U.S. GOVERNMENT PUBLISHING OFFICE

34–645 WASHINGTON : 2019

EXPLORING CHALLENGES AND OPPORTUNITIES 

OF UNDERSERVED BUSINESSES IN THE 21ST 

CENTURY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC GROWTH, 

TAX, AND CAPITAL ACCESS 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED SIXTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

FEBRUARY 7, 2019 

Small Business Committee Document Number 116–003 

Available via the GPO Website: www.govinfo.gov 

SBR002 with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA VELA ́ ZQUEZ, New York, Chairwoman 

ABBY FINKENAUER, Iowa 

ANDY KIM, New Jersey 

SHARICE DAVIDS, Kansas 

JARED GOLDEN, Maine 

JASON CROW, Colorado 

JUDY CHU, California 

MARC VEASEY, Texas 

DWIGHT EVANS, Pennsylvania 

BRAD SCHNEIDER, Illinois 

ADRIANO ESPAILLAT, New York 

ANTONIO DELGADO, New York 

CHRISSY HOULAHAN, Pennsylvania 

VACANT 

STEVE CHABOT, Ohio, Ranking Member 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member 

TRENT KELLY, Mississippi 

TROY BALDERSON, Ohio 

KEVIN HERN, Oklahoma 

JIM HAGEDORN, Minnesota 

PETE STAUBER, Minnesota 

TIM BURCHETT, Tennessee 

ROSS SPANO, Florida 

JOHN JOYCE, Pennsylvania 

ADAM MINEHARDT, Majority Staff Director 

MELISSA JUNG, Majority Deputy Staff Director and Chief Counsel 

KEVIN FITZPATRICK, Staff Director 

SBR002 with DISTILLER

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Andy Kim ........................................................................................................ 1 

Hon. Kevin Hern ...................................................................................................... 6 

WITNESSES 

Ms. Marla Bilonick, Executive Director, Latino Economic Development Center, Washington, DC ............................................................................................ 4 

Ms. Sharon Pinder, President & CEO, Capital Region Minority Supplier 

Development Council, Silver Spring, MD .......................................................... 7 

Mr. Davy Leghorn, Assistant Director, American Legion Veterans Employment & Education Division, Washington, DC ................................................... 9 

Mr. Michael Romano, Sr. Vice President of Industry Affairs & Business 

Development, NTCA—The Rural Broadband Association, Arlington, VA ...... 10 

APPENDIX 

Prepared Statements: 

Ms. Marla Bilonick, Executive Director, Latino Economic Development 

Center, Washington, DC ............................................................................... 23 

Hon. Kevin Hern ............................................................................................... 27 

Ms. Sharon Pinder, President & CEO, Capital Region Minority Supplier 

Development Council, Silver Spring, MD ................................................... 29 

Mr. Davy Leghorn, Assistant Director, American Legion Veterans Employment & Education Division, Washington, DC ..................................... 36 

Mr. Michael Romano, Sr. Vice President of Industry Affairs & Business 

Development, NTCA—The Rural Broadland Association, Arlington, VA 44 

Questions and Answers for the Record: 

Questions from Hon. Bradley Schneider to Mr. Davy Leghorn and Answers from Mr. Davy Leghorn ..................................................................... 54 

Additional Material for the Record: 

CCA-Competitive Carriers Association ........................................................... 56 

SBR002 with DISTILLER

SBR002 with DISTILLER

(1) 

EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN 

THE 21st CENTURY 

THURSDAY, FEBRUARY 7, 2019 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON ECONOMIC GROWTH, 

TAX, AND CAPITAL ACCESS, 

Washington, DC. 

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

2360, Rayburn House Office Building. Hon. Andy Kim [chairman of 

the Subcommittee] presiding. 

Present: Representatives Kim, Davids, Schneider, Delgado, 

Radewagen, Hern, and Spano. 

Chairman KIM. We are going to get started here. We have a 

number of members that are coming over from the National Prayer 

Breakfast so they will come in and the Ranking Member will come 

in as he is able. 

I am Chairman Andy Kim. I am eager to get started here. I just 

want to have an opportunity to be able to make sure we are hearing from the incredible people that we have today that are going 

to be sharing with us. 

Small businesses make up over 99 percent of all businesses in 

the United States and employ almost half of our nation’s workers. 

In 2018 alone, America’s small employers added 1.9 million net 

new jobs to the economy. As I have seen firsthand in my district 

in New Jersey, Main Street businesses are the backbone of our 

communities. 

In my home state, small businesses employ nearly two million 

people, making up nearly half of the private workforce. Among 

them are approximately 58,000 veteran-owned businesses and over 

250,000 female-owned businesses, which is why I am particularly 

happy to be chairing this hearing today. 

While nearly every entrepreneur faces obstacles when it comes to 

getting a new business off the ground and running, entrepreneurs 

from traditionally-underserved backgrounds tend to face even 

greater barriers to entrepreneurial success. 

We often hear that access to capital is the biggest challenge facing aspiring entrepreneurs. As the lifeblood of all new businesses, 

affordable capital is crucial to starting a business. Without it, new 

firms often cannot buy inventory and equipment, pay their employees, and expand operations. 

SBR002 with DISTILLER

2 

Unfortunately, studies have shown that women, minority, and 

veteran-owned businesses face heightened obstacles to securing affordable capital. For example, the Minority Business Development 

Agency found that minority-owned firms experience denial rates 

three times higher than other firms. Despite a similar demand, 60 

percent of veterans reported a financing shortfall and had approval 

rates 10 percent lower than all other firms. 

In response to these challenges, minority-owned firms are more 

likely to rely on personal sources of funding, such as savings, a 

family member, or credit. This unfortunate reality is not only 

unsustainable, it is also hindering small business growth. 

Unfortunately, barriers to entering Federal procurement markets 

are also common for underserved firms. Federal contracts are a 

great source of potential for business growth and it is crucial that 

we find ways to make them more accessible to budding small firms. 

Setting government-wide small business contracting goals was a 

meaningful step towards increasing small business participation in 

the Federal procurement marketplace. However, as the numbers 

show, we will have work to do to level the playing field for underserved businesses. 

For instance, women-owned businesses were awarded $21 billion 

of the total $500 billion in contracts for fiscal year 2017. This is 

highly disappointing considering that women entrepreneurs contribute over $1 trillion a year to the U.S. economy. 

Meanwhile, rural businesses are facing a unique set of challenges, including smaller labor pools, slow population growth, net 

outmigration, and health problems including diabetes and opioid 

addiction. Though these issues impact rural communities at large, 

they can also have a devastating impact on rural entrepreneurship 

and business growth. 

To address these disparities, SBA created several initiatives 

which we will hear more about today. For many underserved businesses, initiatives such as Small Business Development Centers, 

Women’s Business Centers, SCORE, and Veterans’ Business Outreach Centers are there to provide mentorship and other key services. 

Today, I look forward to hearing the recommendations and feedback of our distinguished witnesses to strengthen these initiatives, 

as well as other Federal programs and private sector actions serving underrepresented entrepreneurs. 

I hope today’s hearing will be a productive opportunity to explore 

the challenges facing small firms while identifying areas where we 

can work together on legislation that seeks to level the playing 

field for America’s small businesses. 

Thank you. 

The Ranking Member will submit his statement for the record. 

And if other Committee members have opening statements prepared, we would also ask that they be submitted for the record. 

I would like to take a minute to explain the timing rules. Each 

witness will get 5 minutes to testify. Each member will get 5 minutes for questioning. There is a lighting system to assist you. The 

green light will be on when you begin, the yellow light will come 

on when you have 1 minute remaining, and the red light will come 

SBR002 with DISTILLER

3 

on when you are out of time. And we will ask that you stay within 

the timeframe to the best of your ability. 

Now, I would like to introduce our witnesses. Our first witness 

is Ms. Marla Bilonick. Ms. Bilonick has been the executive director 

of the Latino Economic Development Center since 2014. She has 

also worked for Seedco where she assisted businesses in Lower 

Manhattan that were impacted by the attacks of September 11th. 

Ms. Bilonick is a member of the board of directors of the National 

Association of Latino Community Asset Builders. She is a graduate 

of the University of Wisconsin at Madison and received her Master 

of Arts degree from Johns Hopkins University of Advanced International Studies (SAIS). 

Welcome back, Ms. Bilonick. 

Our second witness is Ms. Sharon Pinder. Ms. Pinder is the 

president and CEO of the Capital Region Minority Supplier Development Council (CRMSDC), a nonprofit corporation whose mission 

is to link corporations and government agencies with minority business enterprises. Prior to joining the council, she served as the director of the Mayor’s Office of Minority and Women-Owned Business Development for the City of Baltimore. She was also Maryland’s first appointed cabinet secretary of the Governor’s Office of 

Minority Affairs. Ms. Pinder holds a Master of Science degree in 

Technology Management from the University of Maryland, University College, where she has the honor of serving as professor of 

practice in the School of Graduate Studies. 

Welcome, Ms. Pinder. 

Our third witness today is Mr. Davy Leghorn. Mr. Leghorn is the 

assistant director of the Economic Division of The American Legion 

where he oversees employment, small business, and VA contracting 

policies. He also administers The American Legion’s Veteran Entrepreneurship Program. Mr. Leghorn served as a motor infantryman in the United States Army, then as a civil affairs specialist 

with the 450th Civil Affairs Battalion. He currently serves as the 

sergeant-at arms for George Washington Post 1 in The American 

Legion Department of the District of Columbia. 

Welcome, Mr. Leghorn, and thank you for your service. 

And today’s final witness is Mr. Mike Romano. Mr. Romano 

serves as a senior vice president of Industry Affairs and Business 

Development for NTCA, the Rural Broadband Association. NTCA 

represents roughly 850 telecom companies throughout the United 

States, many of whom are located in rural communities and small 

towns with a goal of ‘‘building a better broadband future for rural 

America.’’ Prior to joining NTCA in 2010, Mr. Romano worked at 

Bingham McCutchen LLP, Global Telecom and Technology, America Online, and Level 3 Communications and Swidler Berlin. 

Thank you for joining us today. 

I want to just get started right from the beginning, so Ms. 

Bilonick, you are recognized for 5 minutes. 

SBR002 with DISTILLER

4 

STATEMENTS OF MARLA BILONICK, EXECUTIVE DIRECTOR, 

LATINO ECONOMIC DEVELOPMENT CENTER; SHARON 

PINDER, PRESIDENT AND CEO, CAPITAL REGION MINORITY 

SUPPLIER DEVELOPMENT COUNCIL; DAVY LEGHORN, ASSISTANT DIRECTOR, AMERICAN LEGION VETERANS EMPLOYMENT AND EDUCATION DIVISION; MICHAEL ROMANO, 

SENIOR VICE PRESIDENT OF INDUSTRY AFFAIRS AND BUSINESS DEVELOPMENT, NTCA-THE RURAL BROADBAND ASSOCIATION 

STATEMENT OF MARLA BILONICK 

Ms. BILONICK. Good morning, Subcommittee Chairman Kim 

and members of the Subcommittee. It is my sincere honor to be 

speaking with you all today. 

My name is Marla Bilonick, and I am the executive director and 

CEO of the Latino Economic Development Center (LEDC). 

LEDC is a 28-year-old organization with the mission to drive the 

economic and social advancement of low- to moderate-income 

Latinos and other underserved communities in the D.C. and Baltimore metropolitan areas. We operate out of six offices in the region, with over 40 professional and bilingual staff providing topnotch services to our clients. On an annual basis, we serve well 

over 4,000 low- to moderate-income residents. We are a SBA Microlending Intermediary, SBA Community Advantage Lender, and certified Community Development Financial Institution (CDFI). 

Since we began lending in 1997, we have rolled out more than 

$15 million in capital and have provided small business technical 

assistance services to thousands of aspiring and existing small 

business owners in the region. LEDC is a member of, and I sit on 

the board of the Opportunity Finance Network, a membership organization representing the over 1,000 CDFIs in the United States. 

The challenges I will outline are consistent with what we hear from 

our fellow CDFIs operating similarly underserved communities 

around the nation. 

LEDC exists to help underserved populations overcome the challenges that stand in their way of achieving their full potential for 

achieving financial stability and income mobility. While the challenges before them are countless, those I would characterize as the 

most significant are: lack of access to capital, lack of access to information and educational resources, poor or no credit history, and 

systemic and institutional racism and sexism. 

In my testimony, I will elaborate on each of these barriers to success. As the head of a Latino-facing organization and member of 

the Board of Directors of the National Association of Latino Community Asset Builders (NALCAB), I will also include information 

on small business challenges that are specific to the Latinx community. 

So starting with lack of access to capital, the traditional commercial banking system is often not a viable resource for underserved 

small businesses. Commercial banks defer to a fixed minimum 

credit score they will accept for loan approvals and are further hindered from serving small businesses due to restrictions around 

lending to startups or providing smaller-dollar financing. A recent 

report from the Woodstock Institute cited that the number of CRASBR002 with DISTILLER

5 

reported loans under $100,000 in 2015 remained 58 percent lower 

than in 2007. What is more, bank branches are consolidating and 

closing at a steady clip, with 1,700 bank branches closing in the 12 

months between June 2016 and June 2017. 

The alternative for underserved entrepreneurs operating in this 

climate is to take out credit cards that often charge high interest 

rates, access high-cost financing via the emerging online lending 

industry, tap into merchant service cash advances, obtain a loan 

from a loan shark, or obtain a loan from the CDFIs in their area. 

I will note that we have several loans in our portfolio that are restructured financing deals for entrepreneurs who fell prey to the allure of online lenders. 

On the other hand, data shows that CDFIs in OFN’s membership 

alone have originated more than $65 billion in financing in urban, 

rural, and native communities through 2016. To quote OFN’s president, Lisa Mensah, ‘‘ CDFIs exist to move money to places missed 

by traditional lenders.’’ However, CDFIs face challenges in terms 

of reaching the very communities that need our services due to 

minimal or nonexistent marketing budgets, challenges to capitalizing our loan funds, and/or sustaining the high overhead costs associated with the labor-intensive loans we underwrite. 

In terms of lack of access to information and educational resources, starting or growing a business is not for the faint at heart. 

In an ideal scenario, an entrepreneur has the time and support to 

complete an in-depth business plan, complete with a market analysis, elaborate revenue projects, a well-developed management 

plan, and options for financing their one-time startup costs, as well 

as ongoing or variable costs to come. 

Unfortunately, underserved entrepreneurs do not always have 

access to business planning information or resources, nor do they 

have the time to invest in business planning as they are looking 

to their business ideas as a source of income for themselves and 

their families. 

In addition, the regulatory framework is a maze of processes and 

agencies that few could understand without outside support. Depending on the business type, entrepreneurs frequently need to go 

through several licensing agencies and register with their state and 

jurisdiction to be compliant. Layer on top of that the language barrier that many of our immigrant Latinx clients face, and it is doubly challenging to meet compliance requirements. 

I am actually going to skip the reference to poor and no credit 

history, although it is a significant challenge. I want to get to sort 

of the last section which I think is probably the most challenging 

around systemic and institutional discrimination. 

So my testimony cites the same research that you cited, Mr. Kim, 

from MBDA, around the disproportionate disapprovals for minority 

and female borrowers. And, you know, just showing that identical 

applications from minority and nonminority applicants were rejected up to 54 percent times more frequently. And for women, 

women-owned businesses received nearly 50 percent less funding 

than men-owned businesses, and that funding actually declined by 

42 percent between 2016 and 2017. 

In closing, my request would be that we do not lose sight of the 

protections for consumers in general, as well as minorities. The 

SBR002 with DISTILLER

6 

CFPB, OCC, Fed, and FDIC should continue and deepen their evaluation of commercial bank activities with regard to the demographics of who is and who is not receiving loans. 

Just yesterday, the CFPB said it plans to abolish most of its critical consumer protections governing payday loans. And while that 

is not necessarily a direct correlation with our small business clients, it just is a signal to the attitude of the CFPB at this moment 

in time, which is certainly troubling. Specifically, the CFPB should 

finalize its implementation of section 1071 of the Dodd-Frank Act, 

which would require financial institutions to compile, maintain, 

and report information regarding credit applications made by 

women-owned, minority-owned, and small businesses. This kind of 

information would provide policymakers with insights into the precise shortcomings of diverse businesses in seeking credit, enabling 

policymakers to craft narrowly-tailored legislation designed to remedy the shortcomings within each of these entrepreneurial communities. 

Thank you. 

Chairman KIM. Thank you so much. 

Before we move on to our next witness, I just wanted to recognize our Ranking Member here and turn it over to him for his 

opening statement.[16]fb[17] 

Mr. HERN. Thank you, Mr. Chairman. Thank you for your kindness in doing that. My apologies for my tardiness. We were at the 

National Day of Prayer, so I appreciate that. 

I just want to say that as a small businessperson for 34 years 

and a person who has lived the American dream, come from extraordinary poverty to being a very successful businessperson, 

there is nothing that has been a greater joy for me later in my life 

than to help small businessmen and women see their ideas brought 

to life, to start small businesses, to help so many try to find, actually write business plans, and to find access to capital, help them 

mold and model their business plans to work. 

