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[Senate Hearing 113-358]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 113-358
 
                CAPITAL ACCESS FOR MAIN STREET: MEETING 
            OPPORTUNITIES OF GROWTH ALONG THE LOWER COLUMBIA 

=======================================================================

                             FIELD HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 16, 2014

                               __________

    Printed for the Committee on Small Business and Entrepreneurship

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

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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                    ONE HUNDRED THIRTEENTH CONGRESS

                              ----------                              
                 MARIA CANTWELL, Washington, Chairwoman
                 JAMES E. RISCH, Idaho, Ranking Member
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
MARY L. LANDRIEU, Louisiana          MARCO RUBIO, Florida
MARK L. PRYOR, Arkansas              RAND PAUL, Kentucky
BENJAMIN L. CARDIN, Maryland         TIM SCOTT, South Carolina
JEANNE SHAHEEN, New Hampshire        DEB FISCHER, Nebraska
KAY R. HAGAN, North Carolina         MICHAEL B. ENZI, Wyoming
HEIDI HEITKAMP, North Dakota         RON JOHNSON, Wisconsin
EDWARD J. MARKEY, Massachusetts
CORY A. BOOKER, New Jersey
                Jane Campbell, Democratic Staff Director
           Skiffington Holderness, Republican Staff Director

                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Cantwell, Hon. Maria, Chairwoman, and a U.S. Senator from 
  Washington.....................................................     1

                               Witnesses

O'Hara, Amy, Co-Owner, When the Shoe Fits........................     5
Tantisook, Jessika, Farm Keeper, Starvation Alley Farms..........    10
Chance, Craig, Senior Vice President, Community Financial 
  Resources, Columbia Bank.......................................    16
Swanson, Gregg, Chief Lending Officer, Evergreen Business Capital    21
Sawyer, Eric, Vice Chair, Board of Directors, Greater Vancouver 
  Chamber of Commerce............................................    26
Bomar, Mike, President, Columbia River Economic Development 
  Council........................................................    32

          Alphabetical Listing and Appendix Material Submitted

Bomar, Mike
    Testimony....................................................    32
    Prepared statement...........................................    34
Campbell, K. Perry, Ph.D.
    Prepared statement...........................................    52
Cantwell, Hon. Maria
    Opening statement............................................     1
Chance, Craig
    Testimony....................................................    16
    Prepared statement...........................................    19
Flakus, Greg
    Letter dated April 16, 2014, to Chairwoman Cantwell..........    55
Marteeny, Louis
    Prepared statement...........................................    50
O'Hara, Amy
    Testimony....................................................     5
    Prepared statement...........................................     7
Sawyer, Eric
    Testimony....................................................    26
    Prepared statement...........................................    28
Swanson, Gregg
    Testimony....................................................    21
    Prepared statement...........................................    23
Tantisook, Jessika
    Testimony....................................................    10
    Prepared statement...........................................    12

                        CAPITAL ACCESS FOR MAIN
                     STREET: MEETING OPPORTUNITIES
                   OF GROWTH ALONG THE LOWER COLUMBIA

                              ----------                              

                       WEDNESDAY, APRIL 16, 2014

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                     Vancouver, WA.
    The Committee met, pursuant to notice, at 10:35 a.m., in 
the Council Chamber, Vancouver City Hall, Hon. Maria Cantwell, 
Chairman of the Committee, presiding.
    Present: Senator Cantwell (presiding).

  OPENING STATEMENT OF HON. MARIA CANTWELL, CHAIRWOMAN, AND A 
                  U.S. SENATOR FROM WASHINGTON

    Chairwoman Cantwell. The Senate Small Business and 
Entrepreneurship Committee hearing in Vancouver, Washington, 
will come to order. Thank you all for being here.
    I want to take this opportunity, since we are here locally, 
to mention a few people that have been here this morning. The 
mayor of Vancouver was here but had to leave, and so we 
appreciate him allowing us to be here in the chambers; 
Representative Paul Harris of the 17th District; Representative 
Dean Takko of the 19th District; Vancouver City Council members 
Larry Smith, Bill Turlay, and Anne Ogle; the mayor of 
Ridgefield, Ron Onslow, is here; the Port of Vancouver 
Commissioner, Nancy Baker; the President of Clark College, Bob 
Knight; and several representatives of WSU Vancouver.
    So if I missed you and you think I should have shouted out 
your name, give a note to the staff and we will make mention of 
it here. I want to thank the Small Business Committee staff for 
being here and coming to Vancouver, Washington.
    We are here today to talk about Capital Access For Main 
Street: Meeting Opportunities of Growth Along The Lower 
Columbia. I want to welcome the witnesses here today and thank 
them for their involvement in helping us have this discussion 
this morning about access to capital and all the important 
issues related to that.
    I want to thank--with us today is Nancy Porzio, who is the 
Small Business Acting Administrator for this region and came 
down from Seattle.
    So, Nancy, will you stand up?
    Nancy is a resource for our state in the Small Business 
Administration. I told her she'd better have her phone number 
ready. So if anybody here wants to talk about access to capital 
in this part of our state on an ongoing basis, Nancy is a good 
person to know.
    This hearing is part of a two-week listening tour around 
Washington on small business issues. We are having a second 
hearing in Seattle on innovation. We're having a listening 
session in Spokane on exports with the ranking member of the 
committee, Senator Risch from Idaho. And the minority staff 
director is here with us today.
    We are having meetings in Seattle with the SBA 
administrator, who just was recently appointed by President 
Obama, Maria Contreras-Sweet, who will be holding meetings to 
discuss access to capital, innovation, and minority lending. 
Ms. Contreras-Sweet previously ran a community bank in 
California and focused on access to capital to minority 
communities--a great success there. So we're really looking 
forward to her input.
    In addition, she and I and other members of our delegation 
will be traveling to Arlington to meet with small businesses 
impacted by the tragic Oso-Darrington mudslide and what we need 
to do to help. People may not realize it, but SBA deals with 
disaster relief support and small business lending. So we're 
going to be discussing the 530 corridor in our state and what 
we need to do.
    So it's going to be a busy two weeks. But we're so happy to 
start this off in Vancouver, Washington, and have one of the 
two official field hearings we're having during that two-week 
period right here in Vancouver.
    So today, we're here to talk about a new report that is 
simultaneously being released by the committee, which shows the 
successes and challenges of creating capital in Southwest 
Washington. Specifically, the report shows that our region, 
Southwest Washington, may not be getting all the access to 
capital that helps small businesses grow, and we certainly know 
that 75 percent of job growth in America happens--new creation 
happens with small businesses. So we certainly want to see what 
we can do to improve the situation here.
    The Portland SBA District, which includes Oregon and 
Southwest Washington, is the only market on the West Coast 
where approved loan numbers are still down from six years ago. 
We all know what happened with the big downturn. So even though 
we're seeing more dollars moving out the door, the report 
details how Clark and Cowlitz Counties decreased--Clark by 16.2 
percent, Cowlitz by 33.3 percent--from 2009 to 2014. Other 
regions are seeing an increase in both the number of loans that 
they are doing and the amount of capital.
    So our questions are--when we were hit with the economic 
downturn, obviously, Southwest Washington was one of the 
hardest hit communities. At its height, Clark County had an 
unemployment rate of 15.9 percent and home prices doubled--I'm 
sorry--dropped a total of 23.7 percent in only three years. 
And, obviously, the credit markets used by mainstream 
businesses froze up. In fact, even worse, some performing lines 
of credit were pulled right out from under small businesses.
    So today, we are going to hear from small business owners 
to discuss their perspective on the economy, access to capital, 
and what the challenges are to creating jobs right here. Now, 
we know here in the Pacific Northwest about innovation, about a 
21st century economy, about boot strapping and moving forward, 
and the Vancouver-Portland area is a major national hub for 
innovation. The Portland metro area is one the top 15 areas in 
the country for attracting young college-educated people. So we 
want to make sure, just like previous businesses, that these 
individuals have access to capital.
    I'm confident that the next great company is being dreamed 
up right now in a Vancouver or Longview garage, and it's just 
about whether they're going to get access to capital. We need 
to make sure that they have the seeds for that growth.
    Just look at Columbia Sportswear. Forty years ago, the 
family sportswear business was facing financial trouble. So 
they got a loan from the Small Business Administration to 
increase production capacity, and the company grew. Since the 
loan, Columbia Sportswear has grown from 40 employees to more 
than 3,000, and today it generates $1 billion in revenue.
    We want to see more small businesses today like Columbia 
Sportswear was, small businesses that with a little bit of good 
investment, grow huge dividends in job growth. Today, we're 
going to hear from two of those individuals. Amy O'Hara, with 
her husband, Alan, own When the Shoe Fits shoe stores.
    When the Shoe Fits is a full-service men and women's shoe 
store. The staff works with customers to modify footwear in 
order to help alleviate discomfort and solve unique foot 
problems. They received a 7(a) loan to expand their business, 
and from the first store they opened a decade ago to four 
stores today, this has been a great success story right here, 
the 7(a) program. So we want to thank her for her testimony.
    And Jessika Tantisook and her business partner, Jared 
Oakes, started Starvation Alley Social Purpose Company in 2013 
to sell organic cranberry juice that is made in-house using a 
hydraulic juice press. Their cranberry bog is the only 
Washington Department of Agriculture certified organic 
cranberry bog in the state. So they raised capital in two ways, 
crowd funding, which allowed them to raise $12,000 through 110 
different individuals online, and they also received $100,000 
through Craft3, a community development financial institution, 
which allowed them to use financing for the operating equipment 
and expenses.
    So I know that there are many more innovative stories here 
in Vancouver. But what we're going to discuss today with the 
rest of the panel, our lenders, are why we haven't seen strong 
SBA numbers here in Clark and Cowlitz Counties, and what the 
obstacles are that we need to address to help the 7(a) program 
and the 504 program help more successful small businesses in 
Southwest Washington.
    Most people may not even realize that these programs exist. 
But the 7(a) program offers a variable interest rate loan over 
10 years backed by the SBA at zero cost to the taxpayers and 
can be used to renovate a building and provide working capital 
or purchase inventory.
    As one bank said to us, quote, ``The 7(a) allows us to 
finance long-term assets with long-term loans, which then gives 
the borrower monthly payments at the time the lender has 
reduced its risk and yet guarantee the process. It's a win-win 
situation. This''--as they continue to say--``simple fact is 
that this program allows us to do loans we wouldn't otherwise 
do,'' end quote.
    So the 504 program is similar. It provides long-term--up to 
20 years--fixed rate financing for capital assets, such as land 
and real estate and equipment. And the 504 loan is done 
primarily in partnership with traditional lenders and nonprofit 
community development corporations. So we need to make sure 
that they are operating efficiently and effectively, and we are 
certainly moving legislation to reauthorize the 504 refinancing 
subprogram at the federal level.
    We know that the success of all business depends on access 
to capital. If small businesses have the access to capital they 
need, they will hire new workers. They will continue to grow 
economic opportunity.
    But, according to the latest Wells Fargo/Gallup Small 
Business Index, 65 percent of small business owners across 
America say their cash flow was good in the second quarter of 
2007, compared to only 48 percent today in the second quarter 
of 2013. So, overall, across America, people still haven't seen 
the level of access to capital that we want to see. We want 
that to be very good. Good is not enough. We want to see very 
good, and that is because so many opportunities are here before 
us with small business.
    So while I could go on about the various aspects of these 
programs, I just want to again thank our witnesses, the Greater 
Vancouver Chamber, the Columbia Economic Development Council, 
and others who are going to discuss the challenges that they 
face. Maybe we'll find here that some of these issues are in 
the size and challenges of how the 7(a) program works within a 
smaller geographic region or institutions that may not have all 
the resources to dedicate people to the 7(a) program.
    That's why our team is here from Washington, D.C., so we 
can take this information back to the United States Senate, 
because my guess is that Vancouver is probably not unlike other 
areas of the country. If we're being challenged because of the 
size of institutions here, or that maybe some of these 
programs, like the ones that were used by our two businesses, 
aren't as accessible here, that will help us provide answers to 
the rest of the country as well.
    So, again, I want to thank our witnesses for being here 
today and for their testimony. This field hearing is an 
official field hearing, which means the record stays open for 
two weeks. My colleagues will listen to this. People can send 
in testimony for the record, and that will be for two weeks 
post the time of this hearing.
    So we'll start with our individuals today. As I said, we're 
going to hear from Amy O'Hara, who is the Co-Owner of When the 
Shoe Fits. We're going to hear from Jessika Tantisook, who is 
Farm Keeper from Starvation Alley Farms; Mr. Craig Chance, 
Senior Vice President of Community Financial Resources at 
Columbia Bank; Gregg Swanson, Chief Lending Officer at 
Evergreen Business Capital; Eric Sawyer, Vice President, Board 
of Directors, Greater Vancouver Chamber; and Mike Bomar, 
President, Columbia River Economic Development Council.
    Welcome to you all. Thank you for being here today, and we 
look forward to your testimony.
    We're going to start with you, Amy.

