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SUBCOMMITTEE ON FINANCE AND TAX 

FIELD HEARING ON EXPLORING WAYS FOR 

SMALL BUSINESSES TO ACCESS CAPITAL 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

AUGUST 4, 2009 

Small Business Committee Document Number 111-042 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

PARKER GRIFFITH, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEE 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

W. TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Schrader, Hon. Kurt ................................................................................................ 1 

WITNESSES 

Dewolf, Mr. Harry, Director, Portland SBA Office, Portland, OR ....................... 4 

Brunberg, Mr. Jim, Owner, Mississippi Studios, LLC, Portland, OR ................. 6 

Southwell, Ms. Sheryl, President, Specialty Polymers, Inc., Woodburn, OR ...... 8 

Parks, Ms. Wilda, Director, North Clackamas Chamber of Commerce, Milwaukee, OR ........................................................................................................... 9 

Safstrom, Mr. John, Loan Program Manager, Mid-Willamette Council Of Governments, Salem, OR ........................................................................................... 17 

Hein, Mr. Rick, President And CEO, OSU Federal Credit Union, Corvallis, 

OR, On behalf of the Credit Union Association of Oregon ............................... 19 

Wilmes, Ms. Kim, CEO, Metal Innovations, Inc., Aurora, OR ............................ 23 

Harville, Mr. Nick, Business Retention & Expansion Manager, SEDCOR, 

Salem, OR ............................................................................................................. 26 

Brandt, Mr. Terry, Executive Director, Albina Opportunity Corporation, Portland, OR ................................................................................................................ 28 

Compton, Mr. Randy, CEO, Pioneer Trust Bank, Salem, OR ............................. 30 

Nass, Mr. Stephen P., Assistant Vice President, Commercial Loan Officer, 

Pioneer Trust Bank, Salem, OR ......................................................................... 32 

Rasmussen, Mr. Jim, President, Modern Building Systems, Aumsville, OR ..... 33 

(V) 

APPENDIX 

Prepared Statements: 

Schrader, Hon. Kurt ................................................................................................ 36 

Brunberg, Mr. Jim, Owner, Mississippi Studios, LLC, Portland, OR ................. 38 

Southwell, Ms. Sheryl, President, Specialty Polymers, Inc., Woodburn, OR ...... 39 

Parks, Ms. Wilda, Director, North Clackamas Chamber of Commerce, Milwaukee, OR ........................................................................................................... 40 

Safstrom, Mr. John, Loan Program Manager, Mid-Willamette Council Of Governments, Salem, OR ........................................................................................... 44 

Hein, Mr. Rick, President And CEO, OSU Federal Credit Union, Corvallis, 

OR, On behalf of the Credit Union Association of Oregon ............................... 52 

Wilmes, Ms. Kim, CEO, Metal Innovations, Inc., Aurora, OR ............................ 55 

Harville, Mr. Nick, Business Retention & Expansion Manager, SEDCOR, 

Salem, OR ............................................................................................................. 61 

Brandt, Mr. Terry, Executive Director, Albina Opportunity Corporation, Portland, OR ................................................................................................................ 65 

Compton, Mr. Randy, CEO, Pioneer Trust Bank, Salem, OR ............................. 69 

Nass, Mr. Stephen P., Assistant Vice President, Commercial Loan Officer, 

Pioneer Trust Bank, Salem, OR ......................................................................... 69 

Rasmussen, Mr. Jim, President, Modern Building Systems, Aumsville, OR ..... 72 

Statements for the Record: 

Mulligan’s A Sports Bar, Lincoln City, OR ........................................................... 75 

Hallmark Properties Inc., Woodburn, OR ............................................................. 77 

Motel 6, Lincoln City and Seaside, OR .................................................................. 79 

Oregon Microenterprise Network, Portland, OR ................................................... 80 

Corporation for Enterprise Development, Washington, DC ................................. 83 

RTR Services, Inc., Salem, OR ............................................................................... 89 

(VI) 

(1) 

SUBCOMMITTEE ON FINANCE AND TAX 

FIELD HEARING ON EXPLORING WAYS FOR 

SMALL BUSINESSES TO ACCESS CAPITAL 

HELD IN SALEM, OREGON 

Tuesday, August 4, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 8:00 a.m., in the Senate Hearing Room, Courthouse Square, 555 Court Street, N.E., 

Salem, Oregon, Hon. Kurt Schrader [chairman of the Subcommittee] presiding. 

Present: Representative Schrader. Mr. SCHRADER. Well, we’ll try 

and get started here almost on time. We’re ahead of Washington, 

D.C., time already, because all the members that are attending are 

here. That would be me. Usually it takes a half hour to get this 

crew all together. Appreciate everyone coming and being in attendance. Great turnout. That’s very, very good. 

This hearing is about jump starting our credit market again, and 

identifying problems that small businessmen and women are facing 

in my state, Oregon. But I think we’re probably very reflective of 

the issues that we’re seeing around the country. 

It’s not a general type of public hearing, so we have invited testimony only. But if you have other issues you want our congressional 

office to talk about or respond to you on, please feel free to submit 

some information. Jon Pugsley is the lead staff person on this particular hearing. Be glad to take that information to try and get 

back to you, because there is a lot of issues going on in the country 

right now. 

But as chair of the Subcommittee on Finance and Tax for the 

Small Business Committee in our United States Congress on the 

House side, I take real pleasure and appreciate the fact of everyone 

showing up today, and particularly our witnesses here. That’s going 

to be really exciting. So I’m going to call the subcommittee meeting 

to order, and I can make a maybe not so brief statement, and then 

we’ll get to our witnesses here and line out the rules of engagement, if you will. 

Our nation’s economy is built on the foundation of these small 

businessmen and women. Small firms are among the nation’s largest suppliers and our most reliable job creators. Most Americans, 

myself included, get their first job through a small business. Not 

only do they serve as the basis for local commerce, but entrepreneurs also, as we know, contribute to local nonprofits, charity 

groups, churches, and other really worthy organizations. 

2 

Small businesses are nothing short of the glue that holds our 

communities together on a day-to-day basis. Here in Oregon is no 

different. Almost 98 percent of our state’s employers can be classified as small businesses. Together they comprise close to 60 percent 

of the private sector jobs in our state. 

Today, regardless of where a small business is located, here in 

Salem, Oregon, or across the country in Salem, Massachusetts, 

they all face a common challenge, and that’s trying to access capital. But simply, when a family-owned food cannery in Keizer 

wants to expand its operations and hire more workers, it requires 

a loan. 

When a high-tech entrepreneur wants to develop new markets, 

new products, he needs initial investments to get started. And 

when a construction company wants to purchase additional equipment, it takes capital. Investments like these will be what drive 

our economic recovery, not the government. 

During today’s hearings we will examine the challenges Oregon’s 

businesses are experiencing and discuss how to help them. Like entrepreneurs around the country, Oregon businesses often find solutions through the Small Business Administration. Last fiscal year, 

through it’s 7(a) and 504 programs the Small Business Administration helped almost 1,200 Oregon businesses get loans totaling $270 

million. 

That’s money to help firms keep their lights on, the doors open, 

make the payroll, and hopefully hire some workers. The SBA’s 

lending programs are especially important during economic 

downturns when credit is scarce. When the private capital markets 

don’t meet small business’s needs, these initiatives are meant to fill 

in the gaps and get credit flowing again. 

Unfortunately, that doesn’t seem to be happening that much this 

recession. Across the country 7(a) loans are down about 30 percent. 

Here in Oregon the drop-off has been particularly acute, off by 

about 37 percent. Today’s hearing hopefully will explore some of 

the reasons for that. 

The Recovery Act which Congress passed and the president 

signed into law in February has taken some steps to address these 

problems. By making loans less expensive for borrowers, by increasing the percentage of the loan that the SBA will guarantee, 

this new law is hoping to help facilitate private lending to small 

businesses. Since the passage of that act, Oregon businesses have 

received 232 loans, totaling over $53 million, but there is a long 

way to go. 

The act also established a new ARC loan program, which has recently been put into play, in June I believe. It enables small businesses to take out interest-free loans of up to $35,000, bridge loans, 

in effect. And under the program small businesses will have five 

years to repay the loans, and the SBA guarantees 100 percent of 

the loan to entice the lender to make it. 

Congress has done a lot in recent months to help businesses that 

are shedding employees and teetering on the edge of bankruptcy. 

My hope is that this program will actually help the small man and 

the small woman in their businesses. So far Oregon businesses 

have received $500,000 worth or ARC loans, and this program, as 

I said, was launched just in June. During this hearing I’d like to 

3 

get some feedback on how well that program is working and what 

we can do to improve it. 

When Congress reconvenes in September, I expect the Small 

Business Committee to begin consideration of legislation to help 

unfreeze our credit markets as a result of a lot of the testimony 

we’re going to have here today. Last month our subcommittee 

kicked off that process. We had hearings in Washington, D.C. But 

you can only learn so much in Washington, D.C., and I thought it 

was important to get home and talk to all of you. 

That’s why I’m excited to talk to the local businesses here in Oregon about our capital needs. We want to know what’s working, 

and more importantly what’s not, what changes we can make to 

make the programs more effective. And so I’m looking forward to 

hearing from each and every one of you. 

With that, we’re going to go to the witnesses. We have basically 

three panels here. The first panel is going to talk a little bit about 

the problems, or a lot a bit about the problems that we’re facing 

here. We’re going to hear from the lenders a little bit in the second 

panel, because they also face problems and have opportunities. 

And then the last panel in particular we’re going to be trying to 

get at solutions. But certainly anyone at any time in this hearing 

that’s testifying feel free to step up and give us some of the idea 

of the solutions that we could expect. And make sure you turn off 

your pagers. Sorry about that. The ground rules. 

We’ll move to testimony from the witnesses. You have only five 

minutes, I’m sorry, to make your statement. We’ll try and give a 

little leniency. Since we’re here in Oregon, we can do that. But I 

want to give everyone a chance to make their case, and I’d like to 

ask a few questions to kind of tease out some of the threads of 

what’s going on. 

We don’t have any little timers—or do we have any timers here? 

So there is no clock here. There is a clock behind us. Tell you what 

I’ll do. I might just kind of give you a heads up if you are getting 

to one minute. How is that? Is that all right? 

I’ll just kind of hold up one finger, because I don’t want to disrupt your testimony. This finger (indicated). That means you have 

got one minute left. That way you can kind of get down to it here. 

And who is going to be my timer, actually?Michael. Thank you 

very much. I’d like to recognize Michael Day has come out from 

Washington, D.C. He’s actually the lead committee administrator 

for the Small Business Committee. So it’s really an honor to have 

him out here and observing what’s going on. He helps us look moderately intelligent when we draft our legislation, so it’s very, very 

nice that he’s taken the time out of his day to come here. 

And then Ethan Pittleman, who is standing next to him, working 

with Jon Pugsley—where is Jon Pugsley? Jon Pugsley is in the 

back over there—are our two small business coordinators. Ethan 

does it in Washington, D.C., and Jon does it here. So those are 

your two local contacts when I’m not around. So I really appreciate 

all the work they have done here. 

So with that, let’s go to our first witness. It’s going to be Mr. 

Harry DeWolf. He’s here testifying on behalf of the Small Business 

Association. He’s the district director of the Portland district office, 

4 

which is responsible for the delivery of SBA’s programs and services through most of Oregon and southern Washington. 

Prior to joining the SBA in 2005, he served as president and 

chief of operations of AEC Technical Publications, which itself was 

a former SBA business. He also served for over twenty years in the 

U.S. Navy—thank you for your service, sir—as a supply officer, and 

he’s a graduate of Oregon State University and is a regular speaker on the entrepreneurial leadership at Oregon’s colleges and universities. 

Mr. SCHRADER. I thank you for coming to Salem, and look forward to your testimony. Please proceed. 

