[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN THE
21ST CENTURY
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HEARING
BEFORE THE
SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
FEBRUARY 7, 2019
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Small Business Committee Document Number 116-003
Available via the GPO Website: www.govinfo.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
ANDY KIM, New Jersey
SHARICE DAVIDS, Kansas
JARED GOLDEN, Maine
JASON CROW, Colorado
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
VACANT
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TRENT KELLY, Mississippi
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
Adam Minehardt, Majority Staff Director
Melissa Jung, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Andy Kim.................................................... 1
Hon. Kevin Hern.................................................. 6
WITNESSES
Ms. Marla Bilonick, Executive Director, Latino Economic
Development Center, Washington, DC............................. 4
Ms. Sharon Pinder, President & CEO, Capital Region Minority
Supplier Development Council, Silver Spring, MD................ 7
Mr. Davy Leghorn, Assistant Director, American Legion Veterans
Employment & Education Division, Washington, DC................ 9
Mr. Michael Romano, Sr. Vice President of Industry Affairs &
Business Development, NTCA--The Rural Broadband Association,
Arlington, VA.................................................. 10
APPENDIX
Prepared Statements:
Ms. Marla Bilonick, Executive Director, Latino Economic
Development Center, Washington, DC......................... 23
Hon. Kevin Hern.............................................. 27
Ms. Sharon Pinder, President & CEO, Capital Region Minority
Supplier Development Council, Silver Spring, MD............ 29
Mr. Davy Leghorn, Assistant Director, American Legion
Veterans Employment & Education Division, Washington, DC... 36
Mr. Michael Romano, Sr. Vice President of Industry Affairs &
Business Development, NTCA--The Rural Broadland
Association, Arlington, VA................................. 44
Questions and Answers for the Record:
Questions from Hon. Bradley Schneider to Mr. Davy Leghorn and
Answers from Mr. Davy Leghorn.............................. 54
Additional Material for the Record:
CCA-Competitive Carriers Association......................... 56
EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN THE
21st CENTURY
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THURSDAY, FEBRUARY 7, 2019
House of Representatives,
Committee on Small Business,
Subcommittee on Economic Growth,
Tax, and Capital Access,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:10 a.m., in
Room 2360, Rayburn House Office Building. Hon. Andy Kim
[chairman of the Subcommittee] presiding.
Present: Representatives Kim, Davids, Schneider, Delgado,
Radewagen, Hern, and Spano.
Chairman KIM. We are going to get started here. We have a
number of members that are coming over from the National Prayer
Breakfast so they will come in and the Ranking Member will come
in as he is able.
I am Chairman Andy Kim. I am eager to get started here. I
just want to have an opportunity to be able to make sure we are
hearing from the incredible people that we have today that are
going to be sharing with us.
Small businesses make up over 99 percent of all businesses
in the United States and employ almost half of our nation's
workers. In 2018 alone, America's small employers added 1.9
million net new jobs to the economy. As I have seen firsthand
in my district in New Jersey, Main Street businesses are the
backbone of our communities.
In my home state, small businesses employ nearly two
million people, making up nearly half of the private workforce.
Among them are approximately 58,000 veteran-owned businesses
and over 250,000 female-owned businesses, which is why I am
particularly happy to be chairing this hearing today.
While nearly every entrepreneur faces obstacles when it
comes to getting a new business off the ground and running,
entrepreneurs from traditionally-underserved backgrounds tend
to face even greater barriers to entrepreneurial success.
We often hear that access to capital is the biggest
challenge facing aspiring entrepreneurs. As the lifeblood of
all new businesses, affordable capital is crucial to starting a
business. Without it, new firms often cannot buy inventory and
equipment, pay their employees, and expand operations.
Unfortunately, studies have shown that women, minority, and
veteran-owned businesses face heightened obstacles to securing
affordable capital. For example, the Minority Business
Development Agency found that minority-owned firms experience
denial rates three times higher than other firms. Despite a
similar demand, 60 percent of veterans reported a financing
shortfall and had approval rates 10 percent lower than all
other firms.
In response to these challenges, minority-owned firms are
more likely to rely on personal sources of funding, such as
savings, a family member, or credit. This unfortunate reality
is not only unsustainable, it is also hindering small business
growth.
Unfortunately, barriers to entering Federal procurement
markets are also common for underserved firms. Federal
contracts are a great source of potential for business growth
and it is crucial that we find ways to make them more
accessible to budding small firms.
Setting government-wide small business contracting goals
was a meaningful step towards increasing small business
participation in the Federal procurement marketplace. However,
as the numbers show, we will have work to do to level the
playing field for underserved businesses.
For instance, women-owned businesses were awarded $21
billion of the total $500 billion in contracts for fiscal year
2017. This is highly disappointing considering that women
entrepreneurs contribute over $1 trillion a year to the U.S.
economy.
Meanwhile, rural businesses are facing a unique set of
challenges, including smaller labor pools, slow population
growth, net outmigration, and health problems including
diabetes and opioid addiction. Though these issues impact rural
communities at large, they can also have a devastating impact
on rural entrepreneurship and business growth.
To address these disparities, SBA created several
initiatives which we will hear more about today. For many
underserved businesses, initiatives such as Small Business
Development Centers, Women's Business Centers, SCORE, and
Veterans' Business Outreach Centers are there to provide
mentorship and other key services.
Today, I look forward to hearing the recommendations and
feedback of our distinguished witnesses to strengthen these
initiatives, as well as other Federal programs and private
sector actions serving underrepresented entrepreneurs.
I hope today's hearing will be a productive opportunity to
explore the challenges facing small firms while identifying
areas where we can work together on legislation that seeks to
level the playing field for America's small businesses.
Thank you.
The Ranking Member will submit his statement for the
record.
And if other Committee members have opening statements
prepared, we would also ask that they be submitted for the
record.
I would like to take a minute to explain the timing rules.
Each witness will get 5 minutes to testify. Each member will
get 5 minutes for questioning. There is a lighting system to
assist you. The green light will be on when you begin, the
yellow light will come on when you have 1 minute remaining, and
the red light will come on when you are out of time. And we
will ask that you stay within the timeframe to the best of your
ability.
Now, I would like to introduce our witnesses. Our first
witness is Ms. Marla Bilonick. Ms. Bilonick has been the
executive director of the Latino Economic Development Center
since 2014. She has also worked for Seedco where she assisted
businesses in Lower Manhattan that were impacted by the attacks
of September 11th. Ms. Bilonick is a member of the board of
directors of the National Association of Latino Community Asset
Builders. She is a graduate of the University of Wisconsin at
Madison and received her Master of Arts degree from Johns
Hopkins University of Advanced International Studies (SAIS).
Welcome back, Ms. Bilonick.
Our second witness is Ms. Sharon Pinder. Ms. Pinder is the
president and CEO of the Capital Region Minority Supplier
Development Council (CRMSDC), a nonprofit corporation whose
mission is to link corporations and government agencies with
minority business enterprises. Prior to joining the council,
she served as the director of the Mayor's Office of Minority
and Women-Owned Business Development for the City of Baltimore.
