[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] CONDUCTING OVERSIGHT: TESTIMONY FROM THE SMALL BUSINESS ADMINISTRATOR ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS SECOND SESSION ---------- HEARING HELD MARCH 20, 2024 ---------- [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 118-045 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 54-985 WASHINGTON : 2024 ----------------------------------------------------------------------------------- HOUSE COMMITTEE ON SMALL BUSINESS ROGER WILLIAMS, Texas, Chairman BLAINE LUETKEMEYER, Missouri PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania BETH VAN DUYNE, Texas MARIA SALAZAR, Florida TRACEY MANN, Kansas JAKE ELLZEY, Texas MARC MOLINARO, New York MARK ALFORD, Missouri ELI CRANE, Arizona AARON BEAN, Florida WESLEY HUNT, Texas NICK LALOTA, New York CELESTE MALOY, Utah NYDIA VELAZQUEZ, New York, Ranking Member JARED GOLDEN, Maine KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota GREG LANDSMAN, Ohio MARIE GLUESENKAMP PEREZ, Washington SHRI THANEDAR, Michigan MORGAN MCGARVEY, Kentucky HILLARY SCHOLTEN, Michigan JUDY CHU, California SHARICE DAVIDS, Kansas CHRIS PAPPAS, New Hampshire Ben Johnson, Majority Staff Director Melissa Jung, Minority Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Blaine Luetkemeyer.......................................... 1 Hon. Nydia Velazquez............................................. 2 WITNESS Hon. Isabella Casillas Guzman, Administrator, United States Small Business Administration, Washington, DC........................ 4 APPENDIX Prepared Statement: Hon. Isabella Casillas Guzman, Administrator, United States Small Business Administration, Washington, DC.............. 39 Questions and Answers for the Record: Questions from Hon. Williams to Hon. Guzman and Answers from Hon. Guzman................................................ 45 Questions from Hon. Velazquez to Hon. Guzman and Answers from Hon. Guzman................................................ 55 Questions from Hon. Luetkemeyer to Hon. Guzman and Answers from Hon. Guzman........................................... 64 Questions from Hon. Van Duyne to Hon. Guzman and Answers from Hon. Guzman................................................ 65 Questions from Hon. Davids to Hon. Guzman and Answers from Hon. Guzman................................................ 66 Questions from Hon. Crane to Hon. Guzman and Answers from Hon. Guzman................................................ 69 Additional material submitted with Hon. Guzman's QFR's....... 71 Additional Material for the Record: America's Credit Unions...................................... 89 America's SBDC............................................... 91 Funding Circle............................................... 97 Hearing entitled ``Oversight of the Small Business Administration'' dated March 23, 2023...................... 129 Hearing entitled ``Small Business Administration's FY 2023 Budget'' dated April 27, 2022.............................. 523 CONDUCTING OVERSIGHT: TESTIMONY FROM THE SMALL BUSINESS ADMINISTRATOR ---------- WEDNESDAY, MARCH 20, 2024 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 10:02 a.m., in Room 2360, Rayburn House Office Building, Hon. Blaine Luetkemeyer [Vice Chairman of the Committee] presiding. Present: Representatives Luetkemeyer, Stauber, Meuser, Van Duyne, Salazar, Mann, Molinaro, Alford, Bean, Maloy, Velazquez, Phillips, Landsman, McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Chu, Davids, and Pappas. Mr. LUETKEMEYER. As you know, the Chairman always starts the meeting with a prayer and the Pledge. This morning we have Congressman Stauber from Minnesota to do that. Please keep the Chairman and his wife in your prayers as his wife is very ill and that is why he is not here this morning. So, with that, Congressman Stauber, would you please begin with the prayer and the Pledge. Mr. STAUBER. Would you please all rise with me? Dear Lord, thank you for this wonderful day and this opportunity to move our nation forward. We thank you for the witnesses. We thank you for all in attendance, both sides of the aisle. And as we are here trying to better America and our small businesses, please take care of our families and our spouses and our loved ones back home and allow them to have a wonderful, safe day. And thank you for this great nation that we get to call home. Amen. Please join me in the Pledge. I pledge allegiance to the flag of the United States of America. And to the Republic for which it stands, one nation under God, indivisible, with liberty and justice for all. Mr. LUETKEMEYER. Thank you, Congressman Stauber. Good morning, everyone. I now call the Small Business Committee to order. Without objection, the Chair is authorized to declare a recess of the Committee at any time. And I recognize myself for an opening statement. Welcome to today's hearing, which will focus on conducting oversight of the Small Business Administration. I would like to start off by thanking Administrator Guzman on for joining us today. This hearing could not come at a more important time for Main Street America. Our nation's small businesses are facing brutal economic headwinds, and it is our job to ensure that they have a fighting chance at success. This Committee's job is to be main street's voice in Washington, and part of that job is ensuring the SBA is functioning as intended. We must not forget that the sole purpose of the SBA is to help small businesses. During the COVID-19 pandemic, the SBA was asked to step up in ways that were unprecedented. Unfortunately, we know from multiple audits that there were serious problems within the agency that led to unacceptable amounts of fraud. What we know from countless investigations, without a doubt, is that the SBA needs to be right-sized. You take one look at the agency, it's clear they are struggling with their current workload and are straying from their sole mission of helping main street. The way I see it, the SBA is absolutely not in a position to take on more responsibility. I am extremely skeptical that the SBA is deserving of a 20 percent budget increase as there is no evidence the agency is operating effectively or efficiently. Moreover, the SBA has repeatedly demonstrated they are not responsible stewards of our taxpayer dollars. They have delayed this Committee's COVID lending investigation at every turn by waiting months to send over our requested documents. To make matters worse, the SBA has implemented an extremely minimal return to work policy. This is a direct slap in the face to our entrepreneurs who don't have the luxury of a day off or ability to sit in their pajamas and work from home. The SBA undoubtedly needs to take a page out of main street's book on this issue. Given all the problems the SBA had during the pandemic, the ridiculous amount of waste that has been found, and the significant management issues, I do not see how the SBA can responsibly request more money. If they were a private company, no investor would put up more funds for them. The SBA is overwhelmed and cannot adequately achieve its mission. The answer for improvement is not more money, but the cutting of wasteful spending and unnecessary action. You must ensure the agency is capable of handling their current tasks before they even think about expanding into more areas. I want to thank you all again for being here today and I look forward to today's hearing. I hope that today's conversation will provide a pathway for the SBA to get back on track. With that, I yield to our distinguished Ranking Member from New York, Ms. Velazquez, for opening remarks. Ms. VELAZQUEZ. Thank you. Administrator Guzman, welcome and thank you for testifying before the Committee today. It has been 3 years since you were confirmed as SBA administrator, when you took the helm of the agency in the midst of an unprecedented crisis for our nation's small businesses. Restaurants, theaters, gyms and small firms were clamoring for aid. Borrowers had to wait on hold on SBA call lines for hours, only to get wrong information. The Inspector General and GAO were issuing multiple reports warning the relief programs were rife with fraud, and women- and minority- owned small businesses did not have equal access to the programs. Put simply, you inherited a mess. Undeterred, you hit the ground running. You put antifraud controls in place to protect taxpayers' dollars, guardrails that were taken down by the previous administration that led us to the mess that we saw, and you worked with our committee to ensure an equitable distribution of relief. Today we are seeing the fruits of our labor. There have been a record number of small business applications, 16.5 million since 2021, with women- and minority-owned small businesses leading the way. The economy has created 15 million jobs, unemployment remains at historic lows, and we are making progress on the fight against inflation. Looking ahead, I would like to learn more about your plan for the agency. We will have to go over the steps you have taken to combat fraud to push back against some of the erroneous charges we will hear today. I hope we can examine the steps SBA has taken to service the unprecedented level of COVID-19 EIDL loans. It is important to point out that before the pandemic, SBA was servicing about 263,000 disaster loans, totaling approximately $9 billion. In fiscal year 2025, more than 2.5 million loans will need to be serviced. That is a tall order for a small agency. While the launch of My SBA has enhanced the customer service experience for borrowers, the agency will need sufficient funds to process the loans as well as to conduct fraud reviews. Turning to lending, ensuring businesses owned by women, people of color, and underserved groups is an important goal that I share with you. SBA finalized two rules last year that had substantial implications for both 7(a) and 504 programs. As you know, I believe these rules were rushed and I want to hear what you are doing to safeguard the integrity of both programs. With regard to contracting, the federal government is the largest producer of goods and services in the world, and we appreciate that this administration continues to send a record amount of prime contracting dollars to small businesses and government contractors. However, more can be done to level the playing field for small businesses, recruit more small businesses into the federal marketplace, and put more opportunities within their reach. We expect that SBA will work to eliminate the lengthy wait times unique to the Women-Owned Small Business Certification program. Finally, I look forward to a discussion about your fiscal year 2025 budget proposal to better understand the vision for the next fiscal year. Thank you, Mr. Chairman. I yield back. Mr. LUETKEMEYER. The gentlelady yields back. And with that, as stated earlier, our witness today is Small Business Administrator Isabella Guzman. In 2021, she was confirmed as the 27th administrator of the Small Business Administration. Prior to becoming SBA Administrator, Ms. Guzman served in multiple capacities in the agency for 9 years, including as deputy chief of staff and senior advisor at the SBA. Ms. Guzman also served as a small business advocate for the state of California. Over the past year, we have heard from small businesses across the country about the successes and shortcomings facing the agency. That is why we brought Administrator Guzman here today, to ensure the SBA is doing all they can to efficiently and effectively address issues facing main street today. Administrator Guzman, thank you for joining the Committee today and look forward to your testimony and our conversation. Before I recognize the witness, I would like to remind her that her oral testimony is restricted to 5 minutes. If you see the light turn red in front of you, it means your 5 minutes have concluded and should wrap up your testimony. I see you have got the microphone pulled pretty closely to you. We are transcribing it so the closer you can get, the better sound we get. I certainly appreciate it. So, with that, Ms. Guzman, you are recognized for 5 minutes. STATEMENT OF HON. ISABELLA CASILLAS GUZMAN, ADMINISTRATOR, UNITED STATES SMALL BUSINESS ADMINISTRATION STATEMENT OF HON. ISABELLA CASILLAS GUZMAN Ms. GUZMAN. Thank you so much, Vice Chairman Luetkemeyer, as well as Ranking Member Velazquez and distinguished Members of the Committee who are here. Thank you so much. I do appreciate the opportunity to be able to engage and talk about the successes of SBA and the opportunities going forward to work with the Committee to help power our small businesses. At the SBA, we work to ensure that our 33 million small businesses and innovative startups have the tools, the resources, the support that they need to start, grow, and build resilient businesses as our nation's economy depends on their successes. When I was confirmed by the Senate in March 2021, we were still facing unprecedented job losses from the COVID-19 pandemic and subsequent downturn. SBA was scaling dramatically to save small businesses who were facing revenue losses and were unsure if they would survive. President Biden understood the challenges facing small businesses and that is why his American Rescue Plan provided essential support to the very small businesses that are the heart of our communities. Every Member of this Committee knows a small business that wouldn't be open today if not for the support provided through the SBA. SBA's COVID-19 support, more than $450 billion during the Biden-Harris administration, was a critical lifeline for our small businesses when they continued to need it the most. The Paycheck Protection Program helped small businesses and nonprofits to retain their employees. The COVID-19 Economic Injury Disaster Loan, COVID EIDL program and targeted grants provided working capital to not only help small businesses continue to weather the worst effects of the downturn, but also position their businesses for growth to help the economic recovery. The Restaurant Revitalization Fund and Shuttered Venue Operators Grant programs saved our mom-and-pop restaurants, the cafes, the breweries, the stages, the cultural venues, the performing arts centers, which are all anchors of our main street businesses