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▶ 0:18:33okay before we get started I want to recognize uh congresswoman Scolton uh to lead us in the pledge and the prayer you rise e
▶ 0:19:49good morning to everybody uh and I now call the committee on small bsiness to order without objection the chair is authorized to declare the recess of the committee at any time I now recognize myself from my opening statement welcome to today's hearing driving economic growth SBA lending programs and the vital role of Community Banks I want to thank our Witnesses again for being here today and we our Democratic witness is going to be on Zoom I believe uh and so she's trying we're trying to get her on there but I want to know that uh we also know many
▶ 0:20:19of you traveled a long uh to long way to share your experience and perspectives and we deeply value your time and we deeply value your voice now I strongly believe believe that is starting a small business captures the true meaning of American Dream part of what makes America so great is that anyone from any background can go out on a limb with a dream or an idea to provide a new service or product to the marketplace our econom is dependent on small businesses as they are a nation's largest job creators it is our job here in Washington to be main Street's biggest Advocate
▶ 0:20:49and ensure they have the tools to succeed in today's hearing we will be exploring the triumphs and challenges of small businesses and the community lenders that provide this support report under the Biden Administration Main Street America uh endured stifling regulations record inflation and high interest rates at hindered the ability of small employers to hire workers increase wages and reinvest back into their businesses to Spur growth thanks to the return of President Trump a wave of pro business optimism swept over the small business Community
▶ 0:21:19this is new Administration has committed to not only cutting regulations across the board for small businesses and Community Banks alike but also reducing taxes and preserving the tax cuts and jobs act failing to renew the small business provisions of the 2017 tax cuts and jobs act would impact all small Employers in every corner and limit their ability to stay competitive and preserve countless Community jobs throughout this Congress and alongside the Trump Administration we will once again prioritize policies that
▶ 0:21:49support Main Street America by creating an environment where small businesses can Thrive and the full potential of Community Banks can be Unleashed finally due to tra weather delays the witness that we've said Democrats have invited the table is unable to attend in person today we've received permission from leader scalise to allow her to appear remotely and I ask unanimous consent for the letters between letter leaders scalise and I noting that this exception be entered into the record so moved so with that objection as so ordered
▶ 0:22:20so with that I yielded to my distinguished ranking member from New York Miss Velasquez thank you Mr chairman and and I want to thank you and your team for working with us on utilizing remote authority to enable our witness to testify today due to weather related cancellations uh small businesses fuel the American economy they account for more than 40% of US GDP create approximately 2third of new jobs unemploy nearly
▶ 0:22:50half of all private sector work workers yet entrepreneurs and small businesses consistently tell me that access to Capital and investment remains a pressing priority the SBA operates multiple Capital Access and investment programs to ensure entrepreneurs and small businesses have access to the financing and investment they need to grow and scale their operations these programs are essential to small employers and
▶ 0:23:21entrepreneurs especially those in our Rural and under represented communities as they struggle to obtain conventional loans and investment from a financial institution or private fund the SBA largest program the 7A program encourages SBA authorized Landing Partners to provide loans by guaranteeing a significant portion of the loan encouraging lenders to extend credit to small businesses
▶ 0:23:51that might not typically be able to obtain financing 7A loans loans strengthen local communities create jobs and move our economy forward in fiscal year 24 the 78 program supported a substantial volume of lending nationally with over 31.1 billion dollars across more than 70,000 loans A variation of the 78 program is the community Advantage Program delivered
▶ 0:24:22by Mission Focus lenders the community Advantage Program facilitates smaller 7A loans to small businesses and new businesses located located in an underserved Community I am particularly excited to hear from one of our Witnesses this morning about how the community Advantage Program is being utilized in our rural communities another 504 another program the 504 CDC loan
▶ 0:24:52guarantee program which is administered through nonprofit cdcs provides long-term fixed rate financing for major assets such as land buildings and Equipment last year the 504 program delivered almost $6,000 valued at more than $6.6 billion I look forward to discussing how we can better utilize and improve all of these programs the SBA programs
▶ 0:25:22are worth protecting especially lending programs which have proven effective and effici I in how they operate while building up Main Street in our communities I will call on the SBA um to work with us to strengthen those programs thank you a back lady y back and I now will introduce our Witnesses the first witness here with us today is Mr Justin Hooper Mr Hooper
▶ 0:25:52is the CEO and chairman of cross timers region of First Financial Bank located in Weatherford Texas Mr Hooper has more than 30 years of banking experience and began his career as a loan officer uh review and a review analysis in abalene Texas in 1997 Mr Hooper moved to Weatherford as a commercial leader in 2004 and was named Executive Vice President and Senior lender for the Weatherford region in 2012 he was promoted the president of the region in 2017 Mr Hooper serves as a board member for the Weatherford
▶ 0:26:23College foundation and Trinity Christian Academy and as a board uh president for the courta appointed special advocates for children in Parker County Mr Hooper holds a bachelor of Business Administration and finance from McMurray University and attend The Graduate School of banking at Louisiana State University I want to thank you Mr Hooper for being here with us today and look forward to our conversation our next witness here with us today is Michael Sims uh Mr Sims is a chief Commercial Banking officer of Georgia's Own Credit Union located in Atlanta
▶ 0:26:53Georgia Mr Sims has well over two decades of experience in the banking industry serving as an ex Executive Vice President for Vinings Bank uh and State Bank and Trust Company and Sun Trust Bank he is skilled in portfolio management risk management commercial lending Banking and credit analysis Mr Sim serves as a board member for the Waypoint ministry as well as a Committee Member for promise 686 an organization that mobilizes church communities to care for vulnerable children
▶ 0:27:23Mr Sams earned a ma master of business administration at the Brock School of Business at Stanford Sanford University he also holds a Bachelor of Science and finance from the University of Alabama and a Bachelor of Science accounting from the University of Alabama at Birmingham I want to thank you uh for joining us today and I'm looking forward to the important conversation ahead our next uh uh witness here with us today is Mr Frank wedr Mr wedr is an owner and operator of the Premier dog care service bowwow
▶ 0:27:53uh Mr wedig grve has uh and his wife Tamara own five camp boww uh franchises from Austin to San Antonio Texas Mr wed grve is a former senior intelligence officer with over 30 years of experience for the United States Army he has assisted with numerous uh programs during his interview during his service including the command critical survivability program for the renovation of the Pentagon and the Air Force intelligence surveillance and reconnaissance agency as an IT specialist Mr wove
▶ 0:28:23also has worked as a network engineer at the San Antonio water system a Client Services engineer as Lum Corporation and an Enterprise security engineer for information insurance at Ma maay Brown Inc uh Mr wedr is a graduate of TMI Episcopal formerly the Texas Military Institute in San Antonio Texas I want to thank you for your years of service and joining us today and I'm looking forward to the important conversation ahead I now recognize the ranking member from New York Miss alas is to briefly introduce our next
▶ 0:28:53witness appearing before us today thank you Mr chairman I would like to recognize Miss Heidi demoret who has been with mountain Finance for over 17 years she is an experienced small business lender and Community Development professional Mofi is committed to helping business businesses launch and create jobs in rural communities and I recognize and respect her for their work with businesses communities and Community Banks throughout Montana Idaho
▶ 0:29:24won and Utah thank you Miss uh deonette it is a pleasure to have you here I hope that she could get on yeah okay thanks again for all of you being here and uh before recognizing the witnesses I'd like to remind them that their oral testimony is restricted to 5 minutes in length if you see the light turn red in front of you it means your five minutes is up you're done and conclude as you quickly can and
▶ 0:29:54wrap it up uh I also want to say that you will periodically see members of this committee leaving coming back going back and forth we all have other committees that we're involved in so if the if the ranking member gets up and leaves or I get up and leave we're not mad at anybody we'll be back okay all right so with that now I would like to uh recognize Mr Hooper for his five minute remarks thank you Mr chairman chairman Williams ranking member blasquez and committee members uh my name is Justin
▶ 0:30:24Hooper I currently serve as the CEO and chairman for the crosstimber region a First Financial Bank um comprised of 14 Branch offices in the Fort Worth area and further to the West in total First Financial which was founded in 1890 in abene Texas has total assets of just under 14 billion many of our locations are in rural areas just outside or just outside larger metropolitan areas of the state as Community Bankers our customers rely on the bank for working Capital Equipment purchases or potentially a mortgage
▶ 0:30:54or construction loan before turning to the broader small business lending Market I'm pleased to say that during the covid pandemic our bank participated in the PPP program in the form of almost 10,000 loans with total originations of 1.1 billion while difficult to navigate at times the program was very successful and allowed us to support the businesses in our community at a time in which there was much uncertainty First Financial Bank like many lenders enjoys a preferred lender status with the SBA this is likewise a very positive Federal program
▶ 0:31:25but over the years we have found that due to the complexities of navigating all of the standard operating procedures within the SBA programs that it was necessary to form a specialized Department in abing to manage our SBA Loans nonetheless in 2024 we originated 4 million of SBA 7A general purpose loans and 40 million of 504 SBA Loans which provide long-term fixed rate financing for major fixed assets even though we have pre-clearance being on the preferred lender list the typical
▶ 0:31:55turnaround time on SBA Loans Within within our department ranges from 45 to days of course we make many loans to large and small businesses that are not associated with any SBA programs this typically allows for much quicker processing time and in many cases loans that can be closed in days or weeks rather than months it also allows for greater flexibility in our product offerings that we can tailor to the customers needs in 2024 the bank originated 294 million in commercial real estate loans 376
▶ 0:32:25million in loans to schools municipalities and taxing entities and just over 825 million in commercial and agricultural loans the biggest problem for Community Banks is the increased regulatory burdens uh to keep Pace with new and everchanging regulations since 2021 our Personnel costs in this area have doubled and we anticipate that they will continue to rise that number sits at a staggering um estimated 7.1 million per year in addition to the Personnel to support
▶ 0:32:55our audit and compliance function we also incur legal technology and outside audit expenses which are estimated to be another $3.8 million this brings our total annual cost to manage an Ever growing compliance burden to an estimated $1 million annually not counting the massive amount of time invested by Bank Personnel such as loan officers who are not categorized as compliance staff 2025 will bring additional regulatory burdens most notably would be those associated with the implementation of the cfpb small business
▶ 0:33:25data collection rule section 1071 one from Personnel cost training costs and software enhancements necessary to achieve compliance we are estimating an annual cost of 2.1 million for 1071 alone we appreciate your leadership on that issue Mr chairman and to see that that regulation going back on judicial hold additionally with the rise of Internet Reliance and other technology oriented developments We are continuing to see Rising fraud losses in 2024 we incurred debit card losses due to fraudulent
▶ 0:33:55activity of $1.5 million check fraud losses of 735,000 which were typically forgeries and counterfeits to combat this we incur Personnel costs of 2.6 million annually as well as 3.3 million annually in software and Technology expenses the personnel and Technology expenses are necessary and have resulted in the bank stopping additional fraud that would be far in excess of the expense we actually incurred therefore between the actual fraud perpetrated and the cost to combat this it comes
▶ 0:34:25with a price tag of an estimated 8 .3 million annually there's no doubt that the rapid increase in interest rates in 2023 has resulted in much higher borrowing cost for our customers that is lingering into 2025 despite a few rate Cuts over the last year this strain coupled with inflationary pressure that is driving up La labor costs and other items for businesses is causing some to see cash flow diminish in conclusion we are fortunate to live in a portion of the state that's welcoming new residents
▶ 0:34:56every day and there's a lot of optimism in in the area in which we live um and many of our customers are contemplating new projects and new opportunities thank you thank you great timing and now I recognize Mr Sims for his five minute remarks good morning Mr chairman thank you very much ranking member Velasquez and members of the committee my name is Mike Sims and I'm testifying today on behalf of America's Credit Unions I currently serve as the chief Commercial Banking
▶ 0:35:26officer for georg's own Credit Union which is headquartered in Atlanta Georgia Georgia's Own is a Community Credit Union serving over 240,000 members across Georgia with $4.3 billion dollar in assets at Georgia's Own we pride ourselves on small being a small business lender we currently have over 571 million outstanding in member business loans including both SBA 7A and SBA 54 program in 2024 Georgia Zone was the number one ranked Credit