She was also Maryland's first appointed cabinet secretary of
the Governor's Office of Minority Affairs. Ms. Pinder holds a
Master of Science degree in Technology Management from the
University of Maryland, University College, where she has the
honor of serving as professor of practice in the School of
Graduate Studies.
Welcome, Ms. Pinder.
Our third witness today is Mr. Davy Leghorn. Mr. Leghorn is
the assistant director of the Economic Division of The American
Legion where he oversees employment, small business, and VA
contracting policies. He also administers The American Legion's
Veteran Entrepreneurship Program. Mr. Leghorn served as a motor
infantryman in the United States Army, then as a civil affairs
specialist with the 450th Civil Affairs Battalion. He currently
serves as the sergeant-at arms for George Washington Post 1 in
The American Legion Department of the District of Columbia.
Welcome, Mr. Leghorn, and thank you for your service.
And today's final witness is Mr. Mike Romano. Mr. Romano
serves as a senior vice president of Industry Affairs and
Business Development for NTCA, the Rural Broadband Association.
NTCA represents roughly 850 telecom companies throughout the
United States, many of whom are located in rural communities
and small towns with a goal of ``building a better broadband
future for rural America.'' Prior to joining NTCA in 2010, Mr.
Romano worked at Bingham McCutchen LLP, Global Telecom and
Technology, America Online, and Level 3 Communications and
Swidler Berlin. Thank you for joining us today.
I want to just get started right from the beginning, so Ms.
Bilonick, you are recognized for 5 minutes.
STATEMENTS OF MARLA BILONICK, EXECUTIVE DIRECTOR, LATINO
ECONOMIC DEVELOPMENT CENTER; SHARON PINDER, PRESIDENT AND CEO,
CAPITAL REGION MINORITY SUPPLIER DEVELOPMENT COUNCIL; DAVY
LEGHORN, ASSISTANT DIRECTOR, AMERICAN LEGION VETERANS
EMPLOYMENT AND EDUCATION DIVISION; MICHAEL ROMANO, SENIOR VICE
PRESIDENT OF INDUSTRY AFFAIRS AND BUSINESS DEVELOPMENT, NTCA-
THE RURAL BROADBAND ASSOCIATION
STATEMENT OF MARLA BILONICK
Ms. BILONICK. Good morning, Subcommittee Chairman Kim and
members of the Subcommittee. It is my sincere honor to be
speaking with you all today.
My name is Marla Bilonick, and I am the executive director
and CEO of the Latino Economic Development Center (LEDC).
LEDC is a 28-year-old organization with the mission to
drive the economic and social advancement of low- to moderate-
income Latinos and other underserved communities in the D.C.
and Baltimore metropolitan areas. We operate out of six offices
in the region, with over 40 professional and bilingual staff
providing top-notch services to our clients. On an annual
basis, we serve well over 4,000 low- to moderate-income
residents. We are a SBA Microlending Intermediary, SBA
Community Advantage Lender, and certified Community Development
Financial Institution (CDFI).
Since we began lending in 1997, we have rolled out more
than $15 million in capital and have provided small business
technical assistance services to thousands of aspiring and
existing small business owners in the region. LEDC is a member
of, and I sit on the board of the Opportunity Finance Network,
a membership organization representing the over 1,000 CDFIs in
the United States. The challenges I will outline are consistent
with what we hear from our fellow CDFIs operating similarly
underserved communities around the nation.
LEDC exists to help underserved populations overcome the
challenges that stand in their way of achieving their full
potential for achieving financial stability and income
mobility. While the challenges before them are countless, those
I would characterize as the most significant are: lack of
access to capital, lack of access to information and
educational resources, poor or no credit history, and systemic
and institutional racism and sexism.
In my testimony, I will elaborate on each of these barriers
to success. As the head of a Latino-facing organization and
member of the Board of Directors of the National Association of
Latino Community Asset Builders (NALCAB), I will also include
information on small business challenges that are specific to
the Latinx community.
So starting with lack of access to capital, the traditional
commercial banking system is often not a viable resource for
underserved small businesses. Commercial banks defer to a fixed
minimum credit score they will accept for loan approvals and
are further hindered from serving small businesses due to
restrictions around lending to startups or providing smaller-
dollar financing. A recent report from the Woodstock Institute
cited that the number of CRA-reported loans under $100,000 in
2015 remained 58 percent lower than in 2007. What is more, bank
branches are consolidating and closing at a steady clip, with
1,700 bank branches closing in the 12 months between June 2016
and June 2017.
The alternative for underserved entrepreneurs operating in
this climate is to take out credit cards that often charge high
interest rates, access high-cost financing via the emerging
online lending industry, tap into merchant service cash
advances, obtain a loan from a loan shark, or obtain a loan
from the CDFIs in their area. I will note that we have several
loans in our portfolio that are restructured financing deals
for entrepreneurs who fell prey to the allure of online
lenders.
On the other hand, data shows that CDFIs in OFN's
membership alone have originated more than $65 billion in
financing in urban, rural, and native communities through 2016.
To quote OFN's president, Lisa Mensah, `` CDFIs exist to move
money to places missed by traditional lenders.'' However, CDFIs
face challenges in terms of reaching the very communities that
need our services due to minimal or nonexistent marketing
budgets, challenges to capitalizing our loan funds, and/or
sustaining the high overhead costs associated with the labor-
intensive loans we underwrite.
In terms of lack of access to information and educational
resources, starting or growing a business is not for the faint
at heart. In an ideal scenario, an entrepreneur has the time
and support to complete an in-depth business plan, complete
with a market analysis, elaborate revenue projects, a well-
developed management plan, and options for financing their one-
time startup costs, as well as ongoing or variable costs to
come.
Unfortunately, underserved entrepreneurs do not always have
access to business planning information or resources, nor do
they have the time to invest in business planning as they are
looking to their business ideas as a source of income for
themselves and their families.
In addition, the regulatory framework is a maze of
processes and agencies that few could understand without
outside support. Depending on the business type, entrepreneurs
frequently need to go through several licensing agencies and
register with their state and jurisdiction to be compliant.
Layer on top of that the language barrier that many of our
immigrant Latinx clients face, and it is doubly challenging to
meet compliance requirements.
I am actually going to skip the reference to poor and no
credit history, although it is a significant challenge. I want
to get to sort of the last section which I think is probably
the most challenging around systemic and institutional
discrimination.
So my testimony cites the same research that you cited, Mr.
Kim, from MBDA, around the disproportionate disapprovals for
minority and female borrowers. And, you know, just showing that
identical applications from minority and nonminority applicants
were rejected up to 54 percent times more frequently. And for
women, women-owned businesses received nearly 50 percent less
funding than men-owned businesses, and that funding actually
declined by 42 percent between 2016 and 2017.
In closing, my request would be that we do not lose sight
of the protections for consumers in general, as well as
minorities. The CFPB, OCC, Fed, and FDIC should continue and
deepen their evaluation of commercial bank activities with
regard to the demographics of who is and who is not receiving
loans.
Just yesterday, the CFPB said it plans to abolish most of
its critical consumer protections governing payday loans. And
while that is not necessarily a direct correlation with our
small business clients, it just is a signal to the attitude of
the CFPB at this moment in time, which is certainly troubling.