     STATEMENT OF AMY O'HARA, CO-OWNER, WHEN THE SHOE FITS

    Ms. O'Hara. First, I just thank you for the invitation to 
be here. It's truly a privilege. As you said, we own a four-
store chain of comfort shoe stores, my husband and I. Just to 
give you a bit of our background ----
    Chairwoman Cantwell. Amy, can you just move that microphone 
a little closer to you? I just want to be sure we catch all of 
your testimony.
    Ms. O'Hara. I tend to be very loud all the time.
    [Laughter.]
    Chairwoman Cantwell. Thank you.
    Ms. O'Hara. To give you a bit of our background, we've 
worked in various aspects of the footwear industry for our 
entire adult lives. Between the two of us, we have experience 
in retail sales, buying, merchandising, manufacturing, and 
advertising.
    But about 12 years ago, we began the process of trying to 
realize our dream of owning our own retail shoe store. We knew 
we had the ability, the drive, and the energy, and we also knew 
this market area was greatly underserved. Our major roadblock, 
however, was that we had no money. We had perfect credit and 
fantastic resumes, but no money.
    We didn't have any idea of where to turn, and we were lucky 
enough to have someone suggest that we contact SCORE, which is 
an organization we had previously never heard of. SCORE was 
nothing short of a miracle for us. They listened to our 
concept, talked us through potential pitfalls, and challenged 
us at every turn. They then helped us build a business plan, 
something we were unfamiliar with, and they helped us get a 
bank proposal together. And probably most importantly, they 
were the ones that informed us about the SBA lending program.
    So we presented to our first bank, and we chose them 
because they were known to be aggressively lending, 
commercially, in this area. But they turned us down. I think we 
were the only ones they turned down that year. And to tell you 
the truth, we lost count of how many banks turned us down after 
that.
    What we grew to learn was that there's pretty much an 
unwritten rule that banks want their loans to be 100 percent 
collateralized. As a retailer, our largest expense is 
inventory, and the valuation of that asset is pennies on the 
dollar in the eyes of a bank. That was really frustrating. If 
we had the money to 100 percent collateralize the loan, we 
wouldn't need the loan. We also knew that we couldn't go into 
this undercapitalized, because that was a recipe for disaster.
    So, finally, a banker, after rejecting our loan, of course, 
was willing to advise us off the record that if we were to go 
ahead take out a home equity loan for as much as we could, we'd 
be bringing cash to the table instead of a home, and it would 
be much more appealing to a bank. So we did that, and that was 
the magic move, because the next bank we went to was willing to 
take a chance on us and give us our first SBA loan.
    We opened our first store in 2004, and it was nearly an 
instant success. We opened our second store three years later, 
in 2007, but for that, we were able to secure a conventional 
loan. It was early in 2007. Shortly thereafter, we all know 
what happened. The recession took a firm grip. While we 
certainly took a hit in sales and, obviously, profit, we, as a 
couple, dug deep, worked smarter, did more with less, and we 
continued to remain profitable and thrive.
    By 2010, we not only felt confident in our ability to 
withstand the recession, but we realized it was a great time to 
expand because the leasing terms here were so favorable. So in 
2011, we opened our third store in Vancouver. By then, however, 
lending was unbearably tight if not impossible. Despite a great 
relationship with our bank and excellent financials that 
everybody loved, we were told our only option would be again to 
go to SBA. But we believed in ourselves, so we did.
    In early 2013, we decided to expand into the Portland 
market. Our profitability was at an all-time high. We had a 
flawless reputation with our bank, and our credit was perfect. 
But we were again told that it would have to be SBA backed. It 
was the inventory valuation equation again. That was stunning 
to us. I remember saying to my husband that if we have to go 
SBA, how does anyone get a loan for anything?
    It truly helped me respect the value of good timing. I am 
not sure in today's climate that we could have navigated this 
loan environment. Without access to small business lending, we 
would not have been able to do any of this. We now proudly 
employ nearly two dozen people. We provide them with health 
insurance, disability benefits, vacation pay, a 401K plan, and, 
most importantly, we think, a good work environment and a 
living wage.
    We believe we are a true asset to the community. We want 
businesses like Shoe Fits to open and we want them to work. But 
my concern is how do the next Amy and Alan get the bit of help 
they need?
    In conclusion, let me tell you that we are grateful.
    In my opinion, we are literally the epitome of the American 
dream realized. And without the SBA and SCORE, it wouldn't have 
been possible. So thank you.
    [The prepared statement of Ms. O'Hara follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Cantwell. Thank you. We'll have questions for 
you, but we're going to let everybody on the panel give their 
testimony.

