program—it is intended 

to try to address that and to fill those gaps, but it is going to take 

some time. And it comes back to where we started off, with the 

staff that we have and the challenges that we have, that there is 

not enough people and not enough hours in the day to do everything that we need to do in order to make the impacts. So that is 

one challenge in Massachusetts. 

Now on the opposite end of the spectrum, Massachusetts is such 

an innovative economy—high tech, high growth, life sciences. You 

know, there are so many phenomenal ideas, and I come across so 

many young entrepreneurs who are looking for early-stage seed 

money, who are having difficulty and cannot get the access to that 

seed money. There is a tremendous potential for job creation if we 

can get that early-stage seed money into the hands of those entrepreneurs on the innovative side. 

Chair LANDRIEU. Do you have any ideas about that early seed 

money and where it could come from? 

Mr. NELSON. Well, I know like through the SBA, and the President announced through the Startup America, that there is going 

to be $2 billion SBIC funds. One is targeted to the early-stage seed 

fund, but it is not here right now. These businesses, these entrepreneurs, they need the money now. They need the access. 
16 

Chair LANDRIEU. Okay. 

Mr. NELSON. We need the jobs now. 

Chair LANDRIEU. Pravina. 

Ms. RAGHAVAN. So to go back to the designated driver concept, 

one of the things that we did was with the money that the State 

got, which was $55.3 million for the State of New York. We have 

actually been working with the City of New York. When our programs changed, they actually, complementary with the Office of 

Comptroller, complemented the SBA program. 

So the State is going to be doing a similar thing, and actually 

we are sitting down with them next week to start architecturing 

that program because what we found out from the SBA, being in 

New York, New York State is huge. As you know, we have the city. 

Everybody knows about that, but we also have Mid-Hudson. 

And we took a program that we did with just county banks. So 

these are small community banks that serve a very small area, and 

we have a second look program. So what happens is if you are an 

entrepreneur and you get a no from your bank, you put it up online. And then we have 12 banks that look at it, and they actually 

pitched in a fund where each one contributed about $10,000 to a 

fund. 

Chair LANDRIEU. Great idea. 

Ms. RAGHAVAN. And then the fund actually goes ahead and 

makes that loan, so depending on what your rejection. 

And what happened when we originally announced it is they 

were getting very little loans coming through, and we asked the 

question, and the question became people never went to their original bank to begin with. So once they started going, the banker 

would look at it because it is a community bank, and so we can 

fund this without going through the second look program. 

We announced it last year, actually this year, with the City 

Council of New York. They are doing the same thing. So now we 

have two second look programs that do exactly that. 

So now the State is saying maybe we do the same thing on a 

statewide with the new funds that we brought in and using our 

SBDC network. And the City of New York has Small Business Solutions to use that network to provide the technical assistance. So 

one of the boxes on the application will be: Did you get technical 

assistance before putting in your second look application? 

Chair LANDRIEU. Okay. 

Ms. RAGHAVAN. And just to address seed funding, we have been 

working with the entrepreneurship campuses in New York, so Columbia, NYU. They do business plan competitions with their entrepreneurship, and some of these have very good endowment funds. 

So we gave over $750,000 to entrepreneurs through NYU as well 

as Columbia, with their assistance, through their business plan 

competition. 

So we have been looking at that and trying to expand that into 

the SUNY network, asking these universities that have the graduates that have already gone through, who have new technology 

ideas, to bring it into a business plan competition to give away 

some money, either between $50,000 to $250,000. 

Chair LANDRIEU. That is a great model as well. I am just really 

thrilled with, Jeanne, what they have started. 
17 

Tell me your State again. New York? 

Ms. RAGHAVAN. New York. 

Chair LANDRIEU. They have called it a second look program. So 

if you get turned down by your bank, you go online and put basically your information up online, and they have lined up eight or 

so other banks that take a second look at that loan. And something 

like that is really terrific. 

And then the other thing that you shared which I want the staff, 

of course, to make notes on, is the opportunity to link with universities that have strong business entrepreneurship programs. 

And we should identify—I want our staff to identify what universities in the country. So give me the top 100, and I would like to 

send them out a letter, just saying these are some things that we 

are hearing are going on in New York and at Colombia, maybe you 

all could model, because if they are training entrepreneurs and 

they have some of the smartest kids in America going to these 

schools. And they are training the entrepreneurs, and the problem 

is they have a great idea but they cannot get money. Maybe some 

of the government programs that we are funding by being creative 

can help leverage. 

Now some of the schools are wealthy and have these endowments, but a lot of the business schools do great work, but they do 

not have the endowments to give $50,000 to every graduate to get 

their business started. 

Senator, thank you for joining us, Senator Ayotte. This is a very 

informal roundtable. We are getting a plethora of ideas on some of 

our issues. 

So Mr. Cadena, do you want to add to this? 

And then I am going to finally get to my second question. We 

have only had one question and we have talked it for almost 45 

minutes now. 

Mr. CADENA. Yes, I wanted to get back to the microlending in my 

State. First, I got there 10/10/10, so it is easy for me to remember 

when I got to Nevada. But the first thing I wanted to do is bring 

together our microlenders, and we did not have any. We had one 

and one that was kind of in trouble. 

So developing microlenders, alternative lenders, is really something that is difficult, but what I found out is that there is a lot 

of people that will help us, like the casinos. You know, in Nevada 

we have the entertainment industry, but we also have the mineral 

industry now, and construction has died. So we are trying to pull 

them into play. 

We also in Nevada have a very high minority rate, and we are 

not reaching them very well. So we have the number one SCORE 

counselors that come out and help folks, but we did not have a lot 

of folks that spoke Spanish, and we have 33 percent of our population that spoke Spanish. 

So what I have done is I have gotten together with the councils, 

the consulates, and I am helping recruit Spanish-speaking folks by 

getting on the radio with the Mexican consulate and the Spanish 

consulate and the Costa Rican as they have their radio programs, 

and try to bring them in, so that we will give them the information. 

We have the information in different languages, and we share it 

with—we can share it with whoever, whichever consulate, so that 
18 

we can get more of these counselors because without the technical 

assistance they are not going to get in. 

We need to develop more alternative lenders until there is a regulatory respite or change in dings because any kind of foreclosure, 

or what have you, will stop people. So we are looking in our State 

to get some kind of respite. 

I am talking with the FDIC, the OCC and the Federal Reserve. 

We are going to have a roundtable, frankly, hopefully, within the 

next month in my office to talk about how we could do something 

specifically. 

But for help in the small businesses in the minority communities 

that have the language problem, which I understand, it is great 

when they come in and they speak Spanish because I can at least 

speak Spanish to them. But when they come in, in Chinese and so 

forth, then we work with them. But at the end of the day it is our 

community, and it is the responsibility of our communities, and 

that is what I do when I talk to our folks. It is our community of 

Spanish-speaking folks that are Spanish-speaking Americans to 

help our own Spanish-speaking folks. 

Chair LANDRIEU. Well, that is excellent. And it really is a barrier. 

We had an excellent presentation, I recall. She was sitting right 

where you are, Mr. Lopez, from the Vietnamese—no, the Asian 

American Chamber, and they said they are having terrible difficulty with language barriers, accessing the government programs. 

If you think about that Asian community, a broad range of different countries represented, the power of the entrepreneurship in 

that community, as well as in the Latino community, but with a 

Latino community more and more people are speaking Spanish. It 

is not that. But when you think about these Asians, it is a very 

serious barrier, and we are really short-changing our own country 

by not thinking carefully through that. 