STATEMENT OF HARRY DEWOLF 

Mr. DEWOLF. Thank you, Congressman. Congressman Schrader, 

thank you very much for inviting me to testify today. As the district director of the United States Small Business Administration’s 

Portland district, I have the responsibility for the central and western 30 counties of Oregon and four southwest counties of Washington state. My staff of ten is working very hard with our banking 

partners, our 21 small business development centers, and six chapters of SCORE volunteers throughout our community, along with 

our community leaders, to assist the nearly 300,000 small businesses in the Oregon state. 

With the assistance of our partners, I am very proud of the results we have been able to consistently achieve, even in these challenging economic times. To date, SBA has guaranteed 656 SBA 

loans, valued at $149 million in the Portland district. That’s as of 

the end of July. Over fifty percent of these loans went to veterans, 

women, and minority small business owners, and 22 percent of the 

656 went to our rural communities. 

Thanks to the funding and program changes provided in the 

America Recovery and Reinvestment Act, or Recovery Act, the SBA 

has been working to unlock the small business lending market and 

get much needed capital flowing again to America’s small businesses. Nationally and locally the results are growing in positive 

trends. Nationally, loan volume has increased more than 45 percent as of SBA has supported $7.4 billion in small business lending, with the approval of $5.4 billion in loans since February 17th. 

Weekly loan volume is up 45 percent compared to the weeks preceding the Recovery Act. In Portland the loan volume has increased 

40 percent during that same time period. And last month our district achieved the highest number of loans processed in a month 

since August of last year, with 89 loans valued at $23 million, all 

to Oregon small businesses. 

Nationally, lenders are returning to SBA programs. From February 17 to July 17, more than 750 lenders that had not made a 

loan since October of 2008 made 7(a) loans. Of those, more than 

half had not made a loan since 2007. Broad support to small businesses, a significant share of loans supported by the Recovery Act 

funding has gone nationally 26 percent to rural, minority owned 20 

percent, women owned 19 percent, and veteran owned 9 percent. 

Our secondary markets have seen an uptake in the 7(a) loans. 

After months of reduced activity and lower premiums, the SBA 7(a) 

secondary market is picking up and premiums are beginning to reVerDate Aug 31 2005 18:07 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\51520.TXT DARIEN
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cover. For example, nearly $360 million in 7(a) loans settled or 

were sold in the secondary market in June, lifting the secondary 

market closer to historic levels and providing lenders with additional liquidity in increased lending. 

The ARC loan, or America Recovery Capital loans, are reaching 

small businesses. As of July 22, SBA has approved more than 700 

ARC loans, totaling $22.8 million, and weekly loan approvals are 

consistently increasing nationally. In Portland, as of yesterday 

there have been 17 ARC loans made so far, totaling $575,000. 

Some other SBA recovery programs, to date SBA have implemented programs from the nearly $730 million given to us from the 

SBA Recovery Act, including eliminating and reducing fees for borrowers on 7(a) loans and borrowers and lenders of the 504 loans, 

by raising the 90 percent guarantee on 7(a) loans from the original 

75 and 85 percent, more than doubling the surety bond guarantee 

from $2 million to $5 million, a much needed increase, providing 

small business owners with another tool to help them compete for 

federal construction and service contracts. 

Additional funding available from micro lending, the SBA has 

used fiscal year ’09 budget funding for the micro loan program to 

increase Portland micro lending funds to $1.1 million, from original 

$115,000. We are also working very hard to expand our network on 

nonprofit micro lending intermediaries. We’re providing refinancing 

opportunities for eligible expansion projects in the 504 program, expanding access to capital for small businesses by increasing funding levels of the SBIC program, and the SBA has implemented two 

new programs that complement the Recovery Act measures, expanding the 7(a) loan eligibility to more than 70,000 small businesses with a temporary alternative size standard; and finally, the 

offering of inventory financing for eligible automobile, recreational 

vehicle, boat, and other dealerships under the new dealer floor financing pilot program. 

These are challenging times for everyone. These are also times 

of opportunity. Many business owners I speak to are taking this 

time to refine their business model, rewrite their business plan, 

streamline their business practices, get rid of old inventory, and 

sometimes change their businesses altogether. 

Many of today’s most successful companies were created and 

have thrived during some of the most economic downturns. The 

biotech and computer industry were created when the stock market 

was down nearly 50 percent and inflation was headed into double 

digits. In the early ’80s mortgage rates were near 21 percent, yet 

E-trade, Sun, AutoDesk, Adobe, AE, and Semantic were created. 

These companies did not sit on the sidelines. Their founders saw 

needs and opportunities and filled them. 

Mr. SCHRADER. You might want to wrap up, Mr. DeWolf. 

Mr. DEWOLF. Companies such as McMenamins, Columbia 

Sportswear, Mo’s Chowder, and DeMarini Sports are just a few Oregon companies the U.S. Small Business Administration has assisted, either through its loan guarantee programs or through its 

strong network of partnerships to provide counseling and training. 

Thank you again, Congressman Schrader, for this opportunity. 

The Small Business Administration appreciates your leadership on 

6 

the Small Business Committee, and we look forward to working 

with you and your staff to support the nation’s small businesses. 

Mr. SCHRADER. Thank you very much, and thank you for all the 

work you are doing. You are going to be busy, I’ve got a feeling, 

the next few years. 

Mr. DEWOLF. It’s been busy this year. 

[The statement of Mr. DeWolf is included in the appendix.] 

Mr. SCHRADER. Okay. 

Our next witness is Ms. Sheryl Southwell. Ms. Southwell is here 

to testify on behalf of Specialty Polymers, Incorporated, which 

manufactures more than 250 different water-based polymers for 

house paints, wooden deck coatings, roof coatings, cement coatings, 

and wood glues. 

Specialty Polymers is a family-owned small business based in 

Woodburn, Oregon, with another facility in Chester, South Carolina, so it’s a national business. It was recognized by the Austin 

Family Business Association, a unit of Oregon State University’s 

College of Business, as the family business of the year in 2004. 

Congratulations. 

Sheryl is the second generation of Southwells to serve as president of Specialty Polymers, as her father, Raymond ran it for 35 

years. Sheryl also recently was the executive board chair of the 

Strategic Economic Development Corporation, also known as 

SEDCOR, and currently serves on the board of the Woodburn 

Chamber of Commerce. We welcome you and thank you for coming. 

STATEMENT OF SHERYL SOUTHWELL 

Ms. SOUTHWELL. Thank you, Congressman. We are a manufacturer based in Woodburn, Oregon, and for more than 40 years 

we’ve been supplying water-based polymers to companies, like you 

mention, make products such as house paint, deck coatings, concrete coatings, as well as wood doors and windows. As the recession 

hit, our business was hit. Over the past two years we have had to 

cut, cut, and cut some more. At the beginning of 2007, we had 144 

employees. As of today, we have 83.That is 61 people, 61 family 

wage manufacturing jobs that are gone. 

And quite frankly, at this point in time I don’t know when they 

are going to be back, if ever. We don’t spend any money, any 

money unless it’s absolutely necessary. I don’t care if it is for raw 

materials, printing of literature, buying promotional products, taking a customer to dinner, or the cleaning of our office building, if 

it is not critical to our business, we don’t do it. 

There is absolutely nothing, zero, being spent on equipment. No 

pumps, no piping, no stainless steel mixing tubs. In addition, we’ve 

had to suspend donations to local agencies and causes that we’ve 

been supporting for years.And we know that the lost jobs have an 

impact on our community. We know that not buying goods and 

services from the local suppliers impacts our community. We know 

not being able to donate to local agencies impacts our community. 

But this is the reality of the economic climate today. 

Business requires access to money. The news tells us daily, if not 

more often than that, of the challenges of the credit markets. It’s 

hard to get and it’s more expensive. We’ve worked closely with our 

bank, but it’s cost us more money than it’s cost us in the past. SevVerDate Aug 31 2005 18:07 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\51520.TXT DARIEN
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eral years ago we looked at getting an SBA loan to finance a particular project. This was done in conjunction with our bank. And 

I have to say it was a bit discouraging. 

The SBA provided no solutions to manufacturing business that 

was our size. There were no options. Based on our size, the capital 

intensive nature of our business and the requirements, it made it 

impossible for us to secure such a loan. See, Specialty Polymers is 

classified as a small business, but we just don’t seem to fit the profile of what the SBA was designed to serve. 

As you mentioned in your announcement for this hearing, small 

business provides jobs to 57 out of every 100 working Oregonians. 

These small businesses are very personally committed to their communities. They buy from local suppliers. They pay taxes. They donate to the local charities and the local agencies. When small businesses suffer, it’s our communities that suffer. 

I know many small business owners, and I have to include myself in that group, feel that the bail-outs and the stimulus plan 

have passed them by. There was nothing in these plans to support 

small businesses or small businesses of our size. If we’re going to 

work our way out of this recession, small business must be healthy, 

and there needs to be a clear understanding that small businesses 

come in different shapes and sizes. The SBA needs to be able to 

provide solutions for some of the bigger small businesses. Thank 

you. 

[The statement of Ms. Southwell is included in the appendix.] 

Mr. SCHRADER. Very good. Thank you. Very good testimony. You 

struck a good chord. 

Well, let’s go back to Jim Brunberg. Are you recovered enough 

to start, sir? 

Mr. BRUNBERG. I apologize for my being late. 

Mr. SCHRADER. No, no, no. We understand. It’s tough to get 

around sometimes. The only good news I can say is it’s better than 

Washington, D.C., traffic. I don’t even own a car out there. 

Mr. BRUNBERG. I can’t blame the traffic, and I’m not familiar 

with formalities with which I should address the panel or whom I 

am addressing. 

Mr. SCHRADER. You are actually addressing me. 

Mr. BRUNBERG. Oh, hello. 

Mr. SCHRADER. What I’ll do is introduce you, and then you make 

your statement, and then after everyone on the first panel, we have 

three panels, makes their case, then I’d like to ask a few basic 

questions, actually, and we’ll have the next panel come up. And 

then you are off the hook, then, at that point in time. 

Mr. BRUNBERG. Okay. Thank you very much. 

Mr. SCHRADER. So I’ll just introduce Mr. Jim Brunberg. He’s here 

to testify on behalf of Mississippi Studios, a popular night club and 

lounge based up in Portland. Since its founding in 2003, Mississippi Studios has brought such famous performers to its stage as 

the Indigo Girls, Willie Nelson, Huey Lewis—pretty good. 

Jim is also a music performer who has traveled extensively, and 

somehow he found time to complete a law degree from Lewis & 

Clark. That’s impressive. Mississippi Studios is also one of the first 

businesses in our state to receive an ARC loan from the SBA. That 

loan was created by the American Recovery Reinvestment Act, proVerDate Aug 31 2005 18:07 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\51520.TXT DARIEN
8 

vides up to $35,000, zero interest, 100 percent SBA guarantee, for 

very short-term relief for small businesses. 

I’m very interested in your testimony. Please proceed. 

STATEMENT OF JIM BRUNBERG 

Mr. BRUNBERG. Yeah, I’ll try to be brief. I wrote this down to just 

sort of explain how the ARC loan helped us. I own and operate 

Mississippi Studios Concert Venue, a small business in North Portland, in the recently economically redeveloped historic Mississippi 

commercial district. I employ 18 people in the historically risky, 

volatile, yet culturally important arts industry. We underwent a 

seven-month renovation in 2008 in order to expand to an economically sustainable size. 

Even though the big artists that you listed have played our 

venue, we were just an 85-seat, tiny, tiny place, sort of a living 

room concert series. But we would appeal, using my music business 

connections and the recording services that we offered, to pull in 

some of the larger artists. But mainly it was about bringing music 

into our community, which was pretty much devoid of that until 

2003. 

So we underwent this renovation and expansion and established 

a food and bar profit center that would hopefully support our main 

product, which was live music. But the timing of this expansion 

turned out to be unfortunate. The fuel crisis in the summer of 2008 

caused building expenses, especially steel and cement, to almost 

double what they had been a few years earlier. 