▶ 0:35:56Union in in terms of 7A Loan Production in the state of Georgia we currently have 153 7A loans outstanding totaling about $153 million we also make SBA 504 loans and currently have five loans outstanding totaling over $17 million like many Community lenders we saw a dip in interest in member business loans in over 2023 and 2024 as inflationary concerns caused many small businesses to pull back on Capital Access
▶ 0:36:26however we have seen a noticeable uptick in interest and applications in the 3 months since the election and expect 2025 to be a strong year the MBL and SBA loan options at our credit union allow us to work with our small businesses small business members to get them into a product that meets their needs a great example of this is the work that we did with radiant solar a woman-owned small business specializing in solar power Development and Construction also headquartered in Atlanta Georgia we were able to provide the owners with a $5 million
▶ 0:36:57SBA a 7A capline to fund their working capital needs and it helped them earn recognition as one of the nation's top producers in Sol in the Solar industry and we're currently working with them on a potential SBA 504 loan to help meet their needs one of the most pressing challenges facing Credit Unions is the complexity of the SBA program requirements while credit unions are eager to grow their SBA loan portfolios many report the administrative burden makes it extremely difficult to do so lack of internal
▶ 0:37:27expertise and high cost associated with participation also remains a significant barrier even our very experienced SBA lending staff at Georgia's Own we see these challenges as well we may hear the right message from SBA leadership about their desire to help uh Community lenders and small businesses but many times it does not always translate to the field our day-to-day experience in contacting the SBA with questions about loans can often be cumbersome and frustrating it is
▶ 0:37:57common for answers to take questions to questions to take days or weeks or for us to experience delays while the SBA Works to verify information about our borrowers as a preferred lender under the sba's delegated authority we believe we should be given greater leeway to operate so we can get Capital to our small business members we also believe that the SBA should provide more targeted training and technical assistance to community lenders and Credit Unions have expressed a strong interest in working with the SBA to enhance their operational
▶ 0:38:28capabilities in this space regular webinars workshops and ond demand training resources could address gaps in expertise and Empower more credit unions to to participate in the sba's lending programs we also would encourage the SBA to better use Regional Offices to engage existing program lenders and potential new lenders as well having the regional SBA offices more fully engaged in the day-to-day operational issues faced by lenders will ultimately
▶ 0:38:58help streamline inefficiencies and enable quicker access to capital for the small business members that we serve without a fully engaged SBA Regional Offices lenders are left to themselves to navigate a very challenging and often often complex SBA process finally we would encourage Congress to continue to review recent regulatory efforts that hinder small businesses small business lending from Community institutions we are also concerned about the efforts to bring more fintex
▶ 0:39:28into the SBA lending space which we believe would create more risk in the system Additionally the overly broad 1071 rule from the cfpb stands to greatly increase burden on community lenders and we applaud the efforts of chairman Williams to repeal this Ru making in conclusion small businesses are the driving force of our economy and the key to its success it's important that Congress and the SBA ensure that credit unions have the right regulatory environment to meet the needs of their small business members
▶ 0:39:59I thank you for your time and the chance to testify before you today and welcome any questions thank you I now recognize Mr wedig for his five-minute opening remarks good morning chairman chairman Williams ranking member Velasquez and distinguished members of the committee my name is Frank wve and I'm a franchise owner of Camp AOW a dog daycare service company that my wife and I became franchisees of 18 years ago and have since grown our operation to include four
▶ 0:40:29locations in San Antonio Texas and another in Austin at Camp Bowell we offer everything from Dog Daycare boarding to grooming and training within the communities that we operate our team consists roughly of 100 employees I'm also happy to share that we plan on opening up a sixth location within our Texas footprint it's an honor to be here today to give my uh perspective on the impact that the US small business administration's loan programs have on small businesses especially franchisors franchisees
▶ 0:40:59and their employees its impact to to me is near as I utilize the sba's 7A Loan program when I decided to become a franchise owner in 2007 as a retired Colonel with 34 years of uh service in the Army Reserve along with eight years in active duty I'd like to say my skill set came in handy when considering a franchise and the SBA 7 Alpha Loan program was the access to Capital that gave me the opportunity to put it to good use throughout my military career I held
▶ 0:41:29leadership positions at every level including platoon leader officer in charge commander of detachments companies a battalion in a group more importantly I became a husband a father of five and now a proud a proud grandfather of four as you can see s still is not in my nature nor the word retirement in my vernacular in 2005 about 20 years into my Army mostly reserved career I was mobilized to work at the defense intelligence agency during my first summer in Washington my wife and I discussed the possibility of our family
▶ 0:41:59spending a month here with me however one major uh challenge arose what would we do with our dog uh he couldn't join us in our temporary living arrangements and around that time my wife suggested I logged uh log into AOL and of course I'm dating myself to explore a business opportunity she' come across that business was Camp bowow a franchise that emphasized in Doggy Daycare something I'd never heard about uh but I was immediately intrigued this opportunity became a true Family Affair since I was
▶ 0:42:29still advancing in my career my wife took on the brunt of running the business I contributed after hours on weekends during the holidays and uh this was all while we were raising our toddlers which came to camp at Bowell every single day uh ultimately I knew this endeavor would teach my family the difference between working for someone else and working for oneself I believe 100% in giving back I have been awarded franchise of the Year several times I speak to many my peers every chance I get I speak to people in
▶ 0:42:59general and explain to them about my success story the conversation starts with getting to know them the possibility of owning their own business and future and remind them of great opportunities that this country provides us including the government assistant programs available none of this would have been possible without the support of the federal government's SBA program the sba's assistance was inst instrumental in getting my business off the ground I know for a fact that many of my fellow franchises and countless other small businesses would not exist without these critical funding programs
▶ 0:43:29the SBA and access to Capital and its lending programs provided an essential part of the instrument excuse me part of the franchise success story in the fiscal year 2024 the SBA guaranteed $ 31.1 billion in 7A loan volume 6.7 billion in 504 loan volume historically franchises have represented about 20% of the sba's loans by Dollar volume finally I'd like to highlight a regular atory issue that has the potential to not only strengthen
▶ 0:43:59the franchise business model but also supplement SBA lending practices to further support franchise business performance for the years to come that is to permanently extend the 2020 nlrb's joint employer rule recogniz recognizing the harm this would bring both the House and Senate voted to overturn The Joint employer rule on a bipartisan basis in early 2024 using the Congressional review act which I and other members of the fa commend in March of 2024 a
▶ 0:44:29US District Judge struck down the 2023 nlrb Rule and the joint employer standard reverted to the 2020 rule while a reprieve from the previous nlrb's joint employer rule has been welcome news I wanted to stress the importance of the current Common Sense standard and federal law uh labor law has on franchisees like mine and state that any actions toward permanently preserving the current lrb rule would only only protect both businesses and workers but also create the regulatory conditions that
▶ 0:45:00allow both franchisors and franchisees to thrive grow and create jobs and opportunities in the community that uh they serve Mr chairman distinguished members of the committee thank you again for the opportunity to testify and I'm happy to answer any easy questions you might have dogs are Pentagon much harder thank you very much thank you uh now miss n armit is she available can you hear me I am here okay great well uh ranking
▶ 0:45:30member okay all right we will now recognize Mr de arment for her five minute opening remarks here she is chman Williams ranking member of Alaska and committee members thank you for having me here today and thank you for accommodating the travel problems my name is Heidi di arand I'm the president of Mofi we're a nonprofit rural cdfi that provides small business loans and free advisory services to people in Montana Idaho Utah Wyoming Oregon and Washington
▶ 0:46:01Mofi partners with 126 bank and credit union systems across that six state region that refer thousands of their loan denials to us annually between all of those denials and our board members who are commercial lenders we know a lot about who Banks aren't funding today and that's where we come in we provide loans to entrepreneurs and businesses that don't qualify for financing at a bank or credit Union last year Mofi lent $40 million to successful applicants
▶ 0:46:32all of whom had been denied this is a less profitable Venture than banking but it works the businesses we fund build assets they build track record and they ultimately go back to the bank that referred them to us Mofi has done this successfully for decades and we maintain a loss rate of less than of 1% over the last 10 years that 1% I think tells us that these loans aren't riskier they're just simply harder and longer to underwrite so they're less desirable for
▶ 0:47:02a profit motivated bank or a credit union to do this work we rely on two essential SBA programs the microloan program and the community Advantage guarantee program I thought it might be easier to to explain how we use these programs using one of the businesses from my hometown Missoula Montana the business is called Betty's Divine and it's a women's clothing store downtown when the owner came to us she was working in retail and
▶ 0:47:32people were coming in asking for clothing that they didn't sell and that you couldn't Buy in Missoula which I think is the perfect start to a business seeing an opportunity and then figuring out how to build a business around that she wrote A business plan she contacted a bunch of vendors she found a lease space she built great financial projections that made sense she took that all into her bank and they said you don't have any assets you don't have any collateral you don't have outside income you don't have a business history she was denied she did qualify for an SBA microloan through us
▶ 0:48:03and like most of our she became successful and then her bank refinanced her a few years later her Banker came back to us and said that business is doing really well and now she wants to buy a bigger space her own building but she doesn't have the down payment would you do a partnership loan with us where the bank does 70 or 75% and we fill in the Gap we do about 40% of our loans annually as a partnership with banks or unions she was able to buy the building and today she's still there that's 20 years later
▶ 0:48:33she's a huge success she's a household name she's a bit of a community Force where we live and she's just one of many thousands of SBA microl Loans that have been funded across the country over the past 20 years that create jobs Revitalize our main streets and fuel our economies the community Advantage Program is just as important to us Mofi uses the ca guarantee for clients who have been denied Bank financing need up to 350,000 and they're usually startups
▶ 0:49:04we like using them on startups because the ca program is an amazing on-ramp to bankability if you can show as a small business owner a new small business owner that you've been able to make your payments on a CA loan your Banker sees a future 7A client the these are also not risky loans since the start of the program in 2011 our l loes have been I think this is right 65,000 of a percent um I Heard um the other Witnesses
▶ 0:49:34talk about the challenges with some of the SBA programs and how long they take that's not the case with CA it's a fast efficient program that allows us to get Capital to borrowers very quickly today the US Financial system operates on two tiers one for those with established wealth and one for those still building toward that future success we need these SBA programs for an entire generation of low wealth entrepreneurs who are going to be successful tomorrow especially in the rural
▶ 0:50:04areas we serve thank you for your time and for supporting SBA tools thank you very much and uh we'll now move to the member questions under the F minute rule I recognize myself for five minutes Mr Hooper uh Community Banks are an essential resource for small businesses providing a large share of small business capital and offering a more tailored approach to small business business lending than larger financial institutions unfortunately the Biden Administration added $1.7 trillion in regulatory
▶ 0:50:34costs disproportionately impacting small business and small lenders so my question is how has the increased regulatory burden impacted your ability to lend to small businesses thank you for that question um you know I think probably the simplest answer is to say that due to ever increasing budgets that we have for audit and um compliance uh as I mentioned it's almost $1 million is what we're estimating for this for this next year it takes away from our ability to
▶ 0:51:05um reinvest in new loan programs effectively Market those to our customers and roll out new programs that would benefit our clients um additionally um other regulatory issues such as like the Durban amendment that reduced some of our debit card uh interchange income also takes away from our ability to offer low cost or free U business deposit services to our customers in many cases um you know from a very basic perspective