And so with about 99.9 percent of all businesses in the United 

States being classified as small, the impact that small businesses 

have on our economy cannot be overstated. In my home state of 

Oklahoma alone, we have over 340,000 small firms who employ 

over 700,000 people. Many of these businesses are owned by minorities, women, and veterans, and many of these businesses are 

located in rural areas. 

Small businesses owned by minority, women, and veterans face 

a unique set of challenges, ranging from raising adequate financing, to building social capital, to finding the effective mentors. 

Rural businesses, however, while facing those challenges, also tend 

to face a different set of challenges, most notably, access to reliable 

and affordable broadband service. 

Today, more than 24 million Americans lack access to high speed 

internet, the vast majority of whom live in rural communities. 

When comparing urban and rural broadband development, 97.9 

percent of urban America has access to both fixed and mobile 

broadband, while only 68.6 percent of rural citizens have the same 

access. 

The lack of a solid business case for rural broadband deployment 

remains a certain reason for what is often referred to as the ‘‘ digSBR002 with DISTILLER

7 

ital divide.’’ Large telecommunications companies have little incentive to invest in broadband infrastructure in areas with low population density. Instead, small telecommunications carriers are far 

more likely to invest in rural communities, often because they are 

communities. Frequently, however, these small firms face numerous challenges in their efforts to increase broadband access. 

Small businesses specifically require access to reliable and affordable technology to compete with larger competitors. According 

to a recent study, digitally advanced small businesses were shown 

to be more than three times likely to create jobs and experience 

revenue growth at a rate four times higher than small businesses 

who do not employ technology. Yet, despite such outstanding returns, many small businesses do not take full advantage of the 

technologies available to them. Often, this is due to owners not realizing the benefits of such tools offered to them, or simply lacking 

access to reliable technological resources as a result of cost or location. 

Today’s hearing will allow us the opportunity to further discuss 

these and other challenges that businesses owned by minority, 

women, veterans, and rural Americans face while also exploring potential ways to improve and elevate these issues moving forward. 

I look forward to hearing from our witnesses, I again apologize 

for my tardiness, and to having a productive conversation. 

Thank you, Mr. Chairman. I yield back. 

Chairman KIM. Thank you. I look forward to working with you 

on this Subcommittee to do what we can for small businesses. And 

I have to say I am just in awe of your experience, the great success 

that you have had over your career, your particular knowledge 

about small businesses. I think it is going to add a tremendous 

amount of expertise to this Subcommittee, and I am looking forward to working with you on that. 

Mr. HERN. Thank you. 

Chairman KIM. Why do we not get moved back to the witness 

panel? 

I want to move it over to Ms. Pinder, if you do not mind. You 

are recognized for 5 minutes. 

STATEMENT OF SHARON PINDER 

Ms. PINDER. Good morning. I am Sharon Pinder, and for the 

last 4 years I have been the president and CEO of the Capital Region Minority Supplier Development Council. Good morning, Chairman Kim, Ranking Member Hern, and distinguished Committee. I 

thank you for the opportunity today to have this conversation. 

Today I am actually in real awe as I look at the picture of the 

late Congressman Parren Mitchell on the wall when he was Chairman of the Small Business Committee. I think about 40 years ago, 

and the foundation of all MBE programs that exist today, Public 

Law 95-570. And so as we look at the basis of the foundation of 

MBE programs and its challenges, we will talk about day, they 

(challenges) still exist 40 years later. 

The Capital Region Minority Supplier Development Council, is 

the nation’s certifying body for the private sector created on the 

heels of civil unrest in the late 1960s, our mission is to certify, develop, and advocate for minority businesses. 

SBR002 with DISTILLER

8 

The Capital Region Minority Supplier Development Council (my 

particular territory) is the State of Maryland, District of Columbia, 

and Northern Virginia. In addition to that, I operate two Minority 

Business Development Agency (MBDA) Centers. One is the MBDA 

Business Center Washington D.C., and the other one is the only 

federally funded center, federal procurement center. 

Yesterday, I was talking to a group of minority businesses and 

I just arbitrarily asked the question, ‘‘What are your issues’’? 

‘‘What are the problems that you face as businesses’’? And without 

script, just generally what they said to me was (1) capitalization 

or the undercapitalization of their businesses; (2) not having that 

network or those relationships; and (3) not being able to navigate 

as you look at contracts opportunities. 

As we look at the 21st century, many programs and ideas aimed 

at leveling the playing field have existed for over 40 years, and 

across this country we witness enormous gaps that exist between 

the current measures of minority and women availability and number of relative size of minority-owned firms that you would expect 

to exist across the country. These gaps are not without severe consequences for economic health of the country as a whole. 

When minority businesses thrive, communities of color thrive as 

well. Diverse businesses which are more likely to hire local and 

employ people of similar backgrounds work as powerful forces for 

economic development. Communities of color will become the majority in 2044 or before. And how minority businesses fair will impact the sustainability and strength of our nation. 

Our nation’s economic history is rich with examples of public policy and government actions facilitating the spirit of entrepreneurship and directly contributing to the success of capitalism. At critical junctures throughout the industrialization of America, the Federal Government has proactively redirected the flow of commerce 

and in effect has launched the birth of new giants of American industry. From the issuance of Federal land grants that were essential to spurring the growth of railroads and to breathing life into 

the telegraph and telephone industries, from granting the licenses 

and broadcasting frequencies to radio and television companies, 

and from the construction of Federal highway systems to the creation of aviation and aerospace programs, the government has been 

a willing partner in forging a path for new industries. 

For example, the adoption of airmail as the primary mode of 

transportation for the U.S. Postal Service consequently aided in 

contracts to a number of airlines and placed them in a path that 

they became really successful in the private airline industry. 

Due to time, I am going to skip down to the next part of my testimony. 

So what we should consider that timing is everything and that 

this is a critical juncture in our history with an opportune time to 

use the model of the past for purposeful and intentional support 

from the government. Today’s minority businesses can be tomorrow’s moguls, whereas past discriminatory practices prevented 

their participation in building some of the nation’s top industries 

because quite frankly minority businesses were not at the table 

when those industries were born. There is an opportunity now by 

which minority businesses can benefit by being at the table during 

SBR002 with DISTILLER

9 

the infancy of some of today’s emerging industries and technologies. As in the past, partner with the government and as that 

industry grows, those minority businesses will grow as well. Thank 

you. 

Chairman KIM. Thank you for that. And I agree with you. Timing is everything. And we are at a critical juncture, which is why 

we were grateful to have your expertise here today to help us think 

through the way forward. So thank you so much for that. 

Mr. Leghorn, I want to turn it over to you. You are recognized 

for 5 minutes. 

STATEMENT OF DAVY LEGHORN 

Mr. LEGHORN. Chairman Kim, Ranking Member Hern, and distinguished members of the Subcommittee, on behalf of our national 

commander, Brett R. Reistad and the nearly two million members 

of The American Legion, we thank you for the opportunity to testify today on exploring challenge sand opportunities faced by veteran businesses. 

In our testimony, we covered a broad spectrum of topics from 

Federal contracting to entrepreneurial development programs and 

access to capital. We would like to dedicate the balance of our time 

this morning to just two issues. 

One detriment to the veteran small business industrial base has 

always been the misinterpretation of legislation that has designated SDVOSBs as a preferred contracting group. In legislation 

from 1999 and 2003, Congress gave SBA and other agencies broad 

business development authority to help veterans. Unfortunate, the 

SBA and FAR Council announced in 2005 rulemaking comments 

that government-wide SDVOSB program was for established businesses and was not meant to aid in development for new businesses. 

The Kingdomware decision affirmed the intent of the SDVOSB 

set-aside goal in the Veterans Entrepreneurship and Small Business Development Act of 1999, was to encourage small businesses 

and was not intended for the purpose of fulfilling a quota. The Supreme Court opined that the goals exist to provide real opportunities for service-disabled veterans and that the subsequent enactment of the Veterans Benefits, Health Care, and Information Technology Act was ancillary in nature to the Veterans Entrepreneurship and Small Business Development Act and shares the same intent. 

This is significant because agencies are now reminded that this 

reasoning applies to both the Small Business Act goals as well as 

goals under agency-specific laws like the Veterans First Contracting Program at VA. The American Legion had hoped that the 

outcome of Kingdomware would force SBA and the FAR Council to 

revisit the rules of the Veterans Entrepreneurship and Small Business Development Act. This has not occurred. To this end, The 

American Legion asked Congress to encourage SBA and the FAR 

Council to carry out their business development authority. 

Further, the Kingdomware decision signaled the Supreme 

Court’s approval for a model of veterans first or service-disabled 

veterans first to exist in contract set-aside and preference proSBR002 with DISTILLER

10 

grams. Congress can now extend this model government-wide in a 

Small Business Act or an agency-specific legislation. 

Additionally, The American Legion would like to discuss our support for SBA’s entrepreneurial development programs. Since 2012, 

the Boots to Business curriculum taught during the military’s 

Transition Assistance Program has been very successful. Since its 

implementation, Boots to Business has been the litmus test that 

has convinced veterans to launch their business or to delay the 

process until they are ready. 

In the 2019 National Defense Authorization Act, there was an attempt to make at least one of the TAP capstone courses mandatory. 

The American Legion supports this effort and hopes this will expose more service members to SBA and their grantees. 

The American Legion believes more service members should have 

access to SBA programs. Currently, National Guard and reservists 

are not eligible for veteran entrepreneurship and loan programs 

until they are activated under Title 10. This is why The American 

Legion supports legislation that would amend 15 USC to extend 

the eligibility for veteran-focused SBA programs to service members who have been ordered to perform active service for more than 

30 consecutive days. 

Increased utilization of SBA’s veteran-centric programs will require more veteran business outreach centers (VBOC). The American Legion supports the creation of more VBOCs. 

Puerto Rico, Guam, Virgin Islands, and American Samoa are 

often overlooked for veterans programs and services, despite the 

heavy military presence and recruitment efforts that occur there. 

This is why we support the Puerto Rico Small Business Assistance 

Act. The American Legion asks this Committee to authorize 

VBOCs in Puerto Rico and other underserved areas where veterans 

reside. 

In conclusion, Chairman Kim, Ranking Member Hern, and distinguished members of the Committee, The American Legion 

thanks you for the opportunity to explain the position of nearly two 

million members of The American Legion, and we look forward to 

any questions you may have. 

Chairman KIM. Thank you, Mr. Leghorn. That was very informative. 

I want to turn it over to Mr. Romano. You are recognized for 5 

minutes. 

STATEMENT OF MICHAEL ROMANO 

Mr. ROMANO. Thank you, Mr. Chairman. 

Good morning, Chairman Kim, Ranking Member Hern, and 

members of the Subcommittee. Thank you for the opportunity to 

testify today. 

My name is Mike Romano. I am the senior vice president at 

NTCA-The Rural Broadband Association. We represent approximately 850 small businesses that provide broadband in rural 

America. 

Our hope today is to offer a helpful perspective as a complement 

to the discussion of underserved areas and populations by my fellow witnesses. The capital-intensive nature of building infrastructure is particularly challenging in light of the deeply rural, sparsely 

SBR002 with DISTILLER

11 

populated areas NTCA members serve. Yet even as our members’ 

rural broadband networks are difficult to build and maintain, they 

are essential to ensure that other small businesses and consumers 

in rural America can connect with the rest of the world. 

Indeed, we believe that a key to helping underserved communities of all kinds in the 21st century is to deliver 21st century 

connectivity—high-speed broadband upon which users can rely to 

invest in and operate their own businesses to create jobs and provide opportunity. 

Investing in broadband has far-reaching effects for urban and 

rural America alike, creating efficiencies in health care, education, 

agriculture, energy, and commerce. America needs rural broadband 

not only to help farmers efficiently produce crops sold across the 

U.S. and around the world, but to help small businesses of all 

kinds participate in the national and global economies and to help 

all rural citizens experience the life-changing benefits of distance 

learning, telemedicine, and teleworking. 

This task of connecting everyone, however, is easier said than 

done. These challenges can present in different ways in different 

parts of the country for different communities of users. In rural 

areas, communities are more likely to be underserved from a 

broadband perspective because the economics of connecting them 

are difficult, if not impossible to overcome. Distance and density 

present physical challenges unlike any other for the business case 

of deploying and sustaining connections. To compound the business 

case further, rural areas are on average poorer than many urban 

areas and have lower broadband adoption rates. 

Despite such challenges, NTCA’s small business members have 

worked to connect rural America through an effective mix of entrepreneurial spirit, community commitment, and Federal and state 

support programs. Most NTCA members live and work in the communities they serve. They therefore have ever incentive to upgrade 

networks that connect their workplaces, their kids’ schools, their libraries, and their hospitals. But as I mentioned, the business case 

is challenging and complicates greatly both access to and use of 

capital. 

This is where Federal and state programs play a key role. For 

example, the Federal Universal Service Fund (or USF) enables and 

sustains communications infrastructure in rural America, helping 

carriers make the business case needed to justify loans or use of 

other private capital. Although the USF’s effectiveness was hampered for years due to arbitrary caps and regulatory uncertainty, 

the FCC responded late last year to consistent calls from hundreds 

of members of Congress on a bipartisan basis, calling for an infusion of resources and other improvements. It is our hope that the 

bipartisan reforms adopted by the FCC will unleash a new round 

of broadband investment in rural areas and help to sustain the networks already built. 

It is important too that the USF programs involve more than just 

helping connect rural areas. More than two decades ago, Congress 

wisely structured the USF as a comprehensive umbrella with components that seek to address connectivity concerns for discrete sets 

of potentially underserved populations through coordinated proSBR002 with DISTILLER

12 

grams—schools and libraries, low-income consumers, rural 

healthcare, and high cost support for rural networks generally. 

Indeed, in helping to make sure rates for services are affordable 

on rural networks, the high cost program of USF helps Americans 

living in rural poverty afford better access to communications. We 

therefore believe the Federal universal service mechanisms as a 

whole represent a well-thought, comprehensive strategy aiming to 

ensure that every American—regardless of the specific challenge 

that renders them at risk of being unserved or underserved—will 

be connected. 

The Rural Utilities Service (or RUS) also plays a significant role 

in helping small broadband providers access capital to deploy infrastructure in areas where returns on investment are measured in 

decades. Congress has expanded the role of RUS and rural 

broadband deployment through significant resources for new 

broadband loans and grants. These additional funds are welcomed 

and it is now important to ensure that the USF and RUS and other 

programs are coordinated and used as efficiently as possible. 

Much has already been accomplished in connecting rural America. For example, 70 percent of NTCA’s members’ customers already have access to 25/3 megabits broadband which the FCC 

deems to be the standard at this point for broadband, and many 

have faster connections, even up to gigabit service. 

But much work remains, too, especially in the areas not served 

by smaller operators like those in our membership where a digital 

divide exists. 

We look forward to working with your Subcommittee and your 

congressional colleagues to ensure that we can address the 

connectivity needs of underserved and unserved areas and keep 

connected those areas that are fortunate enough to be served today. 

Thank you. 

Chairman KIM. Thank you. And I just wanted to thank again all 

four of you for your testimony here today. 

I will certainly start moving forward with turning it over to my 

distinguished colleagues in just a few minutes but I did want to 

just start by asking a few questions myself. 

I want to start by saying I come into this position with a lot of 

humility. You know, I have a lot to learn. All of us have a lot to 

learn about what it is that we can do to serve small businesses, 

and the four of you, amongst many others, bring that kind of experience that we need to keep hearing about. 

I joined this Committee, and this was a priority of mine because 

my district in New Jersey is a small business district. You know, 

my district has, from the largest employer, a joint military base, 

but all the small businesses that continue to serve the base or are 

a part of both Burlington County and Ocean County. 

My priority is always to protect these military families and, veterans living in my district in particular. And less than 3 months 

ago, SBA and the Federal Reserve Bank of New York released a 

comprehensive report on the state of entrepreneurship for military 

veterans, and it is quite frankly concerning. The report found a 

generational decline in veteran entrepreneurship with fewer young 

veterans owning businesses than past generations. At the same 

SBR002 with DISTILLER

13 

time we are now beginning to see veterans owning businesses at 

lower rates than nonveterans. 

I want to ask unanimous consent to submit this report to the 

record. 

Without objection, the motion is agreed to. 

We know that historically the opposite has been true, that veterans have been generally more entrepreneurial than nonveterans. 

Of course, the skills gained during military service, teamwork, discipline, perseverance, a strong work ethic and crisis management 

all are important parts of the equation and those skills certainly 

have not changed. 

So Mr. Leghorn, I want to build off of your very informative 

statement. I want to ask you, just taking a step back, what has 

changed? You know, why in your experience are fewer young veterans launching businesses and having difficulties with access to 

capital and the financing shortfalls? I just wanted to hear from you 

that bigger picture. 

Mr. LEGHORN. Thank you for your question, Chairman. I think 

the main reason why we are not seeing as many veterans get into 

small business these days and embrace that entrepreneurial spirit 

is because of the recession and we are still kind of climbing out of 

the recession. A lot of these folks are very hesitant to take risks 

right now. As the economy improves, I hope that this is a trend 

that will be reversed. 