Other unforeseen building expenses included the necessity of 

having to move our water, sewer and sprinkler lines, all of which 

involved separate digs, street blockages, delays and extra fees paid 

to the city. Once we expanded and reopened in March 2009, the 

economy turned sour or was in the middle of a downturn, and we 

faced a dearth of available touring vans, patrons and sponsorship 

money, the three main components of success in the industry. 

Although the spring months went fairly well, summer, the dark 

months for indoor music, literally came early and cast a longer, 

darker shadow on our business than we had anticipated. I tried in 

vain to capitalize our efforts to get through the summer, seeking 

traditional funds. While the hope of support from the PDC, the 

Portland Development Commission, presented a distant light at the 

end of the tunnel, immediate funds did not seem attainable to help 

us through the short term. 

Albina Bank had procured us an SBA loan to fund the core of 

our construction budget, so naturally I searched there for some 

summer capital, and was at first turned down. But when the ARC 

program came about, I was informed that there might be some relief for small businesses suffering from the economic crunch. The 

ARC loan we received came just in time for us. 

There was very little bureaucratic friction, and the paperwork 

seemed sensible and easy to understand. The loan funded quickly, 

and literally kept our doors open for the summer, kept my workers 

employed, and kept our business open as a magnet to the economically redeveloping neighborhood. That’s it. 

[The statement of Mr. Brunberg is included in the appendix.] 

Mr. SCHRADER. Very good. Very good. 

9 

Thank you. You made it under the five minutes, too. You get an 

extra gold star for that. Well, thank you. Thank you very, very 

much. Good testimony. 

Well, our next witness is Ms. Wilda Parks. She’s here testifying 

on behalf of the North Clackamas County Chamber of Commerce, 

of which she is president and CEO for almost eleven years. That’s 

very good. You are very nice to stay with us that long. She’s previously served in California, in the Chamber of Management, 

where she completed the six-year program of the United States 

Chamber Institute of Organization Management in 1989. 

She has also been recognized for her entrepreneurial leadership 

by numerous organizations. Wilda was awarded the Russell E. 

Petit Excellence in Leadership Award from the Western States Association Chamber of Commerce Executives, and was named one of 

the top ten business and professional women of the year in California Central Valley in 1966. 

She also serves on numerous boards in Clackamas County, ranging from economic development, crime reduction, to conservation 

efforts. In her spare time—I don’t see how you have any of that, 

but in your tiny bit of spare time she also founded the New Century Players, a Milwaukee area community theater group. Look 

forward to hearing all about it. Thank you. 

STATEMENT OF WILDA PARKS 

Ms. PARKS. Thank you. Thanks for the opportunity to speak 

today on behalf of small business in the metro area, and in fact in 

the state of Oregon. The North Clackamas County Chamber of 

Commerce represents over 600 member accounts, with over 26,500 

employees in the North Clackamas area. Our main goal as the 

chamber of commerce is to ensure a strong local economy. Almost 

70 percent of our membership, similar to many business associations in Oregon, is small business, with less than 25 employees. 

Only 7 percent of our membership have 500 or more employees. 

There are many factors that, working in synergy, assist in the 

development of a strong local economy. As the backbone of the 

economy, small business plays an integral role in that development. But as small business struggles to meet the demands of today’s world of competition, technology, shortages of qualified labor 

pools, and financing, the dangers to all aspects of our communities 

grows greater. 

It’s difficult for business to flourish while dealing with all these 

factors, and almost impossible if any one of them overrides the others. Without access to capital to meet payroll, purchase raw materials, or for a new warehouse where more jobs could be created, 

newer expanded office, or something as seemingly simple as a 

newer enhanced telephone system, small business withers; and, in 

turn, our local economy struggles more. The system falls apart. 

This is a time when stepping up both the borrowing process and 

the opportunities are needed. With the rewriting of the Small Business Administration authorization bill, there is opportunity to redefine lending procedures while also seeking innovative ways for 

business to access funds they need. 

A business person should not have to max out their personal 

credit card to be able to run their business successfully, nor use 

10 

their life savings to expand a successful product line. We know that 

there are many programs available right now, both on the federal 

and the state level, but are they enough, and is this an opportunity 

now to see what else Congress can do to help with that. 

According to ′′USA Today,′′ four in ten small business owners are 

still not able to get the financing they need to run their business. 

That’s a marked increase over nine months ago. Banks have not 

yet loosened the strings on loans, even when backed by SBA or 

state programs. In our chamber alone, I can tell you of a transitoriented development product providing housing for a new breed of 

commuter who wants to live near where they can take transit to 

job sites that almost wasn’t constructed because of a lack of financing. 

After months of exhaustive efforts for a program that was fully 

approved and partially financed by state funds for transit development, this company was able to find out-of-state bank financing to 

secure this project. This one project will mean development and 

construction jobs, housing, a new way of life for dozens of residents 

and future residents, while it also helps meet our state and federal 

guidelines for reduction of emissions. 

Another business, a health club, finally found financing for an 

expansion of their facility, adding new opportunities for healthier 

life style for residents of unincorporated Clackamas County. Then 

there is the cheesecake baker who uses her home kitchen to turn 

out hundreds of the most incredible cakes, and who currently is unable to get financing to open her store-front shop. 

From manufacturers to warehousers who want to extend, to add 

machinery, add jobs, add technology, to the silkscreener and the 

life style coach who want something other than a home-based business, there is a need for additional financing opportunities. 

Too many of our businesses are supporting their livelihood by 

maximizing their credit cards, paying large payments with exorbitant interest rates, and facing declining lines of credit. Not enough 

banks are yet willing to make loans to small business or even 

maintain their credit and loan agreements. 

Dr. Thomas G. Jones, professor at Marylhurst University and 

Clackamas Community College, instructor for the Clackamas Small 

Business Development Center, and noted futurist, says, ′′Small 

business is a vital cog in the economic engine of the United States 

economy, and a vibrant source of innovation.′′ 

′′But it’s more than that. For millions of Americans, their small 

business feeds the soul, energizes the intellect and pays the rent. 

And even beyond those satisfying elements, small business provides a canvas for self-expression, a harbor for humanity in an increasing automated and impersonal world.′′ 

′′However,′′ Jones goes on to say, based on his research and abilities to understand the dynamics, ′′this will be the first time in economic history that small business is not leading us out of a recession.′′ Due to the lack of access to financing and a lack of relief for 

toxic assets, the TART programs for small business, each small 

business deals with 16 other small businesses. It’s a domino effect. 

I submit to you, Congressman Schrader, we cannot permit this 

failure to happen. We cannot permit this spiral of loss. Congress 

has an opportunity now to write the future differently, and I urge 

11 

you to take a lead in crafting a small business financing plan that 

provides opportunity for all and access to those who need it. Let’s 

let small business lead us. 

[The statement of Ms. Parks is included in the appendix.] 

Mr. SCHRADER. Very good. Very, very good. I appreciate the testimony. And a lot of problems that we’re facing right now—I guess 

I’d like to go to Ms. Southwell first, if it’s all right. 

You talked about the problems with your particular business and 

the size of your business and SBA not matching up exactly. What 

were some of the problems you faced and what would be some of 

the solutions, based on your experience? 

Ms. SOUTHWELL. You are talking about the problem we faced 

back when we were looking at getting the loan? 

Mr. SCHRADER. Yes. 

Ms. SOUTHWELL. It was the size of the loan for the project, that 

we were looking at bringing out a new product line, and we needed 

some equipment to go with it, and the size of the loan needed to 

support that new equipment. It didn’t fit within the profile of what 

the bank could work with the SBA. And I don’t know the details 

of that part of it. 

Mr. SCHRADER. Okay. Let me get back to you on that, because 

that’s something that has been a thread in some of our other hearings in Washington, D.C., because there are some loan limits that 

you come up against. And the type of business, you are talking 

then because you are a capital business you have higher loan 

needs? Is that what you are referring to. 

Ms. SOUTHWELL. Yes, you have got to go buy the equipment before you can start making the product and sell it. So it’s the capital 

needed to go get equipment to set up a new line to make the product. 

Mr. SCHRADER. Very good. 

Harry, where do we go from here then? Based on what you have 

been seeing with the Recovery Act rolling out, we had some testimony here that despite the fact that fees have been reduced and 

we’re guaranteeing up to 90 percent of these loans, that it’s passing 

by some of the small businesses in our community. Do you have a 

sense of next steps, based on what you are seeing out there right 

now? 

Mr. DEWOLF. Well, we’re seeing some positive trends. Again, it’s 

bank money, it’s not federal funds that are creating the loans. 

We’re doing the guarantees, and so the loans have to fit within the 

bank’s profile of loans that they are looking at. Now, I would like 

to work with Ms. Southwell on what type of loan she was looking 

at, what bank it was, was it a 504, was it a 7(a). 

Some of that’s education on the bank’s part, and we’re doing a 

lot of effort to train the banks on what products fit the best. That’s 

a continuous effort. I do see it is reduced. I mean the numbers 

show that it’s—the loan volume is down, the loan dollars are down. 

2007 we had an all-time high year, and since then it’s basically 

gone the down slope. 

So there is no single answer. I think the Recovery Act no loan 

fees, has helped tremendously. The subsidized program with the 

ARC loan paying the interest for the banks, there is still some tenVerDate Aug 31 2005 18:07 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\51520.TXT DARIEN
12 

tativeness with the banks on the ARC loan. There is some unknown answers, unanswered questions. 

Mr. SCHRADER. That’s more from the government where to help 

you probably is their nervousness, I suspect. 

Mr. DEWOLF. That’s part of it. It’s that 100 percent guarantee. 

It’s too good to be true for some of the bank’s process. The process 

is decent, it’s normal for them, but the 100 percent guarantee is— 

they are a little iffy on that, if it’s really going to work. And we 

expect those loans to have a higher default rate. We’re not advertising that, but that’s just going to be reality. 

And some of the banks are very concerned on how that higher 

default rate will impact their numeric evaluation that we grade 

them on, and we’re trying to persuade them and create a way of 

saying, no, these will be evaluated in a separate pool. So that’s a 

lot of the hesitation. 

Albina Bank, as Mr. Brunberg has said, is leading the pack in 

Oregon. Of the 17 ARC loans, they have done 15 of them. Wells 

Fargo is coming up, but they are slow to act, and their application 

is quite lengthy. They are using a national clearing house system. 

So my local, regional, and community banks are actually leading 

the pack in Oregon on SBA guaranteed lending. 

Mr. SCHRADER. Very good. 

Mr. DEWOLF. There is no single answer. It’s interesting, it’s important that people understand that this is bank money, and the 

banks are kind of stuck. They are stuck between the Treasury and 

the FDIC saying, you know, conserve capital; Treasury is saying 

lend, lend, lend. And everybody is saying—so they are stuck. 

Mr. SCHRADER. We’ll hear from them in a minute. Be very curious about their impression. 

Mr. DEWOLF. It’s a tough spot. 

Mr. SCHRADER. So let’s—Jim, with the ARC loan, it’s a new loan. 

It sounded—you know, I’m just a small business guy. My veterinary clinic in—I’m a real small, small business. I’m the opposite of 

Sheryl here. I’m a real small business. I don’t mean real, real, but 

small small. And the $35,000 would have been nice. 

I remember getting my credit line canceled, actually, effectively 

a few years ago in one of the last recessions, and they converted 

to a loan, you know, and I had to pay myself down. It wasn’t really 

helping me any. And there has been a lot of discussion that, you 

know, sometimes the SBA process has been a little bureaucratic, 

this, that, and the other thing. 

How was your experience a little different, or was it, you know, 

very bureaucratic and difficult? How long did it actually take you 

to get this loan? You applied. How difficult was the form to read 

and get through? 

Mr. BRUNBERG. Not difficult at all. Super simple. Yeah, I feel I’m 

a—you guys all have such keen financial minds in here, I have a 

feeling, because half of what you are saying I can’t understand as 

a musician. But for me it was really easy to get this loan, yet I felt 

like I was making substantive promises to Albina that made them 

feel comfortable backing it up. 