Specifically, the CFPB should finalize its implementation of
section 1071 of the Dodd-Frank Act, which would require
financial institutions to compile, maintain, and report
information regarding credit applications made by women-owned,
minority-owned, and small businesses. This kind of information
would provide policymakers with insights into the precise
shortcomings of diverse businesses in seeking credit, enabling
policymakers to craft narrowly-tailored legislation designed to
remedy the shortcomings within each of these entrepreneurial
communities.
Thank you.
Chairman KIM. Thank you so much.
Before we move on to our next witness, I just wanted to
recognize our Ranking Member here and turn it over to him for
his opening statement.[16]fb[17]
Mr. HERN. Thank you, Mr. Chairman. Thank you for your
kindness in doing that. My apologies for my tardiness. We were
at the National Day of Prayer, so I appreciate that.
I just want to say that as a small businessperson for 34
years and a person who has lived the American dream, come from
extraordinary poverty to being a very successful
businessperson, there is nothing that has been a greater joy
for me later in my life than to help small businessmen and
women see their ideas brought to life, to start small
businesses, to help so many try to find, actually write
business plans, and to find access to capital, help them mold
and model their business plans to work.
And so with about 99.9 percent of all businesses in the
United States being classified as small, the impact that small
businesses have on our economy cannot be overstated. In my home
state of Oklahoma alone, we have over 340,000 small firms who
employ over 700,000 people. Many of these businesses are owned
by minorities, women, and veterans, and many of these
businesses are located in rural areas.
Small businesses owned by minority, women, and veterans
face a unique set of challenges, ranging from raising adequate
financing, to building social capital, to finding the effective
mentors. Rural businesses, however, while facing those
challenges, also tend to face a different set of challenges,
most notably, access to reliable and affordable broadband
service.
Today, more than 24 million Americans lack access to high
speed internet, the vast majority of whom live in rural
communities. When comparing urban and rural broadband
development, 97.9 percent of urban America has access to both
fixed and mobile broadband, while only 68.6 percent of rural
citizens have the same access.
The lack of a solid business case for rural broadband
deployment remains a certain reason for what is often referred
to as the `` digital divide.'' Large telecommunications
companies have little incentive to invest in broadband
infrastructure in areas with low population density. Instead,
small telecommunications carriers are far more likely to invest
in rural communities, often because they are communities.
Frequently, however, these small firms face numerous challenges
in their efforts to increase broadband access.
Small businesses specifically require access to reliable
and affordable technology to compete with larger competitors.
According to a recent study, digitally advanced small
businesses were shown to be more than three times likely to
create jobs and experience revenue growth at a rate four times
higher than small businesses who do not employ technology. Yet,
despite such outstanding returns, many small businesses do not
take full advantage of the technologies available to them.
Often, this is due to owners not realizing the benefits of such
tools offered to them, or simply lacking access to reliable
technological resources as a result of cost or location.
Today's hearing will allow us the opportunity to further
discuss these and other challenges that businesses owned by
minority, women, veterans, and rural Americans face while also
exploring potential ways to improve and elevate these issues
moving forward.
I look forward to hearing from our witnesses, I again
apologize for my tardiness, and to having a productive
conversation.
Thank you, Mr. Chairman. I yield back.
Chairman KIM. Thank you. I look forward to working with you
on this Subcommittee to do what we can for small businesses.
And I have to say I am just in awe of your experience, the
great success that you have had over your career, your
particular knowledge about small businesses. I think it is
going to add a tremendous amount of expertise to this
Subcommittee, and I am looking forward to working with you on
that.
Mr. HERN. Thank you.
Chairman KIM. Why do we not get moved back to the witness
panel?
I want to move it over to Ms. Pinder, if you do not mind.
You are recognized for 5 minutes.
STATEMENT OF SHARON PINDER
Ms. PINDER. Good morning. I am Sharon Pinder, and for the
last 4 years I have been the president and CEO of the Capital
Region Minority Supplier Development Council. Good morning,
Chairman Kim, Ranking Member Hern, and distinguished Committee.
I thank you for the opportunity today to have this
conversation.
Today I am actually in real awe as I look at the picture of
the late Congressman Parren Mitchell on the wall when he was
Chairman of the Small Business Committee. I think about 40
years ago, and the foundation of all MBE programs that exist
today, Public Law 95-570. And so as we look at the basis of the
foundation of MBE programs and its challenges, we will talk
about day, they (challenges) still exist 40 years later.
The Capital Region Minority Supplier Development Council,
is the nation's certifying body for the private sector created
on the heels of civil unrest in the late 1960s, our mission is
to certify, develop, and advocate for minority businesses.
The Capital Region Minority Supplier Development Council
(my particular territory) is the State of Maryland, District of
Columbia, and Northern Virginia. In addition to that, I operate
two Minority Business Development Agency (MBDA) Centers. One is
the MBDA Business Center Washington D.C., and the other one is
the only federally funded center, federal procurement center.
Yesterday, I was talking to a group of minority businesses
and I just arbitrarily asked the question, ``What are your
issues''? ``What are the problems that you face as
businesses''? And without script, just generally what they said
to me was (1) capitalization or the undercapitalization of
their businesses; (2) not having that network or those
relationships; and (3) not being able to navigate as you look
at contracts opportunities.
As we look at the 21st century, many programs and ideas
aimed at leveling the playing field have existed for over 40
years, and across this country we witness enormous gaps that
exist between the current measures of minority and women
availability and number of relative size of minority-owned
firms that you would expect to exist across the country. These
gaps are not without severe consequences for economic health of
the country as a whole.
When minority businesses thrive, communities of color
thrive as well. Diverse businesses which are more likely to
hire local and employ people of similar backgrounds work as
powerful forces for economic development. Communities of color
will become the majority in 2044 or before. And how minority
businesses fair will impact the sustainability and strength of
our nation.
Our nation's economic history is rich with examples of
public policy and government actions facilitating the spirit of
entrepreneurship and directly contributing to the success of
capitalism. At critical junctures throughout the
industrialization of America, the Federal Government has
proactively redirected the flow of commerce and in effect has
launched the birth of new giants of American industry. From the
issuance of Federal land grants that were essential to spurring
the growth of railroads and to breathing life into the
telegraph and telephone industries, from granting the licenses
and broadcasting frequencies to radio and television companies,
and from the construction of Federal highway systems to the
creation of aviation and aerospace programs, the government has
been a willing partner in forging a path for new industries.
For example, the adoption of airmail as the primary mode of
transportation for the U.S. Postal Service consequently aided
in contracts to a number of airlines and placed them in a path
that they became really successful in the private airline
industry.
Due to time, I am going to skip down to the next part of my
testimony.
So what we should consider that timing is everything and
that this is a critical juncture in our history with an
opportune time to use the model of the past for purposeful and
intentional support from the government. Today's minority
businesses can be tomorrow's moguls, whereas past
discriminatory practices prevented their participation in
building some of the nation's top industries because quite
frankly minority businesses were not at the table when those
industries were born. There is an opportunity now by which
minority businesses can benefit by being at the table during
the infancy of some of today's emerging industries and
technologies. As in the past, partner with the government and
as that industry grows, those minority businesses will grow as
well. Thank you.
