[Senate Hearing 117-326] [From the U.S. Government Publishing Office] S. Hrg. 117-326 OVERSIGHT OF THE U.S. SMALL BUSINESS ADMINISTRATION ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP of the UNITED STATES SENATE ONE HUNDRED SEVENTEENTH CONGRESS SECOND SESSION __________ APRIL 27, 2022 __________ Printed for the Committee on Small Business and Entrepreneurship [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 48-246 PDF WASHINGTON : 2023 ----------------------------------------------------------------------------------- COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP ONE HUNDRED SEVENTEENTH CONGRESS ---------- BENJAMIN L. CARDIN, Maryland, Chairman RAND PAUL, Kentucky, Ranking Member MARIA CANTWELL, Washington MARCO RUBIO, Florida JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho EDWARD J. MARKEY, Massachusetts TIM SCOTT, South Carolina CORY A. BOOKER, New Jersey JONI ERNST, Iowa CHRISTOPHER A. COONS, Delaware JAMES M. INHOFE, Oklahoma MAZIE HIRONO, Hawaii TODD YOUNG, Indiana TAMMY DUCKWORTH, Illinois JOHN KENNEDY, Louisiana JACKY ROSEN, Nevada JOSH HAWLEY, Missouri JOHN HICKENLOOPER, Colorado ROGER MARSHALL, Kansas Sean Moore, Democratic Staff Director William Henderson, Republican Staff Director C O N T E N T S ---------- Opening Statements Page Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland. 1 Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky.... 3 Witness Guzman, Hon. Isabella Casillas, Administrator, U.S. Small Business AdministrationWashington, D.C......................... 25 Alphabetical Listing and Appendix Material Submitted Cardin, Hon. Benjamin L. Opening statement............................................ 1 Davidson, Jonathan C. Letter dated April 27, 2022.................................. 20 Guzman, Hon. Isabella Casillas Testimony.................................................... 25 Prepared statement........................................... 28 Responses to questions submitted by Chairman Cardin and Senators Hirono, Hickenlooper, Rubio, Inhofe, Young, and Marshall................................................... 62 National Association of Federally Insured Credit Unions Letter dated April 26, 2022.................................. 60 Paul, Hon. Rand Opening statement............................................ 3 Letter dated April 15, 2021.................................. 8 Letter dated April 15, 2021.................................. 9 Letter dated May 18, 2021.................................... 11 Letter dated May 6, 2021..................................... 19 Senators Paul, Rubio, Risch, Scott, Ernst, Inhofe, Young, Kennedy, Hawley, and Marshall Letter dated April 15, 2021.................................. 5 Senators Paul, Marshall, Risch, Rubio, Inhofe, Ernst, Kennedy, Hawley, Scott, and Young Letter dated April 13, 2022.................................. 16 Letter dated June 9, 2022.................................... 22 OVERSIGHT OF THE U.S. SMALL BUSINESS ADMINISTRATION ---------- WEDNESDAY, APRIL 27, 2022 United States Senate, Committee on Small Business and Entrepreneurship, Washington, DC. The Committee met, pursuant to notice, at 2:38 p.m., in Room 428A, Russell Senate Office Building, Hon. Benjamin L. Cardin, Chairman of the Committee, presiding. Present: Senators Cardin, Cantwell, Shaheen, Markey, Booker, Coons, Hirono, Rosen, Hickenlooper, Paul, Risch, Scott, Ernst, Young, Hawley, and Marshall. OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S. SENATOR FROM MARYLAND Chairman Cardin. The Senate Small Business and Entrepreneurship Committee will come to order. Let me apologize for being a few minutes late. We just got back from the memorial service funeral for Secretary Albright, which was a fitting tribute to her incredible service to our country. Several members of our Committee were at the memorial service, so literally the buses just got back to the Hill. So my apologies. Good afternoon. Thank you for joining us today, Administrator Guzman. We are now more than 2 years into the COVID-19 pandemic and 1 year into the Biden administration. So this hearing is an opportunity for our Committee to receive an update on the Small Business Administration's implementation of COVID-19 relief programs and learn how the Administration's Fiscal Year 2023 budget request will fund long-term initiatives to support our Nation's small businesses, especially those in underserved communities. Since the beginning of the pandemic, Congress has created several new programs to support small businesses, including the Paycheck Protection Program, the EIDL Advance Grant Program, Shuttered Venue Operators Grant Program, the Restaurant Revitalization Fund, and several others. We have also appropriated more than $1 trillion to the SBA to fund these initiatives. Congress gave the SBA an immense task, and I remain grateful for the thousands of SBA employees who worked around the clock to disburse this aid. They did an incredible service to our country and I offer my sincere thanks. Several independent studies have confirmed that the SBA's implementation of these programs was largely successful and improved over time, especially in terms of equity, the improvements, as a result of the thoughtful policies implemented by Congress as well as the efforts of the Biden administration to invest in underserved entrepreneurs. Today, after enduring the deepest economic contraction in several generations, our economy is growing at the fastest rate since 1984. We are back, but the SBA's importance has not diminished. If anything, the SBA has an even more important role to play in the months and years ahead. In the short term there are still many hard-hit industries that need support. Earlier this month I introduced bipartisan legislation with Senator Roger Wicker to provide additional relief to the more than 177,000 Restaurant Revitalization Fund applicants who remain unfunded, as well as other struggling industries. I just remind our Committee, these restaurants owners of small businesses were in line, they were qualified, they did everything right. There were just not the resources available in order to fund them, and as a matter of equity and need we need to act on that bill. In the long term, SBA must be equipped to meet the needs of the historic number of Americans engaging in entrepreneurship. According to the Census Bureau, Americans registered a record 5.4 million new businesses in 2021, which exceeded the prior record of 4.4 million new business registrations in 2020. Remarkably, the surge is being driven by entrepreneurs in some of our most underserved communities, with minorities, especially minority women, driving the surge. President Biden has made supporting minorities, women, and entrepreneurs in rural communities one of his Administration's highest priorities. It is to unleash the full potential of our Nation, our economy opportunity and economic growth, creating not only good jobs but initiatives and innovation that drives our economy. The experience of the pandemic has demonstrated that the historic barriers that underserved entrepreneurs face are not insurmountable. Administrator Guzman, I am very pleased that the Administration's budget request doubled down on lessons learned during the pandemic. In particular, I believe the Administration's request to increase funding for the SBA entrepreneurial development programs would help create the strong entrepreneurial ecosystems that new small business owners need to succeed. Last week, the Administrator and I participated in a roundtable discussion with minority small business owners in Baltimore about the Community Navigator Pilot Program. It is clear from that discussion that the SBA has an opportunity to leverage the inroads it has made into underserved communities during the pandemic to unleash their untapped growth potential. I am also pleased that the budget request proposes an increase in lending authority for the 7(a) and 504 loan programs. The additional lending authority will further bridge the historic gaps that exist in private capital markets to ensure that entrepreneurs in all communities have the capital they need to start and grow successful businesses. Taking advantage of the current boom in entrepreneurship will also require action from Congress. First, creating a direct lending program at the SBA would allow for another avenue for access to capital, filling the current gaps in our financial ecosystem. A reimagined direct lending program would allow entrepreneurs to apply direct to the SBA or through community lenders for a Federal loan. As we know, many underserved entrepreneurs are discouraged from applying for a loan because of the high rates of rejection. Second, we must codify the Community Advantage Loan Program. The loan program is particularly successful at getting capital to underserved entrepreneurs. I was proud to join the Administrator, Vice President Kamala Harris, and Secretary Gina Raimondo at Howard University at the beginning of this month when we announced that the Administration will extend the Community Advantage for two additional years and implement changes such as increasing the maximum loan size and expanding the number of lenders that participate in Community Advantage, to make the program more helpful to small businesses. And finally, Congress must give the SBA the tools and resources to nurture the next generation of entrepreneurs by creating a network of incubators and accelerators on the campuses of our Nation's historical black colleges and universities, minority-serving institutions, and community colleges. Administrator Guzman, I want to close my remarks by thanking you once again for joining us today. You have now been in your role for more than a year, so I am looking forward to hearing more about what you have done to improve these programs as well as the insight you have gained in this time in order to help accomplish those goals. And with that let me turn to the Ranking Member, Senator Paul. OPENING STATEMENT OF HON. RAND PAUL, A U.S. SENATOR FROM KENTUCKY Senator Paul. This hearing comes at a perilous time for small businesses. Inflation is at a 40-year high. The supply chain crisis is keeping goods offshore instead of on the shelves. Worker shortages across the country are strangling small businesses. The Biden administration needs to be held accountable for its policy failures. But accountability in government requires transparency. Federal employees, from the President's Cabinet on down, have an obligation to be forthcoming when the Congress asks questions on behalf of our constituents. Welcome back to our Committee, Administrator Guzman. But as I have said before, I voted for your confirmation in a good- faith effort to establish a constructive working relationship with you as administrator. I hoped you would abide, by the explicit commitment you made during your nomination hearing to provide this Committee with information it requests. Unfortunately, you have not honored that commitment. Your agency and the officials you lead have repeatedly demonstrated an unwillingness to answer basic questions. Most recently, we sent a letter in January. It took 105 days for you to respond. You responded yesterday, and still did not respond with the information that was requested. When your associate administrator came before this Committee in February, he refused to answer