Let me go to my second question. Then I would love Senator, if 

you want to—we have all said, Senators, a few words—if you want 

to add anything. 

I want to switch, if I could, subjects—the HUBZone, as you are 

very familiar with the HUBZone programs, and there are certain 

areas of the country that are in HUBZones. Some of you might represent HUBZones in your districts. What kind of oversight does 

your office provide to firms claiming to be in HUBZones, or how 

does that work with your offices once a HUBZone firm is awarded 

its first contract? 

The Louisiana District, I know this, conducts a site visit to ensure the firm is actually located in a HUBZone and it is what it 

claims to be. So can we have a conversation about that? 

Greta, you were the first one up, so please go forward. 

Ms. JOHANSSON. We had a very recent case that we were involved with, and it actually precedes becoming a HUBZone firm, 

where an applicant, to become a HUBZone firm, had contradictory 

information in the application file. It was difficult to substantiate 

the place of business. And we were asked up-front from our folks 

in headquarters to do a site visit, so that we could make the determination or add some credibility to either side of it, either to the 

business really is located there or they really are not located there 
19 

and it just a front. So that is one of the ways that we are helping 

with oversight is to address questions before someone is awarded 

a HUBZone contract. 

And we also perform both a set number of assigned onsite reviews of our approved HUBZone firms as well as additional site 

visits as we are able, where we do a little more than just confirming place of business. We will also confirm payroll records and 

the kinds of things that support eligibility for the HUBZone program. 

Chair LANDRIEU. So one of the challenges this Committee needs 

to be mindful of, the more we cut back staff in these offices, the 

less oversight. And if our goal is to narrow down on fraud and 

eliminate waste, fraud and abuse, you do not do that by waving a 

magic wand and breathing air. You have to have actual people focused on fraud detection, et cetera. 

Go ahead, Mr. Dickson. 

Mr. DICKSON. As a small business owner, obviously, there are 

only three ways to extend your services or products: You can sell 

more domestically, you can sell more by exporting, and you can sell 

more to the government. 

And Greg was talking about it earlier. These government contracts for small businesses are very, very important. HUBZone is 

part of that. You know. The last time I looked there was only like 

1.2 percent of all the small businesses in the United States even 

signed up to do business with the government. We need to be out 

recruiting and training businesses to do business with the government, to include the certification programs and the self-certification 

programs. 

We do a lot of procurement in Eastern Pennsylvania—NICPs, 

Defense Logistics Agency, the Army Corps of Engineers. It goes on 

and on and on. We are very active in the procurement side. 

And we have HUBZones. We have 8(a)s, and we have service-disabled veteran-owned businesses throughout Eastern Pennsylvania. 

And we just came across a HUBZone business just about a week 

and a half ago that was a fraud. It was the HUBZone—— 

Chair LANDRIEU. How did you discover it? 

Mr. DICKSON. Well, it was in one of our drive-bys. 

Chair LANDRIEU. So you went by the look. 

Mr. DICKSON. Literally, I sent my—I always send two people out 

because of the HUBZones are in some pretty tough areas, to make 

sure somebody does not get hurt or whatever. 

So I always send two people out, and one of my leads and one 

of my government contract employees found this place that looked 

like it did not smell right. Right? 

So they checked it out. We are not investigators, but we are trying to gather some facts. 

And then I went out again with the lead to take a look at it, and 

the HUBZone business, quite honestly, is being run by this person 

from his $400,000 house. All right? 

Chair LANDRIEU. Okay. That is good. 

Mr. DICKSON. I contacted the—— 

Chair LANDRIEU. I mean that is not good. That is not good. Do 

not say the Chairman said that was good, but I am glad we caught 

them. 
20 

Mr. DICKSON. I contacted the IG, gave them the information, and 

they love it. My guess is by the time it is done that person will end 

up going to jail for fraud, and quite honestly, they should. 

We have a lot of businesses out there that can do business with 

the Federal Government if we teach them how to do it. I was a defense contractor after I was a program manager in the Army. All 

right? 

Doing business with the government is different than doing business with commercially. All right? And we have to teach these businesses how to do that. 

There is a ton of business out there to be had by small businesses, but we have to teach them how to be a HUBZone contractor, how to be an 8(a) contractor, how to be an SDB. You know 

the new women-owned program. I mean there are great programs 

out there, and it is good for the United States business. It is also 

good for the United States government. 

Chair LANDRIEU. Okay. Mr. Lopez, did you want—I am trying to 

get everybody. 

But I just want to say for the record that the Federal Government purchases a half a trillion dollars in goods and services every 

year. And if small businesses could get more of that, of those goods 

and services, (a) the taxpayers in many instances get the better 

products or best products or better technology, cutting-edge technology. 

And those entrepreneurs—think about it. If you are a business with three or four people and you land a $10 million contract or 

a $5 million contract, you are not going to be able to absorb that 

work into your two or three employees. You are going to go out and 

hire six people or seven people to meet the terms of the contract 

that you have just received. 

So you are really, really—sometimes a large business, they get 

a contract. They will absorb the contract in their current workforce. 

Now you can argue it helps retain jobs in a big firm, but it actually really creates extraordinary growth in a small firm that might 

receive a good contract. They have to go out and actually execute 

it, perform it. 

But go ahead, Mr. Lopez. 

Mr. LOPEZ. You know, I was going to add that all the offices go 

out and do site visits and look at those, and there is a lot of great 

companies that are in HUBZones. You know, there is a lot of good 

small businesses that are doing it right. 

One of the things that we are doing in Colorado is trying to educate the procurement officers for the Federal agencies to understand the importance of a HUBZone contract. It is not just another 

goal that they are trying to meet, but it is more of making sure 

that they understand how to service that contract and help us, 

along with them, to make sure that the people that are actually 

doing the business are the small business owner or are the small 

business that stood up for it to be at the HUBZone level, so that 

we do not have that continued black eye as it pertains to the program itself. 

So it is bringing together as many people as we can to understand the importance of the HUBZone program and how we can 

best leverage it to be successful. 
21 

Chair LANDRIEU. Wonderful. Okay, Mr. Goldberg. I am just going 

to catch you all as quickly as I can, and then I would like to ask 

the Senator if she wanted to add anything, or a statement. 

Go ahead. 

Mr. GOLDBERG. I guess there is an advantage sometimes to being 

the old guy in the room. I think I was a district director when the 

HUBZone legislation was passed, and that was probably sometime 

in the late 1990s. And at that time our office had 36 people, approximately 36 people. Now we have 11. 

And when that legislation was passed, I designated one of my 

managers as the HUBZone police. That individual went out to 

every company that applied to make sure that it just was not a 

post office drop; it was not an answering machine, the old-fashioned answering machines before things got sophisticated. 

But as the office shrunk and tried to streamline, we could not 

dedicate a person to be the HUBZone police. Now what we do is 

like everyone else in the agency. We do a random sample. 

A couple of years ago, we went a little beyond the random sample because one of my BOSes, Business Opportunity Specialists, 

that deals in government contracting, had heard something about 

some company in Canton that was a HUBZone-certified company. 

So I said, tell me what he had heard. I said, go down and investigate. 

So he went down, and he found that there was a shingle out, but 

no one was there. Then he went across town out of the HUBZone, 

and they were there. 

We reported it to the IG, and just like our office had shrunk, the 

IG’s regional office in Chicago had shrunk. And his comment was— 

and he is a really good guy to work with. He said, I do not have 

the staff, and I can only use them when there is loss to the government. 

