U.S. GOVERNMENT PUBLISHING OFFICE

28–251 WASHINGTON : 2018

STRENGTHENING SBA’S 7(A) LOAN PROGRAM 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

JANUARY 17, 2018 

Small Business Committee Document Number 115–051 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

TRENT KELLY, Mississippi 

ROD BLUM, Iowa 

JAMES COMER, Kentucky 

JENNIFFER GONZA ́ LEZ-COLO ́ N, Puerto Rico 

BRIAN FITZPATRICK, Pennsylvania 

ROGER MARSHALL, Kansas 

RALPH NORMAN, South Carolina 

JOHN CURTIS, Utah 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

DWIGHT EVANS, Pennsylvania 

STEPHANIE MURPHY, Florida 

AL LAWSON, JR., Florida 

YVETTE CLARK, New York 

JUDY CHU, California 

ALMA ADAMS, North Carolina 

ADRIANO ESPAILLAT, New York 

BRAD SCHNEIDER, Illinois 

VACANT 

KEVIN FITZPATRICK, Majority Staff Director 

JAN OLIVER, Majority Deputy Staff Director and Chief Counsel 

ADAM MINEHARDT, Staff Director 

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C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Steve Chabot ................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 2 

WITNESSES 

Ms. Cindy Blankenship, Vice Chairman, Bank of the West, Grapevine, TX, 

testifying on behalf of the Independent Community Bankers of America ...... 5 

Ms. Patricia Husic, President & CEO, Centric Financial Corporation, Harrisburg, PA, testifying on behalf of the American Bankers Association .............. 6 

Ms. Sonya McDonald, Executive Vice President and Chief Lending Officer, 

Randolph-Brooks Federal Credit Union, Universal City, TX, testifying on 

behalf of the National Association of Federally-Insured Credit Unions .......... 8 

Mr. Tony Wilkinson, President & CEO, National Association of Government 

Guaranteed Lenders, Washington, DC ............................................................... 9 

APPENDIX 

Prepared Statements: 

Ms. Cindy Blankenship, Vice Chairman, Bank of the West, Grapevine, 

TX, testifying on behalf of the Independent Community Bankers of 

America .......................................................................................................... 29 

Ms. Patricia Husic, President & CEO, Centric Financial Corporation, 

Harrisburg, PA, testifying on behalf of the American Bankers Association ................................................................................................................. 34 

Ms. Sonya McDonald, Executive Vice President and Chief Lending Officer, Randolph-Brooks Federal Credit Union, Universal City, TX, testifying on behalf of the National Association of Federally-Insured Credit 

Unions ............................................................................................................ 41 

Mr. Tony Wilkinson, President & CEO, National Association of Government Guaranteed Lenders, Washington, DC .............................................. 58 

Questions and Answers for the Record: 

Questions from Hon. Nydia ́zquez and Responses from Patricia Husic ........ 70 

Questions from Hon. Nydia Vela ́zquez and Responses from Tony 

Wilkinson ....................................................................................................... 71 

Additional Material for the Record: 

CBA - Consumer Bankers Association ............................................................ 76 

H.R. 4743 ........................................................................................................... 78 

Huntington Bancshares Incorporated ............................................................. 96 

ICBA - Independent Community Bankers of America .................................. 98 

Mission Lenders Working Group .................................................................... 100 

NAFCU - National Association of Federally-Insured Credit Unions ........... 104 

NAGGL - National Association of Government Guaranted Lenders ........... 106 

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(1) 

STRENGTHENING SBA’S 7(A) LOAN PROGRAM 

WEDNESDAY, JANUARY 17, 2018 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 11:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Steve Chabot [chairman of the Committee] presiding. 

Present: Representatives Chabot, Brat, Radewagen, Kelly, Blum, 

Comer, Gonza ́lez-Colo ́n, Fitzpatrick, Marshall, Curtis, Vela ́zquez, 

Evans, Murphy, Lawson, Clarke, and Chu. 

Chairman CHABOT. We appreciate everybody being here. 

The economy is improving. Economic data is promising. Treasury 

numbers are moving in the right direction. The tax reform law is 

being implemented. Overall, the economy, as I say, is moving in 

the right direction. However, we continue to see that lending and 

borrowing remain flat for small businesses. This becomes more 

acute as you get down to the smaller firms across the nation. We 

continue to hear that financing projects for growth and expansion, 

which leads to job creation, are challenging. 

One of the top priorities for this Committee is to study how we 

can create an environment for small businesses to flourish. I cannot say it enough, when small businesses grow, so does our economy. To address the gap that small businesses face when financing 

their projects, the SBA offers the 7(a) loan program for small businesses that have a plan in place for growth, but lack the qualifications for conventional lending such as collateral. 

Recent growth in the program has led to a closer look at the 

SBA’s oversight tools. As a result of multiple hearings, meetings, 

and briefings, I, along with the Ranking Member and our Senate 

counterparts, introduced H.R. 4743, the Small Business 7(a) Lending Oversight Reform Act of 2018. This bicameral and bipartisan 

legislation aims to ensure the integrity of the program while bringing stability to small businesses that truly require the services of 

the SBA. Specifically, H.R. 4743 strengthens the Office of Credit 

Risk Management, which oversees lenders at the SBA. It does so 

by reinforcing the office’s oversight authority, increasing enforcement options, enhancing the lender review process, and cementing 

the SBA’s use of the Lender Oversight Committee, which plays a 

major role in significant enforcement actions. 

Beyond strengthening the oversight activities of the SBA, this 

bill will also require a more transparent budget process to ensure 

the SBA is allocating oversight dollars properly. This Committee 

often discusses the importance of Credit Elsewhere Tests. This is 

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not an understatement; this test acts as a gateway into a Federal 

Government guarantee. 

Simply put, the 7(a) loan program cannot be used by small businesses that can receive traditional bank lending. This legislation 

bolsters the test by updating and clarifying the factors often used 

in that test. 

It is important to note because of the fees associated with the 

program that are paid by participants, the 7(a) loan program runs 

on a zero cost to American taxpayers. To ensure that this remains 

the case and to ensure the program remains an option for creditworthy small businesses that justly need it, strong oversight is 

mandatory. 

I believe we are heading in the right direction. We have already 

begun to hear from 7(a) loan participants, and I want to share a 

quote from a letter of support. I would ask unanimous consent to 

enter the letter into the record, and this is the letter here from 

Huntington. And without objection, so ordered. 

It is, as I mentioned, from Huntington Bank, a storied institution 

from my home State of Ohio. And to quote a couple of small parts, 

‘‘This legislation is focused on the long-term success and sustainability of the SBA programs that serve to grow and protect small 

businesses.’’ On the provisions to improve the Credit Elsewhere 

Test, Huntington says that the changes will ‘‘protect the program’s 

integrity.’’ 

Do we have more work to do on this topic? Absolutely. I see this 

as a starting point, not the end point. For the nation’s mom-andpop shops, to those operating a franchise, to those creating the next 

great American product or service, we are just beginning. This 

hearing will provide Committee members the opportunity to hear 

from participants in the 7(a) loan program about how the proposed 

changes will ensure real growth while providing certainty to small 

businesses. 

We appreciate the witnesses for being here this morning. We 

look forward to your testimony. 

And I would now like to yield to the Ranking Member for her 

opening remarks. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

All of us are acutely aware of the vital role access to capital has 

in the success of our nation’s 29 million small businesses. Without 

it they cannot stock their shelves, pay their employees, or upgrade 

equipment. Capital is the key to unlocking opportunities to grow 

and create new jobs in the local economy. A vital pathway to accessing that capital is through the 7(a) loan program, SBA’s flagship lending product. 

At the beginning of this Congress, our committee held a series 

of hearings to take the temperature of the 7(a) program by looking 

at how it is being used and administered. The good news is it is 

as successful as ever. In 2017, the program made 62,400 loans totaling $25.4 billion, an all-time high. At the same time, defaults 

are at historic lows. 

Conventional lending to small businesses has yet to return to its 

prerecession peak, however, making the 7(a) program all the more 

important to driving economic growth. 

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The 7(a) program is not without shortcomings. Both lenders and 

the agency have said oversight could be improved, the oversight 

toolbox made more robust, and transparency increased with legislative action. This committee heard you and set out to address your 

concerns. 

The Small Business 7(a) Lender Oversight Reform Act of 2018 

addresses a number of issues and makes long-overdue reforms to 

the program. The act glorifies the Office of Credit Risk Management and Lender Oversight Committee and outlines the key employees and duties of each. It also requires the office to internally 

submit a budget to ensure there is justification of the fees, salaries, 

and expenses used to carry out oversight functions. These reforms 

ensure the oversight process will have transparency and uniformity 

for both lenders and the SBA. 

We also heard that a Credit Elsewhere Test, a bedrock of the 

program, was not clear enough and lacked an SBA verification 

component. This bill better articulates the characteristic of the 

Credit Elsewhere Test and bolsters verification of how it is fulfilled. 

Finally, we all remember 2015 when the program ran out of authority to lend before the end of the year. This created an artificial 

run on the lenders to get loans approved, unfairly harmed small 

businesses that needed credit, and ultimately required congressional intervention. Today’s bill incorporates provisions from legislation I introduced earlier this year empowering the SBA administrator to request additional lending capacity from Congress to meet 

unexpected demand late in a fiscal year. With improvements offered by the Chairman, this streamlined process strikes a commonsense balance between congressional oversight and ensuring SBA 

can keep making loans to deserving businesses that cannot get 

credit elsewhere. 

I want to thank Chairman Chabot and his staff for working in 

such a collaborative manner on this legislation. I also want to 

thank Senator Risch and Shaheen and their staff for making this 

process both bipartisan and bicameral. Through debate and compromise, we arrived with a legislative product we can all be proud 

of. Administrator McMahon and her team and the trade organizations testifying today were also vital in crafting this bill, and we 

greatly appreciate your input. 

With that, let me thank our witnesses for being here today to 

continue this discussion. I look forward to hearing today’s testimony. 

I yield back. Thank you, Mr. Chairman. 

