[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE ECONOMIC INJURY DISASTER LOAN
PROGRAM: STATUS UPDATE FROM THE
ADMINISTRATION
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 1, 2020
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-084
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
41-295 WASHINGTON : 2021
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
Melissa Jung, Majority Staff Director
Justin Pelletier, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Hon. Nydia Velazquez............................................. 1
Hon. Steve Chabot................................................ 4
WITNESS
Mr. James Rivera, Associate Administrator, Office of Disaster
Assistance, Small Business Administration, Washington, DC...... 5
APPENDIX
Prepared Statement:
Mr. James Rivera, Associate Administrator, Office of Disaster
Assistance, Small Business Administration, Washington, DC.. 38
Questions and Answers for the Record:
Questions from Hon. Dwight Evans to Mr. James Rivera and
Answers from Mr. James Rivera.............................. 42
Additional Material for the Record:
None.
THE ECONOMIC INJURY DISASTER LOAN PROGRAM: STATUS UPDATE FROM THE
ADMINISTRATION
----------
WEDNESDAY, JULY 1, 2020
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:05 a.m., in Room
2118, Rayburn House Office Building, Hon. Nydia M. Velazquez
[chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Finkenauer, Kim,
Davids, Chu, Evans, Schneider, Delgado, Houlahan, Craig,
Chabot, Radewagen, Balderson, Hern, Hagedorn, Stauber,
Burchett, Spano, Joyce, and Bishop.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I want to thank everyone, especially our witness, for
joining us today for our Committee's hybrid hearing.
I want to make sure to note some important requirements.
Let me begin by saying that standing House and Committee rules
and practice will continue to apply during hybrid proceedings.
All members are reminded that they are expected to adhere to
these standing rules, including decorum.
With that said, the technology we are utilizing today
requires us to make some small modifications to ensure that the
members can fully participate in these proceedings. During the
covered period, as designated by the Speaker, the Committee
will operate in accordance with House Resolution 965 and the
subsequent guidance from the Rules Committee in a manner that
respects the rights of all members to participate.
House regulations require members to be visible through a
video connection throughout the proceedings, so please keep
your cameras on. Also, if you have to participate in another
proceeding, please exit this one and log back in later.
In the event a member encounters technical issues that
prevent them from being recognized for their questioning, I
will move to the next available member of the same party and
will recognize that member at the next appropriate time slot,
provided they have returned to the proceeding.
Should a member's time be interrupted by technical issues,
I will recognize that member at the next appropriate spot for
the remainder of their time once their issues have been
resolved.
In the event a witness loses connectivity during testimony
or questioning, I will preserve their time as staff addresses
the technical issues. I may need to recess the proceedings to
provide time for the witness to reconnect.
And, finally, remember to remain muted until you are
recognized to minimize background noise. In accordance with the
rules established under House Resolution 965, staff have been
advised to mute participants only in the event there is
inadvertent background noise. Should a member wish to be
recognized, they must unmute themselves and seek recognition at
the appropriate time.
For those members here in the room today, we will also be
following the health and safety guidelines issued by the
Attending Physician. That includes social distancing and
especially the use of masks. I urge members and staff to wear
masks at all times while in the hearing room, and I thank you
in advance for your commitment to a safe environment for all
here today.
Last night, on the eve of the date the Paycheck Protection
Program expires, the Senate passed a bill to extend the program
to August 8.
From the inception of the program, I have clearly stated
that, until we know where the money is going and how our very
small businesses, which includes independent contractors and
sole proprietors and minority- and woman-owned firms, are
faring, we cannot blindly extend the program. With that said,
Congress still does not have the data it was promised, nor does
the public have any information.
In May, the Congress passed the HEROES Act, which extended
the program through the end of the year and set aside funds for
small businesses with fewer than 10 employees and leveraging
our mission-based lenders, like CDFIs, MDIs, and microlenders.
Moreover, this important bill included provisions to
require the administration to provide regular disclosure to
Congress and the public. Yesterday, Secretary Mnuchin stated he
was working with the Senate on the next steps for PPP and spoke
of secondary loans.
As I have said all along, I invite the Senate and the
administration to sit down with us to discuss extending PPP
loan authority and the many improvements put forth by members
of this committee.
We are meeting today to conduct an important hearing on SBA
implementation of the Economic Injury Disaster Loan Program or,
as some call it, the EIDL Program, which was activated on March
12, making it the first economic relief program to assist small
businesses adversely impacted by the coronavirus pandemic.
I would like to thank Mr. James Rivera, the Associate
Administrator for SBA's Office of Disaster Assistance, for
being here today to discuss many of the issues surrounding the
implementation of the EIDL Program.
Mr. Rivera, I value your commitment and the hard work of
your staff, and I fully understand the extraordinary efforts
put forth to respond to this unprecedented crisis. However, we
are holding this hearing today because of some very concerning
issues that have hindered relief for thousands of small
businesses.
As you know, we held a hearing last month in which we heard
directly from the EIDL applicants about their experiences with
the program. One small-business owner discussed the negative
impact of SBA unilateral reduction of the maximum loan size
from $2 million to $150,000, a cut of more than 90 percent.