And here, because no contract was involved at the time, there 

was no technical loss to the government. 

So what I did then was the next best thing was I called up a 

friend of mine who happened to be the special agent in charge of 

the FBI in Cleveland. He had somebody running Canton for him. 

He said, Gil, what if I call up Canton, have the agent there talk 

to them and put the fear of God in them? 

So the agent went down and talked to the company, and it 

worked for a year. Now I have just found out that the IG is investigating and bringing them up on fraud charges. 

Chair LANDRIEU. Well, that is a very important point, and again, 

you have got to maintain a certain amount of staff level to be able 

to do this work and to make these programs effective. Otherwise, 

you are just really running programs that cannot be effective, but 

they are valuable and can be. But if you undermine them so much, 

you just do not get the benefit from them. 

Go ahead, Mr. Umberger. 

Mr. UMBERGER. While we are on fraud, waste and abuse, and 

talking about some of the staffing issues, we all know we do 

HUBZone site visits. We had one last year where one of my Business Opportunity Specialists was out in Western Maryland. The 

entire county is a dedicated HUBZone. Well, when they go to town 

where this business was supposed to be located, they had to actu-
22 

ally call the business owner to come to the purported location to 

try to verify that they did have some bona fide location and existing business. 

But there are a couple things that are going on in my particular 

district. We have right now 350 8(a) firms that are certified, and 

I have 3.5 full-time equivalents handling all those cases. That is 

roughly, on average, 100 cases apiece. And you know the number 

here, anywhere from 40, 50, 60, but I only have—well, now I am 

down to 12 employees, and there were 33 before I got there 5 years 

ago. 

But to spread out with lender relations and capital access and 

marketing programs and promoting the programs, I cannot take 

and designate more resources there. There has got to be something 

wrong with the formula here. 

Chair LANDRIEU. Right. This is not the time to be slashing these 

budgets. As I said, we have gone from 1,800 people in President 

Bush’s Administration down to 900 in President Obama’s Administration. That is a 50 percent reduction at a time when the challenges are, you could roughly estimate, at least 5 times as great, 

the economic challenges, if not 10 times as great, based on the atmosphere that we are all experiencing. So it really is a real challenge for us. 

Lynn, go ahead. 

Ms. DOUTHETT. I can tell you that in the State of North Carolina 

85 percent of our State is rural, and with the economic situation 

there we have quite a few designated HUBZones. We have 441 

HUBZone-designated firms that have been certified, and I have 

gone from a staff of 35 to 15. We, because we have 9 military bases, 

have received well over $5 billion in contract spending in North 

Carolina, and over $400 million of that has gone to HUBZones. 

So there is opportunity for waste, fraud and abuse, and my folks 

who are out in the field to go out and do these onsite reviews have 

actually within the last year uncovered two firms that were not actual certified HUBZones. The problem is that they are in these 

rural areas and they think that nobody is going to come and check 

on them. 

Chair LANDRIEU. And they need to know that we will and that 

is important to—— 

Ms. DOUTHETT. Exactly. 

Chair LANDRIEU [continuing]. Spend taxpayer money wisely. 

Ms. DOUTHETT. Exactly. So within the last year we have actually—2 years—we have actually gone out and reviewed 135 firms, 

but that is woefully under what we should be doing, considering 

the amount of dollars that are going to these HUBZone firms in 

our State. 

Chair LANDRIEU. Okay. Let me ask Senator Ayotte to say anything she would like to. 

OPENING STATEMENT OF HON. KELLY AYOTTE, A U.S. 

SENATOR FROM NEW HAMPSHIRE 

Senator AYOTTE. I wanted to thank Madam Chairman for having 

this hearing, appreciate it. 

And I also wanted to welcome our District Director, Greta 

Johansson, here. You know one thing we share is that we are both 
23 

relatively new to our position. So appreciate what you are doing in 

our State. 

And Senator Shaheen and I actually were privileged to co-host 

a recent event called a Matchmaker Event in the State of New 

Hampshire that I think I got very good feedback from our small 

businesses on, to connect small businesses to Federal contractors, 

to build those relationships, and I think that was very helpful. 

You know, one of the things that I cannot help but thinking 

when I heard what you had to say, Mr. Goldberg, in this discussion 

about the HUBZones, one of the things that I would like to hear 

your insight on is do we need to give you also greater authority and 

greater tools in terms of if someone is caught in a situation like 

you have identified, Mr. Goldberg, that you would have the opportunity to put them on a list where you are off—no more contracting, no more receipt of the funds. 

I think I get concerned often that even the bureaucracy you have 

to follow in trying to eliminate those who commit fraudulent behavior may be overly burdensome. And can we help you by giving you 

some tools here or more authority on your end to deal with this 

fraud and to cut people off sooner and in a more expedited fashion? 

I would love your insight on that. 

[Laughter.] 

Chair LANDRIEU. That is a great question. It has prompted a lot 

of room to talk. 

Senator AYOTTE. Because you know that is something that we 

could address in this Committee and make sure you have those 

tools and you have the authority to do what needs to be done too. 

Chair LANDRIEU. All right. Let’s respond to that. 

Go ahead, Mr. Dickson. 

Mr. DICKSON. You are sort of darned if you do and darned if you 

do not. All right? 

Part of our job is to help recruit those businesses to do business 

with the Federal Government and train them and also regulate 

them. 

I like the idea, personally, about having that authority to be able 

to say if you are running a fraudulent business on a HUBZone or 

a women-owned business or a service-disabled veteran-owned business, or even a small business that is supposedly small and you 

find out it is not by the NAICS codes, that we could do something 

a lot more expeditiously than we do. All right. 

That is in fact one of the problems. It just takes too long to act 

on it, and the bureaucracy in order to act on it takes a long time. 

And then by the time you get to the end of the road, a lot of these 

companies, nothing happens to them anyway. So there is not a— 

as Gil said, there is not a fear of God in them because they are 

going to get—— 

Chair LANDRIEU. Well, we need to hone down on that and why, 

when you say the bureaucracy is not working fast enough. It gets 

back maybe to that the prosecutors themselves do not have the 

staff necessary to prosecute. That may be one thing. Or, it could 

be something else. I do not know. 

And Ms. Johansson, if you would comment, I am going to slip out 

and have my Brian Van Hook step up, but we are in very able 

hands to finish this roundtable in the next 35 or 40 minutes. 
24 

It has been excellent. Your comments have been terrific, your 

suggestions. We really appreciate getting a better feel for what our 

district offices are actually up against, what your challenges are 

and what you need as we prepare for these budget discussions, but 

as we prepare to run the best agency and provide the oversight we 

can to the SBA, the best we can. 

So Greta, and then I am going to slip out. Thank you all so 

much. 

Ms. JOHANSSON. Thank you. I just wanted to follow up on the is 

there something that we could do. And I agree; it is sort of yes and 

no. There is an upside and a downside. 

On the one hand, the last thing we want to do is stall someone 

who—if we are mistaken. I mean, how much investigation can you 

do to know is this a legitimate HUBZone firm? That is a challenge, 

and that is a challenge with our staffing levels and with the kinds 

of information you need to have access to. 

But there, it would be very beneficial, I think, if we had some 

sort of fast way of throwing up a red flag that could launch enough 

of an investigation to figure out what is it we would need to confirm, yea or nay, without disheartening anyone who belongs in the 

program, without risking a contract that should be awarded, if 

there was some sort of a fast way that we had the ability to send 

up an alert. And that is something that we ought to be able to do 

internally, subject to resources. You would think that we would be 

able to find a way to have knowledgeable enough staff in both the 

districts and in headquarters to be able to identify a way to make 

that quicker. 