 STATEMENT OF JESSIKA TANTISOOK, FARM KEEPER, STARVATION ALLEY 
                             FARMS

    Ms. Tantisook. Hi. My name is Jessika Tantisook, and I'm 
the co-owner and founder of Starvation Alley Social Purpose 
Corporation. It's a cranberry company located in Pacific County 
on the Long Beach Peninsula in Washington state. We make local 
and organic cranberry juice that is unsweetened and undiluted 
and, in my opinion, very delicious.
    Before I started this juice company, I was a cranberry 
farmer. But being foodies and interested in the agriculture 
system, my partner, Jared Oakes, and I moved back to Washington 
state four years ago to see if we could be the first organic 
cranberry farm and have the 1,700 acres that are here to become 
certified organic.
    What we found was that growing cranberries organically is 
possible. However, it was a lot more difficult than we 
originally thought. One of those reasons was finding financing 
for our risky farm venture.
    As a farm, we talked to our local bank and Farm Credit 
Services about funds to help support us in this organic 
transition process, which takes about three years. They turned 
us away, saying our business model wasn't proven and we were 
already over-leveraged and that the working capital needs we 
had could not easily be collateralized through traditional 
banking methods.
    With growing trends nationally in organic and healthy food 
options, this didn't seem like a complicated idea, especially 
in the Northwest, where everybody loves organic foods. We'll 
grow cranberries organically, we thought, we'll make quality 
products, and we'll sell them in our region, which isn't an 
option that consumers here have, because most of our 
cranberries get sent elsewhere, and, again, there's no organic 
options.
    So we funded our first two and a half years of our business 
through our family's fishing business, working multiple jobs, 
and through personal debt. We realize that without these 
support options, our company wouldn't be here today. We also 
know that for many farmers and business owners, in general, who 
would like to make environmentally and socially conscious 
business decisions, these options aren't always available to 
them.
    Last year, we started Starvation Alley SPC, which is named 
after the road where our farm is located, and we wanted that 
company to become the company that we wished existed when we 
started farming, one that would pay farmers what their fruit 
was really worth, which is significantly above commodity 
pricing, a price that would support them growing in more 
sustainable ways. Starvation Alley SPC would be an independent 
juice company, one that was not burdened by the debt of a 
family farm, but could become a dependable customer for our 
farm and those of our neighbors looking for new ways to grow 
cranberries and their livelihoods.
    So we finally got our first loan last February. It was 
through a new company out of Seattle called Community Sourced 
Capital. Community Sourced Capital helps hundreds of people 
compile small loans into one loan for a business, and they make 
the repayment of that loan easy and manageable. We benefited 
from one of these loans, thanks to 110 people in our network. 
We were able to purchase a $12,000 juice press. Since then, 
we've repaid about a fifth of that loan to our 110 lenders.
    With the new juicer as our core piece of equipment, we were 
in a position to grow. We sold our juice to some of the--or we 
still sell some of our juice to the top restaurants in Seattle, 
and we began to start selling in farmers markets. To develop 
these markets and obtain the inventory we needed, we still 
needed a much bigger piece of financing.
    We heard about Craft3, a Southwest Washington Community 
Development Finance Institution, through a friend and found 
that we were a clear fit with an aligned mission. Craft3 
prioritized our community and values alongside our business 
plan and profitability, and after much due diligence, we 
received our first substantial loan of $100,000 last October.
    Craft3's willingness to provide needed capital to our early 
stage business, when few others could or would, gave us the 
monies we needed to scale in Seattle and expand to Portland. 
This meant keeping our jobs, hiring three new employees, and 
being able to support two sustainable farms in Southwest 
Washington last year through purchasing their cranberries.
    Starvation Alley isn't quite out of the red and needs more 
outside investment. We are exploring all options, including 
taking advantage of federal grant opportunities, such as the 
Value Added Producer Grant funds, which will announce award 
recipients in June. So wish us luck. We are in talks with 
Craft3 for a second round of funds, because we still don't 
qualify for traditional financing.
    Last month, we talked to other local banks and another CDFI 
loan which had mentioned SBA options to us. We believe this is 
because we don't meet the criteria, but also feel that there is 
an education piece missing for small businesses. We're not sure 
what the SBA offerings are and whether it's something that we 
should be asking about or if it's something lenders should 
offer.
    What we do know is that the reason our business has been 
successful is because of the willingness of progressive 
financial institutions like Community Sourced Capital and 
Craft3 to evaluate business on more than just financial 
returns. They are measuring other forms of impact that our 
business has on our community. From my perspective, government 
shouldn't be measuring risk on solely the bottom line but on 
community value as well.
    My hope and dream is that as many new financial innovations 
emerge--and we're seeing them emerge already--more programs, 
including federal programs like SBA, will find a ways to create 
money available to more risky businesses like outstanding 
corporations who want triple bottom line values in their work.
    Thank you.
    [The prepared statement of Ms. Tantisook follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Cantwell. Thank you very much.
    Mr. Chance, welcome. Thank you for being here.

  STATEMENT OF CRAIG CHANCE, SENIOR VICE PRESIDENT, COMMUNITY 
               FINANCIAL RESOURCES, COLUMBIA BANK

    Mr. Chance. Thank you, Senator. Thank you for the 
opportunity to share our thoughts. It's always hard to top 
small business stories. Like so many other banks, those of us 
who are lenders and advisors thought this is one of our jobs, 
being in business like yourselves.
    Just for the record, my name is Craig Chance, Senior Vice 
President, Columbia State Bank, also known as Columbia Bank. 
I've been with the bank, managing the unit called Community 
Financial Resources, since 1998. We assist other lenders in our 
organization, branch managers, with SBA lending, but also in 
finding other solutions such as Craft3, or referring out to 
organizations like SCORE, SBEC, and others. Those are all great 
organizations, and we should all do what we can to expand upon 
them.
    My engagement with SBA lending began in 1987, when the now 
Senator Cantwell was a very young legislator in the state of 
Washington and helped create a program called Community 
Development Finance. We went out into banks and other lending 
organizations and talked to them about SBA lending and other 
programs. So, in a way, it created many jobs, but in a small 
way, it helped create my career, so thank you.
    Columbia Bank is a 20-year-old bank headquartered in 
Tacoma. It's grown quite a bit in the last few years through 
five FDIC assisted transactions, and also recently by the 
merger with West Coast Bank. So we're a relatively large 
community bank. We have approximately 140 branches, 80 in the 
state of Washington, 60 in the state of Oregon, and we're about 
$7.2 billion in asset size. Our bank's CEO, Melanie Dressel, is 
particularly proud of the fact that in 2013, we had $800 
million in new loan originations, not renewables but actual 
originations.
    SBA lending is a part of it. We had in fiscal year 2013 $29 
million in SBA 7(a) lending, and we're also very happy with the 
504 program. We did approximately $19 million in third-party 
lender loans under the 504 program.
    We have a unit of nine people in Community Financial 
Resources. Most of those individuals focus on SBA lending. Five 
of them--some, I think, are here today--are based right here in 
Vancouver. So we have quite a crew here in Vancouver focused on 
SBA lending.
    With these opportunities, I always like to mention that we 
very much appreciate our relationship with the SBA staff, the 
district staff, the region staff, the central office staff. In 
all cases, we find them to be helpful and very professional, 
and they make it much easier for us to do our jobs. We welcome 
opportunities to work with the SBA in getting the word out, 
because you're absolutely correct that not a lot of people even 
know these programs exist. So we're happy to help them market 
that or work with their other lenders.
    One of the more fascinating facts of life is that so many 
small business owners, even multi-generation business owners, 
think the SBA program is the, quote, ``lender of last resort.'' 
And the reality is it's a way that gives small businesses an 
opportunity to have financing on terms that are very similar to 
those terms that are enjoyed by their much larger international 
competitors that have direct access to Wall Street.
    So I often go to meetings and tell people, ``Maybe there's 
a conventional option, but it's not the most reasonable option. 
The most reasonable option to give your business some strength 
is the SBA option.'' And we always emphasize to people--are 
there fees with this? Yes, there are. This is not a handout. 
Senator, you mentioned it. This is a zero subsidy program. The 
lenders and the borrowers in small businesses are paying for 
this program.
    We use SBA financing for a broad spectrum of needs. The 
7(a) program is the workhorse that can do almost anything that 
you can think of legitimately, and it provides that long-term, 
fully amortizing financing, one of the more unique attributes 
of this term, working capital. There's really no other way you 
could set up a 10-year working capital loan.
    But it also affords us the opportunity to provide people 
with long-term, fully amortizing real estate loans, business 
acquisition loans. Coming out of the recession, there's a lot 
of firms with financing that's reasonable, maybe, at one point, 
but it's not very reasonable, given the current circumstances, 
and we can restructure it with far more reasonable terms and 
strengthen the business that way.
    Here in Clark County, we just had a couple of examples of 
firms that were assisted with SBA lending, often an interesting 
story. One is a retail store, and she started her business with 
a package of services, including a State of Washington 
Employment Security Program that enabled her to retain her 
unemployment benefits while she launched her business. She's 
been doing quite well.
    Another woman was able to expand a styling salon and it 
helped her establish her financial independence. And an 
environmental contamination remediation firm benefitted by 
restructuring debt as it emerged from the recession, giving an 
example of how businesses can get more favorable terms.
    We recognize that Southwest Washington has had its unfair 
share of challenges, and it truly does go back to the '80s and 
the collapse or at least shrinking of many of the resource-
based industries in this area. And then the more recent 
recession had its impact, especially on construction in this 
area, and then the multiplier effect on other industries.
    But you can certainly see signs of improvement. If you step 
outside the building here, you see all the renewal going on in 
downtown Vancouver. People haven't visited downtown Vancouver 
in a while, but they've been taken aback at what they're seeing 
out there. So you see those opportunities. That's one reason 
why we have SBA lending staff in Vancouver, why we have a 
retail branch and we have a dedicated commercial banking team 
based here in Vancouver.
    When I meet with prospective 7(a) lenders--as one of my 
partners at Evergreen, Gregg--and I think Phil before he went 
into his current position as President Emeritus--described us 
as the evangelical SBA lenders. So we enjoy meeting with 
potential new SBA lenders. And the objections I commonly hear 
are perceived complexity and uncertainty regarding guaranty 
purchases when loans default.
    There's a monthly reporting process that goes to the SBA 
for 7(a) lending, the monthly 1502 report, and that's perceived 
as sometimes a little cumbersome. We have examples where we 
were ending off on a report, and we had to send a wire for that 
one penny or face a $100 fine. For smaller SBA lenders that 
would seem like a major burden.
    And then there's the process of submitting applications. 
We're what SBA calls a delegated lender. We have the authority 
to approve SBA guarantees, but people starting out new in this, 
lenders starting out new, don't have that authority. So they 
have to submit these packages to the guarantee processing 
center in Citrus Heights, California. These packages can be 
several inches thick, and they can border on a book. They all 
have to be scanned, and it's very burdensome. I have visited a 
little bit with the district office, not going to the central 
office, but that's a logical next step after today.
    There used to be a program called the Certified Lender 
Program for lenders who show a little experience with this, and 
it simplified the process. And where I would like to see that 
program go internally--in all institutions when we approve a 
loan, we don't send 8-inch think packages around to each other. 
It's a credit memorandum that provides a detailed summary of 
the proposal. It may include a few forms, and it may include 
financial spreads.
    But it's very simple. It's maybe 20 or 30 pages. How much 
easier that would be to scan that into the system. How much 
labor that would save the SBA in Citrus Heights, and it would 
vastly improve turnaround time in Citrus Heights at their 
busiest times for the small business owners, which is the 
principal advantage.
    We look forward to working with SBA on all those 
improvements and all other ideas that folks have. And we 
certainly appreciate, Senator Cantwell, your advocacy and 
support of the Small Business Administration programs.
    [The prepared statement of Mr. Chance follows:]