He, like thousands of small-business owners across the
country, was drawn to the EIDL Program largely due to the
ability to use an EIDL loan for more than just payroll. Imagine
being in the position of thinking this program, at a max of $2
million, is just what your business needs, only to learn at
loan approval that SBA had drastically reduced the loan amount.
This is precisely the kind of information that needs to be
conveyed to borrowers ahead of time. It makes it a
fundamentally different loan product. And for those who needed
an amount greater than $150,000, EIDL was rendered irrelevant.
Throughout the process, SBA showed a lack of understanding
of the challenges facing small businesses related to COVID-19,
especially by offering a one-size-fits-all $150,000 loan
without offering them an opportunity to apply for a second loan
or seek additional funding. Small businesses looking to the SBA
for help were essentially told, ``Take it or leave it,''
regardless of need or size, and then told to have a nice day.
We also heard from a community pharmacist in south
Philadelphia who applied for the EIDL loan but was denied due
to unsatisfactory credit history. This is a lifelong
entrepreneur who has struggled with resisting margins and is
now saddled with additional burdens due to COVID-19.
Borrowers like the community pharmacist who have been
denied for allegedly unsatisfactory credit history have
reported that the credit threshold for approving a loan is not
clear and borrowers do not know what the limit is, leaving them
feeling like the decision was arbitrary. I am sure it would be
helpful to all if SBA simply communicates the credit minimums
to small businesses up front.
I have also heard from small businesses who were denied
because of unverifiable information, meaning there were items
that were reviewed that caused SBA to question the validity of
the items. But the denial letter never detailed the information
that was missing, leaving applicants with little insight as to
why they were denied.
Though these decisions can be appealed, that only adds to
the delays and expenses of a struggling business owner. These
businesses need relief, and they need it now.
Even more troubling is the fact that the SBA has not
communicated well with applicants, nor has it provided them
with reliable ways to check the status of their applications.
Borrowers are simply told that the loan is processing. The only
other updates they receive are whether the loan has been
approved or denied.
Applicants need to know where they stand in the queue so
they know how much longer they must wait before receiving
financing. And given the current economic climate, if they are
going to be denied, they deserve to know quickly so that they
can explore options for capital elsewhere.
Finally, there was a long period during which the EIDL
application portal was limited to only agricultural small
businesses, which is completely at odds with the intent of the
Small Business Act and the mission of the SBA, which is to aid,
counsel, assist, and protect the interests of all small
businesses.
It is particularly troubling to have heard allegations that
these loans were being processed before other applications that
were already in the queue. And we hope to get a clear answer on
that today.
At the Committee continues its oversight duties, I am
looking forward to hearing from Mr. Rivera about how many
applications are currently pending in the queue, how much more
funding is necessary to meet the loan demand, and what steps
SBA is planning to take to ensure small businesses across the
country receive the economic relief they need to survive.
Already, a number of large companies have declared
bankruptcy post-COVID-19, and experts say it is not long before
this wave of bankruptcies hits small businesses. We need to be
doing more to help avert this outcome.
With that, I look forward to hearing from Mr. Rivera on the
EIDL's performance in response to COVID-19 and what ODA needs
from Congress to fully implement the EIDL Program consistent
with our intent.
I now yield to the Ranking Member, Mr. Chabot, for the
opening statement.
Thank you.
Mr. CHABOT. Thank you, Madam Chairman. And thank you for
holding this meeting on the Small Business Administration's
Economic Injury Disaster Loan Program, popularly known as the
EIDL Program.
At the beginning of the year, the Nation's economy and the
country's small businesses were reaching new heights. We were
experiencing historic levels of unemployment, and momentum was
building. For example, unemployment among African Americans,
Asian Americans, Hispanic Americans was at all-time lows,
meaning that more and more people were working. That was a good
thing.
Unfortunately, COVID-19 made its way to our shores. As a
result, a huge number of America's small businesses, coast to
coast, were forced to close their doors and turn off their
lights. With demand for goods and services limited by this
emergency, small businesses shifted to survival mode.
It was clear from the beginning that the Nation's smallest
firms would need immediate access to capital to weather the
storm. The SBA was handed a task that was unequaled in our
history.
Congress, in a bipartisan fashion, and the Federal agency
that represents, assists, and fights for America's smallest
firms responded by setting up the Paycheck Protection Program,
which works in partnership with private lenders to deliver
funds to small businesses. This program has delivered 4.8
million loans, in the amount of nearly half-a---actually, over
half-a-trillion dollars now.
The SBA also continued to administer the Economic Injury
Disaster Loan Program, EIDL, which had its roots as a post-
event recovery program for businesses and communities that were
hit by a natural disaster.
Both of these programs, from the beginning of this crisis,
experienced overwhelming, unprecedented demand. EIDL shifted
immediately from being a regional program--a natural disaster
typically strikes a particular locale--to a full-fledged
national relief program.
Thus far, the program has delivered just over 2 million
loans, for $127 billion. In my home State of Ohio, for example,
the program has delivered 45,000 loans, for $2.6 billion, to
date.
I would like to thank the SBA for being a vital resource to
the Nation's small businesses, entrepreneurs, and startups.
However, we are a number of months into this crisis now, and
the SBA's EIDL Program has a lot of room for improvement.