Before we implemented that, I would want to feel comfortable 

that we are not going to either overburden ourselves or discourage 

legitimate firms, yet still catch, some sort of an early warning way 

to catch, those ones who are corrupt because it does not really take 

all that much. It only takes one or two bad contracts to firms that 

should not have gotten them to seriously damage the viability of 

what is otherwise a very good program. 

And it discourages the contracting officers from even trying to do 

HUBZone. I mean just it is bad all around, to have contracts misappropriated. 

I am not sure. A lot of it does seem to come down to resources. 

How would we go about doing that in a way that was both effective 

without being destructive or burdensome? 

Mr. VAN HOOK [presiding]. And Ms. Nelson. 

Ms. NELSON. I just had a thought just before she started talking. 

We have a similar model in that our lender oversight folks send out 

reviewers, auditors to do reviews periodically, and if they find problems within a loan that might jeopardize the guaranty at purchase 

time, should it be, it is flagged within our system. 

I do not know exactly how you relate that to the HUBZone, but 

if there is a flag, a contractor who is looking for a HUBZone, at 

least we would have some leverage to get their attention to come 

in and prove to us that they are who they said they were and a 

legitimate business. We call it a Guaranty Repair Flag. 

Mr. VAN HOOK. And Pravina. 
25 

Ms. RAGHAVAN. I was just going to add that I do think it would 

be great to have a list. And I agree with both colleagues; it is a 

good thing and a bad thing. 

And one of the good reasons is in the State of New York as well 

as the City of New York, the MTA, we have some major agencies 

that do business with us and do business with our HUBZones. 

They actually look at our list to figure out whether they are real 

bona fide firms. And to be able to put someone on a list, so that 

they are not only defrauding the Federal Government but also the 

State and the city, would be a fantastic thing. 

And one of the things we have been trying, back to the original 

question, is how do we get to make sure we prevent fraud. Actually, we have been holding our training sessions in HUBZones. So 

the firms actually have to be physically present in their HUBZone 

when they get trained. So their orientation meeting actually happens in their place of business at the HUBZone, but granted, it has 

to have staff to do that. 

And we actually sometimes do it with the city and State. We 

bring them in with us because then you can learn about our programs as well as the other two. When you look at the State of New 

York, there is quite a lot, but the city alone has quite a few programs. So it would be nice to have a great list to sit there and go: 

You are not going to defraud us on three different levels. 

Mr. VAN HOOK. Yes, Gil, if you wanted to make a comment, and 

then I would turn it back over to the Senator. 

Mr. GOLDBERG. Okay. I think the Senator hit the nail on the 

head. I think we do need more responsibility and more tools at our 

disposal. Again, as I said, being the old guy in the room, not only 

do I remember when the HUBZone legislation was rolled out and 

we rolled out the program and I had a big enough staff to have 

HUBZone police, I have seen that happen in other areas of the 

agency as well. But we have to have the staff to go along with the 

authority and the responsibility because if we do not have the staff 

then we end up in a situation where it is on the books that we are 

doing it, but in reality we are doing it by putting a Band-Aid over 

it. And we really need that staff to make it work. 

Mr. VAN HOOK. And Senator, did you have a follow-up? 

Senator AYOTTE. I do not know if anyone had any additional 

comments on this issue. I did not want to cut anyone off. It is important. 

Mr. VAN HOOK. Okay, gotcha. 

Greg. 

Mr. LOPEZ. You know, I think it is important for us to remember 

that when the contracts are awarded to the HUBZone companies 

they are awarded by the procuring agency, and so SBA does not 

have the authority to determine who gets a contract and who does 

not get a contract. And I think that is why it is very important 

when the SBA is working very closely with the procurement Federal agencies to understand the HUBZone program, and it is contract oversight that really falls within the realm of the contracting 

officer. We are an extension of that process by ensuring that they 

are meeting the eligibility, but we really need to work in partnership. 
26 

And I think that message has yet to really resonate within the 

procurement arms of some of the other agencies, but they are starting to hear. For the last 18 months, 2 years, we have been going 

out. So they are starting to pay a little bit more attention as to the 

importance of the HUBZone and how we are looking at them. 

So I think we are making a lot of progress, but I really think 

that at the end of the day the stronger we build those relationships 

with the contracting officers that actually do the oversight of the 

contract, we will be able to really minimize a lot of the fraud, waste 

and abuse, if we all work together. 

Mr. VAN HOOK. Mr. Umberger. 

Mr. UMBERGER. Just a quick comment, that whether it is a 

HUBZone determination based on a site visit that it is a fraudulent 

firm, or what have you, or an 8(a) firm that comes up under an annual review that it is determined that at least in the district’s eyes 

this is a fraudulent firm, rather than what we do now is we put 

them into a termination process, and the termination process is out 

of our hands. It is at a higher authority, and it takes time. 

I could never, for the life of me, understand if we had made a 

recommendation for a termination, why is that firm not suspended 

from further contracting opportunities. So that would be something; I think a tool that we could really use to sink some teeth 

into this. 

Mr. VAN HOOK. And Mr. Dickson. 

Mr. DICKSON. Just sort of a final comment on procurement, you 

know, Greg and I think a lot alike. It is really scary, Greg. 

In another life I was a procurement officer in the government for 

the Army, and it astounds me the lack of understanding that the 

procurement officers have these days of the small business setaside programs, to include not only the small business at 23 percent but also the 55 and the 33—okay, 5 percent SDB, 5 percent 

women, 3 percent HUBZone, 3 percent service-disabled veteran. 

If you look at the Defense Acquisition University, you might be 

very chagrined and surprised to find, since there is 23 percent of 

all the prime contracts are supposed to go to small businesses in 

the country, how little the training goes to the contracts officers 

and their staffs. 

I know, like many of my colleagues around the table here, I 

mean, we do a lot of training in the procurement agencies in our 

districts as to what these programs are and how to use them because they honestly do not know. I sat in the Union League several 

years ago, in Philadelphia, and there was a HCA, Head of a Contract Agency. He was wearing two stars on his shoulders, and he 

was talking about his small business goals. And he said we are 

doing fine, and he specifically was talking about HUBZone. And it 

really surprised me because his goal was 3 percent and they are 

at 1.3 percent. Because they had done better than the previous 

year, which they were at 1.2 percent the year before, he thought 

they were doing fine. 

And I felt like standing up and saying, General, you do not get 

it. I mean your goal is 3 percent. You are not doing fine until you 

have surpassed your goal. 

And it was just the mentality: Well, we did better than last year, 

rather than meeting the goal. 
27 

These goals, these set-aside programs are good for the United 

States. It is good for industry. It is good for the government. 

Until these contract officers not only understand these programs, 

but also as they are looking at their procurement requirements in 

the one hand, they need to be looking at their actual goal attainment in the other hand and have the authority to be able to say, 

well, I am going to take this one; I am going to make it a 

HUBZone. Or, I am going to take this one; I am going to make it 

a women-owned business or just a small business. 

They need to be able to look at that stuff on a daily and weekly 

and monthly basis. And until they do that, we are not going to get 

their attention. 

Mr. VAN HOOK. And Greta, did you have a comment? 