Chairman KIM. Thank you for that. And I agree with you.
Timing is everything. And we are at a critical juncture, which
is why we were grateful to have your expertise here today to
help us think through the way forward. So thank you so much for
that.
Mr. Leghorn, I want to turn it over to you. You are
recognized for 5 minutes.
STATEMENT OF DAVY LEGHORN
Mr. LEGHORN. Chairman Kim, Ranking Member Hern, and
distinguished members of the Subcommittee, on behalf of our
national commander, Brett R. Reistad and the nearly two million
members of The American Legion, we thank you for the
opportunity to testify today on exploring challenge sand
opportunities faced by veteran businesses.
In our testimony, we covered a broad spectrum of topics
from Federal contracting to entrepreneurial development
programs and access to capital. We would like to dedicate the
balance of our time this morning to just two issues.
One detriment to the veteran small business industrial base
has always been the misinterpretation of legislation that has
designated SDVOSBs as a preferred contracting group. In
legislation from 1999 and 2003, Congress gave SBA and other
agencies broad business development authority to help veterans.
Unfortunate, the SBA and FAR Council announced in 2005
rulemaking comments that government-wide SDVOSB program was for
established businesses and was not meant to aid in development
for new businesses.
The Kingdomware decision affirmed the intent of the SDVOSB
set-aside goal in the Veterans Entrepreneurship and Small
Business Development Act of 1999, was to encourage small
businesses and was not intended for the purpose of fulfilling a
quota. The Supreme Court opined that the goals exist to provide
real opportunities for service-disabled veterans and that the
subsequent enactment of the Veterans Benefits, Health Care, and
Information Technology Act was ancillary in nature to the
Veterans Entrepreneurship and Small Business Development Act
and shares the same intent.
This is significant because agencies are now reminded that
this reasoning applies to both the Small Business Act goals as
well as goals under agency-specific laws like the Veterans
First Contracting Program at VA. The American Legion had hoped
that the outcome of Kingdomware would force SBA and the FAR
Council to revisit the rules of the Veterans Entrepreneurship
and Small Business Development Act. This has not occurred. To
this end, The American Legion asked Congress to encourage SBA
and the FAR Council to carry out their business development
authority.
Further, the Kingdomware decision signaled the Supreme
Court's approval for a model of veterans first or service-
disabled veterans first to exist in contract set-aside and
preference programs. Congress can now extend this model
government-wide in a Small Business Act or an agency-specific
legislation.
Additionally, The American Legion would like to discuss our
support for SBA's entrepreneurial development programs. Since
2012, the Boots to Business curriculum taught during the
military's Transition Assistance Program has been very
successful. Since its implementation, Boots to Business has
been the litmus test that has convinced veterans to launch
their business or to delay the process until they are ready.
In the 2019 National Defense Authorization Act, there was
an attempt to make at least one of the TAP capstone courses
mandatory. The American Legion supports this effort and hopes
this will expose more service members to SBA and their
grantees.
The American Legion believes more service members should
have access to SBA programs. Currently, National Guard and
reservists are not eligible for veteran entrepreneurship and
loan programs until they are activated under Title 10. This is
why The American Legion supports legislation that would amend
15 USC to extend the eligibility for veteran-focused SBA
programs to service members who have been ordered to perform
active service for more than 30 consecutive days.
Increased utilization of SBA's veteran-centric programs
will require more veteran business outreach centers (VBOC). The
American Legion supports the creation of more VBOCs.
Puerto Rico, Guam, Virgin Islands, and American Samoa are
often overlooked for veterans programs and services, despite
the heavy military presence and recruitment efforts that occur
there. This is why we support the Puerto Rico Small Business
Assistance Act. The American Legion asks this Committee to
authorize VBOCs in Puerto Rico and other underserved areas
where veterans reside.
In conclusion, Chairman Kim, Ranking Member Hern, and
distinguished members of the Committee, The American Legion
thanks you for the opportunity to explain the position of
nearly two million members of The American Legion, and we look
forward to any questions you may have.
Chairman KIM. Thank you, Mr. Leghorn. That was very
informative.
I want to turn it over to Mr. Romano. You are recognized
for 5 minutes.
STATEMENT OF MICHAEL ROMANO
Mr. ROMANO. Thank you, Mr. Chairman.
Good morning, Chairman Kim, Ranking Member Hern, and
members of the Subcommittee. Thank you for the opportunity to
testify today.
My name is Mike Romano. I am the senior vice president at
NTCA-The Rural Broadband Association. We represent
approximately 850 small businesses that provide broadband in
rural America.
Our hope today is to offer a helpful perspective as a
complement to the discussion of underserved areas and
populations by my fellow witnesses. The capital-intensive
nature of building infrastructure is particularly challenging
in light of the deeply rural, sparsely populated areas NTCA
members serve. Yet even as our members' rural broadband
networks are difficult to build and maintain, they are
essential to ensure that other small businesses and consumers
in rural America can connect with the rest of the world.
Indeed, we believe that a key to helping underserved
communities of all kinds in the 21st century is to deliver 21st
century connectivity--high-speed broadband upon which users can
rely to invest in and operate their own businesses to create
jobs and provide opportunity.
Investing in broadband has far-reaching effects for urban
and rural America alike, creating efficiencies in health care,
education, agriculture, energy, and commerce. America needs
rural broadband not only to help farmers efficiently produce
crops sold across the U.S. and around the world, but to help
small businesses of all kinds participate in the national and
global economies and to help all rural citizens experience the
life-changing benefits of distance learning, telemedicine, and
teleworking.
This task of connecting everyone, however, is easier said
than done. These challenges can present in different ways in
different parts of the country for different communities of
users. In rural areas, communities are more likely to be
underserved from a broadband perspective because the economics
of connecting them are difficult, if not impossible to
overcome. Distance and density present physical challenges
unlike any other for the business case of deploying and
sustaining connections. To compound the business case further,
rural areas are on average poorer than many urban areas and
have lower broadband adoption rates.
Despite such challenges, NTCA's small business members have
worked to connect rural America through an effective mix of
entrepreneurial spirit, community commitment, and Federal and
state support programs. Most NTCA members live and work in the
communities they serve. They therefore have ever incentive to
upgrade networks that connect their workplaces, their kids'
schools, their libraries, and their hospitals. But as I
mentioned, the business case is challenging and complicates
greatly both access to and use of capital.
This is where Federal and state programs play a key role.
For example, the Federal Universal Service Fund (or USF)
enables and sustains communications infrastructure in rural
America, helping carriers make the business case needed to
justify loans or use of other private capital. Although the
USF's effectiveness was hampered for years due to arbitrary
caps and regulatory uncertainty, the FCC responded late last
year to consistent calls from hundreds of members of Congress
on a bipartisan basis, calling for an infusion of resources and
other improvements. It is our hope that the bipartisan reforms
adopted by the FCC will unleash a new round of broadband
investment in rural areas and help to sustain the networks
already built.