So it just sort of cut away a lot of the hundreds of pages of paperwork that had been involved in the previous loan, albeit that was 

a larger loan through the SBA. It just seemed like a very simple, 

13 

straightforward offering of short-term capital. So for me it was just 

super simple. I don’t think it took more than a week to fund. I 

think it was less than that. 

Mr. SCHRADER. That’s impressive. But it’s my understanding for 

these loans you have to show that you have a pretty reasonable expectation of paying them back.You have to have some plan. 

Mr. BRUNBERG. Yeah, and then it just has a—that as an individual I couldn’t take money unless I had a plan to pay it back. 

Because I’m sure you feel that unless the animals were going stop 

getting sick, you would know that your clinic was going—you were 

going to continue to do business and that you recognized what you 

were going to use the funds for. It was a finite, dark hole that you 

needed to—the chasm was—there was a ledge on the other side 

you wanted to jump across, and these funds helped us to do that. 

Mr. SCHRADER. Good, good. I wish you success there. 

Wilda, you referenced in your testimony some of the state programs that are out there, the CAP program, the business development fund. Do you have a sense as to how they are working or 

stepped up? Or maybe go to Harry afterwards, if there is some 

interplay between the SBA and those particular programs. 

Ms. PARKS. No, I don’t. I know that when I talked to small businesses to prepare for this, you know, those were some of the programs that were mentioned. As you said, the CAP and the Business Retention Program, Business Development Fund and some 

others. So Oregon does have some abilities to work with small business, and also of course working with, you know, SBA. 

In our office we’re right next door to Small Business Development Center in Clackamas County. And when I asked a number 

of people going in and out of the Small Business Development Center and stuff, you know, what could happen, what could occur to 

help your business financially, the main thing that I heard was 

banks need to loosen up their funding ability. 

And so I would say that it’s the same kind of thing that was just 

recently said, that they have to trust that that is going to be an 

okay thing to do. And I’m not sure they trust that right now. 

Mr. SCHRADER. Sure, sure. 

Ms. PARKS. So it’s building that trust and helping to ensure that 

those funds would be available. 

Mr. SCHRADER. Very good. 

Harry, comment on that? Are you familiar with those programs, 

and is there some relationship there going on? 

Mr. DEWOLF. The state and the counties and cities have been 

creating some good programs. We’re trying to educate the banking 

community. We just finished a 13 city joint lender training where 

we worked with the USDA Rural Program, State of Oregon Economic Community Development, PDC, and any local Economic Development folks. We go around throughout the state training the 

banks on what programs work for what situations, because the 

SBA is not everything to everybody, neither is the USDA, neither 

is the state. 

But if the banks know where one program starts and where one 

program finishes, that helps. So we’ve been actively doing that. 

We’ve been doing that for three years now. We’re the first in the 

country to do it. It takes a lot of planning and logistics to do that, 

14 

but it’s proven to be very, very successful. So we plan on doing that 

more.And this year we added on a public round table discussion 

about issues and elements that were involved in today’s environment. 

Mr. SCHRADER. Let our office get a copy of any findings that 

came out of that. I’d be very interested. 

Mr. DEWOLF. Absolutely. Absolutely. It’s a matter of lender education, public education. And some of the programs are news to me 

when I find out about them.There are just so many little niche industry incentives or tax credits or funding opportunities out there, 

it’s pretty much a moving target for—at my level. I don’t necessarily track or manage the state stuff. 

Mr. SCHRADER. So the last question, I’m going to run through the 

entire panel on this one, is just a quick impression. It’s a little bit 

of an unfair question, but—and we’ll start with Wilda and go the 

other way here, and that’s what penetration in the small business 

community do you think the SBA has? In other words, how many 

small businessmen and women, what percentage actually know 

they exist and are aware of some of the opportunities there? I’m 

just trying to get a sense. 

Ms. PARKS. I wouldn’t really have any sense of percentage, 

Kurt—or Congressman Schrader. 

Mr. SCHRADER. That’s fine. Kurt is fine. 

Ms. PARKS. However, I do know that in our Chamber Of Commerce, we communicate with about 1,400 email addresses consistently, and we have articles in our newsletter and in our weekly 

broadcast email about SBA opportunities on a consistent basis. So 

we’re doing everything we can to keep in front of it. 

And then of course working with Small Business Development 

Center, a little bit different, but nonetheless, you know, the same 

family, next door, that enables us to get more information out. But 

we consistently, you know, tell people about it. I would hope that 

some nice large percentage of them are paying attention to that. 

Mr. SCHRADER. And the answer is join your chamber so you can 

find out what’s going on. 

Ms. PARKS. That’s true. Thank you very much. 

Ms. SOUTHWELL. And read your emails, right. 

Mr. SCHRADER. Read the emails. Ms. Southwell. 

Ms. SOUTHWELL. I would say the awareness based on the communication that comes out, whether it’s through the chamber or 

through some other agency or group that people are part of, I think 

maybe the awareness is there. I think the challenge is so many of 

us, especially in this environment, and I’ll bet you had this happen 

(indicated), we’re so, lean, everybody is running so lean, that the 

day-to-day business support and keeping things running really 

takes most of the working day, if not longer. 

And so it’s bringing that information to business owners, and 

whether it’s the bank or whether it’s—like usually they come to 

you when they run into a problem and they are looking like where 

can I go and help. It’s getting some of that out there via maybe the 

banks or some method, so that there is some—you know, when 

there is a lot of numbers and names and acronyms for loans, it’s 

a little overwhelming. So I think it’s that communication and unVerDate Aug 31 2005 18:07 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\51520.TXT DARIEN
15 

derstanding of what, how the process works. But I’ll tell you, most 

of us are running. I mean there is— 

Mr. SCHRADER. You are busy. 

Ms. SOUTHWELL. Yeah, yeah. 

Mr. SCHRADER. Jim. 

Mr. BRUNBERG. Ms. Southwell’s points are, I’m sure, true for 

every small business owner, including yourself. I don’t know how 

you find time to do this kind of stuff. But you put the time aside, 

I guess. The SBA, I was only made aware of their existence 

through Albina Bank. I knew what the SBA was as an abstract 

concept, but I didn’t know how they administered their loans. 

So it was through just meeting with private bankers that I 

learned about the SBA. And the PDC had told me to go to Umpqua 

and Albina to look for an SBA loan. So I’m not sure what the budget is for outreach. I live in a newly economically rejuvenated district area, that the whole North Mississippi, North Portland area 

has radically changed its socioeconomic structure over the last five 

years. 

It’s been one of the quickest changing neighborhoods in Portland. 

So there are a lot of small business owners who I’m sure are not 

aware of the SBA. I speak to them all the time. They say, ′′How 

did you do it? Where did you find the money?′′ 

And I’m, ′′Well, I just kept hammering my bank, you know, and 

calling them every week, and they were really good about, you 

know, getting information to me.′′ 

But it’s hard to find—Mr. DeWolf’s organization, Portland Small 

Business Administration Office, I’d love to learn more about what 

they do and tell my friends about them so they can clog your phone 

lines and ask you dumb questions like I would. 

Mr. SCHRADER. Harry, comment? I mean I know you guys have 

been cut back dramatically over the last eight, ten years, or whatever, so that’s part of it. 

Mr. DEWOLF. In 2000 we had a staff of thirty. I have ten now. 

It’s been challenging. As you know, I’ve been working diligently 

over the last four years since I’ve been with the agency to open a 

Southern Oregon office, to expand our reach. It’s greatly underserved down in the Medford metro, south of Eugene area. 

But we work very, very hard using technology. As far as our 

reach, it’s not as deep and broad as I would like. Coming from outside the agency, I use what I would consider current technology to 

get the word out. We were the first in the country to use an Enewsletter that we send to all the chambers, all the media outlets, 

all community leaders, state and federal partners. 

We have over 5,000 subscribers, and it’s through a modern technology called Constant Contact. And that helps.We get the word 

out for that. We do local statewide public loan briefings to the general public. We have over 15,000 hits on our website that I keep 

up to date every week. It’s very important to me. So there is— 

working through our small business development centers, they are 

our lifeline to the public. 

They are in every community college throughout the state. There 

is 19 in Oregon, and I have two in southwest Washington. Without 

them we would be far less effective than we currently are, and we 

are not as effective as I would like to be. So with the state reducing 

16 

the funding to SBDCs 50 percent, that will have an impact, a negative impact. 

And from the state’s—from my view of that, I think the state is 

very shortsighted on that, because they are going to lose small 

business creations, they are going lose the tax base, they are going 

to be paying more unemployment. It’s very shortsighted, because 

the federal—I pay a million dollars to the SBDC program. 

The state’s requirement to that, to get the million dollars, is to 

match it. Before the 2010 budget was written out the state was 

doing a two-to-one match, which was quite noble, and now it’s barely matched. And having a substantial cut, as they are going have, 

they will be reducing their locations probably down to close to 15. 

So I don’t see every community college having an SBDC active, 

open office. And that’s a shame. Without them, without SCORE, I 

couldn’t do what we do. 

Mr. SCHRADER. It’s all about leverage. 

Mr. DEWOLF. I would just be answering the phone and not getting out of the office. It’s leveraging current assets. 

Mr. SCHRADER. Yeah. Very good. Well, thank you all very much. 

Appreciate you coming and testifying and taking time out of your 

busy days, and we’ll let you excuse yourselves and get the next 

panel up. Thank you so much, guys. 

Mr. SCHRADER. All right. The next panel will come up front here, 

some of our lenders, give us some perspective on the lending side. 

They are feeling, I think, a bit squeezed. On the one hand, Congress and Treasury say lend, lend, lend; and the other hand, the 

regulators push back a little bit, saying well, now we want to make 

sure you have good balance sheets and we don’t make this maelstrom even worse. 

So it should be very interesting. I think even in our last panel 

we’ll have some community banks give us a little perspective also, 

and hopefully have a lively discussion. We can learn quite a little 

bit. 

Well, the same ground rules apply. Theoretically you have got 

about five minutes. As you saw, we were a little bit more lenient 

than we would be back East, but this is Oregon. So I want to make 

sure you get as much out as you can, but leave time for a little bit 

of questions. There is only two of you, so that should make it a tad 

easier. And appreciate your coming very, very much. Your perspective is going to be critical to freeing up our credit markets and 

making things happen. 

Our first witness, if you will, is Mr. John Safstrom. He’s here to 

testify on behalf of the Mid-Willamette Valley Council of Governments, where he serves as business finance manager. He has a lot 

of expertise. He previously served as credit and loan officer with 

the Farm Credit System, that I used when I started my veterinary 

clinic, frankly. 

He also was production manager for Weyerhaeuser, supervising 

logger operations in Southern Oregon, and spent five years as a 

commercial fisherman. You have traveled.He’s a graduate of Western Washington State University and Pacific Lutheran. And I’m 

looking forward to hearing your testimony. Please begin. 

17 

STATEMENT OF JOHN SAFSTROM 

Mr. SAFSTROM. Well, thank you. I am the loan program manager 

at the Mid-Willamette Valley Council of Governments. I also serve 

as a senior loan officer for Cascades West Financial Services, the 

largest Oregon-based certified development company, also known 

as the CDC, that provides the SBA 504 loan program to businesses 

throughout Oregon, and a piece of Washington now, I guess. 

I would like to thank Congressman Schrader for his continued 

support of the CDCs and the 504 program, as well as our regional 

loan programs. He helped establish one of the loan programs while 

he was a county commissioner at Clackamas County. Today I am 

very pleased to— 

Mr. SCHRADER. That would be my lovely wife. 

Mr. SAFSTROM. —provide a statement about a need to improve 

access to capital for small businesses. Our typical day is a test of 

our creativity—finding ways to work around regulatory limitations 

of the SBA and other federal and state loan programs to structure 

small business’s financing proposals, and then getting banks to 

participate in them; all of that, added to the fact that our national 

economy is now in the middle of a credit crisis. 

And, yes, we do have ideas on how to improve access to capital 

with the SBA 504—the SBA loan programs, more than the 504. 