Ms. JOHANSSON. Just a quick follow-up, and it is really only specific to HUBZones is most of what I have heard here today, and 

my own experience, is the HUBZone firms that were not really 

HUBZone firms was based primarily on they did not really have a 

real place of business in a HUBZone. And for much of the country 

that may be hard to assess before a firm is approved into the 

HUBZone program, but there are areas where drive-bys are really 

not difficult. Maybe I am biased because I come from New England 

and we can actually drive by just about anywhere we need to, and 

that is not true everywhere. 

But some of those things, rather than catching the fraud after 

someone is in a program or receiving contracts, we may be able to 

prevent it up front if the primary problem, is in the HUBZone program anyway. The most frequent problem seems to be place of 

business. That can be checked. And if we cannot do it ourselves, 

there are resources all over the country, and we all have partners 

that we work with. 

And I am just curious if there is some way that we can do a more 

effective job before they get in the program. And it is also less public that way, so it is not discouraging for either the contracting officers or legitimate HUBZone firms. I am just curious if that might 

be an area where we could do better, subject to resources. 

Senator AYOTTE. I wanted to thank all of you for being here and 

for the important work that you do. I, of course, want to give special thanks to our District Director in New Hampshire. We can get 

around New Hampshire probably a little bit easier than some of 

the other States you represent, but very much appreciate the work 

you are doing for small businesses in the country. 

My husband is a small business owner. So you know it is always 

a challenge to start your own business and to grow it, enhance it, 

and we just want to create a positive climate for all of them to do 

that, particularly in these difficult economic times. 

So I have to run, but I want to thank you all for being here 

today. 

Mr. VAN HOOK. Thank you. 

And I guess kind of following up on the discussion that you guys 

had, I know that a lot of district offices have road shows and kind 

of get out. But also when we mention the staffing cuts that you 

guys have had, could you just kind of briefly talk about what, how 

much time is spent in the office versus how much time is spent on 
28 

the road because I know that as the staff has been cut that has 

kind of limited also the ability to get out and travel around? 

So I guess you are closer to me. I will go with you first. 

Mr. CADENA. Well, when I got to the office there were four of us 

in the office and two up in Reno, and we have one of the largest 

areas to cover. So we are now up to a total of eight people. 

Also, in Nevada, we are kind of like the national office based on 

one thing. We have so many conferences that come into Nevada, 

and we send people there all the time. 

So there is a lot of times in my office where it is literally I am 

there. And if I am not, somebody else is, and that is one person. 

So we do cover. 

So the reality is it is probably a little over 70 percent of the time 

we have got people out constantly. Up in Reno, because it is such 

a large area, I have one guy basically that lives on the road, literally lives on the road. He has his Durango that we finally got 

him, and he just drives around and goes from small town to small 

town. But that is an issue, but in our office, more so than anything 

else is. 

And it is great because it helps our training because we do get 

some wonderful—the one I am looking forward to is there is the 

WBENC, the women’s businesses. It is going to be 4,000 small 

businesses, a women’s group that comes in. We are also going to 

have the DAC that should have well over a couple thousand. 

But it does take a lot of our people’s time. So it kind of—yes, we 

appreciate it because we like doing it and it is high profile. We get 

to learn a lot. However, most of that time has nothing to do with 

my district because most of the people that we are talking to are 

from out of state. 

So it does have—we love it because we learn a lot, but we are 

not really supporting, if you will, our district because we are doing 

so much. 

And it makes sense. It does not make any sense to be sending 

people from all over the country when you have got an office there. 

The great thing is just give me a little more staff. 

Mr. VAN HOOK. Well, we keep track of that in New Orleans because we are also competing with you guys for conventions. So I 

think it is New Orleans or Vegas is kind of where folks split their 

time. 

Mr. CADENA. And we both have had different kinds of disasters. 

Mr. VAN HOOK. Yes, that is true. 

Lynn. 

Ms. DOUTHETT. One of the things, we are fortunate in that we 

actually have three alternative work sites, which means that I 

have three guys on the ground that cover a territory. One is large; 

it is 34 counties. And one is small; it is 16 counties. 

But our office is set up in a model that works with those folks 

out in the field, utilizing their time. Probably at least 70 percent 

of it is on the road because the charge was that we would actually 

see our loan production increase, our strategic alliances create 

more workshops and training for both small businesses and citizens, which we have effectively done over the last seven years, 

using this model. 
29 

Where we have a challenge is in the district office because our 

procurement portfolio is we have 120 firms and we have 2 people 

to manage the program, and that compliance issue is huge. So even 

though we can send them out to do some speaking, they have to 

remain really to do the annual reviews, which is a very time-consuming process. 

And as far as myself and our lender relations folks and our marketing people, they are on the road I would say at least 50 percent 

of the time. 

Mr. VAN HOOK. And when you say certain staff travel more than 

other staff, so there is a certain complex relation. 

Ms. DOUTHETT. I would say that the model was that we would 

transform ourselves into a marketing organization, and do more 

sales and marketing and training, which we have effectively done. 

But it is a challenge in terms of the reporting functions and compliance to be sure that we have every I dotted and every T crossed. 

Mr. VAN HOOK. Mr. Dickson. 

Mr. DICKSON. The SBA actually categorizes the district offices as 

very small, small, medium, large and extra large. Okay? 

Pravina, for instance, is an extra large, New York City, of course. 

Philadelphia, last time I checked was the largest of the large. All 

right? 

Five years ago, we had 11 people, and we got down to 5. Now 

I am at 17, which has been a wonderful thing. 

We have broken up our staff into teams, geographical teams, and 

we have taken away silos where I have the lending people, the government contracting people and the marketing people all underneath a lead for a specific geographic area. And it works very well 

for us. All right? 

All the people, I have hired. Everybody has come from outside 

the government except for my deputy who just got back from Saddam Hussein’s palace. He was the DLA Commander in Baghdad 

for six months. Everybody else came from outside the government, 

and very entrepreneurial, all the way from people from their early 

30s to in their 60s, older than I am. All right? 

Their jobs are not in the office. I make them come to the office 

one time every two weeks for a staff call just so I can see their face 

and make sure that they know what is going on, et cetera. But 

they spend tons of time out of the office, dealing with banks and 

businesses and economic development agencies, and you name it. 

They are out there networking, counseling businesses, recruiting 

banks, et cetera. We have three government cars, and we run the 

wheels off of those babies because I mean it is a big district. 

I have got two-thirds of the State of Pennsylvania, and our job 

is to go out there and penetrate the market with the gospel of the 

SBA, as to the technical assistance that is out there, that is available, the counseling for government contracting, how do you do 

that, how do you get capital access, whether it is SBA guaranteed 

loans or commercial loans or USDA loans. You know, how do you 

get the money that you need to run your company and to hopefully 

expand your company? All right? 

So our people’s jobs are on the road, and they do it. Our staff, 

and I know a lot of my colleagues’ staffs, they do an absolutely excellent job. I am very proud of them. 
30 

Mr. VAN HOOK. Okay. Thanks. 

I am going to turn it over to Linda, and then I know we have 

maybe 15 minutes or so. So I am going to turn it over to Diane because she might have some questions. And I have a couple more 

questions for you guys since the Senator covered some of my good 

questions, but I still have a couple more for you. 

So, Linda. 

Ms. NELSON. Okay. One of the things we have done is try to— 

we are a staff of 11. We are a small office, and we are pretty much 

at the max by the previous definition. We have had to retrain folks. 

For instance, if one of my lender relations is going to Batesville, 

Arkansas to do a lender training and there is a HUBZone there, 

she goes by, looks to see if it looks like a bona fide business, may 

check with the post office. We check water records to see if they 

have water running to the building. You know most of them need 

a restroom. We think, anyway, but not in Arkansas maybe. 