It is important too that the USF programs involve more than
just helping connect rural areas. More than two decades ago,
Congress wisely structured the USF as a comprehensive umbrella
with components that seek to address connectivity concerns for
discrete sets of potentially underserved populations through
coordinated programs--schools and libraries, low-income
consumers, rural healthcare, and high cost support for rural
networks generally.
Indeed, in helping to make sure rates for services are
affordable on rural networks, the high cost program of USF
helps Americans living in rural poverty afford better access to
communications. We therefore believe the Federal universal
service mechanisms as a whole represent a well-thought,
comprehensive strategy aiming to ensure that every American--
regardless of the specific challenge that renders them at risk
of being unserved or underserved--will be connected.
The Rural Utilities Service (or RUS) also plays a
significant role in helping small broadband providers access
capital to deploy infrastructure in areas where returns on
investment are measured in decades. Congress has expanded the
role of RUS and rural broadband deployment through significant
resources for new broadband loans and grants. These additional
funds are welcomed and it is now important to ensure that the
USF and RUS and other programs are coordinated and used as
efficiently as possible.
Much has already been accomplished in connecting rural
America. For example, 70 percent of NTCA's members' customers
already have access to 25/3 megabits broadband which the FCC
deems to be the standard at this point for broadband, and many
have faster connections, even up to gigabit service.
But much work remains, too, especially in the areas not
served by smaller operators like those in our membership where
a digital divide exists.
We look forward to working with your Subcommittee and your
congressional colleagues to ensure that we can address the
connectivity needs of underserved and unserved areas and keep
connected those areas that are fortunate enough to be served
today. Thank you.
Chairman KIM. Thank you. And I just wanted to thank again
all four of you for your testimony here today.
I will certainly start moving forward with turning it over
to my distinguished colleagues in just a few minutes but I did
want to just start by asking a few questions myself.
I want to start by saying I come into this position with a
lot of humility. You know, I have a lot to learn. All of us
have a lot to learn about what it is that we can do to serve
small businesses, and the four of you, amongst many others,
bring that kind of experience that we need to keep hearing
about.
I joined this Committee, and this was a priority of mine
because my district in New Jersey is a small business district.
You know, my district has, from the largest employer, a joint
military base, but all the small businesses that continue to
serve the base or are a part of both Burlington County and
Ocean County.
My priority is always to protect these military families
and, veterans living in my district in particular. And less
than 3 months ago, SBA and the Federal Reserve Bank of New York
released a comprehensive report on the state of
entrepreneurship for military veterans, and it is quite frankly
concerning. The report found a generational decline in veteran
entrepreneurship with fewer young veterans owning businesses
than past generations. At the same time we are now beginning to
see veterans owning businesses at lower rates than nonveterans.
I want to ask unanimous consent to submit this report to
the record.
Without objection, the motion is agreed to.
We know that historically the opposite has been true, that
veterans have been generally more entrepreneurial than
nonveterans. Of course, the skills gained during military
service, teamwork, discipline, perseverance, a strong work
ethic and crisis management all are important parts of the
equation and those skills certainly have not changed.
So Mr. Leghorn, I want to build off of your very
informative statement. I want to ask you, just taking a step
back, what has changed? You know, why in your experience are
fewer young veterans launching businesses and having
difficulties with access to capital and the financing
shortfalls? I just wanted to hear from you that bigger picture.
Mr. LEGHORN. Thank you for your question, Chairman. I think
the main reason why we are not seeing as many veterans get into
small business these days and embrace that entrepreneurial
spirit is because of the recession and we are still kind of
climbing out of the recession. A lot of these folks are very
hesitant to take risks right now. As the economy improves, I
hope that this is a trend that will be reversed.
In terms of lending, I think one of the rather cool things
that have happened since the decline of regional and community
banks is that lending has kind of diversified and this is a
trend we would like to see a lot more of and I think when the
veterans do come back and start their own businesses the
lending field is going to be very different for them and it is
going to be very conducive to starting new business.
Chairman KIM. Thank you for that.
Based on what you were saying, what we have heard from all
four, not every business owner experiences the same struggles
when starting or growing a business. So Mr. Leghorn, just one
final follow up. What are some of the obstacles unique to
veteran startup companies? I want to get a better sense of what
you feel like is particular obstacles or opportunities that are
being faced and things that we might be able to do to support.
Mr. LEGHORN. The main thing that hampers veteran-owned
small businesses is collateral and we are generally cash poor.
You know, and that is why folks like what I spoke about before
with the diversity of lending and CDFIs are so important for
the veteran community because normal bank products generally do
not work for us and larger banks are less likely to make 7(a)
loans to folks without collateral.
Chairman KIM. Well, thank you for that.
I want to make sure we turn it over to my other colleagues
who I am sure have very insightful questions.
So Ranking Member, Mr. Hern, I want to turn it over to you.
You are recognized for 5 minutes.
Mr. HERN. Thank you, Mr. Chairman.
As an opening statement to your testimony, I will tell you,
I look around. I think I may be the oldest up here. I have been
creating jobs for a long time. I know that. First small
business 1985. I will tell you, also having started a bank and
still in banking, I sat on the board until I got this gig in
November and I had to resign that board. But I chaired the Loan
Committee for 10 years. And as you probably can imagine, I have
a tremendous heart for small businesses and people who want to
take that journey.
Mr. Leghorn, you said your problem with your folks are lack
of collateral and cash poor. I will tell you that represents
about 99.9 percent of the folks out there that have an idea, is
how do I get that idea off the ground? So I would say that is
probably ubiquitous to everybody that is trying to create a
business for the first time.
I will tell you, you are so right that there are a lot less
community banks today than there were 15-20 years ago. And
Dodd-Frank was really the catalyst to that because right now
community banks over the last 5 years are hiring a lot more
compliance officers than they are actually lending officers
because you still have to make money in the banking business
and you have to also comply with Federal Government
regulations.
So, you know, you all have to work within the banks. The
banks are very competitive. They are trying to loan to
everybody and they still have to meet the creditworthiness that
is required of them of the Federal Government because they are
monitored relentlessly, audited by the Federal Government and
by their banking institutions in their states. And so as we
look at this, you know, we have got to figure out how to help
folks get mentored, and I think your agencies do that. How to
present a business plan, because everybody has to look at
everybody as if there are no color, there are on genders, to
actually make a loan. Because we have to have the ability to
repay our loans, either through a guaranteed process through
the SBA, or if it is a traditional loan, which many are made,
there obviously has to be the ability to actually function and
make that loan work.
Ms. Pinder, could you tell me, since we are talking about
this mentorship, could you tell me how you do that with the
folks that you represent in getting them off the ground if they
come to you with an idea?
Ms. PINDER. Our organization is made up of the Fortune 500
type companies of corporations. So we do not necessarily look
at startups. And so when a startup comes to us, our question is
``Are you ready to do business with these corporations?'' And
if they are not ready to do business, offer building capacity
support. And so startups, depending upon the industry, because
sometimes industry if it is like information technology or if
that is the idea, may attract more equity (funding) kind of
things. But to answer your question, we do mentor companies in
terms of getting them prepared to do business with our
corporations. And we do that in a number of ways.