While EIDL loans are being processed and the Advance grants
are being disbursed, too many small businesses are left with
questions--questions on communication, questions on the status
of their loan, and questions surrounding the maximum loan
amount under the program.
When small-business owners are left with limited
information, common, everyday business decisions become
difficult. We must strive to provide small businesses with as
much information as possible, especially during these uncertain
times.
I look forward to getting to the bottom of many of these
questions and determining how we can work together to provide
solutions for our Nation's smallest firms.
I want to thank the SBA's Associate Administrator for the
Office of Disaster Assistance, Mr. James Rivera, for joining us
today. I look forward to his testimony and also, obviously,
answering questions from members on both sides of the aisle.
As was the case prior to the COVID-19 outbreak, I know that
small businesses will once again be our Nation's guiding light.
And, with that, Madam Chairwoman, I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
I would like to thank a moment to explain how this hearing
will proceed. Each witness will have 5 minutes to provide a
statement, and each Committee member will have 5 minutes for
questions. Please ensure that your mike is on when you begin
speaking and that you return to mute when finished.
With that, I would like to introduce Mr. James Rivera, the
Associate Administrator for SBA's Office of Disaster
Assistance. In this capacity, Mr. Rivera directs the SBA
Disaster Loan Program, including EIDL.
He began his SBA career in Texas in 1989, serving as a
disaster loan specialist. Over his 30-year SBA career, he has
also served as the Associate Administrator for the Office of
Financial Assistance. And prior to his public service, Mr.
Rivera was a commercial loan officer in the private sector.
We welcome you back to the Committee, and you are
recognized for 5 minutes.
STATEMENT OF JAMES RIVERA, ASSOCIATE ADMINISTRATOR, OFFICE OF
DISASTER ASSISTANCE, SMALL BUSINESS ADMINISTRATION, WASHINGTON,
D.C.
Mr. RIVERA. Good morning, Chairwoman Velazquez, Ranking
Member Chabot, and members of the Committee. Thank you for the
opportunity to update you on the agency's Economic Injury
Disaster Loan Program and our response to the coronavirus
pandemic.
In March, SBA worked with all States and territories to
facilitate approval of 56 disaster declarations for small
businesses affected by the pandemic. At that time,
Administrator Carranza made an important administrative change
to ease the business impact certification. This enabled the SBA
to provide disaster loans for small businesses in all 50 States
and 6 U.S. territories, and it established a nationwide
disaster assistance program.
As a result, the loan numbers and dollars we are
experiencing are unprecedented so far. This agency has provided
economic relief to over 6.8 million small businesses, for over
$147 billion. This more than doubles the amount of disaster aid
provided in the entire 67-year history of the agency.
To help achieve that, SBA created and implemented an
entirely new online portal application and distribution system
for EIDL loans and grants. This system has now handled over 8
million applications and has allowed us to distribute dollars
to those small businesses in record time. Currently, we are
processing grants in less than 2 days.
The pandemic and nationwide program has also required the
agency to scale up our disaster staff, now totaling over 7,000
personnel.
Meanwhile, our program office continues to service 175
other major and agency disaster declarations, which total a
billion dollars in natural disasters this year, including the
two recent requests from Governors for small businesses
assisted in areas of civil unrest.
These successes, unparalleled and historic for the agency,
have not been without their challenges, however. Let me mention
a few.
First, between mid-March and the end of April, the agency
had to stop processing applications three times. This was due
to the program changes made through CARES Act legislation, the
lack of funds, and the need to stand up an entirely new system
to administer the grants. During this time, the agency received
close to 4 million applications in a 2-week period. This did
set us back, and we have now been working hard to catch up
since.
In moving quickly to build the new system, we unfortunately
were not able to provide the same internal visibility as exists
with our disaster loan application portal. This, combined with
the application volume mentioned above, resulted in uncertainty
for many.
Following the exhaustion of funds and in receiving
additional funding, the agency looked at how best to maximize
these dollars for pending applications, newly eligible
agricultural enterprise businesses, and future applicants. In
reopening the portal 2 weeks ago, we also needed to keep in
mind that the disaster application period, as defined in the 56
declarations, runs through mid-December.
With regards to the EIDL grants or advances, the agency
also looked at how best to maximize those funds. We consulted
bill authors, and, through a per-employee allocation, we now
have been able to reach 2.2 million more businesses with
financial aid.
I mentioned the significant growth in our staffing, but
that comes with the need of education and training. We continue
to adjust every week to the demands in our call center and in
our loan processing centers.
In highlighting our successes and reflecting on our
challenges, it is also important to evaluate where we are
today. We have been continuously processing loans for 2 months.
All applications have now been initially decisioned. All
advances have been distributed.
Our processing times, due to volume and stoppages, averaged
around 41 days. Since we reopened the portal, our processing
times for new applications are now 5 days. We are much stronger
and at a stable operational staff level today, and small
businesses are getting the needed dollars disbursed to them in
record times.
At SBA, our mission is one of service. We have a proud
history of helping small-business owners in their time of need.
Every disaster event is unique, and there are always lessons
learned. While facing a disaster situation unlike any in our
agency's history, we have had to do this while operating in a
telework and virtual environment ourselves. We have also been
affected by the pandemic, having lost one of our dedicated
staff members to the virus.