across the country. Our historic level of investments in small businesses, including through the American Rescue Plan, combined with the opportunities in landmark legislation, such as the bipartisan Infrastructure law, the CHIPS and Science Act, and the Inflation Reduction Act, set the stage for America to have the strongest economic recovery of any developed country in the world. Last year, when I appeared before this Committee, leading economists were predicting an economic downturn. Now the U.S. economy continues to power ahead. Inflation has slowed over the past 18 months and interest rates are down from their recent highs. And with 14.8 million more jobs than when the President took office, labor markets are stable and strong. We have seen the top 3 years of small business application filings on record. This historic small business boom has seen 16.8 million applications filed since the President took office. These acts of hope, as President Biden refers to them, are powered by entrepreneurs in every state, and especially by women and people of color who are leading with the highest startup rates. This is what happens when we have an administration that is committed to building an economy from the middle out and bottom up. SBA's capital and resource programs are reaching more communities and making an impact. I have visited thousands of small business owners across the nation, including with many in your congressional districts, and entrepreneurs continue to inspire inform SBA's important work. Small businesses have shared with me their future plans and prospects, as well as the challenges that they face every day, and finding affordable capital often tops the list. In 2023, SBA supported more than $50 billion across our lending, bonding, investment, and disaster programs. Our reforms helped reverse the decline in small-dollar lending that we had been experiencing for 10 years. By simplifying and cutting red tape, we have made it even easier to work with the SBA and have given greater flexibility to our expanded lending network to make the type of small-dollar loans that are key to supporting SBA's historically underserved communities, which includes rural, low-income, veterans, women, people of color, and startups. SBA's loans to underserved markets have increased as a result of reforms at the SBA. For example, loan numbers and dollars to Black-owned businesses have more than doubled. Loan dollars--excuse me, loan numbers to Latino-owned businesses have doubled and increased to women-owned businesses by 70 percent. And for the first time in more than 40 years, SBA awarded three new licenses in its small business lending company program to companies in Alaska, Colorado, and Arkansas. SBA transitioned community-based lenders and community advantage out of their pilot license into a new permanent CA SBLC license. SBA now has 142 community advantage SBLCs, 39 more than the number enrolled under the pilot program just 2 years ago. Critically, SBA has also prioritized preventing fraud across our programs. We put in place best practices for fraud prevention, detection, and response. We have also continued to work in close partnership with the inspector General and the GAO and law enforcement to recover and law enforcement to recover stolen taxpayer funds in the COVID pandemic programs. Because of our reforms, all SBA loans and our core programs are screened for fraud prior to disbursement as part of our eligibility check. Our aggressive actions and investments mean that SBA is more strongly positioned to combat fraud, waste, and abuse across our programs, which allows our entire mission-driven team at the SBA to focus on delivering entrepreneurial support and resources to help more Americans start and grow their businesses and recover after disaster. I look forward to working in partnership with the Committee to ensure SBA has the resources to help advance our communities and the economy. Thank you very much. Mr. LUETKEMEYER. Thank you, Ms. Guzman, for your testimony. We will now move to Member questions, the 5-minute rule. We now recognize the gentleman from Minnesota, Mr. Stauber, for 5 minutes. Mr. STAUBER. Thank you, Mr. Chair and Ranking Member Velazquez, for holding this hearing today. And thank you to Administrator Guzman for appearing today. Over the past year, the Small Business Committee has heard concerns from real small business owners about the regulatory burden they feel from this administration. These unelected bureaucrats and backrooms make these rules without care for the overwhelming cost to our small businesses. Countless times across the SBA's website, Administrator Guzman's name is followed by, quote, `` The voice in President Biden's cabinet for America's 33 million small businesses.'' Based on the regulations out of this administration, it is evident to me the complaints from small business owners across America aren't being adequately addressed. Administrator Guzman, on April 27 of 2022, you testified in front of this Committee during my line of questioning that you were `` not familiar'' with the Small Business Regulatory Enforcement Fairness Act, also known as SBREFA. Are you familiar with it now? Ms. GUZMAN. Yes, of course I was familiar at the time. I don't recall saying that, but SBREFA, of course, I am familiar with it. Our Office of Advocacy, which is independent, deploys it. Mr. STAUBER. Yeah, I recall you saying you had no familiarity with it. Ms. GUZMAN. Perhaps on the specific issue you were talking about. Mr. STAUBER. Do you think that you were the voice for America's 33 million small businesses when you were completely uneducated about a law that protects small businesses from burdensome regulations over a year into your administration? Ms. GUZMAN. I am prepared and I am very familiar with the regulatory process that the federal government---- Mr. STAUBER. Thank you. Thank you very much. In your congressional budget justification, you claimed that in fiscal year 2023, your agency helped reduce regulatory burdens on small businesses and removed roadblocks that threatened their survival. Yet since President Biden's inauguration, the administration has issued over 800 final rules costing Americans over $475 billion. That's with a B. And as I mentioned, however, we have had numerous small business owners sit right where you are, Administrator, and testify to this Committee that the crippling impact that this administration's regulations have had on their businesses. Week after week, we have small businesses, folks, men and women, come and talk about the regulatory burden that this administration has placed on them. So, we have you saying you are reducing regulations on small businesses and actual small businesses saying they are being bombarded with new regulations. Are you suggesting that these businessmen and women who paid money out of their own pocket to come and testify are not telling the truth? Ms. GUZMAN. Of course not, sir. And what I would share with you is that the SBA has reduced regulation within its programs. Of course, those are the regulations that I have decision- making on in terms of being the administrator of the SBA. You know, we know that---- Mr. STAUBER. One second, just because time is limited, I appreciate that. The SBA has been told repeatedly by its Inspector General, the Government Accountability Office, independent auditors and Congress that is failing its current responsibilities. It has a massive 30-year loan portfolio to service. It has unprecedented amounts of fraud to deal with. It is wasting time, money, and resources on duplicative programs. o make matters worse, the SBA announced on Tuesday that it has entered a Memorandum of Understanding with the Michigan Department of State to collaborate on voter registration. In its announcement, the SBA grasps at straws to connect the Small Business Administration's missions to elections. What is the Small Business Administration's mission statement? Ms. GUZMAN. We serve small businesses and help impacted communities post disasters. Mr. STAUBER. Would it be help Americans start, grow, and build resilient businesses? Ms. GUZMAN. That is correct. Mr. STAUBER. That is a mission statement, right? What does that have to do with elections? Ms. GUZMAN. The President's executive order directed federal agencies to expand---- Mr. STAUBER. These are small business--ma'am. Ms. GUZMAN.--opportunities to get information. Mr. STAUBER. With all due respect, you are the voice of our small businesses. They are saying they are not partaking in the election. They want to have--grow their business and be resilient in America. How do you connect elections to servicing or promoting small businesses? Ms. GUZMAN. I think we can all agree that we want small businesses to vote and be active in this democracy. And, of course, providing information on how they can do that is a simple process on our website. Mr. STAUBER. So, I will ask another question. Articulate for me where in the SBA's congressional mandate or its mission statement that election work is part of the SBA's responsibility. Ms. GUZMAN. This is not election work. This is just providing information to the public, to the small businesses who come to visit our website, giving them information on how they could register in their state. That is the extent of the SBA's role in this. And, you know, again, you know, the President's executive order was clear. The federal agencies should work to ensure that we have a strong electoral base and people are aware of their options and their ability to vote. Mr. STAUBER. Mr. Chair, I am out of time. Thank you very much. Mr. LUETKEMEYER. The gentleman's time has expired. With that, we go to the Ranking Member, Ms. Velazquez, from New York, for 5 minutes. Ms. VELAZQUEZ. Thank you. Administrator Guzman, in testimony before our Committee, IG Ware agreed with an SBA report that 86 percent of the fraud occurred in the first 9 months of the pandemic under the previous administration. What antifraud controls did your administration put into place? Ms. GUZMAN. Thank you so much, Ranking Member. And I think you said it best that we inherited these programs and the controls that were put in place at the time, which were de minimis. You know, frankly, at the President's direction, the first thing he talked to me about was the importance of making sure that these funds got into the hands of the businesses they were intended to serve. And that's what we focused on doing at the SBA, implementing controls on the front end so that we could strengthen our portfolio, making sure we were fully underwriting COVID EIDL and checking for fraud across the portfolio, especially, of course, on all our new programs as well, where we have incredible performance of less than 1 percent fraud. We, in addition, created a Fraud Risk Management Board, so that we could have longevity for some of these fraud controls, risk frameworks that we have put into place on our core lending programs, as well as on these disaster loan programs. The GAO and the IG have both testified before this Committee, asserting that the SBA is in the best position that it has ever been as a result of these efforts to address the GAO and IG's concerns and institute sustainable fraud risk frameworks for the agency. Ms. VELAZQUEZ. Thank you. In fiscal year 2023, SBA serviced 2.5 million COVID-19 EIDL loans, 10 times the amount of disaster loans the agency was doing before the pandemic. What specific steps have you taken to improve customer service and be responsive to borrowers? Ms. GUZMAN. Not only did we focus on strengthening the portfolio, those incoming loans, and making sure that we are preventing fraud at the front end, but in addition, we wanted the customer service on the back end. So My SBA, which you referenced in your testimony, obviously was our investment in technology to streamline the servicing of these nearly 4 million in total loans that the SBA is now managing for 30 years, as our Vice Chairman mentioned. So, My SBA provides an enhanced customer service. It has enabled us to continuously communicate with these borrowers and ensure that the performance of the portfolio is strong. Ms. VELAZQUEZ. What type of challenges are you facing, and what do you need from Congress to ensure this effort is a success? Ms. GUZMAN. These COVID pandemic programs are not in our baseline budget, which is why you see an increase. We are requesting funding to continue to maintain these nearly 4 million in loans that the SBA is now responsible for servicing at this point and collecting on for the American people. And so that additional funds will help us support that, as well as the continued performance around PPP, the Restaurant Revitalization Fund, Shuttered Venues, all of our COVID programs to ensure that we are continuously reporting and servicing these small businesses. Ms. VELAZQUEZ. Thank you. The timeframe to obtain certification for SBA's contracting programs varies. Veterans can receive certification in a few weeks, while women can wait for 9 months. Is a budget request of $6.2 million sufficient to hire the personnel you need to administer the WOSB program and bring wait times in line with the other programs? It is great that we go out there and meet with women-owned businesses and promise that we will do everything we can to help them grow their business, and move those businesses to the next level, but it takes money and resources for SBA to pay the attention that it needs in providing the resources to the WOSB program. Ms. GUZMAN. And, you know, this transfer of the veteran certification to the SBA from the VA enabled SBA to, you know, rethink how it certifies these businesses. VetCert is the gold standard. We intend on investing in technology across all our certifications to streamline access. We recognize the backlogs and lengthy times that women face in order to get certified to get those set-asides in government contracting. So, we, this year, are investing in technology to streamline, aligns with the VetCert program. And we believe that this funding is sufficient in order for us to perform that simplification and clear the backlog. And we have doubled down on our staffing, too, temporarily to clear that backlog. Ms. VELAZQUEZ. Five years ago, the director of the Office of Credit Risk Management