▶ 0:51:35uh the more time that we have to spend on compliance and Regulatory oversight just takes away from our our time that we can spend with our customers and and tailoring products to their needs thank you under the bid Administration the sba's flagship 7A Loan program was altered with rule changes the Stripped Away prudent Lending standards that had preserved a programmatic Integrity for decades uh while many of these changes uh were said to simplify 7a
▶ 0:52:05lending program they are instead confusing The Lending community and impacting the services that Community lenders provide to borrowers so in your testimony you described that credit unions have expressed a strong interest in working with the SBA to enhance their operational capabilities in the SBA Landing space but that there is a great deal to be desired in that area so what opportunities do you see for the SBA to better work with credit unions uh thank you for the question Mr Williams um chairman Williams I think the the immediate
▶ 0:52:35um area where we can focus our concentration on with the SBA is through their regional district offices um if we have them as a resource to help us navigate the process policies and procedures that are Ever Changing inside of the SOP it'll help us to deliver more efficiently and more effectively to the small businesses that we serve in our communities um the program itself the The Loan program the 7A and the 504 the structures that those programs
▶ 0:53:06allow are very good and very flexible it's the process and the procedures and the policies and the regulation that has dampened the effectiveness of those really good programs in getting into the hands of the business community that them um with portions of the tax cuts and jobs act set to expire as you're aware uh small businesses Across America are concerned their taxes will go up if you were able to keep more of your own cash on hand
▶ 0:53:36and not pay to the government how would you use that money I would definitely use it for improvements um to my business I would also like to uh you know pay my employees a little bit better um I think that um I can only bring home so much money these days and uh I would love to pass pass that on to to my employees and uh provide uh you know enriching lives to to dogs to be honest in other words
▶ 0:54:07the money can be used better by you than the federal government yes sir you can create more taxpayers with it yes sir okay uh I now recognize the uh ranking member for five minutes of questions good morning and thank you Mr chairman um I've been a member of the small business committee ranking and chair I've been a member of the financial services committee and um you know to say that uh regulations
▶ 0:54:37and U are impacting uh Financial Services institutions uh and that the Biden Administration uh hindered uh small business formation doesn't hold water uh the biding heart Administration oversaw the fastest rate of new business applications on record with entrepreneurs filing an average of over
▶ 0:55:09applications every month a rate that was over 90% faster than P pre pre pandemic averages importantly the small business boom of the last four years was equitably distributed among multip multiple segments of the population uh business ownership uh double among black household hit a 30-year high for Hispanic household households new business
▶ 0:55:39creation rates hit a 30-year height for asian-americans and women owned uh businesses uh a higher share of businesses than before the pandemic and so I thought that the topic here today uh is was about small business lending and the different programs under SBA not making a case about tax cut but I I I know that that is uh the
▶ 0:56:09agenda here um Mr Armin uh can you explain how Mofi is utilizing the community Advantage s sblc program to provide Capital uh to small businesses in the rural communities do you serve yes absolutely um thank you we use the community Advantage Program much like Banks use 7A but we use it for a different segment of the market borrowers
▶ 0:56:40who are creditworthy but who are denied at Banks or credit unions our clients aren't seeking a CA loan they're referred to us from a bank after the bank says no I think it's really challenging in the rural areas right now that we serve over time banks have Consolidated and closed some of the branches and even in the rural areas um that do still have a bank the commercial lending officer usually isn't there they're in larger cities they don't
▶ 0:57:10know the the area very well and decisions can be made elsewhere and the what segment of the market um does the community Advantage Program reach that a traditional 7A lawn might not yeah it it it reaches people who don't have wealth assets prior experience in a bank or high cash flow I don't think you need those things I think we've proven you don't need those things to be successful
▶ 0:57:40in business and be successful in paying back a loan but we under write for repayment the same way a bank does we just don't use factors like wealth assets or prior your cash flow instead we use potential industry viability and um sort of hard work and determination it works thank you um Mr Sims as you know I have been supportive of uh raising the member business Landing cap in the
▶ 0:58:10past um but we need uh to do it in a responsible way I also just want to say for the record that the MBL cap is an issue for the financial services committee and in which this committee doesn't have jurisdiction but as a member M of the financial services committee I have made the case in terms of raising the cap Mr Sims I understand you participate in both the 7A Loan program as the primary lender and the 504 Loan program as a partner
▶ 0:58:40working in conjunction with certified development companies with a lens on the processes of both programs will you agree with the following statements one the 504 program has a unique Economic Development mission and two at times the 504 program can be overly complex if so do you have any recommendation to streamline the program and more efficiently get Capital into the hands of small
▶ 0:59:10businesses um yes ma'am thank you for the support of the um member business lending cap very much appreciate that and I would agree with your statements I certainly do agree with your statement one the program provides small businesses with a very solid financing vehicle for owner occupied commercial real estate as you know the 504 is best used in that environment if you're looking for uh cash flow C or excuse me operating capital and other elements of the financing it's not part of that program but it is a very good program
▶ 0:59:41nonetheless um and as you know on the other side we do work with local not for-profit cdc's to provide the debenture on the sellout once the loan is has met met its term L's time is up thank you thank you next I'd uh now recognize Mr Alford from the great state of Missouri for five minutes thank you Mr chair and thank you ranking member of Vasquez uh today small businesses are working to recover after four years of inflation supply chain issues Workforce
▶ 1:00:12shortages and burdensome over regulations but I want to let you know I want to let Main Street know that help is on the way with President Trump in office and Republicans in control of both Chambers of Congress we will work for you to make sure that your businesses Thrive and we will cut the red tape and free you to spend more time actually building your businesses not just filling out paperwork to satisfy some bureaucrat down the street
▶ 1:00:42we will codify the Trump tax cuts to protect the 199a passrs and to keep more of your dollars in your own pocket and we will work with the SBA to make sure that existing businesses have the access to Capital and counseling that they need to ensure that Americans can continue to found more small businesses in America uh Mr Hooper I I've heard some of the same issues from our uh Community Bank where I bank in Raymore Missouri from Bill McDaniel the
▶ 1:01:12president the burdens of these over regulations uh among the most harmful regulations implemented during the Biden Administration or the uh 1071 rule implementing by the Consumer Financial Protection Bureau and thank goodness that chairman Williams introduced last uh February 5th HR 976 which would repeal the cfpb's implementation of the 1071 rules uh fen's implementation of the beneficial ownership reporting rule
▶ 1:01:42has been paused by federal courts though there are additional pending actions in court so my question to you is uh number one do you believe the cfpb is constitutional I do not I do not either thank thank you what happens if the 1071 rules are put back into place what effect will that have on lending uh to people who need this money the capital to start and maintain a small business sure thank you for the question um there's a couple of points there with 1081 the
▶ 1:02:12the there's 81 data points that have to be collected uh at the time we would take an application and um and then some of those some of that data is then published uh by the cfpb annually and so that raises all kinds of privacy concerns and and things of that nature especially relative to if there were denials and and things like that included in some of those data points and so um you know just just simply um managing it and then also on our side the cost
▶ 1:02:42uh to implement it is astounding as I mentioned we we're estimating if prior to it it being um um stayed you know we were looking at over $2 million in cost potentially do the training and everything necessary uh um but I will tell you most of our customers would find the the questioning uh very um Troublesome and difficult as well Mr Sims do you believe that the uh cfpb is constitutional I do not sir thank you um want
▶ 1:03:12to continue with you Mr Sims you reach you mentioned about Regional Offices they needed to be more proactive I agree with that Senator Janie erns introduced a bill uh to relocate SBA workers in part from the the office down here in DC which we were at a year and a half ago uh and they all scurried to show up when they knew we were coming and on any given day even if uh the building is uh staff with 100% of the employees in the building it's only 67%
▶ 1:03:42full it's a waste of money basically we need to get these SBA Regional Offices out into Rural America where we have business deserts if you will so they can get the capital and count counseling they need uh in a lot of these areas where we have the the rule Broadband uh to operate businesses and the people wanting to relocate out in the into the uh communities of Rural America what are your thoughts on that and how would uh credit corporations or not credit corporations but Credit
▶ 1:04:13Unions play a vital role in that yes sir uh thank you for the question Mr Alford um I think simply leveraging the expertise that you would have inside of an SBA district office and and from a credit unions perspective my focus is on the business member and how do I figure out what's the best product set for that business member and to have an advocate that has the innerworking the knowledge of the SBA process policies and procedures to help us when we hit a roadblock
▶ 1:04:43and we have a question that has arisen as a result of of a particular request they would be able to help us navigate that process thank you very much and again thank you for being here on this snowy day coming here on your own time and your own dime I appreciate it and I yeld back gentleman y's back I now recognize Mr McGarvey from the great state of Kentucky for five minutes thank you Mr chairman I appreciate that I'll start with a question for the whole panel are any of you all Supreme Court Justices no sir no sir no sir
▶ 1:05:14fantastic uh I just want to point out last year in cfpv V Community Financial Services Association of America the Supreme Court upheld in a 72 decision the cfpb's funding as constitutional uh if we do get to take back the Supreme Court rulings in this committee I'd like to start with a few myself uh maybe with DOs and citizens united but for the moment it is constitutional so we will keep it there uh I want to agree with something that was said earlier the American dream is alive and well and powered through
▶ 1:05:44our small businesses so is the American economy powered through our small businesses but let's zoom out and take a macro look at what's happening right now because even though Donald Trump came into office campaigning on lowering costs and lowering inflation what we are seeing right now in the numbers coming out today is an incredible rise in inflation 3% over last year in fact not just take last year it is
▶ 1:06:14the fastest growing month for inflation since August of 2023 we are seeing the costs rise in everything from gasoline to groceries to the things that our consumers use which of course has an impact on our small Community this inflation is driven at least in part by the Tariff policies of the Trump Administration I want to read you something in Kentucky local store owners are already hearing about their suppliers prices going up one estimate
▶ 1:06:44suggests the president's tariffs could cost the average Kentucky and up to $1,200 each year and it's not just about Rising prices here at home during the last Trump Administration retaliatory tariffs from trade Partners set off a broader trade war that hid wide swats of American industry from agriculture to manufacturing to Aerospace and Motor Vehicles to distilled Spirits I'm not quoting from some liberal publication here I am quoting from Senator Mitch McConnell's oped to The Courier Journal
▶ 1:07:16today on top of the rising prices and Rising uh cost that consumers and our small businesses are are making we're seeing the FED not cut the interest rate which is going to again have an impact on our small businesses and if that's not enough the Trump Administration last month froze funding at every single SBA Capital Access program which we have heard time and again on this committee that our small businesses to succeed to grow to start
▶ 1:07:46use that that Capital Access provided by the the SBA as such a lifi so I think we have to zoom out and look at is happening to our small businesses and make sure that we are going in the right direction where their costs are indeed lowered so that consumers can buy things our small businesses can grow and our economy can continue to thrive I have a question for Mr Armament where you conduct business in rural Montana just like in in my State farmers and ranchers are going to see their Market shrink thanks to Trump's tariffs
▶ 1:08:17they'll Force manufacturers in my district to make the hard choice between swallowing increased input costs and cutting jobs or passing them along to their customers could you briefly explain about why these SBA Capital programs are important alternatives for small business in this kind of restricted lending environment that we find ourselves yeah one of the best things about the SBA programs that we use is that they provide Capital to cdfis and SBA lenders like us to use in rural areas that
▶ 1:08:47capital is very limited and it's one of the only sources we have to reach into some of the most rural most oppressed land values is building vales depressed areas without them fewer businesses would get funded in Rural America and and we know that Community lenders support veterans rural Americans other traditionally underserved groups um just briefly because we've got a little less than a minute left it what would happen if Rural communities lost access to these SBA resources what would it mean for for farmers