In the end, I know we share a common goal: to provide
economic relief to American small businesses. We will continue
to do our very best, and we will continue to work closely with
you to achieve that goal.
Thank you.
Chairwoman VELAZQUEZ. Thank you, Mr. Rivera.
I now recognize myself for 5 minutes.
Mr. Rivera, SBA received approximately $2.7 billion in
funding for salaries and expenses to fulfill your mission to
deliver the PPP, EIDL, and other agency programs to struggling
small businesses.
What portion was allocated to the Office of Disaster
Assistance? How much has been spent? And what have been the
biggest cost drivers?
Mr. RIVERA. Thank you, Madam.
We received two sets of funds. We used $7 billion initially
in our existing disaster funds that was carried over from
Harvey, Irma, Maria on the loan side. On the administrative
side, Congress was generous enough to give us $470 million, and
we are close to spending through that right now. The $2.1
billion we have planned out over the next--I think it sunsets
in September of 2021. So, we are working through those funds
right now.
Major costs, to answer your question, we have 7,000
employees; we have close to 2,000 contractors. We are running a
24/7 operation at the call center. So a lot of these expenses
that we have not had in a natural disaster have grown
exponentially with this effort.
Chairwoman VELAZQUEZ. Okay. So you hired more staff. You
hired contractors to help you perform the duties of the office
in providing assistance to small businesses.
And so that is one of the first issues that I raised, and I
was the one fighting here to get that money to you. Because I
have been on this committee for 28 years, and I know every time
that there is a natural disaster how bad the agency has failed.
Because the budget has consequences, right? And every time that
the budget is cut, manpower is going to be reduced. And here we
are.
Of course, we provided the money to hire more staff and to
hire contractors, bring in contractors, but then there is the
training and so on. So those are issues that we need to keep in
mind, because climate change is not going away, and we are
going to be in this position many, many times more.
Mr. Rivera, I have heard countless complaints about SBA's
poor customer service. Applicants spent hours on hold, only to
be told their applications were pending and to check back again
next week.
Why was SBA's system unable to provide more detailed
information regarding the flow of the application through the
approval process?
Mr. RIVERA. Let me, if I can, take you back to mid-
December. We have this system internally that we use to respond
to--natural disasters; it is the Disaster Credit Management
System 2.0. We used that for the first 2 to 3 weeks.
When we received the opportunity to do a grant program--
which we have never had a grant program on the disaster loan
side--we pivoted to an existing contract that we received post-
Harvey, Irma, Maria. It was a surge contract that enabled us to
rebuild it.
And, looking back, we should have had visibility, no doubt
about it, similar to the way we have with the disaster loan
application portal. What happened is, in our angst to get this
service out and get to this new portal, we did not have
visibility in the application portal.
Once an applicant gets invited into the loan queue or to
the grant queue, there is visibility. But, in hindsight, we
should have added that additional visibility that we didn't
have.
Chairwoman VELAZQUEZ. At the Senate hearing a few weeks
ago, Administrator Carranza said that the SBA was working to
add more visibility to the automated system. When will that be
completed?
Mr. RIVERA. So, we don't have any loans in the application
queue anymore. Everything has been processed. Since we have
reopened the portal, we have received close to an additional 2
million loan applications. Everything is in the loan queue, so
there is visibility from that perspective, and all grants have
been processed.
Chairwoman VELAZQUEZ. So why, then, did she say that the
Administration was planning to add more visibility?
Mr. RIVERA. I think if you go back to the June 15 date,
that is just the amount of applications we had in the queue. I
think it was a timing issue.
Chairwoman VELAZQUEZ. Okay. Thank you.
So, Mr. Rivera, we understand that SBA limited the size of
the EIDL loan to $150,000. What percentage of applicants had
requested and, based on the EIDL calculation, should have
received more than $150,000?
Mr. RIVERA. So, currently 80 percent of the applications
are below $150,000. The average loan is $61,000 overall. We
have 19 percent of the applications that are at that $150,000
threshold.
Chairwoman VELAZQUEZ. Okay. So can you answer my question,
just the percentage of people that applied for $2 million
that----
Mr. RIVERA. Right.
Chairwoman VELAZQUEZ.--didn't receive it and just got
$150,000?
Mr. RIVERA. So, Madam, I don't have that information
because we----
Chairwoman VELAZQUEZ. Can you please forward that
information to us?
Mr. RIVERA. Sure. But we determine economic injury. You can
request whatever you want, but it is based on 6 months of
working capital.
And I think we could have done a better job of
communicating that it is based on 6 months of working capital.
It is not based on whatever loan amount that you are
requesting. It is different than a traditional bank loan, from
that perspective.
Chairwoman VELAZQUEZ. Okay.
My time has expired, and I now recognize the Ranking
Member.
Mr. CHABOT. Thank you, Madam Chair.
Mr. Rivera, I have heard from many small businesses and
numerous Members of Congress about the lack of communication
coming from the SBA, with regard to the EIDL Program
specifically.
How can we work together to ensure that small businesses
receive the most up-to-date information on EIDL assistance? And
are there any programmatic changes that we need to consider?