In terms of lending, I think one of the rather cool things that 

have happened since the decline of regional and community banks 

is that lending has kind of diversified and this is a trend we would 

like to see a lot more of and I think when the veterans do come 

back and start their own businesses the lending field is going to 

be very different for them and it is going to be very conducive to 

starting new business. 

Chairman KIM. Thank you for that. 

Based on what you were saying, what we have heard from all 

four, not every business owner experiences the same struggles 

when starting or growing a business. So Mr. Leghorn, just one final 

follow up. What are some of the obstacles unique to veteran startup 

companies? I want to get a better sense of what you feel like is particular obstacles or opportunities that are being faced and things 

that we might be able to do to support. 

Mr. LEGHORN. The main thing that hampers veteran-owned 

small businesses is collateral and we are generally cash poor. You 

know, and that is why folks like what I spoke about before with 

the diversity of lending and CDFIs are so important for the veteran 

community because normal bank products generally do not work 

for us and larger banks are less likely to make 7(a) loans to folks 

without collateral. 

Chairman KIM. Well, thank you for that. 

I want to make sure we turn it over to my other colleagues who 

I am sure have very insightful questions. 

So Ranking Member, Mr. Hern, I want to turn it over to you. You 

are recognized for 5 minutes. 

Mr. HERN. Thank you, Mr. Chairman. 

As an opening statement to your testimony, I will tell you, I look 

around. I think I may be the oldest up here. I have been creating 

SBR002 with DISTILLER

14 

jobs for a long time. I know that. First small business 1985. I will 

tell you, also having started a bank and still in banking, I sat on 

the board until I got this gig in November and I had to resign that 

board. But I chaired the Loan Committee for 10 years. And as you 

probably can imagine, I have a tremendous heart for small businesses and people who want to take that journey. 

Mr. Leghorn, you said your problem with your folks are lack of 

collateral and cash poor. I will tell you that represents about 99.9 

percent of the folks out there that have an idea, is how do I get 

that idea off the ground? So I would say that is probably ubiquitous 

to everybody that is trying to create a business for the first time. 

I will tell you, you are so right that there are a lot less community banks today than there were 15-20 years ago. And Dodd-Frank 

was really the catalyst to that because right now community banks 

over the last 5 years are hiring a lot more compliance officers than 

they are actually lending officers because you still have to make 

money in the banking business and you have to also comply with 

Federal Government regulations. 

So, you know, you all have to work within the banks. The banks 

are very competitive. They are trying to loan to everybody and they 

still have to meet the creditworthiness that is required of them of 

the Federal Government because they are monitored relentlessly, 

audited by the Federal Government and by their banking institutions in their states. And so as we look at this, you know, we have 

got to figure out how to help folks get mentored, and I think your 

agencies do that. How to present a business plan, because everybody has to look at everybody as if there are no color, there are on 

genders, to actually make a loan. Because we have to have the ability to repay our loans, either through a guaranteed process through 

the SBA, or if it is a traditional loan, which many are made, there 

obviously has to be the ability to actually function and make that 

loan work. 

Ms. Pinder, could you tell me, since we are talking about this 

mentorship, could you tell me how you do that with the folks that 

you represent in getting them off the ground if they come to you 

with an idea? 

Ms. PINDER. Our organization is made up of the Fortune 500 

type companies of corporations. So we do not necessarily look at 

startups. And so when a startup comes to us, our question is ‘‘Are 

you ready to do business with these corporations?’’ And if they are 

not ready to do business, offer building capacity support. And so 

startups, depending upon the industry, because sometimes industry 

if it is like information technology or if that is the idea, may attract 

more equity (funding) kind of things. But to answer your question, 

we do mentor companies in terms of getting them prepared to do 

business with our corporations. And we do that in a number of 

ways. 

We have a MBE Academy. We have educational and training 

programs to help people become, at the end of the day, competitively viable. 

Mr. HERN. Okay. Mr. Romano, more and more people today, 

usually they are sole proprietors, they do not really have employees. They have an idea and to go from being an idea to having multiple employees, which lends itself to usually going into an urban 

SBR002 with DISTILLER

15 

area, if you live in the rural area which many of Americans do, especially throughout the Midwest, how does what you are trying to 

accomplish, putting broadband in rural areas, how does that help 

them make that transition from an idea to concept of starting, 

making money, getting contracts and work, to getting employees? 

Mr. ROMANO. Thank you, Ranking Member Hern. 

I would say the first thing is if you are looking to locate a business, one of the first things we hear from relocation firms or from 

folks looking to get something off the ground is what kind of 

connectivity do I have? Because whether it is obtaining supplies, 

finding customers, finding markets, that connectivity is critical. 

One of the programs we have started is called Smart Rural Community, and it is really intended to focus on not just the fact that 

you have got networks out there but sort of celebrate and accentuate the uses of them—focusing on what are people doing to generate economic development, job creation, and therefore be able to 

stay in a rural area rather than have to move necessarily to the 

city. We want people to be able to choose where they live rather 

than be forced to live in a certain place based upon what kind of 

access they have. 

Mr. HERN. Thank you. 

One last question for, is it Ms. Bilonick? Oh, wow, two in a row. 

That is good. 

Could you help me understand, and I apologize that I missed 

your opening statements, but could you let me know what is your 

default rate of when you are trying to lend and get folks started? 

Ms. BILONICK. So we have typically stayed below a 10 percent 

default rate, which we feel is excellent given the fact that we are 

giving loans to what folks would call sort of the most risky population out there. That is startups. That is folks with poor or no 

credit. And so we are very proud of the default rate. 

Mr. HERN. That is incredible. 

Ms. BILONICK. Yeah, thank you. 

Mr. HERN. Thank you. 

Chairman KIM. Great. Thank you for that. 

I want to recognize my colleague from New York, Congressman 

Delgado. 

Mr. DELGADO. Thank you, Chairman, Ranking Member. Thank 

all of you. I find your testimony very, very informative. 

I am going to get right to it. I have a few questions. 

So in parts of my district, Upstate New York, Hudson Valley, 

Catskills, very, very rural area. I have driven by signs that say 

broadband access coming soon. It is a sight that is hard to imagine 

in New York, in the USA, in the 21st century. I cannot overstate 

how big an issue this is for small businesses and communities in 

my district and Upstate New York. Mr. Romano, your testimony 

very powerfully speaks to that. In today’s global economy it is unthinkable that startup businesses; mom and pop shops; young students; small dairy farmers; and innovative, sustainable ag operations are being left behind. Left behind because of where they live 

and operate. 

Now, my state has made significant investments of late to bridge 

this gap, but as we look to a more connected future, I think it is 

critical that we also work to ensure equitable broadband access. 

SBR002 with DISTILLER

16 

And again, as you note in your testimony, the minimum service 

thresholds today will be unworkable for folks tomorrow. We should 

be aspirational as we think about the quality and speed of service 

folks need to keep up with our rapidly changing economy. 

So with that in mind, Mr. Romano, what is an acceptable speed 

of service? Not by definition, but in practice. And how can we ensure rural communities like mine do not get left behind again? 

Mr. ROMANO. Thank you, Congressman. 

We have a number of members in your district and I know that 

they are doing a very good job with broadband but they also look 

around and see the challenges you are talking about. New York is 

taking important steps to try to address that. 

It is somewhat frustrating sometimes when you focus on a static 

speed definition. You’re building a network that is financed for and 

then intended to last for decades, 20 years. We really believe that 

you should be looking more at the future proof utilization of the 

network, the applications that are going to be utilized, not aiming 

for a speed standard by date X but thinking about will that network be scalable to fulfill demands that we might expect reasonably 10, 15, 20 years from now, telemedicine applications, 4K TV 

definitions, 8K and beyond. So we really like to focus more on the 

future-proof nature of the technology underlying the network than 

speed at any given moment in time specifically. 

Mr. DELGADO. And I appreciate your desire not to want to put 

a number out, but is there a range? 

Mr. ROMANO. I would say we should be aiming for networks 

that are capable of delivering at least 100 megs today and scalable 

to hit gigabit and beyond tomorrow. 

Mr. DELGADO. Good. 

Another issue, again, this is for you, Mr. Romano, is broadband 

mapping. Current mapping practices rely on census blocks, meaning that if just one home in that block has broadband, the entire 

area is considered served. In rural areas, one census block can span 

several counties. Can you talk a little bit about the importance of 

establishing an accurate national broadband map? 

Mr. ROMANO. One of the most significant problems in identifying where broadband is needed is false positives. Overstatement 

of coverage that leads to—in census blocks that might be miles 

wide—one customer on one part of one location denying service essentially to a customer miles and miles away. Movement towards 

a more granular or accurate map is going to be important. I would 

submit that granularity and accuracy are not the same thing. We 

need to both get more granular and get more accurate. Unless you 

are going to independently verify the submissions by providers in 

question, I believe you are always going to need sort of like what 

RUS is looking at now, a challenge process or some way of having 

a verification of no matter what kind of data is submitted by a provider, ultimately having the opportunity to say, yeah, they are 

there or no, they aren’t. That is the only way we are going to get 

to make sure that no customer is left behind simply because they 

happen to live in a geography where somebody else claimed to 

serve. 

Mr. DELGADO. Thank you. Thank you. 

SBR002 with DISTILLER

17 

And I have just one more question for you, Ms. Bilonick. I really 

appreciate your remarks. 

I want to speak to some of the limitations you outlined for 

CDFIs. And putting aside the impact of Dodd-Frank, you do list a 

couple of other items that you think pose stress or strain on your 

ability to do the work that you are doing. Specifically, and I just 

want to note, too, that in my district the work that your kind of 

program provides has had a tremendous effect and has provided a 

lot of opportunities, particularly for folks actually just north in the 

Albany area. So I really appreciate that work. 

But specifically, you talk about nonexistent marketing budgets, 

challenges to capitalizing on your loan funds and/or sustaining the 

high overhead costs associated with labor-intensive loans we underwrite. 

Could you specifically tell me what we can do to help address 

these factors? 

Ms. BILONICK. So I think to start, the marketing issue is an 

issue that all CDFIs face. I think anyone who has worked in the 

industry and gone to a dinner party knows that once you tell someone that you work for a CDFI it is then like a 20 minute later conversation describing what CDFIs do, the coverage in the whole 

United States and the impact that we have. 

So one thing, you know, specifically, I think, and I was actually 

speaking with OFN about this as well, is just a broader marketing 

campaign about the existence of CDFIs. I think there are so many 

clients that come through our offices that say we had no idea this 

existed, if I had only known 10 years ago, you know, fill in the 

blank. But it is just sort of the best kept secret out there and we 

really feel like that, and maybe that is more at the local level in 

doing PSAs and some things we could certainly engage our local 

governments in as well. 

And then with regard to capitalizing our loan funds, I would just, 

I would not say beg but I would request that you please keep the 

line items for CDFI fund in Treasury and the Small Business Administration be fully funded because that is something that really 

impacts our bottom line it is actually the lowest cost capital that 

we can access in terms of debt to then relend out. 

And then my last issue around the labor intensivity of the work 

that we do, we are really dependent on the philanthropic community, whether that be government grants or corporate foundation 

grants that we rely on just because the work that we do lending 

with small businesses is so intensive. You know, if you walk into 

a bank you may meet with a loan officer and then they ship your 

application to a central office located elsewhere and that is sort of 

the end of the story and you may have a really quick turnaround, 

but there is not that face to face and personal experience. For us, 

we are typically working with people who have a very big story behind what they are presenting on paper and then in addition to 

that what they are presenting on paper requires a lot of support 

from us to actually get from their idea phase to like we help people 

put together their projections for their loan applications to us. So 

we are doing a lot of technical assistance just in the underwriting 

process, so it is not, you know, we do have an algorithm that we 

use internally but it is not like a spit it into the machine and get 

SBR002 with DISTILLER

18 

a response, which is the beauty of CDFIs, and that is how we are 

able to do the loans that we are able to do, but it costs a lot of 

money and it costs a lot of manpower even at our most efficient. 

Thank you so much. Thank you. 

Chairman KIM. Great. Thank you so much. 

I want to now recognize the gentlelady from American Samoa. 

Ms. RADEWAGEN. Talofa. Good morning. 

I want to thank Chairman Kim and Ranking Member Hern for 

holding this hearing. I represent the territory of American Samoa. 

We have the highest enlistment rate in the United States Army, 

and because of that we are also among the highest veteran rate per 

capital. Veterans and serving reservists own and operate businesses throughout my district, so I would like to direct a couple of 

questions to you, Mr. Leghorn, though you are all welcome to answer if you have any additional input. 

What resources are veterans currently lacking during their business creation process? 

Mr. LEGHORN. Thank you for your question, ma’am. 

One of the issues with the military’s Transition Assistance Program is that it overly focuses on making resumes. The problem 

with American Samoa is that when veterans go back to American 

Samoa there are not any employers there for them to give a resume to. What American Samoa really needs is a VBOC so that 

there can be economic development and veterans can go back and 

actually create jobs. So that is definitely something I see that needs 

to happen. 

Ms. RADEWAGEN. Okay. Your testimony highlights challenges 

associated with veteran participation in the Federal contracting 

process. Can you please expand on what those challenges are and 

any solutions you would recommend? And what role does 

mentorship play in veteran entrepreneurship? 

Mr. LEGHORN. So I think there were two questions there. I will 

tackle the first one. I will parse them apart. 

So in terms of participation in Federal contracting, like we mentioned in our testimony, the foundation legislation that created 

SDVOSBs as a preferred contracting group was focused on established businesses and it was determined at the time that it was not 

meant for business development. So what that means is that in 

Federal contracting right now we see a huge sum of money being 

given to very few small businesses, whereas we want the business 

development aspects to lead the program towards giving more 

money to a larger pool of veteran-owned small businesses. 

And the second part of the question was regarding what we are 

doing mentorship-wise? 

Ms. RADEWAGEN. Yes. 

Mr. LEGHORN. Okay. So The American Legion is one of the few 

organizations that offer small business counseling. We help you 

with your governance documents. We help you onboard to VA’s Vet 

First program. And we also provide advocacy and also we do a lot 

of events that bring government officials into the room where veteran small businesses can interact with them. So pretty much advocacy, counseling, and events is what we do. 

Ms. RADEWAGEN. Thank you. 

SBR002 with DISTILLER

19 

And so as a follow up to that, what additional resources are necessary to foster increased mentorship opportunities? 

Mr. LEGHORN. Can you clarify if you meant what The American Legion needs? 

Ms. RADEWAGEN. Well, what additional resources are necessary to foster increased mentorship opportunities? That would be 

part of it. 

Mr. LEGHORN. Well, I definitely think The American Legion 

could use another small business counselor and advocate like me. 

I think on the government side we definitely want more entrepreneurial development programs for veterans. We want the programs 

to have more of a business development aspect. We want access to 

the 7(J) program, and definitely more VBOCs. When we are talking 

about mentorship, VBOCs are where the rubber meets the road for 

veterans. 

Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back. 

Chairman KIM. Thank you. 

I want to now recognize the gentlelady from Kansas, Congresswoman Sharice Davids. 

Ms. DAVIDS. Good morning. Thank you for your time, and I 

really enjoyed reading through your testimony. I know I missed a 

significant portion of it. 

But there are a couple of things, so I am actually in the Kansas 

City metro area in Kansas and I always love to talk about how entrepreneurship is baked into the DNA of the community that I live 

in. And because of that, one of the things that I have seen a lot 

of is this idea of an ecosystem, and actually, I am sure that you 

all have talked about this a lot, is the ecosystem that is needed to 

support entrepreneurs and small businesses as they develop and 

grow from very small businesses to small businesses that can do 

contracting with larger organizations. 

Can you talk a little bit about the, maybe coalition, if it is coalition building that you have done? I know the OFN exists and there 

are a few other spaces. And actually, this is probably something 

that all four of you could maybe say a little bit of something about. 

I think that when we look at statistics, like the Kansas City Fed 

did a report not too long ago showing that across the country African American women are the highest, fastest growing segment of 

entrepreneurs, and I know in Kansas City, the Kansas City area, 

we have got an ecosystem that can help support folks, like law 

firms, SEED Law in Kansas City does a lot of work with small 

businesses. We have got a number of other organizations that help 

people from CDFIs until they are ready to take on larger contracts. 

Can you talk a little bit about how we can look at, I do not know 

if it is metrics? I do not know what it is, but how we look at how 

we are supporting the entire ecosystem, not just individually 

CDFIs or mentoring programs. You cannot mentor your way out of 

not having access to capital. So can you talk a little bit about that? 

We will start here with Ms. Bilonick. Thank you. 

Ms. BILONICK. So I would just say we have been very lucky in 

that we have had at the local level and national level sort of preexisting coalitions like OFN, like the National Association for 

Latino Community Asset Builders. At the local level we are part 

of a coalition called the Coalition for Nonprofit Housing and EcoSBR002 with DISTILLER

20 

nomic Development, which is a longstanding organization that has 

people both from the housing and small business development side 

of work here in Washington, D.C. 