Chairman CHABOT. Thank you very much. The gentlelady 

yields back. 

And I would like to thank the Ranking Member for her leadership and her cooperation and the bipartisanship that she and her 

staff showed with ours in crafting this as well. We really do try to 

work in a bipartisan manner on this Committee, and we certainly 

showed that in this case. 

If Committee members have opening statements prepared, I ask 

that they be submitted for the record. 

And I would like to take just a moment to explain our timing 

system and the lights and that short of thing. The rules are pretty 

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simple. You get 5 minutes to testify, and we will have 5 minutes 

each to ask questions. There is a lighting system to assist you. The 

green light will be on for 4 minutes and the yellow light will be 

on for a minute to let you know it is about time to wrap up. And 

then the red light will come on and we would ask you to stay within those parameters if at all possible. 

And I would now like to introduce our distinguished panel here 

this morning. 

Our first witness is Ms. Cindy Blankenship. Welcome back to the 

Committee. Ms. Blankenship has been a frequent visitor and guest 

here and speaker and has done really a fine job over the years. She 

is the Vice Chairman and Chief Operating Officer of the Bank of 

the West in Grapevine, Texas, which opened in 1986, under her 

leadership. Ms. Blankenship has spent years as a leader in community banking in Texas and throughout the country. She has also 

been a past chair of the Independent Community Bankers of America and a member of the FDIC’s Advisory Committee on Community Banking. Ms. Blankenship is testifying today on behalf of the 

Independent Community Bankers of America, and we welcome you 

back. 

Our next witness will be Ms. Patricia Husic. Ms. Husic is the 

President and Chief Executive Officer of the Centric Bank in Harrisburg, Pennsylvania, which she established. Prior to her time 

founding Centric, Ms. Husic was an executive at a number of Pennsylvania financial institutions and is a past chair of the Pennsylvania Bankers Association. With nearly three decades of banking 

experience, Ms. Husic has been recognized on multiple occasions as 

one of the 25 Women to Watch in Banking. Ms. Husic is testifying 

today on behalf of the American Bankers Association, and again, 

we welcome you today. 

And I would now like to yield to the Ranking Member for the introduction of our other two witnesses this morning. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

With more than 20 years of experience and increasing responsibility in marketing, strategic planning, management, and lending, 

Sonya McDonald has spent the majority of her career in the credit 

union industry. As the EVP/Chief Lending Officer at RBFCU, 

Sonya is currently responsible for a $6 billion portfolio, including 

$22 million in SBA loans. Ms. McDonald holds a bachelor’s degree 

in journalism from the University of Texas at Austin. Welcome, 

and thank you for being here. 

Tony Wilkinson has served as President and Chief Executive Officer of the National Association of Government Guaranteed Lenders for more than 25 years. He is responsible for overseeing the association’s government relations strategy and often offers expert 

testimony before Congress. He works closely with SBA and the 

Small Business Committee to ensure the continued stability and 

availability of the SBA 7(a) business loan program to the nation’s 

small businesses. Welcome, and thank you for being here. 

Chairman CHABOT. Thank you very much. 

And we will now hear from Ms. Blankenship. You are recognized 

for 5 minutes. Thank you. 

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STATEMENTS OF CINDY BLANKENSHIP, VICE CHAIRMAN, 

BANK OF THE WEST; PATRICIA HUSIC, PRESIDENT & CEO, 

CENTRIC FINANCIAL CORPORATION ; SONYA MCDONALD, 

EXECUTIVE VICE PRESIDENT AND CHIEF LENDING OFFICER, RANDOLPH-BROOKS FEDERAL CREDIT UNION; TONY 

WILKINSON, PRESIDENT & CEO, NATIONAL ASSOCIATION OF 

GOVERNMENT GUARANTEED LENDERS 

STATEMENT OF CINDY BLANKENSHIP 

Ms. BLANKENSHIP. Chairman Chabot, Ranking Member 

Vela ́zquez, and members of the Subcommittee, I am Cynthia 

Blankenship, Vice Chairman and Corporate President of the Bank 

of the West in Grapevine, Texas. It is a $450 million community 

bank with 105 employees in the Dallas-Fort Worth suburban area. 

I am also a former Chairman of the Independent Community 

Bankers of America, and I am pleased to testify today on behalf of 

more than 5,700 community banks represented by ICBA. 

A robust 7(a) program with broad community bank participation 

will help small businesses thrive and create jobs. We are grateful 

for this Committee’s strong support of the 7(a) program. 

Bank of the West is a 30-year partner with the Small Business 

Administration and a leading SBA lender in the Dallas-Fort Worth 

district. We currently hold in service nearly $100 million in highquality SBA loans with a minimal loss ratio. Historically, Bank of 

the West 7(a) loans have created thousands of jobs in the communities we serve and help sustain and strengthen our local economy. 

Bank of the West uses the 7(a) program to supplement our lending and credit services by reaching a broader range of borrowers 

who would not qualify for conventional loans. 

To preserve the long-term viability of the 7(a) program, ICBA 

supports targeted reforms such as those contained in the Small 

Business 7(a) Lending Oversight Reform Act, H.R. 4743, to ensure 

its integrity and continued safety and soundness. H.R. 4743 would 

codify the SBA Office of Credit Risk Management, which supervises and oversees all SBA lenders, and the Lender Oversight Committee, which reviews the office’s enforcement recommendations. 

The bill would provide guidelines for lender reviews, codify lender 

appeal rights, and create greater transparency in the office’s budget. These provisions strengthen the integrity of all SBA lending 

programs and all responsible lenders should support them. 

The 7(a) program is only available to small businesses who would 

not otherwise qualify for a conventional loan. To safeguard the program from abuse, H.R. 4743 would codify the SBA’s Credit Elsewhere Test, which requires lenders to fully substantiate and document the reasons a given applicant cannot be served with conventional credit. Stable funding of the 7(a) program is critical to the 

thousands of borrowers who rely on it. 

As is well known to this Committee, program funding came to an 

abrupt halt in the summer of 2015 when it reached its authorization cap well before the end of the fiscal year. Congress was forced 

to pass an emergency increase to the authorization cap to restart 

the program. 

ICBA greatly appreciates the support and responsiveness of this 

Committee in passing the emergency increase. Thankfully, the hiaSBREP-219A with DISTILLER

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tus was short-lived. A longer program shutdown would have cut off 

the thousands of small businesses that rely on this program for 

payrolls, investment, and expansion. 

While the 7(a) program is fully funded by user fees and no taxpayer dollars are appropriated, a program authorization level must 

be approved by Congress each year, and once that level is reached, 

no more loans can be approved. H.R. 4743 would give the administrator authority to raise the cap by up to 15 percent one time each 

fiscal year with the approval of the House and Senate authorizing 

and appropriating committees. 

I have focused my remarks today on the 7(a) program. However, 

taking a broader perspective, I urge this Committee to support regulatory relief that would strengthen community banks and enable 

more small business lending in SBA programs and in conventional 

markets. We are grateful to the Financial Services Committee for 

its passage of numerous regulatory relief bills in this Congress and 

past Congresses. These bills were the groundwork for the Senate 

Banking Committee’s passage of S. 2155 in December on a strong 

bipartisan vote. S. 2155 contains robust regulatory relief for community banks which will create more small business credit, economic growth, and jobs. We urge the House to quickly pass S. 2155 

when it is sent over from the Senate in the coming weeks. We must 

not miss this long-awaited opportunity for community bank relief. 

Thank you again for convening this hearing. I am happy to answer any questions you may have. 

Chairman CHABOT. Thank you very much. 

Ms. Husic, you are recognized for 5 minutes. 

STATEMENT OF PATRICIA HUSIC 

Ms. HUSIC. Thank you. 

Chairman Chabot, Ranking Member Vela ́zquez, and members of 

the Committee, I am Patricia Husic, President and CEO of Centric 

Bank, a community bank headquartered in Harrisburg, PA. I appreciate the opportunity to present the views of ABA on legislation 

that would improve the availability of SBA 7(a) loans and oversight 

of the program. ABA applauds your leadership, Mr. Chairman and 

Ranking Member Vela ́zquez, in introducing H.R. 4743 and working 

with your Senate counterparts. 

The SBA 7(a) loan program is very important to small businesses 

as it helps fill a critical gap, particularly for early-stage businesses 

that need access to longer-term loans. This long overdue bill will 

strengthen the SBA’s Oversight Office and provide flexibility to the 

administrator to increase the program’s maximum lending authority in the event it would be reached. 

At Centric Bank, the 7(a) program has helped hundreds of entrepreneurs during the past 10 years start their own business, purchase an existing one, or expand a current business. At Centric 

Bank, we view SBA lending as a way to get a customer to yes in 

a safe and sound manner. Without this program, many entrepreneurs would never realize their dream. 

For example, over 5 years ago, a young customer had a dream 

of owning his own restaurant in Harrisburg. When he finally found 

a business to purchase, he was unable to obtain a traditional bank 

loan. Through the 7(a) program, we were able to help this owner 

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acquire the building and business with a 10 percent down payment 

and appropriate repayment terms. His business is profitable, and 

just 9 months ago we financed a second restaurant for him using 

the 7(a) program. The program enabled this entrepreneur to realize 

his dreams and now he is the owner of two profitable and successful restaurants, employing more than 60 people. 

We also assisted a U.S. Army veteran who wanted to open a gun 

range with education and training for the public. They also had the 

foresight to open their facility to police municipalities to provide access for the officers while they were off duty. The customer was unable to obtain financing through a traditional bank loan. With a 

longer-term loan provided through the 7(a) program, the business 

owners obtained the financing they needed and they were able to 

open their facility. They have hired 20 people, the majority of 

whom are veterans. 

Another customer of Centric Bank was looking to expand his existing minority-owned construction company from Philadelphia into 

the New Jersey markets. Centric Bank closed a $675,000 7(a) loan 

to buy the commercial building, provide working capital for expansion, and hire new employees. Without the SBA guarantee, we 

would not have been able to provide the funding due to an overall 

collateral shortfall. This loan has provided our customer with a 

foundation for sustained growth. 