testified that the office was increasing its personnel to 42 FTEs to better fulfill its mission. How many employees does OCRM currently have? Are you confident the office has the resources it needs to conduct oversight of the new SBLCs? Ms. GUZMAN. Within the last several months, we have been able to increase our staffing. We are now from the now in 35, and we continue to have open positions that we are filling aggressively. This is one of the top priorities. We want to give them their full capacity. We, of course, have invested in technology. We have partners to ensure that our oversight of our lenders is strong, and OCRM is currently doing that. Ms. VELAZQUEZ. Thank you. I yield back. Mr. LUETKEMEYER. The gentlelady's time has expired. With that, we will go to the gentleman from Pennsylvania. Mr. Meuser is recognized for 5 minutes. Mr. MEUSER. Thank you, Mr. Chairman, very much. Thank you, Administrator. Good to see you. One of the concerning topics that I have, and before this Committee, was the rule change on the SBA regarding small business lending companies where a lender will receive the government guarantees when underwriting small businesses. When you testified here last year, March 23, 2023, you assured us the SBA had sufficient oversight capabilities. In fact, responding to a question from Ranking Member Velazquez, who asked, have you heard concerns with allowing--have you concerns with allowing unregulated companies associated with significant fraud into a federally guaranteed program? Your response was, and I am paraphrasing, I know that the SBA has a rigorous application process, so I am not concerned and we intend to hold any business that wants to participate to their performance, to their underwriting standards for transparency, et cetera. So, not soon after that--well, let me ask this. In your view, are all companies subject to this rigorous application process in light of the example of Funding Circle, where the CEO recently, 2 weeks ago, stated how all of their losses, their mounting losses, which have existed for the last couple of years? And, Mr. Chairman, I would like to submit their income statement for the record, Funding Circle. Mr. LUETKEMEYER. Without objection. Mr. MEUSER. Thank you. It would require significant capital. He says, I mean, you saw all of our losses over the last several years. So, the SBA program, what we don't believe will be the best use of our capital to invest in those loans in the U.S. business. So it is a pretty easy question to ask, why would the SBA approve such an organization that had such mounting losses and, in the end, an unwillingness even to serve, when, by the way, it was just one of three that was approved? It wasn't like there were 400 and this was one. This was one of three. So, if you would explain. Ms. GUZMAN. Yes, I would. And Funding Circle, just for the record as well, is fully capitalized in its U.S. operations based in Colorado. And so, you know, they are in a strong position in terms of being able to deliver against their mission of small-dollar lending. They continue to work with the SBA in the licensing process. It is not finalized at this point. Obviously it was awarded, but they still have to go through our rigorous application process, and we still are continuing to work with them. Their intention is to start lending with the SBA program in the coming weeks. Mr. MEUSER. Well, do they own it? So, in other words, if they intend to sell their U.S. business, can they also sell their SBLC license? Ms. GUZMAN. We have currently, and for years, for decades now, 14 SBLCs that have turned hands. They go through the same rigorous, you know, licensing process when those licenses are sold. So it would be the same process. Mr. MEUSER. With all due respect---- Ms. GUZMAN. It would be the same process. Mr. MEUSER.--you continue to say the due diligence on choosing them was rigorous. Ms. GUZMAN. And they have intended to maintain that license within their U.S. operations. Mr. MEUSER. You do recall that we had issues, both sides, everyone here, on the speed that we were moving forward with such licensing, and then, yet we are pointing out a failure from one of three. And it just--you can't help but bring back last year's testimony where everyone in this Committee had real concerns about the speed and why this was being done as quickly as it was. In fact, Patrick Kelly sat here telling us how important it was to move forward with these companies. And meanwhile, it clearly, in this case, did not work out either. Ms. GUZMAN. The 14---- Mr. MEUSER. Didn't work out for him either. Ms. GUZMAN. So, to take us back a little bit to that, too, note that we have still persistent gaps in the marketplace for startups, for underserved markets overall, in rural deserts around the country. Our SBLCs perform, those 14 that have historically been performing, perform to fill market gaps. Our goal is to expand that program, adding three licenses for the first time in 40 years on an existing program. We viewed that as a responsible expansion, not opening the floodgates, but obviously a responsible expansion by adding three new lenders into the program. And we are comfortable to continue to work with Funding Circle's U.S. operations. Mr. MEUSER. Well, hopefully, the level of comfort isn't as high as it was before. Hopefully, there is some healthy paranoia taking place that we don't want this to happen again. I want to ask you about something else I find very concerning, and that is the President's executive order on demanding and helping people, however you want to put it, businesses, encouraging them to register and to vote and et cetera. Can you provide this Committee every email and every official correspondence to small businesses and interagency on those discussions related to requesting, enticing companies to register? Ms. GUZMAN. I will put in that request to my team and we will follow up with you directly. Yes. Mr. MEUSER. Thank you. I yield back, Mr. Chairman. Mr. LUETKEMEYER. The gentlemen yields back. The time has expired. With that, we go to the gentlelady from Washington, Representative Gluesenkamp Perez, recognized for 5 minutes. Ms. GLUESENKAMP PEREZ. Thank you, Vice Chairman Luetkemeyer, a fellow challenging last name. And thank you to Administration Guzman. Mr. LUETKEMEYER. Did I get close? Ms. GLUESENKAMP PEREZ. That was right on the head of the nail. Mr. LUETKEMEYER. Thank you. Ms. GLUESENKAMP PEREZ. Yeah, thank you. And thank you, Administrator Guzman, for being here with the Committee today and for your work on behalf of small businesses across the country. Last year, at just about this time, you came to testify in front of this Committee, and I told you about my experience with our auto shop, spending a year trying to navigate the 504 loan program. And that program was truly a vital source of capital for our business and in maintaining trades businesses. Right? All the other businesses were getting bought out and turned into coffee shops and tattoo parlors. And so being able to maintain an independent auto shop in so many communities is critical. So, we are pleased that this avenue of capital is available to people working in the trades who don't have another avenue. What is the administration doing to make the experience more navigable for first-time entrepreneurs who don't have a year to follow up to spend on this process? Ms. GUZMAN. Yes, I completely agree. The 504 program is a vital asset builder for small businesses around the country and for sustainability in neighborhoods as costs increase, buying their building or buying equipment. And it is critical with these investments, whether it is chips, infrastructure, or the Inflation Reduction Act, as businesses need heavy investment capital to move forward. We have streamlined our regulatory process on both 7(a) and 504. Really trying to work to make sure that the lenders have easier processes and more certainty around their guarantee as well by simplifying the affiliation component. That was the number one reason for denials. It was really a very confusing process previously, but we have also deferred to their underwriting standards and best practices as well. So, these have been very well received by the trade organization that represents the 504 lenders and ADCO. They are very excited as well to see the layering of the community advantage SBLCs that many of them are colicensed as. And so I believe that this will continue to enhance our 504 programs. But we do need to do more outreach and awareness and thus the expansion of our networks, our entrepreneurial ecosystems, to include navigators to help direct more businesses to the SBA as an alternative is something we are also focused on. Ms. GLUESENKAMP PEREZ. That is great. Last year we talked about the MySBA.gov portal and its goal to give a single point of entry for businesses to perform the things they need. Can you give us an update on the improvements made to the system over the past year and how is it serving businesses? Ms. GUZMAN. Our goal is to simplify the customer experience for the small businesses. The President's executive order on customer experience, you know, direct specifically some of our programs on this, including the unified lending platform where servicing happens, where now disaster lending happens. Recently, with the Western Governors Association in Oregon, the governor said, you know, after the ice storms, businesses and individuals got their money within 2 days thanks to this new system. So that is one of the experiences. The other is VetCert, and our goal is to add on the other programs of the SBA into this single door entry for our small businesses so that it can be enhanced. Ms. GLUESENKAMP PEREZ. Great. The SBA also recently launched the Lender Match program, which according to SBA press release, features nearly 1,000 lenders, 257 community-based lenders, who can connect to potential customers and earn their business. But I am concerned because I have also heard from small business community banks that are in the process of getting certified for SBA lending that the process is onerous and time-consuming. I am wondering what considerations are being made in the program for small community banks who may have limited staff capacity. Can you share generally and briefly what the administration is doing to make sure community banks are able to participate in SBA lending? Ms. GUZMAN. Yes, 100 percent and this is one of our top priorities. Eighty-three percent of the PPP lenders hadn't done an SBA loan in 5 years. Those are the small community banks. We wanted to simplify our regulations and cut red tape for them. Lender match is an incredible tool that we wanted to level the playing field in as well. And so what we have done is added on our prescreening for fraud and eligibility, which we have deployed across our 7(a) portfolio into the Lender Match system, so that we could give these lenders more qualified leads, and not just cold leads. So that should streamline their ability to review and vet the 50,000 businesses we get there every month. The second thing, though, was to allow for a 48-hour waiting period, because the larger institutions have staffing that just are dedicated to Lender Match to be able to get those leads. And clearly, we want everyone the opportunity to go after any prospects or their own borrowers in many cases. So that was the goal in this recent upgrade. Ms. GLUESENKAMP PEREZ. Thank you very much. I yield back. Mr. LUETKEMEYER. The gentlelady's time has expired. With that, go to the gentlelady from Texas. Ms. Van Duyne is recognized for 5 minutes. Ms. VAN DUYNE. Thank you very much, Mr. Chairman. Administrator Guzman, you are aware of the document requests, that we have sent four letters to you on the decision surrounding this some $100,000 portfolio, right? Ms. GUZMAN. Yes. Ms. VAN DUYNE. So, you are aware? Ms. GUZMAN. Yes, correct. Ms. VAN DUYNE. Well, it is interesting, because many of the documents that you have provided us have been nonresponsive to our requests. In fact, SBA has continually missed deadlines and they have produced irrelevant documents in response to Committee requests. And by the way, I really appreciate the $4,000 document drop--that 4,000-page document drop that you gave to us Friday night on--it is incredible that all of a sudden, it has taken a year, but we got 4,000 pages Friday night right before this hearing. But only 20 percent of what you have produced this Committee over the last year was actually responsive. And let's talk about this April 2022 memo, which confirms your decision to end collections on PPP and COVID EIDL loans less than 100,000. And I am going to use the term `` end collections'' because that is the phrase that is written on the document that we are discussing, and that decision is the subject of this investigation. As you are well aware, both the OIG and this Committee found that this April 2022 memo provided insufficient justification for the decision to end collections on delinquent debt value at 100,000 or less. And that was under the Debt Collection Improvements Act. The SBA produced three additional documents analyzing the PPP portfolio, but evidently did not have additional analysis for the COVID EIDL. So, let's discuss the substance of this memo. It says, `` The most cost-effective means to protect the government's financial interest is to end collections, including Treasury referrals on the subject loans.'' You have repeatedly said that this memo simply meant no referrals to Treasury, but that is clearly not what the memo stated. You said the cost of the final step in the loan process, referrals to Treasury, was too high. And later you actually, I think, detailed that cost as being somewhere between 300- and $500 million a year. So, you hired a consultant in 2021 to analyze the whole COVID EIDL portfolio and to make recommendations. They recommended that you sell either all or parts of the portfolio, potentially getting as much as 50 cents on the dollar, but you didn't sell. Why? Ms. GUZMAN. That was one of four studies, and we take the collections very seriously at the SBA. As you alluded to, that stated to end collections at the ninth step. We had, obviously, proceeded a step. Ms. VAN DUYNE. But I am asking, why didn't you take the advice of someone that you actually paid taxpayer dollar to do an analysis? Ms. GUZMAN. There were four analyses. And keep in mind that this is---- Ms. VAN DUYNE. Did any of them suggest that you not sell? Ms. GUZMAN. Yes, the first study, which under DCIA, I engaged in my authority to not refer to Treasury the first time. However, the subsequent studies did suggest that there could potentially be upwards of a $100 million collected. Ms. VAN DUYNE. So, I better reclaim my time. Because just a few months after you received the recommendation to sell, you said that the under 100,000 portfolio was not collectible. So did you reconsider the sell then? Ms. GUZMAN. As I shared with some of your fellow Committee Members when they visited the SBA, the cost to see the SBA's portfolio---- Ms. VAN DUYNE. I don't--I am just asking, yes or no, did you reconsider the sale then? Ms. GUZMAN. We have considered all of the studies' analyses, yes. Ms. VAN DUYNE. Okay. So every day that passes, the value on these loans diminish. Selling the portfolio could have gotten you as much as 50 cents on the dollar, which is a lot better than the nearly zero that your April 22 memo actually said you expected to collect. Back to the decision not to collect these loans. When you reversed the decision in December '23, you provided an update for PPP at $23.9 million with an unexpected recovery of $128.5 million. During a briefing with the Committee staff, SBA told us they didn't have a specific cost for COVID EIDL at this stage. That was January of this year. Do you have an updated cost analysis? Ms. GUZMAN. We have, based on the updated cost analyses, we have started the process of referring to Treasury and we have been paying under---- Ms. VAN DUYNE. So, do you have a cost analysis now? Because this is over a year ago. Ms. GUZMAN. For selling the portfolio? Ms. VAN DUYNE. For COVID EIDL versus just the PPP. Ms. GUZMAN. For COVID EIDL we have the four studies that are guessing at the analysis. Ms. VAN DUYNE. Okay. So, but that doesn't---- Ms. GUZMAN. Remember that this is an unprecedented portfolio---- Ms. VAN DUYNE. But there are two studies---- Ms. GUZMAN.