▶ 1:09:17and ranchers in your state I think the biggest thing we would see is fewer business starts most of the business says we fund using these SBA programs our business starts and Banks and credit unions are not funding those businesses so these programs are what they have thank you so much Mr chairman iel back gentleman eel's back and now recognize Mr Loda from the great state of New York for five minutes thank you Mr chairman thanks for hosting this important hearing today for the witnesses for traveling uh here to be
▶ 1:09:47with us um ensuring America's small businesses have access to Capital is fundamental to America's economic success and that starts by empowering Community Banks and Credit Unions not just as lenders but as trusted partners that fuel local economies create jobs and drive growth for too long burdensome regulations inflation and misguided policies have restricted the flow of capital making it harder for small businesses to expand fortunately Community Banks and Credit Unions remain steadfast allies of
▶ 1:10:18America's small businesses offering personalized Lending Solutions and building relationships that big Banks simply can't through vital Federal programs like 7A and 504 loan programs the small business administration partners with these lenders to create jobs Drive economic growth and strengthen our communities but for these programs to truly help small businesses we must cut red tape reduce costs and ensure access to Affordable Capital with the right policies we can unleash the full potential
▶ 1:10:48of America's small businesses allowing them to thrive innovate Empower America's economy moving forward this leads me to first question Mr Hooper thank you for being here today sir you're the CEO and chairman of Regional Bank and in your testimony you highlighted how compliance costs at your bank have doubled since 2021 with an estimated $10.9 million annually spent on Regulatory Compliance this committee understands sir that regulations like the cfpb's 1099 rule add significant
▶ 1:11:18reporting burdens making it harder for Community Banks to compete with larger institutions so my question is this Mr Hooper how has the 1099 Rule and the broader regulatory environment impacted your ability to provide Capital to small businesses so I would say generally speaking the regulatory environment that we have in in general we spend a lot of time on that and so uh a lot of time resources and and frankly the the 1099
▶ 1:11:48rule you referring to the 1,99 pages of the um of of the legislation relative to that came from The Dodd Frank act yes okay so you know we we had to form an entirely new Department after the implementation of that um so that we could make sure we were compliant and could do it well and so uh it's it's incredibly burdensome it's tough on our customers especially our small business customers who want to get a mortgage you can just sense when they walk in if they own a business that they know you know
▶ 1:12:18the the reporting requirements for them is elevated and uh and frankly getting a mortgage is much harder for them in many cases than it is you know sometimes our other our other types of uh businesses and Mr if you didn't have to spend those resources doing that burdensome onerous Regulatory Compliance could you use those resources to increase the wages of your employees decrease the cost for your consumers and otherwise invest that money in better areas absolutely awesome Sir Mr Sims you're the uh Chief Commercial Banking officer of Georgia's Own Credit Union you've been a leading
▶ 1:12:49SBA lender with strong record in both the sba's 7A and 504 uh loan programs however uh sir you noted in your testimony that administrative complexity and slow response times from the SBA often create challenges for Credit Union trying to efficiently serve small businesses so my question is this what specific reforms to 7A and 504 would help Credit Unions expand access to Capital while at the same time ensuring these programs remain sustainable and effective sir uh thank you Mr lot
▶ 1:13:19for the question um again go back to the programs the programs themselves are very good processes are not as good I can point to specific examples within our organization where we've seen a decline in our SBA production from 2022 to 2024 uh to the tune of about 25% the vast majority of that has to do with uh burdensome regulatory environment and process and procedures associated with moving
▶ 1:13:50applications through the SBA process so it's a it's a Time drain uh money does not get to your business member as quickly as they would like it uh and quite frankly the the really the first reaction that I get when I talk to business members about using SBA tools as a vehicle for their financing is I have to sell through the reputation that the SBA has for inefficiency and the time to uh take a loan from Soup To Nuts
▶ 1:14:20great sir and and I only have a few moments remaining but Mr wet grve I read in your bio 30 4 years in the army retired as a colonel appreciate your service sir um real quick with about 15 or 20 seconds how would you um how would reducing unnecessary costs and Regulatory burdens impact your ability to expand hire more employees make more loans sir yes um thank you for the providing the question um it would of course allow me and others to be able to expand more aggressively and be able to employ additional people and
▶ 1:14:51serve uh service the community thanks for your time sir appreciate it I yield gentlemen E's back I now recognize Miss scullton from the great state of Michigan for five minutes thank you Mr chairman um I just want to clarify that there is no cfpb 1099 rule you know I I think that was testimony that was getting uh a little muddled and it's important to get that uh into the record um you know also earlier this week
▶ 1:15:21we extended fins Sen's beneficial ownership requirement through uh Mr nun a bill that passed on suspension in this house um I want to turn to some some critically important things here for West Michigan um Miss jent I understand that your organization is an SBA certified Community Advantage lender my district in West Michigan is home to many Hub zone areas which are historically underutilized
▶ 1:15:52business zones The Hub Zone Program establishes a goal of awarding 3% of federal Contracting dollars to hubzone certified businesses each year uh miss dearm your testimony points out that the community Advantage program was designed to enable lenders to reach into communities that might otherwise have trouble accessing the capital that they need can you explain how this program can boost Hub zones like the ones that we have in West Michigan
▶ 1:16:22absolutely Hub zones like other lowincome communities don't have the same asset value and they're harder to lend in when you go in to look for us in our experience when we go into lend there we often have expenses going into buildings or revitalizations that don't then pan out in appraisals the SBA Community Advantage can write that ship when you're underwriting a loan and get Capital to borrowers who don't qualify for a bank loan or a Credit Union loan but are absolutely
▶ 1:16:53credit worthy to build a business be successful get a CA loan and eventually graduate back into thank you so much uh Mr Westgrove first and foremost I want to thank you for your service to our nation and your accomplished career in the armed forces um as a co-chair of the Congressional franchise C caucus I also appreciate uh your story uh of how you came to be
▶ 1:17:23uh and and grow Camp back ow um we have a number in our district and uh our our beloved family dog Smokey uh has has utilized those Services uh as well so um you noticed the you noted the importance of acquiring 7A loan to start your business can you explain how this program was critical to the long-term success of your business yes absolutely thank you for the question um I don't think I could have have gotten any
▶ 1:17:53other type of financing at the time um and uh you know even though some of the requirements were uh they're not as as strict as the conventional type process so I you know greatly appreciated that um there's a more flexible structure in the SBA program other than the the conventional uh process um even though the underwriting was very comprehensive it was very manageable at the time um the partner that
▶ 1:18:23I was utilizing to to uh to give me the uh loan um you know provided me counseling along the way and was very instrumental in the The Lending process um and uh I just really appreciated everything that kind of came to the table um because I just think that there's so much more background in the SBA lending program that's true thank you yeah absolutely thank you um and one more for you miss Erman uh the microloan program provides uh up to 50,000 to help
▶ 1:18:53not only small business but certain nonprofit Child Care Centers to grow as a mom of two I know all too well how critical child care services are in bolstering our economy um especially to those trying to grow their small businesses can you speak to how the microloan program addresses the growing need for child care services in our country yes one of the great things about the microloan program is it provides technical assistance dollars we see a lot of especially women come in and say
▶ 1:19:23I'd like to start a child care business but they don't know where to start they don't know how to put together Financial projections find a facility or use their home these ta dollar allow us to bring a an advisor in help write a business plan create Financial projections find a lease get legal services and get them set up for Success once they're set up for success and have a micro loan in place those businesses do really well it's a perfect program because it combines those two
▶ 1:19:55thank you I yield back gentle lady yields back I now recognize Mr Jack from the great state of Georgia for five minutes well thank you very much Mr chairman and I'd be remiss if I didn't start by acknowledging one of my guests in the audience today the chairman of Georgia's Small Business Development Committee and the House of Representatives Mr Mike chokis chairman thank you for being here today and likewise to our Witnesses thank you very much for testifying before our committee as we continue to navigate the complex and evolving challenges facing small business it
▶ 1:20:25is crucial that we recognize the vital role credit unions and Community Banks play in providing accessible affordable Financial Services to entrepreneurs particularly those in our underserved and economically disadvantaged communities I'd like to of course because we've got a Georgian in the audience uh today I'd like to direct my questions to Mr Mike Sims who leads uh Georgia's Own Credit Union in my home state and first and foremost I'd like to start by asking you U I think in your testimon you note that
▶ 1:20:55over 240,000 members are served across our state of Georgia how many employees uh do you have in our state of Georgia yes sir we have currently over 700 employees working at Georgia's Own Credit Union and within my district if I'm not mistaken I think you've got two branches you've got one in Douglas County and one in F county is that correct yes sir so what I find interesting in particularly within your testimony is just how successful Georgia's Own Credit Union has been recognized throughout the state and uh the you know the impact that you have our community
▶ 1:21:25is evident I mean one of the the areas of Georgia that's booming in growth is County Douglas County as you get a little further out from Atlanta we're seeing enormous economic growth in large part fueled by small businesses and those small businesses are often dependent on the credit unions um much like your own so I I'd like to ask uh I think in your testimony you noted that you were recognized as the number one credit union in the state of Georgia you know what are some helpful tips and and practices you would you advise our committee to engage upon uh to help continue to
▶ 1:21:55have business Thrive especially in my home to State and District yes thank you um Congressman Jack appreciate the question very much and recognition of the the performance of Georgia Zone from an SBA lending perspective inside of the state and that that's a record that we're very proud of him we've been ranked number one uh Credit Union over the last five years always in the top five from a a instate production level as well and again I think I would get back to a conversation that we had a little bit yesterday and
▶ 1:22:25and also with chairman Williamson is leveraging our local district offices um I think there's a great role for them to be able to play in supporting both those of us that are in SBA lending and you heard Mr Hooper talk about having to build the infrastructure to be able to do that appropriately and it takes a lot of investment to do that um it can be that investment can be uh mobilized and um Amplified with help from our regional and for my
▶ 1:22:55colleagues across the committee and for everybody watching uh there's a lot of debate right now over tax reform and some of the taxes that are coming up uh can you illustrate to all of us what the consequences would be and for not just consumers people dependent on the credit union but the broader economy if the tax exemptions currently afforded to credit unions were to be reduced or eliminated this fiscal year yes thank you for that question um as you know Credit Unions return over $36 billion to the economy annually thanks to that tax exemption at a cost of just under $3 billion to
▶ 1:23:26the our taxpayers and so there's a multiple return on that um I think eliminating or changing the credit union tax exemption would change the nature of how we do business and what we're trying to accomplish with our business members and quite honestly I think you would see a fewer you would see fewer Comm uh Credit Unions uh in especially rural markets um which would lead to uh fewer dis to deployment of capital even underneath the sba's program and so I think that would be a detriment quite frankly to small business members as well as
▶ 1:23:56consumers in the marketplace well I appreciate that I'm not going to take much more time but I just want to again illustrate as all of us are working across this distinguished body to advance an agenda that we were all elected to advance I think it's critical that we remember the impact of uh some of the the the tax Provisions we're considering uh vcv reconciliation at the same time too I think we were all elected to advance progrowth uh Economic Policy that's one of the reasons why president Trump earned the victory that he did and why more
▶ 1:24:26Americans voted for House Republicans this time than ever before so I'm grateful for your testimony I'm grateful for all the witnesses being here today and chairman thank you very much for letting me bring my own chairman from Georgia small uh business committee and the House of Representatives of Georgia to our hearing today thank you gentleman ne's back I now recognize Miss mver from New Jersey for five minutes thank you uh chairman and ranking member for having this hearing today and to each of our Witnesses thank you so much for joining us on a very snowy day and and making
▶ 1:24:56your way here um access accessing capital is a critical early step that our nation's entrepreneurs must take to turn their business ideas into reality and a much needed push for businesses fighting to expand as our ranking member said um we all know the critical investments into small businesses made by the biteen Harris Administration help millions of business owners to start small businesses and last for four years in the last four years many