It is essential that small businesses that qualify for the 7(a) loan 

program are able to utilize the program to obtain access to the necessary capital to build and grow their businesses. In past years, 

this has been a challenge as the program has hit its funding limits. 

H.R. 4743 would grant the authority to the administrator to increase the amount for general business loans up to 115 percent of 

the fiscal year’s limit. This important measure helps ensure that 

small businesses will not be affected by temporary shutdowns in 

the program leaving them unable to meet payroll, purchase inventory, or secure equipment and supplies. Importantly, this bill also 

takes steps to improve the oversight of the program to prevent 

fraud and increase efficiency. Clear responsibilities for the Office of 

Credit Risk Management, including risk analysis, providing timely 

findings to lenders and establishing a Lender Oversight Committee 

should ensure the appropriate level of accountability while maintaining checks and balances. H.R. 4743 also helps to ensure capital 

goes to small businesses that face financing obstacles by clarifying 

the factors considered in the Credit Elsewhere Test. 

The 7(a) program is an example of how bank lending facilitates 

economic growth. This program should be vigorously supported in 

the future, and H.R. 4743 is an important measure to ensure the 

continued success of this program. In my written statement, I outline several suggestions that would improve the servicing aspects 

of the 7(a) program and would hope the committees will consider 

these in your deliberations. 

Thank you. I would be happy to answer any questions. 

Chairman CHABOT. Thank you very much. 

Ms. McDonald, you are recognized for 5 minutes. 

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STATEMENT OF SONYA MCDONALD 

Ms. MCDONALD. Chairman Chabot, Ranking Member 

Vela ́zquez, and members of the Committee, thank you for the invitation to appear before you this morning. My name is Sonya 

McDonald, and I am testifying today on behalf of NAFCU. 

I am the Executive Vice President and Chief Lending Officer at 

Randolph-Brooks Federal Credit Union. In this role, I am responsible for a $6.6 billion portfolio that encompasses consumer, mortgage, and commercial lending. I appreciate the opportunity to 

share with you our thoughts on strengthening the Small Business 

Administration’s 7(a) loan program. 

RBFCU became an SBA-preferred and express lender in September 2005. We are delegated with SBA authority and are able 

to offer all of their products. In both 2016 and 2017, we were the 

number one SBA lending credit union in our 55 county districts. 

SBA products allow us to leverage our lending dollars, mitigate 

the risk associated with the loans, and extend more credit to our 

community’s small businesses. Our current portfolio has 210 active 

SBA loans with a balance of approximately 23 million. 

There are many stories of small business owners looking for that 

loan that will allow them to either start or grow their business. 

While other institutions may have scaled back their small-dollar 

business lending, credit unions have been willing to fill that void. 

At RBFCU, we are pleased that we have been able to step up to 

help meet the demand. SBA’s 7(a) loans make it easier for credit 

unions because the government-guaranteed portion of these loans 

does not count towards the arbitrary credit union member business 

lending cap. 

In San Antonio, we have a great bagel shop, the Bagel Factory, 

owned by an Air Force veteran and his wife. They went to 20 different places and were denied before coming to Randolph-Brooks 

for an SBA loan. That business is now thriving as it enters its 

eighth year. This is an example of the kind of business that SBA 

7(a) loans are here to help. 

Last year, NAFCU renewed a memorandum of understanding 

with SBA to help address the challenge of getting more credit 

unions involved with the SBA. The MOU formalized a joint partnership that aims to increase the availability of small-dollar loans 

by providing more outlets for entrepreneurs to access SBA products 

in their neighborhoods and it makes the small-dollar loans more 

accessible to underserved communities, including women and minorities. 

We appreciate the work SBA has done to improve their processes. We also support your legislative efforts in H.R. 4743, the 

Small Business 7(a) Lending Oversight Reform Act of 2018. This 

legislation will help credit unions by bringing more clarity to SBA’s 

7(a) loan program by outlining more specifics in statute. We are 

particularly pleased to see the Credit Elsewhere Test better defined 

in the bill as compared to what is included in the standard operating procedures. This will help clear up ambiguity for lenders. 

One of the most important parts of the bill is the administrator’s 

authority to increase the budget amount to 115 percent of the limit. 

This would be beneficial to both borrowers and lenders versus the 

hard cap that currently exists and helps ensure that lenders and 

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small businesses will not face a situation where the ability to use 

the 7(a) program comes into doubt due to the popularity of the program. 

One area where we think the legislation could be improved would 

be to have better definitions for penalties. Adding clarity that requires the director to distinguish between minor compliance errors 

and willful or negligent violations would be helpful. 

Overall, we believe this is a solid legislative package and would 

urge the Committee to support and advance this legislation in a 

timely fashion. 

In conclusion, small businesses are the driving force of our economy and the key to its success. The ability for them to have access 

to capital is vital for job creation. While SBA’s 7(a) program provides opportunities to establish struggling businesses, there continue to be ways the program can improve. The SBA has taken 

some steps in the last year to improve the program. Enacting the 

Small Business 7(a) Lending Oversight Reform Act is another step 

that will help. We urge you to support this legislation. 

We thank you for your time and the opportunity to testify before 

you today on this important issue. I would welcome any questions 

you may have. 

Chairman CHABOT. Thank you very much. 

Mr. Wilkinson, you are recognized for 5 minutes. 

STATEMENT OF TONY WILKINSON 

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

Vela ́zquez, and members of the Committee. My name is Tony 

Wilkinson, and I am here on behalf of the National Association of 

Government Guaranteed Lenders, NAGGL. NAGGL is a national 

trade association representing banks, credit unions, nondepository 

lenders, and other entities that participate in the Small Business 

Administration’s 7(a) Loan Guaranty Program. NAGGL’s members 

are responsible for approximately 80 percent of all the SBA 7(a) 

loans made annually. 

This Committee and its colleagues on the Senate Committee on 

Small Business and Entrepreneurship have been looking into the 

performance of the SBA 7(a) loan program and SBA’s role in oversight of the program for about the last 3 years. There has been 

great care taken by this Committee to approach this issue with 

diligence, and as the CEO of the SBA’s 7(a) industry’s trade association for the last 30 years, I can tell you honestly that your careful approach to this matter is a rarity in the history of this program and it is incredibly appreciated. Your staff, particularly Rob 

Yavor for the majority and Justin Pelletier for the minority—and 

since they are in the audience I will give a shout out to Renee 

Bender on the majority and Kevin Wheeler on the minority over in 

the Senate—they have worked diligently to understand the very 

technical issues of the 7(a) program. We also very much appreciate 

the Committee’s announced intention to continue to work with industry and the agency to perfect H.R. 4743 going into the markup 

process. The lending industry that NAGGL represents is grateful 

for this Committee and its staff’s longstanding commitment and 

dedication to engaging the many stakeholders throughout the process, and we look forward to working with you and with SBA to enSBREP-219A with DISTILLER

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sure that the final legislation provides appropriate direction for 

SBA’s lender oversight efforts. 

I am pleased to testify today to discuss NAGGL’s support for 

H.R. 4743, the Small Business 7(a) Oversight Reform Act of 2018, 

which will strengthen SBA’s Office of Credit Risk Management and 

how it performs its role to oversee the 7(a) program. 

One of the most important provisions to the lending community 

included in H.R. 4743 includes granting flexibility authority to the 

SBA administrator to increase the 7(a) program’s authorization cap 

by 15 percent if the pace of lending is set to exceed that fiscal 

year’s given cap. NAGGL first presented this flexibility language to 

the Office of Management and Budget and to Congress in the wake 

of the fiscal year 2015 7(a) lending shutdown, drawing on the same 

language and precedent set by the House and Senate Appropriations Committees in their treatment of various USDA loan programs. Since then, NAGGL has enjoyed the partnership of Senator 

Risch, Coons, and Shaheen, to name a few last Congress, who introduced a bill in the Senate to establish cap flexibility, and this 

Congress, Ranking Member Vela ́zquez championed a bill in the 

House to move this proposal forward. And as you know, OMB included this language in the last three presidential budget proposals, so SBA has been a champion for this proposal as well. 

In both fiscal year 2014 and in 2015, the SBA 7(a) program saw 

demand from small business borrowers reach the program’s authorization cap before the end of the fiscal year, and in fiscal year 2015, 

the program shut down for several days. Some of you on this Committee helped see unusual measures of emergency supplemental 

language pass Congress and receive the President’s signature to 

ensure the 7(a) program remained available to the country’s small 

businesses, and industry owes you a great deal of gratitude. But 

those were rare instances of congressional intervention and, unfortunately, these threats of shutdown destabilized the program and 

altered lender behavior. The issue largely stems from the great difficulty in anticipating the exact number of borrowers who will be 

applying for SBA 7(a) loans 18 months in advance as we go 

through the budget process. 

While this flexibility language should never supplant the role of 

Congress in setting authorization caps and still requires approval 

from this Committee and its colleagues in the Senate and in the 

Appropriations Committee, it serves as a commonsense safeguard 

against last-minute panic. Thank you to this Committee for embracing and now championing this concept. 

H.R. 4743 also updates the Credit Elsewhere provision currently 

in statute, a clarification lenders have long asked for and which is 

critically important to the program. The cornerstone principle of 

the 7(a) program is that it complements but does not compete with 

conventional small business lending. The noncompetitive status of 

the program is assured by the fact that before any 7(a)-loan guaranty can be approved, the participating lender must certify that 

the loan could not be made without the SBA guaranty. NAGGL believes the proposed legislation will strengthen compliance with the 

Credit Elsewhere requirement by clarifying the types of situations 

which cause the SBA guaranty to be required and provide further 

SBREP-219A with DISTILLER

11 

assistance that 7(a) loans continue to fill the existing small business credit gap. 

Finally, I would like to applaud the Chairman and Ranking 

Member for the provision of the bill which improves the oversight 

review process for lenders. NAGGL has long called for full-time employees of SBA to lead each team of reviewers that conducts the 

oversight reviews of the program’s participating lenders. When 

there is a full-time employee present and supervising each review, 

it ensures that there is a deep foundation and understanding of the 

incredibly complicated policies that are specific to SBA. 