I think what is challenging, at least from my point of view, and 

I do not purport to speak for the entire panel, but from my perspective I think the coalitions that exist between like organizations are 

there and are in place. The more challenging piece is forming coalition and community between needed partnerships that are in differing spaces. For example, you mentioned like the legal field. So 

we have a partnership with the D.C. Bar Pro Bono Legal Clinic, 

but that was sort of happenstance because someone on our board 

is the person that leads that clinic. And so I think fostering those 

kinds of relationships would be extremely valuable for the ecosystem. Like, those of us who are operating in the same space, we 

know each other, we see each other at meetings. You know, we 

work together. But I think the more challenging hurdle for us to 

overcome as an ecosystem is really bridging those networks that 

are sort of outside of our comfort zone or outside of our usual suspects because those networks, you know, I mean, I would even say 

for myself, the people on the panel are not people that I work with 

on a daily basis and we could all benefit from working together. 

And so, you know, that is where I think there is a big challenge. 

Ms. PINDER. Again, thank you for your question. 

I think what we need to do is recognize that some groups are different. You talked about African American women being the fastest 

growing segment in entrepreneurship, and they are. And so when 

you then think about wraparound services for businesses, it is not 

a cookie-cutter approach. I always tell businesses that they need 

the ABCs. That is the attorney, banker, and the CPA. Right? And 

so once you have that foundational kind of activities understand 

that is an integral part of your business it helps. But I agree with 

my colleague, there are some intersections of resource that are 

available. Whether you are the person that wants to kick the tires 

and see if an idea works, well, there are resource centers for that, 

whether that is PTAP, SBRC, and that kind of thing. And so just 

an understanding of those issues that businesses face, in particular 

businesses of color, you know, and looking at microlending, for example, looking at alternative methods of financing businesses, 

bootstrapping is, yes, universal in terms of people starting businesses, but the long-term effect of businesses that are 

bootstrapped, which mean started without capital on minority businesses is greater than other businesses. And so just recognizing 

what those nuances are relative to groups of entrepreneurs. 

Chairman KIM. Ms. Davids, do you want to follow up? 

Ms. DAVIDS. Well, the time ran out. 

Chairman KIM. Yeah, I mean, I am happy to allow it. 

Ms. DAVIDS. Do you mind? Yes, do you mind if we take the 

time? Thank you. 

Mr. LEGHORN. Thank you for your question, ma’am. And I believe part of your question was regarding metrics. And that is the 

part that I really want to address. 

From our testimony, we discussed how SBA and the resource 

partners were really reliant on metrics drawn from the 7(a) loan 

program. The 7(a) loan program has diminished in utilization coinSBR002 with DISTILLER

21 

ciding with the disappearance of regional and community banks. So 

we do not believe that the 7(a) loan should be used as the primary 

metric anymore. I do not know what other metrics might be but we 

have to find other ways of getting information aside from pulling 

it all from 7(a) loans when it comes to job creation and lending. 

Mr. ROMANO. And to pick up on that point about metrics, there 

is no shortage of metrics in the telecommunications industry, but 

one thing I think that could be relevant here is the areas our members serve, a town of 5,000 people is a metropolis. And so any small 

business growth there accrues to the benefit of the community as 

a whole because there are not that many businesses to start, and 

a lot of people working from home even as well, telecommuting, if 

you will, teleworking. Some way though it occurs to me that tracking sort of small business growth in these deeply rural areas paired 

with, quite frankly, and there are statistics separately on this, 

what kinds of increases in connectivity—what has made it possible 

for the small businesses to either establish, relocate, or grow in 

those deeply rural areas—I think is the kind of metric that would 

be relevant to see the better broadband somebody gets, how much 

better do they do in terms of building and growing small business. 

Ms. DAVIDS. Thank you. 

Chairman KIM. Thank you so much. Thank you again to all the 

witnesses for taking time out of your schedule to be with us here 

today, and I want to thank my colleagues as well for their time and 

for their insightful questions and points. 

As we have heard today, we certainly have our work cut out for 

us. As we are striving to create more opportunities for underserved 

businesses, small businesses, from accessing affordable capital to 

being able to meaningfully compete for contracts in the Federal 

procurement marketplace, underrepresented entrepreneurs have 

had the deck stacked against them for too long and it has kept 

them from creating good private sector jobs in their local neighborhoods. 

I look forward to working with my colleagues to find policy solutions that will empower them to create the good-paying jobs of the 

21st century. 

I would ask unanimous consent that members have 5 legislative 

days to submit statements and supporting materials for the record. 

Without objection, so ordered. 

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

we are adjourned. Thank you. 

Mr. HERN. Mr. Chairman, can I say one thing? 

Chairman KIM. Yes, please. 

Mr. HERN. I just want, because in business you are about getting results, and I know that you are probably going to leave here 

and feel like you testified and nothing really got done. But we will 

work hard on this because it is so important to our nation and I 

said this in our Full Committee, that we cannot have big businesses in the future if we do not have small businesses today because we are the incubators, the small businesses, for all the big 

businesses that we have in American today that put so many people to work. So I know you are not asking to create more programs. 

You are asking us to help make these better and secure them. And 

so I assure you that I will work with my Chairman that we make 

SBR002 with DISTILLER

22 

that happen with the team, that we look at every opportunity. And 

I am with you on the metrics, and Ms. Davids, my colleague from 

Kansas. You know, the problem in business is when you have more 

than one set of books you never get anything done. So we have to 

find the right numbers that measure everything because every 

group that is asking us for help will say that they are the fastest 

growing. And so we have to really determine the fastest growing 

and where the real needs are because it is different across this very 

nation and we have to make sure that we take care of everyone to 

the best of our abilities. Thank you. 

Chairman KIM. Thank you for that. I think that spirit and that 

energy is something all of us here on the Subcommittee feel. There 

is a reason why I wanted to join this Committee on Small Business 

because it has a reputation of just working together across the 

aisle, bipartisanship, to be able to get things done for small businesses in America. And I think I am looking forward to working 

with the Ranking Member and members on both sides for us to be 

able to make sure that we can move ahead in that productive way. 

So we certainly will follow up. We are eager to get to work and 

do what we can to improve the overall climate and ecosystem, to 

borrow a word, for small businesses in America. 

So thank you again. We stand adjourned. Thank you. 

[Whereupon, at 11:23 a.m., the Subcommittee was adjourned.] 

SBR002 with DISTILLER

23 

A P P E N D I X 

SBR002 with DISTILLER


Insert offset folio 23 here 34645.001

Testimony of Marla Bilonick 

Executive Director/CEO, Latino Economic Development Center-LEDC 

Provided to the Committee on Small Business 

Subcommittee on Economic Growth, Tax, and Capital Access 

"Exploring Challenges and Opportunities Faced by Underserved Businesses in the 21" Century" 

February 7, 2019 

Good Morning Subcommittee Chairman Kim and Members of the Committee on Small Business 

Subcommittee on Economic Growth, Tax, and Capital Access. It is my sincere honor to be speaking with 

you all today about the challenges and opportunities faced by underserved businesses in this century. 

My name is Marla Bilonick and I am the Executive Director and CEO of the Latino Economic 

Development Center-LEDC. 

LEDC is a 28-year old organization with the mission to drive the economic and social advancement of 

low•to moderate-income Latinos and other underserved communities in the D.C. and Baltimore 

Metropolitan Areas by equipping them with the skills and tools to achieve financial independence and 

become leaders in their communities. We operate out of 6 offices in the region, with over 40 

professional and bilingual staff providing top-notch services to our clients. On an annual basis we serve 

well over 4,000 low- to moderate-income residents. Scanning all of our programs, the majority of our 

clients are Latino (60%) and a sizeable portion are African-American/Black (30%). The remaining 

portions are White/Caucasian and Asian (10%). Our core asset-building programs are: Housing 

Counseling, Affordable Housing Preservation; Small Business Capacity Building; and Small Business 

lending. We are a SBA- Microlending Intermediary and certified Community Development Financial 

Institution (CDFI). LEDC receives support for our small business services from partners including the 

Small Business Administration, CDFI Fund (Treasury), private corporations, and philanthropic 

foundations. 

Since we began lending in 1997, we have rolled out more than $15 million in capital in the form of over 

1,200 small business loans. We've provided small business technical assistance services to thousands of 

aspiring and existing small business owners in the region. last year, LEDC distributed close to 200 loans 

in the communities we serve. LEDC is a member of and I sit on the Board of the Opportunity Finance 

Network, a membership organization representing the over 1,000 CDFis in the United States. The 

challenges I will outline are consistent with what we hear from our fellow CDFis operating in similarly 

underserved communities around the nation. 

Our reason for existence is to help underserved populations overcome the challenges that stand in the 

way of them reaching their full potential for achieving financial stability and income mobility. The 

entrepreneurs we serve face formidable hurdles in starting and expanding their businesses and it's our 

role to help them to overcome and eliminate those hurdles. While the challenges are countless, those 

that I would characterize as the most significant are: 

Lack of access to capital, 

Lack of access to information and educational resources; 

Poor or no credit history, and 

Systemic and institutional racism and sexism. 
24 

SBR002 with DISTILLER


Insert offset folio 24 here 34645.002

In my testimony, I will elaborate on each of these barriers to success and will close with a description of 

how nonprofit organizations and community development organizations like LEDC work every day to 

mitigate these challenges. As the head of a Latino-facing organization and member of the Board of 

Directors of the National Association of Latino Community Asset Builders-NALCAB, I will also include 

information on small business challenges that are specific to the latinx community. 

lACK OF ACCESS TO CAPITAL 

According to an August, 2018 report from the Small Business Administration, the most common source 

of capital to finance business expansion is personal and family savings, with 22% of entrepreneurs 

relying on that source. However underserved entrepreneurs do not frequently have sufficient savings 

built up or friends and family that can personally invest in their business ventures. They do not have the 

proverbial "rich uncle" to reach out to for an interest-free family loan or grant. Thus, they turn to 

institutional lenders, credit cards, or alternative sources of financing that often come with a hefty price 

tag attached. 

The traditional commercial banking system is often not a viable resource for underserved small 

businesses. Commercial banks typically have a fixed minimum credit score they will accept for loan 

approvals arid are further hindered from serving small business due to restrictions around lending to 

start ups or providing smaller-dollar financing. A recent report from the Woodstock Institute cited that 

the number of CRA-reported loans under $100,000 in 2015 remained 58% lower than in 2007. What's 

more, bank branches are consolidating and closing at a steady clip, with 1,700 bank branches closing in 

the 12 months between June, 2016-June, 2017. This environment is not small-business friendly. 

The alternative for underserved entrepreneurs operating in this climate is to take out credit cards that 

often charge high interest rates; access high-cost financing via the emerging online lending industry; tap 

into merchant service cash advances; obtain a loan from a loan shark; or tap into the Community 

Development Financial Institutions in their area. I will note that we have several loans in our portfolio 

that are restructured financing deals for entrepreneurs who fell prey to the allure of online lenders 

promising fast cash, only to realize they had signed off on deals that were, indeed, too good to be true. 

On the other hand, data shows that CDFis in OFN's membership alone have originated more than $65 

billion in financing in urban, rural, and Native communities through 2016. To quote OFN's President, 

lisa Mensah, "CDFis exist to move money to places missed by traditional lenders." However, CDFis face 

challenges in terms of reaching the very communities that need our services due to minimal or 

nonexistent marketing budgets; challenges to capitalizing our loan funds, and/or sustaining the high 

overhead costs associated with the labor-intensive loans we underwrite. 

LACK OF ACCESS TO INFORMATION AND EDUCATIONAL RESOURCES 

Starting or growing a business is not for the faint at heart. In an ideal scenario, an entrepreneur has the 

time and support to complete an in-depth business plan, complete with a detailed market analysis, 

elaborate revenue projections, a well-developed management plan, and options for financing their onetime start-up costs as well as the ongoing or variable costs to come. This plan provides a framework and 

sequencing that sets up the entrepreneur for success. Unfortunately, underserved entrepreneurs do not 

always have access to business planning information or resources. Nor, do they have time to invest in 

business planning as they are looking to their business idea as a source of income for themselves and 

their family. We have had many a client come to our doors with business cards and a signed lease in 

hand ... BEFORE they have mapped out how their idea will play out as a living business. 

2 
25 

SBR002 with DISTILLER


Insert offset folio 25 here 34645.003

In addition, the regulatory framework is a maze of processes and agencies that few could understand 

without outside support. Depending on the business type, entrepreneurs frequently need to go through 

several licensing agencies and register with their state and jurisdiction to be compliant. Layer on top of 

that the language barrier that many of our immigrant Latinx clients face, and it's doubly challenging to 

meet compliance requirements. Organizations that provide small business coaching and training are 

critical to helping underserved entrepreneurs to navigate the regulatory framework and adequately plan 

their businesses from concept to implementation. 

POOR OR NO CREDIT HISTORY 

The 2017 Small Business Credit Survey found that 50% of small businesses rely exclusively on their 

owners' personal credit scores to secure debt and another 37% use both the owners' personal scores 

and business credit scores. According to Forbes 2018 article, Why Minorities Have So Much Trouble 

Accessing Small Business Loans, "The average minority small business owner has a credit score of about 

707-15 points lower than the average small business owner in the U.S. A nearly perfect credit score is 

basically mandatory for the most advantageous bank loans, even though there are numerous plausible 

explanations as to why an otherwise responsible and dedicated business owner would have poor or very 

little credit history." 

Meanwhile 50% of LEDC's lending goes to entrepreneurs with credit scores lower than 640, which is 

considered "Fair" by the credit bureaus and would never be sufficient to clear a traditional bank loan. 

For Latinx communities, the culture of credit that prevails in the United States is not always culturally 

compatible with the cash-based and distrusting offinancial institutions experience oftheir home 

countries. Many of our clients keep cash in their homes, rather than place it in a bank. In addition, given 

current anti-immigrant sentiments, there is a segment of our client base that distrusts institutions in 

general for perceived fear of undermining their ability to live in the United States. 

SYSTEMIC AND INSTITUTIONAL DISCRIMINATION ON THE BASIS OF RACE, ETHNICITY, AND/OR SEX 

Underserved small business clients face institutional and systemic discrimination on the basis of race, 

ethnicity, and/or sex. A 2016 Independent Business Survey conducted by the Institute for Local Self 

Reliance reported that of the business owners who applied for a bank loan in the past two years, 54% 

were rejected. The Minority Business Development Agency's (MBDA) research finds that minority 

business owners are denied loans at nearly three times the rate of non-minority owners. More troubling 

is that even when minority owners have access to capital it comes at inequitably high cost. A recent 

report in Forbes, co-authored by staff from the Kauffman Foundation, found that minority business 

owners receive higher borrowing costs, are offered smaller loans, and have their loan applications 

rejected more often than non-minority applicants. The study goes to on to describe that even when 

minority-owned businesses have identical business characteristics and credit reports compared to their 

non-minority-owned counterparts, they still gain less access to credit. 

The lending gap for women is also dramatic. A prominent fintech company, reports that in 2017, 

women-owned businesses received nearly SO% less funding than men-owned businesses, and that 

funding for women-owned businesses declined by 42% between 2016 and 2017. 

For immigrant and Latinx populations, the language barrier can present unfortunate opportunities for 

discrimination and abuse. Many of our clients sign off on contracts or leases with extremely unfavorable 

terms due to their lack of understanding. We also find that unethical characters prey on immigrant 

3 
26 

SBR002 with DISTILLER


Insert offset folio 26 here 34645.004

communities and charge exorbitant rates for services that are free or low-cost to the public such as 

registering a business or obtaining permits or business licenses. 

CDFis and small business technical assistance providers can mitigate the challenges posed by systemic 

and institutional discrimination by targeting the very populations that are victims of discrimination. In 

addition, small business support organizations must be active in advocacy at the local and national levels 

to ensure that discriminatory practices be called out and admonished and predatory lending practices 

be eliminated. Federal agencies such as the Consumer Financial Protection Bureau, Office of the 

Comptroller Currency, The Federal Reserve Bank, and Federal Depository Insurance Corporation should 

continue and deepen their evaluation of commercial bank activities with regard to the demographics of 

who is and is not receiving loans. Specifically, the CFPB should finalize its implementation of Section 

1071 of the Dodd-Frank Act, which would require financial institutions to compile, maintain, and report 

information regarding credit applications made by women-owned, minority-owned, and small 

businesses. This kind of information would provide policymakers with insights into the precise 

shortcomings of diverse businesses in seeking credit, enabling policymakers to craft narrowly-tailored 

legislation designed to remedy the shortcomings within each of these entrepreneurial communities. 

CLIENT PROFilES 

To end on a positive note, I would like to highlight two client success stories that are exemplary of 

clients that have defied the aforementioned challenges. These American heroes are forging pathways to 

economic security for themselves and the families they support. 

Ana Cecilia Mendoza got her start in construction nearly 15 years ago. When she first moved to the U.S. 

she cleaned hotels, waited tables, and flipped burgers. But the paychecks she was bringing in barely 

covered the cost of her babysitter. Desperate to provide for her family, she began working in 

construction after realizing how much more lucrative that industry was. She was not intimidated by the 

work, insisting "Since I was a little girl, my father took me to the fields (in El Salvador). He taught me 

how to be strong and do a man's job." She recently decided to open up her own construction company, 

Cecilia Construction, LLC. With an emphasis on hiring women, the business will provide interior 

construction services such as drywall installation. She began to work with one of our coaches in early 

2018 and enrolled in our Entrepreneur Training for Success course in October of last year. She has 

developed a marketing strategy and is registering her business with the District. She plans to be open for 

business in June of this year. 