Even as SBA has worked to implement new programs and fee reductions that were spoken about earlier with the 2009 stimulus 

bill, the SBA’s program eligibility and underwriting policy, so critical to maximizing effectiveness, are drifting instead towards more 

conservative and restrictive interpretations. 

For example, SBA moved to restrict 504 borrowers from accessing their personal home equity for funds to use in new 504 projects. 

NADCO, our Association of Certified Development Companies, has 

prevailed on SBA to reconsider this negative impact. We are hopeful that SBA will again allow business owners to inject capital in 

any way possible into their businesses. As we know working 

around entrepreneurs, they are all in at all times. 

We believe that many small businesses need better access for 

loans and access to larger guaranteed loan amounts. The current 

restrictions can be addressed in these following ways: First, increase the maximum 504 to venture beyond its current limit of $1.5 

million; second, allow borrowers to use both the maximum 504 and 

7(a) loan limits; third, eliminate regulation that restricts business 

owners with higher net worth from participating in 504 loan 

projects; fourth, allow small businesses being acquired by new owners to make eligible fixed asset transfers through the sale of stock; 

fifth, SBA restricts assisting rural borrowers by applying outdated 

population parameters. We request that more current U.S. Department of Agriculture definitions of rural areas business be applied 

to SBA programs, increasing the availability of capital in rural 

areas; and, sixth, allow the 504 program to refinance existing conventional bank loans in the process, bringing equity and working 

capital, especially refinance bank loans to companies written with 

five-year call provisions. 

This last suggested change comes from concerns that banks do 

fail or have substantially tightened their lending standards. In either case, performing loans to good companies are being called, 

18 

forcing these historically good small businesses with performing 

loans into foreclosure and causing jobs to be lost. These companies 

chose this type of financing when commercial mortgage-backed security industry was active, and five years later they would have 

choices. 

The reality now, capital markets are frozen and banks are restricting lending. Refinancing with the SBA 504 loan structure is 

a sustainable alternative. The company gets a fixed rate, lowerthan-market rate of interest over ten or twenty years, and the bank 

loan is structured for the commercial-backed securities industry 

when that recovers. 

It’s a win-win for businesses and banks, and we support this 

time is of the essence SBA change. 

Those are just a few of our ideas about access to capital. We have 

some other ideas about the costs that were mentioned earlier, and 

I can go into those now. Basically, there are three areas, the cost 

to borrowers; the cost to our CDC operation, such as Cascades 

West Financial Services that we are a part of; and the recovery on 

loans that are in liquidation. 

SBA informed us that the 2010 budget increases the cost of the 

504 Program to borrowers by 38.9 basis points per annum. This is 

due to the SBA’s econometric subsidy model that includes the national employment rate and the forecast of defaulted loans. 

We request that Congress appropriate sufficient funds to offset 

this fee for the next two years, while businesses grow healthy and 

get cash flow back, so they could pay these increased fees at a later 

date. Sorry. One more minute. All right. Speeding up. 

The cost to our—one more sentence on that. It just doesn’t seem 

right to in the stimulus package take, you know, fund cost, lower 

cost and everything, and eight months later raise these costs. It 

just doesn’t seem right on that side. For the regulatory problems 

we’re having with our CDC, a few years back SBA decided one type 

of structure of a model of a CDC fit all. 

In our area three councils of governments provide all of the program management and all of the staff for a CDC. That was deemed 

not quite the right structure. We have had more regulatory hoops 

to jump through, and it has been a very substantial cost to our collaborative based model. In summary, I guess I would like to say 

working together we will be more creative and flexible, serving the 

needs of new industries and tearing down the walls for arcane and 

irrelevant and restrictive regulations, I hope. 

And these unnecessary barriers are going to stifle our movement 

into the 21st century economy. I have many more things to say, but 

I guess that’s all I can say now. And small businesses are nimble 

and very forward thinking, and they will lead us out of the recession. Thank you. 

[The statement of Mr. Safstrom is included in the appendix.] 

Mr. SCHRADER. Very good. Thank you for your comments. We 

have a new SBA director that I think is going to be very receptive, 

hopefully, especially in this economy. So you have very good ideas. 

You came in with some excellent, excellent ideas. Appreciate it. 

Mr. SAFSTROM. I have more, too. 

Mr. SCHRADER. Good. I’ll submit them for the record if they are 

not already. 

19 

Mr. SAFSTROM. No, no, they are submitted, yeah. 

Mr. SCHRADER. Okay. Good. 

All right. Our next witness is Mr. Rick Hein, currently serving 

as president of Oregon State University Federal Credit Union. He 

has served on the OSU Federal Credit Union’s leadership team 

since April 2000. Before joining OSU he worked at the credit union 

mutual group of Madison, Wisconsin, and also served a two-year 

stint as member of the board of directors for the California Center 

Credit Union. You are a credit union guy. 

He is a graduate of Texas Christian University. He serves on numerous advisory boards and committees, including the Willamette 

Criminal Justice Court, the Corvallis Corporate Round Table, and 

the Boys and Girls Clubs of Corvallis. Thank you for doing all that. 

In 2005, he was selected as the Credit Union Association of Oregon 

advocate of the year. I look forward to hearing your testimony. 

Please begin. 

STATEMENT OF RICK HEIN 

Mr. HEIN. Thank you, Congressman Schrader. It’s a pleasure to 

be here and to be invited and to represent the 83 credit unions of 

Oregon and the 1.4 million members. 

America’s small businesses are the engine of growth of our nation’s economy. The effect of the sub prime mortgage crisis has 

spread to all types of lending, resulting in a decrease in availability 

of business credit. As Congress continues to consider ways to help 

the economy recover, Oregon credit unions support the elimination 

of the statutory cap on credit union member business loans. 

Last week, representatives Paul Kanjorski and Ed Royce introduced HR 3380, the Promoting Lending in America Small Businesses Act, which would increase the credit union member business 

lending cap to 25 percent of a credit union’s total assets, raise the 

de minimum threshold for a loan to be considered, a member business loan, to $250,000, and exempt loans made to nonprofit or religious organizations, as well as loans made to qualified underserved 

areas from the cap. 

These changes to the current statutory restrictions on credit 

union member business lending will give credit unions currently 

serving the lending needs of their business-owning members the 

opportunity to help even more, and it will encourage credit unions 

that do not currently offer these loans to consider investing the 

necessary resources to do so. We look forward to its enactment. 

The cap on credit union member business lending, currently at 

12 and a quarter of total assets of the credit union, has no economic, safety and soundness, or historic rationale. The cap was enacted in 1998, and prior to 1998 there was no cap. After a decade 

it’s time to remove this arbitrary restriction. Credit unions have 

been lending to their business-owning members for a century. Net 

charge-offs for credit union loans are lower than charge-off rates 

for business loans made by other financial institutions. 

And at a time when lenders are withdrawing credit from America’s small businesses, it makes economic sense to restore credit 

unions’ full ability to lend to their business-owning members. The 

Federal Credit Union Act was passed 75 years ago to promote savings for provident purposes to balance the credit structure of the 

20 

United States. We have successfully been that balance for over 75 

years, and the American consumer has an alternative for fair and 

equitable financing. 

If there was no statutory cap on the amount of business lending 

a credit union could lend, the Credit Union National Association 

estimates that credit unions could make up to an addition $10 billion in business loans in just the first 12 months. This represents 

a significant economic stimulus that does not cost the tax payers 

a dime and does not expand the size of government. 

According to the Credit Union National Association, at the end 

of 2008, 44 of Oregon’s 83 credit unions reported outstanding balances from member business loans. The average member business 

loan granted in Oregon in 2008 was over $284,000, and the market 

share of lending for Oregon credit unions is just over 4.7 percent, 

compared to 95 percent for banking institutions. Finally, Oregon credit unions have a total balance of $758 mil- lion in member business loans, compared to roughly $15.3 billion 

in total business loans for Oregon banking institutions. Credit 

unions are, by definition, locally-owned, controlled, with local decision-making and a strong service-oriented philosophy. 

Member-owned credit unions are a natural choice for business 

owners faced with challenges getting access to credit. Today Congress has the opportunity to help small business owners by eliminating the credit union member business lending cap. Thank you 

for this opportunity to testify today. 

[The statement of Mr. Hein is included in the appendix.] 

Mr. SCHRADER. Very good, Mr. Hein. Thank you. Thank you very 

much. I appreciate the testimony. 

Let’s go to John right away, and give you a chance to talk a little 

bit about some of your other ideas that you got withheld in the official part of the testimony. If you want to hit on a few other points 

for a few minutes, please go ahead. 

Mr. SAFSTROM. Okay. Another one that’s a cost savings that will 

fit into what I talked about briefly was the increased cost to the 

program by the 38.9 basis points to the borrowers because of the 

default rate in the subsidy model. 

And one thing to note, that the SBA 504 loan program has been 

off the subsidy until the stimulus package brought in funding certain fees that were before borne by both the CDCs, the Certified 

Development Companies, such as Cascades West. The banks pay a 

fee for the privilege of financing with us, and the borrowers pay a 

fee, and that was rolled into their interest rate matrix, you might 

say. 

And for the folks who don’t understand the 504 loan program, debentures are sold on Wall Street to insurance companies, banks, 

foreign governments, and everything else in the bigger spectrum of 

things. And then those funds are really lent to the borrower with 

a spread like a bank or a credit union would do. But those were 

just—those are statutory costs, and costs such as this subsidy fee 

impact would raise that effective interest rate to the borrower. 

To drop that, one of the problems is the cost of collecting loans 

and recovery on these loans that are already out there. And Congress several years ago enacted—well, I guess—I don’t know how 

to say this—got SBA to create a new regulation to take advantage 

21 

of CDCs such as the one we work with, and the Council of Governments, that do collect loans routinely, to use our staff to do that 

service. 

One of the problems is that they haven’t done that. It’s been a 

very, very limited effort; and when it’s done, it’s done with more 

of a—I don’t know how to say this.You are told what to do. It’s kind 

of a—you are dictated how to do it, what to do, and not be able 

to do the collection. The collection is done on a kind of a dynamic 

effort, and it’s not something done from a central servicing place 

and then you tell somebody to do it. 

It’s done on the move. To speed that up, we would like have SBA 

use our services and also pay us for them.Right now we’re not getting paid to do it, and so it’s quite a drain on really our whole economic development effort to place staff time to do that. 

And as another piece of that, we would like to have SBA actually 

have an accounting system where we can tell the borrower what 

their borrower balance is on any day; and also, in this electronic 

age, be able for the borrower, if they are in a defaulted loan and 

it’s been repurchased back and all of these other things, that they 

can actually send a wire transfer in to pay their loan down or use 

an ACH. 

That currently is a big issue, and it doesn’t make any sense. And 

we feel that if the CDC that wrote the loan has to collect the loan 

and has to go through these processes, we would like to be able to 

use the current electronic age to help us, and actually tell the borrower, you know, what their balance is. Right now that’s not possible. There is a disconnect between that. 

I could go on and on with some more ideas, but those are the 

basic ones. We want to save costs, and we’re looking to expand access to borrower’s financing. And I have to say, the one around 

the—probably people miss some of the pieces that I put, but the 

one about purchasing a business through the transfer of stock, that 

has been prohibited by SBA. 

There is this one line, ′′You shall not finance the purchase of 

stock.′′ But if the stock is equal to the amount of the fixed asset 

that you are financing, why not allow that to happen. And we have 

had that situation here, and I cite that in the written testimony, 

that it would have been a very important financing option. And the 

other option that occurred— 

Mr. SCHRADER. If I may, do you know why that was put in there? 

That predates my tenure in the Congress, obviously. 

Mr. SAFSTROM. I would assume to stop certain transactions that 

were taking advantage of SBA or something like that. But there 

seems to be a way—there is a philosophy to restrict, versus open 

and look at the bigger picture. And each financing proposal is always different than the next one. 