There is a whole host of other provisions in this bill that I would 

be happy to discuss. And with that, I will conclude my remarks. 

Chairman CHABOT. Thank you very much. 

And I will recognize myself for 5 minutes to begin the questions. 

And I will open with a general question. I am just going to kind 

of go down the line here. 

On the small business lending environment in our country, we 

hear that small businesses and their optimism is on the rise. Is 

this increase in optimism being matched by a demand for small 

business loans that you are seeing at your particular institution? 

And if you could just give us the general climate. And I have got 

some other questions, so if you could maybe take 15 to 30 seconds 

or so to answer. And I will begin with you, Ms. Blankenship. 

Ms. BLANKENSHIP. Well, I am in the Dallas-Fort Worth 

metroplex, and the North Texas economy is thriving. So it has been 

very encouraging to see small businesses start to be encouraged by 

the economy and believe that they can now take the chance to gamble and leverage. We saw many businesses just sit on liquidity for 

years after the crisis, so we are seeing an uptick. 

Chairman CHABOT. Good. Thank you very much. 

Ms. Husic? 

Ms. HUSIC. We are seeing a lot of increase of SBA lending and 

small business lending. As a point of reference, Centric Bank, we 

are headquartered in the Harrisburg, PA, area. We also loan in 

Lancaster County where we have an office as well as an office, and 

we loan through the suburban Philadelphia market, as well as in 

the western part of New Jersey. For some statistics or a number 

to support that, for example, last year our organization had about 

a 30 percent growth in our commercial lending, of which we are 85 

percent focused on small business. Last year, we originated over 

$200 million in commercial lending, of which $38 million was SBA 

7(a) loans to about 46 clients. Looking at 2017, we originated about 

$210 million in commercial loans. That SBA 7(a) number was in 

excess of $41 million, but to more borrowers, to approximately 77 

borrowers. 

Chairman CHABOT. Thank you very much. 

Ms. McDonald? 

Ms. MCDONALD. Just like Ms. Blankenship, I am in Texas, and 

Texas has had a very strong economy. What we are seeing is more 

confidence—— 

Chairman CHABOT. Could you pull that mic a little bit closer 

there? Thank you. 

SBREP-219A with DISTILLER

12 

Ms. MCDONALD. What we are seeing is more confidence in the 

economy. We are seeing more applications from our small business 

members. 

Chairman CHABOT. Great. Thank you. 

Mr. Wilkinson? 

Mr. WILKINSON. While I am not a direct lender, our members 

are reporting robust growth. Our loan volume through the first 

couple of weeks of January, year-to-date this fiscal year we are up 

18 percent nationwide in 7(a) lending. So, good economy. 

Chairman CHABOT. Good. Glad to hear that on all counts here. 

Mr. Wilkinson, I will go to the next question with you. This Committee has emphasized the importance of the Credit Elsewhere 

Test in the past. Can you provide a little detail on how this test 

works in practice? And do the changes in the bill that we are considering here today, will they further clarify and bolster this test 

to ensure that the correct small businesses are entering the program? 

Mr. WILKINSON. I would be happy to. As has been mentioned 

here, the cornerstone tenet of the 7(a) program is that it does not 

compete with the commercial lending marketplace; that it complements it. The issue becomes how to provide better guidance to 

lenders to assure that the Credit Elsewhere Test continues to be 

appropriately met for each and every loan. And part of the issue 

has been for our lenders is that the current definition has not been 

updated for decades. 

And I thought I would read to you what it currently says. It says, 

‘‘For purposes of this act, the term ’credit elsewhere’ means the 

availability of credit from non-Federal sources on reasonable terms 

and conditions, taking into consideration the prevailing rates and 

terms in the community in or near where the concern transacts 

business.’’ 

Well, in today’s lending environment, geography really does not 

matter, and so there is a lot of language there that becomes confusing to our members in how to comply with that statute. So we 

believe the language that is in H.R. 4743 clears that up, defines 

what are acceptable items that need to be reviewed and would be 

required for the lender to document in their file. 

Chairman CHABOT. Thank you very much. 

Ms. Husic, I have only got about a minute left. So, as you know, 

this bill would require SBA to perform a portfolio risk analysis. 

And I want to make sure you do not think we are going too far 

there. I see Congress receiving this information is very important. 

However, from your perspective, we are not asking too much there, 

are we? 

Ms. HUSIC. Absolutely not. When we take a look at—I think, 

you know, I look at our own organization. When we take a look and 

evaluate the loans we booked to our portfolio with each of those 

certain industry concentrations, we have a certain percentage of 

our capital that is allocated to that. You know, from there, on an 

annual basis, and even more so on a quarterly basis, we do evaluate that, and I think that is a good business practice. Furthermore, 

it is a good risk management practice to do that. 

Chairman CHABOT. Thank you very much. And my time is expired. 

SBREP-219A with DISTILLER

13 

The Ranking Member is recognized for 5 minutes. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Mr. Wilkinson, all of you mentioned that this bill includes flexibility language for the administrator to request an increase in the 

authorization cap of the program to meet unexpected demand. 

There seems to be some confusion about how this will work in practice. So my question to you is, can you elaborate on this authority, 

how can it be used? 

Mr. WILKINSON. I would be happy to. First, this authority is 

actually mirrored by the same authority appropriators have given 

to the Department of Agriculture’s USDA loan guaranty programs 

in recognition that demand on any given day, week, or month can 

often exceed expectations and that lending is cyclical. The intention, as set out in this language, is that the authority can be used 

only once per year. So presumably, the agency would want to use 

its authority at the end or towards the end of a fiscal year to prevent programmatic shutdown if the authorization cap was going to 

be insufficient as that was the case in 2015. 

Ms. VELA ́ ZQUEZ. So not at the end of a short-term CR, correct? 

Mr. WILKINSON. Correct. So at a CR, it really becomes a function of do we have what is called anomaly language in the CR that 

allows SBA to spend at whatever the pace of demand might be. 

Ms. VELA ́ ZQUEZ. And can you please explain how the anomaly 

process can work? 

Mr. WILKINSON. I would be happy to. So what happens under 

a CR is the Office of Management and Budget takes the number 

of days that are provided for in the CR and divides that into the 

authorization cap for the year. So we get X amount of money to 

lend during that period of time. With an anomaly, that calculation 

is not necessary. We are allowed to spend up to the authorization 

cap at whatever pace. And just so folks understand, we hit that apportionment cap at the last CR. We actually had a program shut 

down for a few hours. A lot of folks do not know that we did, but 

we had a program shut down for a number of hours as the last CR 

ended and the current one started. There was a gap there for about 

6 or 7 hours. 

Ms. VELA ́ ZQUEZ. Thank you. 

Ms. McDonald, SBA’s capital access mission is to aid and assist 

America’s small businesses, including underserved and vulnerable 

small businesses to obtain the capital that they need. So does SBA 

encourage lenders to make loans to underserved markets, such as 

to firms majority-owned by those who are socially and economically 

disadvantaged and to new businesses? 

Ms. MCDONALD. Well, at Randolph-Brooks Federal Credit 

Union, we have about 240 SBA loans to minorities, approximately 

230 to women, and 167 to veterans. So this is a huge part of our 

SBA lending. That is what credit unions are here for. We are here 

to provide those small-dollar business loans to folks who could not 

get it. The average SBA loan at Randolph-Brooks is less than 

$90,000, and I would say more than half of our SBA loans are for 

less than $75,000. 

Ms. VELA ́ ZQUEZ. In your meetings with SBA officials, is there 

any discussion as to what is it that you are doing to increase small 

SBREP-219A with DISTILLER

14 

business lending for underserved communities or underserved 

small businesses? 

Ms. MCDONALD. Well, at Randolph-Brooks we serve a lot of underserved areas. We call them community charter areas and we 

look for opportunities to help folks. I am thinking right now of a 

Mexican restaurant on the south side of San Antonio. So we have 

lots of opportunities to do that and the SBA has gotten much better 

at working with us to make things easier. 

Ms. VELA ́ ZQUEZ. Thank you. 

Ms. Husic, you testified that increasing the time that a seller can 

remain on as an employee with the business will be beneficial. This 

is something I am also exploring as a way for the 7(a) program to 

help ESOP and Co-Op ownership transitions. Can you please elaborate on why extending this period is necessary and whether there 

are any additional safeguards that could be implemented to address concerns about a seller double-dipping after the sale of the 

business? 

Ms. HUSIC. Absolutely. We have had certain situations where 

perhaps it is a first-time business owner, they are acquiring the 

business, and which would be helpful and we are not looking for 

a long-term period of time, but maybe in certain situations a 2-year 

period of time might be valuable. When any type of loan we are 

making, conventional or SBA, we are always looking to set the borrower up for success. So maybe navigating some challenging times 

in a business and they have not been through that before, maybe 

some also intricacies in with particular clients could be beneficial, 

I think in the end that new business owner has to have the ultimate ability to terminate that employment and to give control so 

there is no double-dipping going on there. 

Chairman CHABOT. The gentlelady’s time is expired. 

The gentleman from Kansas, Mr. Marshall, Dr. Marshall, is recognized for 5 minutes. 

Mr. MARSHALL. Thank you, Chairman. 

My first question is going to be for Ms. Husic, and then I want 

to ask you other three the exact same question, so I am going to 

give you a chance to prepare. The second question is going to be, 

how are the Tax Cuts and Jobs Act going over in your community? 

What has it done to unleash this economy? If you can give me some 

examples. 

My first question for Ms. Husic, I have been part of a bank board 

for 15 years, and over and over I saw the great things that the 

small business loans did. Specifically, what has this bill done to improve that process? How is it going to help your customers? 