a simple, straightforward question--do you believe the taxpayer has a right to know how you spend their money? I do not think it gets any simpler than that, and yet we could not get an answer. Likewise, for more than a year, over a year, we have been asking for information about nearly $100 million in loans given by the Small Business Administration unlawfully to Planned Parenthood. Since February 2021, members of this Committee have sent seven letters to you requesting information regarding SBA's continued approval of PPP loans. Despite a clear determination, these entities were ineligible by the previous administration. We have not gotten a clear-cut answer that the policy has changed or that there has been a directive to change the policy, nor have we received the information that we have requested, specifically the communications between you and Planned Parenthood. I request unanimous consent at this point to enter these letters into the record. Chairman Cardin. Without objection. [The information referred to follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Senator Paul. The information requested in these letters is necessary for the Committee to conduct adequate oversight of the SBA's handling of these loans. Specifically, these requests have included unredacted copies of agency records related to Planned Parenthood loans, records related to any Planned Parenthood affiliate's application for the loans, communications from or with any Planned Parenthood affiliate or their representatives, the names of the SBA employee who actually, if it was actually, conducted a formal or informal review of any of Planned Parenthood's affiliate's eligibility for loans. Not only have you ignored these written requests, you have failed to produce the requested documents, even after the Chairman and I met personally with you or with your representative to ask for this. Instead of cooperating with the Committee and providing the requested information, you have spent the last year obstructing our legitimate oversight efforts. It took you 3 months to tell us you were not going to give us anything from the last letter. We sent it January 11th. You replied yesterday, or someone in your office did, to say, ``Take a hike. We are not going to give you any information.'' How you can possibly think that is transparency is beyond me. The SBA has forgiven at least 37 PPP loans to Planned Parenthood. Rest assured, members of this Committee will not stop seeking answers as to why over $77.9 million in taxpayer money was illegally given and now forgiven to Planned Parenthood. It seems the lawlessness of this Administration is not exclusive to the SBA. Federal law requires the Secretary of the Treasury to appear before this Committee to testify at regular intervals. It is the law. Secretary Mnuchin fulfilled this responsibility to do so. Secretary Yellen is nowhere to be found. We have been asking, as of today, for the last 366 days for her to appear, as she is mandated by law. Mr. Chairman, I would like to submit for the record a letter to Secretary Yellen from all Committee Republicans requesting that she participate in this hearing or schedule an alternative time to appear as required by statute. I will note that we received a response, once again a few hours before this meeting, from an Assistant Secretary for Legislative Affairs, claiming that Secretary Yellen has delegated her legal obligation to testify to the Deputy Secretary. Can you imagine if a Secretary of State said, ``Oh well, you know, I think I will just send my Assistant Secretary of State to Foreign Relations,'' or the Defense Department, you know, says, ``Well, you know, I just do not think I will go to Armed Services this year. Maybe I will send my Deputy.'' We write laws. We write laws so we can have oversight of the Executive branch, and Yellen is just basically thumbing her nose and say, ``Oh, I just do not think I will show up. Maybe I will send my Under Secretary.'' You do not get to create the laws. We did, and you would think there would be bipartisan support for adhering to the law and having the Secretary of Treasury actually appear. The law passed by Congress is clear that Secretary Yellen must appear. It is not happening. Secretary Yellen does not have the power to rewrite the law and to avoid being scrutinized by Congress. I fear that without a subpoena she will continue to openly defy Federal law. Administrator Guzman, thank you for being here today, and I look forward to hearing whether or not you will finally answer the questions and will release the information that has been requested on Planned Parenthood. Chairman Cardin. Did you want to put in the record the letter to Secretary Yellen? Senator Paul. Yes, if you can. Chairman Cardin. Without objection. And the reply from Treasury will also be made part of the record. [The information referred to follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Cardin. If I might just comment briefly on the two points you raised. First, in regard to Planned Parenthood, and I might say it also involves other organizations in addition to Planned Parenthood, such as YMCAs and Boys Clubs, and issues like that. We have been going around on this for a long time, and I regret that the casualty has been that the Deputy Administrator has not been confirmed, even though that person is eminently qualified and no one challenges the person's qualifications. We have tried to do everything we can to accommodate the request for information. So I recognize we are in disagreement on this, but I do believe that the agency has provided all the information in regard to the circumstances, including the transparency of every loan and forgiveness that was given. So I just want the record to reflect we have a disagreement on that. I do not join the Ranking Member in his concerns. In regard to Secretary Yellen, I agree. I thought Secretary Yellen should testify before this Committee, and I so told you that. We have now gotten a formal reply from Treasury saying that she is formally delegating that to the Deputy Secretary, who, by the way, is a very competent person who has control over a lot of the programs that we are interested in. If the Ranking Member desires, I will arrange for the Deputy Secretary to testify before us. If that is not adequate, then we will continue to hold out hope for the Secretary herself to appear before us. But we can talk about that at another time because I do agree we should hear from Treasury in this Committee. With that let me turn it over to Administrator Guzman. STATEMENT OF HON. ISABELLA GUZMAN, ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION Ms. Guzman. Thank you so much. Good afternoon, Chairman Cardin, Ranking Member Paul, as well as the distinguished members of the Committee. Thanks for the opportunity to appear before you today, in person, to discuss President Biden's Fiscal Year 2023 budget request for the U.S. Small Business Administration. The President's budget requests a total of $1.06 billion to foster growth and opportunity across America's economy by supporting the SBA's critical small business programs and disaster assistance. This funding level generates practical investments in economic progress, and with your support allows us to continue delivering crucial programs and services for a surging wave of American entrepreneurs. Over the past year I have visited small businesses across 28 states and Puerto Rico. I have witnessed the strength and resilience of American entrepreneurship first-hand. Despite hardships from the pandemic, America's small businesses and innovative startups are creating new jobs, powering our economy, strengthening our global competitiveness, and supporting working families, and Americans are launching businesses at record rates. Business applications have risen more than 30 percent from pre-pandemic level, and as the Chairman said, in 2021, 5.4 million Americans applied to start a business. One of this Administration's top priorities is making sure the opportunities of this growing economy are reaching all Americans. President Biden often says that ability is spread evenly but opportunity is not, and that is important because building equity, ensuring access and opportunity are open to all is not just the right thing to do but it is good for business and the economy. Thanks to historic legislation passed by Congress, the SBA has been able to deliver critical relief and help millions of small businesses, especially in our hardest-hit communities, survive the pandemic. In Fiscal Year 2021, the SBA distributed more than $450 billion in financial relief through the Paycheck Protection Program, the COVID Economic Injury Disaster Loan, and Advance programs, the Restaurant Revitalization Fund, and the Shuttered Venue Operators Grant program. These vital relief funds saved jobs in every community in the country. Now we are delivering on the promise of PPP forgiveness. To date, 87 percent of all eligible PPP recipients have submitted forgiveness applications, and nearly all, 99.4 percent of all qualified applicants, have had their loans partially or fully forgiven. SBA has not only delivered on pandemic relief but our core capital programs, which support hundreds of thousands of jobs, are breaking records. Demand for SBA capital support is outpacing the resources available, with a 62 percent increase in 7(a) loans approved, and a 41 percent increase in 504 loans approved. Given the high demand for SBA's capital programs and their effectiveness for our small businesses, President Biden is requesting a 13 percent increase across our core programs for a total of $71 billion. In addition, the budget recognizes that SBA needs additional support to service $361 billion in COVID EIDL. The budget requests authority to reprogram existing balances and targeted COVID EIDL advance to support and service loans for the 3.9 million borrowers. A large percentage of these borrowers will start making payments in the months ahead, requiring SBA to shift from origination to servicing. As we enter this new phase of recovery, SBA must provide the borrowers with the needed resources as well as the quality customer service that they deserve. While my written testimony outlines other budget priorities, one additional key area I want to highlight is our efforts to upgrade our systems and processes to detect and prevent fraud. During this Administration, the SBA has acted quickly to protect taxpayer dollars, first by restoring controls and deploying new technology to mitigate fraud. Our work to implement or enhance fraud controls has been recognized by Federal accountability agencies and watchdogs. I also recently announced the creation of a new Fraud Risk Management Board to replace the Fraud Risk Management Council. This new board provides the oversight and the agency-wide coordination recommended by the GAO. Additionally, I designated a Special Counsel for Enterprise Risk to work directly in my office to further limit fraud and risk across the agency, in coordination with this established fraud management framework. To recover taxpayer funds we are working closely with the Office of Inspector General and other Federal authorities to refer suspected fraud to law enforcement authorities. Effect stewardship is necessary for the SBA to achieve our mission. I am committed to working with stakeholders, including