They are not all cookie cutters. You know, every entrepreneur 

has a different situation. Like the lady that was speaking about 

her polymer company, I mean we work those kind of situations out 

using sometimes a combination of loan programs, if not the SBA. 

Mr. SCHRADER. So what other local governments, or how should 

the SBA work with local governments more? To put through the 

CDCs or are there other avenues that we could be engaged in. 

22 

Mr. SAFSTROM. Well, in the state of Oregon, all of the Oregonbased CDCs have loan programs similar to the ones that we provide. Maybe not quite as many, but similar. The rural development, 

IRP Program, the EDA revolving loan fund, that kind of thing. And 

you know, those are just the general categories. And they can work 

in partnership with the SBA loan. Up to 50 percent, no more than 

50 percent federal financing. But in that scenario we could put 100 

percent finance into small businesses after this. 

Mr. SCHRADER. We are going to get some competition here, so I 

hope everyone can still hear, it sounds like. Rick, I guess to you, 

I mean Craig has been trying to get some of these loan limits lifted 

for quite sometime, and it’s always been a little controversial. 

And I don’t want to rehash the old bank versus credit union debate here, but it does seem like—I guess my question to you is, 

what is the appetite in the credit unions, especially right now, 

when times are so bad and regulators both for credit unions and 

banks are cracking down a little bit—and, you know, frankly, being 

good financial managers, you guys want to make sure you stay solvent in this terrible time. What’s the appetite for credit unions to 

really jump in and maybe do some of these small business loans 

that maybe don’t even pencil out for banks, even when times are 

pretty good? 

Mr. HEIN. Well, I think one of the advantages— 

Mr. SCHRADER. Would you get to the mic a little bit? Pull it right 

up, given our competition. 

Mr. HEIN. I think one of the advantages credit unions have had 

over the years, the past 75 years, is that we look at our members 

as part of the community. And then I’m sure the community banks 

have done the same thing, as well as the— 

Mr. SCHRADER. That’s true. The community banks are a little different sometimes, than more of the big Wells Fargo types. 

Mr. HEIN. Right. And, well, I think the credit unions have a 

great appetite for helping the small business owners. Credit unions 

have gone out and looked even—and created micro loans for even 

smaller business owners, those that need, you know, a $3,000 loan. 

And they really have no collateral. They are just trying to figure 

a way to start their little business up. 

Many credit unions have began those micro loans. What has really hampered some of the credit unions from getting into this type 

of line of business is the start-up cost of hiring personnel, making 

sure you have the expertise as required by the National Credit 

Union Administration, and getting everything ready so we can do 

things right. 

One of the things I’d like to point out also is credit unions have 

been doing mortgage loans for years. We have no cap. Credit 

unions have been having credit cards.We have no cap. Credit 

unions have been doing consumer loans for automobiles and everything. We have no cap. But we have a cap on member business 

loans. Why is that different? 

There really is not a huge difference there. We continue to follow 

safety and soundness guidelines. We’re heavily regulated by the 

National Credit Union Administration, and we follow those guidelines as they are prescribed. 

23 

Mr. SCHRADER. Recently our Small Business Committee has been 

looking at new proposals to increase the outreach that we hear is 

critical here, but particularly with credit unions, trying to get credit unions more actively engaged in the SBA lending program like 

7(a) and 504. Can you comment on the type of support and outreach that would be most effective, based on your experience. 

Mr. HEIN. Well, from what I’ve learned regarding any type of 

government guaranteed loan, members come in, and they are really 

excited about the opportunity of getting a government insured loan 

through a financial institution, whether it’s a credit union or even 

a community bank. 

But one of the issues that they find out is that there is a huge 

amount of paperwork that they are going to have to participate in, 

and there is a lot of information that they are going to have to provide. And a lot of folks, when they realize that, it kind of turns 

them off. It’s just, you know, I just can’t go through all of this. I’m 

kind of looking for that service that I’ve received on my car loan 

and on my home loan, and now I’m going have to jump through a 

lot of hoops to just qualify for the loan. 

Mr. SCHRADER. Okay. Very helpful. 

Well, we’ve got a big third panel, so I’ll let you gentlemen go. 

Thank you very, very much. Really appreciate the solutions. 

We’ve got our third panel up with more solutions, hopefully. This 

is a bigger panel, so I’m going to be a little tougher on the time 

limits, guys, to make sure everyone gets a chance to talk, and 

maybe I’ll get one or two questions in. Because we’ll shut her down 

around ten, to respect everyone’s time and efforts. Great panel, 

though. This is probably one of the core pieces of why we’re here. 

Mr. SCHRADER. Well, we’ll start out with Ms. Kim Wilmes. Ms. 

Wilmes is here testifying on behalf of Metal Innovations, Incorporated, which she co-founded with her husband, Craig, in 1996. 

Metal Innovations is based in Aurora, and specializes in fixed-wing 

and aircraft structural repair, modification, parts manufacturing, 

and product development. Their clients include Alaska Air, FedEx 

Cessna Caravan Fleet, and SkyWest. 

She is a native Oregonian, who previously served as executive director of the Pacific Northwest Aerospace Association, and she also 

sits on the Enterprise for Employment in Education board, taking 

an active interest in K-12 education and reform. Thank you very 

much for doing that. You are a very busy lady. 

STATEMENT OF KIM WILMES 

Ms. WILMES. Thank you, Congressman Schrader, for taking the 

time to listen to small business concerns regarding the difficulties 

that we are facing in today’s economic environment. 

Mr. SCHRADER. You are going to have to eat the microphone in 

case they start drilling again. 

Ms. WILMES. Okay. The lack of importance placed on small 

business’s contributions to our country’s employment has been disheartening. Although many elected officials have spoken regarding 

small business concerns, the rubber has never met the road by providing any useful solutions to help alleviate the closed credit markets. Little, if nothing, has been done to provide economic stability 

to this critical piece of our country’s economy, small business. 

24 

As a small business owner yourself, you understand the sacrifices 

that are made to follow your dreams, start a small business, create 

jobs, pay taxes, et cetera. Small business owners understand all too 

well what it’s like to mortgage their home, sell a vehicle, cash in 

retirement, and extend credit in any way possible just to be able 

to have enough money to establish a business and follow a dream. 

We as small businesses risk a lot to be useful contributors to society, which is very apparent in the number of jobs that we create 

and consistently provide. The numbers are laid out in black and 

white. As stated in an article located on the ′′Oregon Labor Market 

Information System,′′ on 6/23/2009, the U.S. Small Business Administration claims that 99.7 percent of all U.S. firms are small 

businesses, and that these firms have created between 60 and 80 

percent of all new jobs over the past ten years. 

So if this is the case, why has small business been almost completely overlooked through the allocations provided through the recovery plan? And even more critical, why have the banking difficulties for small business only half-heartedly been addressed? I was 

extremely concerned when I watched an interview on 7/27/2009 

with Robert Gibbs. His words were directed towards the health 

care reform package: ′′If we do nothing, millions of people are going 

to lose their health insurance. If we do nothing, millions of small 

businesses aren’t going to be able to afford the coverage that they 

already provide. Some of them are going to have to lay people off.′′ 

Let’s stop right there. Health insurance coverage affordability is 

not going to cause me to lay people off. We currently and have always provided fully paid health insurance benefits for our employees and their families, and I have never considered laying off an 

employee due to the cost of health care insurance. 

All this statement tells me is that the agenda focus is only based 

on the interest of the elected and not the true and immediate needs 

of their constituents, especially small businesses. We eventually 

need to address the health insurance costs; but if you truly want 

to help small business, the focus needs to be placed on opening up 

of the credit markets. 

Let me provide you with a short example in the form of an equation. No credit for small business in the form of credit lines, expansion loans, refinances, et cetera, equals layoffs, equals business closures, equals who cares about health insurance costs. Pretty simple. 

The only stab at helping small business has been addressed 

through increasing SBA guarantees and providing fee waivers. 

Sounds good on paper, but for those small businesses try to renew 

a loan, credit line, or access new credit, this solution is virtually 

useless to most due to the unrelenting credit market. 

Much of the general population doesn’t realize that to attain an 

SBA guarantee you must first have a bank that is willing to house 

the loan. Good luck in finding a bank to participate. They are few 

and far between. 

Many of the companies being required to have SBA guarantees 

are only facing this requirement due to the bank’s ability to take 

advantage of a system that will guarantee their risk at only 10 percent. What a luxury. I’d love to have someone give me hundreds 

25 

of millions in TARP money and have someone else pick up 90 percent of the risk on my business decisions. 

Here are a few examples of companies’ experiences regarding 

funding difficulties that I have encountered over the past few 

months. You must also be aware that the banks mentioned in the 

following examples have received hundreds of millions in TARP 

funds. Our line of credit with Sterling Bank came due in October 

2008. We were told in September that it would not be renewed. We 

began to do month to month renewals on our line of credit. 

After four months of exhausting our resources and not finding 

any new banking options, Sterling decided that they could possibly 

renew our line of credit with a state guarantee and additional covenants. The covenants proposed would have caused us to close our 

businesses within a matter of days after signing. We had worked 

too hard and sacrificed too much to allow this to happen. 

What was most upsetting is that we had always paid our loan 

pavements on time, had never defaulted on a bank loan, were posting record year-end profits, had several long-standing contracts, 

with our monthly short-term work load consistently equaling over 

$1.6 million in work in process, and were hiring, not laying off, employees. 

After five months of interviewing 17 different lending institutions, we found a bank that was willing to work with us, and we 

feel very fortunate that we’ve established this relationship. And we 

did have to access a state guarantee for that, to complete the move. 

Most businesses have not been so lucky. 

The scenario is being experienced by small businesses throughout our country. I’ve received several calls in recent weeks from 

companies in crisis due to the closed credit markets. A company 

that had been operating for over 40 years, unable to access refinancing for the commercial property housing their business, they 

were on a two-year renewal cycle. 

Their current lending institution is not willing to renew the loan. 

If the loan is not renewed within one to two months they will be 

in default and lose everything. What will the result be? Complete 

closure, loss of commercial property, and job loss. 

A very viable machining business that needs a couple hundred 

thousand dollars to increase their line of credit to facilitate a new 

contract, thus creating jobs, even with their impeccable credit history they were unable to access the increase and had to turn the 

contract away. What was the result? Loss of opportunity and jobs. 

As you can see, it is not just one industry that’s being affected 

by the closed credit market. It is affecting small business across 

the board. I have heard from numerous lenders that they are open 

for lending. Don’t believe it. What banks are saying and what small 

businesses are experiencing are two different scenarios. 

As a small business, we generally run very lean operations and 

take a personal interest in our employees and their well-being. We 

will sacrifice personal financial stability to assure that our employees receive their paychecks and can put food on their tables. We 

cannot afford to individually hire expensive lobbyists to promote 

our cause. We rely on our elected officials to make decisions that 

are in the best interest of the majority, including small business. 

26 

I’m asking for your help in opening the credit market for affordable and accessible financing options for small businesses. Please 

do not turn your back on all the small businesses that have sacrificed so much to provide employment opportunities for our citizens and to follow their dreams of owning their own business. 

Thank you for your time. 

[The statement of Ms. Wilmes is included in the appendix.] 

Mr. SCHRADER. Very good. Very good. Nice job. 

All right. Let’s go to Mr. Harville. Tough act to follow. Mr. 

Harville is here to testify on behalf of SEDCOR, that does a lot of 

good work, where he serves as its retention-expansion manager. 

Since his arrival in our great state in 1987, he has served as the 

executive director of the Lincoln County Humane Society, director 

of the membership of the Newport Chamber of Commerce, and is 

executive director of the Woodburn Chamber of Commerce. 

He has been nationally recognized for his work with both the 

commercial fishing industry, his work for Economic Development in 

the gold mines in Appalachia, and also serves on the Agribusiness 

Council of Oregon Board of Directors, the Advisory Board for 

Silverton Hospital network, the Economic Development Advisory 

Board for Dallas, and he also serves on my Small Business Advisory Board. Thank you, Nick. So look forward to your testimony. 

Please proceed. 