So we kind of share duties instead of just one person is responsible for doing all of this, and I am sure others have done this too. 

But we have learned to leverage our State agencies, and we have 

an MOU. This is a national pilot, and we are 1 of the 17 States 

with the USDA Rural Development. They have more money than 

we do and sometimes more people because they have field agents 

around their State. And so, we put literature there, and sometimes 

they serve as a referral. 

But the Arkansas Economic Development Commission has recently reorganized their economic developers into industry-specific. 

So we are going to be training them, and they are in all these different areas of the State more than we can possibly be. I mean we 

are out. We have three cars. We are out a lot—to alert us when 

there is something specific. 

You know, we sometimes go hold a bank’s hand. They do not 

want to do the designated driver approach, and so we go hold their 

hands from the application. I have even typed up their closing documents, I am ashamed to say, because it was painful to watch this 

loan officer doing it, and I did. We will do whatever we can as far 

as leveraging that. 

So I think the main thing is retraining, sharing and leveraging 

some of the outside resources, including our SBTDC. They will do 

drive-bys for us in their area because they have six sub-centers. 

Mr. VAN HOOK. Thanks. 

And Diane, did you have a question? 

Ms. DIETZ. Absolutely. I have about 50 questions for you all, but 

I know some of you have planes to catch, so we certainly will not 

keep you here that long. 

I would like to echo the Chair’s remarks and sincerely thank you 

for coming today. Washington, DC, is for some of you, a train ride 

and for many of you, a plane ride away, and we certainly appreciate your taking this afternoon to spend with us. We could keep 

you here all afternoon, asking questions and still have more questions, but of course we will not. 

On behalf of the Ranking Member, we do sincerely appreciate 

your time, and I believe that today’s panel is truly a jobs creation 

panel. So we cannot tell you enough how much this feedback is important to us. 
31 

I did want to hit on one question. It is something we hear a lot 

about in the Committee. It is a primary concern for small business 

owners, entrepreneurs, and that is the regulatory environment. 

And I would love to hear from each of you. One of the fantastic 

aspects of this panel is that it is so broad. There are many of you 

from the Northeast. We love the Northeast, and we love the South 

as well, and there are some wonderful people here from the West. 

I am wondering, maybe specific to your state or industries that 

you see in your state, particularly maybe to manufacturing, what 

you see as a hurdle for small business in creating jobs. Is the regulatory environment something that you hear a lot about from small 

business owners? 

The Office of Advocacy at SBA released a report that said small 

businesses with 20 employees or less pay approximately 36 percent 

more in regulatory costs, and we hear consistently that the regulatory environment is a major hurdle to job creation. 

So I am wondering if you could shed some light on what we can 

do from the Committee perspective, and Mr. Dickson, I will start 

with you. 

Mr. DICKSON. Eastern Pennsylvania used to be a manufacturing 

heyday. It was really big there, and I think that is why then Administrator Hector Barreto sent me to Philadelphia, because of my 

manufacturing background. The comments I have for you are not 

from the SBA, are from just my personal experience. 

We go back to basics as to how do you grow a company, how do 

you expand your sales. Again, there are only three places—domestic, international and government. Okay? And the government, of 

course, goes to Federal, State, local, metro airport authorities—you 

name it—all over the place. 

Manufacturing, for the most part, or much manufacturing, has 

gone offshore now. All right? In my background I have seen that, 

and it is very disturbing to me personally because I am an industrial engineer by trade. 

We have a different cost basis in the United States. It is very difficult for manufacturers to compete on a level playing field when 

there is not a level playing field with international customers and 

international manufacturers. 

You know, in industry in the United States, when we have a barrel of used oil, we recycle it; we take care of it. In other countries 

they take it out back, and they throw it away. All right? 

Our plants are filled with safety devices for protecting our workers. You know, hard hats and glasses and steel-toed shoes and 

hand guards on CNC mills and lathes and things like that. That 

costs money, and those are really all good things. 

Do not get me wrong. I think they are wonderful things, but our 

manufacturers are competing on a worldwide basis now, with people that do not have that kind of cost basis. All right? And it puts 

them in a huge disadvantage. 

And I talk to people all the time, realizing that 19 out of every 

20 customers are overseas when you look at the numbers. I talk 

to manufacturers all the time and try to get them to look into exporting their products, and they never think about it because they 

cannot compete with the prices overseas. 
32 

Just in the company that I came from, before I came to here, I 

mean we were offloading all sorts of things to the Pacific Rim, to 

South America, to Eastern Europe and things like that. 

I mean when you look at the wrap rate, which is the labor rate 

and the material and overhead and everything else. When you look 

at the wrap rate overseas versus the wrap rate in the United 

States, it is not competitive. 

Ms. DIETZ. What do we do to level the playing field for manufacturers? In 2008, if the manufacturing sector were a country, they 

would have been the 8th largest economy in the world. So what do 

we do? We need those jobs. 

Mr. DICKSON. This sounds like protectionism, but it is really not. 

Okay? One thing that the Federal Government could do is put tariffs on those products coming from overseas countries that do not 

have the same type of environmental or worker safety laws. There 

has got to be a mathematical method of looking at the different industries and all of the countries that come to the United States to 

sell their products and if we could figure out how to mathematically equalize the playing field. Okay. 

For instance, you get a country that is manufacturing textiles. 

All right. And if we could figure out how much more our textile 

manufacturers are paying just for the environmental and just for 

the safety side of it, and then put a tariff on those products, that 

would probably do two things. First of all, it would certainly equalize the playing field, but it would also force other countries to increase their awareness of safety and environmental. All right? 

Ms. DIETZ. Yes. 

Mr. DICKSON. To me, it would level this playing field that has become very unlevel. 

And as a manufacturer, in a manufacturing background, you 

would not believe. It is 25, 30, 35 percent more expensive to manufacture in the United States. I could get things manufactured and 

shipped to the United States cheaper than I could manufacture 

them in the United States. That is a real disadvantage for a small 

business. 

Ms. DIETZ. Thank you very much. 

Mr. Lopez, I know you have a plane to catch, and if you would 

like to answer this and then leave, I certainly appreciate your time 

today. 

Mr. LOPEZ. You bet. You know, going back, I want to go back to 

the last question about us going out and how much time we spend 

in the office and how much time we spend outside of the office. 

I can share with you—and I am sure we are experiencing it 

across the country—there is more and more demand from the general public and organizations for SBA to come out into the general 

public to talk about our programs and services. There is a thirst 

amongst small businesses to learn what SBA can do to assist them. 

And I can tell you in my office the staff does not appreciate when 

I go out and talk to the community because the phone starts ringing and I create more work because when people start realizing all 

the resources and all the depth and all the partners that we have 

at their disposal, at no cost, then they start realizing that what a 

great opportunity to learn more about the Federal contracting, 

business development, economic development, all those types of 
33 

things. So I can just say that as we go out there, there is more and 

more that people realize this agency has to offer to the strength of 

our country. 

Now when it comes to the regulatory issues, clearly, there is a 

lot of need for regulatory guidance. However, I can tell you this; 

small businesses in my area are concerned as to the language. It 

is not written necessarily for the common businessman. You know, 

you need to have attorneys. You need to have staff interpretation 

as to what are these regulatory issues that they are supposed to 

follow. Even when they think they have it right, perhaps there is 

an attorney that has a different interpretation of what it is that 

the regulation should be doing and how it should be applied. 