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    Chairwoman Cantwell. Thank you very much for your 
testimony.
    We'll hear now from Mr. Swanson.

 STATEMENT OF GREGG SWANSON, CHIEF LENDING OFFICER, EVERGREEN 
                        BUSINESS CAPITAL

    Mr. Swanson. Thank you. I have a reputation for talking a 
lot, so I'm trying to get this down, and I'm going to be 
watching very closely. As stated, my name is Gregg Swanson, and 
I work for Evergreen Business Capital. We were founded 34 years 
ago and are the largest CDC in the Northwest. CDCs are 
nonprofit organizations authorized by the SBA to underwrite and 
service 504 loans.
    By utilizing the SBA 504 loan program, Evergreen has helped 
small businesses create more than 37,000 jobs and make more 
than $2 billion in capital improvements. We have advanced small 
business development by providing loans totaling upward of $800 
million in the Northwest.
    The types of businesses that we have helped, particularly 
here in Southwest Washington, range from manufacturers to 
retailers to medical providers. We also end up helping a lot of 
the hard to finance industries, like hotels, construction 
contractors, and restaurants. Evergreen Business Capital has 
helped to create or retain over 3,000 jobs just in the 
Southwest Washington area since our inception.
    I'll give you an example of one of the small businesses 
that we have been able to help using the SBA 504 loan program. 
It's located not far from where we are today in downtown 
Vancouver. This particular business provides IT solutions to 
other small businesses in the area, and with the help of the 
504 program, that small business owner was able to secure a 
mortgage payment that was actually less than their current rent 
payment, and they were able to move into a larger space, which 
allowed the creation of 40 jobs. These are the types of success 
stories we see created by the program every day.
    Our clients typically find the SBA 504 product to be 
advantageous because of the smaller down payment this loan 
program provides. For many small businesses still recovering 
from the great recession, the importance of being able to get a 
loan while only putting 10 percent cash down, whereby allowing 
the small business to preserve their working capital, cannot be 
understated.
    Many businesses exhausted all their working capital during 
the great recession and simply could not take advantage of 
growing their small business during this slow recovery unless 
they had the SBA 504 loan program. Currently, under the 504 
program, not all businesses do qualify for the low 10 percent 
down payment option. It's our opinion that the SBA should 
consider this 10 percent down payment option for all businesses 
regardless of the type of property that they're purchasing or 
the experience of the owner-operators.
    The SBA would also help many small businesses that have 
found it hard to recover from the great recession if they would 
reinstate the 504 refinance program. Furthermore, reinstating 
the 504 refinance program with a simpler set of rules would 
also prove advantageous toward helping more businesses.
    During the short time period that refinance was available 
with this program, Evergreen was able to provide more than 45 
borrowers with their refinance projects. We financed a total of 
$44 million in SBA loans, with 28 new jobs created and 1,000 
jobs retained as a result of the refinance.
    In recent years, the SBA has made great strides in 
advancing their technology platform for applications. New rules 
have also just been implemented in an attempt to streamline and 
simplify the 504 product. In order to reach more small 
businesses, the SBA will need to continue both these 
initiatives in order to make the 504 product easier and less 
time consuming for small business owners.
    The SBA has many hurdles to jump to meet all of their 
regulatory requirements, but they also need to keep in mind 
that their end users, the small business owners, need care, 
customer service, and simple courtesy when dealing with the 
maze of ever-changing rules. This is what Evergreen tries to 
provide, and as with all CDCs, we have boots on the ground and 
understand the different environments that our small business 
owners work in, but the SBA must also work towards making 
themselves a user-friendly environment as well and keeping 
capital safe and secure for the taxpayers and its investors. We 
believe it is possible to do both.
    [The prepared statement of Mr. Swanson follows:]

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    Chairwoman Cantwell. Thank you very much. That was concise. 
I don't think Jane had to flag you once.
    Mr. Sawyer.

   STATEMENT OF ERIC SAWYER, VICE CHAIR, BOARD OF DIRECTORS, 
             GREATER VANCOUVER CHAMBER OF COMMERCE

    Mr. Sawyer. I'll try to make that two in a row if I can.
    Chairwoman Cantwell. It's okay. We're going to get into a 
discussion here. But usually we're balancing between 20 
colleagues who all want to ask their questions. Luckily, you 
just have to have questions from me today.
    Mr. Sawyer. So I just can really talk.
    [Laughter.]
    Chairwoman Cantwell. Yes.
    Mr. Sawyer. Welcome to Vancouver. I'm Eric Sawyer, the 
Chair Elect for the Greater Vancouver Chamber of Commerce and a 
local business leader as well. I wish to thank Chairman 
Cantwell and members of the committee for holding your field 
hearing today here in Vancouver. It's a tremendous opportunity 
to be able to share some different stories with you and some 
insight.
    When I'm not representing the GVCC, I am an Area Manager 
for a company headquartered here in Vancouver called BBSI. 
BBSI's purpose is to advocate for small business owners. We 
work hand in hand with the very same businesses that the 
Chamber puts me in front of, the small business owner, the 
entrepreneur. In both roles, I have the honor of seeing 
firsthand what business owners experience every day.
    Working with over 3,000 small companies at BBSI, we know 
that every entrepreneur who starts their business has three 
unique qualities that they all share. I think Amy and Jessika 
can back me up on this. They're the last person to get paid, 
they can't quit, and they have literally everything they own 
invested in their dream and their passion. Correct? That's 
probably right.
    So that sounds like a good deal. I can't quit, I'm the last 
to get paid, and I've got everything invested. Right? Awesome. 
Sign me up. But that's the opportunity, and that's exactly what 
we're talking about here.
    The Greater Vancouver Chamber of Commerce represents 1,000 
businesses in Southwest Washington, which includes about 45,000 
employees. And you ask how are we doing now? Does the small 
business owner have access to capital? Well, yes, and then 
maybe no.
    Banks are advertising opportunities now, and we've heard 
the credit market for small business is opening up. They're 
requiring excellent credit, proof of performance, well 
documented financials, business plans, and marketing 
strategies. Small and/or new businesses find it difficult to 
get loans. Business owners are willing to do that work if it 
means access to credit.
    But, as an entrepreneur, again, you put everything you have 
into the game, and that oftentimes puts your personal credit at 
risk, regardless of current business stability and performance. 
Then when your business is thriving and you need capital to 
support it or expand it, you get turned down by the banks 
because your personal credit isn't strong enough.
    We have a client who started their company three years ago, 
and they're actually going to be--they're nominated for a 
Rising Star Award by the SBA. Their first year revenues were a 
little under $12,000. Their second year revenues were a little 
over $200,000. Their third year revenues were over $700,000. 
Clearly, they know how to run a business. They're growing. 
They're creating jobs in the area. But because they put 
everything they had into that business, their personal credit 
was really stretched thin. So when they went back to look at 
expansion, they couldn't get it.
    The moral of that story is: Why does personal credit play 
such a huge role in that situation? This particular business 
owner is banging his head on his desk, saying, ``I am clearly 
demonstrating an ability to run a business. I am clearly 
showing you I know what I'm doing. I've got the performance and 
the growth to show it, and I'm creating jobs. But because my 
personal credit score is low, I'm going to get turned down.'' 
It's one of those things that just kind of doesn't make a lot 
of sense.
    So summing up my two points there, just quickly, better 
capital access education for the business owner is critical, 
and then lending guidelines that are maybe a little bit more 
practical. I don't know if that's just a generic term to throw 
in there. But, again, why does the personal credit score play 
such a huge role in that?
    But we are grateful for the help of business advocates such 
as the Small Business Administration through its SCORE program, 
SBDC, and the SBA office as well. And one of the things I did 
hear consistently when talking to clients who have utilized SBA 
services is that the Portland office is a tremendous resource, 
that the staff there is excellent, and that they get a 
tremendous amount of support, and they really feel that they're 
on their side as the small business owner. So that was great to 
hear.
    Here in Vancouver, however, we tend to feel a bit removed 
between Portland and Seattle. We are served by our Portland, 
Oregon office, the SBA office. And we appreciate the outreach 
they've done to connect with our small businesses. But our 
business owners have a hard time getting out of their offices 
to drive to Portland for workshops and meetings and ongoing 
education.
    At the Chamber, we'd like to help facilitate that 
connection. We invite the SBA to hold field office hours here 
in Vancouver at the Chamber offices once a month. We'll work 
with the SBA to set times and set different scenarios. But 
we've got the meeting space, and we've got the office space to 
be able to coordinate and set something up like that. So we'd 
like to initiate that.
    Our business at the Chamber needs to be one stop shopping 
for the business owner. That's why we're creating a small 
business resource center for businesses at the Chamber.
    Wrapping it up real quickly, we see tremendous opportunity 
for the SBA, first, in helping small businesses more 
successfully access the credit market through education and 
guidance. And, second, when the SBA plays the role of lender, 
we would urge them to review each business' financials with 
consideration for what we established at the beginning of my 
little speech here, that the entrepreneur is the last person to 
get paid. Right? They can't quit. They've got everything on the 
line. And, oh, by the way, they're kind of the backbone of our 
economy.
    [The prepared statement of Mr. Sawyer follows:]