Gabriela Febres and Ali Arellano are life and business partners who started off selling Venezuelan 

cheeses to a growing network of fans several years ago. From there, they began cooking traditional 

Venezuelan foods including Are pas, which spawned their food truck concept, Arepa Zone which was 

funded by LEDC through their initial loan in 2013 of $25,000. The food truck quickly grew to viral 

follower status and they could barely keep up with demand. From there, they won a business 

competition for a year's free rent on a booth in De's Union Market. This growth was facilitated by LEDC's 

second loan of $27,000. They took on their next goal of having their own brick and mortar restaurant 

and launched a fast casual location right off of Scott's Circle in the District, catering to an active business 

and residential crowd. LEDC invested in the brick and mortar location with a $100,000 loan. These 

clients are direct recipients of loans originating from the following Federal sources: CDFI Fund, SBA, and 

HHS Community Economic Development. They are a shining example of success and have created 11 

jobs in Washington, DC with potential for many more as they continue to grow. 

4 
27 

Opening Statement of Ranking Member Kevin Hern 

Committee on Small Business 

Hearing: ‘‘Exploring Challenges and Opportunities of 

Underserved Businesses in the 21st Century’’ 

February 7, 2019 

*As Prepared for Delivery* 

Thank you for yielding, Chairman Kim. 

With 99.9 percent of all businesses in the United States being 

classified as small, the impact that small businesses have on our 

economy cannot be overstated. In my home state of Oklahoma 

alone we have over 340,000 small firms who employ over 700,000 

people. Many of these businesses are owned by minorities, women, 

and veterans and many of these businesses are located in rural 

areas. 

Small Businesses owned by minority, women, and veterans face 

a unique set of challenges, ranging from raising adequate financing, to building social capital, to finding the effective mentors. 

Rural businesses, however, while facing those challenges, also tend 

to face a different set of challenges, most notably, access to reliable 

and affordable broadband service. 

Today, more than 24 million Americans lack access to high speed 

internet, the vast majority of whom live in rural communities. 

When comparing urban and rural broadband deployment 97.9 percent of urban America has access to both fixed and mobile 

broadband, while only 68.6 percent of rural citizens have that same 

access. 

The lack of a solid business case for rural broadband deployment 

remains the central reason for what is often referred to as the ‘digital divide’. Large telecommunications companies have little incentive to invest in broadband infrastructure in areas with low population density. Instead, small telecommunications carriers are far 

more likely to invest in rural communities, often because they are 

their communities. Frequently, however, these small firms face numerous challenges in their efforts to increase broadband access. 

You may ask, why do small businesses need broadband access? 

Why is this a challenge to rural businesses? Simply put, small 

businesses need access to modern technology to complete in the 

modern marketplace. In 2018, 95 percent of Americans own a cell 

phone and 89 percent of Americans use the internet. Technology 

has influenced nearly every aspect of society. From manufacturing 

to education, access to technology is synonymous with success. 

Small businesses specifically require access to reliable and affordable technology to compete with larger competitors. According 

to a recent study, digitally advanced small businesses were shown 

to be three times more likely to create jobs and experience revenue 

growth at a rate four times higher than small businesses who don’t 

employ technology. Yet despite such outstanding returns, many 

SBR002 with DISTILLER

28 

small businesses do not take full advantage of the techniques available to them. Often, this is due to owners not realizing the benefits 

such tools offer them, or simply lacking access to reliable technological resources as a result of cost or location. 

Today’s hearing will allow us the opportunity to further discuss 

these and other challenges that businesses owned by minority, 

women, veteran and rural Americans face while also exploring potential ways to improve and elevate these issues moving forward. 

I look forward to hearing from our witnesses and to having a productive conversation. 

Thank you and I yield back. 

SBR002 with DISTILLER

29 

SBR002 with DISTILLER


Insert offset folio 29 here 34645.005

Capital Region Minority Supplier 

DevetopmentCouncil 

Written Testimony of 

Sharon R. Pinder 

President of the Capital Region Minority Supplier Development Council 

Operator of the MBDA Business Center, Washington, DC and the Federal 

Procurement Center 

Before the 

U.S. House of Representatives 

Committee on Small Business 

Subcommittee on Economic Growth, Tax, and Capital Access 

"Exploring Challenges and Opportunities Faced by Underserved Businesses in the 

21'' Century" 

Rayburn House Office Building Room 2360 

Thursday, February 7, 2019 

Good Morning Chairman Andy Kim, Ranking Member Representative Kevin Hern 

and the distinguished members of the Committee on Small Business Subcommittee 

on Economic Growth, Tax, and Capital Access. It is an honor to provide testimony at 

the hearing entitled "Exploring Challenges and Opportunities Faced by Underserved 

Businesses in the 21st Century. 

Background 

I am Sharon Roberson Pinder, President and CEO of the Capital Region Minority 

Supplier Development CounciL I've been president of the Council for 4 yea1·s. My 

work in the diversity and inclusion space formally started in 2003 when I was 

appointed by Governor Robert L. Ehrlich as the State of Maryland's first ever cabinet 

level Secretary for the Governor's Office of Minority Affairs. 

During my first three years as Secretary, the number of contracts awarded to 

Maryland's women and minority businesses increased from 15% to 22% and payments 

to them increased by $1 billion. I am also very proud that we created Maryland's 

Small Business Reserve Program the country's first state level set aside for small 

businesses. 

In 2012, I was appointed by then Mayor Stephanie Rawlings Blake as the Director of 

the Mayor's Office of Minority and Women·Owned Business Development (MWBD) 

for the City of Baltimore. As a member of the Mayor's cabinet, I was responsible for 

the management of the City's minority and women·owned business programs. During 

my tenure we developed and implemented the supplier diversity and inclusion 

strategy for the City of Baltimore. 

In addition to my appointed positions I have been an entrepreneur. My businesses 

included The Pinder Group and The Center for Business Inclusion and Diversity. 

During my years as an entrepreneur, I created the Top 100 MBE Awards© program, 

10750 Columbia Pike I Suite 200 I Silver Spring I MD 120901 

0:301-593-5860 IF: 301-593-13641 www.CRMSDC.org! C©CRMSDC 
30 

SBR002 with DISTILLER


Insert offset folio 30 here 34645.006

Capital Region Minority Supplier 

Development Council 

In its 12th year, it is the mid-Atlantic region's premier recognition ceremony for 

minority businesses. 

I began my work as president and CEO of the Capital Region Minority Supplier 

Development Council in 2015 and in my first 18 months of my tenure, CRl\1SDC won 

$4 million in grants from the U.S. Department of Commerce Minority Business 

Development Agency for a new MBDA Business Center, Capital Region, and the 

nation's only Federal Procurement Center solely dedicated to helping MBEs obtain 

federal contracts. We also implemented several signature programs significantly 

enhancing services to both corporate members and MBE suppliers. 

I share this background information with you to give you a sense of my ability to look 

at the topic of minority business as an entrepreneur, from the vantage point of 

government (state, local, and federal levels), the private sector, and as a non·profit 

entity. 

The Capital Region Minority Supplier Development Council ("CRMSDC" or "the 

Council") is a non·profit (501 (c)(3)) organization located at 10750 Columbia Pike, 

Suite 200, Silver Spring, MD 20901. The Council is one of23 regional affiliates of the 

National :Minority Supplier Development Council (NM:SDC). 

The Council was founded in the aftermath of the riots following the assassination of 

Dr. Martin Luther King. As various federal commissions undertook studies to 

determine the root causes of violence in the cities, so did corporate America. Their 

studies determined that the root cause of unrest was lack of access to the American 

Dream of life, liberty, and the pursuit of happiness. This dream requires money,( i.e., 

jobs, income and business revenue and relationships). The study led those corporate 

executives to the implementation of trade fairs and job fairs to provide jobs for 

residents and business opportunities for minority businesses. Their activities 

coalesced into the establishment of the corporate·led National Minority Purchasing 

Council with regional affiliates. The Greater Baltimore Minority Purchasing Council 

was founded in 1972. It later merged with the Greater Washington Minority 

Purchasing Council and, with subsequent national name changes, became the MD/DC 

Minority Supplier Development CounciL In 2013, through mergers, the name was 

subsequently changed to its current name of the Capital Region Minority Supplier 

Development Council. 

(refer to history video https://www.youtube.com/watch?v=7euJ7XSUz40) 

The significance of the establishment of NMSDC was that it was built of the idea of 

economic development and wealth creation in minority communities. It was the hope 

of NMSDC's corporate founders that an employed minority community and a vibrant 

minority business community would help to generate income that could be spent by 

that community to buy the products and services of corporate America. It would also 

create an economic sense ofwellness that would lessen chances for violence in the ~ 

10750 Columbia Pike I Suite 200! Silver Spring I MD 120901 

0:301-593-5860 IF: 301-593-13641 www.CRMSDC.arg! Q@CRMSDC 

! 
31 

SBR002 with DISTILLER


Insert offset folio 31 here 34645.007

Capital Region Minority Supplier 

Development Council 

streets. NMSDC established the regional councils to certify minority businesses and 

to provide a link to their corporate procurement departments. CRMSDC also offers 

highly impactful training to the leadership of MBE firms at business schools such as 

Kellogg, Tuck and others. Additionally, it has offered similar training locally, with 

the result that many minority business leaders are able to move their firms from start· 

up and sub-contractor status to fully sustainable businesses. The impact of 

CRMSDC's activities is that its nearly 400 MBE firms generate over $3 Billion in 

revenue and employ approximately 20,000 people. This tracks we1l with the data from 

NMSDC nationally where 1,595 corporations work with 12,000 certified minority 

firms to create $400 Billion in output and 2.2 million jobs. (Source: NMSDC 2017 

Annual Report) 

Understanding the Root Cause 

The most profound law ever enacted was Public Law 95·507. It is the foundation and 

cornerstone of all programs impacting the underserved communities. Forty· one years 

after its enactment, the goal of these programs still remain the same.. to develop 

competitively viable companies. The ultimate vision is for companies to have the 

ability to compete fairly in an open marketplace in the absence of these programs. 

In 1978, major changes to the Small Business Act were made with the passage of 

Public Law 95·507, The intent of the 95th Congress and the new law's stated goal was 

to provide opportunities for small business concerns of disadvantaged owners to 

participate in the performance of government contracts. In particular, the law sought 

to create the opportunity for full participation for socially and economically 

disadvantaged groups that have suffered the effects of discriminatory practices. These 

groups include, but are not limited to, African Americans, Hispanic Americans, Native 

Americans, and other minorities or culturally disadvantage groups. 

Key Points of the Original Law 

Some of the key points of the law are: 

Participation by large businesses in some type of Small Business Program 

mandatory instead of voluntary 

Changed "best efforts" to "Maximum Practicable Opportunities" 

Required a small business inclusion plan for procurements 

Determined disadvantaged business concerns as being both socially and 

economically disadvantaged 

Established the Office of Small and Disadvantaged Business Utilization. 

The late Congressman Parren J. Mitchell and the late Senator Edward Brooke were 

the authors of Public Law 95·507. Mr. Mitchell used his tenure as Chairman of the 

Small Business Committee to make a significant difference in the lives of small, 

women and minority businesses. As a native Baltimorean and daughter of an inner 

10750 Columbio Pike I Suite 200 I Silver Spring MD 120901 

0:301-593-5860 IF: 301-593-13641 www.CRMSDC.org I Q©CRMSDC 

-------
32 

SBR002 with DISTILLER


Insert offset folio 32 here 34645.008

Capital Region Minority Supplier 

Development Council 

city entrepreneur, I lived in Congressman Mitchell's district and grew to understand 

the significance of his actions. 

As Chairman of the Small Business Committee, Congressman Mitchell attached an 

amendment to a $4 billion public works bill that compelled state and local 

governments, seeking federal grants, to set aside 10% of the funds to retain minority 

firms as contractors and subcontractors. 

There are a couple of things that deserve the Committee's attention: 

Meeting Goals- the Artificial Measure. 

We have become so obsessed with making numbers, and meeting goals, that we've 

missed the purpose of the programs and why it exists. We constantly ask the question 

"Have you met your goal"? This obsession deflects issues associated with what it 

takes to build capacity in order to compete by these firms. We should be developing 

these companies, so if these programs leave tomorrow, MBE firms will have the 

capacity to be competitive in the marketplace. Additionally, we miss that the true 

measure of success for minority businesses is actual payments versus contract 

awards. To be given a contract award is good news, but it only matters when you 

execute, employ and receive payment in a timely fashion. Actual payments are the 

measure of success for small businesses. 

Reviewing Subcontracting Plan 

Major corporations doing business with the federal government should be submitting 

subcontracting plans to be reviewed by the SBA. It appears that reviews are done via 

a selection process. The truth is that all subcontracting plans should be reviewed. 

The absence of these types of reviews speaks to the lack of accountability and 

compliance. 

Challenges and Barriers 

Our challenge is to figure out how we increase the probability of success for small, 

women and minority·owned firms. How do we create the environment where 

entrepreneurs have the courage to choose this path for wealth creation without any 

stigma's of being a minority business? An environment where entrepreneurs are 

treated like rock stars and are comfortable putting capital at risk, reputations on the 

line, and ideas in harm's way, in an attempt to create jobs, wealth, economic 

opportunity, and ultimately fortify hope. Our failure to figure out this dilemma will 

create a strain on our nation's financial growth and our economic future will be in 

jeopardy. 

Capital forms the lifeblood of all businesses, allowing for payroll, investment, and 

overall sustainability. Minority· owned businesses face a harder time accessing capital 

10750 Columbio Pike I Suite 200 I Silver Spring I MD 120901 

0:301-593-5860 IF: 301-593-13641 www.CRMSDC.org i liJ@CRMSDC 

-------
33 

SBR002 with DISTILLER


Insert offset folio 33 here 34645.009

Capital Region Minority Supplier 

Development Council 

(loan denial rates for firms owned by people of color are three times higher than non· 

minority firms) and accessing good capital, as we typically pay higher interest rates 

and receive lower loan and equity investments. 

Minority businesses typically have a harder time bootstrapping their businesses. 

Bootstrapping can be defined as operating your business without capital. Starting 

businesses without capitalization hinders the growth and trajectory of that business. 

The other key ingredient is relationships. Business is about relationships and turning 

those relationships into revenue. Minority businesses typically do not have the 

relationships that help propel businesses into the next level of growth. 

Our lack of networks is a real handicap. Not being involved in the planning process 

is a hinderance. Minority businesses are typically late in the business cycle because 

they are not a part of the planning process of major procurement opportunities. 

According to the Census, African American women·owned businesses are the fastest 

growing segment of all businesses. Minority business ownership (Source: PBS News 

Hour): 

11% are AfricanAmerican·owned 

• 53% are Asian·owned 

• 32% are Hispanic·owned 

Contracts determine the success of companies. They bring in revenue, establish a 

track record of success, and allow businesses to grow. Corporations and government 

agencies increasingly embrace supplier diversity, the proactive strategy of contracting 

with businesses owned by historically marginalized communities. However, diverse 

businesses still receive an appalling lack of contracts. In 2014, Fortune 100 companies 

spent just 4.8 percent of total contract dollars with minority-owned businesses, with 

many government agencies performing similarly. (Source: Black Star News) 

The World Economic Forum ranked the U.S. as number twenty·three (23) out of thirty 

(30) developed countries for economic inequality. The country ranked worst in the 

economic inclusion category which includes measurements of the level of poverty, and 

the distribution of wealth and income. It also ranked low in social safety nets, 

efficiency of public goods and services, labor compensation and employment. (Source: 

The Atlantic) 

Diverse businesses play a critical role in closing the racial wealth gap and shaping the 

larger economy. The threat or the real issues still remain in three ways: access to 

capital, access to contracts and access to key relationships. 

MBE Programs 2.0 

Many programs and ideas aimed at leveling the playing field have existed for over 

forty yea1·s. I've been taught that "public policy defines the behavior 

10750 Columbia Pike I Suite 200 I Silver Spring 1 MD 120901 

0:301-593-5860 IF: 301-593-13641 www.CRMSDC.org i ti©CRMSDC 

Lf) 

~ a. 

~--------- --------------------
34 

SBR002 with DISTILLER


Insert offset folio 34 here 34645.010

Capital Region MinorltySupplier 

Development Council 

in the marketplace", 'l'hrough their national network and years of study on this topic 

- Anthony Robinson, Esq_ ofMBELDEF (Minority Business Education Legal Defense 

Fund) and Franklin Lee, Esq of (Tydings and Rosenberg, LLP) are proteges of 

Congressman Mitchell and the country's leading authority on socio·economic issues. 

Across this country they witnessed that enormous gaps exist between current 

measures of minority and women availability and the number and relative size of 

minority I women·owned firms that you would expect to exist across the country. 

These gaps are not without severe consequences for the economic health of the country 

as a whole. 