▶ 1:25:26of whom come from underserved communities we saw business ownership rates double and reach a 30-year High among communities of color my district alone in the great state of New Jersey in the 10th Congressional District home to nearly 2,000 minority owned businesses they definitely benefited from the uh efforts of the last Administration as we continue through this Congress we must be mindful to protect the progress made by these communities with that
▶ 1:25:57I would like to throw my first question to uh Mr Sims and Mr Hooper each of you represent a different and critical part of how the SBA can help small businesses Access Capital this is especially critical to protecting the gains made by underserved communities in recent years in your view what more can Congress do to assist small businesses in accessing capital from institutions like yours thank you for that question question um I think a couple of ways
▶ 1:26:27uh one is you know we can continue to expand the SBA resources uh which can be a benefit for some of our customers and I think just make the the system less cumbersome um additionally uh if if we can reduce the cost uh due to regulatory changes because it's an Ever evolving uh landscape uh that would allow us to to then spend some of those same dollars on on Bankers who who actually can go and and work with clients uh again rather than
▶ 1:26:57U rather than us investing large sums in in oversight of the compliance side thank you thank you m m mcgyver um Congressman mcgyver um I would suggest that um again the the programs are really good they're very flexible you heard Mr W wve talk about the flexibility of the program that allowed him to put his business together so I would encourage Congress to encourage the SBA to focus on their core competency and that is how can we eliminate the burden
▶ 1:27:28of EX excess policies processes and procedures in order for us as the distributed lending Force that's in the marketplace that's that are talking with business members on a day-to-day basis and we understand what they're looking for in in the structure and how do we get Capital into their hands more quickly and more efficiently thank you for that um I would also like to ask the panel about their thoughts on the Consumer Financial Protection protect Protection Bureau the cfpb has recovered over 21
▶ 1:27:58billion for consumers who have been victims of abusive and illegal activity with a budget of less than 700 million how do you propose the government protect consumers from Crooks in the open market if it no longer exist exists that's to panelist I think if the cfpb did not exist there are other regulatory agencies that can provide um similar um we already have several you know that that oversee the financial
▶ 1:28:29industry and so so I think you could easily push some of those same um uh some of those same oversight activities to some of those other agencies that already exist uh and I would agree I would suggest that credit unions believe in the importance of consumer protection uh laws and in having an entity to regulate otherwise unregulated unregulated entities is critically important don't have an official position on the cfp elimination uh but the industry has long advocated for change to make consumer Bureau
▶ 1:28:59part A bipartisan commission uh under unfortunately under that construction or that current structure the bureau has to become overly or has become overly political and I think the focus needs to be on those unregulated entities uh that would be regulated okay any feedback from you Mr W I would just agree with them since I don't know much about your your question sorry okay um and I know we have Miss um I'm not sure if she's still on Miss dearm who's
▶ 1:29:29on Dar yes oh okay would you like to uh chime in in a couple of seconds that I have left one the one thing I would say is that working with low wealth borrowers they fall victim to predatory online lenders and so we'd want to make sure that that protection is extended to people regardless of whether or not they have resources thank you I'm out of time thank you lady Ys back I now recognize Miss King Hines from the Northern Mariana Islands
▶ 1:30:00for five minutes thank you m Mr chair and thank you to all the witnesses who braved the storm today I am from the maranas where it's about 75 degrees right now so this weather is not the business for me um it's very encouraging to hear about the optimism and resilience among small businesses across the United States but as we've heard optimism as as we heard optimism alone is not enough it must be backed by a financial system that empowers small businesses with
▶ 1:30:30the capital that they need to thrive we have seen how entrepreneurs responds to the economic op optimism taking risks and investing in growth but that optimism alone does not drive lending decisions it is the Outlook of financial institutions that determines whether Capital flows into communities and businesses when Banks see potentials when Banks see potential for secure returns they invest when uncertainty looms a vicious cycle takes hold businesses struggle lending slows and economic
▶ 1:31:00recovery stalls right now my district is caught in that very same exact cycle in an economy where Banks see no path to recovery even the brightest most promising entrepreneurs find their potential stifled lenders hesitate Investments dry up and businesses are left to fend for themselves small businesses in myct District aren't giving up they are fighting for recovery but in speaking with business owners more and more they're being forced to rely on
▶ 1:31:30highin credit cards and personal loans just to stay afloat unlike the rest of the US where Consumer Debt is 69% of the size of commercial and Industrial loans in the Northern Mariana Islands Consumer Debt is 180% of commercial lending that is just unsustainable small businesses should not have to shoulder the burden of economic recovery alone and so you know I wish we had a credit union back home from where I'm at um we only have
▶ 1:32:01we we have we're down to two two Banks right now three Banks and um so this is a more of a broad question for Mr Hooper um how can the federal government help small businesses in communities where Industries have collapsed or remained in in Decline so basically in these economic conditions where uh we're caught in this vicious cycle how can the federal government assist to be able to allow for access to Capital
▶ 1:32:32you know I think um as Mr Sims noted the the SBA programs that exist are good programs and so I think continuing to make those more manageable for the consumer um as well as the banks that are putting those programs into place uh with the customer I think is is one way um just to make it less burdensome um you know that I would say that's probably one of the primary ways additionally if if interest rates come down a little more I know many of our customers would appreciate lower borrowing
▶ 1:33:02rates which also make it more manageable from a uh from a small business perspective as far as um them managing their budgets with other inflationary pressures they already have all right um just a a quick follow-up question in your written testimony you you spoke about the fact that it's not just the beginning of the application process but the bank's ability to go and recover uh those ba guarantees can you speak as to the challenges with regards to that particular issue sure um I'm actually in the middle of one right now we're in our second year of
▶ 1:33:32trying to do the recovery part of the Dilemma is um once you go down that road and you start through liquidation you have to liquidate everything um that you had as collateral as well as pursue all other opportunities for uh recovery and could be a variety of different things um you have to do all of that before you can go back to the SBA to to to get the SBA to honor the guarantee that they gave Inception of the loan so the other difficulty that exists within that is
▶ 1:34:02um like others have mentioned getting communication from the SBA can prove difficult and some of the answers we get at times are vague and so uh which also puts us in a precarious position because if we don't make the right choices as we go through that liquidation process and that recovery process it has the potential for the SBA to um Calla back potentially some of that guarantee uh when we get to that stage of the process which would I presume uh discourage us lending certainly makes
▶ 1:34:32it harder if if we don't have clear expect you know clear expectations understanding of of how the SBA is going to respond all right thank you I yield the rest of my time Mr chairman thank you Gentle lady yields back I now recognize Mr cisos from the great state of California for five minutes thank you Mr chairman um Mr Sims you noted in your testimony uh the legislative purpose of section 1071 is to facilitate enforcements of fair lending laws and to
▶ 1:35:03enable communities governmental entities and creditors to identify businesses and Community develop needs and opportunities of women-owned minority owned and small businesses we all seem to want loans that are more transparent more Equitable and more responsive to the needs of all borrowers you know in my uh Community um a lot of our community banks have kind of been eaten up by the bigger Banks there really aren't too many here in California Credit Unions have kind of help to kind of fill that void
▶ 1:35:34but I I feel there's a need to kind of protect those Banks how do we protect those so besides the regulatory questions what are are other steps that we on the committee can take to ensure that Community lenders are strong and competitive to support small businesses and I'll open that up to the panel to see whoever wants to to answer you want go first um thank you Congress SOS um again I get back to the similar comments that you've
▶ 1:36:04gotten from Mr Hooper here um produ products are good SBA in particular products are very good process is not good and um the 1071 rule adds to the burden associated with that um and in many cases it's going to be increased cost for us to comply uh also increase costs for the business member to comply uh and I I truly believe that you will see many U business members business owners uh
▶ 1:36:34not seek Capital to inject into their business because of the reporting requirements that we're asking for them as they come in to try and Access Capital anyone else care to respond you want nothing oh no I was going to say I think Mr Sims had a great answer so okay sounds good um but what other steps I will say in in order to protect
▶ 1:37:04these Community Banks who are the lenders to our our small businesses uh big Banks don't like to do small loans what steps can we take to make sure that we protect your interest to ensure their survival and they don't get gobbled up by bigger institutions well I can tell you I I've been a community Banker my my entire career and um I love it it's it's um it's something that I hope never changes and
▶ 1:37:34something I hope I can do for the remainder of my career um you know being a community Banker means that it's the the the business owners and the customers we work with are the same people I see at church the same people I see in the grocery store same people I see at a restaurant on Friday night it's it's it's the people we live with and are part of the fabric of the same community in which we live and so um their success means success for the community and and you know and we're part of that community and S success for the bank and so I I think um you know Community banking is a necessary
▶ 1:38:05Tool uh because it it starts with at the very personal relationship level and um and and we walk hand inand with our customers and are a a um a proven Financial partner over the years for them all right thank you um uh Miss diment out there on the zoom uh thank you for supporting women-owned small businesses across the northern Rockies and according to the SBA summary report last year 73.8% of total dollar
▶ 1:38:36amount of for 7A loan approvals went to to mail owned businesses ased 71.2% of total dollar amounts for the 504 program the Montana Community Development Corporation had 23 approved microloans in fiscal year 24 in Montana alone SBA microloans offer funding to traditionally underserved businesses such as women-owned businesses sbas also fund uh Business Development Centers loan programs Federal contract opportunities
▶ 1:39:06among others the focus on women and minority-owned businesses last month the SBA awarded 26.5 million to create 13 new wh women de business centers and support 17 existing centers across the country if president Trump isn't stopped and doubles down these programs funded by the SBA are at risk to be affected by a freeze in federal funds what would the impact for access to capital for the women-owned businesses have for you well
▶ 1:39:36I think what we've seen is that women have some special challenges their credit scores often go down when they have kids and leave the workforce their assets go down when they leave the workforce and so just like everybody else who's low wealth or low income they have a very hard time getting a bank loan especially when they're starting out the SBA programs allow us to wrap services around these people to help them create business plans and financial projections and get legal help and start their business and then within a
▶ 1:40:06couple years become bankable without those programs the on-ramp into bankability will not exist all right thank you for that answer I yield back I now recognize Mr Downing from Montana for his five minut minutes thank you uh Madam chairwoman uh Community Banks are the economic lifeblood in rural communities Across the Nation providing tailored relationship-based banking services for small businesses
▶ 1:40:37in Montana second district which I'm proud to represent uh Community Banks help businesses like small farms and local stores access the the capital that they need to thrive regulatory red tape and inflationary policies particularly under the Biden Administration have crippled community banks in my home District we have seen the number of Community Banks drastically decrease hurting the ability of local employers to hire workers and reinvest in their businesses the Trump Administration is now championing uh bold
▶ 1:41:07reforms to how the government functions promising to cut unnecessary regulations that have hindered entrepreneurship I'm incredibly optimistic about uh uh about our economic future under President Trump's leadership and I look forward to seeing what in coming small business administrator Kelly laugher will do to reinvigorate uh support for our community Banks uh so to start off uh I'm going to start with Mr Hooper um through your operations in Texas uh to what extent do you provide services
▶ 1:41:37to rural businesses such as farms thank you for that question um that's one of the the unique things about the company I work for First Financial spread all across the state we have 79 locations many of those locations are in Far West Texas and up in the handh handle um and those are uh predominantly agricultural um you know communities and so uh last year alone we originated 54 million in agricultural loans many of those are going to be probably in