Congress, to protect SBA's programs from abuse and ensure that legitimate businesses have a clear path to access the financial resources Congress has created for them. Thank you again, Chairman Cardin and Ranking Member Paul and the distinguished members. I look forward to your questions. [The prepared statement of Ms. Guzman follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Cardin. Thank you, Madam Administrator, and once again thank you for your leadership. We will now start a round of 5-minute questions. I want to ask first, if I might, about the SBIR and STTR programs. I mention that because they are set to expire at the end of September. We do have legislation that is heading toward conference in the COMPETES Act, where the House has passed a clean, 5-year extension of these programs. We are hopeful that there will be some action in the conference committee. I have heard from our national security team and people at DoD that they are extremely concerned if there is a lapse in the program. I know by the work of small business, high-tech companies in Maryland under this program the type of work they are doing for our national security and defense in innovation could not be duplicated by companies that are--if we do not have the SBIR and STTR programs. My question to you is, how important is it for us to avoid a lapse in these programs, and in reauthorizing, is it important that we do not put restrictions in that could make it difficult for this program to continue to operate under its current authorities? Ms. Guzman. Thank you, Senator. I do share that this SBIR/ STTR program is really strong for our Nation's innovation. You know, Qualcomm, 23andMe, great companies have come out of this program, and we know that it is very necessary, as America's seed fund to continue to provide this early stage capital, in order for us to stay competitive globally in such key industries and technologies. Any disruption, of course, would be challenging for those small businesses or those innovators. They need certainty and not having that within this program would definitely be a huge lapse in our ability to innovate as a country. And so I would encourage whatever we can do to continue to extend that for 5 years as well as not inhibit it with any restrictions. I know that our partners, the 11 agencies that administer this program, have continued to advance their objectives and find, through our small businesses, innovative solutions to problems. Chairman Cardin. And I just note that we have extended this program, with bipartisan co-sponsorship, both in the House and the Senate, so it has enjoyed strong bipartisan support. The House action was done in the bipartisan manner over a long period of time. In fact, we have had legislation to make it permanent that has been supported by both Democrats and Republicans. September is coming up soon, so it is important that we express support for this. I would just urge you to be engaged in the conference activities to try to get this done. I want to talk about direct lending for one moment. I see that is in your budget, if I am correct on that. I think it was an initiative by the Administration, and it is certainly an area that I think is important. Could you explain why a direct lending program would help fill some of the voids we currently have in regard to access to capital by small businesses that traditionally do not have the confidence of the banking community. They may be the smaller of the small businesses. We know there has been a decline in loans to the smaller companies. The commercial lenders like to have larger loans. They are easier to manage. Can you explain the need for direct lending? Ms. Guzman. Yes, of course, and broadly we are asserting our interest and continued research in this area within the budget. No specific dollar amount requested. SBA, of course, has been doing direct lending through its disaster products to communities, both homeowners, renters, as well as businesses, since inception in 1953. With the small business capital access, the issues of barriers are strong, especially for underserved communities. Forty-four percent of small businesses get their capital through the banking system as well. Even in SBA's lending we have seen a decline in small- dollar loans, especially $50,000 and under, but $150,000 and under in general, with less lenders in that space. As you mentioned, they are still complicated loans to do and just as expensive as a larger loan. The SBA's intent with direct lending is to get engaged and provide a simply alternative product for those institutions that may want support in financing certain business. It could be a community bank that is not underwriting restaurants but wants to retain that depository relationship and that customer and continue to support that business. And so they could access the SBA's direct lending vehicle with the eligibility criteria and underwriting standards that we would create and hold ourselves accountable to the same standard as them in order to fill that gap. That is the intent of the program, and it is really with the purpose of trying to simplify lending at the SBA and continue to work through our banking partners as well as others. Chairman Cardin. And last, let me just have you comment on why the Administration decided to extend the Community Advantage program and expand its availability. Tell us why that was important to continue that program. Ms. Guzman. For the same reason of these huge capital gaps, especially in small-dollar lending that we are seeing. We found, especially during PPP and during the relief programs, that our CDFIs, our community financial institutions, our CDFIs and our CDCs, stepped in and provided support for underserved, underbanked communities. And so we want to make sure that these businesses can be success. Community Advantage would simplify eligibility as well as underwriting, but as well, allow us to extend the pilot and allow more lenders in, so that we can get more CDFIs. Chairman Cardin. Thank you. Senator Paul. Senator Paul. Do you believe the taxpayer has a right to know how you spend their money? Ms. Guzman. Most definitely. Yes, sir. Senator Paul. Do you believe Congress has a right to know how the money is spent, oversee the process to examine the paper trail of how decisions are made and how the money is spent? Ms. Guzman. As I shared with you, I believe in transparency, and I feel like there is a strong responsibility to continue that collaboration and open dialog. Senator Paul. Have you released to us unredacted copies of the agency records related to Planned Parenthood's PPP loans? Ms. Guzman. We have responded to letters. We have also provided you letters to Planned Parenthood entities from the SBA, all of the datasets underlying PPP with specific analysis of the Planned Parenthood, in particular---- Senator Paul. We have specifically requested all of the records. Have you released all of the records to us? Ms. Guzman. There are a couple of items that we have not, including, as you mentioned, the names of the staff that were in the process of review. That information as well as the proprietary individual applications, the agency---- Senator Paul. Have you released to us the communications between you and Planned Parenthood? Ms. Guzman. We provided you with the letters from SBA to Planned Parenthood entities, yes. Senator Paul. You have not released to us the communications from Planned Parenthood to you as well, in support of their application. Ms. Guzman. We have not released any proprietary information. Senator Paul. Have you released to us the information or the deliberative process that went into reversing the Trump administration's policy that had decided that it was illegal to give this money and that they should give this money back, it was illegal to give the money to Planned Parenthood? Have you released to us the deliberative process, any written material, on how you came to a different conclusion than the Trump administration? Ms. Guzman. For clarity there was no policy or law or anything that the Trump administration put forward. There was a preliminary determination letter---- Senator Paul. There was no deliberative process on your part? There was no discussion? There was never a discussion 1 day that says, ``Oh, you know what? We think they did not do this and it is not final.'' You would think you would have a meeting or something and you would have like a transcript of the meeting where so-and-so says, ``Wow, that was a crazy idea and we object to that.'' It just sort of happened and there was no discussion, meaning no deliberation of a major policy that the Trump administration said that this is illegal, because Planned Parenthood is so closely and tightly controlled these do not qualify as individual small businesses. They are a big business, not a small business. It is not a small thing to reverse that. Are you telling me that that was reversed with no discussion and no paper trail, and there exists no paper at the Small Business Administration that explains or codifies the deliberative process of how you changed your mind on this? Ms. Guzman. Well, just to back up again from a factual basis there was no policy implemented. We issue policies with information notices---- Senator Paul. Well, it was, because they were told to send the money back. They received letters to send the money back, so you made a different decision. You cannot just say, ``Oh, they never made a decision so we did not reverse a decision.'' You reversed the decision, because instead of sending the money back to you--and some of them, I think, were attempting to send the money back to you, and I assume they sent you a check and then you sent it back to them. Did that ever happen? Ms. Guzman. What I am happy to---- Senator Paul. Did that ever happen? That is a specific question. Ms. Guzman. I cannot---- Senator Paul. Did any of the Planned Parenthoods send you money back, like they were told to, and then did you turn around and send it back to them? Ms. Guzman. I cannot speak to any specific ones, but let me share with you the action taken---- Senator Paul. So if I write you a letter---- Ms. Guzman [continuing]. By---- Senator Paul [continuing]. In 3 months will you not respond to me again? The thing is, this is not a dispute over whether or not you are being transparent. It is not a dispute over whether or not you have given the documents. You clearly have not given us the documents. We want the documents to see how Planned Parenthood argued they are eligible for these loans. The Trump administration said they were not. They said they were. You say there was never any deliberative process and there is no paper. I do not know whether to trust you or not. But I cannot imagine an agency like yours does not at least have a meeting, there are no minutes to a meeting where you changed a major decision like this? It is $100 million and no one ever said anything. There is no written documents? You have not been transparent with us, and you have not given us what we asked for. We cannot do the oversight of whether or not Planned Parenthood is a small business or a big business unless you give us the information. Ms. Guzman. If I may---- Senator Paul. You have turned this into a partisan position, whereas there was a time when this was one of the least partisan of all the committees