Mr. RIVERA. The last, gosh, 3 months have been a tough
road, obviously. This is a national footprint; it is not a
regional disaster, from that perspective.
We have learned a lot from a communication perspective. And
to answer your question, we need to do a better job of getting
what the program guidelines are out there and being able for
all small businesses to understand.
We thought we were communicating pretty well from the
perspective of when we talked to each individual business
owner; they knew exactly what we were trying to do and what we
were trying to address their needs. But there is always room
for improvement, and we are willing to work with Congress,
however you see fit.
Mr. CHABOT. We definitely would want to work with you on
that, and I think both sides. You know, this is a very
bipartisan committee, and I think we can work together with you
to improve this.
As we consider ways to improve the Federal response to this
emergency and emergencies in the future, do you believe that
private lenders could have a role within the Disaster Loan
Program?
Mr. RIVERA. Let me state what we are actually doing.
We had the surge contract. We have actually used the surge
contract--I will hold back the name of the company. I can tell
you offline if you want. But, basically, this company is doing
what private lenders are doing.
When we moved to this portal, they are processing the loan
for us. Under the traditional EIDL, the goal is two loans per
day. Under this contract that we are using, where we have this
business doing--this bank-type business doing an algorithm, we
can do 25 loans a day.
So, we are using the private sector, in a private-public
partnership relationship, to process these loans. We could not
have processed these loans on our existing platform. That is
why we stopped for 2 weeks. We went and we built this portal
with this company, with this institution, and that is what has
enabled us to do that.
Definitely, moving forward, this is the path forward. It
has increased the cycle times. It has increased the
productivity. It has helped us provide quicker, faster service,
from that perspective.
Mr. CHABOT. That is good to hear. Because, obviously,
injecting some of the private sector and competition into the
government--which tends not to be, no offense or anything, a
little less efficient, because, you know, we don't compete with
others. They do. And we learned that in the PPP program. You
know, we had the private sector out there make the loans, and I
think that sped up the process tremendously.
My next question: We know more about this emergency today
than we did in March. We are also starting to see some
businesses return under modified operations. Congress is
currently debating the Federal Government's next steps as it
pertains to this emergency.
As we continue to have these discussions, where should we
concentrate our efforts within the EIDL Program? Where should
we make adjustments to ensure the program assists current
small-business applicants? And how can we structure the program
to be flexible and nimble when the next disaster strikes?
Mr. RIVERA. Well, I have to thank the Committee and
Congress from the perspective of what you enable us to do. You
eliminated some statutory requirements. The ``credit
elsewhere'' test is not required. We didn't have to get Federal
tax returns. So we went truly with just a credit score, from
that perspective. You have been very helpful through this
process.
As we continue to take a daily look at the amount of volume
that we have--we have 8 million applications--in relation to
what we process, we will continue to have that discussion, as
far as other opportunities that we may have.
Mr. CHABOT. Okay.
How are you and how should we measure the effectiveness of
the EIDL Program?
Mr. RIVERA. Effectiveness. I wish I could approve every
loan. I really do. We must have a credit standard. We are a
loan standard. I mean, our current approval rate is 51 percent.
One of the things that has been different with this new
portal is we have a DocuSign-type document where we are able to
immediately disburse within the next day. Generally, under the
traditional process, it takes us 2 to 3 weeks because we are
flipping paper back and forth between us and the small
business, where, now, we are 99 percent disbursed.
So, of the $131.9 billion that we have approved, we have
already disbursed $130 billion to the small businesses. That is
money in their bank. I mean, it is a day turnaround time, from
that perspective.
So, it has been a positive experience. That is one of the
real lessons learned that we have used from a technology
perspective, using the algorithms, using those types of
features.
What we need to figure out is how can we better improve on
these individuals, these small businesses that we decline. Many
of them received grants, you know, the advance, but we are
going to come out with a lessons-learned, and we will be sure
to share that with you when this COVID period ends and we can
move on and look back from that perspective.
Thank you.
Mr. CHABOT. Thank you.
My time has expired, Madam Chair.
Chairwoman VELAZQUEZ. Time has expired.
And now the gentlelady from Kansas, Ms. Davids, is
recognized.
Ms. DAVIDS. Thank you, Chairwoman Velazquez and Ranking
Member Chabot, for holding this hearing today.
The Economic Injury Disaster Loan Program, or EIDL Program,
is definitely meant to provide an immediate lifeline to small
businesses who are struggling to stay afloat during the
coronavirus pandemic. But I have heard from too many small
businesses, small-business owners in my community that, you
know, they are experiencing chronic delays, a lack of
transparency in response to their applications.
And I know we have kind of been talking about that this
morning already, but, Mr. Rivera--first of all, thank you for
joining us today.
You know, as I have heard from my constituents and
witnesses in this committee that the Chairwoman referenced
earlier around their frustration, I am curious about, you know,
whether or not you all are working to provide more step-by-step
information for applicants and then, you know, whether or not
you are going to be able to have more frequent and open
communications going forward. Because, you know, you are
talking about the technological and operational work that you
are doing, and I am just curious what that is going to look
like going forward.