So I would encourage that while we have the need for regulatory 

language, it needs to be simplified so that small businesses can understand it, so that they can better plan for the future as to how 

they are going to expand and how they are going to continue to deliver the services, recognizing that there are additional guidelines. 

And the other thing I would say is sometimes these regulatory 

policies are so well hidden that the small business owners does not 

even know about it until someone brings it to their attention, not 

in an informative manner but more in a punitive manner, that 

they are not following it. 

Ms. DIETZ. Thank you very much. 

Ms. Raghavan. 

Ms. RAGHAVAN. Congratulations. You said my name correctly. 

Ms. DIETZ. You know what? Brian gave me a phenomenal phonetic spelling. So I must give the credit to Brian. 

Ms. RAGHAVAN. I mimic, actually, Greg’s comment about the way 

the wording of the regulation is. It is very difficult. And we get it 

a lot in the offices: Can you just explain what this means to me? 

And I think we have actually a great example in New York. You 

may have heard we have the New York Mets as one of our teams. 

They built a new stadium, but what people did not realize is by 

building a new stadium it has auto body shops. We have the largest bunch of auto body shops in the country, 300 of them that employ over 1,000 people, sitting behind the stadium. 

So when Citi Field was built, they obviously asked to get rid of 

these people, and the City of New York gave some money. But one 

of the things that they did not talk about is how do you position 

300 auto body workers into a different area, 300 auto body workers. 

They have been working with us, the SBA, as well as we have 

been working with the city to not only get them to move to the 

Bronx, where we have a huge amount of manufacturing as its base, 

but it also has one of the highest rates of unemployment, at 19.2 

percent, and move 1,000 employees over there. 

And one of the things we did is worked with the United Auto 

Workers, which has a Hispanic Chamber of Commerce for auto 

workers, to actually get them being compliant to the State, as well 

as the city, regulation for having an auto body work shop, by getting the city to help them pay with their settlement fund to actually make sure all these auto body shops are in compliance. 
34 

And when they move over to work, one of the things we found 

out, the biggest thing, was the language barrier. Everyone speaks 

Spanish. So we had to go through that. 

Also, we had 300 people trying to get funds for loans who have 

300 different sets of tax returns, so trying to put them together. 

They actually have been working with SCORE as well as the 

SBA to get them all together, to make it a cooperative. And they 

are going to buy a cooperative, buy a piece of land under our 504 

program to actually move everything from Queens to the Bronx. 

But right there is a regulation. They did not even know they 

were violating them because they were just written in English but 

not English that anyone could understand. And actually sitting 

down there and actually translating, taking them through that, 

and actually saying here are your rights and this is what we can 

do to help actually helps a lot. So some of that will actually ease 

that. 

And I just wanted to comment on manufacturing and technology. 

You were asking what we can do. I think one of the programs that 

we do not exploit very well is actually the commercialization of 

technology into manufacturing. 

We have our SBIR program. I think if you look at phase three 

of that where about 47 percent of those who go from phase two to 

phase three is supposed to be for commercialization of technology. 

And I think if we were able to link that technology and that program with actually some of the manufacturing space we have in 

the United States, we would be surpassing because we are actually 

inventing new technology that has not been out there. So there are 

not other countries that can play in that, and we are one of the few 

countries that can do that. We have some of the greatest labs. 

I have the pleasure of having Stonybrook SBDC as part of my 

Small Business Development Network. They have one of the only 

nano-infrared technology type of things, which I still do not understand what it does, but there are only two of them. And they have 

four Nobel laureates working there. And you can imagine some of 

the commercialization of some of those projects to be out. We could 

be putting them not only in New York, where we also have manufacturing issues, but in our neighboring States and Philadelphia as 

well as in North Carolina. 

So I do think if we were able to use that program, which is already there, and actually link it to something else, we could be 

winning that battle as well. 

Ms. DIETZ. Thank you. That is fantastic. 

Lynn. 

Ms. DOUTHETT. To piggyback on what Pravina just said is that 

under the SBIR program every year it is always a big question of 

whether or not it is going to be refunded, and that was a comment 

that really resonated in the Startup America program. North Carolina was the first place where they held that particular conference 

in understanding reducing barriers for these technology companies, 

these high growth companies. So we actually invited 130 companies 

to come, who are located throughout the Research Triangle area as 

well as the mountains and the coast, to participate in giving feedback on how it is that these barriers can be reduced. 
35 

In the small group forums that I attended, one of the patents 

and trademarks was a huge area in terms of being able to get that 

pushed through more quickly prior to other countries stealing that 

information. Right? That was one of the top things that came out, 

also FDA approvals. 

I mean a lot of these companies are doing R&D here, but their 

greater market share is globally. It is really not here. So their 

manufacturing costs are being recouped; the R&D costs are being 

recouped overseas, but we are really not the market for that product, or creating the manufacturing of that product here. 

So there is a lot of good output and commentary that are going 

to come out from this regulatory barrier dialogue that has happened all over the country. That will put our Federal agencies in 

a position to understand better where their processes are being 

clogged up, in order to free up these internal processes, as well as 

address regulation that is prohibiting us from creating jobs and allowing our businesses to move forward. 

Ms. DIETZ. Thank you. 

Mr. Goldberg. 

Mr. GOLDBERG. I think you heard a number of DDs talk about 

staffing issues and the need for their employees to be out in the 

community, out with the small business, reaching out to the small 

businesses and the bankers, and I would like to add a little historical perspective here. 

In the late 90s, when the agency started to downsize and then 

streamline and centralize, we were set up as a wholesaler of the 

product. The banks made the loans, the centers processed them, 

and we were there to tell the SBA story and to market, and basically to do it by getting people out from behind their desk and 

going out into the community. 

I think that changed, at least in the Cleveland District, in April 

of 2008. That is when the recession first started to hit small business, and our phones were ringing off the hook. So we had to have 

people in the office, not just out in the field, answering the needs 

of small business—my bank just cut my line; my bank is demanding payment—and to deal with those situations. 

It is very labor intensive when you are trying to deal one-on-one 

as opposed to a wholesale. We were talking to lots of people all at 

once. So we had to balance having the staff out there doing community outreach, talking to big groups and having roundtables, talking to bankers, with having enough people in the office to help 

these individual businesses that called in and wanted us to help 

them find a bank. 

I told them, we cannot find a bank for you. We cannot recommend a bank, but we could point you in the right direction. 

Come on in. We will talk to you about what the actual issue is, and 

then we will talk to some banks and work together with you. 

That is very labor-intensive, but it also saved a lot of businesses. 

With the Recovery Act and the Jobs Act to follow, that gave us the 

90 percent guarantee and the tools to save those businesses. 

But we have to balance the need to be out in the community with 

the need to have people in the office to help these businesses when 

they call, and starting in 2008 those calls just came in. I think I 

was getting five or six calls, seven, eight, nine calls a day. The 
36 

staffer were getting even double that. And we had to have people 

in the office. 

The last, let’s say, 10 months or so those calls have subsided a 

bit because the banks are lending some again with our programs. 

But we still have become instead of that wholesaler we are like a 

hybrid organization now out in the field, where we are doing retail 

work as well as wholesale work. And I think we need to balance 

the act and have the right staff number to provide the service 

when they do call and they do come in, as well as be out in the 

field. 

Ms. DIETZ. Thank you very much. 

Mr. Cadena and then Ms. Nelson. 

Mr. CADENA. Yes, I wanted to talk about the regulatory. Thirteen 

years I was in New Mexico, and I am going to take a New Mexico 

approach to this. 