--with very different parameters for under it. Ms. VAN DUYNE. You paid for immense analysis on the PPP program, but you haven't done it on the EIDL program. There's no actual written comparison, was there, between PPP and EIDL? Ms. GUZMAN. And we have continued collection on these. Ms. VAN DUYNE. So, was there an actual written comparison between PPP and EIDL? Because if you had it, we have requested it and we haven't gotten it. Ms. GUZMAN. We have done four analyses trying to compare as best as we can this unprecedented portfolio---- Ms. VAN DUYNE. PPP, but not EIDL. Ms. GUZMAN.--to performance of other small business portfolios. Ms. VAN DUYNE. PPP, but not EIDL. Ms. GUZMAN. And we have made the decision to---- Ms. VAN DUYNE. So, if the COVID EIDL is indeed more collectible, because that is what we have been told, even if PPP was not worth collecting, EIDL may have been. So, subsequent analysis was done on the collectability. We have seen that a number of times, but we still haven't seen it on EIDL. So, the analysis supporting your decision to end collections has been deemed inefficient under the Debt Collection Improvement Act by OIG, KPMG, and this Committee. And yet there was no subsequent analysis done on the COVID EIDL. Ms. GUZMAN. And as all of these loans have started their process---- Ms. VAN DUYNE. So, I am going to reclaim my time---- Ms. GUZMAN.--being referred to Treasury---- Ms. VAN DUYNE.--because I am almost out of it. Ms. GUZMAN.--that is irrelevant. Ms. VAN DUYNE. What I am hearing you say is you have stonewalled congressional oversight. You incurred the cost to collect these loans by taking all the collection actions, but you didn't actually collect the money, because, as you just said, you didn't refer them to Treasury. So, though---- Ms. GUZMAN. We have referred them to Treasury. Ms. VAN DUYNE.--independent agencies pointed out that you violated the Debt Collection Improvement Act by not referring these loans to Treasury, you ignored them. You have wasted billions upon billions of taxpayer dollars not only by delaying these decisions over the last 2 years, but with poor decision- making. Unbelievable. I yield back. Ms. GUZMAN. These loans have been referred to Treasury and we are collecting on them. In fact, we have, you know---- Ms. VAN DUYNE. I yield back. Ms. GUZMAN.--more than two X'ed our ability to collect on those small dollar loans. Mr. LUETKEMEYER. The gentlelady's time has expired. With that, go to the gentleman, the representative from New Hampshire, Mr. Pappas, for 5 minutes. Mr. PAPPAS. Thanks very much, Mr. Chairman. And, Administrator, great to see you here. Always happy to have you back in New Hampshire. You have visited many times, and I appreciate the local focus that you bring to your role. I think it's important for anyone in Washington to continue to understand that solutions just don't come from this place. They come from our main streets. And I think you have demonstrated that through your work. As you know, SBA's disaster loan program was created to help communities recover after a disaster by providing low interest loans to businesses and homeowners. The seacoast region of my district has been devastated by extreme weather events, and they have been able to access economic injury disaster loans that were made available to small businesses in that part of the state earlier this year. But more rural communities that I represent may not know about the disaster assistance that SBA provides. I know that SBA has been working on new outreach programming to rural communities, like portable help centers that can be set up in more remote areas. But my understanding is that none of these efforts are specifically designed to meet the needs of rural communities. So, I am wondering, in the wake of a GAO report that said that there is no specific rural outreach, how SBA plans to move forward with strengthening its disaster planning to ensure that it is meeting the needs of all of our communities. Ms. GUZMAN. Thank you for that question, and I am very proud of our ability to innovate in the disaster space with our improved lending platform. But we definitely want to get the awareness out there. A couple of things. With the Rural Communities Act, we did enact a new process for which governors can declare rural disasters when it doesn't rise to the level of a federal disaster. And that streamlines the process for governors to be able to declare a disaster, only identifying one, you know, house or business that has been harmed, and so--versus five. And in rural communities, sometimes that is very difficult and requires miles of travel. So that is the first thing. And we have had 14 declarations and have been reaching out to all the governors in the Offices of Emergency Management to ensure that they are aware of this streamlined process. And so far, the response has been very positive. We have also entered into an MOU with the USDA to ensure that we are reaching out to rural communities, not only on disaster, but as well on our small business programs, on capital access, on exporting. And this Rural Prosperity tour that we have launched at the SBA has, you know, begun in three states, and we are continuing to expand, and I am looking forward to continued travel on that myself personally, to try to build awareness around all of our programs. But when a disaster happens, whether it is rural declared by the governor or federal, the SBA immediately deploys on the ground. And we have tried to be as aggressive as possible with portable operations centers as well as extensive outreach in multiple languages. Mr. PAPPAS. Well, thank you for your comments there. Switching gears, today happens to be National SBDC Day, and I know I asked you last year about this same issue with a proposed cut for SBDCs across the country. I know in my state, our Small Business Development Center helped businesses access more than $37 million in new capital, increasing their sales by $26.4 million in 2023 alone. So, despite this performance, the proposed budget would reduce SBDC funding by $105,000 in my state alone. That could mean the loss of an entire center and decreased coverage in underserved and rural areas. So, we did talk about this in the wake of last year's proposed cuts. That did not come to fruition, thankfully. But I am wondering, given the impact of SBDCs across the country, $6.8 billion of the $7 billion in capital provided by the resource partners are through our SBDCs. Why does it make sense to reduce funding for the best performing program in terms of resource partners? Ms. GUZMAN. The SBDCs, you know, I always praise. They do an incredible job serving small businesses. On a recent trip that I went to Michigan, there was a restauranteur who literally brought the SBDC alongside because they helped them at every step of their journey, including accessing capital. On that same exact trip, I met another business that did not want to use the SBDC, that didn't feel that it was for her. Whether it is a university-based system or what have you, our SBDCs do an incredible job of serving the 326,000 businesses they served last year. But the other 32.7 million need alternatives and entrepreneurial ecosystems on the ground that meet them where they are and bring them back into SBA's ecosystem. And that is why we are trying to incentivize the development of new ecosystems around the country. Community navigators is that example where we are trying to ensure that there are alternatives to bring people back to the SBA, in fact, most likely back to an SBDC. But we need to reach more businesses and definitely go beyond the reach of our current resource partner network that in total reaches about 500,000 every year. Mr. PAPPAS. Well, I would just say in my neck of the woods, our SBDC is firing on all cylinders. They are essential. And if it ain't broke, you know, I don't think we need to fix it or pull funding away. So I would urge you to reconsider that. But I yield back my time. Thank you. Mr. LUETKEMEYER. The gentleman's time has expired. With that, we go to the gentlelady from Florida, Representative Salazar, recognized for 5 minutes. Ms. SALAZAR. Thank you, Mr. Chairman. And thank you to you, Administrator Guzman, for being here with us. And last time we spoke was at your office in December, where we went to your office to review and to visit the headquarters. So thank you very much for having us there and showing us around. I just want to concentrate on something major, which is that most federal government agencies, like the SBA, are required to have an annual independent audit, just like publicly traded businesses do so in the private sector. Right? And this past year, the SBA retained a very major, important consulting firm by the name of KPMG. Highly respected, widely trusted, so we are in good hands. Unfortunately, KPMG found not too many good things when they did the SBA audit. And I am going to tell you three that were found: inadequate loan process reviews, poor recordkeeping, and legal compliance issues. Did you study thoroughly, are you abreast, are you aware of everything this very important company said about your agency? Ms. GUZMAN. Yes, and I have met directly with KPMG, who was retained by our independent Inspector General, of course, to perform this audit. Those findings were regarding the COVID portfolio, which, again, was established in 2020. When I came in in 2021, my focus, at the President's direction, was to ensure that we had strong fraud risks and controls. Unfortunately, those findings stand on the existing 2020 portfolio. Ms. SALAZAR. So, that means that these findings do not show your performance as an administrator? Ms. GUZMAN. No, because---- Ms. SALAZAR. You have no responsibility for what the findings found? Ms. GUZMAN. I take responsibility for SBA's programs and operations---- Ms. SALAZAR. All right, so they are right there. Ms. GUZMAN.--for 2021 and what---- Ms. SALAZAR. So, which one of the findings--but wait. Ms. GUZMAN. Mm-hmm. Ms. SALAZAR. You have been there for 3 years. This review or this study was conducted in November of '23. So, You were there, '21, '22, '23. Which one of these findings is the most damaging to you as an administrator? Ms. GUZMAN. I view---- Ms. SALAZAR. You got to own something. Ms. GUZMAN. I view all of the findings--well, they are on the COVID pandemic programs. Ms. SALAZAR. Okay. Ms. GUZMAN. The COVID EIDL, PPP, obviously, that were established without controls, we instituted guardrails. And you'll note in the KPMG audit, they recognize our progress against all of these. My team has been working very diligently to ensure that we are implementing strong controls and also situate the SBA, so that---- Ms. SALAZAR. Yeah, but, you know---- Ms. GUZMAN.--we will never---- Ms. SALAZAR.--when you tell me---- Ms. GUZMAN.--have this problem again. Ms. SALAZAR. When you tell me, yeah, I have done it, I mean, you know, just give it to me in one sound bite. You were there for 3 years. They came in in November '23. They are saying that things are not the way they are supposed to be. So where does your responsibility fall? Ms. GUZMAN. And my responsibility lies in fixing the problems that were established when the COVID pandemic programs were established in 2020. And that is what we have been doing, and we have been making incredible progress as KPMG, the IG, the GAO will all attest to that. Ms. SALAZAR. Wait, wait, wait. The IG has said that we missed $20 billion--I am sorry, $200 billion. So, I am just trying to understand your leadership. How good has it been or not for the agency based on this report by these independent people? Ms. GUZMAN. The 200 billion---- Ms. SALAZAR. I don't hear--I just don't hear where, you know, where do you own responsibility? Ms. GUZMAN. I own responsibility in the reforms that we have implemented that have stopped and thwarted over $500 billion, 21 million attempted frauds, attempts against the agency and these COVID programs. Ms. SALAZAR. Did you fire anybody? Ms. GUZMAN. I own responsibility---- Ms. SALAZAR. Did you fire anybody? Ms. GUZMAN. The---- Ms. SALAZAR. Inadequate loan process, poor recordkeeping, legal compliance issues. Is everyone that committed these crimes to our small business community are still there making a living or getting a paycheck? Ms. GUZMAN. The leadership that made the decisions around the 2020 implementation of the COVID pandemic programs served in the previous Trump administration and are no longer there. My responsibility is to figure what's needed---- Ms. SALAZAR. No, no, I am asking you specifically---- Ms. GUZMAN.