Mr. RIVERA. The current portal that we are using is
exclusive to COVID. And what we have done is, we have 1 million
to 2 million individuals that are in certain parts of the
queue, so we continue to communicate. We have reached out five,
six, seven times via email. We are calling these 1 million to 2
million people through our call campaign. We are leaving
messages.
If I could fast-forward to today, we are a better operation
than we were, you know, 90 days ago when we were standing up.
Internally, we had to understand this new portal ourselves. So,
in looking back, we should have probably had better
communications, been a little bit more transparent when it
comes to the 10 steps in the process.
And that is kind of the tactical approach that we are doing
right now. As I have mentioned, everybody is in the loan queue.
We have processed all of the grants on the 8 million
applications that we have received so far. And we are still
receiving, you know, 200,000 to 300,000 applications a day
since we reopened the portal back in mid-June.
Ms. DAVIDS. Thank you.
And then just really quickly, you know, the local SBA
district office in the Kansas City metro area that serves the
Kansas Third has done a great job of outreach and has been
great at communicating with my office and our constituents.
I am curious about, what kind of coordination is happening
and communication with district offices and our entrepreneurial
partners? And are there ways that we can better utilize those
district offices for that function?
Mr. RIVERA. That is one of the things Administrator
Carranza reminds me daily of: no stovepipes, organizationally.
We are very collaborative with field operations. We thank field
operations. They have given us several hundred employees to
help us process these loans.
We have very clear communication. If there is a
congressional, for example, that comes in from your district,
we have a direct line of 20-plus disaster agents that can
provide responses from that perspective. They do have other
stuff other than COVID to do, but they spend all their time
between PPP and EIDL, as far as communicating back and forth
with us.
Ms. DAVIDS. Thank you.
And, you know, the last comment I will make is just, I have
appreciated the Chairwoman's work on helping us increase the
transparency around who has been receiving the various loans
and grants.
And, also, Mr. Rivera, I appreciate the work and your time
today.
With that, I will yield back.
Chairwoman VELAZQUEZ. Thank you.
And I am going to take the privilege of using 55 seconds to
ask you a followup question of the question that she asked, Ms.
Davids.
And that is that, when we held a hearing here with SBDCs,
all our partners, they mentioned that they learned of changes
made by SBA on rules and guidance from the media. So you need
to have better coordination with the partners that are in the
field, helping them in providing the information--the most
accurate information.
Mr. RIVERA. Yes, ma'am. We agree.
You know, Allen Gutierrez, the head of the Entrepreneurial
Development, he is just right down the--5, 10 offices away from
me.
The challenge we have is, this was such a new process for
us that, as we communicated internally, sometimes people got to
the media before we had the opportunity to get to our resource
partners. And we clearly understand that we have to do a better
job communicating.
Chairwoman VELAZQUEZ. Okay.
So the gentlelady from American Samoa, Mrs. Radewagen, is
recognized for 5 minutes.
Mrs. RADEWAGEN. It is a beautiful morning here in Pago
Pago, American Samoa, at 3:30 a.m. And I want to thank Mr.
Rivera for being with us today.
Mr. Rivera, can you explain the rationale for initially
allowing only agricultural-related businesses access to the
EIDL portal for weeks? That caused some confusion here in my
home district.
And what do you think Members of Congress should focus on
within the EIDL Program as we debate the next steps?
Mr. RIVERA. Regarding the agricultural applications, we
process those concurrently. We set up a separate queue where we
were continuing to process these loans that were in the queue,
and then we set up a different track for the agricultural
enterprises. So, they were being processed concurrently, you
know, from that perspective.
What could we do different? As I mentioned earlier, the
ability to let us not have to do a ``credit elsewhere'' test,
the ability for us not to have to get Federal tax transcripts,
from that perspective, a lot of those improvements have just
been phenomenal and have enabled us to have a more cookie-
cutter approach in order to get this assistance out as soon as
possible.
Mrs. RADEWAGEN. Do you believe there is room for private
lenders to operate within SBA's Disaster Loan Program moving
forward?
Mr. RIVERA. So, you know, as I mentioned earlier, we are
using a private-sector organization that has--we had a surge
contract post-Harvey, Irma, Maria where that is their portal.
So you go into the SBA website, you go up to their portal, they
do the algorithm with all the data that they are completing,
and then they bring it back to us for a team lead to do the
decisioning.
Had we not had that relationship and had we not had that
contract, we wouldn't have been able to process 25 loans, on
average, per loan officer per day. We would be probably at two
to three loans per day, which is not--that is not acceptable.
So, you know, we do take advantage of these opportunities
with these private-sector organizations. We had this contract
in place post-HIM.
Mrs. RADEWAGEN. Thank you, Madam Chair. I yield back the
balance of my time.
Chairwoman VELAZQUEZ. The gentlelady yields back.
And now we recognize the gentlelady from California, Ms.
Chu, for 5 minutes.
Ms. CHU. Mr. Rivera, the CARES Act provided $25 million for
SBA to develop resources in non-English languages. And I do
want to recognize the agency for publishing several guides and
translations in 17 languages.
Asian-American businesses have been particularly hard-hit
by the COVID pandemic. And nearly 175,000 Asian-American-owned
firms do business primarily in non-English languages. And, in
fact, one-third of the community is limited English proficient.