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    Chairwoman Cantwell. Thank you, Eric.
    Last, but certainly not least, Mr. Bomar.

  STATEMENT OF MIKE BOMAR, PRESIDENT, COLUMBIA RIVER ECONOMIC 
                      DEVELOPMENT COUNCIL

    Mr. Bomar. Good morning, Senator, and welcome. Thank you 
again to you and your staff for being here today in Vancouver. 
I also want to thank the entire Senate Committee on Small 
Business and Entrepreneurship for their work and dedication to 
assisting small businesses and the opportunity to provide 
testimony on behalf of CREDC and the business community.
    I'm currently the President of CREDC. I serve on a number 
of professional and nonprofit organizational boards, including 
Greater Portland, Inc.; the Southwest Washington Workforce 
Development Council; Clark County Skills Center Advisory Board; 
and the WSU Vancouver Alumni Advisory Board.
    Serving Clark County since 1982, the CREDC is a private-
public partnership of about 140 investors and strategic 
partners working together to advance the economic vitality of 
Clark County through business growth and innovation. Through 
collaborative leadership, the CREDC promotes quality jobs and 
capital investment while maintaining the county's exceptionally 
high quality of life.
    Access to capital is a key component of attracting and 
growing businesses in Clark County. As a resource for local 
businesses of all sizes, the CREDC works to connect businesses 
with programs, and partners that can help identify the most 
appropriate funding options available to companies based on 
their makeup, history and their growth projections.
    Small business is a driving force in Southwest Washington, 
and startups, in particular, are consistently net job creators 
nationally. According to the Kauffman Foundation, startups 
gained over 2 million jobs during the recession, compared to 4 
million jobs lost by more mature companies during that time.
    Since 2009, CREDC has been assisting entrepreneurs in 
connecting with the resources that they need. Last year, the 
CREDC Entrepreneurial Strategy 2.0 report was completed by 
Scruggs and Associates to better guide these efforts. As noted 
in the report, the vast majority of net job creation comes from 
startups in the first few years of growth, the stage two 
companies, and highly scalable companies as well. Those that 
are homegrown tend to grow faster than those that are 
nonresident companies recruited from elsewhere.
    CREDC's entrepreneurial program focuses on scalable, or 
high-impact companies that have strong growth potential. Often 
these companies export goods or services and have revenue 
potential of at least $10 million to $20 million. A large 
portion of these companies are in the high-tech sector, which 
accounts for roughly 5 percent of companies, but more than half 
of all new jobs created.
    To expand on that, high-tech and innovation-based companies 
are a focus area at CREDC, yet often experience the greatest 
challenge in earning access to capital. Scalable companies 
typically have greater capital needs and often require some 
form of intellectual property protection. They also tend to 
have markets that are national or global in scale. As a result, 
they often require alternate funding sources such as angel or 
venture capital funding.
    Our connection to the Greater Portland metropolitan area 
provides great opportunities and is especially important to 
entrepreneurs and startups looking for initial investment from 
venture capital or angel funding sources. But it also poses 
some challenges for businesses looking to grow in this region.
    We are very fortunate to have strong collaboration with 
partners such as the Chamber, SCORE, SBDC, and the Keiretsu 
Forum. The vast majority of dedicated entrepreneurial services 
in this region are located in Portland. While the 
entrepreneurial networks are strong and available to companies 
throughout the entire region, Clark County businesses can face 
unique challenges in access to the resources that are 
available. This is true for both startups and small businesses 
looking to expand.
    It's important that leaders in our area are aggressive in 
reaching out to companies to ensure that business opportunities 
are not lost for lack of connecting to already existing 
resources. While the CREDC's role is one of connector or 
business concierge, we continue to work with our strategic 
partners in the traditional lending institutions to develop 
more expertise around identifying the companies with great 
potential but potentially low rankings through the traditional 
lending practices of today.
    We encourage the continuation of the SBA's SBIR, 504, 7(a), 
and similar programs that assist the types of small businesses 
operating in Southwest Washington. We also encourage 
maintaining and expanding resources to connect local small 
businesses with the information about these and other lending 
opportunities that they need to be able to make use of them. 
And we continue to support existing programs, such as the Small 
Business Development Centers as well.
    Though the foundation to serve Southwest Washington 
companies is strong, there's likely an opportunity for both 
regional entrepreneurial networks and traditional lending 
institutions to better serve our startup companies. The goal of 
this effort would be to increase the options and opportunities 
for Southwest Washington startup companies with sound 
practices, innovative technology, and experienced management 
with the potential to be funded.
    I want to thank you again, and the rest of the Senate 
Committee on Small Business and Entrepreneurship for the 
opportunity to provide input and for your interest in assisting 
a strong and thriving business environment in Southwest 
Washington.
    Thank you.
    [The prepared statement of Mr. Bomar follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Cantwell. Well, thank you very much. That was a 
good wrap-up, Mike, and a good segway for us to jump into the 
question segment of this, which is--you know, I think I'll just 
start with all of you collectively. Several of you have 
mentioned more education, with either the Chamber providing a 
role, as you're saying, or maybe a network of entrepreneurs 
with institutions or more education or just--how do we get the 
word out to various businesses that here is the economic 
opportunity in Southwest Washington to leverage your business 
ideas with institutions that may not necessarily be ready to 
financially support you, but with the SBA backing are willing 
to do so.
    Does anybody have----
    Mr. Sawyer. I'll jump in real quick as the Chamber 
representative. I think, naturally, a lot of small businesses 
look to the Chamber to provide that leadership role in 
education. And if the Chamber had the opportunity to work a 
little bit more closely with the SBA and create those field 
office hours at the Chamber, it would be relatively easy for 
the Chamber to get the word out to our members and to the 
business community, in general, that that opportunity is there. 
So I think the conversation just needs to happen and we need to 
create that opportunity. That would be one step in the right 
direction.
    Chairwoman Cantwell. Anybody else on that point?
    Mr. Bomar. I think statistically and in perception, funding 
is centered around metro areas, and that tends to be a thriving 
magnet for a lot of entrepreneurs in the region. One of our 
goals that I see as an opportunity is to really try to capture 
entrepreneurs before they make the leap into that central area 
and to really help them understand that they don't have to be 
in that central core, that they can access the same resources 
in this metro area, through enhanced collaboration both across 
the river and in making sure that the programs and the partners 
that we have here are maximizing those resources at the right 
stage to be able to capture those entrepreneurs before we lose 
them.
    Chairwoman Cantwell. We have two business people here, and 
they can say whether they were brought to all the Chamber or--
you know, obviously, you can create a value within the Chamber 
and EDC community that there are ways to help businesses 
financially so that you can become, if you will, a resource of 
information for businesses. But these two businesses--you 
immediately started going to financial institutions. Right?
    Ms. O'Hara. No. We first did SCORE, and they were the ones 
who helped us do everything. And out of the blue, it was 
something my mother said one day while I was whining. But we 
didn't know what to do. We didn't have a business background. 
We know shoes. And she said, ``Oh, you know, what's the need of 
that''--she'd kill me if she heard me imitating her like that.
    [Laughter.]
    Which is why I want to emphasize I think SCORE is an 
unbelievable resource and underappreciated, probably. And I 
think our local chapter did an excellent job of advertising 
seminars and webinars. But I think they are a great avenue to 
get the word out. But that's what we did.
    Chairwoman Cantwell. Jessika.
    Ms. Tantisook. I'll speak just a little bit about Pacific 
County. I mean, we're not close to a major metropolitan area, 
and we're about two hours from Vancouver. So we did start with 
local banks, and, like I said, they didn't walk us through even 
the process to get ready to be eligible for SBA opportunities.
    So I don't know if there is a piece that is missing between 
local financial institutions and SBA, or if the Chambers can 
reach out to local banks or how that gets out to more rural 
areas. But I think that is often overlooked.
    Chairwoman Cantwell. Remind me how you found the Community 
Development Financial Institution.
    Ms. Tantisook. Through a friend--like, ``Oh, you should 
talk to Craft3.''
    Chairwoman Cantwell. So----
    Ms. Tantisook. Sort of word of mouth. It's usually what 
gets things done in small communities.
    Chairwoman Cantwell. And you were doing--I mean, first of 
all, congratulations on what you achieved with taking your 
vision and turning it into something. You know, our state has 
something like over 300 different agricultural products, and we 
went almost overnight from doing very little with blueberries 
to becoming one of the number one organic blueberry producers 
in the country. And so it was a huge explosion of growth. So 
now what you're doing with cranberries, I'm sure, will also 
have a very bright future.
    You mentioned, you know, how to measure these business 
opportunities on a little different basis. I mean, do you have 
any ideas or suggestions with--we are seeing a lot of 
investment in food enterprises, and we in the Northwest are 
doing very well with--you know, with all our software and 
airplanes and everything else, I still remind people that our 
ag economy is the number one employer in our state.
    Ms. Tantisook. We spend a lot of money on food, yes.