in Washington. But your stonewalling has made it into a partisan position where we cannot get together to even meet to see if you can have an assistant because you will not give us the data that we have asked for. Ms. Guzman. The action taken in response to this preliminary determination letter was simply--which was defined again that there were just approximately 400 businesses under a whole code, including Planned Parenthood. All the action taken by me was to put those approximately 400 borrowers back into processing, all of them subject to the rules that were put forward by the agency. Of course, those were interim final rule notices, all the FAQs, all the information notices, not preliminary determinations. Senator Paul. So the bottom line is you are not going to send us the information we are asking for. Ms. Guzman. We have complied and sent you extensive information. Senator Paul. You have complied by not sending us what we asked for. So what you are saying, in a public hearing, is you are not going to send me the information we have asked for. And where do you get the legal authority just to deny Congress what they are asking for? Ms. Guzman. The agency has historically not provided proprietary applicant information. In addition, the specific names of employees---- Senator Paul. This would be the arguments about whether you are a small business or a big business. We already know the name of the entity so that is no longer proprietary. We have heard of Planned Parenthood. We all know that is what the dispute is about. What their arguments are, about whether they are a big business or a small business, you would think would be very objective and you would be happy to show that you went through item this, this, and this, you had a meeting, you all voted that these five things they adhered to and they did not. If that does not exist, it means I do not think you were doing your job. If it exists and you will not give it to us, I think that is reprehensible. Ms. Guzman. Well, Senator, I would love to offer you, again, I know my team has offered to meet with your staff to review these---- Senator Paul. We have tried for a year and you are not giving us anything we have asked for. Every time we have asked we wait 3 months and you send us a letter, saying, ``Oh well, we will give you this and this, but we will not give you this.'' We want to see the communications. We want to see the deliberative process about why you made this decision. Here is why I am also troubled by this, and I will end with this. In testimony before Congress on November 16, 2021, you stated that you were not aware of Planned Parenthood affiliates receiving forgiveness on their loans. We now have the data, and apparently they were forgiven on July 1st. So three, 4 months after their loans were forgiven you come before us and say you do not have any idea whether they have been forgiven or not. Ms. Guzman. I am not aware of individual loans, and so I became aware when I cleared a letter to this Committee, which was after that. Senator Paul. Well, you are not aware of it but we have been asking about it for a year. So I think it would be something that would rise to your attention. But the bottom line is all it would take is if you really believe what you said in the beginning, that you believe in transparency, if you gave us the documents this could be over. But you have stonewalled us back and forth, back and forth, over and over again. No evidence of what the deliberative process was on how you reversed a major decision by the previous administration, and now no documentation on what the arguments for why Planned Parenthood is either a small business or a big business. So I am disappointed, and will continue to be asking questions. And the thing is that ultimately I think the taxpayers deserve better. Chairman Cardin. Let me just--because the Ranking Member and I disagree as to the cooperation that we have received from the SBA. Just to try to set the record straight, the previous administration, the Trump administration, made certain determinations in regard to PPP loan applications, consistent with the law passed by Congress, because I was part of the drafting, as was Senator Shaheen, along with Senator Rubio and Senator Collins. And we did provide for nonprofits. That was one of the issues we talked about, and we did provide that those who have arrangements with similar groups are not necessarily disqualified. It depends upon the affiliated rules that are used by the SBA. The Trump administration processed those loans and allowed those loans to go forward. Then, I believe it was in January but I am not sure of the exact date, but there was a letter sent out to Planned Parenthood by the Trump administration that was somewhat of a perplexing letter, because it said they questioned their eligibility; please send back the money or tell us why you are eligible. Each of the Planned Parenthood organizations that wanted to proceed with the loan sent back a letter saying we fully comply, et cetera. They sent a letter back. No further action was taken by the Trump administration. The Trump administration also put a hold on about 400 organizations that had questionable, or had to further explore whether they were qualified for affiliation or not. When the Biden administration came in, they released the holds, as I understand it, on the 400 organizations, saying if they comply, and there are standard procedures for determining affiliation based upon control, they would be able to be eligible, and if they did not, they were not. There was no change in policy. There was no change in policy by the Trump administration. There was no change in policy by the Biden administration. We have tried, on several occasions, working with the Administrator, to get all the information to every member of this Committee. What the Administration cannot provide is proprietary information on individual applications, which is standard practice of privacy. And second, they cannot provide information that does not exist, and since there is no change in policy there is no documentation of a change in policy. So I do not know how much more we can do on this. I have tried to provide as much information as possible. And let me just remind the Ranking Member this all started with the Deputy Administrator. We made arrangements for separate meetings to provide substantial amount of information about the Deputy Administrator, which was privacy information. We made it available so every member of this Committee could see it. I share the Ranking Member's desire for total transparency. I think the Administration has provided that in regard to the request that you have made. I just really wanted to put that on the record. Senator Paul. One quick point. When we did finally get the information on the person that had been nominated they said, ``We will review this in private.'' The same goes for any of this. It could be any of the Planned Parenthood stuff could be reviewed in private as well, if you do not want it out on the front page of the newspaper. But the thing is, not revealing--there is an argument that goes back and forth on what is an affiliated group and what is a big business and what is a small business. I do not think that is a proprietary sort of argument. And if it is, then I do not know how we would ever do oversight. You know, what if an enormous Standard Oil of 1911 wants to be a small business? Would we not want to see what their arguments are on why they are a small business or why they are a large business and they get small business loans? So I really think that argumentation back and forth, from the advocate of the person who says, ``No, I am not a big business, I am a small business,'' I just do not understand how that can be proprietary. Chairman Cardin. I think we are having trouble interpretation here. The rules for affiliation are well documented by the SBA. There are specific guidelines that need to be followed in regard to satisfying the affiliation rules. And in each of the applications that was verified. I do not know what else we can say other than that. Some of the information in verification could be proprietary, but I am not exactly sure what you are looking for. Maybe I am confused. Senator Paul. What happened is the Trump administration said they were a big business. The Biden administration says they are a small business. So they were disqualified under the Trump administration and they are qualified under the Biden administration. And so there was argumentation we assume made by Planned Parenthood, through communications sent back to the Small Business Administration, saying, ``Hey, we think this is a wrong decision and we do not want to send our money back.'' I think some of them actually sent their money back, and I think they should be honest with us. Did some Planned Parenthoods send their money back? Will you answer that question? Chairman Cardin. If I could just respond to that and then let the Administrator respond. I think you are making an assumption about the Trump administration which is not accurate and maybe you need the information from the Trump administration, because the Trump administration processed the loans. There is no indication that they had specific information to request this money back. The letters went out but without documentation from the Trump administration, not the Biden administration. So I think maybe it is the Trump administration you are trying to get the information from, which has not been an easy task for Members of Congress to get information out of the Trump administration. Senator Paul. No, this is information we know exists. It is from the lawyers and/or advocates for Planned Parenthood. These letters went back and forth. So Small Business Administration said, ``You are not qualified. Send the money back,'' and then they said, ``Oh no, we are qualified, and these are our arguments.'' Those arguments should be public record and we should be able to see what are the arguments for--you are right, the rules should be fairly clear, what is an affiliate. They are longstanding rules. But that should be out in the open. And, you know, it is sort of like are you a contractor or an employee? There is a whole checklist of things you look at it. But we would want to know what is the argumentation, because there are people who believe that Planned Parenthood, one, has the same legal defense for all of their affiliates, has the same sort of set of rules, and there is evidence that Planned Parenthood cannot make individual decisions without permission from the parent company. So there are arguments, at least on the side of them being considered to be a big business, not a small business. But even if we lose that debate we would want to see what was the debate, what was the discussion back and forth, because they did reverse the Trump decision not to give them the money, and then they gave them the money. Chairman Cardin. I think confusion here--and then we will go back to the questioning--I think the confusion is that the determinations were made by the Trump administration. The Biden administration released a hold. They looked at the records that were submitted, the information that was submitted. There was not a hearing. There was not a discussion. This was paper being processed. Remember talking about, in this case, hundreds of