We have a MBE Academy. We have educational and training
programs to help people become, at the end of the day,
competitively viable.
Mr. HERN. Okay. Mr. Romano, more and more people today,
usually they are sole proprietors, they do not really have
employees. They have an idea and to go from being an idea to
having multiple employees, which lends itself to usually going
into an urban area, if you live in the rural area which many of
Americans do, especially throughout the Midwest, how does what
you are trying to accomplish, putting broadband in rural areas,
how does that help them make that transition from an idea to
concept of starting, making money, getting contracts and work,
to getting employees?
Mr. ROMANO. Thank you, Ranking Member Hern.
I would say the first thing is if you are looking to locate
a business, one of the first things we hear from relocation
firms or from folks looking to get something off the ground is
what kind of connectivity do I have? Because whether it is
obtaining supplies, finding customers, finding markets, that
connectivity is critical.
One of the programs we have started is called Smart Rural
Community, and it is really intended to focus on not just the
fact that you have got networks out there but sort of celebrate
and accentuate the uses of them--focusing on what are people
doing to generate economic development, job creation, and
therefore be able to stay in a rural area rather than have to
move necessarily to the city. We want people to be able to
choose where they live rather than be forced to live in a
certain place based upon what kind of access they have.
Mr. HERN. Thank you.
One last question for, is it Ms. Bilonick? Oh, wow, two in
a row. That is good.
Could you help me understand, and I apologize that I missed
your opening statements, but could you let me know what is your
default rate of when you are trying to lend and get folks
started?
Ms. BILONICK. So we have typically stayed below a 10
percent default rate, which we feel is excellent given the fact
that we are giving loans to what folks would call sort of the
most risky population out there. That is startups. That is
folks with poor or no credit. And so we are very proud of the
default rate.
Mr. HERN. That is incredible.
Ms. BILONICK. Yeah, thank you.
Mr. HERN. Thank you.
Chairman KIM. Great. Thank you for that.
I want to recognize my colleague from New York, Congressman
Delgado.
Mr. DELGADO. Thank you, Chairman, Ranking Member. Thank all
of you. I find your testimony very, very informative.
I am going to get right to it. I have a few questions.
So in parts of my district, Upstate New York, Hudson
Valley, Catskills, very, very rural area. I have driven by
signs that say broadband access coming soon. It is a sight that
is hard to imagine in New York, in the USA, in the 21st
century. I cannot overstate how big an issue this is for small
businesses and communities in my district and Upstate New York.
Mr. Romano, your testimony very powerfully speaks to that. In
today's global economy it is unthinkable that startup
businesses; mom and pop shops; young students; small dairy
farmers; and innovative, sustainable ag operations are being
left behind. Left behind because of where they live and
operate.
Now, my state has made significant investments of late to
bridge this gap, but as we look to a more connected future, I
think it is critical that we also work to ensure equitable
broadband access. And again, as you note in your testimony, the
minimum service thresholds today will be unworkable for folks
tomorrow. We should be aspirational as we think about the
quality and speed of service folks need to keep up with our
rapidly changing economy.
So with that in mind, Mr. Romano, what is an acceptable
speed of service? Not by definition, but in practice. And how
can we ensure rural communities like mine do not get left
behind again?
Mr. ROMANO. Thank you, Congressman.
We have a number of members in your district and I know
that they are doing a very good job with broadband but they
also look around and see the challenges you are talking about.
New York is taking important steps to try to address that.
It is somewhat frustrating sometimes when you focus on a
static speed definition. You're building a network that is
financed for and then intended to last for decades, 20 years.
We really believe that you should be looking more at the future
proof utilization of the network, the applications that are
going to be utilized, not aiming for a speed standard by date X
but thinking about will that network be scalable to fulfill
demands that we might expect reasonably 10, 15, 20 years from
now, telemedicine applications, 4K TV definitions, 8K and
beyond. So we really like to focus more on the future-proof
nature of the technology underlying the network than speed at
any given moment in time specifically.
Mr. DELGADO. And I appreciate your desire not to want to
put a number out, but is there a range?
Mr. ROMANO. I would say we should be aiming for networks
that are capable of delivering at least 100 megs today and
scalable to hit gigabit and beyond tomorrow.
Mr. DELGADO. Good.
Another issue, again, this is for you, Mr. Romano, is
broadband mapping. Current mapping practices rely on census
blocks, meaning that if just one home in that block has
broadband, the entire area is considered served. In rural
areas, one census block can span several counties. Can you talk
a little bit about the importance of establishing an accurate
national broadband map?
Mr. ROMANO. One of the most significant problems in
identifying where broadband is needed is false positives.
Overstatement of coverage that leads to--in census blocks that
might be miles wide--one customer on one part of one location
denying service essentially to a customer miles and miles away.
Movement towards a more granular or accurate map is going to be
important. I would submit that granularity and accuracy are not
the same thing. We need to both get more granular and get more
accurate. Unless you are going to independently verify the
submissions by providers in question, I believe you are always
going to need sort of like what RUS is looking at now, a
challenge process or some way of having a verification of no
matter what kind of data is submitted by a provider, ultimately
having the opportunity to say, yeah, they are there or no, they
aren't. That is the only way we are going to get to make sure
that no customer is left behind simply because they happen to
live in a geography where somebody else claimed to serve.
Mr. DELGADO. Thank you. Thank you.
And I have just one more question for you, Ms. Bilonick. I
really appreciate your remarks.
I want to speak to some of the limitations you outlined for
CDFIs. And putting aside the impact of Dodd-Frank, you do list
a couple of other items that you think pose stress or strain on
your ability to do the work that you are doing. Specifically,
and I just want to note, too, that in my district the work that
your kind of program provides has had a tremendous effect and
has provided a lot of opportunities, particularly for folks
actually just north in the Albany area. So I really appreciate
that work.
But specifically, you talk about nonexistent marketing
budgets, challenges to capitalizing on your loan funds and/or
sustaining the high overhead costs associated with labor-
intensive loans we underwrite.
Could you specifically tell me what we can do to help
address these factors?
Ms. BILONICK. So I think to start, the marketing issue is
an issue that all CDFIs face. I think anyone who has worked in
the industry and gone to a dinner party knows that once you
tell someone that you work for a CDFI it is then like a 20
minute later conversation describing what CDFIs do, the
coverage in the whole United States and the impact that we
have.
So one thing, you know, specifically, I think, and I was
actually speaking with OFN about this as well, is just a
broader marketing campaign about the existence of CDFIs. I
think there are so many clients that come through our offices
that say we had no idea this existed, if I had only known 10
years ago, you know, fill in the blank. But it is just sort of
the best kept secret out there and we really feel like that,
and maybe that is more at the local level in doing PSAs and
some things we could certainly engage our local governments in
as well.
And then with regard to capitalizing our loan funds, I
would just, I would not say beg but I would request that you
please keep the line items for CDFI fund in Treasury and the
Small Business Administration be fully funded because that is
something that really impacts our bottom line it is actually
the lowest cost capital that we can access in terms of debt to
then relend out.