--and improve those problems. Ms. SALAZAR.--anyone who was there during the pandemic and was responsible for these faults, are they still there? Yes or no. Ms. GUZMAN. The responsibility is with the leadership and the leadership---- Ms. SALAZAR. You are leadership---- Ms. GUZMAN. I am. Ms. SALAZAR.--but you just told me that you came after pandemic. Ms. GUZMAN. I am responsible for fixing the programs, not for creating the control issues that were established in 2020. However, I took---- Ms. SALAZAR. But you are not answering me. Ms. GUZMAN.--responsibility for correcting them---- Ms. SALAZAR. Did anyone pay---- Ms. GUZMAN.--which I have done. Ms. SALAZAR. Is anyone responsible? Has anyone lost their job because of their lack of good leadership? Ms. GUZMAN. The 2020 Trump administration people who made the decisions are no longer there at the agency. Ms. SALAZAR. I yield back. Thank you. Mr. LUETKEMEYER. The gentlelady's time has expired. With that, go to the representative, Mr. McGarvey, from Kentucky, for 5 minutes. Mr. MCGARVEY. Thank you, Mr. Chairman. Thank you for being with us today, Administrator Guzman. We have had a lot of hearings in this Committee on pandemic relief fraud, and good. None of us likes fraud in this program. All of us want to see this money recouped. At least I am glad this time they scheduled a hearing when you could be here to respond, which is a nice change. Let's think about where we were 4 years ago today. I think it is important to remember where we were. People were dying in hospital hallways. People were hunkered down in their homes, scared, rationing toilet paper. You had small businesses across this country who had no idea if or how they could survive. I was getting calls in the state senate in Kentucky from restaurant owners, from people in my hometown just scared. And you know what? Fortunately, Washington acted. And the Congress, let's give credit where it is due. The Trump administration got relief out to our small businesses. They saved our main streets. They saved our businesses. It saved our economy, which is how we recovered so much faster than everyone else in the world. And look, are there going to be problems with something like this? Yeah, and there were. But we are focusing so much on the bad news that we fail to recognize that the SBA's relief programs were an unmitigated success. So, we need to talk about some of this fraud, right? How did it happen? Well, let's be honest about it. In standing up our businesses, the Trump administration rolled back the internal controls meant to prevent fraud in our loan programs. Why? Well, our small businesses needed relief and they needed it quickly. But it shouldn't be a surprise that when you remove these regulations, it opens the door for bad actors. And that is why 86 percent of the likely fraud in these programs ended up occurring in the Trump administration. Did you serve in the Trump administration? Ms. GUZMAN. No, I served during the Obama administration and the Biden administration, so 9 years. Mr. MCGARVEY. Okay. So, it didn't happen on your watch. And ironically, here we are right now in a hearing when my colleagues are complaining about regulatory burdens while simultaneously questioning you on what happens when you roll back those burdens and the fraud occurs. So, since then, we have taken a long number of antifraud controls, taken the steps to reduce the fraud, and it has resulted in billions of dollars in relief being seized or returned to the federal government. And we know now both the OIG and the GAO have testified in front of us confirming the SBA's commitment to recovering fraud and improving these programs, which is good. We all want to recover fraud that was given out. So, we appreciate your efforts in those regards. You know, I am from the South, and maybe we need some more people from across the aisle, from the southern part of this country, because we still have manners. And you have been asked a question a number of times and not been given the chance to actually answer. I would love to hear an answer about, in November of 2023, when the Funding Circle was awarded one of the three new SBLC licenses to help support small businesses and increase access to capital for business owners in underserved markets. We know the U.K.-based lenders started making 7(a) a loans this year, but they are now offloading their U.S. small business lending operations. How does this impact your vision for SBLC operations? Ms. GUZMAN. The SBA is proud of the 14 existing SBLCs, as well as the nearly 140 additional CA SBLCs, those community advantage lenders. The program is strong and working to fill gaps in underserved markets. The Funding Circle is the last of the three newly awarded SBLCs that has not started doing lending. We are still in the process. The other two were what we call NFRLs. These were previous state-chartered entities working with SBA products, and so they streamlined. And Alaska and Arkansas have already started to do loans. We are excited to bring on lenders who are focused on small-dollar loans where our current lenders are unable to fill the demand. Funding Circle continues to work with the SBA, my team, to fulfill the SBLC license and ensure that they can start lending with SBA products in the community. They were a strong performing PPP lender, really getting hands into those smallest of the small businesses, focused on making sure that they could survive during the pandemic. So, you know, that is still in process. We are still going through the steps that are necessary for them to, you know, meet all of our standards at the SBA, and when that is complete, we can inform the Committee. Mr. MCGARVEY. Thank you. And very quickly, the SBA retains authority to approve or not approve the sale of licenses. Should the Funding Circle choose to sell the license to the entity you don't support, would you commit to not approving the sale? Ms. GUZMAN. That is correct. We have done it in the past. We have denied sales in the past. Mr. MCGARVEY. Thank you. I yield back. Mr. LUETKEMEYER. The gentleman's time has expired. With that, go to the gentleman from Florida. Mr. Bean is recognized for 5 minutes. Mr. BEAN. Thank you very much, Mr. Chairman. Good morning to you and good morning, Administrator Guzman. It's good to have you here. On December 8, 2022, SBA suspended auto analytics, which was doing business as Womply, from engaging in any actions related to the SBA loan programs. That suspension was later extended through December 3, 2023. Earlier this week, the director of the Federal Trade Commission's Bureau of Consumer Protection said Womply deceived small business owners trying to secure loans at their greatest time of need. They have reached a settlement with the FTC where Womply and its CEO were ordered to pay $26 million to small businesses harmed by the company's actions. In fact, we have heard from lenders who say they were partnered with Womply at the behest of the SBA. Those lenders are now on the books--on the hook for the Treasury Department for the fraudulent loans Womply processed for them, and in return, Womply is seeking to collect the referral fee from these lenders. What is the status of that suspension of Womply? It says here that they were, at least my report says they were suspended through December 3. Are they still suspended? Ms. GUZMAN. We extended the suspension and Womply remains suspended. Mr. BEAN. Very good. What do you say to the lenders who have worked with SBA for years and have been great partners, but now being forced out of business because of the actions of Womply and others like them? Ms. GUZMAN. Womply was a technology provider to banks, to CDFIs, to these private lenders as well, and it is unfortunate. I know that is a current case, so my, you know, comments will be limited. But note that they continue to be, you know, prohibited from accessing or engaging in SBA lending whatsoever. And of course, you know, SBA has worked diligently to try to deliver on the promise of forgiveness to those lenders who acted in good faith. And we have 96 percent of the portfolio forgiven at this point under PPP. And we will continue to try to work to follow all the laws and follow the guidance. Mr. BEAN. Will you commit, they have done some bad things, but will you commit that they should never come back in any type of space or lending space of the SBA? Ms. GUZMAN. We will continue to make sure that they are suspended from ever engaging in SBA's programs. Mr. BEAN. Something that we all came together as a Committee here not too long ago was we passed the We Want Our Money Back Act, which says that we want to keep all of these fraudulent loans that were made fraudulently, we want them on the front burner. We want reports from the folks watching it out for them. We have no plans to forgive any of these types of loans that were made fraudulently. You wouldn't want to forgive loans that were made fraudulently. We are going to go back and get them. Is that right? Ms. GUZMAN. We are going after all fraud. We have referred all fraudulent loans to the IG and the Department of Justice and law enforcement who are pursuing all fraud at the SBA. And we support, with--it is part of why SBA needs more funding. We actually support the Inspector General in those investigations and invest a lot of time to fight fraud. Mr. BEAN. Thank you. Thank you. Your Office of Credit Risk Management sent emails to a large number of PPP lenders saying, hey, did you find any fraud? Are you aware of any fraud? Let us know. So it is sort of like an investigation that you are doing. Can you talk about the status of that investigation? Have you found additional fraud through your inquiring of banks and other lenders? Ms. GUZMAN. We have done an exhaustive study of our portfolios. We identified $400 billion in potential fraud and have now narrowed it down. My team likens it to walking through TSA and with your belt buckle, the, you know, alarms go off. That is the initial, you know, fraud check. But then once you get down into the portfolio and do further analysis, which we have done with not only technology, but actual manual reviews, we have narrowed the fraud down to $36 billion. Now, within that---- Mr. BEAN. That is a big number difference---- Ms. GUZMAN. It is a huge number. Mr. BEAN.--because the Inspector General says it is 20 times that. Ms. GUZMAN. Right. He had $200 billion in potential. Mr. BEAN. Or more. Ms. GUZMAN. We had $400 billion in potential. Mr. BEAN. Yeah. Ms. GUZMAN. And we have narrowed it down pretty far. Mr. BEAN. How do you reconcile that? That is just such a big number that--and, hopefully, you are working on that. I know you have been before and you have said 36. But he says--in fact, he was a great witness and was very credible. He says it is much, much more than just the plain $36 million. And I know to our friends on the other side of the aisle that want to blame the previous administration, but you are in charge now, and so we expect you---- Ms. GUZMAN. I am working. Mr. BEAN.--to go after bad guys. I think the American taxpayers and these small business owners are sick of seeing people cheat the system and break in line and steal our money, and that is why we want our money back. Were these, the frauds that you found to the PPP investigation, were they banks or nonbanks or do you know? Ms. GUZMAN. It is actually mixed. If you look even just at the Clyburn report, there was a mix of banks and CDFIs and private lenders across the board. Mr. BEAN. Thank you very much. My time has expired. So much to talk about. Thank you for being here. I yield back. Mr. LUETKEMEYER. The gentleman's time has expired. With that, we go to the gentlelady from Kansas. Ms. Davids is recognized for 5 minutes. Ms. DAVIDS. Thank you, Chairman. And thank you to you and our Ranking Member for holding the hearing today. Before I begin with my question, I did want to enter into the record the transcript from the last hearing when Administrator Guzman was here with us. And it reflects that she was not familiar with the regulations that were in the works on WOTUS, the Waters of the United States, specifically, versus SBREFA. Mr. LUETKEMEYER. Without objection. Ms. DAVIDS. So thank you, Administrator Guzman, for joining us and being here to testify today. I do appreciate the work that the SBA is doing to help our country's entrepreneurs. And definitely, I want to thank you for taking some time to come to my district in the Kansas City metro area a few years ago and just kind of see the entrepreneurial spirit that we have got going on out there. And, of course, would love to have you back if your schedule allows. And I will jump right into some of the things that I have been working on since I came to Congress, which is supporting and expanding the SBA's Women's Business Centers program. And I have introduced and reintroduced the Women's Business Centers Improvement Act a number of times. It has passed out of the Committee and the House with overwhelming support, and would increase oversight, increase the SBA's investment in women's business centers, and double the cap on the grants that the centers are able to receive each year. The administration's fiscal year 2025 budget notes very clearly just how successful the WBC program has been. You know, in fiscal year 2023 WBCs, including the Kansas City WBC, which is in the Kansas Third, trained 87,900 entrepreneurs and helped establish more than 3,400 new small businesses. And your budget proposal shows an increase in the number of clients served and new businesses that are created through WBCs, but keeps the funding for the program equal to last year's level. I would love to hear you kind of expand on that and kind of how you see the WBC program working and whether or not there truly is adequate federal resources going into that program, and also kind of what SBA is doing to capitalize