If SBA does not fulfill its mandate to reach these firms
with in-language materials and services, they risk being left
behind during our recovery.
The EIDL portal remains available only in English, and the
agency has still not updated Congress on what actions it is
taking to proactively reach out to business owners with limited
English proficiency.
So could you explain what specific steps your office has
taken to ensure that EIDL is accessible to business owners with
limited English proficiency, especially considering we provided
$25 million for SBA to develop resources in non-English
languages?
Mr. RIVERA. Thank you, Congresswoman.
We translated fact sheets into, I think it was, 17
different languages.
And I am looking at the Chairwoman. I remember, during
Hurricane Maria, we choked when it came to the language
services.
So, we have a $2 million contract where we use translators.
We have not heard anything, from the language services
perspective, when it comes to being unable to translate.
We do understand that need. Our application is still in
English. We have an application in Spanish. And we will
continue to try to figure out how to get more languages as we
proceed.
Ms. CHU. Like I said, you have been provided $25 million to
translate. And the reason that you haven't heard anything is
probably because those people with limited English proficiency
are shut out. So I would urge you to translate those
applications.
Mr. Rivera, Congress took steps to ensure that sole
proprietors, independent contractors, and the self-employed
were fully included in the small-business recovery resources
made available during this crisis. And that includes the EIDL
emergency grant program established by the CARES Act, which
Congress specified was to be valued at $10,000 per applicant
and, along with a traditional loan, would work in concert with
the Paycheck Protection Program. EIDL would provide a quick
injection of working capital to meet operating expenses, and
the PPP would enable businesses to retain their employees.
I am deeply concerned about SBA's actually rather shocking
decision to cap the emergency grant at just $1,000 per
employee, as is inconsistent with congressional intent and has
had a disproportionate impact on these independent workers,
including so many in the world-class creative economy in
southern California.
These independent businesspeople also have fixed costs that
they are struggling to pay, and many creative industries in my
district, in fact, have halted production to comply with public
health guidelines.
So you specified in your testimony that the SBA made
adjustments to the EIDL grant in order to make the funding last
longer, but how does the SBA justify cutting the grant's value
by 90 percent for independent contractors and sole proprietors?
Does the agency have plans to make adjustments to the grant
formula so that it can meet the needs of these types of
business owners?
Mr. RIVERA. We put a lot of analysis into these
determinations, these decisions. At the agency level, the
decision was to do $1,000 per employee. If you were self-
employed, you know, zero employees, you received a $1,000
grant.
Had we used $10,000, we would have been out of funds
immediately. We did get the first $10 billion, and then we did
get the subsequent $10 billion. We are currently--I think this
morning it shows we are, like, at $15 billion, $16 billion. We
would have been run out of money.
And what we are trying to do, basically, is just provide as
much assistance across to as many small businesses as possible.
And that is the approach we took.
Ms. CHU. And why is it that you have not deputized SBDCs to
provide timely information?
Mr. RIVERA. I have to get back with you. I need to have a
conversation with the Assistant Administrator. I thought we
were providing clear guidance and clear communications
internally.
As I mentioned earlier, the information we have internally
sometimes gets out before we are able to distribute it through
the entire resource partner network.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Ms. CHU. Thank you. I yield back.
Chairwoman VELAZQUEZ. And now we recognize the gentleman
from Ohio, Mr. Balderson.
Mr. BALDERSON. Thank you very much, Madam Chair.
And thank you for being here today with your testimony and
answering some of our questions.
A question I was asking was already asked by a colleague,
but I would like to expand on that a little bit. Mrs. Radewagen
asked you--and I want to continue from her question--about
America's small businesses through previous disasters.
You used the example of Hurricanes Harvey, Irma, and Maria
as well as floods across the Midwest. Hurricanes Harvey and
Irma in 2017 were just weeks apart from each other. For these
2017 storms, did SBA close the EIDL portal for one sect of the
population?
Mr. RIVERA. I am sorry. Can you repeat the last part of
that question?
Mr. BALDERSON. Yes. Did the EIDL portal for one sect of the
population--for these 2017 storms, did the SBA close the EIDL
portal for one sect of the population?
Mr. RIVERA. No, I don't believe we did.
I mean, we are working on two different systems right now.
We have the Disaster Credit Management System that is handling
all non-COVID, and then this specific portal is specific to
COVID by itself.
Mr. BALDERSON. Okay.
Mr. RIVERA. We have done a billion dollars' worth of
natural disaster loans this year that are non-COVID. So that
track continues to go, you know, business as usual, from that
perspective.
Mr. BALDERSON. Business as usual. Thank you.
Followup to that: During any previous disaster where EIDL
funds were awarded by the SBA, was it ever the policy to shut
out applicants from one disaster in order for other requestees
to have access to EIDL funds?
Mr. RIVERA. No, not that I am aware of.
You know, EIDL funds are 2 percent of natural disasters.
Mr. BALDERSON. Okay.
Mr. RIVERA. Most of the loans are to homeowners. A lot of
people don't understand that Congress gave us the authority
back in 1953 for homeowners. The lion's share are homeowners
and then businesses. And then, as part of the business loan,
there is an Economic Injury Disaster Loan component.
But I am not aware of that, but I can check back with you
if there is a misunderstanding.