▶ 1:42:07the South Texas and then up in the Panhandle in West Texas so um and and a lot of those are smaller communities that were able to uh uh to to partner with those business owners for those AG loans what what do you see are the biggest challenges in you know small farms accessing capit um I live in Texas so weather is always uh the biggest challenge but we can't fix that one and so um but uh but I would say just just again if we are more accessible through the reduction of of some
▶ 1:42:37of the uh the burdens we have on the regulatory side I think that that it allows us to be better bankers and how how do you see um your your business uh and you know how your rural business and your partners your small farms Etc compared to your larger National Banks what what do you how do you compare those um again I think um back to my comments earlier those are the same people we live with in the community those are uh and that's why we're we're hand inand with them because their success is our success
▶ 1:43:08and so um but I think that's that's something you only get when you're part of the same fabric of the community that they are yeah I agree uh What In your experience are the most effective SBA programs in promoting access to Capital and Rural communities especially local farms um the 7A program is is very good uh it provides um longer terms than we might normally have on conventional financing and uh the 504 program we've used extensively is great as well great um
▶ 1:43:38since the 2008 recession the federal government has implemented numerous regulatory reforms that have disproportionately burdened community-based financial institutions so uh to Mr Sims uh how have these regulatory burdens hurt your institutions thank you Mr Dow for the question I think it uh principally manifests itself in um additional staff and resources and infrastructure that we have to put in
▶ 1:44:08place in order to comply and appropriately comply with that regulation um and honestly it takes us away from what we do best which is to be out in the marketplace and trying to serve our business members and finding the right Capital vehicle for them as they're they're seeking to um either grow expand buy new businesses right thank Mr Hooper anything to add to that no sir so uh to actually either one of you um how can Congress and the Trump Administration
▶ 1:44:39you know fix this again I think um reducing the regulatory burden it's just such a huge piece of what we deal with on a daily basis and so I think that's first and and foremost one of the things that needs to be tackled um to allow us to be Bankers again appreciate that and thank you for your answers um you I think your your responses have uh demonstrate de demonstrated how important Community Banks are in thriving rural economies
▶ 1:45:09and I I look forward to the Trump Administration eliminating unnecessary regulatory burdens burdens and empowering local banks credit unions and other uh financial institutions and on that uh I yield back thank you madam thank you I now recognize Mr Tran from California for five minutes thank you madam chair I want to welcome and thank the witnesses for being here uh Miss Dar I proud proudly represent the largest and oldest vietamese community in the
▶ 1:45:39United States known as Little Saigon this community is a symbol of resilience and entrepreneurial spirit and serves as a thriving Center for viames Americans and small business and a key part of our Orange County's economy Little Saigon is littleon is a successful is successful because Vietnamese people are tenacious and resourceful however this can only get you so far and time and time again I hear from the Vietnamese community that because of limited language uh capacity and lack of understanding of the financial system
▶ 1:46:09they are unable to access capital and make that leap of faith to start a small business in fact we know that minority owned businesses are less likely to be able to obtain a bank loan and often start out with just half as much Capital as their white owned businesses my question to you is how does your loan underwriting process differ to accommodate applicants with limited credit history or limited English profic proficiency and what impact has the that flexibility had had on increasing loan access
▶ 1:46:40in underserved communities thank you for the question we rely on the microloan program to reach communities that often don't start at Banks where Banks aren't the first place they go they might go to friends and family limiting their Capital the microloan program comes with technical assistance dollars so we can get out in the field meet with business owners meet with Community leaders pastors find folks that are in that exact situation that you talk about we also bring in
▶ 1:47:10outside folks to help them through the loan application process in whatever language they need and with the flexible underwriting standards that a cdfi has we don't rely on wealth or asset or prior business experience so we're able to provide these wraparound Services loan proceeds as well as any type of process they need to enter the financial mainstream and once they're in one of the nice things about those microne ta funds is
▶ 1:47:40that once they're in we're then instantly trying to find a banker or a commercial lender at a credit union that compare with that small business owner and over time build a relationship to onboard them back into the financial system when we do that then we see their friends and family start going to that bank and it creates a system where we become less needed overall in that Community thank you for that answer uh Mr Wes uh Wester Grove Orange
▶ 1:48:10County's economy thrives thanks to the hard work of committed dedicated and resourceful small business owners as a small business owner myself before coming to Congress I can say that it is not easy owning and running a small business and we Face issues that are uniquely different from large corporations an issue that I have faced and have commonly heard about from small business owners from Orange County is limited access to Capital my question to you is on this side of the aisle we are always looking for ways to improve awareness of sba's Capital
▶ 1:48:40Access programs and the benefits they provide as a small business owner how did you become aware of sba's Capital Access program and how do you think we can help improve awareness of these programs for thank you for the question so when I first started with Camp Bow I was introduced um to certain parties um that have made me more aware of uh uh you know these opportunities for uh seeking financial assistance uh my father was a onion farmer in South Texas
▶ 1:49:10and he uh was always borrowing money and um I always remember him you know contemplating on um the terms and stuff like that so um but to answer your specifically I I know that there's a um the Small Business Development Center it's at the University of Texas in San Antonio and I think that's critical because I meet a lot of people that are that want to start their own business because they want the entrepreneurial story right and so I always push
▶ 1:49:41them to that entity in particular because I know that they're there for you know the assistance and the SBA uh help but anything that would advertise in an entrepreneur magazine or something like that would be extremely beneficial thank you for your answer uh Mr Sims Credit Union member business lending cap is limited by Statute the statute limits both the aggregate amount of lending and lines of credit for a commercial for commercial purpose a credit union can make up uh to can
▶ 1:50:11make up to a specific borrower as well as the aggregate amount of commercial lending a credit union can make can you briefly explain the the member business lending cap and how does this affect veterans who are looking to start and grow small business sorry thank you Congressman Tren uh the uh the MBL cap has has really two limitations on my business lending Activity one it's set at 12.25%
▶ 1:50:41of assets of my organization so as I approach that number I have to modify my business activities in the marketplace which might mean for example for a veteran owned business that I may be unable to make that loan because I've approached that cap um I think there's a couple of things that also go into that the number of loan the amount of loan that counts in that underneath that cap is $50,000 it was established in 1998 I see your face reacting to that hasn't been adjusted since that time um an example or recommendation I
▶ 1:51:11might have would be to put that at the sba's small business level which would be 350 so now you would have two loans that are out there that mirror up with each other gentleman's time is up thank you Mr Sims I yield back Mr chairman now I'd like to recognize Mr finstead from the great state of Minnesota for 5 minutes thank you chairman Williams for holding this important hearing today and thank you to our Witnesses for braving this weather although I find it laughable being from Minnesota that this is a weather event this is a dusting back home so
▶ 1:51:42uh as a small business owner myself I understand the important role our rule lenders play in allowing individuals to pursue the American dream we have great opportunity in the 119th Congress to make meaningful changes that Revitalize Main Street businesses ensure new business owners have access to Capital I look forward to working with the Trump Administration and the members of this committee and our local financial institutions to reform the small business administration into a transparent and accountable entity that strengthens rural communities and drives economic growth
▶ 1:52:12across our nation with that being said uh I hear quite often from uh small businesses across my district and and and across uh Rural America America that sometimes feel like the SBA uh treats them like fly Overland and really uh a lot of times where small businesses have interface with the SBA is is through our lenders you are the face of the programs to to our small businesses and so you know the programs
▶ 1:52:43well so my question uh is for Mr Sims uh as you know small businesses uh across Rural America rely heavily on the seven a and the 504 lending programs over the past four years what changes have you seen to the 7A and the 504 lending program and what impacts have your customers felt on changes thank you for the question Congressman uh the vast majority of the changes that we have seen over the past four years have to do with the standard
▶ 1:53:13operating procedures of the SBA lending program so the SOP the programs themselves the loans themselves the structure and the terms are very good the process associated with engaging with the SBA and helping our business members navigate that those processes is the most cumbersome piece piece of the equation would you say those changes have made it more useful for our small businesses to access those programs or really burden
▶ 1:53:43burdensome and and created another roadblock uh much more burdensome um and it comes in two two Fashions one is uh from a an SBA lender if you recall from Georgia's Own specifically we're the number one credit union producer in the state of Georgia so we have a really experienced staff and as the SOP changes on an annual basis we have constantly got to go back in and figure out what those changes look like and in many cases they they don't make a lot of sense and what that does is slow
▶ 1:54:13down the process and then we have to translate those changes to our business members as we engage them in in Capital Access do the small businesses that you work with have a stable full of lawyers compliance officers and and reg regulation folks that can navigate this that's probably a better question for M Mr W grve over there when he was seeking you got a stable full of lawyers and regulators and compliance officers you're looking at him I'm sure exactly all in one so there their poses an opportunity and a challenge for I think this committee
▶ 1:54:43and this Congress is to you know clean up some of the stuff that just doesn't make sense and make these programs again good solid historical programs we know have worked very good but if they're sitting on a shelf because we can't get get get out of the way of ourselves then it's just a good program sitting on a shelf so um I will uh turn this uh a little bit here to uh Mr Hooper I've heard from several organizations across southern Minnesota regarding the confusion around the beneficial ownership Rule and
▶ 1:55:13uh what impact has this rule had on your bank and what have you heard from your customers on the on the ground uh regarding the implementation of this um so I would say many of our customers just find it intrusive because we're we're digging in to um work through all of the different business owner or the different owners of that business um I know our new account staff spends a tremendous amount of time making sure that they complete um all the beneficial ownership forms as well as our lending staff and so it's just a it's a cumbersome
▶ 1:55:44process and customers are not always appreciative of the process either uh so Mr Hooper I would assume that your uh you're designating staff time to that all pro bono it's all free you don't have any opportunity I mean you're just going to eat all that right absolutely yeah so the you know the the cynical I guess point is that there is time money and effort that is put into this and again we have to ask ourselves in this Congress you know who are we afraid of in this scenario
▶ 1:56:14and what are what problem are we trying to fix and uh at the end of the day it is access to Capital that's the most important thing for Rural America to thrive right now and if we continue to put roadblocks in between uh a good intended government program and the and the customer at the end of the day we will see Less jobs created not more I appreciate your time and Mr chair I yield back gentlemen y's back I now recognize Dr Conway from the great state of New Jersey for five minutes I thank you Mr chairman
▶ 1:56:44and uh thank you to the witnesses who have presented themselves here today to offer information on the SBA program uh I I want to start my uh my time here with some remarks I have to say I'm I'm always distressed to hear uh America talked down I you know we've heard about how terrible things are in the economy and yet um uh some of our ranking members uh uh here have quite rightly noted uh that we have had during the Biden Harris
▶ 1:57:15Administration uh over the past four years entrepreneurs filed more than 20 million new business applications and uh saw the fastest rate of new business applications on record with entrepreneurs filing an average of 440,000 applications every month a rate uh that is over 90% faster than the pre pandemic averages and as we've heard we have seen uh the number of black households um and Hispanic households and Asian households hit new high highs in terms of their
▶ 1:57:45business ownership again all greater than pre pandemic uh in New Jersey um we're very um uh pleased uh and I have some experience with the SBA process um we have seen an average of of um we have 28771 approved s7a loans with an average loan size of 700 I'm sorry 43,4 22 and as um you know uh these are essential