Entrepreneurship still remains the key element of the American Dream. For millions 

of Americans, starting and owning a business has been the route to success, security, 

and providing for one's community. This is particularly tt·ue for people of color, who 

face disparate unemployment rates and obstacles breaking through the "good old boys 

network" to secure good, stable jobs. 

When minority·owned businesses thrive, communities of color thrive. Diverse 

businesses, which are more likely to hire locally and employ people with similar 

backgrounds, work as powerful forces for economic development. Communities of color 

will become the majority by 2044; how minority· owned businesses fair will determine 

the sustainability and strength of the nation. 

Our nation's economic history is rich with examples of public policy and government 

action facilitating the spirit of entrepreneurship and directly contributing to the 

success of capitalism. At critical junctures throughout the industrialization of 

America, the federal government has proactively re·directed the flow of commerce 

and, in effect, has launched the birth of countless new giants of American industry. 

From the issuance of federal land grants that were essential to spurring the growth 

of railroads and to breathing life into the telegraph and telephone industries, from the 

granting of licenses and broadcasting frequencies to radio and television companies, 

and from the construction of the federal highway system, to the creation of the 

aviation and aerospace programs, the government has been a willing partner in 

forging a path for new industries. 

For example, the adoption of "air mail" as the primary mode of transportation for the 

U.S. Postal Service, coupled with USPS's subsequent assignment of airmail transport 

contracts to a number of fledgling airlines, placed many of them on a sustainable path 

that ultimately led to a burgeoning private passenger airline industry. More recently, 

with the building of the global infrastructure for the internet by the Defense Advanced 

Research Projects Agency (DARPA), the federal government has been instrumental in 

establishing a fertile environment for the launching of an enormous global 

information technology industry. In each of these instances, government has often 

directly accelerated the growth and success ofwell·recognized corporate giants. 

The most obvious downside from much of this historical government intervention and 

direct assistance to the private sector has been that so much of it occurred at a time 

1 0750 Columbia Pike I Suite 200 I Silver Spring i MD I 20901 

0:301-593-5860 l F: 301-593-13641 www,CRMSDCorg I Q@CRMSDC 
35 

SBR002 with DISTILLER


Insert offset folio 35 here 34645.011

Capital Region Minority Supplier 

Development Council 

in history when people of color were not allowed in the room as equal participants, 

and were presumed to be unqualified and unfit to compete in business. 

Across the country economic deserts exists (particularly in our major cities) and today 

mirrors the segregated history of our past. The fruits of past patterns of investment 

and the devastating societal effects of past economic exclusion limited to the 

generation in which they occurred? Not necessarily. The reason is because in all of 

the ensuing years, never once has there been a concentrated, purposeful effort to re· 

direct the flow of commerce to irrigate those deserts, and to establish a fertile 

environment or "ecosystem'' for business formation and growth to truly flourish within 

these communities. Without such intervention, the economic climate has been 

painfully slow to evolve. In all likelihood, a significant degree of the persistent racial 

economic inequalities that we continue to observe in our society today are most likely 

a lasting stain that Jim Craw's legacy of racial exclusion has left upon our economy. 

Timing is everything. This is a critical juncture in our history and an opportune time 

to use the model of purposeful and intentional support from the government. Today's 

minority businesses can be tomorrow's moguls. Whereas past discriminatory 

practices prevented their participation in the building of some of the nation's top 

industries, today there is an opportunity. Minority businesses are capable and can 

benefit by being at the table during the infancy of today's emerging industries and 

technologies. As in the past, ·in partnership with the government, as that industry 

grows, the altitude of minority businesses will excel as welL 

10750 Columbia Pike I Suite 200 I Silver Spring ! MD 120901 

0: 301-593-5860 I F: 301-593-13641 www.CRMSDCorg I ti©CRMSDC 

·-----
36 

SBR002 with DISTILLER


Insert offset folio 36 here 34645.012

STATEMENT OF 

DAVY G. LEGHORN, ASSISTANT DIRECTOR 

NATIONAL VETERANS EMPLOYMENT AND EDUCATION DIVISION 

THE AMERICAN LEGION 

BEFORE THE 

SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF REPRESENTATIVES 

ON 

"EXPLORING CHALLENGES AND OPPORTUNITIES FACED BY UNDERSERVED 

BUSINESSES IN THE 21 5T CENTURY" 

FEBRUARY 7, 2019 
37 

SBR002 with DISTILLER


Insert offset folio 37 here 34645.013

STATEMENT OF 

DAVY G. LEGHORN, ASSISTANT DIRECTOR 

NATIONAL VETERANS EMPLOYMENT AND EDUCATION DIVISION 

THE AMERICAN LEGION 

BEFORE THE 

SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF REPRESENTATIVES 

ON 

"EXPLORING CHALLENGES AND OPPORTUNITIES FACED BY UNDERSERVED 

BUSINESSES IN THE 21ST CENTURY" 

FEBRUARY 7, 2019 

Chairman Kim, Ranking Member Hem, and distinguished members of the Subcommittee on 

Economic Growth, Tax, and Capital Access, on behalf of National Commander Brett P. Reistad 

and the nearly two million members of The American Legion, we thank you for the opportunity to 

testify before you today on exploring challenges and opportunities faced by underserved 

businesses in the 21" century. We commend your leadership in exploring the challenges faced by 

underserved businesses- particularly veteran-owned small businesses (VOSB's). The American 

Legion looks forward to working with this committee to continue fostering policy and initiatives 

that empower veterans to pursue the American entrepreneurial spirit. 

BACKGROUND 

Veterans continue to serve their country long after their military service by employing 5.03 million 

Americans, managing receipts in excess of $1.14 trillion dollars, and accounting for nearly I 0% 

of U.S. Small Businesses1

• Despite strong numbers, veteran-owned small businesses continue to 

experience unnecessary bureaucratic obstacles and difficulties in securing government contracts, 

as was evident in the landmark Kingdomware Technologies, Inc. v. United States (U.S.). court 

case. 

In response to the need of the VOSB population, The American Legion established a taskforce of 

volunteer small business owning legionnaires in 2011. The American Legion Small Business 

Taskforce works to identify critical issues impacting VOSB's, along with working to ensure that 

viable and workable solutions are examined. The goal and mission of the Small Business Task 

force is to furnish The American Legion with first-hand experience and insight into the VOSB 

community, so we can accurately advocate for them before this critical committee and Congress 

as a whole. 

The American Legion responded to concerns from our Small Business Task Force, by establishing 

small business counseling services for VOSB's or veterans hoping to start a business. We rely on 

our taskforce volunteers to take on advisory roles in our entrepreneurship services and to lend their 

1 Small Business Administration: Office of Advocacy. Veteran-Owned Businesses and Their Owners: Data from 

the U.S. Census Bureau's Survey of Business Owners (2017). Washington, D.C. 

2 
38 

SBR002 with DISTILLER


Insert offset folio 38 here 34645.014

expertise in small business advocacy. The Small Business Taskforce is the national voice of the 

veteran entrepreneur. 

We assist veterans in establishing their disability claims, enabling the veteran to then obtain their 

Service-Disabled Veteran-Owned Small Business (SDVOSB) or Veteran-Owned Small Business 

status under the Veterans First Contracting Program (also known as Veterans First). Through our 

initiative, our efforts led us to participate in the Verification Assistance Counseling Program 

through Veterans First since its inception. The American Legion, through our Small Business 

Task Force, assists veteran small business owners in obtaining verification or maintain verification 

status when facing debarment. It is important to note, that our services are not exclusively offered 

to the two million members of The American Legion, but to all veterans who express a need or 

interest. 

The American Legion's efforts to advocate on bebalf of our nation's veteran small business owners 

does not stop at the chamber doors of Congress, but it also extend to the chambers of the justices, 

federal agencies, and the White House. The American Legion supports veteran-owned businesses 

as they continue to endure legal efforts to circumvent and subvert PL I 09-461 's Veterans First 

Program. The American Legion submitted an amicus brief in support of Kingdomware 

Technologies with the federal appellate court and Supreme Court. We also signed on to an amicus 

brief in support of veteran-owned businesses in PDS CQnsultants. Inc. v. US. The American 

Legion continues to relentlessly support this committee and this Congress in eliminating artificial 

roadblocks that are detrimental to our veteran entrepreneurs. Our efforts will continue until VA 

procurements meet the letter and intent of the Veterans First Program. 

The court decision in Kingdomware Technologies. Inc. v. US. was a significant victory for veteran 

small business owners, yet significant challenges remain. The American Legion believes these 

set-asides should expand beyond the Department of Veterans' Affairs (VA) and across the federal 

government. Further, The American Legion commends the Small Business Administration's 

(SBA) work through the Office of Veterans' Business Development (OVBD), but strides remain 

to be made. With only 22 Veterans Business Outreach Centers (VBOCs) across the country, rural 

Americans and those living in Puerto Rico, Guam, the Virgin Islands, and American Samoa often 

lack access to resources. Without access to resources, veterans who participate in the Boots to 

Business Program (B2B) as part of the military's Transition Assistance Program (TAP) have no 

method of follow-up. Often we see veteran small businesses owners come out ofB2B-singularly 

focused on creating a business plan, without an understanding of how to establish business 

governance or conduct the requisite administrative tasks to be recognized as a business in their 

state or territory. Lastly, The American Legion supports initiatives and organizations that advance 

emerging internet-based and peer-financed alternative capital options that focus on funding 

veteran-owned small businesses. 

REALIGNMENT OF FINAL RULES AND INTENT AFTER KINGDOMW ARE 

The greatest detriment to the veteran small business industrial base has been misinterpretation of 

legislation stipulating SDVOSBs as a preferred contracting group for the federal government. The 

American Legion expects the outcome of Kingdomware Technologies, Inc. v. US. 2 will reinterpret 

the rules of Veterans Entrepreneurship and Small Business Development Act of 1999. 

2 Kingdomware Technologies. Inc. v. United States, 579 U.S. (2016) 

3 
39 

SBR002 with DISTILLER


Insert offset folio 39 here 34645.015

The Justices of the Supreme Court were clear in their unanimous opinion; the intent of the three 

percent set-aside goal for SDVOSBs in the Veterans Entrepreneurship and Small Business 

Development Act ofl999 is to "encourage small business" and not for the sole purpose of fulfilling 

a quota.3 The Supreme Court opined that the subsequent enactment of the Veterans Benefits, 

Health Care, and Information Technology Act of 2006 was ancillary in nature to the Veterans 

Entrepreneurship and Small Business Development Act of 1999 and shares ilk intent. 

The nexus in the intent of the two separate and distini;t programs has broader implications for the 

federal government. The opinion of the court advises agencies that the reasoning behind the setaside goals applies to government-wide SDVOSB programs and agency-specific programs (i.e. 

Veterans First Contracting Program at the Department of Veterans Affairs). 

Initially, the Small Business Development Act of 1999 and Veterans Benefits Act of 2003 gave 

SBA and other federal agencies authority to increase VOSBs industrial base. In 2005, SBA and 

the Federal Acquisition Regulatory (FAR) Council issued concurring final rule comments stating 

SDVOSB Programs were not developmental in nature4

. SBA and the FAR Council concurred 

SDVOSB programs are localized to the benefits in f(:deral contracting and the sole purpose is to 

increase participation of established SDVOSBs already within the federal marketplace. SBA and 

the FAR Council were clear that the SDVOSB Program was not meant for business development 

or growing an industrial base. The reversal in rule-making is arguably contrary to the intent of 

Congress and was widely unpopular. 

As result of the SBA and FAR Council's rule-making comments, the SDVOSB Program 

developed purely into a set-aside program where the only metric for success was measured by 

dollars out the door as opposed to the wellbeing of the veteran small business industrial base. A 

program geared to meet a minimum threshold of dollars-spent does not encourage growth of the 

industrial base. As a result of the aforementioned objective, the vast majority of the three percent 

federal set-aside is localized to a small group of companies. The culmination of a set-aside 

program without business development in mind, coupled with measuring success on dollars out 

the door vs. the creation of new business led to the program as it currently exists- it fails to meet 

the intent and the letter of the law. 

Kingdomware Technologies, Inc. v. the US. was groundbreaking in that the decision harkened 

back to Congress' original intent at creating an SDVOSB Program with business development and 

the growth of the industrial base as a part of the framework. The American Legion expects the 

decision to result in SBA and the FAR Council reconsidering their 2005 final rule comments thus 

realigning them with the Court's decision and original congressional intent. Further, any 

subsequent rule change for the SDVOSB Program must incentivize agencies to take into account 

the diversity of SDVOSBs participating in the marketplace and not simply by a dollars out the 

door figure. 

3 Kingdomware Technologies, Inc. v. United States, 579 U.S. (2016) ("In an effort to encourage small businesses, 

Congress has mandated that federal agencies restrict competition for some federal contracts."). 4 Ibid 

4 
40 

SBR002 with DISTILLER


Insert offset folio 40 here 34645.016

To SBA's credit, they have begun examining solutions towards the problems that stemmed from 

the 2005 rule-making decisions. OVBD created several successful entrepreneurship development 

programs under a separate authority to grow the veteran small business industrial base. Also, work 

is already underway at S BA to revise the small business goal's grading criteria to ensure that the 

total federal set-aside spend is spread out to more veteran-owned small businesses. The American 

Legion sees the Kingdomware decision as a catalyst that shall hasten many programmatic 

improvements that the SBA has already been working towards and finally recognize the 

developmental intent of the SDVOSB program. The American Legion believes the inclusion of 

SDVOSBs into the SBA's 7(j) programs is a good start. 

VETERANS FIRST CONTRACTING PROGRAM BEYOND VA 

The American Legion supports the expansion and improvement of all entrepreneurship programs, 

loan programs and numerical goals for all veterans to compete in government procurement and 

contracts.5 This is why we believe the Kingdomware decision lends credibility for the additional 

tier of veterans' preference to exist within existing federal contract set-aside programs. This 

preference can now be legislatively extended government-wide or at the very least, to several other 

agencies. 

Mandated in 2006 by Public Law 109-461 and, before that, by President Bush's 2004 Executive 

Order 13360, VA was entrusted with a fiduciary responsibility to grow the veteran small business 

industrial base. The American Legion believes that the federal agencies that send our 

servicemembers to war should share in V A's responsibilities. The Department of Defense and the 

Department of Homeland Security should have the moral imperative to enforce the veteran's 

preference in their purchases. To this end, The American Legion asks that the Veterans First 

Contracting Program within VA should be legislatively extended to the aforementioned agencies 

requiring the same preference in set-aside authorities. 

OVBD AND BOOTS TO BUSINESS 

Since its implementation in 2012, the Boots to Business (B2B) capstone course taught as a part of 

the military's Transition Assistance Program (TAP) has been very successful. SBA was the first 

to pilot and then implement their portion of TAP in compliance with the directives of the VOW to 

Hire Heroes Act of2011. B2B is a lean program, administered solely through SBA's 22 Veterans 

Business Outreach Centers (VBOCs). We are proud to report that during the recent government 

shutdown, 95 percent of the scheduled B2B sessions taught on and off military bases were 

administered. For the last five years, the two day B2B curriculum has been the litmus test 

that has helped veterans launch their businesses. 

B2B is currently a non-mandatory portion of a three-tracked capstone course available 

to Servicemembers within two years of their date of separation. In the 2019 National Defense 

Authorization Act, there was an attempt to make at least one of the TAP capstone courses 

mandatory. The American Legion supports this attempt and hopes this will expose more 

servicemembers to SBA and their partners. 

5 The American Legion Resolution Number 21,2018. 

5 
41 

SBR002 with DISTILLER


Insert offset folio 41 here 34645.017

The American Legion believes we should increase the pool of servicemembers eligibility for SBA 

programs. Currently, Guard and Reserve members are not eligible for vet small business 

development and entrepreneurship programs until after they are activated under Title I 0. The 

American Legion recognizes that our National Guardsman are often deployed under Title 32 and 

the law must be changed so that they too are eligible for SBA programs. This is why The American 

Legion supports legislation similar to H.R. 7199,the National Guard and Reserve Entrepreneurship 

Act of 2018, introduced during the !15th Congress, that proposes amending 15 USC §636 to 

increase the eligibility of military-focused SBA programs to those who have "[been] ordered to 

perform active-duty service for more than 30 consecutive days". 

Increased utilization of SBA's military and veteran-centric programs will require more VBOCs. 

The American Legion supports the creation of more VBOCs to include one in every state and the 

territories. Puerto Rico, Guam, Virgin Islands, and American Samoa are often overlooked for 

veterans programs and services, despite the heavy military presence and armed services 

recruitment efforts that occur in these places. That is why American Legion Resolution No. 26 

supports Section 301 of H.R. 225, the Puerto Rico Small Business Assistance Act of 2019. The 

American Legion asks this committee to consider creating VBOCs in other locations where 

military and veterans are heavily populated. 