And then my last issue around the labor intensivity of the
work that we do, we are really dependent on the philanthropic
community, whether that be government grants or corporate
foundation grants that we rely on just because the work that we
do lending with small businesses is so intensive. You know, if
you walk into a bank you may meet with a loan officer and then
they ship your application to a central office located
elsewhere and that is sort of the end of the story and you may
have a really quick turnaround, but there is not that face to
face and personal experience. For us, we are typically working
with people who have a very big story behind what they are
presenting on paper and then in addition to that what they are
presenting on paper requires a lot of support from us to
actually get from their idea phase to like we help people put
together their projections for their loan applications to us.
So we are doing a lot of technical assistance just in the
underwriting process, so it is not, you know, we do have an
algorithm that we use internally but it is not like a spit it
into the machine and get a response, which is the beauty of
CDFIs, and that is how we are able to do the loans that we are
able to do, but it costs a lot of money and it costs a lot of
manpower even at our most efficient.
Thank you so much. Thank you.
Chairman KIM. Great. Thank you so much.
I want to now recognize the gentlelady from American Samoa.
Ms. RADEWAGEN. Talofa. Good morning.
I want to thank Chairman Kim and Ranking Member Hern for
holding this hearing. I represent the territory of American
Samoa. We have the highest enlistment rate in the United States
Army, and because of that we are also among the highest veteran
rate per capital. Veterans and serving reservists own and
operate businesses throughout my district, so I would like to
direct a couple of questions to you, Mr. Leghorn, though you
are all welcome to answer if you have any additional input.
What resources are veterans currently lacking during their
business creation process?
Mr. LEGHORN. Thank you for your question, ma'am.
One of the issues with the military's Transition Assistance
Program is that it overly focuses on making resumes. The
problem with American Samoa is that when veterans go back to
American Samoa there are not any employers there for them to
give a resume to. What American Samoa really needs is a VBOC so
that there can be economic development and veterans can go back
and actually create jobs. So that is definitely something I see
that needs to happen.
Ms. RADEWAGEN. Okay. Your testimony highlights challenges
associated with veteran participation in the Federal
contracting process. Can you please expand on what those
challenges are and any solutions you would recommend? And what
role does mentorship play in veteran entrepreneurship?
Mr. LEGHORN. So I think there were two questions there. I
will tackle the first one. I will parse them apart.
So in terms of participation in Federal contracting, like
we mentioned in our testimony, the foundation legislation that
created SDVOSBs as a preferred contracting group was focused on
established businesses and it was determined at the time that
it was not meant for business development. So what that means
is that in Federal contracting right now we see a huge sum of
money being given to very few small businesses, whereas we want
the business development aspects to lead the program towards
giving more money to a larger pool of veteran-owned small
businesses.
And the second part of the question was regarding what we
are doing mentorship-wise?
Ms. RADEWAGEN. Yes.
Mr. LEGHORN. Okay. So The American Legion is one of the few
organizations that offer small business counseling. We help you
with your governance documents. We help you onboard to VA's Vet
First program. And we also provide advocacy and also we do a
lot of events that bring government officials into the room
where veteran small businesses can interact with them. So
pretty much advocacy, counseling, and events is what we do.
Ms. RADEWAGEN. Thank you.
And so as a follow up to that, what additional resources
are necessary to foster increased mentorship opportunities?
Mr. LEGHORN. Can you clarify if you meant what The American
Legion needs?
Ms. RADEWAGEN. Well, what additional resources are
necessary to foster increased mentorship opportunities? That
would be part of it.
Mr. LEGHORN. Well, I definitely think The American Legion
could use another small business counselor and advocate like
me. I think on the government side we definitely want more
entrepreneurial development programs for veterans. We want the
programs to have more of a business development aspect. We want
access to the 7(J) program, and definitely more VBOCs. When we
are talking about mentorship, VBOCs are where the rubber meets
the road for veterans.
Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
Chairman KIM. Thank you.
I want to now recognize the gentlelady from Kansas,
Congresswoman Sharice Davids.
Ms. DAVIDS. Good morning. Thank you for your time, and I
really enjoyed reading through your testimony. I know I missed
a significant portion of it.
But there are a couple of things, so I am actually in the
Kansas City metro area in Kansas and I always love to talk
about how entrepreneurship is baked into the DNA of the
community that I live in. And because of that, one of the
things that I have seen a lot of is this idea of an ecosystem,
and actually, I am sure that you all have talked about this a
lot, is the ecosystem that is needed to support entrepreneurs
and small businesses as they develop and grow from very small
businesses to small businesses that can do contracting with
larger organizations.
Can you talk a little bit about the, maybe coalition, if it
is coalition building that you have done? I know the OFN exists
and there are a few other spaces. And actually, this is
probably something that all four of you could maybe say a
little bit of something about. I think that when we look at
statistics, like the Kansas City Fed did a report not too long
ago showing that across the country African American women are
the highest, fastest growing segment of entrepreneurs, and I
know in Kansas City, the Kansas City area, we have got an
ecosystem that can help support folks, like law firms, SEED Law
in Kansas City does a lot of work with small businesses. We
have got a number of other organizations that help people from
CDFIs until they are ready to take on larger contracts.
Can you talk a little bit about how we can look at, I do
not know if it is metrics? I do not know what it is, but how we
look at how we are supporting the entire ecosystem, not just
individually CDFIs or mentoring programs. You cannot mentor
your way out of not having access to capital. So can you talk a
little bit about that?
We will start here with Ms. Bilonick. Thank you.
Ms. BILONICK. So I would just say we have been very lucky
in that we have had at the local level and national level sort
of preexisting coalitions like OFN, like the National
Association for Latino Community Asset Builders. At the local
level we are part of a coalition called the Coalition for
Nonprofit Housing and Economic Development, which is a
longstanding organization that has people both from the housing
and small business development side of work here in Washington,
D.C.
I think what is challenging, at least from my point of
view, and I do not purport to speak for the entire panel, but
from my perspective I think the coalitions that exist between
like organizations are there and are in place. The more
challenging piece is forming coalition and community between
needed partnerships that are in differing spaces. For example,
you mentioned like the legal field. So we have a partnership
with the D.C. Bar Pro Bono Legal Clinic, but that was sort of
happenstance because someone on our board is the person that
leads that clinic. And so I think fostering those kinds of
relationships would be extremely valuable for the ecosystem.
Like, those of us who are operating in the same space, we know
each other, we see each other at meetings. You know, we work
together. But I think the more challenging hurdle for us to
overcome as an ecosystem is really bridging those networks that
are sort of outside of our comfort zone or outside of our usual
suspects because those networks, you know, I mean, I would even
say for myself, the people on the panel are not people that I
work with on a daily basis and we could all benefit from
working together. And so, you know, that is where I think there
is a big challenge.
Ms. PINDER. Again, thank you for your question.
I think what we need to do is recognize that some groups
are different. You talked about African American women being
the fastest growing segment in entrepreneurship, and they are.
And so when you then think about wraparound services for
businesses, it is not a cookie-cutter approach. I always tell
businesses that they need the ABCs. That is the attorney,
banker, and the CPA. Right? And so once you have that
foundational kind of activities understand that is an integral
part of your business it helps. But I agree with my colleague,
there are some intersections of resource that are available.