loans. There is not a day set aside for argument. It is a process at SBA, looking at the material submitted by the applicant to see if they comply with the test. I assume that is the process that was used. That is the documentation. There is no verbal documentations here. This was a processing process. So I think that is our confusion, and the confusion where we seem to be at deadlock is that the original determination was made by the Trump administration. There is no documentation for why that letter was sent out, asking for the money back. But it never was implemented because they did not follow up after the reply was sent in by Planned Parenthood. Then comes in the Biden administration and they are looking at this in puzzlement because they have 400 that are in this category and only Planned Parenthood got the letters. They do not understand why. What the Administration does, I think, is the right thing, is tell the processors, ``Check to make sure they qualify under our rules, based upon the information that has been submitted.'' Senator Paul. I think that decisionmaking process involved reading the advocates for Planned Parenthood's arguments for why they are a small business, not a big business. Chairman Cardin. They may have read the correspondence. Senator Paul. That is what I mean. So that correspondence would be the advocacy. And while there might not be a deliberative process where they say why, we would see the argumentation, both for and again, or at least for why they are a small business. But we are being prevented from seeing Planned Parenthood's argumentation for why they are a small business. Chairman Cardin. If I am right I think one of the--I might be wrong on this, but I think one of the Planned Parenthoods released their letter. I might be wrong on that. Senator Paul. The Small Business Administration has not released any. Chairman Cardin. One of the Planned Parenthood groups did release it. Senator Hirono. Mr. Chairman? Chairman Cardin. Yes, Senator Hirono. You are next. Senator Hirono. Well thank you, as it turns out. So obviously we are not going to resolve this matter. Chairman Cardin. No. Senator Hirono. And for all the time that I have been here, Republicans have been trying to defund Planned Parenthood. OK, that is a fact. And every opportunity to make sure that Planned Parenthood does not get any assistance from whatever source is in line with the Republican position for the whole time that I have been in the Senate. And by the way, sitting here listening to the SBA Administrator and the SBA being taken to task for not being responsive and not doing their job is pretty rich, considering that the Republicans on this Committee have failed to show up when it is time for us to make a decision, up or down, on the nomination of Dilawar Syed to be Deputy Administrator of SBA. And I also listened to the Ranking Member say, just now or a little while ago, that this hearing comes at a perilous time for small businesses. I agree. We should get on with it, and we should start with Republicans not boycotting the numerous times that, Mr. Chairman, you have called on us to do our jobs on this Committee. So I do have one question relating to Mr. Syed for the Administrator. Knowing that these are perilous times, would having a confirmed Deputy Administrator on your leadership team be helpful to your work? Ms. Guzman. Thank you so much, Senator Hirono, for that question. The Deputy Administrator plays a role in operations at the SBA, and, of course, that position is important at the SBA. Dilawar Syed is highly qualified and would be an excellent choice if the Committee moves forward to vote. Senator Hirono. Yes. I suggest that we all do our jobs. So regarding Native American businesses, as you know one of my top priorities is working to make sure that we do more in D.C. to better support Native businesses, including Native Hawaiian businesses, and I have had that discussion with you. Last year, for example, I worked with my colleagues to introduce bipartisan legislation that would fully authorize SBA's Office of Native American Affairs to ensure Native businesses have a stronger voice within SBA. So I was glad to see the President's budget proposal increase funding for outreach to these businesses. Can you speak to how SBA will prioritize outreach to Native businesses in the coming year, and describe some of the outreach activities that you would be pursuing with these Native businesses? Ms. Guzman. Thank you, Senator Hirono. We share that priority, and the Biden-Harris administration and the agency moved to ensure that Native-owned businesses and Tribal-owned businesses can access the programs of the SBA. First and foremost, of course, I have elevated the Office of Native American Affairs to report directly to me so we can prioritize the activities, including outreach and education, and the administration of grants that they do to entities to help support them. I will highlight that within the Community Navigator Pilot Program that we have funded at the national scale, our Tier One grantee, Oweesta Corporation, which is a CDFI collaborative. And they are doing outreach to ensure that Native-owned businesses are connected to capital and resources within the Federal Government at the SBA. In addition to that national we have multiple, almost half of the entities that are funded also focused on Native communities and their various territories that they cover. So with this additional support of the Community Navigators we feel that our entrepreneurial development support to Native communities can be better satisfied so that we can connect them to our resources. And then, of course, on access to capital issues, as we expand our Community Advantage program and look at adding new CDFIs we are hopefully going to be leveraging these relationships with the Native CDFI community to increase access to capital. Finally, I would say, of course, that on our contracting programs in particular, that we have focused outreach on making sure that when we try to increase the number of small businesses doing business with the Federal Government that we do that inclusively, including to Native-owned businesses and Tribal-owned entities. Senator Hirono. I think these kinds of outreach efforts are really important, because just saying that it is important, if we do not put in process and ways that we are going to do that it just does not happen. And I also want to mention that the Office of Manufacturing recently created is going to be doing more to support small and medium-sized manufacturers. So that is a whole other area of funding that is going to be very important. And I will certainly give you feedback from the Native- owned businesses that I worked as to how these kinds of outreach programs are helping them. Thank you for your commitment, Administrator. Ms. Guzman. Thank you. We welcome the opportunity to work with you. Senator Hirono. Thank you. Chairman Cardin. Senator Ernst. Senator Ernst. Thank you, Mr. Chair, and thanks today as well, Administrator. We appreciate it so much. We appreciate you coming in today. And over the last few months, of course, I have been doing the 99-county tour across Iowa, visiting a lot of our small businesses. And in each of those counties that I visit, constituents tell me that they are really struggling with the impact of inflation--of course, I am sure you hear it every day as well--on their small businesses, just the extreme costs that they are bearing, and including their ability to maintain their payroll for their employees. The most recent consumer price index report from the Bureau of Labor Statistics shows that prices increased by 8.5 percent over the last 12 months, which is the largest year-over-year increase for over 40 years. And over that same period, producer price index increased by 11.2 percent, indicating that most small businesses are experiencing increasingly diminished margins in real terms and prices for consumers as they continue to skyrocket because of the inflationary crisis. So inflation has created a hidden value-added tax on our small businesses in Iowa and throughout the country. From the SBA perspective, what is SBA doing to both help those small businesses navigate those climbing prices and also to prevent those costs from being passed along to consumers? And in your opinion, how can the Administration respond to inflation to help struggling small businesses? Ms. Guzman. Thank you so much, Senator. I enjoyed my recent visit in Iowa, and I look forward to returning and hopefully visiting with you. You have some incredible small businesses. Senator Ernst. Thank you. Ms. Guzman. We are aligned. In terms of what the SBA is doing and what we are supporting for small businesses specifically, of course, the President's budget recognizes the burdens of higher costs and higher gas prices, or rather he appreciates the burdens. Some of the measures that are being taken around pocketbook issues, of course, SBA has a role to play. When we look at childcare costs, in particular, SBA is trying to help. That would not only help reduce costs but it also helps with the workforce. And, of course, we have boot camps, training, childcare, entrepreneurs in this space, and we have launched a series of conversations, roundtables with those childcare entrepreneurs and others to formulate new policies and be able to better support the expansion of that supply of childcare facilities, which will hopefully expand our workforce. The other, of course, part that the President's budget really focuses on is expanding our productive economy and manufacturing so that we can make more in America. Small businesses, of course, 75 percent of all manufacturers are 20 and under employees, in particular. So they have a large role to play. We will be leaning in to supporting our manufacturers, to make sure that more small manufacturers can make things in America, and that includes not only the manufacturing initiative, the manufacturing hub that we are standing up within our government contracting business development but across our centers. Our centers do an incredible job of helping small businesses position for success. We want them to focus on manufacturing. And last, just specifically around inflation, we know that all those immediate pressures are difficult for small businesses. Our advisor network across the 1,300 centers plus the over 450 navigators are continuing to help small businesses. Our SBDCs are doing training on supply chain management. Our WBCs are doing innovative things. One is connecting military spouses locally to jobs locally. We are really trying to lean in to provide actual technical assistance that helps with today's problems. Senator Ernst. No, thank you, and I appreciate you raising the issue of childcare. That is something that Senator Rosen and I do have a small business bill that we have worked on together that would expand access to Small Business Administration loans, of course, for nonprofits and so forth. So we would love to continue working on that with you. And just very briefly, if you could expand a little bit on what you are maybe doing to assist small businesses in those rural areas that have been disproportionately hit by inflation. Ms. Guzman. Yes. For me, rural is very important. I spent a long time in California, traveling around rural, and I have tried to focus on