▶ 1:58:15for small businesses to to grow and to thrive uh to uh Advance the economic vitality of their communities we've heard today in uh and in our previous hearing a lot of concern about uh the um 1071 program and uh I have to say uh when I particularly as you just heard me talk about these important improvements uh that we've seen um and the uh business ownership by persons of color and and minorities other minorities
▶ 1:58:46um which I take as a sign of a vital and uh America America that includes everybody in our economic growth and yet we hear that this program uh which is designed to actually find out what's going on with lending activities in the banking sector uh is being uh we're being asked not to collect data now I'm a physician uh I thrive on data and taking data and producing that data understanding that and then using that data to make um to make
▶ 1:59:16help patients make decisions this is across all businesses whether you're sending somebody to the moon or building a bridge uh data analyzing it and using it to make good decisions is important now the society has decided uh that's important uh that fair lending take place and that all people in our in our country irrespective of their color or where they're from have access to Capital so explain to me without getting the data to understand whether our Fair uh lending rules are being uh and laws
▶ 1:59:47are actually working um and um that there is compliance with those laws that re recognizes that we're all part of a great country if we take away the data collecting process to find out how the laws are working and how you in the lending Community are actually whether you're actually in compliance with the law or not how do we ensure that that everybody has a has a stake in our economy and has a chance to start their own small business and that's for Mr Hooper and Mr Sims thank you for that question um
▶ 2:00:17you know I would say you know in my opinion it's our responsibility as good Bankers to um to make loans to to everyone we can in our community and support the community at large I you know not specifically talking about 1071 but speaking about from a fair lending perspective you know I'm very proud of the products that we offer um not only to um you know specifically we have better products for those customers that
▶ 2:00:47live in majority minority census tracks we also have um programs that are you know I live in Texas and so uh we have um people who are there on work visas and may have an i 10 and so we're able to provide different home ownership options for them with lower amounts down and and additionally we try to have bilingual Personnel in just about every office that we can I need toclaim my time because I see the clocks ticking I don't think we can make good decisions without getting data uh data should
▶ 2:01:17drive our policy decisions and if we pass a law we want to find out whether or not it's working um uh I'll just leave with the time I have remaining to talk about um um the serve act that I'm uh a lead on with Miss Davis and Mr Alfred uh I'm a veteran myself and serve a lot of veterans in my community I live near a base um and served on that base but can the time remaining and I'll leave it uh for a later answer offline but tell me how the SBA is
▶ 2:01:47working to make ensure that veterans are getting a fair shake and and access The Lending process thank you Mr chairman for your forbearance back and now recognize Mr stabber from the great state of Minnesota for five minutes thank you very much Mr chair uh uh for holding this meeting and thank you to our Witnesses for taking time out of your busy schedules to provide insight into the challenges and opportunities in small business lending access to Capital is critical for the success of small businesses and in Rural America
▶ 2:02:17small businesses depend on relationship banking a personalized approach to lending where Community Banks and Credit Unions Excel these institutions and the SBA back loans programs they provide must remain a reliable source of funding for entrepreneurs however concerns have been raised about recent changes to SBA backed programs including uh weakened guard rails in the 7A program which could increase lending risks and lead to higher costs for taxpayers Mr Sims you've seen firsthand the
▶ 2:02:48impact of SBA lending policies on small business Borrowers how have the SBA policy changes affected small business loan default rates and what reforms are needed to prevent taxpayers from being left on the hook um thank you for the question Congressman stalber um first and foremost in support of the SBA platform um with every SBA loan that is originated the borrower is charged an origination fee for their guarantee for the sba's guarantee of that loan and so that guarantee
▶ 2:03:18then goes into the coffers of the SBA those f FS are then used for any defaults that occur underneath that program and so from a taxpayer perspective it's it's actually not a taxpayer funded organization um it's self-sufficient with regard to the premiums that are collected association with uh new origination loans the uh origination fees are adequate in your mind yes sir they have been since the Inception of the program Mr
▶ 2:03:48W Grove your story is exactly what the S uh 7A program is meant to do help aspiring entrepreneurs across access rather the capital they need to make their dream of owning a business reality had you explored non SBA loan options before turning to the uh 7A program yes sir I did and can you share a little bit about the process you went through um you know in one particular um process it was a little Annoying I
▶ 2:04:18uh asked for uh the SBA I mean sorry The Lending um in the loan and um I did all my homework I did uh the procedure to get my business plan done and then all of a sudden they came back to me and said I'm sorry you don't have seven years in business so I spent like a month doing all this extra work and it was extremely uh unfulfilling and uh so that's when I basically went with the SBA program and uh the 7A tell briefly tell us about that
▶ 2:04:49how it went you know it went very well I mean the L uh the lender itself just had so much information for me and um uh you know I talked to other Camp ba owners in my uh organization um and this is what they uh had done as well so um again just having that expertise in The Lending institution was phenomenal and a guy like me who didn't have all that business Acumen just you know devoured it you know those
▶ 2:05:19entrepreneurs out there that are uh across this great nation that want to take that risk sometimes they don't know where to go in the 7A with the your local Community Banks of credit unions are going to give them that opportunity uh and they're the ones that change the world yes sir literally uh you know improving government efficiency is a big topic around here these days and their uh their changes the SBA could make to improve entrepreneurial access uh to these loans um I want to just thank you all for
▶ 2:05:49being here I will tell you that the last administ istration I've been on small business since I've been a member of uh privilege to serve as a member of Congress and I tell you what the last Administration was devastating to small business owners I mean we're looking at 11,000 rules and regulations uh and and monies uh that small business owners had to put forward just to get started uh or rather 1100 uh regulations rather not 11,000 1,00 regulations that
▶ 2:06:19are spread out uh 20 bucks here $40 here that's real money to Real Americans that are trying to make it and uh we need to make sure that these loans are given up with as as you said Mr W grve with the information on how to go not spend a whole month and then they tell you you haven't been in business seven years you know your life experience matters too right what you did in your life uh matters and uh should should be considered in in allowing these loans to go forward but I can tell you
▶ 2:06:49that under President Trump's leadership uh the the optimism uh among small business owners is growing uh he's prioritizing tax relief regulatory reform and access to Capital uh small businesses are the backbone of our country and they will continue to be the engine of our economies Mr chair y back gentleman Ys back I now recognize Mr oeli from the great state of Maryland for five
▶ 2:07:19minutes thank you all for uh being here today uh I'll just open with an invitation um I joined many of my colleagues on this side um we want to be in conversation about regulations that might be burdensome uh we I certainly don't have the time here but if if you want to provide for the record for the commit benefit uh specific regulations instead of wholesale changes maybe with specific examples of how that could be helpful I would very much welcome uh the opportunity to have that information uh given to us um
▶ 2:07:50so I I guess my question would be um it wouldn't be something that would be viewed favorably by customers or your clients uh if I were to say I want to bring 20 people and look at some of your most sensitive systems like I want to have access to your systems tomorrow I'm GNA I mean that's not something that's good business practice or something that your customers would take kindly to is that a assessment yeah okay and if you wanted to be processing loans faster or opening a new franchise
▶ 2:08:21um um if you wanted to provide more training you wouldn't tell your employees to stop working you wouldn't stop processing loans is that also a fair assessment yeah so I actually again agree I think we want to find ways to help uh SBA do more training help work through some of the regulations that might slow down these these uh processes but just want to point out that that is in fact what is happening um within the SBA we have someone who without vetting or um transparency is in there has access to some of the
▶ 2:08:51most sensitive data um that your partners in this work uh share and you know just concerned about instead of finding ways to work through these regulations um we're instead uh telling people across this government to stop working to not come to work and I think that is at odds um with some of the testimony we heard today so um but but very much look forward to um those specific examples and and hopefully allowing our professionals at SBA to work through those to partner with you
▶ 2:09:21and again really appreciate you making the time to be here today and with that I will do a rare thing Mr chairman and actually yel back some Time gentleman he's back and now recognize Mr muser from the great state of Pennsylvania for five minutes well thank you very much Mr chairman thank you all uh for for being here and as mentioned before braving the weather and providing some important testimony uh it makes a difference so thank you um you know uh uh Mr uh see here just looking at the
▶ 2:09:51be prior testimony Mr Hooper you had stated in your opening testimony since 2021 our Personnel costs related to compliance and risk have doubled and we anticipate that they will continue to rise the number sits at a staggering $7.1 million you would not to say in 2025 uh 2025 will bring additional regulatory burdens that's that's nice to look forward to most notably uh those associated with the implementation of 1071 directly obviously from from the SBA Personnel
▶ 2:10:21costs training costs and software enhancements necessary to achieve compliance we were estimating annual cost of $2 million so we had a financial service committee a hearing uh few days last week and it was about making Community Banks great again and without a doubt the biggest takeaway was the regulatory burdens the compliance burdens the problems I mean just just basically the the weights being put on your backs to allow small business to to access capital and it just uh uh you know thank goodness we've got Administration
▶ 2:10:52in here and a new SBA administrator and a majority that understands small business is going to going to work on doing things that are that are positive for you and not negative and not deny it it's it's incredible in light of the evidence and everything else that um that those sit here and want to want to say how actually how wonderful things should be for you as opposed to what your evidentiary uh uh testimony uh not just implies but but clearly states so
▶ 2:11:22you know this um the 1071 rule you know we we've talked about it so many times with the 81 separate data fields has that helped anyone in any way shape or form I I'll ask you Mr Hooper no Mr Sims no sir no no no no consumers help no no businesses help uh M uh Mr wed grov I'm sorry how to pronounce your name wov any any uh positives coming out of that extent Ive amount of data
▶ 2:11:52no sorry yeah priv private data yeah I well we didn't think so that's why we want to eliminate it um can you uh the privacy concerns that come with it do your small businesses have grave concerns surrounding the Privacy as well as the costs and the uncertainty and everything else that that comes with it absolutely okay well that's as well okay um so Mr Sims the
▶ 2:12:23uh 7A program of the Biden Harris change the existing credit elsewhere test to self-certification exercises we know what happened there uh what degree of concern do you have that this is affected which it clearly has the Integrity of the program uh yes sir a great example of that is um the credit elsewhere test as an example if a borrower a business member wanted to come to me and move their SBA loan from one institution another let's say they got tired of
▶ 2:12:53Mr Hooper's friendly face over here and they wanted to come to me uh for me to refinance that existing 7A loan underneath the SBA policy I actually have to go to Mr Hooper and seek his okay in order to refinance that and ask him to provide for me a letter that says that I cannot provide the financing that the borrower has requested so from a competition perspective doesn't doesn't seem like a really ni good thing plus the borrower has indicated that as as nice as Mr Hooper is they want to
▶ 2:13:23find a different relationship and they can't do that without his approval thanks uh Mr W grov and I am pronouncing it right I hope my apologies I I did come in late and I hate doing that we did have chairman Powell in our other my other committee so we had to pay some attention over there but the um the small business provisions of tax cutting jobs act 199a the bonus appreciation um the um R&D tax credit it's how significant is that to your
▶ 2:13:53your your clients your customers the small businesses that you serve I I I could not elaborate on that I don't know the answer okay M Mr Sims or Mr Hooper would you repeat the question I'm sorry the these the tax cut and jobs act Provisions uh bonus depreciation R&D tax 199a even the carried interest and such uh how significant a blow will it be if we don't complete that and and uh continue those uh tax
▶ 2:14:24that tax relief that business tax incentive sure I think it changes the uh platform and the go forward Marketplace for those small businesses and they'll react accordingly which would be I'm going to stop investment I'm not going to seek additional capital for me to go Advance my business opportunities thanks well the Cavalry is uh is is here we're going to be on the side of small business I yield back Mr chairman gentleman yields back and now recognize Miss Simon from great state of California for five minutes it is a great state