    Chairwoman Cantwell. We have to eat.
    Ms. Tantisook. And we love to eat. I think that's a great--
I mean, that's one reason why we wanted to have our business 
here, because of the thriving food community. And so I have a 
couple of thoughts, I guess. One is we're a social purpose 
corporation, and we function like a corporation. But we're able 
to write in a special mission into our company when we were 
incorporated. There's also other third-party certifications.
    So is there a way, I guess, that there's--you need funds 
that you can qualify for if you're one of these organizations 
that, you know, are out to do more for the community other than 
just have their business housed there, that are working in 
communities and creating jobs and increasing environmental 
benefits and things like that.
    Chairwoman Cantwell. Do you think there's a Web site 
anywhere that basically talks about how you become an entity 
like that?
    Ms. Tantisook. The Washington Social Purpose Corporation 
Web site is pretty good. It has almost every incorporated SPC 
on there. So I think that could be one way to get information 
at least for those companies.
    Chairwoman Cantwell. And does that talk about capital on 
that Web site?
    Ms. Tantisook. I'm not sure, actually.
    Chairwoman Cantwell. And is that why you think you got the 
crowd funding?
    Ms. Tantisook. I went to business school in Seattle at the 
Bainbridge Graduate Institute, and the startup that we worked 
with were classmates and friends.
    Chairwoman Cantwell. So, again----
    Ms. Tantisook. So our connection to them was also a 
personal connection, and so that's how we've gotten a lot of--
what we've done so far is through our network and telling our 
story, and our story has taken us a long way. And also out of 
our team of seven we have three engaged on our team, and so we 
have a great business plan and great financial projections.
    And like you were saying, they only take you so far. 
People--our banks are like, ``Oh, these are great. We love 
them, but we can't lend because of--we need to see two years of 
operating with a year of net positive cash flow,'' and we don't 
have those yet.
    Chairwoman Cantwell. The financiers--any comments on what 
you're hearing here on how we water this garden of opportunity, 
of innovation, given some of our more traditional focuses on 
finance?
    Mr. Chance. Well, sometimes the classes and seminars are 
lenders and some of the organizations. We're guilty of offering 
them, for example, at noon. How many small business owners can 
break away at noon? So we have to be willing to have those in 
the evening or on the weekend when those sessions are more 
accessible to people.
    And I'll say in looking at startups, at least from my 
perspective, we do some, and it's very much focused on people's 
experience, their ability to at least put something into the 
transaction so it's not 100 percent financed. We talked a 
little bit about collateral here, and that's the great virtue 
of SBA lending. There's so many SBA 7(a) loans that are poorly 
collateralized, and the focus is really on either projected or 
historic cash flow, the experience of the individual, their 
general business acumen. It's not so much based on collateral, 
and that's really what separates the SBA lenders from more 
conventional peers.
    Mr. Swanson. I'll just say that probably 90 percent of what 
our loan officers do is try to do outreach to lenders, and it's 
going out to a lot of small branches throughout the Northwest. 
We have 10 loan officers. They're taking everything from 
southeastern Oregon to northern Idaho.
    So for us, it's a big educational piece of our mission, and 
so we're going to small lenders, branch bankers, real estate 
brokers, anyone that we can get the word out to about our 
program, because we feel it still doesn't really get the--it 
doesn't have the financial assets as some of the other loan 
programs. So for us, it's just a continued fight getting it out 
there, and, clearly, we have a lot more work to do to get it 
out there.
    Chairwoman Cantwell. And it seems like it's not only the 
communication. Everybody mentioned the communication. I just 
wanted to point out that SCORE, which Amy mentioned, is a 
service corps of retired executives, and they provide 
counseling for early stage companies, and they do get support 
from the SBA. So it is, if you will, a network out there in the 
community, so that seems to have benefit to small businesses or 
entrepreneurs who are looking for those economic opportunities.
    Mr. Swanson. SBDCs, too. They're really good out in the 
communities as well.
    Chairwoman Cantwell. And why do you think that is?
    Mr. Swanson. They really help small business owners with 
business plans and kind of how to get through the maze of 
financing. There's a lot of really good SBDCs throughout the 
Northwest that--again, they can really take a look at an 
entrepreneur or someone that wants to start a business up and 
tell them very matter of factly, ``This is what you're going to 
need to do to find financing.''
    And they have a great network, so they can say, ``This is a 
lender that might work for your business'' or ``This is a place 
not to go.'' So they can really help them, again, with the 
business plan writing and what-not. The SBA has gotten rather 
strict on the 504 side with projections, business plans, and 
that sort of thing.
    Whether you're a startup business or, in your case, an 
existing business that wants to expand to a new location, even 
if you have enough cash flow coming in to open up a new 
location based on your existing, they still want full business 
plan projections. So SBDCs really help with that and provide 
that technical assistance.
    Chairwoman Cantwell. Mr. Chance, you mentioned the 
simplification of the process--several people mentioned the 
simplification of the process, some obviously for the process 
to be a certified lender, and then the process, in general, 
for, I guess, simplifying the marketing of benefits. What do 
you think the SBA has to think about in that regard? And I know 
several people mentioned it, so other people can jump in here.
    Mr. Chance. Sure. This would be in getting the lenders more 
engaged as part of the information for the business community. 
But then you also have to have lenders who are willing to be 
engaged. And I would make the argument the more SBA lenders 
there are, the better it is for the marketplace. So that's the 
reason I said evangelical, because it is helpful to have many 
banks talking about it as a product in the marketplace.
    But the objections usually come in from concern about 
paperwork, although that has been simplified in most recent 
SOP. But there are still concerns about complexity of the SOP 
and it's an ongoing effort to streamline it.
    This certified lender program is a step where--essentially, 
right now, you have guarantee lender programs are sending in 
the thick packages. You have the option for express lending, 
which is a very simple process and probably underutilized here, 
and then the primary program, at least for us, the preferred 
lender program, where we can go up to that $5 million loan. 
That would be kind of unusual. Most are smaller than that.
    And we have delegated authority, and part of that is the 
expertise to do it. A lot of lenders don't have that expertise, 
and they have to go to Citrus Heights, and that's the process 
where, I think, that yield is a little larger than the express 
loan or has some complexity or risk to it and the lender wants 
a higher guarantee. They want the 85 or 75 percent guarantee. 
If we bring back that certified lender program in a meaningful 
way, that might help encourage at least some of the community 
banks to become more engaged.
    Chairwoman Cantwell. Mr. Swanson, do you have comments?
    Mr. Swanson. Yes. You know, obviously, on the 504 side of 
things, we--there's more risk to the SBIR loan, so we're 
scrutinized a little bit more as opposed to how a bank does 
when we submit our package to the SBA. I think, again, in the 
spirit of talking about access to capital, specifically in 
Southwest Washington, I think that the SBA tends to do a one 
size fits all, you know. They're processing in Citrus Heights, 
California. They're processing all these loans.
    And I know for us, as a CDC who has 10 loan officers 
throughout the Northwest that are invested in their 
communities, I think there are situations where the SBA is just 
trying to apply a one size fits all, and credit just isn't that 
clean. You can't just say, ``Well, they met this requirement, 
they've got this many years to cash flow, they've got this much 
leverage''--you know, your example is a good one.
    I think that the SBA could probably work on a partnership 
with the CDCs that are local a little bit better. We're all 
kind of trying to do the same thing, you know. We want to 
protect the SBA and have the long-term--the investors. And I 
think that SBA could rely a little bit more on local CDCs on 
the 504 loan.
    What we know about the community--we're the ones that are 
meeting with the borrowers. We're seeing the business in 
operation, and I think that would go a long way to help the 
process and help the basic feeling sometimes out in the 
marketplace that, again, the SBA process is difficult, and it's 
all black and white, and there's no room for any gray.
    Chairwoman Cantwell. Jessika, you're shaking your head.
    Ms. Tantisook. Just recently, we were talking last month 
with a couple of banks that asked basically--it's a similar 
process. You have to meet these three-year requirements, and 
you don't, and you're not eligible for the loan. So it doesn't 
seem like it's based on our unique team or our vested values, 
on what we've done so far as a company. It just seems like it's 
about checking boxes.
    Chairwoman Cantwell. Any thoughts from lenders about that? 
That goes beyond simplification.
    Mr. Chance. An old boss of mine used to say we don't have a 
monopoly on business. There's probably several thousand banks 
in America. And I hear exactly what Jessika is saying. There's 
so many who get that reaction.
    As a person who manages SBA lending, one thing that's one 
of my responsibilities--and things I think about at 3 o'clock 
in the morning--is how we make sure all of our lenders, all of 
the people involved in credit decisions, are aware of the 
opportunities. And like any other industry, there's a certain 
amount of turnover. But the word--it's an effort to continually 
get that word out.
    And different lenders are going to have different 
approaches to it. Some will be very much check the box, saying 
if you have a credit score of X, you're good. If it's one point 
low, you're not. Other lenders may be more flexible. And for 
better or for worse, that ends up being one of the burdens of 
the entrepreneur to figure out which of these lenders from the 
many thousand in America are going to be a good connection for 