policies. We have an Office of Rural Affairs, of course, that targets initiatives in the district offices. Our community navigators, actually nearly half of those as well are focused on rural. I have added that as a component as a measure within this program, as I would like to see our expansion of services to rural entrepreneurs. So we will be happy to track that for you. Senator Ernst. Thank you, Administrator. Thank you, Mr. Chair. Chairman Cardin. Senator Shaheen. Senator Shaheen. Thank you, Mr. Chairman, and thank you, Administrator Guzman. We are looking forward to having you in New Hampshire on Friday. We have a really interesting small business picked out for us to visit, so I look forward to that. You know, I remember being in the State Senate in New Hampshire in the early 1990's, when we had a very bad recession in the State, and five of our seven largest banks failed, and what kept small business afloat was the SBA. And the district office of the SBA was really critical in helping small businesses navigate, stay afloat, and that has continued. It is, I think, one of the most important agencies that we have in New Hampshire. And I recognize that SBA needs to balance a wide variety of funding needs, but I think our district office is an integral part of SBA's ability to deliver services for our small businesses, and I support really robust staffing for the offices. So will you commit to keeping Congress informed about any potential changes regarding funding, or closure of any district offices that could affect their ability to serve our communities? Ms. Guzman. Yes, we can definitely keep you in the loop of any of those anticipated plans. And I will say that the budget calls an overall 2.5 percent an increase in our budget, but some of that for salaries and expenses so that we can make up for some of those vacancies that we have. And I know how vital our district offices are on the front lines. Senator Shaheen. Is there a discussion underway now to reduce funding or close any of those offices? Ms. Guzman. We are not discussing any closures of offices at this time. You know, if anything, I think that remote work has enabled us to spread out a little bit further. But as we evaluate our staffing models and how we are going to achieve this new scale, in terms of our portfolio, but also the heightened interest in our services as a result of serving over 8 million unique businesses during COVID relief, obviously our field and all our offices are undergoing that exercise, and we will continue to keep you informed. Senator Shaheen. So I should then interpret from your remarks that there are discussions currently underway about looking at funding district offices. Ms. Guzman. Correct. I mean, we, of course, have been under restricted resources in terms of our ability to meet with the growing salaries and benefits expenses and hope to see this 2023 budget realized so that we can again strengthen the employee base of the SBA, especially in this environment where we are seeing new entrepreneurs at such record rates. Senator Shaheen. Well, Mr. Chairman, I hope we will stay in touch, this Committee, with what the SBA is doing with respect to funding district offices, because again, they are very important. Chairman Cardin. I would think this is an area that is going to be of interest to every member of this Committee, obviously. The offices are our contact, the bridge with our small businesses. So Senator Shaheen is correct. We are all going to be interested in any changes that are made. Senator Shaheen. Thank you, Mr. Chairman. I was really pleased that the Economic Aid Act in 2020 included a number of enhancements to the 504 loan program, specifically regarding the ability of small business borrowers to refinance existing 504 loans. And I know, at least it is my understanding, that the interim final rule became effective at the end of July 2021. Do you have any data on whether we have actually seen, as a result of implementing these changes, an increased number in refinancing activity, and is that data you can share with the Committee? Ms. Guzman. I can follow up with you and make sure that my team presents any data on that. Yes, I will. Senator Shaheen. Do you have any sense, off the top of your head---- Ms. Guzman. I do not---- Senator Shaheen [continuing]. Whether there has been an increase in activity? Ms. Guzman [continuing]. Have a sense in terms of the impact, at this point. Senator Shaheen. Well thank you. I think that is one of the areas where it seemed to me that we could really support small businesses through that refinancing, and it would be helpful to be able to track that. Ms. Guzman. I can show that the 504 program overall is highly popular, which is why we are requesting an increase from $7.5 to $9 billion in the 504 program, in particular. Senator Shaheen. Great. Well I certainly support that. And as we know, the war in Ukraine, the unprovoked war in Ukraine, has imposed an unprecedented array of sanctions against Russia and Belarus. And given that it looks like that conflict is going to continue for some time, can you speak to whether we have heard from any of our small businesses about potential impact from those sanctions? Ms. Guzman. Our Office of International Trade actually has been working to advise small businesses of sanctions so that they can be compliant, and updating our online tools with that latest information. You know, anecdotally, I know that they have worked with a couple of businesses just to make sure that they have an awareness of who are impacted, but I could not give you further details. Senator Shaheen. Thank you. I am out of time but I think it would be helpful for us to know what resources SBA has for small businesses who have been affected, so that we can help share that. Ms. Guzman. We will. Thank you. Senator Shaheen. Thank you, Mr. Chairman. Chairman Cardin. Senator Risch. Senator Risch. Thank you very much, Mr. Chairman. First of all, let me say that this is an oversight hearing and I am glad you are holding the oversight hearing. It is how to determine how an agency is doing. And I never judge an agency by an individual case, but sometimes looking at an individual case gives you a thumbnail that there may be issues. So I am going to talk about an individual case. I have sat in this room for over a dozen years. Just before I became Chairman, Mary Landrieu had remodeled the room, and it is a very nice room and very ostentatious, and it provides us to give these flowery speeches about how important small businesses is, how important it is to America, and how we all want to help them. Well, let me talk about a case of mine now. I do not know how familiar you are with either the logging or timber industry. It is a very important industry in Idaho. And the industry has a tendency, like many industries, to consolidate, so you wind up with bigger and bigger companies at the expense of, of course, small businesses. And so over the years a lot of us have thought to see that when the United States Forest Service puts out bids that there is a set-aside for small companies, and this would be not only the logging companies that cuts the logs and then haul them to the mill but also for the milling companies, that are small milling companies. So there is a small business in Idaho that is a logging company, and they took advantage of the set-aside program, bid on a sale, and after the sale was bid it turns out that the logs that they were cutting, because of some industrial activity, have some small amount of contamination in the wood of asbestos. Not a big deal but a big enough deal that it concerned the small mills that they have to sell to. Now remember, a small company has to cut the logs and then they have to take them to a small mill. Well, this company was perfectly happy to cut the logs. However, none of the small mills would take them because they could not take the risk. But the large mills will take them. They are willing to take the risk. So this small company said to the SBA, ``Look, this is how the contract is working out. We cannot sell to a small mill. We can only sell to a large mill. But what we will do is sell the logs to a large mill and exchange them for logs which we will then take to a small mill.'' And so the slate is clean. Your agency has told them to pound sand, and they have asked over and over again to find a work-around for this, and they have been told by your agency that they cannot do it. Look, we all give these speeches about how important it is to help small businesses. This is a simple matter of a waiver. It is a simple matter of somebody making a discretionary call to be able to go through the steps that they have got to go through to comply, and that is get a small business to cut this sale and then the small business deliver that amount of 1,000 board feet or 1 million board feet to a small mill to mill. What can you tell me about this? Ms. Guzman. Well, you are taking me back to my days in the Obama-Biden administration, as there was a timber rule that I had to deal with, with my government contracting team. And I know how difficult it is for those small mills to have to calculate the distance they travel to the types of mills they have to sell, et cetera. And so I cannot recall all the specifics but I recall the challenges as well as dealing with it in the far north of California, where, obviously, there is a big industry there as well. You know, I do not know anything about this particular case but I am happy to take it back to my government contracting team. I have asked my team, of course, to implement and first be steadfast on our controls. But I do know that we have to also give small businesses the benefit of the doubt and really evaluate the situation from their perspective and meet them where they are and be as friendly as possible, from a customer service perspective. So I will take it back and we will follow up with your office to see how we can assist in this matter, if it is a matter of a waiver, and understanding what the impacts are and our authorities within this area. Senator Risch. Thank you. I appreciate that. And this is an instance where the SBA that we all love and embrace can actually do some good for a small business, on a specific level. So we would appreciate your affirmative action on that. Ms. Guzman. Thank you. Senator Risch. Thank you, Mr. Chairman. Chairman Cardin. Let me thank you for that example. Our Committee needs to be the advocate for where small businesses have a disadvantage over large companies. You are giving one example where a larger company could take the risk where the smaller company could not. That is something that we have to make sure that we level that playing field, so I appreciate you bringing that up. We have done that with bonding, for example, where it is much easier for a larger company to get bonds than smaller companies. So these are the types of issues that I think our Committee can play an important role, so thank you for that question. Senator Risch. Thank you. Chairman Cardin. Senator Rosen. Senator Rosen. Thank you, Chairman Cardin, and thank you for holding this hearing. Thank you, Administrator Guzman, for being here today. I want to agree with Senator Shaheen, the importance of the district offices. I can tell you that our office in the State of Nevada was instrumental. We could not have gotten