LENDING PROGRAMS 

The 7(a) program is the SBA's flagship program. SBA does not directly provide the funds to a 

small business, but rather issues a guarantee to the bank that should the small business default the 

SBA will back the loan. 7(a) loans utilization for veterans have seen a recent decline, from 

$1,370,204,100 in 2015 to $1,064,474,800 in 2018, but there is no reason to be alarmed 

considering the innovation and diversification of small business lenders within the last decade6

• 

SBA's flagship program is the 7(a) loan. The 7(a) loan program is operated through banks, but 

banks have been a diminishing source of credit for small business according to the National 

Federation of Independent Business 7 . The downward trend has persisted throughout the last 

decade due to a combination of factors, but mainly because bank-based programs have rigid 

structures that are less effective at meeting the mercurial needs of small businesses. 

According to the Federal Financial Institutions Examination Council, the number of commercial 

banks has been in steady decline since the 1980s. The US lost over 2000 commercial banks since 

20098, and new banks are not forming. The banking industry is consolidating under financial 

industry giants. 

Large financial institutions avoid small business lending because small loans are time intensive 

for their amount, hard to securitize, and expensive to underwrite and service, which is why 

6 U.S. Small Business Administration: Office of Capital Access. Veteran Lending Update: December 6. 2018. 7 Small Business, Credit Access, and a Lingering Recession. (2012, January). Retrieved February 1, 

20 19, from http://www. nfib. com/Portals/0/pdf/a llusers/research/studies/small-business-credit-study-nfib2012.pdf 

8 Commercial Banks in the U.S. (2018, December 13). Retrieved February 1, 2019, from 

https ://fred. stlouisfed. org/series/U SN U M 

6 
42 

SBR002 with DISTILLER


Insert offset folio 42 here 34645.018

community and regional banks form the backbone of the 7(a) and 504 loan programs. The decline 

in community banks has inadvertently led to the diminished utilization of7(a) loans. 

The downward trend in bank creation inadvertently spurred diversification in the financial 

industry. Alternative lenders began to take over the traditional roles of community banks when it 

came to small business lending. Coming out of recession, when banks were reticent to make riskier 

loans, the market still found a way to link investors to new and innovative products. The alternative 

lending industry gained significant traction within the last five years with online peer-to-peer and 

social lending products outpacing Securities Exchange Commission regulations. 

According to statistics from SBA's Office of Capital Access, veteran usage of the micro-loan 

program is trending upwards annually from $2,083,315 in 2013 to $3,705,147 in 2018. The 

American Legion had the opportunity to work with the Latino Economic Development 

Corporation (LEDC) to conduct outreach to local veteran start-ups about micro-lending. It is 

important to note, that during the 2018-2019 government shutdown, community development 

financial institutions (CDF!s) were unable to process loans and provide services to veterans. To 

prevent this from negatively impacting veteran owned small businesses, The American Legion 

asks that SBA's loan processing staff be designated "essential" workers during a government 

shutdown. 

The lending renaissance experienced in the aftermath of the recession diversified and reshaped 

small business financing. Traditional bank-based lending is just one of many ways to make credit 

accessible to small businesses. Micro loans, social financing, peer-to-peer lending, private equity, 

venture capital, and angel investors have gained a stronger foothold, and this diversity has been a 

win for small business because they are no longer solely reliant on 

banks. For the reason that small business financing is no longer dominated by traditional 

lenders, SBA needs to reconsider the promotion of 7(a) loans as their flagship product. An SBA 

grantee's primary metric for success is the capture of7(a) loan dollars; this ultimately bleeds over 

into the administration of entrepreneurial development programs including B2B, where there is a 

push to get small businesses ready to go to the banks to utilize SBA's premier loan product. ED 

programs should be helping businesses get financing. Often, the first interface a small business 

owner has with the SBA or a grantee is when they need financing; however, bank loans currently 

comprise just a limited fraction of small business borrowing. 

This is the right time for SBA to re-evaluate their goals and metrics that the ED programs support. 

It's time to update an aging lending program and time to prioritize exposure of veteran 

entrepreneurs to alternative lenders. Through American Legion Resolution 152: The American 

Legion supports initiatives and organizations that advance emerging internet-based and peerfinanced alternative capital options that focus on funding veteran-owned small businesses. 

CONCLUSION 

Chairman Kelly, Ranking Member Hern, and distinguished members of this critical committee, 

The American Legion thanks you for the opportunity to explain the position of our nearly two 

million members of The American Legion. Questions concerning this testimony can be directed 

7 
43 

SBR002 with DISTILLER


Insert offset folio 43 here 34645.019

to Jonathan Espinoza, Legislative Associate, in The American Legion's Legislative Division at 

(202) 861-2700, or jespinoza@legion.org 

8 
44 

SBR002 with DISTILLER


Insert offset folio 44 here 34645.020

Statement by 

Michael Romano 

Sr. Vice President of Industry Affairs & Business Development 

NTCA-The Rural Broadband Association 

Arlington, VA 

Before the 

United States House of Representatives 

Committee on Small Business 

Subcommittee on Economic Growth, Tax and Capital Access 

Exploring Challenges and Opportunities Faced by 

Underserved Businesses in the 21st Century 

Washington, DC 

February 7, 2019 
45 

SBR002 with DISTILLER


Insert offset folio 45 here 34645.021

NTCA -Michael Romano 

February 7, 20!9 

Page I of9 

INTRODUCTION AND BACKGROUND 

Chairman Kim, Ranking Member Hem, and members of the Subcommittee, thank you for this 

opportunity to testify today on the challenges faced by small businesses and underserved 

populations. I am Michael Romano, Senior Vice President oflndustry Affairs & Business 

Development ofNTCA-The Rural Broadband Association, which represents nearly 850 small, 

community-based carriers in 46 states that offer advanced communications services throughout the 

most sparsely-populated areas of the nation. 

Small, hometown-based rural telecom providers like those in NTCA's membership connect rural 

Americans with the world- making every effort to deploy advanced networks that respond to 

consumer and business demands for cutting-edge, innovative services. These cooperatives and 

locally-operated companies serve the most rural parts of the United States, reaching areas that 

contain less than five percent of the U.S. population, but which are spread across more than 35 

percent of the U.S. landmass. The average density in these rural service areas is about seven 

customers per square mile roughly the average density for the entire state of Montana. 

While the economics of operating in these very rural areas would make them likely candidates for 

being unserved or underserved in terms of communications connectivity, NTCA's small business 

members have led the charge in deploying broadband in rural America and closing the digital 

divide for those rural areas fortunate enough to be served by these hometown providers. Fixed and 

mobile broadband, video, and voice are among the many services that some rural Americans can 

access thanks to our industry's commitment to serving sparsely populated areas. The rural telecom 

industry has always been innovative, currently exemplified by the mission to deploy the more 

future-proof fiber-based systems that will provide the foundation small businesses can rely on to 

invest, relocate, and thrive in rural America. 

Of course, as much as we wish NTCA members could expand into other rural communities- and 

they often try to do so where they can- there are many rural areas lacking access to sufficient 

broadband, and some that lack access to any broadband at all. The distance and population density 

of rural America present unique challenges for service providers, but the effects are ultimately felt 

by the residents and businesses that live and work in these areas. To compound matters further, on 

average, rural areas in the U.S. are poorer than urban areas 1 and have lower broadband adoption 

rates. 2 Thus, it is important to take a holistic view of what it means to be an undeserved small 

business, for example, in the 21 '

1 century. NTCA submits that available, affordable broadband is 

essential to overcoming such challenges, and my testimony wit! provide examples of broadband's 

benefits and also discuss effective policy for ensuring universal broadband service. 

1 Brakkton, Booker, Report: Rural Povert\' In America Is 'An Emergencv', npr.org {May 31, 2018). 2 Tomer, et al, Signs of Digital Distress, The Brookings Institution Metropolitan Policy Program (Sep 20 17). 
46 

SBR002 with DISTILLER


Insert offset folio 46 here 34645.022

NTCA -Michael Romano 

February 7, 2019 

Page 2 of9 

BROADBAND IS ESSENTIAL INFRASTRUCTURE THAT DRIVES ECONOMIC 

GROWTH AND VIABILITY IN RURAL AMERICA 

Broadband Benefits Rural and Urban Areas Alike 

One means of helping underserved businesses grow and thrive is to connect them to markets for 

their products and services. Such concerns exist across America, in rural and urban areas alike, of 

course. But in rural areas, as discussed earlier, this connectivity can be a unique challenge due to 

geographical barriers barriers that broadband can help break down and overcome. Indeed, in 

rural and urban areas alike, broadband availability and adoption strongly correlates with increased 

economic opportunity and prosperity. A 2016 government study found that just 41 percent of 

adults with household incomes less than $20,000 had home broadband access, while 90 percent of 

adults with household income higher than $100,000 had access. 3 Other studies reveal that the 

availability of broadband services, regardless of adoption, added as much as 1.4 percent to the U.S. 

employment growth rate. 4 

Investing in rural broadband has far-reaching effects for both urban and rural America, creating 

efficiencies in healthcare, education, agriculture, energy, and commerce, and enhancing the quality 

of life for citizens across the country. A report released in 2016 by the Hudson Institute in 

conjunction with the Foundation for Rural Service underscores the nationwide benefits that arise 

from rural broadband; this study found that investment by rural broadband companies contributed 

$24.2 billion to the economies of the states in which they operated in 2015.5 Of this amount, $8.3 

billion accrued to the benefit of rural areas, while nearly $16 billion accrued to the benefit of urban 

areas. In addition, better broadband access in rural America is helping to drive growth in online 

transactions- a recent survey found, for example, that rural consumers account for more than I 0.8 

billion internet-driven transactions annually, representing approximately 15% ofthe national total.6 

Broadband Benefits Consumers and Communities 

The benefits of rural broadband, however, go beyond sheer numbers - it is helpful as well to 

understand the productive uses of broadband and what they mean to those communities that get and 

stay connected. Rural America needs broadband not only to help farmers efficiently produce the 

crops that are sold around the world, but to help rural small businesses participate in the global 

economy and help all rural citizens experience the potentially life-changing healthcare, educational, 

and employment benefits of broadband. 

'Digital Inequality and Low-Income Households, HUD Office ofPolicy Development and Research (2016). 4 Galperin and Viecens, Connected for Development? Theory and evidence about the impact oflntCQ1Ct technologies on poverty 

alleviation, Development Policy Review (2017). 5 The Economic Impact of Rural Broatlbrmd, The Hudson Institute, Washington, D.C. (2016). 6 A Cyber Economy: The Transactional Value of the Internet in Rural America, White Paper, iGR (2018). 
47 

SBR002 with DISTILLER


Insert offset folio 47 here 34645.023

NTCA Michael Romano 

February 7, 2019 

Page 3 of9 

A major benefit of rural broadband, for example, comes in the form of distance learning. With a 

shortage of teachers in many areas of rural America, many schools must rely on high-speed 

connectivity to deliver interactive-video instruction for foreign language, science, and music 

classes. For example, one rural South Dakotan teaches Levell and 2 Spanish to over 100 students 

in over a dozen high schools from a small office located on her farm. Her broadband connection 

enables her to instruct hundreds of students who otherwise would not have the opportunity to learn 

Spanish. 

Access to healthcare is a critical issue for rural area~, where the lack of physicians, specialists, and 

diagnostic tools normally found in urban medical centers creates challenges for both patients and 

medical staff. Telemedicine applications help bridge the divide in rural America, enabling realtime patient consultations and remote monitoring, as well as specialized services such as telepsychiatry. A small provider in Georgia recently partnered with the county public school system to 

deploy telehealth equipment to connect the school nurses' offices with physicians at a regional 

hospital. Through this partnership, the hospital, the school system, and the rural broadband 

provider facilitate better healthcare for students who might not otherwise see a physician in an area 

where parents can ill afford to miss a half or full day of work for a doctor visit. 

A small telco opened the nation's first "Virtual Living Room" in rural Kentucky in 2017 to enable 

U.S. service veterans to access broadband-enabled U.S. Department ofVeterans Affairs (VA) 

telehealth and other online services for no fee at publicly accessible locations. The Virtual Living 

Room saves travel time and costs while enabling connections to skilled physicians and other 

providers in the VA medical system. The innovative project blends rural technology, VA 

resources, and local support to encourage veteran use of advanced medical technologies. 

Fast, high-capacity broadband in rural areas also creates jobs. In Sioux Center, Iowa, a major 

window manufacturer built a 260,000 square-foot plant to employ 200 people. The company 

considered more than 50 locations throughout the Midwest, but selected Sioux Center in part 

because the rural broadband provider enabled this plant to connect with its other locations 

throughout the U.S. using a sophisticated "dual entrance" system that could route traffic to alternate 

paths, ensuring that the main headquarters 250 miles away and other facilities would remain 

connected. Similarly, in Cloverdale, Indiana, a rural broadband provider met with developers and 

helped bring an industrial park to its service area. Powered by this provider's broadband, the 

facility created more than 800 jobs in the area. In Havre, Montana, a rural broadband provider is 

partnering with a tribally-owned economic development agency to create a Virtual Workplace 

Suite and Training Center that is expected to create about 50 jobs. 

These stories are repeated throughout NTCA member service areas and are recognized annually by 

NTCA's Smart Rural Community (SRC) program that promotes rural broadband networks and 

applications that communities can leverage to support innovative economic development, 
48 

SBR002 with DISTILLER


Insert offset folio 48 here 34645.024

NTCA Michael Romano 

February 7, 2019 

Page 4 of9 

education, healthcare, government services, public safety and other vital public functions. SRC 

recognizes top-performing broadband providers and their communities through its Showcase 

Awards; offers grants for innovative technology deployments in the Collaboration Challenge 

program; and provides educational resources and programming. NTCA also recognizes the 

providers of the fastest, most robust rural networks with its "Gig-Capable Provider" certification. 

Recipients must demonstrate that gigabit technology is commercially available within 95% of one 

or more exchanges or census blocks in their service area. NTCA's membership already boasts over 

l 00 "Gig Certified" providers. 

As described in a recent CoBank report on rural economic challenges, "Rural America faces a 

unique set of economic challenges, but it has demonstrated resilience during the past eight years of 

recovery. The rural population, jobs, and incomes are all trending in the right direction. And 

current efforts to improve rural broadband access offer the greatest opportunity to make a 

significant dent in the rural/urban economic divide. As broadband becomes more widely available 

in rural communities, enhanced access to education, healthcare, and business opportunities can 

markedly improve the quality of life and the economic vitality in these communities. Rolling out 

broadband to rural communities will take several more years in some areas. But as access 

increases, so will rural America's economic potential."7 

BARRIERS TO RURAL BROADBAND DEPLOYMENT 

NTCA believes it should be clear that a key to helping underserved communities in the 21 '

1 century 

is to provide them with 21" century connectivity- high-speed broadband upon which they can rely 

to invest and operate businesses that will create jobs and provide opportunities for residents and 

consumers alike. This task, however, is easier said than done. In many cases, in rural areas in 

particular, communities (and the residents and businesses within them) are underserved (or even 

unserved) because the economics of connecting them are difficult, if not impossible, to overcome. 

Building broadband networks is capital-intensive and time-consuming. Indeed, the primary 

challenge of rural network deployment is in making a business case for constructing networks 

across hundreds or thousands of miles where the population is sparse, the terrain is diverse, and the 

permitting and contractual considerations can be substantial. Then, even when and where networks 

are built, they must be maintained over those hundreds or thousands of miles- this maintenance 

requires technicians who regularly travel long distances to make service calls and customer service 

representatives trained to deal with questions about router and device configurations in ways that 

were unimaginable for "telephone companies." 

Moreover, even the best local or "last mile" networks in rural markets are dependent upon "middle 

mile" or long-haul connections to internet gateways dozens or hundreds of miles away in large 

7 TilE YEAR AHEAD: Forces that will shape the U.S. rural economv in 2018, CoBank Knowledge Exchange Report (2018). 
49 

SBR002 with DISTILLER


Insert offset folio 49 here 34645.025

NTCA Michael Romano 

February 7, 2019 

Page 5 of9 

cities. Reaching such distant locations is expensive, and as customer bandwidth demands increase 

moving from Megabytes to Gigabytes to Terabytes of demand per month per customer- so too 

does the cost of ensuring sufficient capacity to handle customer demand on those "long-haul" fiber 

routes that connect rural America to the rest of the world. 

All these factors make the delivery of broadband in rural America an ongoing effort that requires 

sustained commitment. We will miss the mark as a nation if we treat the broadband challenge as a 

one-time declaration of"success" just for the very preliminary act of connecting a location. After 

initial construction of rural broadband networks, much work remains to ensure consumers and 

businesses can adopt and make effective uses of networks, and to upgrade and sustain those 

networks over time to keep pace with consumer demand- this undertaking is where public policy 

plays an important role in helping both to build and sustain broadband in rural markets. 

OVERCOMING BARRIERS TO BROADBAND DEPLOYMENT IN UNSERVED AND 

UNDERSERVED COMMUNITIES 

Making the Business Case for Broadband Infrastructure Investment and Sustaining Operations 

So how do we overcome these significant challenges of deploying and sustaining rural broadband 

infrastructure? The first step is to clearly identify those challenges and think carefully and 

creatively about measures to address them. Above all else, the economics of rural broadband 

present the primary barrier to deployment. The rates that rural consumers pay are rarely sufficient 

to cover even the costs of operating in rural areas, much less the enormous capital expenditure 

required in the first instance to deploy reliable, high-speed broadband in rural America. Without a 

reasonable business plan, providers are hard-pressed to justify borrowing funds or using one's own 

capital to build and then even harder-pressed to sustain networks in areas where densities are low, 

distances are great, and terrain and topography complicate construction. 