Ms. HUSIC. Well, first and foremost, the SBA, and specifically 

the 7(a) program is a great program, and it is an opportunity if you 

cannot do the loan conventionally, how do we get our client to a 

yes? And that is what we look to do as small businesses, 85 percent 

of our lending. But when you take a look at some of the processes, 

we have had some clients that when a number of years ago the 

SBA ran out of funds and we were getting ready to settle and we 

were waiting for the SBA approval, we are a nonpreferred lender 

so that we submit our applications to the SBA and wait for the approval to come back. And we were sitting there with that particular 

client. We could not get them over the finish line with that unnecSBREP-219A with DISTILLER

15 

essary or that wait, that you could never give them that specific 

timeline. 

We have also had another client at that same timeframe was 

looking for a loan and it was to be able to support additional inventory connected with an additional contract which, again, these type 

of things would help that if that situation were to present itself—— 

Mr. MARSHALL. Does this bill make it more efficient, do you 

think, the process? 

Ms. HUSIC. I think it will make it more efficient, but also, that 

if the SBA runs out of funds, they would have the ability to have 

that additional 15 percent to be able to extend that. 

Mr. MARSHALL. Got it. Okay. 

Ms. Blankenship, how are the Tax Cuts and Jobs Act impacting 

Texas? 

Ms. BLANKENSHIP. Well, I think very positively. I think it is 

a bit early yet, but I think the general—— 

Chairman CHABOT. I am not sure if that mic is on. 

Ms. BLANKENSHIP. To answer your question, the tax cut has 

had a positive effect on the Texas economy. On our small businesses, I see a lot of encouragement, a lot of future planning. They 

seem to be willing to leverage those additional dollars saved by 

their tax savings, which in turn helps the community. So we are 

very excited to see that. 

Mr. MARSHALL. And you hope the 7(a) is just one more step to 

making those dreams come true, living this American dream? 

Ms. BLANKENSHIP. Exactly. 

Mr. MARSHALL. Ms. McDonald, where are you from? Remind 

me. 

Ms. MCDONALD. San Antonio. 

Mr. MARSHALL. San Antonio, another Texas gal. We are just 

loaded with Texas here. 

Ms. MCDONALD. Another great Texas town. 

Mr. MARSHALL. How is the Tax Cuts bill working down there? 

Ms. MCDONALD. It is going very well. We had a record year in 

lending last year, particularly towards the end of the year. Typically, in November-December, lending slows down. We had record 

months. In fact, I got an email just right after Christmas that said 

we had over 1,800 loan applications in one day. And so that is pretty incredible, especially on a skeletal staff at Christmastime. But, 

and from the small business perspective, we are seeing an increase 

in those applications. And, in fact, we are hiring an additional business loan officer to keep up with the demand. 

Mr. MARSHALL. So maybe this law will work an old dovetail 

right into those 1,500—is that what you said? 

Ms. MCDONALD. Eighteen hundred loan applications. 

Mr. MARSHALL. In a day. 

Ms. MCDONALD. Now, these were for consumer loans. 

Mr. MARSHALL. That is all right. Okay. 

Mr. Wilkinson, how have your customers, your clients been impacted by this Tax Cuts bill? 

Mr. WILKINSON. Well, I represent the lender, so I am not dealing directly with our small business customers, but as I mentioned, 

our loan volume is up 18 percent year-to-date, so something good 

is happening. 

SBREP-219A with DISTILLER

16 

But I did want to respond to your earlier question, how does this 

bill help small businesses? And it is more from a programmatic 

perspective. We want this program to be a program of integrity. It 

is working great right now. We want it to continue to work great. 

We are ahead of this curve. We want to make sure SBA has the 

tools and resources to keep the lenders between the lines, so we are 

not responding to any kind of problem right now, but we are going 

to make sure that this program is here for the long haul for borrowers for many years to come. 

Mr. MARSHALL. Okay. Ms. Husic, you have not had a question 

to respond to my Tax Cuts question. I thought we would get back 

to you. I think you have a story to tell as well. 

Ms. HUSIC. For the tax cuts, we are exploring several different 

ways of where, not only how, do we help more small businesses. We 

have not finalized on any specifics of what we will do as an organization. At this point, our board is still finalizing that, but we see 

great opportunities within our marketplace. There are a lot of 

small business optimism, and more interesting, starting businesses 

and expanding, buying more capital outlays, those type of things. 

Mr. MARSHALL. I think I would just close this, I finished up my 

town halls this week going to every county. Over and over the economy is improving. And people ask me why. And see if you agree 

with this. I think number one is we have cut back on regulations. 

And I think number two is that consumer confidence is incredible 

out there. And then lastly is this tax reform. Is there any other big 

picture out there that you think has added to the sudden—not necessarily sudden, but the great economy we are experiencing? 

Ms. HUSIC. To your point, I believe all those things, and those 

reasons encompass the reason why there is small business optimism, as they are the job creators. As we are looking forward, as 

you mentioned, as far as some relief of regulatory burden, as community bankers, we are looking for some of that relief as well of 

the additional amount of regulation and burdensome that over the 

past 8 to 10 years community banks have really been burdened 

with. 

Mr. MARSHALL. Sorry, I went over. I apologize, Chairman. 

Chairman CHABOT. That is okay. The gentleman’s time is expired. 

The gentleman from Pennsylvania, Mr. Evans, who is the Ranking Member of the Subcommittee on Economic Growth, Tax, and 

Capital Access, is recognized for 5 minutes. 

Mr. EVANS. Thank you, Mr. Chairman. 

I would like to start out starting from Ms. McDonald and go 

down that particular direction about what ways do you think that 

can improve this particular program? So I will start with Ms. 

McDonald and then to the right. 

Ms. MCDONALD. Well, I think that this bill is a great start. It 

codifies the expectation. We talked about the Credit Elsewhere 

Test. From a credit union perspective, and we have talked about 

this before, but increasing the member business cap for credit 

unions would help. There are a lot of credit unions who do not participate in SBA lending because it does take a lot to get a program 

started. You would have to hire somebody, and then if you are 

SBREP-219A with DISTILLER

17 

wildly successful, then you have to cut back, which does not do 

anything for member service. 

Ms. HUSIC. Several other ways that the SBA 7(a) program can 

be enhanced, currently, the law does not allow for any type of consolidation or refinancing with a current lender so that if that business owner would like to do any of those things they cannot do it. 

So, for example, if they have been with our organization for several 

years, they need to go to another financial institution, and I think 

that is very challenging for that business owner because here is 

someone they have a relationship with, they know their business. 

They are forced to go elsewhere in order to do any of those items. 

An opportunity, too, looking at this particular bill here is that if 

there is an opportunity to carve out for the portfolio lenders and 

suggesting of banks with assets under a billion. So, for example, 

with this particular piece, that if prior to this, if you were in excess 

of our legal lending—legal lending for a bank is 15 percent of our 

capital is what we can lend. With the SBA guaranty, you could 

back that out. That is no longer the case. So for those of us who 

are portfolio lenders and we want to make loans in our communities, that can be prohibitive to us. 

Also, too, we talked briefly about having the seller remain on for 

an extended period of time. In situations we have seen it was up 

to a 2-year period of time to help maybe navigate through the waters of being a first-time business owner. But a new component 

with this is that a key employee who is not an owner can be required to guarantee the loan and the SBA can come back and require that. They are going to have all the challenges or the downside of guaranteeing a loan without having the benefits of an ownership. And I do not know many individuals who are an employee, 

who are not an owner, who would be willing to sign to guarantee 

that. So those are some of the items I would recommend. 

Ms. BLANKENSHIP. I would just echo their comments. But I 

would like to expand on the inability to refinance your own credit. 

We take the risk on these small businesses when they come in and 

we use the SBA 7(a) program because that is what it was designed 

for, those small businesses that cannot get conventional credit. But 

our bank, our small community banks are taking that risk. And so 

when the business gets up and successful, if you could look at 

maybe some term, 3 years down the road you are successful, that 

is when our customers get cherry-picked out of our portfolio. And 

I understand the complication that the guaranteed portion many 

banks sell in the secondary market, so then there is an issue with 

that. But if it is a portfolio loan, let us take the entire risk back 

in-house and then that would be more dollars back into the SBA 

program to leverage into new small business. 

Mr. EVANS. Mr. Wilkinson, could you talk about the Credit 

Elsewhere provision and how it helps the SBA 7(a) program? 

Mr. WILKINSON. Well, again, it is the cornerstone of our program and we are optimistic that the new language provided in H.R. 

4743 will clarify that for lenders so they know exactly what is expected and how the file will have to be documented in terms of how 

they determine that the borrower could not get credit elsewhere. So 

the old definition is quite old. It has not been updated for many 

decades and really does not fit the marketplace in which we lend 

SBREP-219A with DISTILLER

18 

today. So we are cautiously optimistic that this language will pass 

and it will make our jobs a lot easier. 

Mr. EVANS. Thank you, Mr. Chairman. I yield back the balance 

of my time. 

Chairman CHABOT. Thank you very much. The gentleman 

yields back. 

The gentleman from Utah, Mr. Curtis, is recognized for 5 minutes. 

Mr. CURTIS. Thank you, Mr. Chairman and Ranking Member, 

for this opportunity for this critical conversation and this very important bill. I must admit, as I have listened to the testimony 

today, my heart has raced and my palms have grown sweaty because not too many years ago I was an owner of a small business 

and the trauma of going through loans and navigating this, signing 

your home up as collateral, I think we frequently underestimate 

the sacrifice our small businesses make to drive our economy and 

to employ people. 

And as part of that experience, I know—I would like to think I 

know how a lot of these businesses think, and you will not be surprised that many of them find institutions difficult to navigate. 

They may be very good at patents. They may be very good at manufacturing. They may be very good at sales, but they are not necessarily very good at navigating. 

And Ms. McDonald, if I could start with you because of your title, 

and then ask the others as well to answer this question, and that 

is, are we doing enough to market and to help businesses that are 

not walking through your door who need this vital program, but do 

not understand? And if we are not doing enough, what should we 

be doing? 

Ms. MCDONALD. Well, my credit union career actually started 

in marketing, so I love the idea of marketing all the time. And we 

do do a good job of marketing. At Randolph-Brooks, the concern 

that we have is that if we put up a billboard on 281 in San Antonio 

that talks about the business loans that we do, we would get inundated and we would not be able to serve those members effectively. 