through COVID and everything we had to do without the hundreds of webinars they gave to small businesses up and down our State. Ninety-nine percent of businesses in Nevada are small businesses. So I want to get a shout-out to them, and we need them to stay. It is really important. People know they are there, and they work with us. But I want to also talk about Nevada and tourism, because the pandemic hit travel and tourism harder than any other industry. It devastated small businesses across Nevada, and really across the country. The American Rescue Plan, which I was proud to support, included $750 million to the Economic Development Administration for states and communities impacted by job losses in the travel, tourism, and outdoor recreation industries. But to date there has not been any direct Federal aid specifically for tourism-related small businesses. So, Administrator Guzman, can you talk about why some of the SBA relief programs that Congress created, like Paycheck Protection Program, were in many cases not sufficient for hard-hit sectors like tourism, and why more targeted relief is now, and what other legislation do we need, especially our restaurants? Our restaurants are really hurting. The Chairman has some legislation out there. It is really important that we get them back on their feet. Ms. Guzman. Thank you for that, Senator Rosen, and my team and I would be happy to work with your office and provide any technical assistance. We recognize how impacted the travel and tourism industry was. Of course, we also recognize that PPP did not sustain them for as long as they needed. We really focused our outreach on COVID EIDL to make sure that there was additional funding, affordable, patient, long-term capital for especially the hotel industry, as an example, as well as restaurants and others who need additional support if they were not able to access the Restaurant Revitalization Fund. I continue to hear from businesses that they are still recovering. Some of them have not, of course, returned to full revenue. And so at this point what we have to offer them is our continued modifications on COVID EIDL as long as funding remains, as well as additional support with our core programs. But we are happy to work with you to come up with some other solutions for the industry. Senator Rosen. Thank you. It is really important because are not back, and tourism, it is coming back, not all the way back. Our restaurants are coming back, not all the way back, and we have to help them. And another way we can help them is to expand online resources for small business owners, because of the past few years, particularly during the pandemic, businesses have relied more and more on their online tools, ranging from teleworking to e-commerce. So it is important that the Federal Government also meets small business owners where they are, including the expansion of digital interactions between small businesses and the SBA's resource partners. So I have heard a lot from small businesses about the need for more digital tools and counseling through the SBA. Are you considering making investments to increase online access for small business to business counseling so they can use all the products that we fund? Ms. Guzman. Yes, and I am trying to be as efficient as possible with that and go to the industry itself and launch the Small Business Digital Alliance, in partnership with Business Forward and corporations who are already providing tools and resources for our Nation's small businesses. We know that three out of four businesses adopted technology to survive during COVID, and we want to continue to build on those trends for operational efficiencies as well as expansion in markets. We launched our first event with Google in Ohio, and next week, during National Small Business Week, we will be highlighting more resources to help small businesses with digital tools. It is a high priority for me to get businesses engaged in e-commerce. Senator Rosen. I think it matters. In the last few seconds I have I just want to talk quickly about new startups. There has been a spike in new startups, particularly in Nevada. Reno-Sparks area, nearly 100 startups have launched since 2020. And so I am a strong advocate for entrepreneurship. I want to see this surge continue. So what new investments--I am just going to go quickly--is SBA making to help support and encourage this surge of new startups that have happened, particularly during the pandemic? Ms. Guzman. For our innovative startups, of course we have the Accelerator program and the SBIR/STTR program, which we would continue to amplify out there in the communities. And we are making improvements to try to ensure that small businesses can access those programs, as well as, of course, our capital programs, which small businesses point to as one of the biggest challenges for them. And they want to hire people. They want to be able to expand. And so with the Community Advantage overhaul we are feeling confident that we can help more of these small businesses, and look forward to supporting your district. Senator Rosen. Thank you. I appreciate it, and I look forward to maybe Joni Ernst and I, our bill on nonprofit childcare having access to small business. That would be a real big help for people to go back to work. Chairman Cardin. Senator Booker. Senator Booker. Thank you. There is an issue that I have been bringing up for two administrations now, and I have been proud to work with this Committee on it, and I am proud the Administration is taking such great steps on it. It is really to reduce barriers for justice-involved entrepreneurs. They face so many when it comes to starting a business. And April is Second Chance Month, in which we acknowledge both the deep power of redemption in our society when we support people making second chances and when we make our communities safer. Studies, as you probably know, Administrator, have shown that the greatest deterrent to recidivism is jobs, employment, a steady paycheck, economic opportunity, but too many justice- involved people just do not have that. According to the DOJ, 60 percent of formerly incarcerated individuals are unemployed still a year after they reenter society. For those who do find employment, their take-home pay is 40 percent less than those who are not incarcerated, and the average lifetime earnings of someone who has been incarcerated is less than those, obviously, who have not been. And entrepreneurialism is a real pathway. It is an exciting reality for people who have been involved in this system. A 2020 analysis found that individuals with a criminal record are more likely to become entrepreneurs compared to those without a record, in part because it is a viable pathway to overcome the stigma of incarceration and a lot of the challenges. When the Paycheck Protection Program was rolled out by the Small Business Administration 2 years ago, the SBA initially denied individuals with certain criminal histories from applying. I was proud to work across the aisle with the Trump administration and with you to eliminate many of those restrictions. But we know that serious roadblocks still exist with justice-involved entrepreneurs who are trying to access the business and consumer credit that they need. In January, the CFPB released a report that described how the SBA itself has various restrictions that can bar applicants who are incarcerated, indicted, or on probation for felonies and other certain misdemeanors, which are inconsistent across programs and hard for consumers to fully understand. Meanwhile, that same CFPB report stated that there is limited evidence to suggest that criminal history decreases creditworthiness. Further, these restrictions are something that exists only at the SBA, not in the private lending space, and not even across other Federal agencies. And this is why I am so joyful to have worked with the Administration over the last several months to address this issue, and yesterday the White House announced that the SBA will take steps to remove these barriers from the SBA's 7(a) microloan and 504 loan programs, and is working toward addressing the problems across the rest of the SBA portfolio. This is going to have transformational effects on communities like mine and entrepreneurs across the country. And so with that long-winded approach, Administrator, could you tell me more about the impact of this change for small businesses and your commitment to it? Ms. Guzman. Thank you so much, Senator, for that, and I share your passion for this issue. I was recently at Goucher College in the Chairman's district and met with several Second Chance entrepreneurs who are making progress in their own lives and in the communities that they are impacting. So the SBA can do more, and will be doing more as the White House announced, to simplify. We have already shown what we can do with the Community Advantage program, because the reforms recently announced include changes, removing those restrictions so that formerly incarcerated, indicted, et cetera, could access our programs. And we will be exploring that across the 7(a), 504, and microlending programs as well. You know, further to that, I feel that there are a lot of learnings that could be had from not only the experiences of those entrepreneurs. We want to continue to highlight them and the opportunities and the pathways forward with technical assistance and more entrepreneurial education. And finally I will say I was recently in Ohio, meeting with an incredible entrepreneur that has a successful chain of restaurants as he is growing, just a couple to start, and hopefully grow, but who uses justice-impacted individuals as employees. And I think that is also a strong model to demonstrate, especially with such a tight labor market, to show what entrepreneurs can do as well for the workforce in this space. So I look forward to working with you across our core lending programs to make sure that they are inclusive and give everybody an opportunity, that entrepreneurship is a pathway to building wealth, and I agree with you that that is especially for these Second Chance entrepreneurs. Senator Booker. Thank you so much, Mr. Chairman. Thank you. Chairman Cardin. Senator Booker, thank you for your leadership on that. We are really working with the SBA to be able to provide the special attention to returning citizens on entrepreneurship opportunities. We are making progress. The Biden administration has been pretty strong on this. So thank you for your leadership on this. Senator Booker. Thank you very much. Chairman Cardin. Senator Hickenlooper. Senator Hickenlooper. Thank you, Mr. Chairman. I think we would be remiss if we did not wish Senator Booker a birthday. You probably already did that. Senator Hirono. Right. Happy birthday. Senator Hickenlooper. I wanted to make sure that we did recognize him. I do not know if anybody wants to sing. Senator Booker. I would prefer not. Chairman Cardin. You may not know this. Your birthday present to him was to allow him to jump over you, because you were here earlier than he was. So I gave him your birthday present. Senator Hickenlooper. That is a nice gift, although then I only get one question because I have to go preside. I am on a tight schedule. So now my gift to him is give him a little guilt, which will just cling to his breast. I want to ask you