We have the two national labs in New Mexico. In New Mexico, 

frankly, there is a lot of regulation. So the national labs really provide wonderful nanotechnology, solar technology. 

All kinds of companies start in New Mexico. Not one Fortune 500 

company is there because too much regulation, too much tax, too 

much everything. They go to Texas; it is a little less. Go to Nevada; 

there is nothing. You can do whatever you want. It is a wild West. 

Come on, let’s play. 

So the difference is as you have small businesses, as they are 

trying to do something, watching Texas, New Mexico and Nevada, 

just everybody around, every State has different regulations. So it 

is not just Federal regulations. 

And as Mr. Lopez was talking about, when they bring something 

and bring it to me—I am educated; I can read—I have no clue what 

half of those regulations are. So we not only have the Federal problem, but depending on where you are at, you have different State 

regulations that just add additional burden. 

So we are moving. You know, we are not doing anything from a 

national basis. We are just stirring the pot. 

And when we are looking at trying to get increased jobs in America, we have to make that regulatory environment less because I 

can assure you—and I am talking as a New Mexican—that that is 

probably one of the hardest places to go work, yet we have two national labs that are awesome, one that hopefully has not burned 

down today during the fire. 

There is a lot of stuff going on. But you know, that is where the 

Intels and the Microsofts started. They are not there because it is 

just too much regulation. 

The SBIR also is a big issue; it is. Every year we would have 

folks coming in saying, well, we will go to step one, step two, what 

have you. But they are concerned about well, if we get started, are 

we going to be able to go through the whole mix. So that uncertainty really stops people from trying. 

I mean because there is a lot of good technology. There is no 

question. In America, especially in the State of New Mexico with 

the two national labs, you are getting a lot of innovation and everything that starts. 
37 

But it is some of this uncertainty. You do not want to get in, 

start and then what happens when you get through step one. Are 

you going to be able to take it all the way through? 

Then again, with your patents and your copyrights, that process, 

because it gets real difficult, those things need to be either streamlined because that really does hurt small businesses, the innovation part, because that is what keeps this country going. We are 

innovative. 

I mean you know the hardest thing with working with the scientists, like from Stonybrook, they always—when they come in and 

they want: So how do you take it to market? 

You know, they come in and tell you this is how. I understand 

how to use a cell phone, actually not completely because they 

change it all the time, but they want to tell you how it works. 

We do not care. We want to know how do you take it to market. 

And the same thing with the regulatory, the regulations that are 

out there, you read them, and they do not make any sense. And 

Greg is 100 percent right. I have read through some of those things 

and even had some of my attorneys try to explain some of this stuff 

to us, to me, and even the legal opinion of the regulation does not 

make any sense. 

So if that does not make any sense, then you are having a small 

business that has a great idea, has an SBIR. So we are just adding 

layers upon layers while our good friends in China and everywhere 

else, they just figure it out and just do it. So that is something. 

And I agree with you, Mr. Dickson, that we do need to have some 

kind of a number to make it fair. Otherwise, all we are doing is 

creating and innovating, and other people are building and making 

money. 

Ms. DIETZ. And that is an excellent point. Thank you. 

Thank you, Ms. Nelson, for being so patient. 

Ms. NELSON. Sure. Our Administrator likes to say that now everybody wants to dance with us. And I love to dance, but you cannot do it 24–7. 

[Laughter.] 

We have kind of the opposite problem. We have less than 3 million people spread over 51,000 square miles. And they are in small, 

little communities, and some of them are very isolated from 

broadband. You know, piping sunshine in is a problem sometimes. 

But they have some skills, and what we are seeing is some grassroots leadership. Mayors who have left those communities when 

they got old enough to get out of town, to get their education and 

a career, retire early, come back, and they are taking leadership. 

And they are joining together in small clusters of these very 

small communities—I am talking 500 people—and locating a business incubator, just a small place to kind of hold and nurture some. 

We have a photographer. We have someone who does some of the 

best craftwork you would ever see in carving wood, birds. It was 

one of the White House ornaments. 

They are not even aware of the services. We are trying to hook 

them up with SCORE counselors, the SBTDC and our office, technically, with Skype which we are doing through SCORE. We cannot possibly go there every time and share every single thing, but 
38 

we can go and establish a relationship, and then we can pipe the 

sunshine in through the technology. 

But within our program, we are not able to do this. We are having to find resources, and the Arkansas Rural Development looks 

like it is going to step up to the plate. We have worked with EDA 

to see if they possibly could. 

But as to the regulatory issue—and by the way, I brought packets. If you want boring statistics about Arkansas, you are welcome 

to them. 

Mr. VAN HOOK. That is great. 

Ms. NELSON. So if you cannot sleep some night. 

I am also a CPA, and for about 12 years I practiced part-time. 

I primarily did a lot of tax, and that is the most awful set of regulations. I do not understand most of it. 

I have done tax returns that were 900 pages for a very small 

company because of their structure, and they were not making a 

whole lot of money. And you can only guess how much that cost 

them, and there is no value added, other than keeping them out 

of IRS prison. 

We have at least four cities that have a problem with IRS because they have not paid payroll taxes. They cannot possibly go forward. We are working with the ombudsman because the ombudsman can also help small communities, small municipalities. They 

will not even talk to them to come up with a compromise plan. 

Yes, we know we need to pay, but we cannot move forward and 

get more revenues and people and grow our communities with this 

cloud and lien on the town. IRS literally owns them. 

Mr. LOPEZ. You know, I am going to have to excuse myself to 

catch my flight. 

Ms. DIETZ. Please do. 

Mr. LOPEZ. But before I leave I do want to leave you with some 

articles about success stories from different companies, from SBA. 

I am very proud to say that one of the Colorado firms was recognized in this. 

But I do want to leave it with you because I think it is important 

for everybody to understand how well SBA approaches all the small 

businesses and to see it in writing and to see, hear firsthand from 

the small business owners because we could sit here all day and 

tell you all the success stories that we deal with every single day, 

but I think it is important for this Committee to understand the 

impact that we have. So I just want to leave these with you. 

Ms. DIETZ. Absolutely. Thank you very much for bringing them. 

Mr. UMBERGER. How would you like those provided? 

Mr. VAN HOOK. We can follow up with you. 

And then I just want to end on a good note. I know that is how 

the Chair likes us to end. I just want to point out that this roundtable was a little unique because usually when we have roundtable 

each participant is an expert on one issue. So I noticed when we 

would have a question each of your name tents would go up because you are all experts on a lot of these issues and you are all 

familiar with it. 

Then also, I just wanted to thank Julie Verratti on our staff. She 

has been on detail for a couple of months. She helped us with 

SBIR, trying to get it passed a few months ago, and she has been 
39 

invaluable to our staff. And I think she also helped Diane with the 

pronunciations. 

Ms. DIETZ. Thanks, Julie. 

Mr. VAN HOOK. Yes. So, Julie, it is her last day tomorrow. So she 

is kind of going out on a high note. 

So we just want to thank everybody on that. 

I do not think I had anything else to include. I just want to 

thank everybody for flying up here, taking a train, driving. 

And then, the record is going to be open for two weeks, to July 

14th. So if you have any materials, any information, any Arkansas 

statistics that we can throw in there, on tourism, any Las Vegas 

convention information, we can throw that in there as well. 

Mr. CADENA. I will send you whatever you want. 

Mr. VAN HOOK. Okay. We appreciate it. 

And this meeting is adjourned. 

[Whereupon, at 4:44 p.m., the hearing was adjourned.] 

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