So we have to be very strategic in how we market the program because the worst thing that can happen is you get 1,800 phone calls 

and you are not able to service them. 

But we work with our local SBDCs. We work with the SBA. We 

work with our members. And really, that is where our program 

started was not that we were going out and marketing small business loans; it was our members that came to us and said, hey, you 

do a great job with our personal stuff. We want you to take care 

of our business needs, also. And so that is how we grew into business lending was because the members were asking for it. So word 

of mouth does a really good job for us. 

Mr. CURTIS. I do not know if any of the others want to weigh 

in on that. Please, yes, Ms. Husic? 

Ms. HUSIC. One of the things we do at Centric Bank is we work 

with SCORE. SCORE is the Service Corps of Retired Executives, 

who are mentoring for small business. And over the year we may 

be doing 6 to 10 events, different seminars they may have. We are 

educating those who have an interest to own their small business, 

SBREP-219A with DISTILLER

19 

to how to navigate the waters. What do they need to do to be prepared? 

There are other things we do. We reach out to our local economic 

developments, our chambers throughout the areas and the markets 

that we serve in being able to be a resource if there are questions, 

but also to have individuals, they can come forward being prepared 

if that is something they are looking to explore. 

Mr. CURTIS. Thank you. 

I would like to take this opportunity to point out to all of us that 

we have more work to do. The fact that we would flood your bank 

if it was advertised, it points out that there are just a lot of businesses out there who need access to this who do not understand it 

and hopefully we can do more for them. 

I think the last question that I would like to ask, and maybe I 

will start with you, Mr. Wilkinson, is if you are familiar with the 

fee enough that is associated with this to comment on how prohibitive is that for these small businesses? Clearly, we are taking them 

above market rate by doing this. And are you finding that we are 

eliminating businesses and turning them to other less traditional 

sources because of that fee? 

Mr. WILKINSON. Okay, as with everything else in our program 

there is not really a very simple answer, so bear with me. But 

there is a sliding scale of fees charged to the small businesses that 

increases as the loan size increases. And you know, given our loan 

volume, it is easy for me to say no, they are not prohibitive because 

we are still seeing a strong increase in demand. On the interest 

rate side, we are legislatively capped at for most loans prime plus 

2-3/4. So the interest rate today is—I forget what prime is. What 

are we, 4? So we are like 6-3/4 on our interest rate cap. So the pricing is really not pricing folks out of the market. 

Mr. CURTIS. Okay. Please? 

Ms. BLANKENSHIP. Well, I agree. And the thing about the pricing, while a lot of customers, you know, kind of flinch at the pricing, it does give them an alternative to credit card financing, 

which, you know, I think that the SBA does a great job in providing capital access rather than going through the credit card. 

Mr. CURTIS. Or hard money loans. 

Ms. BLANKENSHIP. Or hard money. 

Mr. CURTIS. Mr. Chairman, I yield my time. 

Chairman CHABOT. Thank you very much. The gentleman’s 

time is expired. 

The gentlelady from California, Ms. Chu, is recognized for 5 minutes. 

Ms. CHU. Thank you. 

Mr. Wilkinson, as you mentioned in your testimony, the authorization level for the 7(a) program is typically set 18 months in advance and it is hard to anticipate the level of demand that far out. 

Before 2014, had the 7(a) program reached the cap before the end 

of the year, and what do you believe has changed with lending over 

the past few years to cause this increase? 

Mr. WILKINSON. Yes, we hit the cap a couple of times before 

2014. I believe it was 2003 and 2004, if my memory serves me correctly. But today we have more lenders participating in the program than we did back then so the program is much more robust 

SBREP-219A with DISTILLER

20 

and more dynamic. It is growing and it is tough to really gauge 

what our growth rate is going to be 18 months in advance, and that 

is why this flexibility language is so important. We try to do a good 

job of surveying our members and get their estimate in their budgets, what is their growth forecast for the next year. But again, 18 

months in advance is a long way to try to guess where we are going 

to end up and what things may be happening in the economy along 

the way that might stimulate or cause demand to slow down. So 

the flexibility language in our opinion is critical so we do not bump 

into those caps and cause program shutdowns going forward. 

Ms. CHU. And then there is the issue of oversight. As the 7(a) 

portfolio has grown nearly 60 percent over the past 5 years, many 

questions were raised about how the Office of Credit Risk Management was handling oversight of such a large portfolio. 

So Mr. Wilkinson, the Small Business 7(a) Lending Oversight 

Reform Act would require OCRM to prepare a budget justification 

for Congress in order to create more transparency. How will this 

requirement address some of those concerns? 

Mr. WILKINSON. Well, we want to make sure that the Office of 

Credit Risk Management has the tools and resources it needs to 

conduct appropriate oversight. I think that is the critical part of 

this program. As I mentioned before, we want to have a program 

of integrity. That means we keep everybody between the lines so 

that this program is here for the long haul. We as lenders would 

like to know what resources OCRM is getting. Part of those resources we are paying for so we would like to know what that 

might be. And then just to know that they do have the tools and 

the resources they need to get the job done. One of our issues with 

OCRM has been they will come out and they will do a review of 

the lender and sometimes it takes several months before that review is completed. And hopefully, with the additional resources 

they can provide those reports in a more timely fashion, and it is 

much more beneficial to the lender if they are having issues, that 

they find out about them today rather than a year and a half from 

now. 

Ms. CHU. In fact, that leads to a question I have for Ms. Husic. 

In addition to requiring SBA employees to manage reviews, the 

Small Business 7(a) Reform Act also sets timelines for review reports and correspondence to be transmitted back and forth between 

SBA and lenders. Can you tell us why it is important for SBA to 

provide lenders with an audit report within 60 business days instead of 18 months as has happened in the past? 

Ms. HUSIC. It is very important to receive the feedback. So, for 

example, if an organization is perhaps in some things, if there is 

a common thread, something systemic, and with the underwriting 

or something they are not doing, I think it is important to get that 

feedback, especially if you are a more robust lender or any lending 

at all, an importance to be able to receive that feedback to make 

any modifications and corrections, what you are doing at your particular organization. 

Ms. CHU. Now, it is my understanding that many of the SBA 

lenders rely on the services of third-party agents to assist in the 

origination, closing, servicing, and liquidation of these loans. You 

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mentioned, Ms. Husic, the lack of training is a problem in the loan 

liquidation process. Could you please elaborate? 

Ms. HUSIC. Yes. So for us at Centric Bank, we do utilize a thirdparty to assist us with any, if there is liquidation, et cetera. During 

the course of Centric, we have not had that particular issue with 

us. We are at a 0 percent delinquency as well as a 0 percent default rate for any type of SBA lending that we have done. But we 

have heard it has been a common thread within the industry as 

well as to ensuring the particular order that you go in to liquidate 

as to ensuring that you maintain and preserve the guaranty piece. 

Ms. CHU. Thank you. I yield back. 

Chairman CHABOT. The gentlelady yields back. Thank you. 

The gentleman from Iowa, Mr. Blum, who is the Chairman of the 

Subcommittee on Agriculture, Energy, and Trade is recognized for 

5 minutes. 

Mr. BLUM. Thank you, Chairman Chabot, and thank you to our 

panelists for being here today. I appreciate it very much. 

I would like to focus the next couple of minutes if we could on 

the default ratios of the SBA’s 7(a) loan program versus your commercial loan portfolio as a whole. Can you compare and contrast 

those, the three of you that work at financial institutions, please? 

Ms. Blankenship? 

Ms. BLANKENSHIP. I would say our SBA default ratios are 

very low. It is probably 1 percent or less than our total default ratios. 

Mr. BLUM. What would your total commercial loan portfolio default ratio be on average? 

Ms. BLANKENSHIP. Historically, well, our past dues are about 

2 percent, so our charge-offs are maybe .5. So we do not have a lot 

of charge-off and default ratios. And particularly on our SBA, we 

have had great historical—we do not have zero such as Ms. Husic, 

but traditionally they have been very low. I think the program and 

its integrity—and I thank this Committee for holding this oversight 

because we want to preserve this program and make sure that 

there are not third-party players, and you can preserve this program so that we can offer—these are good customers. They just 

needed extended terms. 

Mr. BLUM. I was Chairman of the Director’s Credit Committee 

on a $1.5 billion bank before this life and we would ask the question occasionally if our default ratios got too low, are we taking 

enough chances? Do you think you are taking enough chances? Are 

the collateral requirements different on an SBA loan than they are 

on a general commercial loan? 

Ms. BLANKENSHIP. Sure. 

Mr. BLUM. Are they more stringent? 

Ms. BLANKENSHIP. I mean, the collateral requirements on an 

SBA, you have more flexibility with collateral. And as well as 

terms. Terms are a big deal so that you can stretch that repayment 

term out and allow that customer to have enough cash flow until 

he gets his business up and successful and running. So that is one 

of the biggest advantages, the reason that we cannot make a traditional or conventional credit under current regulatory guidelines in 

our banking environment. 

Mr. BLUM. Ms. Husic? 

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Ms. HUSIC. For our portfolio and our non-SBA, so our delinquencies and our nonaccrual, we are at .42 percent of our lending 

portfolio. Very pristine. 

Mr. BLUM. Very pristine. 

Ms. HUSIC. And you are looking at our asset quality—— 

Mr. BLUM. Congrats. 

Ms. HUSIC.—of our SBA loans, we have a zero percent default 

rate and a 0 percent delinquency. We have been doing that, it will 

be almost 11 years. And over the past 6 to 7 years we have been 

a much more robust lender in those regards. And I have to say, if 

I look historically through the life of Centric, especially if you look 

over the economic downturn, you would see loans that had gone 

bad during that period of time. I think especially over the past, you 

know, 2 to 3 years, there has been much improvement in the credit 

quality through financial institutions in general. 

Mr. BLUM. Zero percent, that is off the charts. You need to take 

more risk. 