on the program's success outside of the proposed budget line items that we see. Because I know that you guys do a lot of things outside of just the numbers that we are seeing on the paper. Ms. GUZMAN. Yes, and happy Women's History Month. And, you know, as I said, women businesses are starting at the highest rates. They are starting to double the rates of men. It is really critical that we, you know, address these gaps, capital as well as resources. Our Women's Business Centers also do an incredible job. It is a strong resource partner network. They are oftentimes, you know, held back by some of their statutory limits in terms of how much we can fund them by and their ability to match as well. And so truly, we want to continue to provide them with stronger technical assistance, make sure that we are streamlining their knowledge and content of SBA, so that they can save their time to work directly with the small businesses. That is first and foremost. And we actually have, you know, strong funding. We plan on deploying more WBCs. We have a notice out now that we should be awarding additional states and additional centers around the country, and we have an additional one that will be coming out soon that we hope to deploy across the country. And we are trying to get as creative as possible with the women who lead these centers to understand how we could better support them through this upcoming grant cycle. You know, I know that as we continue to work and advise, if we can find solutions to strengthen them individually, then I know the program will continue to grow. Ms. DAVIDS. Thank you. And we are working on the statutory limitations that you all are working with. Because my time is limited, I will just kind of quickly note that including Women's Business Centers, I have also been working on the Native American Entrepreneurial Opportunity Act, which we also were able to pass recently. I don't think Mr. Crane is here, but I got a chance to work with him on that bill, which, again, overwhelmingly passed. We will submit some questions for you to respond to regarding just kind of the success and/or challenges around outreach to Native communities. And, again, appreciate your time here today and the work that all the folks at SBA are doing. And I yield back. Mr. LUETKEMEYER. The gentlelady's time has expired. With that, go to the gentleman from Kansas. Representative Mann is recognized for 5 minutes. Mr. MANN. Thank you, Chairman Luetkemeyer, for hosting the hearing this morning. And thank you, Administrator Guzman, for being here. I am Congressman Tracey Mann and I represent the big First District of Kansas, which is to the east of Congresswoman Davids' district. I represent 60 primarily rural counties in the western and central parts of Kansas. My district is home to more than 20,000 small businesses, and more than 80 percent of our employees in the district are employed by small businesses, which help drive the economy and define and help people to achieve the American dream. In the big first, small businesses rely on the federal government to do more good than harm on trade promotion programs and on a reasonable regulatory environment to achieve the American dream. President Eisenhower, a Kansas hero, knew this full well when he established the Small Business Administration in the first place in 1953. Unfortunately, today, small businesses are facing excessive regulatory burdens, rising inflation, and increasing uncertainty, which are things that I hear from businesses all over Kansas practically every day. Ensuring that small business owners remain competitive in the domestic international marketplace is a top priority for me. Administrator Guzman, as the administrator, you are in a unique position to advocate for these concerns. The Office of U.S. Trade Representative generally relies on advice from other agencies, including SBA, through the Trade Policy Staff Committee and the Trade Policy Review Group, to develop positions on international trade issues. However, this Committee has raised concerns that decisions are being made with little or no input from SBA, and trade is incredibly important, not for all, but for a lot of our small businesses in Kansas and around the country. How are you working to ensure that USTR and your counterparts in the Biden administration consider small businesses when making decisions regarding international trade? Ms. GUZMAN. Thank you for that question. And I know, I don't know if it is in your district, but ShieldAg was one of our legacy businesses who, you know, focuses on international trade, and we have helped them with the STEP grants. I would say that, you know, we have a close working relationship within our Office of International Trade, as well as the Office of Advocacy that both engage on international trade negotiations to try to give the small business a voice with USTR, and so those relationships are longstanding and continue. Mr. MANN. How often do you meet with Ambassador Tai, and do you have any concrete plans for continued future engagement with her? Ms. GUZMAN. I have regular engagement with all cabinet members, including Ambassador Tai. And we have had a couple of opportunities to travel around the country jointly at two locations where we had joint roundtables with small businesses to hear some of their concerns. Mr. MANN. In SBA's budget request of U.S. Congress to increase funding for SBA's international trade promotion and state trade promotion expansion programs, I am interested in improving these programs with an eye towards how do we be as fiscally responsible as we can. So I would ask a question. Why should Congress increase funding for these programs when the Export Working Capital Program, the International Trade Loan Program, and Export Express Loan Programs have historically been duplicative and underutilized, with the total of only 245 loans being made in fiscal year 2023? What are some areas for improving these programs to better serve our small businesses and small business exports, and should they be expanded? And what are your thoughts on that? Ms. GUZMAN. Well, we continue to operate those within our 7(a) platform as a zero subsidy impact program. We, you know, agree that we would like to see those numbers expanded, and, you know, part of it is the cap, the limit. But there are other challenges that could be regulatory. We are currently looking at that and would look forward to partnering with your office to make sure that we have some good solutions moving forward to simplify access to working capital across all of our businesses. A lot of people use traditional 7(a) as well. Mr. MANN. That is right. Well, I have no further questions. And thank you for being here this morning. Mr. LUETKEMEYER. The gentlemen yields back. And with that, we go to gentlelady from California, Representative Chu, recognized for 5 minutes. Ms. CHU. Well, Administrator Guzman, thank you for coming to my district, to the city of Monterey Park, after the mass shooting. Your outreach to us, your presence, and your ability to extend help to the small businesses that were impacted meant so much to the people there. So, I truly appreciate it. And let me say the colleagues on the other side of the aisle are saying, what are you doing to hold the top SBA leaders who were there when the fraud happened accountable? Well, they are gone. The American people fired them when they fired the Trump administration, who was in charge when the vast majority of fraud happened. Turning to other topics, I have great interests in the SBIC, the Small Business Investment Company program, and, in fact, Representative Garbarino and I have a bipartisan bill, the Investing in Main Street Act, which would amend an outdated law to finally allow financial institutions to invest up to 15 percent, triple the current amount of 5 percent, of their capital and surplus into SBICs. This is a commonsense change to increase the amount of investment capital available to small businesses. But unfortunately, the bill languishes in the Senate, despite having passed the House overwhelmingly for several Congresses in a row. So, for one, can you discuss how changing and growing the amount of money available to SBICs would help small businesses? And also, I wanted you to address the fact that you are finalizing it and implementing a rule titled the SBIC Investment and Diversification and Growth Rule, which modernizes the SBIC program with the goal of increasing equity investments to small businesses and underserved communities, which is a goal I think is so much needed. So can you discuss that as well? Ms. GUZMAN. Yes, on the SBIC program, this is a very powerful program. Last year, $8 billion was invested through our SBICs into small businesses, creating over 130,000 jobs. And so really, it is vital that small businesses have this growth capital. It has, you know, been a part of some of our most iconic brands in this state. Federal Express, you know, founder would say how he couldn't get capital, but through an SBIC. So, there are multiple examples of successes within our SBIC program and all of our programs. On the SBIC program we believe that we can achieve some of the same goals that you had outlined by trying to, you know, support simplification of our licensing, as well as adding on new types of SBICs that allow for and align with the demands of some of these long-term investment strategies of some of these critical industries and others. And so we have added an accrual SBIC with this regulatory reform passed this summer, which allows for an alignment with more of an equity type investment or growth investment for long-term build. And that is the vehicle that we have partnered with the Department of Defense on to create the SBIC critical technologies. In addition, we have created a reinvestor SBIC that will allow for a fund to fund structure, which will create opportunities in underserved communities to have smaller emerging fund managers come forth under a fund that would be able to manage to the SBIC program's, you know, strong oversight and controls. We do believe that these opportunities are opening up the licensing process for more. We have also streamlined the licensing process. And so as a result, our pipeline is very healthy with a lot of requests for both the accrual SBIC, the SBIC critical technologies, and we are seeing a change. And of course, having some more flexibility around the cap and requirements around this program is really vital. Ms. CHU. Thank you. And I wanted to address the Community Advantage Loan Program. Ranking Member Velazquez and I just recently introduced our bill to codify it. But I am thrilled that you have given certainty to the program through the new California SBLC license. And it is great that you have added 30 new mission lenders into the program for 142 SBLCs. I wanted to see if you could address the--well, there was uncertainty for a lot of the mission lenders, and now it seems to have stabilized. But is there assurance that you can give that the current guidance and lender requirements won't be changed or overturned by a future administration? Ms. GUZMAN. We are committed to the regulatory reform that made permanence for the community advantages through the program, through the SBLC, and we are committed to the established policies that we put in place that really, you know, give them strong access to the 7(a) portfolio. So, as a result, you have seen with this permanence, obviously, the increase in the people who want to participate with that spike of over 30. But also we are seeing their ability to go out and recruit funding to be able to do these small business loans as a result. So we are committed to maintaining that working relationships and continuing to work with them to ensure that, you know, we are taking their feedback and continuing to evolve to meet the marketplace needs. Ms. CHU. Thank you. I yield back. Mr. LUETKEMEYER. The gentlelady's time has expired. With that, we go to the gentleman from Missouri. My fellow colleague from Missouri, Mr. Alford, is recognized for 5 minutes. Mr. ALFORD. Thank you, Mr. Chair. Appreciate that. Administrator, good to see you. I think we saw you back on December 3 at your office. I will get into that in just a bit. You know, I have long been concerned with the SBA's lax work-from-home policy and what that means for our nation's 33 million small businesses, getting them the help they need, when they need it. As it turns out, I share this concern with another former business owner in this town, White House Chief of Staff Jeff Zients. Mr. Zients directed every agency to return to their workforce, to the office, at least 50 percent of the time. In fact, he required that every department submit an action plan to OMB on January 26. So, Administrator Guzman, following this hearing, we will be sending a letter requesting that you share this action plan with Members of this Committee. Can you please comment on what work you have done on this plan so far? Is it complete and what is your plan? Ms. GUZMAN. Yes, the whole of SBA across the country has returned to work. We are seeing that these mission-driven people who work at the SBA, because a lot of them have that very mission tie, too---- Mr. ALFORD. What do you mean, return to work, ma'am? Ms. GUZMAN. Meaning that we are, you know---- Mr. ALFORD. To the office? Ms. GUZMAN.