▶ 2:14:54that's what I said you sure did I appreciate it thank you Mr chair thank you ranking member I am actually super excited um to speak with you all today and to our witness on Zoom um I've learned so much and there's so much more to to learn and I love that I have background music listen I'm I'm in agreement with what so much have has been said today and in fact I'm here to actually speak on behalf of the Community Banks in the beautiful 12th
▶ 2:15:25District of California we have over 19 Community Banks and you know I've worked with these banks in the job training programs that I've developed over the past 30 years for young people coming out of the foster care system seeking to shift uh their generational poverty I've worked with folks coming out of incarceration uh the Community Banks in our district from Beneficial Bank uh to you to Summit Bank they've done such incredible work so one I want to acknowledge them you know Mr Westgrove I don't have a
▶ 2:15:55question for you but I just want to thank you so much because I actually went down a rabbit hole last night learning about bowwow and I got to tell you as someone with a disability who has been very linked to guide dogs from the blind I saw the work that you've been doing with disabled folks and their pets uh folks don't realize when someone's going in for long hospital stays or for surgeries uh they need somewhere to keep their animal that actually keeps them alive when when they're well I want to thank you for that I also want to acknowledge that as a vet we're
▶ 2:16:25talking about SBA as a veteran and again I come from a family of veterans on my maternal side SBA should be doing everything in its power to streamline resources folks who are leaving and retiring from the service many in my district are left in poverty they don't deserve the bureaucracy I 100% agree if we want to do right by our veterans SBA needs to expand its Serv making sure that you don't have to spend 6 months not even two days getting to a representative
▶ 2:16:56just last week I was in my district visiting our SBA lead and they are so wonderful wonderful folks who are working in community there are I mean I got the stats here over 26,000 small businesses in California's 12th District less than two hours after I left the meeting with the SBA lead these staff members who are working with lowincome business owners with business owners from technology again to your dry cleaners to your
▶ 2:17:26auto repair shops two of these members got layoff notices in this time where we are talking about building up the nation's economy particularly the backbones of our community I agree Mr westg Grove we need a robust system with regulations that keep us from waste Fraud and Abuse but frankly as we cut the federal work Force we will find less opportunities for our business owners to get the resources
▶ 2:17:56that they need to thrive I want a bustling downtown I want a transportation system that brings folks from the suburbs to the city we can get there but SBA my God we need to expand it I want to say one more thing um our small businesses pay local taxes we know and those taxes support our police our fire in fact our school systems why some of that comes from the state and the FEDS our small business when we say lifeblood they keep our cities
▶ 2:18:26alive so as we cut which is on the table our SBA staff we cut Public Safety we damage Public Schools we prevent our vendors from accessing the resources that they need to escape poverty once and for all we take from single mothers trying to create a beauty shop or a local Consulting opportunity we take time and resource for them and we leave
▶ 2:18:56them at uh the RS of the public Dole so in terms of Community Banks they do what I know a lot of the big Banks can't do they support folks right front and center they're at the desk every single day so I just have a quick question for Miss Mr I'm going to pronounce your name correctly someone give it to me correctly before I miss pronounce it de arit people mispronounce my name all the time that's why I ask I I have a brief
▶ 2:19:27question uh you know for you you know your organization works on the ground to finance small businesses local small business that are that are often underserved and it sounds like Community Banks and nonprofit lenders we only have a couple of seconds are filling in the gaps name three gaps that they're filling in low wealth low income no business say that again we have a couple seconds low wealth low income and no
▶ 2:19:57business experience low wealth low income and low business experience the foundation of this country is built on those three demographics being able to lift themselves up let's fund fund an SBA and Community Banks give them all the resources that they need to lift up populations from Urban to rural I yield back GLE lady yields back now recognize Mr bresnahan from the great state of Pennsylvania for 5 minutes thank you Mr chairman I appreciate the opportunity
▶ 2:20:27here and to the witnesses for braving the inclement weather and making it out to uh glorious Washington DC uh before this in my prior life something that brought me a lot of pleasure was uh working with entrepreneurs I was a real estate developer and nothing would bring me more joy than someone taking the the leap trying to make it out on their own and um something that was unanimous with with every conversation was how do we have accessibility of capital and what do I need to do as it work with the Community
▶ 2:20:57Bank but there was always a barrier to try to get out the ground either there wasn't prior experience they didn't have the collateral to secure a certain loan um and people would always suggest well what about the SBA and what they found was it was absolutely impossible to try to navigate and there were some earlier questions relevant to the team of lawyers and accountants I mean at my company even you know we grew to 175 people and would struggle to meet the
▶ 2:21:27sba's requirements sometimes to Pro procure the the the capital necessary I couldn't imagine a young entrepreneur trying to hurdle these boundaries to really make a difference what could we do to lessen the bureaucratic red tape to really get dollars into the hands of these entrepreneurs and young businesses that ultim will make a difference and I guess my my first question would be for Mr Sims thank you Congressman um
▶ 2:21:58I honestly think the place to start is with the SOP the standard operating procedures of the SBA again I go back to the the products are good the structure of the products are good the terms are very flexible in particular as you compare them to a traditional commercial uh type product set and so I I think going through the thousands of pages of of the SOP and streamlining how a small business is able to engage with the SBA through
▶ 2:22:29their local Banker whether it be a community bank or credit union there is where your expertise lies we're going to ask them questions to understand what it's going to take for them to be able to qualify underneath the SBA requirements so even miss dament said a few minutes ago um let's go uh to uh low wealth low income low low business um experience the SBA has requirements for that so you must meet minimum debt service coverage requirements
▶ 2:23:00you must meet minimum business experience requirements and you must meet minimum collateral exper collateral requirements so even if the you wanted to use the SBA vehicle as a an opportunity for the type um businesses that she's providing services to you could not because they would not qualify right so when she talks about turning the banks turning those down Credit Unions turning those Downs we're following the SBA procedures so the place to start is to create
▶ 2:23:30opportunity for the type of businesses that she's serving where there might be a special program for example we talked about a area where they're maybe disadvantaged or issues that are going on in that particular Community you could create a program where those requirements were lessened still safe still prudent but they're not set at the at the level that they are today so who whose responsibility would that fall under would that be more in the lane of the Community Bank itself it would not it would be in the lane of
▶ 2:24:00the administrator of the so of the uh SBA and sop and sometimes what I've noticed is we were super involved with a Community Bank it was our primary lender uh for many years and sometimes the Community Banks though have availability of resource concerns and you know trying to get staff analysts or being able to keep up with the demand to supplement the applications with the actual raw material is a challenge and it becomes a pitch point and then our young business or our entrepreneur need to
▶ 2:24:30find a way to get around the blockage there in the artery and try to make a difference and ultimately it it stops them from opening up their doors uh my last question would just be by a quick show of hands have have any of you individually had to fill out any of the beneficial ownership forms for any of your own entities you did I had to fill out a of them and and it took me from Harrisburg to Washington DC for about 2 and a half hours and I did it on the online portal after it would crash more times
▶ 2:25:00than I would care to admit but it was frustrating and you know I felt that I wanted to go through the process knowing that I was going to be serving on the small business committee and I thought the 87 data fields that Mr muser had referenced earlier were incredibly redundant um if you have a single member LLC you're asked to provide the same information on three separate pages and I think it will uh again be one of those barriers for that small business to get up and running and off of the ground so with that I yield
▶ 2:25:31back thank you gentleman he's okay we have one more uh Mr L no okay here she comes ask any if they have anything
▶ 2:26:01she's here right now let's go okay uh now recognize Miss goodlander uh who made a grand entrance here so from great state of New Hampshire for five minutes thank you Mr chairman and my apologies this is my my first day with two hearings at the exact same time so I've I've gotten my steps in today but I want to thank uh you Mr chairman for bringing this hearing together and to our Witnesses for
▶ 2:26:31coming from all across the country um to talk about this this really important set of issues I am so excited to be serving on this this committee um New Hampshire is a great state and uh the overwhelming majority more than 99% of our businesses are small businesses um we're also the home of the birth of the credit union which is very exciting so Mr Sims I wanted to ask you um from your perspective um how what priorities you would you would really point
▶ 2:27:01this committee towards um in the days ahead um you had mentioned the importance of regional SBA staff um we are getting a lot of really unsettling reports about SBA staff who have received termination notices um and who aren't sure about their fate within that important um government agency and I just want to ask you about if you could say a bit more about about your Partnerships with SBA staff and the role that the SBA has played
▶ 2:27:32yes thank you for the question and I'm I'm sad to hear that as well um those those folks in our Georgia region district office play a vital role in my opinion and canly um even a greater role play even a greater role in uh helping Community Banks and Credit Unions navigate the SBA processes again you you've heard me say this a number of times the products are very good they're very good the process leaves a great deal to be desired
▶ 2:28:03um and often we're faced with elongated time frames in which time we we would pose a question to seven eight questions and waiting for that question to come back well there's a business member that's impacted by that time frame as well that's on the other end of that answer and it would really be nice if we had um a regional district office members that we could go to and say hey can you help us navigate this here's what we've done here's the questions we asked and we sure could use some assistance with us is there someone that you can pick up inside the phone that calls up
▶ 2:28:33the chain to be able to help us with that well thank you for that um you know I've I've some of the most exciting stories that I've heard from small business owners um across New Hampshire have have been the stories of microloans that have really made all the difference um across across my state um you know one in particular an SBA supported program um that we've been following is the graft and Regional Development Corporation they've got a microloan program
▶ 2:29:03um that's that's really helped um to bring about what we all want on this committee which is the realization of the American dream for hardworking people um this this program it's been amazing to read the stories from hair stylists to Plumbers this program has support Ed business owners all across my state um I wanted to ask and open it up to to um our Witnesses um if you could share a bit more about your experiences with SBA microloan programs uh and what you've seen work
▶ 2:29:34well and and and any reforms that you'd point us to here in Congress I'll jump in if it's okay um I'm I'm embarrassed to say that I'm not familiar with many of the microloan programs and then I would also go back to what a great great conversation that that could be with our district offices who probably are very familiar with that uh most of my organizations focuses on the 7A product and the 504 product and as I've learned today quite frankly through the conversation there are a
▶ 2:30:04lot of other different products that I'm not currently utilizing today so a little education for me and again I think we could lean on those um district offices uh in order for us to get more involved in those type of lending programs I would say to jump in on the microne is that right may I jump in on the micone programes it I was just going to note that I'm not as familiar with the micro loan programs
▶ 2:30:34as well um our primary focus has been on the 7A and the 504 programs I'd be happy to jump in on the micro prog thank you that' be great yeah we do a ton of microloan programs a ton of micr loans one of the really interesting things about lending is if you think about someone who's getting a business loan a small business loan when you look at them I think
▶ 2:31:04from a bank or credit union perspective you think if that business fails what are we going to do to get repaid we're going to have some outside income some outside wealth some collateral microlenders often don't have that when they look at the the clients that we serve and we think about that as a safety net those Family Resources assets the microloan program provides technical assistance and that allows us to go in and make sure that they have good business planning an asset plan a credit building plan
▶ 2:31:35and an on-ramp to bankability it replaces that safety net by providing a loan that's wrapped in technical assistance services so you don't need wealth thank you thank you Mr chair I yield back okay lady yields back uh I'd like to now thank our Witnesses uh for your testimony today and for your appearing before us uh without objection members have five legislative days submit additional materials and written
▶ 2:32:05questions for the witnesses to the chair which will be forwarded to the witnesses so I ask the witnesses to please respond promptly if there's no further business uh with that objection the committee is adjourned and thank you again for being here thank you you very much with you
▶ 2:32:48you e