Ms. HUSIC. When you see our lending numbers, we are doing really a robust amount. As I mentioned, last year we did over $41 

million with 77 loans in the SBA and total lending, over $210 million that was improved. One of the things so important to us is setting the client up for success. And there is a lot, as I mentioned, 

the numbers that we approved, there is a large list of the numbers, 

and I would say equivalent to 25 to 30 percent that we have said 

no to. One of the things we do like to do is if we do say no, we 

give them a way and a path how do you get to a yes? And so almost some homework maybe to go back and to say these are some 

of the things, if you work on and improve we could perhaps help 

you and assist you in the future, but until some of these things 

have been worked upon or done or enhanced, we want to set them 

up for success and make it a win-win. 

Mr. BLUM. Ms. McDonald? 

Ms. MCDONALD. Well, just like Ms. Blankenship and Ms. 

Husic, we have a very low delinquency ratio, charge-off ratio. 

Again, not at 0 percent. We do take a little bit more risk. But it 

depends on what the needs of the member are, and for us it is 

what can we do to help the member? How can we help them either 

grow their business or start a new business? 

Mr. BLUM. Is it higher or lower than your commercial loan portfolio in general? 

Ms. MCDONALD. It is generally just a bit higher, but our commercial loan portfolio is incredibly low as well. I want to say somewhere between 1 and 1-1/2 percent. 

Mr. BLUM. Would your lender banks, what would the experience 

be there in credit unions? 

Mr. WILKINSON. Expecting that you were going to ask this 

question I brought the numbers. So there are two different ways 

to look at this, the way you as a banker would look at it, what were 

the charge-offs this year, and what was our loan portfolio balance 

at the end of the year? So at the end of fiscal year 2017, that 

charge-off rate was .8 for the entire 7(a) program. Now, the other 

way that the Office of Management and Budget looks at this is 

rather than as a typical banker would make a loan to a business 

and have that loan renew every year, so a 15-year loan would be 

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15 separate loans for the bank. SBA looks at this as one long 15- 

year loan. So they look at it as a cohort. They call it a cohort of 

loans, and how does that cohort of loans perform? And they then 

come back with all those numbers from all the cohorts that they 

have and they put that in the budget request. 

So in the fiscal year 2018 budget request, our defaults net of recoveries over a portfolio that can span 25 years was 4.49. So you 

figure an average life of about 10 years, our annual charge-off rate 

would be somewhere just under .5. 

Chairman CHABOT. The gentleman’s time has expired. 

Mr. BLUM. That is amazing, and I yield back. Thank you. 

Chairman CHABOT. Thank you. 

The gentleman from Florida, Mr. Lawson, who is the Ranking 

Member of the Subcommittee on Health and Technology, is recognized for 5 minutes. 

Mr. LAWSON. Thank you, Mr. Chairman. And welcome to the 

Committee. 

One other thing I read in the proposed legislation, and maybe 

you can respond to it is that the lending to smaller firms over 2008 

to 2016 went down by about 13.7 percent, but the increase to larger 

firms went up by almost 46 percent. What happens in that regard? 

Mr. WILKINSON. So you are talking about loan volume? 

Mr. LAWSON. Right. 

Mr. WILKINSON. Okay. I am going to look at loans of $150,000 

or less. Back in 2015, our numbers dropped, but our dollars moved 

up, so we were making fewer number, but larger dollar amounts. 

And then going up to the next step, 150 to 350, those numbers actually improved slightly. 

Mr. LAWSON. Okay. Did anyone else want to comment? 

Ms. MCDONALD. What I can tell you is that is not an issue at 

Randolph-Brooks. More than half of our SBA loans are less than 

$75,000, so that is kind of our niche. 

Mr. WILKINSON. Okay. The other thing I would add is if you 

look at the current fiscal year, the loans in the small categories are 

all up. So while through fiscal year 2017 they were flat or modest, 

they have begun to move up in the current fiscal year. 

Mr. LAWSON. Okay. And Mr. Wilkinson, since you are talking, 

can you discuss the effectiveness of the oversight mechanism that 

SBA had put into place, including risk profiles to guarantee that 

the 7(a) program is effective? 

Mr. WILKINSON. Yes. They developed a—they call it PARRiS, 

a risk protocol where they review lenders. It is a very robust system. It is still relatively new, but it looks like a really good system. 

We would like for them to have a few more years managing this 

to see how it works out, but we think it is a pretty good oversight 

tool. 

Mr. LAWSON. And one other thing that was very intriguing is 

I guess in a credit union they must be doing something very significant because when you say that you do not have hardly any defaults, what are you doing during the course of the loans to put you 

in that position? 

Ms. MCDONALD. Well, we work with our members. It is about 

communication. We look at our loans. Depending on the amount of 

the loan, we look at either a quarterly or a semiannual basis. We 

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go and we talk to members. We see how things are going. We make 

sure that that line of communication is open. We have a very good 

underwriting staff and we do a very good job with our loans. 

Mr. LAWSON. Okay. Thank you. And Ms. McDonald, can you 

discuss the growth in the 7(a) lending? I believe that the data show 

that growth in lending has increased, so what does it do for the 

small-dollar loan? And you can tell me a little bit, what do you consider a small-dollar loan? 

Ms. MCDONALD. Well, for us a small-dollar loan is, well, by SBA standards, less than $350,000. For us, it is really anything 

less than $100,000. And again, that is mostly what our niche is. 

And your question was how are we increasing it? 

Mr. LAWSON. We have tremendous member loyalty, and so when you do something for a member at a $75,000 level that 

maybe they were not able to get somewhere else or maybe somebody did not spend the time with them and you are able to help 

them, then they tell their family and they fell their friends. And 

that is the best kind of advertising that you can have is that word 

of mouth. Randolph-Brooks has been very successful in helping 

people with their personal finances for a very long time. And as I 

mentioned before, the only reason that we got into member business lending is because those same members were coming to us 

saying we want you to help us with our business needs. 

Okay, and real quick, and anyone can respond to it, there was 

always some consideration that the commercial banks area felt 

that credit unions were doing more than they were supposed to in 

getting involved in business lending. Is that generally the same 

feeling? 

Yeah, Ms. Husic? 

Ms. HUSIC. We see quite a bit of that in our market area. We 

say, in fact, the credit unions are reaching out to do more commercial loans on their various electronic signs out in front of their numerous buildings. They do. They have signs ‘‘We do commercial 

loans.’’ And there is a big push towards it. 

Our goal is, yes, we want to help the small business in our community, just the piece is we would like to be able to have a level 

playing field in order to compete. 

Mr. LAWSON. Mr. Chairman, with that, my time ran out. I yield 

back. I have a lot more questions I could ask. 

Chairman CHABOT. All right. Thank you very much. The gentleman’s time has expired. 

The gentleman from Kentucky, Mr. Comer, is recognized for 5 

minutes. 

Mr. COMER. Thank you, Mr. Chairman. And my questions are 

going to be geared towards Ms.—is it Husic? Am I pronouncing 

that right? I appreciate the American Bankers Association. Like 

Congressman Marshall and Congress Blum, I served as a director 

of a bank, 15 years, community bank back in Kentucky. And we 

did not do very many SBA loans. I know other banks did, but we, 

for whatever reason, did not do that many. But I am curious, when 

a small business customer enters your bank, how does the conversation proceed all the way to a SBA loan? Is there a reason you 

send it to the SBA or what is the process to get that customer towards that SBA loan? 

SBREP-219A with DISTILLER

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Ms. HUSIC. Sure. So at Centric Bank, we have a total of 15 commercial lenders. We do not have any individuals that are solely focusing on SBA loans. I would say out of those 15, about half of 

them are contributing to the bulk of our SBA loans. And again, 

they are doing other loans that are non-SBA as well. So, in times, 

and just recently, I sat down with a client, and many times a prospective client. So part of the conversation when someone says they 

are looking to say maybe start up a new business or acquire a business, we go through the process to ask them, you know, do you 

have a business plan? From there, you know, looking at the specifics with the financials, the tax returns of them personally, personal financial statement, a business plan; for the business perhaps 

they are acquiring, the financials to support that and their projections. First and foremost, we are always looking at can we do this 

loan conventionally? That is where we start. 

When there are times that we are unable to get them there, we 

are looking at perhaps they do not have the required amount of 

down payment, 20 or 25 percent in, to purchase to have their own 

skin in the game of their own funds and needing a lesser down 

payment. Is it a collateral shortfall? As when they are purchasing 

a business there might be a more significant dollar that is associated with good will. We are not going to do an extended payment 

terms of, you know, past a 7- or 10-year if we are doing that conventionally. So first and foremost, we walk through those questions, can we do it conventionally? When we cannot accomplish 

that, we like to look at how do we get the client to a yes? 

So the SBA program would be the next one we are looking at. 

And at times, we are looking at the SBA 504. So it is not necessarily always the 7(a). We are looking at what makes the most 

sense for that particular customer in front of us. In the end, we 

want to be able to set them up for success through that process. 

And at times I look at it, we are a consultative banker to them and 

trying to help navigate through the process, and maybe some 

things they do not have sufficient information coming to the table. 

Mr. COMER. I am going to switch gears here. Dodd-Frank, that 

is something I hope that we can somehow repeal. I know the House 

has passed legislation to repeal it. Maybe a compromise since we 

cannot seem to get there in the Senate would be just to focus on 

community banks, try to ease up the regulatory burden that community banks face with, in my opinion, the excessive regulations 

and the excessive compliance that is required now because of DoddFrank. 

My question with respect to this testimony, has Dodd-Frank had 

any effect on the 7(a) loan program? Are more customers having to 

qualify now for an SBA loan because of Dodd-Frank or less or has 

it affected availability and access to credit any with the SBA program? 

Ms. HUSIC. Well, I look at—there is an aspect of Dodd-Frank 

that has not even come into place as far as being effective for 

banks needing to do, and that is with small business lending where 

the data needs to be compiled and will need to be compiled going 

forward if something is not done or impacted, we are to compile 

that similar to HMDA for the residential loans. So that is particular. That is outstanding. 