--having to work to the office. Correct, mm-hmm. Mr. ALFORD. So if we go down there today, the desks will be filled. Ms. GUZMAN. We are complying with, of course, the standards. The SBA is back 5 days a pay period, and across the country at this point. Mr. ALFORD. Because, you know, we attempted to visit the SBA. When I first got on this Committee and on the Ag Committee and Armed Services, the first thing I want to do is go meet people, see where they work. And we were told, you can't come down here. Sitting Members of Congress, we got in the Pentagon, but we could not get in the USDA, which has 2 million square feet of office space, or the SBA with roughly 290,000 square feet of office space. And because of that, we filed the CABO Act, the Congressional Access to Bureaucratic Offices Act, which mandates that sitting Members of Congress and their appropriate staff should be allowed into these agencies, such as yours, which we have oversight. I am sorry that we had to file that. We got quite a number of sponsors. Our attempt is not to come in and stir up trouble, but we do have oversight of these facilities. And after our December 3 visit, which was a very nice visit, I think we had a very good discussion, I was told--I got a few pictures here of our visit, here is some of the empty office spaces there at the time. Here is a good shot of you, me, and Jake Ellzey on this Committee talking. After our December 3 visit, I was told that SBA employees were directed to consolidate their desk to mask the fact that only 10 percent of the 295,000 square foot SBA headquarters was being used Do you have any knowledge of that being true? You have, what, seven or eight floors there? Ms. GUZMAN. We have, but we only occupy two thirds of the building. There are three other agencies that also occupy this building Mr. ALFORD. All right. Ms. GUZMAN. But the floors that we visited were, upon request to certain offices, and we have, you know, 50 percent occupancy on any given day at a minimum. So that is not accurate. Mr. ALFORD. Som nothing was staged for our visit there on our CABO cavil? Ms. GUZMAN. No, the only thing that was orchestrated is which offices you wanted to visit, which was capital access rural, and so we went to certain floors. Actually, we went to the floors that SBA fully occupies. Mr. ALFORD. Well, I must say, your staff was wonderful to talk with. Look, we have got a lot of work to do together, I think, to help the American people starting businesses and maintaining the business. I do think it is very important that, you know, COVID is over. We have got to get back to work. If we are not going to use these buildings, let's shut them down. Let's consolidate and save money for the American taxpayer. Would you agree with that? Ms. GUZMAN. We are looking constantly at our space requirements aligned with our, you know, facilities' needs. So, yes, I align with that completely. Mr. ALFORD. Former Speaker Nancy Pelosi once said, show me your budget and I will show you your values. I have seen your budget. It raises serious doubts about your values. The Office of Veterans Business Development exists to fulfill SBA's mandate to serve our veterans. To fulfill this important duty, you have requested $335,000. That total is about the same as the increase in transit subsidies that you requested. Transit subsidies have risen from $300,000 in '23 to $600,000 in '24, to $900,000 requested now in fiscal year 2025. This is despite the SBA's notorious absenteeism. According to a GAO study, less than 10 percent of your office space is even being used. Now, I know you say that people are starting to come back, but we have to accelerate this. Administrator Guzman, I am deeply concerned with the values contained within your budgetary request. Thank you, Chairman. And I yield back. Mr. LUETKEMEYER. The gentlemen yields back. And with that, we go to the gentleman from Minnesota. Mr. Phillips is recognized for 5 minutes. Mr. PHILLIPS. Thank you, Mr. Chairman. And greetings, Madam Administrator. As you might know, I am retiring at the end of this Congress at the ripe age of 55. Might have to get a real job, and it is been a joy to work with you. I want to say thank you for coming to my district, for supporting small businesses, of which I have been one most of my life, and grateful for what you do. As you know, my highest priority is to expand employee ownership. I think it is a nonpartisan part of the American dream. I know that is one of your mandates as well. And we also are all aware, because we have had this conversation, that one of the barriers, in many cases, to ESOPs or co-ops is the risk of losing the status of contracting, preferred contracting status. And take a woman-owned business, and she wishes to convert to an ESOP for set-aside contracts. Oftentimes, they won't do so because they will lose that if they become an ESOP. So, have you reached any conclusions at the SBA about how we can remove that barrier so more businesses can convert without losing that access to the set-aside contracts? Ms. GUZMAN. I appreciate that question. I know we explored that topic with some of the ESOP experts in your district. On the contracting side, we do not have a solution at this point in terms of how we can allow for that greater affiliation and control issue when it comes to small businesses that are structured in that way. But I am happy to explore that further with you during your time here. Mr. PHILLIPS. I would welcome that with me in my office. As you know, I have got the Employee Equity Investment Act that has a fix for that. As you know, it also asks the SBA to take a formal step to try to reduce that barrier. So, I would truly-- -- Ms. GUZMAN. I can report to you as well that we have a couple of SBICs, for example, that are focused on employee ownership, and ESOPs in particular, that are now licensed, as well as we have now removed and allowed for delegated authority for ESOP transactions within our 7(a) portfolio, which was part of the Main Street Act. Mr. PHILLIPS. Okay. As much as I can do to encourage it. You know, the more we have employee owners of small businesses, the more we have small business owners. So, thank you. And I also want to ask about AI. I think it is underappreciated, the forthcoming disruption. Clearly, large enterprises are well positioned to both take advantage of it, protect themselves from it. But I am deeply concerned about the ability of small businesses to compete. So how is the SBA looking at that, and how much demand for AI tools and technical assistance are you hearing from small business owners? Ms. GUZMAN. It is quite extensive. As you know, during the pandemic, small businesses adopted technology at very high rates. The SBA has, you know, focused on expanding the free tools and resources to small businesses around technology, and, you know, that includes focusing on their adoption of AI. They are already using it extensively as they develop their marketing, or perhaps using it as chatbots in their customer service. And so we know that it is going to help enable them to make progress in their efficiencies. And obviously following the, you know, President's executive order on ensuring that the agency as well, is leveraging technology both an innovative way, but responsibly. And so we continue to partner with, you know, organizations out there to try to get those tools and awareness out there. Mr. PHILLIPS. Do you believe the SBA has adequate resources, both human and financial, to ensure a level playing field? Ms. GUZMAN. Obviously, we continue to focus on the innovative startups as well, you know, through the SBIR program to make sure that innovative startups have pathways to the data and computational power that they have. And we are happy to see movement around that across the federal government and the agencies that deploy SBIR. Mr. PHILLIPS. With my last minute and a half, I want to just chat about youth entrepreneurship and my belief that we as a country are not doing enough, especially in our public schools, to educate, expose, and promote entrepreneurship amongst young people. Can you share any thoughts you might have about how the SBA can make further investments, inspiring young people to become entrepreneurs, at least to give them the tools to perhaps start their own business one day? Ms. GUZMAN. Yeah. I was recently at South by Southwest, and, of course, saw the lemonade stand winner, and he was just such an incredibly inspiring young man, 11 years old---- Mr. PHILLIPS. Yeah. Ms. GUZMAN.--already thinking about distribution of his lemonade across Texas. But, of course, I mean, this is oftentimes the important pathway and a choice for people to jump right into entrepreneurship. And so, you know, obviously, we are set up to help administer and advance our loan programs, which, you know, then focuses on the adult population. But you see a lot of our accelerators in our networks really focusing on youth entrepreneurship as well, and at least exposing the youth to entrepreneurial pathways, and we think that is important. Mr. PHILLIPS. Yeah. With my closing, I hope that can be one of our legacies here in this Congress, to inspire young people to be owners of this economy, and they can't become owners if they don't have the tools. And I think the SBA can surely play a role in providing those. So, thank you most of all for your service, and I am grateful. I yield back. Ms. GUZMAN. Thank you. Mr. LUETKEMEYER. The gentlemen yields back. We have some more Members on our side coming. They are not here yet. I want to hold my questions to the end. So with that, we are going to recognize a gentleman from Ohio, Mr. Landsman, for 5 minutes. Mr. LANDSMAN. Thank you, Mr. Chair. And thank you, Secretary Guzman, for being here and for all that you do. I really appreciate that you came out to the district, southwest Ohio and Cincinnati, and we toured a host of small businesses. They were very appreciative of your time, and we have had a really great relationship with your team in terms of helping our small businesses navigate the SBA and all kinds of challenges that they are facing. One of the small businesses we visited was the Water Lily Learning Center. And you and I share a passion for childcare small businesses, and, you know, Cincinnati, I think, is unique in that, you know, years ago, I and others led a ballot measure called the Cincinnati Preschool Promise to provide 2 years of quality preschool for 3- and 4-year-olds in Cincinnati. And that funding supports tuition assistance for families who couldn't otherwise afford quality preschool at centers, both public and private, and nonprofit and small businesses. It has made a big difference for Water Lily and others as a source of revenue so that they can keep their classrooms open, childcare and the preschool classrooms that they run. Recognizing the importance of early childhood education and the critical role it plays in child development, and, of course, the childcare small businesses, the critical role that they play in our small business ecosystem and our larger economy in terms of folks being able to work if they can afford quality childcare, my team and I introduced the Childcare Small Business Insight Act, which would study the state of childcare in the nation and offer recommendations. It passed unanimously out of the Committee in January, so I am grateful to my colleagues for that. I wanted to just get your thoughts on this topic. So, first, you know, what do you foresee as shortcomings in the for-profit childcare industry as it relates to the SBA? This is something that you and I have talked a lot about. You have a depth of knowledge and real passion for this. So, you know, what do you think this study, when passed, hopefully the full House will pass it, what do you believe that this study will find in terms of where the SBA is doing really important work for these childcare small businesses, but also where the gaps may be? Ms. GUZMAN. Yes. Thank you so much for that question. And I have visited, you know, beyond Water Lily, several childcare facilities across the country, and truly, it is part of our infrastructure. Women entrepreneurs that I meet with continuously flag childcare as an issue and are looking forward to the Child Tax Credit and their ability to leverage that to help make childcare more affordable for them. On childcare in particular, we see a lot of our small business owners leveraging a 7(a) program, but also 504 to buy their building property. Buying property and being able to maintain sustainability in the community is really important. You know, I think with these, their models are very challenging in terms of their ability to raise revenues, you know, especially in underserved communities. And so, you know, obviously, there is a financial issue that goes beyond SBA. But we try to help them with the technical assistance and know-how to effectively run their businesses and do childcare boot camps across our resource partners, and are looking to try to improve those models in order to strengthen their operational expertise, because they have to be so efficient as entrepreneurs to be able to survive in the childcare industry. But we know that affordable capital is part of that. And so we need to do better outreach to support these entrepreneurs, who are mostly women, to be able to access our capital programs as well. And that is partly what we are doing. We have a childcare summit coming up at the White House, where we will focus on childcare business in particular, and ensure that, you know, we have pathways at the SBA to support them. Mr. LANDSMAN. That is great. Thank you for that. I really do appreciate how much you have led on this. Last question. The micro loan program, which is really designed to help the nonprofit childcare centers, do you envision something--you know, because on the capital side, there is obviously help, as you just mentioned; on the operations side is where they really struggle in addition to the capital stuff. And owning the building is really important. Do you envision something similar? Could that be something that may come out of the study and the work is a micro loan program for these childcare providers that are for-profit? Ms. GUZMAN. Yes. And micro loan--both for-profit and nonprofit can access the SBA's micro lending program. It is the only time nonprofits can access our program. And so, you know, we feel continued support of that. I know there is Senate action on expanding that access to other programs at the SBA. Mr. LANDSMAN. Yeah. Great. I think the challenge is, is how much does it--you know, is it sufficient? And I think that is a question for us. But hopefully, that is something that comes out of the work of this bill. So thank you again, and I yield back. Ms. GUZMAN. Thank you. Mr. LUETKEMEYER. The gentleman's time has expired. We have a lot of Members that are in and out because of other Committee hearings, and we are going to continue to be flexible with that. So with that, we are going to go to Mr. Thanedar from Michigan for 5 minutes. Mr. THANEDAR. Thank you. Thank you, Mr. Chair. And thank you, Administrator, for your passion and your access. I thought I am the only Member where you come and visited my