Whether you are the person that wants to kick the tires and see
if an idea works, well, there are resource centers for that,
whether that is PTAP, SBRC, and that kind of thing. And so just
an understanding of those issues that businesses face, in
particular businesses of color, you know, and looking at
microlending, for example, looking at alternative methods of
financing businesses, bootstrapping is, yes, universal in terms
of people starting businesses, but the long-term effect of
businesses that are bootstrapped, which mean started without
capital on minority businesses is greater than other
businesses. And so just recognizing what those nuances are
relative to groups of entrepreneurs.
Chairman KIM. Ms. Davids, do you want to follow up?
Ms. DAVIDS. Well, the time ran out.
Chairman KIM. Yeah, I mean, I am happy to allow it.
Ms. DAVIDS. Do you mind? Yes, do you mind if we take the
time? Thank you.
Mr. LEGHORN. Thank you for your question, ma'am. And I
believe part of your question was regarding metrics. And that
is the part that I really want to address.
From our testimony, we discussed how SBA and the resource
partners were really reliant on metrics drawn from the 7(a)
loan program. The 7(a) loan program has diminished in
utilization coinciding with the disappearance of regional and
community banks. So we do not believe that the 7(a) loan should
be used as the primary metric anymore. I do not know what other
metrics might be but we have to find other ways of getting
information aside from pulling it all from 7(a) loans when it
comes to job creation and lending.
Mr. ROMANO. And to pick up on that point about metrics,
there is no shortage of metrics in the telecommunications
industry, but one thing I think that could be relevant here is
the areas our members serve, a town of 5,000 people is a
metropolis. And so any small business growth there accrues to
the benefit of the community as a whole because there are not
that many businesses to start, and a lot of people working from
home even as well, telecommuting, if you will, teleworking.
Some way though it occurs to me that tracking sort of small
business growth in these deeply rural areas paired with, quite
frankly, and there are statistics separately on this, what
kinds of increases in connectivity--what has made it possible
for the small businesses to either establish, relocate, or grow
in those deeply rural areas--I think is the kind of metric that
would be relevant to see the better broadband somebody gets,
how much better do they do in terms of building and growing
small business.
Ms. DAVIDS. Thank you.
Chairman KIM. Thank you so much. Thank you again to all the
witnesses for taking time out of your schedule to be with us
here today, and I want to thank my colleagues as well for their
time and for their insightful questions and points.
As we have heard today, we certainly have our work cut out
for us. As we are striving to create more opportunities for
underserved businesses, small businesses, from accessing
affordable capital to being able to meaningfully compete for
contracts in the Federal procurement marketplace,
underrepresented entrepreneurs have had the deck stacked
against them for too long and it has kept them from creating
good private sector jobs in their local neighborhoods.
I look forward to working with my colleagues to find policy
solutions that will empower them to create the good-paying jobs
of the 21st century.
I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
And if there is no further business to come before the
Committee, we are adjourned. Thank you.
Mr. HERN. Mr. Chairman, can I say one thing?
Chairman KIM. Yes, please.
Mr. HERN. I just want, because in business you are about
getting results, and I know that you are probably going to
leave here and feel like you testified and nothing really got
done. But we will work hard on this because it is so important
to our nation and I said this in our Full Committee, that we
cannot have big businesses in the future if we do not have
small businesses today because we are the incubators, the small
businesses, for all the big businesses that we have in American
today that put so many people to work. So I know you are not
asking to create more programs. You are asking us to help make
these better and secure them. And so I assure you that I will
work with my Chairman that we make that happen with the team,
that we look at every opportunity. And I am with you on the
metrics, and Ms. Davids, my colleague from Kansas. You know,
the problem in business is when you have more than one set of
books you never get anything done. So we have to find the right
numbers that measure everything because every group that is
asking us for help will say that they are the fastest growing.
And so we have to really determine the fastest growing and
where the real needs are because it is different across this
very nation and we have to make sure that we take care of
everyone to the best of our abilities. Thank you.
Chairman KIM. Thank you for that. I think that spirit and
that energy is something all of us here on the Subcommittee
feel. There is a reason why I wanted to join this Committee on
Small Business because it has a reputation of just working
together across the aisle, bipartisanship, to be able to get
things done for small businesses in America. And I think I am
looking forward to working with the Ranking Member and members
on both sides for us to be able to make sure that we can move
ahead in that productive way.
So we certainly will follow up. We are eager to get to work
and do what we can to improve the overall climate and
ecosystem, to borrow a word, for small businesses in America.
So thank you again. We stand adjourned. Thank you.
[Whereupon, at 11:23 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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Opening Statement of Ranking Member Kevin Hern
Committee on Small Business
Hearing: ``Exploring Challenges and Opportunities of Underserved
Businesses in the 21st Century''
February 7, 2019
*As Prepared for Delivery*
Thank you for yielding, Chairman Kim.
With 99.9 percent of all businesses in the United States
being classified as small, the impact that small businesses
have on our economy cannot be overstated. In my home state of
Oklahoma alone we have over 340,000 small firms who employ over
700,000 people. Many of these businesses are owned by
minorities, women, and veterans and many of these businesses
are located in rural areas.
Small Businesses owned by minority, women, and veterans
face a unique set of challenges, ranging from raising adequate
financing, to building social capital, to finding the effective
mentors. Rural businesses, however, while facing those
challenges, also tend to face a different set of challenges,
most notably, access to reliable and affordable broadband
service.
Today, more than 24 million Americans lack access to high
speed internet, the vast majority of whom live in rural
communities. When comparing urban and rural broadband
deployment 97.9 percent of urban America has access to both
fixed and mobile broadband, while only 68.6 percent of rural
citizens have that same access.
The lack of a solid business case for rural broadband
deployment remains the central reason for what is often
referred to as the `digital divide'. Large telecommunications
companies have little incentive to invest in broadband
infrastructure in areas with low population density. Instead,
small telecommunications carriers are far more likely to invest
in rural communities, often because they are their communities.
Frequently, however, these small firms face numerous challenges
in their efforts to increase broadband access.
You may ask, why do small businesses need broadband access?
Why is this a challenge to rural businesses? Simply put, small
businesses need access to modern technology to complete in the
modern marketplace. In 2018, 95 percent of Americans own a cell
phone and 89 percent of Americans use the internet. Technology
has influenced nearly every aspect of society. From
manufacturing to education, access to technology is synonymous
with success.
Small businesses specifically require access to reliable
and affordable technology to compete with larger competitors.
According to a recent study, digitally advanced small
businesses were shown to be three times more likely to create
jobs and experience revenue growth at a rate four times higher
than small businesses who don't employ technology. Yet despite
such outstanding returns, many small businesses do not take
full advantage of the techniques available to them. Often, this
is due to owners not realizing the benefits such tools offer
them, or simply lacking access to reliable technological
resources as a result of cost or location.
Today's hearing will allow us the opportunity to further
discuss these and other challenges that businesses owned by
minority, women, veteran and rural Americans face while also
exploring potential ways to improve and elevate these issues
moving forward. I look forward to hearing from our witnesses
and to having a productive conversation.
Thank you and I yield back.
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