SBREP-219A with DISTILLER

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You know, in general, Dodd-Frank, the addition of hiring individuals for the compliance rules to be able to oversee, so that has cost 

us as community banks to having that. You know, you get into 

qualifying mortgages. You get into a lot of noncommercial as well, 

but it has, the regulatory burden has been significant and onerous 

on community banks. 

Mr. COMER. Okay. Thank you, Mr. Chairman. I yield back. 

Chairman CHABOT. Thank you. The gentleman yields back. 

The gentlelady from Puerto Rico, Jennifer Gonza ́lez-Colo ́n, is recognized for 5 minutes. 

Ms. GONZA ́ LEZ-COLO ́ N. Thank you, Mr. Chairman. And thank 

you for all our witnesses today. 

My first question will be to Ms. McDonald, and it will be, as part 

of your testimony you highlighted the importance of better definitions for penalties on page 15. What kind of errors should be defined as minor compliance errors and why? 

Ms. MCDONALD. Thank you. The minor compliance errors 

would be if somebody put the wrong date on something, if somebody checked the box wrong. What we would like to see is there 

be a difference between willful malicious negligence in trying to do 

something on there, and another would be it is a training issue and 

we screwed it up and we need to understand what the penalties 

are because between 0 and $250,000, that is a big number. 

Ms. GONZA ́ LEZ-COLO ́ N. And what penalties should we apply to 

those areas? 

Ms. MCDONALD. Oh, gosh. In most cases I would say if it is 

something like where you changed a date or you messed up in that, 

it would be better to point it out first and then have some type of 

a penalty after that. 

Ms. GONZA ́ LEZ-COLO ́ N. Okay. My second question will be to 

Mr. Wilkinson. And it will be, you mentioned the PARRiS system 

on page 10 of your testimony, highlighting that it is in the final 

stage. Do you think the system can converge with the new regulations or be adapted? 

Mr. WILKINSON. To the proposed legislation? 

Ms. GONZA ́ LEZ-COLO ́ N. Yes. 

Mr. WILKINSON. Oh, yes. I think it can. That should not be an 

issue at all. 

Ms. GONZA ́ LEZ-COLO ́ N. So without a problem? 

Mr. WILKINSON. Not in my opinion. 

Ms. GONZA ́ LEZ-COLO ́ N. Okay. 

Mr. WILKINSON. SBA may have a difference of opinion, but it 

should work just fine. 

Ms. GONZA ́ LEZ-COLO ́ N. Okay. And my last question will be to 

Ms. Blankenship. In your testimony you mentioned the Credit 

Elsewhere Test. Please explain how the test operates and the average time it takes to do that and what other recommendation is required in addition to the inability to receive the conventional credit? 

Ms. BLANKENSHIP. Well, I think the Credit Elsewhere Tests 

were encouraged by, as Mr. Wilkinson said earlier, it was fairly 

ambiguous before, and the last thing that we want to do is be out 

of compliance with the expectations of the program. So by defining 

the Credit Elsewhere Test criteria and making it as simple as posSBREP-219A with DISTILLER

27 

sible, although, remember, every applicant is a custom deal more 

or less, and typically a lot of times we would use—what our regulators would allow as a conventional loan and if we could not get 

that done, and you can look at their credit scores or their lack of 

collateral. So it is fairly easy to know that this would not be a slam 

dunk credit approval process. Again, I just applaud this Committee 

for trying to preserve this SBA program. We have used SBA programs since we opened our bank in 1986 and it is a cornerstone 

of our lending. Thank you. We appreciate that. 

Ms. GONZA ́ LEZ-COLO ́ N. We do support it. 

What other persons or people are involved in this process besides 

the bank and the client? 

Ms. BLANKENSHIP. The other, well, at Bank of the West, since 

we have had this program since 1986, we have a very dedicated 

and trained—this is a niche program, and it is complicated. So we 

actually have about six people on staff that specialize in SBA. So 

they work in conjunction with the lender, and so we have our credit 

analyst and our loan department and our underwriters that also 

assist that loan officer. 

Ms. GONZA ́ LEZ-COLO ́ N. Yeah, but besides the client and the 

bank, to the Credit Elsewhere Test, is it anybody else besides the 

client and the bank, outside the bank and the client that is working on that or no? 

Ms. BLANKENSHIP. Typically, it would just be the client coming to the bank for us. 

Ms. GONZA ́ LEZ-COLO ́ N. Okay. 

Ms. BLANKENSHIP. And then we would determine if it meets 

the criteria of the Credit Elsewhere Test. 

Ms. GONZA ́ LEZ-COLO ́ N. Thank you for being here. 

And with that, Ms. Chairwoman, I yield back the balance of my 

time. 

Ms. RADEWAGEN. Thank you very much. Talofa and good 

morning. You know, I am really looking forward to being back 

home in sunny and warm American Samoa. And I want to thank 

the Chairman and Ranking Member for holding this hearing. 

So I have got a question for all of you. From your perspective, 

does the length and the cumbersome nature of the SBA application 

process hurt a small business’ ability to access capital? Ms. 

Blankenship? 

Ms. BLANKENSHIP. Well, it is a cumbersome and lengthy process and, you know, I would be lying if I told you that our customers 

are often disgruntled with the amount of paperwork, but I think 

when we show them that it is such a viable alternative for them 

and they could not get this credit elsewhere, and in our case, since 

we have been doing this for over three decades, we have sort of perfected holding their hand and counseling them and walking them 

through the process. We would like to see it streamlined. We would 

like to see more specific definitions, but it works for us. 

Ms. RADEWAGEN. Ms. Husic? 

Ms. HUSIC. To the same points, it is a more complex process and 

I have to say of all of our small business clients that come into 

Centric, and I would say less than 5 percent walk in the door and 

say I want an SBA loan. And in fact, when that topic ends up getting brought up for a discussion point that they did not qualify for 

SBREP-219A with DISTILLER

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conventional lending, you have probably about half of them saying 

I do not want to do a government guaranteed loan because they 

have said I have heard through other individuals that it is a very 

complex process, it is very time-consuming. And for us, we are not 

a preferred lender. I would say an average turnaround from application to the time we close could be 6 to 7 weeks. We have had 

those that have been in excess of 3 months. 

So I think some of those things could be perceived by that small 

business client as, again, cumbersome. Again, to the point of, you 

know, that at the end, if that is the way that they are going to be 

able to realize their dream of owning their own business, we can 

get them to a yes by that and to show them, you know, we are 

there working with them as a partner to accomplish that. 

Ms. RADEWAGEN. Ms. McDonald? 

Ms. MCDONALD. Just like they said, there is a perception that 

SBA loans are very onerous; that they take a lot of time. We are 

a preferred lender, but there are a few times that we do have to 

send it through general processing and that can take up to 8 

weeks. So that is somewhat frustrating, particularly for our members. As I think Ms. Blankenship said, the benefits to the member 

is what helps us sell the program. 

Ms. RADEWAGEN. Mr. Wilkinson? 

Mr. WILKINSON. Last year we did over 62,000 loans. We are on 

pace to do over 65,000 loans this year, so there are a lot of small 

businesses that do not find this too cumbersome, I think especially 

when they figure out that they are able to appropriately finance a 

long-term asset with a long-term loan that reduces their monthly 

payments and puts their business in a proper spot, the paperwork 

suddenly gets forgotten. 

Ms. RADEWAGEN. Thank you. I reserve my time. 

Chairman CHABOT. Thank you very much, Madam Chairman. 

And we want to thank everyone for coming. If people are wondering what happened, we had a markup in Judiciary. Most members, in fact, all of us are on several committees and the Judiciary 

was marking up a bill and they needed my vote for it to pass, and 

it did, so. But I think all the members who had any questions got 

to ask them. 

We want to thank the very distinguished panel for their excellent 

testimony this morning and now into this afternoon. I think you all 

did a very good job. It helped us to learn more about this program 

and how it impacts out there, especially amongst small businesses, 

which after all is the focus of this Committee; and also, the legislation that we are considering as well, which is both bipartisan and 

bicameral since the Senate is considering as well. So we want to 

thank you very much all for shedding light on that. 

And 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 very 

much. 

[Whereupon, at 12:31 p.m., the Committee was adjourned.] 

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67 

SBREP-219A with DISTILLER


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68 

SBREP-219A with DISTILLER


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69 

SBREP-219A with DISTILLER


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70 

SBREP-219A with DISTILLER


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71 

SBREP-219A with DISTILLER


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72 

SBREP-219A with DISTILLER


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73 

SBREP-219A with DISTILLER


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74 

SBREP-219A with DISTILLER


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75 

SBREP-219A with DISTILLER


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76 

SBREP-219A with DISTILLER


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77 

SBREP-219A with DISTILLER


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78 

SBREP-219A with DISTILLER


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79 

SBREP-219A with DISTILLER


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80 

SBREP-219A with DISTILLER


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81 

SBREP-219A with DISTILLER


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82 

SBREP-219A with DISTILLER


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83 

SBREP-219A with DISTILLER


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84 

SBREP-219A with DISTILLER


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85 

SBREP-219A with DISTILLER


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86 

SBREP-219A with DISTILLER


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87 

SBREP-219A with DISTILLER


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88 

SBREP-219A with DISTILLER


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89 

SBREP-219A with DISTILLER


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90 

SBREP-219A with DISTILLER


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91 

SBREP-219A with DISTILLER


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92 

SBREP-219A with DISTILLER


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93 

SBREP-219A with DISTILLER


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94 

SBREP-219A with DISTILLER


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95 

SBREP-219A with DISTILLER


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96 

SBREP-219A with DISTILLER


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97 

SBREP-219A with DISTILLER


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98 

SBREP-219A with DISTILLER


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99 

SBREP-219A with DISTILLER


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100 

SBREP-219A with DISTILLER


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101 

SBREP-219A with DISTILLER


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102 

SBREP-219A with DISTILLER


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103 

SBREP-219A with DISTILLER


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104 

SBREP-219A with DISTILLER


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105 

SBREP-219A with DISTILLER


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106 

SBREP-219A with DISTILLER


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107 

Æ 

SBREP-219A with DISTILLER


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