district twice in the last 6 months, but looks like you have been all over the country. You came to our district, you and I walked on the streets and visited some small businesses that we had planned to visit. You also took the time to visit some people who approached us while we were there. And I really appreciate your passion. We heard firsthand some of the small business owners who benefited from the PPP and other SBA programs. So thank you again. Thank you for your help. I am a small business owner, ran small businesses for 25 years, wrote one of the SBIR grants that I got awarded. I took advantage of the 504 program, and that helped me tremendously to grow my small business, create hundreds of jobs in my business. Recently, I introduced the LIONS Act, we call it, which is, you know, being from Detroit and a Lions fans, we are pleased to call that a LIONS Act. But what it does is raises the 7(a) loan amounts from the $5 million to $10 million because the valuations have gone up and it becomes more capital is needed for business owners to invest and grow their businesses. And my question to you is, how do you see this increase of $5 million to $10 million in the loan amounts? How much of a burden that is to get that accomplished, how much of an administrative cost that is going to add, too, and just, frankly, I wanted to know what you think about it. Ms. GUZMAN. Yeah, we similarly, you know, are interested in seeing that expanded, especially as we see manufacturing and other critical industries needing additional capital. We know that SBA could fill those gaps in the marketplace. And you are right, you know, it hasn't been changed since the Obama-Biden administration increased it to $5 million, you know, for inflationary pressures. It would be up in the sevens if we just changed it for inflation alone. So we agree that that money is needed. It would be simple to administer in terms of expanding the access that would, you know, benefit more of our banks and lending institutions who access those funds for some of their small businesses in their portfolio. Mr. THANEDAR. Thank you, Ms. Guzman. And, you know, going back to the questions being asked about the fraud, I want to point out that a lot of that happened during the Trump administration. The question raised about the people who were responsible in your, you know, department, and clearly, you know, many of those people are no longer here because the American people, you know, fired them. But my question to you is, I mean, your testimony mentioned pandemic relief funding and the potential for fraud. To paraphrase from the briefing, in an effort to disperse Paycheck Protection Programs and COVID-19 funds swiftly, the SBA weakened and removed internal controls. In early 2021, safeguards were reinstated. One of the tactic was to install a screening process during loan approvals. So, my question is, can you make a statement on where the SBA stands regarding protections against fraud? Are these acts of fraudulent activity a risk for the clientele of the SBA or to the administration alone? How effective have the protective measures have been? Ms. GUZMAN. Thank you. The protections have been strong. As I said earlier, we have averted 21 million attempted fraudulent loans from, you know, accessing the COVID pandemic programs, you know, which was over $500 billion worth. And so clearly, the controls that we put in place have enabled us to get back to our normal standing of our decades of experience doing disaster lending using the right controls in place. And so I am very confident that with these added measures that we have now applied across our whole portfolio, despite the fact that the 7(a) 504 didn't experience the levels of fraud of the COVID pandemic programs, we are now strengthening our programs for the future alongside the financial institutions that are doing the same to ensure that fraud is not a problem in any of our programs going forward. Mr. THANEDAR. Thank you for your great work, and I yield it back. Mr. LUETKEMEYER. The gentleman's time has expired. With that, I understand we have got three Members, two Republicans and one Democrat, who are on their way back from the transportation markup. So if they get here before I finish up, we will let them ask questions. If not, we will see once where we are at that point. But let me begin my 5 minutes. Ms. Guzman, have you talked to Secretary Yellen lately? Ms. GUZMAN. Regular engagement with cabinet? Yes, but---- Mr. LUETKEMEYER. So, have you asked her about when she is going to show up to give us a PPP report? It is several years past due now. Ms. GUZMAN. As requested, in our previous hearings, we informed the Treasury about this request, but---- Mr. LUETKEMEYER. And they are ignoring you. As they are knowing the law which says she's supposed to be here. That is not a request by a letter. That is in the law that Congress passed. She is supposed to show up. So, anyway, thank you for that. You know, the discussion this morning is about, or has been quite a bit about, who is at fault for this? I can tell you I was part of the group that put the PPP program together. And I can tell you I was very strenuous in my concerns about allowing the fintech companies in, who do not have the controls in place. And that is where about 95 percent, according to the IG, and they testified in that chair right over there, that is where most of the fraud occurred in the PPP program. And I was very strenuous also in my remarks with regard to EIDL, knowing that there is basically none, zero, anything in place by the SBA to keep the money in place without having being able to be fraudulently accessed, especially at the amounts that the program was allowed to grow to. That aside, you jumped into this program knowing where it was at. So, now your responsibility is to clean it up. And that is the concern we have this morning, and that is where we are coming from with our questions. Why have you not gone out and sold part of the portfolio, and as Ms. Van Dyne talked about, in a way that alleviates the need for more money for your agency, as well as recover some of the money? Ms. GUZMAN. We have evaluated this, and at this point, are still collecting successfully within SBA's own collection efforts. And the Congress, as I had---- Mr. LUETKEMEYER. With all due respect, Madam--Madam, Madam, excuse me. Ms. GUZMAN. I haven't answered the question. Mr. LUETKEMEYER. I don't know how you can say you are adequately doing it. According to the IGA, you told the IGA that in October 20, $47.7 billion of the EIDL loans were written off. Is that not correct? Ms. GUZMAN. The EIDL portfolio is performing better than what Congress expected. Mr. LUETKEMEYER. That is not my question. My question is, the IG didn't say that we could even validate the information. But you told him that you have got $47.7 billion that you have charged off of EIDL loans. Is that correct? Ms. GUZMAN. I would have to double check those numbers before I testify to that. Mr. LUETKEMEYER. Is it close? Ms. GUZMAN. I would have to double check those numbers. I will get back to you. Mr. LUETKEMEYER. When did you charge those off? Ms. GUZMAN. Over the course of our collections as---- Mr. LUETKEMEYER. Oh, prior to September 30? Ms. GUZMAN. Again, we'll have to get specifics to you on this topic, but what I will share is that---- Mr. LUETKEMEYER. Did you charge any loans off prior to September 30 of 2023? Ms. GUZMAN. I would have to get back to you, sir, and I will. Mr. LUETKEMEYER. Okay, let's ask the question this way. Have you sent any 1099s out to the folks that you cancelled the debt for? Ms. GUZMAN. I do not know where we are at in that process. And so, again, we will get back to you. What I will like to answer your question about COVID idol in particular. You know, obviously, we have put in those strong controls into the program. Yes---- Mr. LUETKEMEYER. Well, again, Madam Chair, with all due respect--our Madam Guzman, the IG sits in his chair here and comes in about once every 6 to 8 months and tells us in his report you are not doing a lot of things that he requests you to do. You ignore the advice from the report that you actually requested and paid for from the accountants, although you did say KPMG said, well, you could do some of it. But the IG says you only implement about half of what he actually recommends. So when you say that you implement these things, it's a broad statement, which is not true. I am sorry. Ms. GUZMAN. As I have shared with the Chairman, going back to your original question about selling the portfolio, Congress could appropriate, enact something and appropriate the dollars to sell the portfolio, as it would cost the federal government money to sell. Mr. LUETKEMEYER. No, it would not, Madam Chair--or Madam Guzman. Ms. GUZMAN. It would within the appropriations process. Yes, it would. Mr. LUETKEMEYER. There is no way it costs money when you recover money. When you sell the portfolio, you will recover some money, and you will cover all the costs for whatever it is. You have a net gain. Ms. GUZMAN. We are happy to work with your team to review how that would work in appropriations, but that is what Congress and action would take. Mr. LUETKEMEYER. Well, I know that CBO doesn't score it that way, but CBO doesn't score it correctly because they don't score the recovery. Ms. GUZMAN. And so, as a result---- Mr. LUETKEMEYER. That's the problem. Ms. GUZMAN.--it would cost taxpayer dollars to do that. Mr. LUETKEMEYER. But you are going to recover several times more than that when you do that. I mean, this is not rocket science. I mean, this is---- Ms. GUZMAN. And we are still collecting and this portfolio is still performing. As I said, it is performing way better---- Mr. LUETKEMEYER. Well, Madam---- Ms. GUZMAN.--than any of the disaster---- Mr. LUETKEMEYER. Madam---- Ms. GUZMAN.--we have ever---- Mr. LUETKEMEYER. Ms. Guzman, we are going to send you a request to find out when these 47 points separating---- Ms. GUZMAN. Happy to reply to that. Thank you. Mr. LUETKEMEYER. And did you send 1099s out? Ms. GUZMAN. Happy to reply to those requests. Mr. LUETKEMEYER. If you didn't do that---- Ms. GUZMAN. Thank you. Mr. LUETKEMEYER.--you are in violation of the law. Again, whose decision was it to not sell a portfolio? Ms. GUZMAN. Ultimately, we haven't made any final decision on this portfolio. As we are still collecting. We are still going through the 9 steps on PPP and the 14 steps on EIDL that are required---- Mr. LUETKEMEYER. So, you have a big decision on whether to act---- Ms. GUZMAN.--which is referring to Treasury. Mr. LUETKEMEYER.--on reports that you got? Ms. GUZMAN. We are acting on those reports that said that we could still potentially profit by trying to collect at the Treasury stage. And so we have pursued the Treasury option. We are still in that phase, and we are making collections, continuing to make sure that this portfolio performs. And again, this is outperforming any expectations of Congress. Mr. LUETKEMEYER. Oh, I guarantee it won't outperform my expectations, I guarantee you. Ms. GUZMAN. As established. Mr. LUETKEMEYER. Another quick question for you here. You made a statement a while ago that you have doubled down on staffing to do the recovery of these things. Are those people working from home or they are working from the office? Ms. GUZMAN. Double down on staffing? I said I doubled down on--during this testimony, I said I doubled down on staffing to clear some backlogs and certifications. Mr. LUETKEMEYER. My question is, are they working from the office or are they working from home? Ms. GUZMAN. Our position at the SBA is 5 days of in work-- or, excuse me, 5 days in the office for all of our employees that are working, you know, not in a remote stance. Mr. LUETKEMEYER. Let me ask my question again. The question is very simple. Are they working in the office or are they working from home? Yes or no. Ms. GUZMAN. It is a mixture, and some of them are working in the office and they are---- Mr. LUETKEMEYER. So, you are hiring people to work from home. Is that what you are telling me? Ms. GUZMAN. During the pandemic, people were hired---- Mr. LUETKEMEYER. No, that is not my question, ma'am. My question is---- Ms. GUZMAN.--temporarily on a remote basis. Mr. LUETKEMEYER.--the new people you are hiring, are they going to work from home---- Ms. GUZMAN. New permanent---- Mr. LUETKEMEYER.--or are they going to work in the office? Ms. GUZMAN. Any new permanent people who are hired at the SBA come into nonremote status, so meaning that they do have to come into the office. Ms. LUETKEMEYER. So the new people---- Ms. GUZMAN. Any new person. Mr. LUETKEMEYER.--are working from the office? Ms. GUZMAN. Any new person hired on a permanent basis at the SBA, yes, they definitely---- Mr. LUETKEMEYER. Whew, man, this is---- Ms. GUZMAN.--have to work at the SBA. Mr. LUETKEMEYER. This is unbelievable. I can't get a straight answer. It took me 3 minutes to get an answer on that question. Ms. GUZMAN. Well, it depends on what you are asking and letting me---- Mr. LUETKEMEYER. It is a simple question, Madam--Ms. Guzman. A while ago, you made also a statement about red tape. You said you were cutting red tape. Can you give me examples some red tape you cut? Ms. GUZMAN. Yes. Affiliation for control caused a lot of cumbersome processes for our lenders, especially when it came to the time of, you know, performing against that guarantee. And so we have simplified the program for our lenders, which ultimately will benefit the borrowers, and that is across our regulatory reform. The same with the SBICs, simplifying the process of licensing to ensure that, you know, we cut red tape for those participants. Mr. LUETKEMEYER. Okay. Folks aren't here yet, so with that, we are going to thank you, Administrator Guzman, for your testimony and for appearing for us today. Without objection, the Members have 5 legislative days to submit additional materials and written questions for the witness to the Chair, which will be forwarded to the witness. We ask the witness to please respond promptly. If there is no--there is no further business, and without objection, the Committee is adjourned. Ms. GUZMAN. Thank you. [Whereupon, at 11:49 a.m., the committee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]