a quick question, and you have to be concise. I will put my other few questions into the record. Ms. Guzman. OK. Senator Hickenlooper. First I want to thank you. When you come to Colorado it makes a huge difference, and your team has been remarkable. The barriers that you got over in terms of the Marshall Fire and really helping adjust, this affects people's lives in real time who have lost, in many cases, everything they own. Over 1,000 houses were lost. And I wanted to ask a little bit about the disaster loans that really are a lifeline for survivors. Modernizing how the SBA estimates building costs is a great first step, and that is something we have now, I think we are all together on. But I think we also have to look at how do we update the borrowing limits to reflect the median price of a home that has more than doubled in the 28 years since loan limits were last reset. So I guess what is the plan? How do we update the Disaster Loan Assistance home and personal property loan maximums to account for that nearly 30 years of inflation? Ms. Guzman. Thank you. Thank you for that question and your leadership for the community impacted by the Marshall Fire. We have so far supported over 100 million loans now, and we see the impact was huge. We were pleased to be able to do what we could do administratively to change the way that we estimate, and also have changed the process of going forward, we can move more quickly so that we can help borrowers at the inception with accuracy. We are looking at those levels, and as I have shared with you in our conversations, we will be exploring whether or not we can increase those limits for the borrowers and explore that subsidy impact for the future. Senator Hickenlooper. Well, I have more questions that I will put into the record, but the one thing I have learned is if Dick Durbin is anywhere around the Senate floor you cannot be late for when you are presiding or there will be payments to be made. Again, I want to thank you so much. You have really done a great job with the morale. Every time I meet someone from the SBA I really feel rewarded, and I feel you should feel the reward of that effort time that obviously you are putting in. It is really having material results, so thank you for that. Ms. Guzman. Thank you. Senator Hickenlooper. I yield back to the Chair. Chairman Cardin. Thank you. Senator Markey. Senator Markey. Thank you, Mr. Chairman, very much. So do you agree that there is a need to replenish the Restaurant Revitalization Fund so that minority-and women-owned restaurants who got pushed to the back of the line have the support they need? Ms. Guzman. We are seeing the impact continue for our restaurants and know that they need continued support. Senator Markey. So you support---- Ms. Guzman. We would stand ready to deploy the program and know that we could support the nearly 158,000 small businesses that are waiting. Senator Markey. Yes, and on the Small Business Innovation Research program, of which Massachusetts has received tens of thousands of these grants and created hundreds and hundreds of thousands of jobs in our tech community, I am very worried that we are staring down a disaster with the program's expiration in just a few short months. We have seen this movie before. Could you talk about how important it is for SBIR to be reauthorized and fully funded? Ms. Guzman. It is one of the most valuable programs, I think, in the Federal Government, the SBIR/STTR. I mean, Qualcomm alone and their success more than pays for the program in many respects, as well as all the other great impact companies, 23andMe, et cetera. The program is really critical to providing non-dilutive funding to innovators, and I think SBA is proud to help direct that set-aside within the program for small businesses and also look to expand its reach to more underserved communities. I know that any disruption or anticipation of disruption could slow the processing down. It is already a difficult, slower process for small businesses to go through, and so we would not want to see that reduced, even for a few months, the impact of our ability to compete globally on innovation. Senator Markey. Thank you. And again, in Massachusetts the STTR and SBIR programs have been central to our innovation economy being created. It is so many thousands of companies that now exist, only because of these programs. So we thank you so much, and we appreciate the fact that these programs are merit-based, science-based, in terms of the awarding of the grants, and I think that is the best way to ensure that we maintain and enhance American competitors. We are definitely tied to the ability to get these ideas out into the market, creating jobs, and giving us an edge over other countries in the world. So we thank you so much. Thanks for all your great work. Chairman Cardin. Thank you, Senator Markey. Administrator Guzman, the two largest programs that were created for COVID were the PPP program and the EIDL--not created. EIDL was there, the EIDL loan program, and then it was made eligible for COVID relief. The number you said in your opening statement is pretty remarkable, that you are now over 90 percent as far as loan forgivenesses are concerned, and you have been able to process that. We normally hear when there is serious backlog problems. It has been kind of quiet on our front, which means you must be doing a pretty good job. Ms. Guzman. Thank you. Chairman Cardin. That is quite a record and I just really wanted to acknowledge that, and I am glad to see that you have been able to keep up with the demand that is out there, because the numbers are just staggering, and the dollar amounts are staggering, and it is critically important for our economy. So those small businesses that need to get those loans off the book through forgiveness, it is an important point. So thank you for making that a priority. In regard to the EIDL loan program, thank you for, first of all, you increased the dollar amounts, which we were very pleased to see. More than $100 billion has been issued since September. Most have gone toward the modification of existing loans, if I understand correctly. We know that there is no longer new loans being given, but there is nearly four million small businesses that participated in the EIDL loan program, which is again a remarkable number that is out there. These loans are going to need to be serviced. Does your budget give you adequate resources in order to deal with this significant workload that you are going to have in servicing these loans? Ms. Guzman. Oh, we are asking for $320 million to be transferred from COVID EIDL advance into the SBA's COVID funding so that we can service these loans into the future. Of course, they are 30-year loans, and so our budget request includes that transfer. Chairman Cardin. I think that is all the questions I had. I was pleased to see the Administration changed the Federal contracting for minority-and women-owned small businesses. This is something we have been asking for. Could you speak to the various ways that the agency is working with the Administration to ensure Federal contracting is more equitable? Ms. Guzman. Yes. I would be happy to. Thanks for that question. Within our budget as well we are asking for an increase in the 7(j) funding as an example. We think that we need to lean into entrepreneurial education, to help more businesses get contract-ready, and that is one program in which we hope to get more small businesses back in the system. There has been a 40 percent drop of small business contractors doing business with the Federal Government, and we want to make sure that is inclusive. The SBA also, in addition to the various reforms that we announced with the White House and OMB, we also, part of that released disaggregated data so that we could track performance of our underserved or socioeconomic groups. So as we continue to move forward in the future, outreach will be done to make sure that we can attract all of the businesses. Especially as we are seeing women and people of color start businesses at such high rates, we need to bring back innovation into our industrial base and recruit more small businesses. So we believe equity is a real key to ensure that we can continue to have a flow of contractors, small business contractors to do business with the Federal Government, so from an entrepreneurial development. But in addition it is capital. It is bonding. Those are also top concerns. And so we are working across our Capital Access Program as well as our SBIC program to make sure that we can get funding into the hands of contractors who need support to be able to deliver against these contracts. Chairman Cardin. Thank you. We already had a hearing and talked a little bit about the Navigator Program and we are looking forward. It is somewhat a unique model, so we are looking forward to getting your assessment as to how that program is working through its hub-spoke arrangements. And the expansion of the Entrepreneur Resource Partners I know is very much appreciated. I have commented about the expansion of Women Business Centers in Maryland the Veterans Outreach Business Center in our State. These centers are really critically important. We also, although it comes under Commerce, the MBDA codifications in the infrastructure bill. It has also made a huge difference for small businesses, minority small businesses. So there is a lot going on, and we appreciate your observations as to how we can fine-tune these programs moving forward. I think this budget year gives us a chance to do that. We had some conversations that we may not be able to get the entire expectations we had in President Biden's initial plans that included the Build Back Better Act, but we think we can move some of these issues through the budget process. So we welcome your thoughts as we try to advance these ideas or these programs or these missions in any way we can. We are now moving beyond COVID, so how do we institutionalize what we have learned from COVID to have these tools moving forward that can help small businesses, in any economic circumstance, what is available to be activated when we have another challenging economic circumstance. Ms. Guzman. Thank you, and we look forward to leveraging this moment as well. SBA has never achieved this scale or this awareness in the communities, and we want to build on that, and we look forward to collaborating. Chairman Cardin. And last, let me point out, to Senator Risch's point that I did on the logging. I have also been talking to Secretary Wyden in regard to taxes. There are many areas where small businesses have additional obstacles that larger companies do not have. So I hope that you will look at us as a partner to work with our sister committees here to try to help deal with issues that may not be under our Committee's jurisdiction but we can help small businesses, and we could use your advice as to how we can move forward to help America's small businesses. Ms. Guzman. Thank you very much for that offer. Chairman Cardin. And again, thank you very much for your testimony today and for your service to our country. Ms. Guzman. Thank you. Chairman Cardin. With that the Committee will stand adjourned. [Whereupon, at 4:04 p.m., the Committee was adjourned.] APPENDIX MATERIAL SUBMITTED [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]