These challenges highlight why sufficient ongoing support from the High-Cost Universal Service 

Fund (USF) program overseen by the Federal Communications Commission (FCC) is so important, 

allowing providers to keep rates affordable for consumers and to help justifY use of one's own 

capital and/or obtaining financing from the few lenders that tend to serve rural Internet service 

providers. In short, support from the federal High-Cost USF program is essential to make the 

business case for broadband in many unserved and underserved rural areas. In fact, the USF is the 

primary, if not the only, tool to ensure- as mandated by the Communications Act- that those 

living in deeply rural areas can purchase telecom services that are reasonably comparable to what 

urban Americans receive at rates reasonably comparable to what urban consumers pay. 

Put another way, USF does not itself "pay for" upfront network construction; instead, the USF 

program supports ongoing operations (and the repayment ofloans and private capital) by ensuring 
50 

SBR002 with DISTILLER


Insert offset folio 50 here 34645.026

NTCA - Michael Romano 

February 7, 2019 

Page 6 of9 

that rural consumers can pay reasonable rates for their use of services atop networks, thereby 

allowing consumers to buy such services and operators to justify the business case for investments 

in those networks in the first instance. USF is thus perhaps the best, most successful example of a 

public-private partnership that exists in the broadband space, having helped to justify the business 

case for private network investments that can total tens of billions of dollars per year when 

measured as gross plant in service. 

Fortunately, after receiving dozens of bipartisan letters signed by hundreds of members of 

Congress over several years calling for an updated and sufficient High-Cost USF program, the FCC 

in December agreed to substantially increase the support available to small, rural carriers through 

USF and also set a baseline requirement of25/3 Mbps for supported networks. The recalibrated 

resources are needed and welcome after many years of budget shortfalls and capped support, and 

now that Congress received much of what it asked for on USF, it becomes increasingly important 

to coordinate funds appropriated to the U.S. Department of Agriculture's Rural Utilities Service 

(RUS) for broadband loans and grants with High-Cost USF support to ensure federal broadband 

support efforts aren't duplicated. 

It is also important to note that USF does much more than support rural networks. This work is the 

discrete mission of the High-Cost program to help ensure that networks are available in rural 

areas, and that consumers and businesses can afford to adopt and make good use of the services 

offered atop them. But universal service policy aims to do more, holistically considering 

potentially unserved and underserved users of all kinds. More specifically, in first codifying the 

USF in 1996, Congress wisely structured the USF as a combined umbrella program with 

components that seek to address discrete sets of potentially underserved populations through 

coordinated programs E-Rate for schools and libraries, Lifeline for low-income consumers, Rural 

Health Care, and High-Cost for rural networks. 

Indeed, in helping to ensure rates for services are affordable on rural networks, High-Cost also 

helps millions of low income Americans connect to broadband, as many of the nation's poorest 

counties are rural. 8 For these reasons, we believe the federal universal service mechanisms as a 

whole represent a well-thought, comprehensive strategy that aims to ensure that every American 

regardless of the specific challenge that renders them at risk of being unserved or underservedwill have the chance to obtain access to advanced communications services at affordable rates. 

Financing Deployment of Broadband Infrastructure to Reach Unserved and Underserved 

Communities in Rural America 

If the business case for investment in rural broadband networks can be made- which, as noted above, 

often relies upon USF support in the first instance- the question then turns to how a provider can 

!\Stebbins, Samuel, The Poorest Countv in Every State. 2417 Wall St (Jan 9, 2019). 
51 

SBR002 with DISTILLER


Insert offset folio 51 here 34645.027

NTCA- Michael Romano 

February 7, 2019 

Page 7 of9 

obtain the resources needed to build the network. Deploying a communications network in an 

unserved or underserved rural area requires a large capital outlay due to the challenges of distance and 

terrain. In some cases, a provider may have capital on hand to self-finance the construction of such a 

network, but this is not often the case- especially when smaller operators are the ones typically most 

focused on expanding broadband into underserved rural markets. 

There are very few lenders, however, willing to provide capital for rural broadband construction given 

the long-term nature of the returns involved and the limited nature of the returns as compared to more 

densely populated markets. Indeed, in many cases, smaller rural operators have only a handful of 

lenders to turn to for capital to deploy broadband infrastructure, with RUS, Co Bank, Rural 

Telecommunications Finance Cooperative (RTFC), and some community banks prominent among 

those lending entities. 

The RUS in particular has long played a crucial role in addressing rural broadband challenges through 

its telecommunications programs that finance network upgrades and deployment in rural areas. Since 

at least the early 1990s, the RUS telecom programs have financed advanced network plant at a net 

profit for taxpayers and helped deploy state-of-the-art networks to rural Americans left behind by 

providers unable or unwilling to serve low-population-density markets. 

Not only does RUS help rural America remain connected, but its Broadband Loan & Loan Guarantee 

program and traditional Telecommunications Infrastructure Loan & Guarantee program make loans 

that must be paid back with interest- creating a win/win situation for rural broadband consumers and 

American taxpayers. With the passage of new legislation last year, RUS will figure even more 

prominently in rural broadband deployment strategy as Congress has begun providing RUS with 

substantial additional resources to make broadband grants and grant/loan combinations. In addition to 

the creation of a new $600 million RUS broadband loan/grant pilot program in the Fiscal Year 2018 

Omnibus appropriations bill (with plans to add more funds in Fiscal Year 20 19), the recentlyreauthorized Farm Bill added a grant component to the Broadband Loan Program and increased the 

program's authorization from $25 million to $350 million. 

Far from supplanting the High-Cost USF program, RUS telecom programs will need to continue to 

work in concert with USF as RUS finances the substantial up front costs of network deployment 

and the High-Cost program helps to make the business case for such construction and then sustains 

ongoing operations at affordable rates. In particular, USF by law aims to ensure "reasonably 

comparable" services are available at "reasonably comparable" rates, making adoption of services 

possible by consumers and small businesses that need such access to thrive as described earlier in 

this testimony. Not to be confused or conflated, RUS capital and ongoing USF support therefore 

serve distinctly important, but complementary rather than redundant, purposes in furthering rural 

broadband deployment. 
52 

SBR002 with DISTILLER


Insert offset folio 52 here 34645.028

NTCA - Michael Romano 

February 7, 2019 

Page 8 of9 

It is essential that these complementary roles continue, and that we avoid the prospect of two, dueling 

federally-supported networks built in a rural area that could not sustain either one without such federal 

support. We can make smarter, better use of federal resources by reaffirming and codifying yet again 

the complementary nature of coordinated RUS and FCC programs, rather than allowing these 

programs and the resulting networks to be pitted against one another in a manner that undermines the 

sustainability of the networks and the integrity of the programs themselves. 

Expediting Broadband Deployment to Reach Underserved Communities More Quickly and Effectively 

As mentioned earlier in this testimony, a further barrier to broadband deployment can arise in the 

form of disparate applications, fees, and reviews across federal and state land-owning and landmanaging agencies. Such concerns can be particularly acute for smaller broadband providers, who 

have fewer staff and financial resources to navigate multiple agency procedures. Efforts to 

streamline federal permitting processes would free resources for broadband investment. The RAY 

BAUM'S Act laid a great foundation for reforming federal permitting by standardizing applications 

and introducing shot clocks.9 More could be accomplished on this front by requiring better 

coordination among federal agencies for broadband projects, expediting use of existing federal 

rights-of-way, and allowing states to conduct reviews for federal lands. 

DELIVERING BROADBAND TO UNSERVED AND UNDERSERVED RURAL 

COMMUNITIES: PROGRESS AND REMAINING WORK 

Despite the many challenges of deploying broadband in rural areas, a survey ofNTCA members 

conducted in 2017 found that 58 percent of respondents' customers are served via fiber-to-thehome, up by 17 percent from 2017. Over 38 percent of customers are served via DSL technologies, 

2.6 percent by cable modem, 1.2 percent via fixed wireless, and 0.1 percent through satellite. 10 

Due in no small part to increased fiber deployment, rural customers served by NTCA members 

have access to faster broadband speeds, including 70 percent that can now access speeds at or 

above 25 Mbps download. These statistics confirm what we already know, but occasionally 

overlook- that through the work of small, local operators committed to the rural areas in which 

they live, we are making strides year-over-year to reduce the digital divide. 

But the job is far from done. The statistics noted above are good news, but they also tell a story of 

many rural consumers and communities waiting for services to come. Despite the community 

commitment ofNTCA members, twelve percent of consumers still cannot get even I 0 Mbps 

broadband, while 30 percent are unable to obtain 25 Mbps broadband- a speed that is considered 

average for most urban Americans today. In these cases, even those providers that live and work in 

the communities they serve cannot muster the resources or make the business case for investment 

9 H.R.1625- Consolidated Appropriations Act, 2018, Division P (Public Law No: 115-141). 

w NTCA Broadbandllntcrnct Avai!abilitv Survev Report (20 18), NTCA-The Rural Broadband Association, Arlington, VA 
53 

SBR002 with DISTILLER


Insert offset folio 53 here 34645.029

NTCA- Michael Romano 

February 7, 20!9 

Page 9 of9 

and ongoing operation. And the story is even worse in areas that are not served by cooperatives 

and other small hometown-based telecom companies like those in NTCA's membership; in other 

rural communities, we hear frequently that many more consumers, businesses, schools, and medical 

facilities are lacking in access to even basic levels of broadband. 

And, finally, even where broadband is available, sustaining it and upgrading it to keep pace with 

today's economy and user demands is a challenge unto itself; the job is not finished when 

broadband networks are deployed, because consumers' use of broadband depends upon reliable and 

affordable services that will remain high-quality and keep pace with advances in technology and 

user needs. For example, while DSL and fixed wireless technologies are important "tools in the 

toolkit" to provide customers with some basic level of broadband access, it is difficult to see as a 

long-term proposition how these technologies can keep pace with consumer demand and business 

need. Thus, even as we have successes to celebrate and proven track records of success to emulate, 

we as a nation have much more to do to reach underserved populations and unserved areas, and to 

also sustain robust and affordable rural broadband where it is available today. 

CONCLUSION 

Robust broadband must be available, affordable, and sustainable for rural small businesses and 

underserved populations to realize the economic, healthcare, education, and public safety benefits 

that advanced connectivity offers. As noted in this testimony, it takes an effective mix of 

entrepreneurial spirit, access to capital (whether from RUS or otherwise), commitment to 

community, and federal USF support to enable and sustain deployment of communications 

infrastructure in many parts of rural America. 

The RUS and the High-Cost USF programs play important, but complementary rather than 

redundant, roles in promoting the deployment and sustainability of broadband infrastructure in 

rural America. Promoting greater access to capital through strong, well-tested RUS loan and grant 

programs, ensuring sufficient funding of USF to make the business case for use of private and/or 

borrowed capital in rural areas, and demanding continued coordination between essential federal 

programs that aim to promote broadband access in rural America are all critical pieces of a 

comprehensive and thoughtful national rural broadband strategy. 

I thank the committee for its leadership on and interest in all these issues, and we look forward to 

working with you to realize a vision of true universal service in the form of robust and sustainable 

networks that will deliver reliable, high-quality, and affordable communications services 

throughout rural America now and for years to come. 
54 

SBR002 with DISTILLER


Insert offset folio 54 here 34645.030

Question for the Record - Rep. Bradley Schneider 

Committee on Small Business 

Subcommittee on Economic Growth, Tax and Capital Access 

Hearing: "Exploring Challenges and Opportunities of Underscrved Businesses in the 21" 

Century" 

February 15, 2019 

Answers for Rep. Bradley Schneider: 

The American Legion appreciates your efforts to codify Boots to Business as a mainstay of veteran 

specific programing at the SBA. The Boots to Business curriculum was created in response to the 

multi-agency effort to revamp DOD's Transition Assistance Program in 2011. Since its inception, 

Boots to Business has become one of the more popular portions of the TAP classes and has served 

as our servicemember's initial introduction to the SBA and their resource partners. 

How can Congress and the SBA work with organizations like The American Legion to 

promote these programs and make sure veterans are aware of these opportunities? 

The best way forward for The American Legion, Congress and the SBA to market entrepreneurial 

development programs to the veterans is to make these programs available and for SBA and their 

resource partners to work with the Legion and our 8000 legion posts across the US. Not every one 

of our members will go to a Boots to Business class, but chances are, they know someone who 

needs that service. So please continue to engage our posts at the state and district levels and let us 

help get the word out. 

What differentiates private entrepreneurial training programs from those offered by the 

SBA's Veterans Business Outreach Centers? 

Regarding the differences in public and private entrepreneurial development programs: One way 

in which these programs differ is in the cost. In general almost all military or veteran facing small 

business programs the SBA grantees administer are free of charge. Whereas in the private sector, 

many entrepreneurial programs or incubator services extract a fee or take a piece of the business. 

The Legion works exclusively with SBA grantees like the Institute for Veterans Military and 

Families and the VBOCs, so all of the counseling and entrepreneurship events The Legion provides 

are free. 

How can we ad.just the Post 9/11 GI Bill to support veterans pursuing opportunities such as 

internships and apprenticeships? How else can we make these benefits more flexible for 

veterans to pursue careers and educational opportunities that best suit their needs? 

In concept, The American Legion also supports a more flexible and cater to a broader scope of 

veterans' needs. The Post 9/11 GI Bill was very generous, but it missed two categories of veterans. 

There are those who are not college-bound with a deep entrepreneurial spirit and those who already 

have degrees from higher education institutions who would rather use the Post 9/11 GI Bill benefit 

as financial backing for a business idea. 
55 

SBR002 with DISTILLER


Insert offset folio 55 here 34645.031

The American Legion supported Senator Moran's (R. KS) Veterans Entrepreneurial Transition 

Act of 2015 that permitted veterans educational benefits to be paid out in grants for veteran 

entrepreneurs as long as the recipient enrolls in a select number of SBA entrepreneurial 

development programs and courses. 

We echo your sentiment on expanding the parameters of the Post 9/11 GI Bill. At the end of the 

day, it's about choice. Expanding an earned benefit to appeal to a group of veteran entrepreneurs 

that feels that they have been left out in the Post 9/11 GI Bill simply gives the community one 

more avenue to gainful employment. 

Questions concerning this testimony can be directed to Jonathan Espinoza, Legislative Associate, 

in The American Legion's Legislative Division at (202) 861-2700, or jespinoza@legion.org 
56 

SBR002 with DISTILLER


Insert offset folio 56 here 34645.032

cca 

-

February 7, 2019 

rural. 

regional. 

nationwide.® 

The Honorable Nydia Velazquez 

Chairwoman 

Committee on Small Business 

U.S. House of Representatives 

2302 Rayburn House Office Building 

Washington, DC 20515 

The Honorable Steve Chabot 

Ranking Member 

Committee on Small Business 

U.S. House of Representatives 

2408 Rayburn House Office Building 

Washington, DC 2051 

Dear Chairwoman Velazquez and Ranking Member Chabot: 

Competitive Carriers Association ("CCA") 1 commends the House Committee on Small Business 

("Committee") for holding today's important hearing on "Exploring Challenges and Opportunities of 

Underserved Businesses in the 21st Century." One of the most challenging obstacles to overcome for a 

small business is to be on the wrong side of the digital divide, without access to the latest generation of 

broadband technology. There is no question that access to wireless broadband is a fundamental 

component of participation in the 21st century, and a key economic driver for our country and 

consumers. 

As CCA has testified previously before this Committee, mobile broadband helps to power the United 

States economy and allows consumers in all areas urban and rural- to access innovative services and 

technologies. Wireless broadband fuels benefits for rural consumers, schools, health care facilities, 

public safety, farmers, and businesses of all sizes. As this Committee knows well, small businesses play 

vital roles in the communities they serve and rely on dependable technology to advance their missions. 

Small and rural carriers help to achieve this mission and are critical to closing the digital divide by 

continuing to invest in their hometowns. The majority of CCA's members live and work in the 

communities they serve, and share in the benefits powered by expanded wireless broadband service 

and the deployment of next-generation technologies. CCA members employ neighbors, sponsor local 

events and hometown teams, and host community service events, and power businesses striving to stay 

competitive in an increasingly technology-dependent world. 

Closing the digital divide plaguing rural America is a top priority for Congress, the Federal 

Communications Commission ("FCC"), the Administration, and CCA are committed to work on that 

priority. Consumer demand for mobile broadband data is undeniable and growing at an exponential 

rate. In 2016, Americans consumed 1.8 exabytes of data on their smartphones, tablets, and other 

1 CCA is the nation's leading association for competitive wireless providers and stakeholders across the United States. CCA's 

membership includes nearly 100 competitive wireless providers ranging from small, rural carriers serving fewer than 5,000 

customers to regional and national providers serving millions of customers. CCA also represents associate members 

including vendors and suppllers that provide products and services throughout the mobile communications supply chain. 
57 

Æ 

SBR002 with DISTILLER


Insert offset folio 57 here 34645.033