STATEMENT OF NICK HARVILLE 

Mr. HARVILLE. Thank you, Congressman. First, what is small 

business? In Oregon, 80 percent of the companies have less than 

ten employees. If, as in most federal programs, you use the SBA 

definition of small business, this region’s largest employer with 500 

employees is considered small. Thomas Jefferson said, ′′Were we directed from Washington when to sew and when to reap, we should 

soon want bread.′′ 

The current recession was triggered by a collapse of the housing 

market. This was aggravated by the revelation that the mortgage 

market had been distorted, which in turn led to practices in financial markets that brought down and endangered the existence of 

many prestigious financial institutions. 

Trouble in banks then led to tight money, a general slowdown in 

the economy, lost jobs, and a worsening in the housing crisis that 

started the whole thing in the first place. Finding money in today’s 

banking environment is a company’s largest concern and challenge, 

and rightfully so. 

Small businesses are constantly planning capital needs and investing time with lenders to plan financial needs. Today lenders 

won’t even look at good deals, let alone anything that may be 

slightly out of the box. Unless you have all the cash required to 

launch or expand your business, one of the most challenging aspects of running a small business is locating resources to raise 

money. Raising capital is the most basic of all business activities. 

But as many entrepreneurs quickly discover, raising capital may 

not be easy. In fact, it can be complex and a frustrating process. 

However, if you are informed and have planned effectively, raising 

money for your business will not be a painful experience. Whether 

27 

your business needs funds due to unforeseen expenses or you are 

looking to expand, you will need to communicate with investors. 

They are interested in the quantity of capital you need, your 

product, your company, your financials. And sometimes today that 

isn’t enough. The most important things they look at are your business plan, management team, your track record, and your exit 

strategy. This information is critical to them so they can understand how they will get their money back. 

But even with a government guarantee, they want only the 

cream deals. They have tightened even older companies’ financial 

agility to reach new market opportunities to almost nothing. Orders back up because company A can’t get an increase in their 

credit line, let alone a term loan. So company B sits waiting for 

things to loosen up again, which means that company C can’t take 

the parts that company B needs to make sales to company A. The 

adverse effect ripples all the way down the supply chain. 

Since October, the U.S. Treasury has been buying stock in banks 

around the country as part of the capital purchase program. Initially the program’s money was to be used to prop up troubled 

banks. More recently, the Treasury has been buying stock in 

healthy banks, with the goal of encouraging those banks to turn 

around and lend out money to customers. 

Despite that encouragement, lending is in gridlock. Most consumers know what the ′′Wall Street Journal′′ proved on July 27, 

2009. The total number of loans held by 15 large U.S. banks 

shrank by 2.8 percent in the second quarter. All you have to do is 

talk to your friends and neighbors about lending, and you will find 

story after story about the difficulties getting a loan for a mortgage. 

The numbers underscore the two related trends weighing on the 

economy. Financial institutions are clamping down on lending to 

conserve capital as a cushion against mounting loan offices. The 

loan demand is falling as companies shelve expansion plans and 

consumers trim spending to ride out the recession. 

That combination is making it harder for the U.S. economy to rebound. Some analysts predict that the loan portfolios won’t start 

growing until the second half of 2010. As firms continue to 

downsize, cut costs, reduce inventories, the nation’s largest banks 

are reporting that demand for credit in commercial real estate market is well below normal levels, according to the U.S. Treasury Department monthly banking lending survey from the largest 21 recipients of government bail-out money from the capital purchase 

program. 

After private investors grew reluctant last year about buying 

SBA loans from firms that finance them, these firms found themselves way down with old loans, which prevented them from funding new loans for small businesses. The recovery of the SBA credit 

markets has been a rare bright spot for small business lending. 

While SBA loans remain a fraction of the overall credit issued to 

small businesses, these government-backed loans have been on the 

upswing since Congress approved the administration’s $787 billion 

economic stimulus package in February. That legislation waived 

many of the fees that banks paid to the government for offering 

28 

SBA loans, and raised the public guarantee for the losses up to 90 

percent. 

In the July 27, 2009 daily finance, more than half of the new 

loans made by the banks in April and May were for refinancing 

mortgages and renewing credit to the businesses, not new loans. 

Some analysts don’t expect to see loan portfolios grow until the second half of 2010. 

Consumer spending has led us out of most of the recessions, but 

consumers can’t help this time because credit is so tight. Trillions 

are being thrown at the problem, but we don’t seem to be getting 

any bang for the buck except helping the banks to turn a profit. 

It’s time to stop worrying about Wall Street profits and start worrying about Main Street in the new economic policies. 

If we want to make SBA programs work, then let them be industry driven. Let industry, who are the borrowers, tell you what is 

wrong with the SBA system. They know what could be done to fix 

it, if policy makers will listen. 

[The statement of Mr. Harville is included in the appendix.] 

Mr. SCHRADER. Very good. 

Our next witness is Mr. Terry Brandt. He’s the executive director 

and board member of Albina Opportunities Corporation. I had the 

chance to visit with him the other day. He has over 30 years experience, specializing in commercial real estate development in the 

Portland metropolitan area, with project management consulting 

and entrepreneurial small business growth. 

He’s been active as a board member and advisor for a number 

of municipal task forces and committees and nonprofit organizations throughout his career that have supported community sustainability and small business development. I welcome you to the 

committee, Terry. 

STATEMENT OF TERRY BRANDT 

Mr. BRANDT. Thank you very much, Congressman. I am pleased 

to be here and appreciate the invitation to testify before the distinguished House Small Business Subcommittee on Finance and Tax. 

I am the executive director of Albina Opportunities Corporation, 

also known as AOC, a nonprofit lender with a mission to spur entrepreneurship and provide credit to women, minority, and disabled-owned businesses in low to moderate income communities 

and CRA qualified areas in the Portland area. 

AOC desires to make loans to borrowers that have been traditionally underbanked and underserved in our communities. We leverage our loan funds by partnering with bank and non-bank lenders on specific loans. We provide the gap funding necessary to help 

mitigate loan risks to our participating lending partners on small 

business loans. 

By subordinating our interest in our loan to the interest in the 

loan of a participating bank, AOC provides more security for the 

bank, and thereby increases the ability of the small business entrepreneur to obtain needed financing. The reason I am here testifying today is because events now occurring in the financial marketplace, as we have heard so far today, are having a detrimental 

affect on our ability to make small loans to qualified businesses to 

whom we would like to provide capital. 

29 

We have tried to find ways to fund loans in light of recent stricter bank loan underwriting standards; however, we are unable to 

make loans to credit-worthy small businesses when banks use blanket non-starter underwriting criteria that preclude any discussion 

at all. In addition, without a partnering bank or non-bank partner 

lender, AOC is not able to obtain an SBA guarantee for its qualifying loans. 

Traditional bank lending resources have pulled back from the 

lending marketplace for a number of reasons, including increased 

borrower scrutiny and stricter loan underwriting criteria. AOC 

wants to continue to provide financing to businesses, and to do that 

it is important for us to find sources of loan capital and loan guarantees until the banks return to this market. 

We believe the only source for such capital and guarantees may 

be the federal government. What happens to small business lending when banks collectively contract and traditional financing 

routes dry up? Lenders that adopt all or nothing restrictions and 

responses to problems do not consider the bulk of loans that can 

be effectively underwritten. 

Their over response to perceived problems results in stifling the 

growth of good small businesses. Lender underperformance and 

lack of creativity will not solve the lending log jam. With the exception of the micro loan program, almost all the lending in the SBA’s 

tool kit is done by banks. If for some reason these lenders simply 

cannot or will not lend money to small businesses, the predominant 

SBA 7(a) loan guarantee program will be significantly underutilized. 

AOC has been challenged to find ways to establish partnerships 

with SBA-approved bank lenders, given many of the reasons previously stated. As an example of a recent response to this challenge, AOC has offered to mitigate the perceived risk in a prospective loan by agreeing to fully subordinate its position of its SBA 

loan guarantee to a lending partner. 

In essence, by financing only the guaranteed portions of AOC’s 

loans, a bank would receive a 100 percent guarantee from the SBA 

on any of its loans. At this time AOC has yet to find a bank or nonbank lender willing to partner on this loan. In addition, without a 

bank partner, AOC’s ability to obtain an SBA loan guarantee is restricted, unless it could also be approved as a non-bank lender by 

the SBA. 

AOC’s small business lending program may be considered not too 

dissimilar to the SBA’s dependence on bank and non-bank lenders 

to administer its loan guarantee program. Both organizations are 

dependent on its lending partners. Until banks return to this market, we will be unable to satisfy the demand for loans needed by 

our local small businesses. 

To mitigate these problems, we offer two recommendations. One, 

utilize the Troubled Asset Relief Program, TARP, to enhance lending through banks or through organizations like AOC. TARP is not 

going to quickly or meaningfully stimulate the small business sector, and the economy isn’t going recover until small businesses 

begin to expand again. 

TARP isn’t stimulating small business lending.Most TARP 

money was given to banks, which in turn didn’t provide most of the 

30 

money for small business lending. Many banks used TARP funds 

to repair their balance sheets rather than extend new credit. There 

is a need for TARP funds, to increase liquidity, to enable community financial institutions, to build lending capacity, to meet increasing loan demand, and fill financing gaps resulting from banks’ 

retrenchment. 

Access to treasury rate financing for business is critical and 

could be responsibly implemented through proven delivery systems 

of community financial institutions by earmarking some TARP 

funds for small business loans, either through banks or community 

financial institutions like AOC. 

Section 103 of the TARP legislation states, ′′In exercising the authorities granted in this act, the secretary shall take into consideration ensuring that all financial institutions are eligible to participate in the program without discrimination based on size, geography, form of organization, or the size, type, and number of assets 

eligible for purchase under this act.′′ 

Mr. SCHRADER. You will have to wrap up, Mr. Brandt. 

Mr. BRANDT. Recommendation two, utilize the SBA non-bank 

lending licensing capability to enhance the opportunity for small 

businesses to gain access to the SBA loan guarantee program. 

Thank you for your consideration of these recommendations. I’d be 

happy to answer any questions. 

[The statement of Mr. Brandt is included in the appendix.]* 

Mr. SCHRADER. Very, very good testimony. Sorry I had to cut you 

off there a little bit. But we have your written record, and I like 

the recommendations. 

Well, let’s go to Mr. Compton. Mr. Compton is president and 

chairman of Pioneer Trust Bank, in Salem, Oregon, one of the 

state’s oldest banks, and the only locally-owned national bank in 

Marion County. Mr. Compton is a native Oregonian, graduated 

from South Salem High School and Oregon State University, 

stayed in his community, which I appreciate. 

He’s the third generation of Comptons to have served as president of Pioneer Trust, following his grandfather, H. V. And his father, Stuart. Mr. Compton also serves on the board of directors and 

is treasurer of the Oregon Law Foundation. 

I welcome you to the committee, Mr. Compton. 

STATEMENT OF RANDY COMPTON 

Mr. COMPTON. Thank you, Congressman Schrader. And I’m also 

here with Mr. Nass from our office, as well, so we’re doing this together. Hearing the testimony—excuse me, I have a frog in my 

voice, obviously. You know, we’ve been—Pioneer Trust Bank has 

been around since 1924. We cater to the small businesses. That’s 

what we’re all about. Listening to the testimony previously I think 

almost made me feel like I need to apply to the Federal Witness 

Protection Program. 

But, you know, quite honestly, we certainly understand and respect the words that have been spoken today, because we don’t necessarily disagree with the information at all. We are a small business as well. We employ 62 full-time equivalent employees. We’re 

also a traditional bank. By meaning a traditional bank, we take deVerDate Aug 31 2005 18:07 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\51520.TXT DARIEN
31 

posits from the local businesses and the local customers, and then 

we turn around and lend them to the community. 

So from that respect we support the local businesses, and we 

keep these loans. These loans are on our books. As a matter of fact, 

in the last year our loan portfolio is actually up seven and a half 

percent over last year. And we’re probably one of the few banks 

that does that. But we do like to keep our loans. 