you, personally, for your type of business and for the life 
cycle of your business.
    I don't know if there's a simple answer to that question. 
But it's like finding the dentist you like, the physician you 
like. There is a certain process to go through and figure out 
is your institution or is that particular institution ideal for 
you. The one across the street is very convenient, but they may 
not be the one that really can help you the best with this type 
of a program. So it takes a little shopping.
    Chairwoman Cantwell. Well, one of the reasons why we're 
doing this tour is because I personally want to see us do 
something besides make exotic financial instruments. I want us 
to grow small businesses. But we have to demystify access to 
capital and make sure we're increasing access to capital. So 
you have given us some things to think about already as it 
relates to simplifying and enhancing the communication.
    But I think for us, it's much less, so--because we're so 
innovative. I think it would also behoove us to take the 
blinders off for a second and say, ``What else should we be 
doing to get more capital out to all of these people in an 
information age that would create more of these 
opportunities?''
    Again, when you think about how much capital is locked up 
in the five biggest institutions, it's like 50 percent of the 
assets in the United States are in five big institutions, you 
know, doing lots of activities that I personally think aren't 
performed enough, while the squeeze on capital for small 
business is still--you know, you might say that we have enough. 
I personally think one of the things the committee is going to 
do is increase the 7(a) cap to a higher level to get more money 
out there and get the refi 504 program going again. So we're 
going to try to get capital out there.
    Our new administrator comes from a background in California 
where they've learned that small is big, that is, that 
sometimes the capital was just--a $150,000 threshold was more 
than people wanted, and that looking at the smaller portfolio 
helped, you know, a thousand flowers bloom and then come back 
and be able to access a bigger program.
    So any thoughts on that, about the loan size or, you know, 
something where we would be more creative with the program that 
would emphasize smaller amounts of capital to be accessed? Or 
do we think that's being taken care of somewhere else in the 
market, like the crowd sourcing or personal financing?
    Mr. Chance. There are other alternatives, and I think when 
we talk about very small loans, generally, say, 50 and under, 
there's an awful lot of that that's taken care of on a 
conventional basis with smaller banks. And where the SBA is 
helpful is where the bank receives greater risk, and I don't 
know that the average bank would save a lot of risk if this 
$25,000 loan goes bad. After all, it's the size of a car loan.
    I once heard a major national lender say, ``I wonder if the 
SBA program would work better as a credit card program.'' And I 
said, ``Why would we want to?'' Well, what would be the public 
policy benefit of it. If you need a credit card, stay by your 
mailbox, and you'll get that loan.
    So I think we make a much bigger impact on things that 
credit cards can't do when there aren't opportunities like home 
equity loans. And, generally speaking, that gets to be a little 
bit larger, and that's--sometimes we look at numbers of SBA 
loans opposed to dollars, because I think right now, especially 
as the economy has gotten at least a little better and 
financial investing is stronger, there is greater access to 
those conventional opportunities for the under 50.
    You might have situations like the crowd funding and micro 
lending. There's organizations like Seattle Community Capital 
Development. Those are good alternatives to build as well, 
because they serve a niche that's not being fulfilled by 
financial institutions.
    Chairwoman Cantwell. Mike, did you have any comments on 
that, particularly as you related to high-tech businesses and 
the fact that you wanted to focus on, you know, startups?
    Mr. Bomar. Yes. I think, you know, a couple of points. We 
have--one of the key connections is the educational 
institutions, and we talk about relationships and how those get 
transferred into knowledge about access to capital. Locally, 
with both WSU and Clark College, we have excellent institutions 
that are able to focus and create entrepreneurs with their 
programs and the research capacity that they have here as well, 
too.
    Particularly, with angel funding or venture capital or 
crowd funding--and there's been some legislation recently 
passed on that--there are some opportunities at various levels 
of funding. I think the key is going to be the barrier to 
access relative to the size of the fund needs to be considered 
as well.
    So there are other avenues that are less constrictive as 
far as what's available, so it may not behoove the SBA to go 
smaller necessarily. But I wouldn't have that available right 
now. I just think that it's important, but it may be serviced 
elsewhere as well.
    Chairwoman Cantwell. Anybody else on that point?
    Mr. Swanson. I'll just say I actually cut my teeth on SBA 
lending when they first brought out the SBA express program. I 
was working for a very large--one of those national lenders 
that has a lot of capital. And I saw a lot of good from it. It 
was a program--I think our average loan size was $30,000. And, 
again, there was a lot of good--we could do a lot of small 
startups and build those into the bigger 7(a) loans, and it 
does mean a lot to their building.
    Evergreen Business Capital--we finally decided to apply for 
the Community Advantage Program, which is the small loans that 
CDCs can do. For us, it was a tough decision because you have 
to have capital within your organization, and as a nonprofit 
who--we put the money toward SCORE and SBDC, and we had to hold 
some of that money back in order to have that capital because 
the SBA does put a lot of the risk onto the CDCs to do those 
small loans.
    We feel it would be a great thing for us, because, again, 
we've got people in these small communities. But it isn't the 
easiest thing to do. But we hope to be lending it in the next 
year.
    Chairwoman Cantwell. I wanted to go back to you, Mr. 
Swanson, because you talked more specifically about the 504 
program. So what do you think we need to do to more target our 
help there? You mentioned understanding the core customer and 
the refinance program--you know, simplifying the rules. What, 
specifically, do you think SBA needs to do to make that program 
successful?
    Mr. Swanson. Well, like I mentioned before, they have cut 
some of the rules out. They have simplified it, and those start 
taking place, I believe, this week. So we are looking forward 
to seeing that happen. I think it's just a general idea that 
the SBA needs to delegate a little bit more authority to the 
local CDCs.
    I think, you know, coming out of the recession, a lot of 
CDCs--their portfolios did not do well, and I think the SBA 
should look at each CDC as an individual organization, not all 
as a whole, when they're reviewing each credit. I think, again, 
not all CDCs are created equal. There's a lot of great CDCs 
across the country.
    And I think if the SBA, again, didn't take a one size fits 
all as they look at applications from each CDC, I think that 
would really help put out more capital to small businesses. As 
the local CDC knows the borrower, knows the business, knows the 
local economy, I think that could really help.
    So that's not really detailed, but it's a bigger picture 
than--the process for 504 has just always had this reputation 
for being really long. When I first entered into the 504 world 
seven-plus years ago, you know, it would take a month to go 
from application into getting an SBA authorization. But for us, 
as an organization, we've cut that by less than half.
    So this whole thing moving forward--it's just got to be a 
continual moving forward, and with the SBA continuously having 
someone there trying to say, ``How do we make this easier for 
the borrowers? How do we get the capital out?''--of course, 
balancing still that the SBA needs to protect the taxpayers and 
their investors.
    Chairwoman Cantwell. You mentioned the 10 percent down.
    Mr. Swanson. I think that would be huge. Like I said, what 
we're really seeing a lot nowadays is small business owners, 
you know, the ones that got through the recession, a lot of it 
was not taking salaries. It was using every bit of cash they 
had in the business to keep it going.
    Now, as we get this slow recovery, we're really seeing 
that, you know, they have contracts, they need more equipment, 
they need a bigger space. But they don't have that down 
payment. Even the 10 percent is just insurmountable for some of 
them.
    But if we could make it so all businesses--currently, with 
a 504 program, if you're a business that has less than two 
years experience, or if you're what the SBA calls a special 
purpose building--like a hotel is an example--they require an 
extra down payment on this. So I think if we could just have 
504 as everything is 10 percent down, I think that would help a 
lot of businesses in this economy. That 10 percent has really--
fixed rate is great, too, but the 10 percent down is huge in 
the 504 program, getting access to capital.
    Chairwoman Cantwell. Any other comments on the 504 program?
    Mr. Chance. A little encouragement. They haven't offered it 
to the regulatory agencies of the financial institutions. But 
they visit with the credit people to encourage this, and they 
do through the community outreach efforts, but the more of 
that, the better. It's very helpful when our credit people hear 
that a program like 504 is a great way to help with owner-
occupied real estate, because it's ultimately one of those 
larger transactions, and the credit administration people are 
providing the approvals.
    Mr. Chairman. So you think that there's doubt that's 
created at the federal level?
    Mr. Chance. Not only is there doubt, but it's just they're 
not getting the message as consistently and as strongly as 
would be desirable. If they were hearing that from the FDIC, 
for example, and the credit administration--``Hey, we really 
like this product. We really like this product. It's a good 
product,'' it would be helpful. Sometimes there's an 
inconsistency in the world. We hear from the marketing side, 
and then even with the SBA ----
    Chairwoman Cantwell. And what would the other side be 
saying? This is an important piece.
    Mr. Chance. One says it's very important--this is something 
good to do. The audit side has been saying, ``Be cautious, be 
cautious,'' and that's very--that signals the SBA to come in. 
We've had favorable audits. Others tell me, other banks, that 