We have kept a strong capital base, we’ve kept liquidity, and we 

do that to meet the needs for the community and for our customers. We agree that this is very important for community banks 

to do this. And what’s happened over the last year or so, and actually it’s gone on for quite some time, is the leveraging of the financial system. 

There is this tremendous need for Wall Street that banks needed 

to increase profits to take the risks that they felt were out there, 

and we honestly did not agree with that philosophy, and we did not 

follow it. We made sure that we had sufficient resources on hand 

to take care of our community and take care of our customers; 

therefore, we didn’t participate. 

In any event, we did not take any TARP money. We will not take 

any TARP money. We stand independent of these plans. As a matter of fact, we were talking about this, and my predecessor prior 

to me had done one SBA loan; and he showed me the file when I 

was about Steve’s age, and it was about this thick (indicated). And 

he looked at me, and he said, ′′My advice is, if it’s good enough to 

keep in our portfolio, it’s good enough to stay there.′′ And that’s 

what we’ve done. 

We’ve have a few that we’ve have an opportunity to work with 

Mr. Safstrom at the Mid-Willamette Valley Council of Governments. But I also think it’s important, and one of the reasons why 

I asked Steve to come here, is—and thank you for allowing this to 

happen—is because when I was his age, I went through some pretty severe— 

Mr. SCHRADER. You are making us sound very old here. 

Mr. COMPTON. Well, I appreciate that. 

Mr. SCHRADER. We’re not that old, Randy. Come on. 

Mr. COMPTON. It’s that Hair Club for men, stuff like that, everything you read. No, but, you know, I’ve been through a few of these 

cycles. I understand and feel the need. Our responsibility as a bank 

is to, notwithstanding being involved with the community and 

being a member of the community, but to provide the credit needs 

for everybody in this community that we can take care of. 

You can’t take care of everybody. We’re a small business. Our total assets are about $265 million. You know, in a bank that’s 

been around since 1924, one would think that you would have billions and billions; but, you know, we love Salem, we’re here in 

Salem, we get outside of Salem and I’m lost, so we make sure that 

we take care of the needs, and that’s what we’ve been doing since 

then. 

But, you know, we encourage people to deposit their funds with 

the community banks, because we turn around and relend it within 

the community. At least that’s what we do, because, you know, 

where else are we going to go? We’re not in New York. We’re not 

in Washington. We’re not in California. We’re just in Salem. 

32 

So, you know, we work with our customers. And these times, 

which are very traumatic for everybody, and we’ve heard it all 

today, we want to make sure that we work with our customers. We 

do not leave our customers out in the dark. We want to make sure 

that they are well taken care of. If they have a need and they have 

a situation, we work through it. 

We work with them. We sit down. Steve goes out, visits the offices of the people that he deals with, but he needs to hear and see 

this as well. I’ve heard it. I’ve seen it. I understand it. That’s what 

made our bank the bank it is today. But for the future and for future management, we need to have folks like Steve hear these 

types of conversations, these meetings, participate, be a part of it, 

and learn from it, because that ultimately will make us a better, 

stronger bank for the future, to be able to meet the further needs 

and the future needs of this community. 

And I’ll just have Steve say a few minutes, since I, as he will testify, take most of the time anyway. 

[The statement of Mr. Compton is included in the appendix.] 

Mr. SCHRADER. Well, you did pretty good. 

Let me just introduce Steve a little bit. And I appreciate there 

is a difference between the community banks that have always had 

prudent lending standards versus these big investment banks that 

got in the game, and I think unfortunately. So not all banks are 

created equal, and thank goodness for the work you guys have done 

for generations in the community. And we all, I think, recognize 

that. 

Mr. Steven Nass is also here to testify on behalf of Pioneer Trust 

Bank, where he serves as assistant vice president. Mr. Nass is a 

native Oregonian, graduated from Willamette University in 2001 

with a degree in economics.He’s worked for Pioneer for the last 

eight years, risen from commercial loan officer to vice president. 

That’s very impressive. 

He was a four-year starter on Willamette’s football team. That’s 

pretty impressive. Played my son’s Linfield team. He’s active in numerous men’s sports leagues in Salem, and also serves as a member of Salem Rotary. In addition he’s a wish granter for the Make 

A Wish Foundation. Thank you for that very, very much. And 

please proceed. 

STATEMENT OF STEPHEN P. NASS 

Mr. NASS. Thank you, Congressman Schrader. I’ll keep it fairly 

brief. You know, I’ve had the pleasure of working for Pioneer Trust 

Bank, as Randy mentioned, a small business itself, well capitalized, 

well managed. I am a small business lender. I’m out there making 

loans, trying to find good loans. Although these days I seem to 

spend more time collecting than actually making, which is frustrating. 

But the bank has given me flexibility to modify, extend, do whatever we can to get additional access to capital for these small businesses that need it. It’s a tough time. They just need to get through 

it, work on their plans. And as a bank, we’ve chosen not to use a 

lot of SBA lending, because we feel we lose that flexibility. We feel 

that we lose that ability to really get down in the trenches and help 

these small businesses. 

33 

And then I think with the restrictions on whether it’s paperwork 

or whether it’s fees or whether it’s just the inability to even get 

your account balanced if you want to refinance, you know, as John 

Safstrom mentioned earlier, those are the things that we will feel 

as a bank we’re able to offer non-standard loan products. 

And I don’t want to confuse anybody. I’m not talking about exotic 

stuff here. I’m talking about simple, straightforward loans that 

meet the customer’s unique needs, because I guarantee there is 100 

customers and they have 100 different ways to run their business. 

They are going to need 100 different loans, and that’s what we’re 

all about down at Pioneer Trust Bank. 

[The statement of Mr. Nass is included in the appendix.] 

Mr. SCHRADER. Very good. Thank you very, very much. And I 

think the one-on-one that your bank and other small community 

banks, you get to know the person. I used to know, way back when 

I started my veterinary business, and even when I started the farm 

I could go in and actually talk to a loan officer face to face, and 

you could size the measure of the man or woman in front of you 

and figure out if they are going to, you know, make good. It’s an 

unfortunate change that’s occurred over the last fifteen, twenty 

years. 

Well, last, but not least, let’s go to Mr. Rasmussen. James Rasmussen is CEO and president of Modern Building Systems, a modular manufacturing business started by his father in 1971. Modular 

Building Systems provides turn-key building solutions for single 

and multi-story buildings. Mr. Rasmussen also serves on the executive leadership council and the board of the Salem Chamber of 

Commerce. 

He’s a past board member of Modular Building Institute, which 

is the National Association for Commercial Mobile and Modular 

Companies. Jim is a graduate of Oregon State University, been 

married to his wife Colleen for 22 years, and has two daughters, 

Erin and Kaitland. Thank you for taking time today. 

STATEMENT OF JIM RASMUSSEN 

Mr. RASMUSSEN. Thank you, Congressman Schrader, for allowing 

me to come up and speak for the Subcommittee on Finance and 

Tax. Modern continues to do well in this down economy. We are not 

going to set any records this year, of course, and had to let a few 

people go over the last year. But looking over the last five years, 

our employment base is actually up from averages. We are also 

starting to see ERA funds flow to small businesses like my own 

company, as we are the recipient of a contract in the Hanford area, 

so we appreciate that. 

Our business has not had a problem accessing capital so far in 

this market. I hope that stays the same. Matter of fact, right during the economic meltdown we were getting a loan in Sacramento, 

which was kind of the epicenter of the national meltdown for industrial property, to fuel our continued expansion where we lease 

buildings to various clientele. 

What I see, knowing a number of banks, we do choose to bank 

with a community bank, but what we see is that banks are being 

just more careful. I don’t believe that the capital markets are 

closed. Proof of lending for bare land in Sacramento would be good 

34 

proof of that. The capital markets aren’t closed. They are just more 

difficult than what they had been. My belief is that the underwriters were not probably doing as good a job as they should. 

They were looking more at volume than they were at the underlying assets and balance sheets of companies. I also believe that 

banking is one of the most heavily regulated industries that exist, 

and it makes one wonder what the federal regulators were doing 

when you have the CEO of a former and nonexistent bank, Washington Mutual, on record as saying a thin file is a good file. 

And to me that’s what creates a bubble real estate economy, 

which kind of was the precursor for our poor overall economy that 

exists today. Now, you know, the federal regulators and FDIC 

banks are all being overly careful, probably, and that’s what small 

businesses like myself are starting to feel. 

TART money, I feel that it was a moderate success, and that it 

didn’t allow—or it caused the bank system to stabilize. And, you 

know, we were in real fear of our banking system falling apart just 

six months ago, and we can’t forget that. And I think that the Fed 

probably did a pretty good job in setting that system up to allow 

banks to take over other banks. 

And you will notice that quite a number of banks have already 

paid back their TART money. Many Americans don’t realize that 

TART money wasn’t a loan. It was a purchase of preferred stock 

in those banks at a rate of 5 percent interest, which I would characterize as a wholesale rate. 

What I saw is that caused the bank’s average, you know, fund 

rates that they could charge their money, to go up, thereby raising 

consumer and business loan rates. As far as the SBA is concerned, 

Modern, over 38 years, we’ve really never used any of their programs. We looked at a 7(a) loan in 1992. Just too cumbersome. 

Found another way to do the financing of that project. 

We have used the U.S. Export Assistance Center that helps 

small businesses and large businesses alike export to foreign countries. We’ve got buildings in Japan, China, all over the place, and 

I’ve found the U.S. Export Center to be very effective and extremely helpful. 

So that said, they are part of SBA. Most of their other programs, 

though, we really don’t use. The SBDCs I think are helpful, in that 

they help small businesses. If you are a widget maker and not necessarily a guy that knows how to write a business plan so that the 

Pioneer Trust Bank will provide the funding for that idea, they 

probably do a pretty good job. But for the amount of money that 

goes into that system, I think that the chambers of commerce and 

the Salem Economic Development Corporations of the world probably would be more efficient in the delivery of those services. 

My feeling about a recipe for improving access to the capital markets is to just ease the regulatory environment to create an environment where companies feel like they are willing to take risks; 

and not just companies, but inventors and business people in general. That’s what does create wealth in this country, and successful 

ideas in turn create jobs. 

The other is to lower taxes. When you lower taxes, what happens 

is people will generally work a little bit harder, because they feel 

like the dollar is staying in their back pocket. And that’s what 

35 

gives them the incentive to go out and take those risks, to go, you 

know, live their dream, whatever their business opportunity is. 

And at the end of the day you don’t feel like you are working 

through May to be able to just pay your tax bill. 

And so I guess that said, my recipe for improving the economy 

is lower the tax rate and provide a level playing field for companies 

that are competing globally. 

[The statement of Mr. Rasmussen is included in the appendix.] 

Mr. SCHRADER. Very good. Very good.Thank you. Thank you. We 

probably don’t have a lot of—we don’t have any time, really, to ask 

any questions. I apologize to the panel for that. But a very good 

panel first to last, and hitting on a variety of different themes, 

some different points of view. It certainly seems like we can 

streamline things in SBA quite a little bit, provide, I think, some 

ongoing consistency in the programs, maybe even a few reductions, 

which would require some appropriations, which we can explore 

when we get back to Washington, D.C. 

A lot of other really great, you know, comments here. My goal 

usually in these hearings is to listen to folks that are on the 

ground, not make this a top down, we know what’s best for you approach, because you guys are in the trenches every day, and see 

if we can incorporate some of your suggestions, get you some of the 

legislation that we’ll hopefully be putting back out in September or 

October, hopefully, after we get back from my so-called recess. 

At this point I’ll ask unanimous consent that members have five 

days to submit a statement and any other supporting materials 

they want for the record. Ms. Wilmes did a great job. Thank you 

very, very much on that. 

Without objection, so ordered, and really appreciate everyone’s 

attendance. At this point the meeting is adjourned. 

[Whereupon, at 10:00 a.m., the subcommittee was adjourned.] 

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