they get cautionary tales, like you haven't scrutinized that 
carefully enough. You haven't--you've underwritten it at a 
little higher leverage than you should. And so they're kind of 
getting mixed signals between the different divisions.
    Chairwoman Cantwell. Well, maybe that should be the subject 
of another hearing in Washington, to make sure that we 
understand how the regulators are looking at the 7(a) and 504 
programs, because I think this is very important, very 
important. And it was very frustrating during the downturn to 
have on the one hand the Treasury giving access to large banks, 
and then at the same time federal regulators pounding on all 
the community banks on their margin rates and, thereby, you 
know, causing various challenges or collapses at the same 
time--so very challenging and very frustrating.
    If we could go back just for a second about this area, in 
general, I just want to make sure that before we wrap up today 
that I understand. Do you think this is about not having enough 
lenders in the area? Do you think it's about communication? One 
suggestion from some people in the community was that maybe 
even the government shutdown slowed down the number of loans 
that were being processed, and that's why these numbers are 
off, you know, from last year.
    Clearly, I would like to come back in a year, in two years, 
and see that Clark County and Cowlitz County and Southwest 
Washington, the lower Columbia, is one of the most business 
friendly places for job creation and new enterprises, and here 
is this cadre of people advocating these services. That's one 
thing I'm hearing from all of you, communication and advocacy. 
But are we missing the sheer number of places, too, in the 
region that are providing those resources?
    Mr. Chance. More is always better, government shutdown is 
bad, and, certainly, the help in the internal marketing of 
federally enhanced programs, because it creates uncertainty. 
And we're not running a grant program where you apply on May 
the 1st, and we offer awards the following month, and that's 
it. During the year, we want to be lending multiple times every 
day. If there's uncertainty about the availability of the 
program, it makes it harder to have the momentum.
    Chairwoman Cantwell. But do you think that's what's causing 
this issue here?
    Mr. Chance. I don't think so, because as your statistics 
show, Portland is a little unique. There are other places in 
the country that don't have the same effects. It could be true 
that this part of the country seems, for whatever reason, to 
enter recessions a little bit later and come out of them a 
little bit later. So we may be seeing that general effect.
    Chairwoman Cantwell. What we're seeing--you know, increases 
in other areas. And so we certainly want to--you know, we want 
a thousand flowers to bloom here and new enterprises, and we 
want to make sure they get access to capital.
    When you were--I'm not sure if it was you, Mr. Sawyer, or 
Mr. Swanson--talking about having these open houses and having 
SBA attend, were you thinking of Portland or Seattle? Or do you 
think we should have them both?
    Mr. Sawyer. Well, I think what I was referring to was 
collaboration with the Portland office to have SBA office 
hours, field hours--call it what you will--at the Vancouver 
Chamber and be able to advertise that to Vancouver Chamber 
members and/or the business community at large that this 
opportunity is here. If you want education, if you want to make 
a contact with the SBA, here's an opportunity. You don't have 
to drive across in traffic or whatever. It's here five minutes 
away. Come on down--trying to become that one stop shop for all 
of our members as well as the business community at large.
    Chairwoman Cantwell. So do you think that's been part of 
the gap, that some people ----
    Mr. Sawyer. Absolutely.
    Chairwoman Cantwell [continuing]. Don't know that the 
service--you know, they don't know who to go to because they're 
on the Washington side, and they don't know if they should go 
to Portland or Seattle?
    Mr. Sawyer. Well, there's a gigantic chasm that is that 
river that nobody wants to cross. Honestly, a lot of times, it 
is a problem for business owners. They literally don't have the 
time. I mean, it's a lot to ask you guys to be here today for a 
couple of hours. I mean, business owners are busy. They've got 
plenty of things going on on their plates.
    So to drive over--and, again, a lot of times, those other 
meetings are at times that are not exactly convenient. So if 
the Chamber were to work with providing that opportunity to 
present a more opportune time, I think you'd see some more 
access to more business communities.
    Ms. Tantisook. And I'd echo that and say that whatever 
solution you look at, just to make it simple for business 
owners as well as making it simpler for banks and lenders. To 
make it simpler on us--we don't have a lot of time, and I know 
that in the past two years, we've spent months and months and 
months just on financing, whether it's filling out grants or 
working on loan applications.
    Our team is pretty qualified to do some of that stuff, but 
I know a lot of business owners don't have those skills to come 
up with the things that the banks are asking for. So how can we 
create solutions that really work with the nature of business 
owners, which is they're busy, and sometimes they don't have 
all the skills to get the required documentation.
    Chairwoman Cantwell. Nancy, did you want to add--I know 
you're not miked or up, but as Acting Regional Director of the 
SBA, is there anything you want to say about the state giving 
resources here in Vancouver?
    Ms. Porzio. Yes, there is.
    Chairwoman Cantwell. Is there a microphone she can come up 
to?
    Ms. Porzio. Thank you. Yes, I am representing the regional 
administrator, Calvin Goings, and I'm district director in 
Seattle, and, actually, I think, formal mentor to the new 
district director in Portland, Camron Doss. He's been on board 
for about six months. So we've been talking about some 
collaboration, but I think it's been made very clear today that 
we need to be doing more between the two offices, perhaps doing 
more training together down here.
    They have a relatively new staff in Portland, and I think 
they could gain a lot from the staff that's located in Seattle. 
They have an average of 25 years of experience with SBA. So I 
do think that we could come down and do some joint training. 
But I also think we need to figure out how to make it a little 
easier. It's just always complicated when another district has 
part of the state.
    So I don't know if I would go so far as to say we need to 
change that and make it just Washington state and Oregon state. 
But I think we need to come up with a way that we can work a 
little closer together, you know, with all of our partners. The 
SBDCs report to Washington, yet they have a responsibility with 
the Portland office. It's confusing. So I think--I don't know 
if that's something you necessarily need to deal with, or if 
that would be something SBA could look at.
    Chairwoman Cantwell. Well, we certainly, you know, want to 
deal with it, because we think small business is a great 
economic development strategy for our country, in general. And 
if access to capital is a key ingredient, we want to make sure 
that it gets out there. We just want to address any issues that 
might meet this issue of regional challenges because people are 
not sure whether they should contact Seattle or contact 
Portland. And, obviously, we want them to have the best of both 
worlds.
    I just want to point out that there is a woman, Ann Marie 
Mehlum, who is the SBA access to capital person at the SBA in 
Washington, D.C. She is from Oregon, so back there, the head of 
the whole program is a Northwest person. So we should get her 
involved in making sure that we address any issues that might 
be about communication.
    People in Vancouver should have the best of both worlds, or 
Southwest Washington should have the best of both worlds. But 
that might be a little confusing. So maybe what we should do is 
just try to figure out something that the SBA could communicate 
or come to terms with about how we would work as a region 
together.
    Ms. Porzio. Well, this has been very enlightening, and it 
has helped me to see what's going on, and we will definitely go 
back and make some plans to improve service and make sure that 
we're more visible.
    Chairwoman Cantwell. Thank you.
    Mr. Sawyer. Could I ask a quick question? At the risk of 
making this sound weird, but simplifying it, is there a turf 
war, so to speak, in terms of a funding mechanism for 
Washington state based on however many loans go through you 
versus Oregon? Would there be a reason why it would benefit 
Vancouver to stay within Washington? Or is it just a matter of 
it doesn't matter who gets it, as long as the entrepreneur gets 
taken care of?
    Ms. Porzio. Definitely the second is more true to form.
    Mr. Sawyer. Okay. Okay.
    Chairwoman Cantwell. My guess, Eric, is just as you said, 
you know. No one wants to cross the river, and no one else 
wants to drive three hours. So the question is how do we--your 
suggestion was right on target, how to get the Chamber and 
maybe others having services right in their backyard. So I 
think that's what we should work on. That's a good example.
    Well, we're about out of time. I wanted to also mention for 
those who are watching, as I mentioned earlier, this is an 
official record for the Senate Small Business Committee, and so 
the record will remain open for my colleagues and others. I 
know that we have a--Vancouver Capital Access has been showing 
this, and there is--and we'll have a link to the Web site, the 
sbc.senate.gov Web site, and that will be a place if people 
want to send an email, they can send an email as well.
    So if anybody at home who is watching this who is a small 
business owner or wants to be a small business and have access 
to capital questions, then Vancouver Capital Access, all one 
word, no spaces, at sbc.senate.gov. You can send an email and a 
communication, and we will get you to the appropriate sources.
    So I want to thank all the witnesses for your testimony 
today and your willingness to be here. To the entrepreneurs, 
thank you for being daring and helping our economy. To the 
lenders, thank you for your input on how to improve these 
programs. To the EDCs and the Chamber, thank you for making 
this area a more attractive place for economic development.
    We look forward to continuing this listening session around 
the state, and we will certainly get back to you on the 
recommendations that we will be taking before the full 
committee.
    So, again, thank you, everybody in Southwest Washington, 
and we're adjourned.
    [Whereupon, at 12:02 p.m., the hearing was adjourned.]

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