Mr. BALDERSON. No. Thank you very much.
And, Madam Chair, I yield back my remaining time.
Chairwoman VELAZQUEZ. Mr. Balderson, would you yield for a
second?
Mr. BALDERSON. Yes, ma'am.
Chairwoman VELAZQUEZ. So is your question related to the
fact that the SBA EIDL Program shut the portal just to allow
agricultural borrowers to apply for loans?
Mr. BALDERSON. Yes, Madam Chair.
Chairwoman VELAZQUEZ. So he is asking you if there has been
in the history of the EIDL Program any time where one group is
coming in, like the agricultural, the farmers, and then
shutting the portal for everybody else.
Mr. RIVERA. Well, we process concurrently. As I mentioned
earlier, we continued with the EIDL track, and then we had an
ag track continuously at the same time.
Chairwoman VELAZQUEZ. Yeah, but these are COVID-19-related
borrowers, farmers applying for loans. And non-farmers were not
allowed to apply, because the portal was shut down for them.
Mr. RIVERA. Well, the--oh, I am sorry. I understand your
question now.
Chairwoman VELAZQUEZ. Why did you make that decision? And
who made that decision?
Mr. RIVERA. It was an agency determination.
Chairwoman VELAZQUEZ. Why?
Mr. RIVERA. Because Congress gave us the authority to make
loans to farmers. Disaster wasn't able to make----
Chairwoman VELAZQUEZ. But Congress didn't give you the
authority to shut down the portal to every other borrower that
was injured by COVID-19.
Mr. RIVERA. Right. But since we have opened the portal up
since June 15, I mean, we accepted those 500,000 applications
that were in the queue. So, I mean, they delayed maybe, what, 2
weeks, 3 weeks?
Chairwoman VELAZQUEZ. Do you realize how many borrowers
were calling our offices, crying out because they needed
assistance and the portal was shut down for them----
Mr. RIVERA. Right.
Chairwoman VELAZQUEZ.--and clearly stated----
Mr. RIVERA. I understand.
Chairwoman VELAZQUEZ.--shut down for you but open for
agricultural.
Mr. RIVERA. I understand. And I apologize for not answering
your question earlier. I didn't quite understand.
Mr. BALDERSON. I may have asked it incorrectly, so that is
okay. Thank you.
Mr. RIVERA. No, no. Thank you.
Chairwoman VELAZQUEZ. I just would like to have a sense as
to why that happened.
Mr. RIVERA. Why the portal was only open for ag businesses?
Chairwoman VELAZQUEZ. Uh-huh.
Mr. RIVERA. Because, at the time, the decision was, let's
let the ag businesses get in.
We have not had authority for agricultural enterprises
since the mid-1980s, so we had to stop and we had to retool the
system. And then, during that period of time, we also got
additional funding. We didn't have funding at the time. We
needed to get the additional $50 billion. I mean, so there were
some stops and go's.
From the intent of why we went ag only, that was an agency
decision.
Chairwoman VELAZQUEZ. Okay.
I yield my time from Mr. Balderson.
Mr. CHABOT. Thank you.
If the gentleman would yield, I will be very brief.
Just for those dozens of people who might be watching at
home, the thing that we have to have out there is the fact that
the EIDL loan program was not open to agriculture or farming
originally, and then we passed legislation to open it up to the
ag community. So, for a period of time, it was only open to the
ag community, although the applications were still there, and
then it has reopened again.
So, I mean, that was the reason behind this. Because it
hadn't been open, so you had people in the ag community that
weren't even eligible for a long time. Then they were.
Now, I mean, I understand why we might at this point argue
with that decision. I had people in my district that were not
ag that were wondering, why can't we get this?
But that was the reason, correct?
Mr. RIVERA. Yes, sir.
Mr. CHABOT. Okay.
Thank you.
Chairwoman VELAZQUEZ. Badly communicated to the general
public.
Mr. RIVERA. I understand.
Chairwoman VELAZQUEZ. Now we recognize the gentlelady from
Minnesota, Ms. Craig, for 5 minutes.
Ms. CRAIG. Thank you so much, Madam Chairwoman.
Mr. Rivera, I am sitting here, and this isn't my prepared
question, but I just want you to understand, if you really
believe that ``The agency could do better'' is the best
response to the performance--you know, I have a lot of
businesses in my district who, if this were the kind of
customer-service level that they had provided, they would be
out of business 3 months ago.
You know, I am sitting here today going through my email,
because I have folks in my district who applied and heard
crickets for months. No response from the EIDL Program
application.
I have a gentleman in my district who finally got a
response from you that there was missing information on his
application. And we even elevated this to the regional acting
director in my office. We were told there was a 24-hour email
line that Members of Congress could use in order to help our
constituents get a response on their EIDL loan applications.
Nine days later, we got a response to that email that says
there was missing information, and still not telling us, so
that we could tell our constituents, what information was
missing or what was needed to help that application.
So the Chairwoman has brought up the lack of communication,
but I am just telling you, in case no one else on your team is
telling you directly, that the customer-service levels our
constituents are facing is terrible in this program.
And I understand--I spent 22 years working in business
before I came to this Congress and came to this committee, so I
understand the volume. I understand that you guys are under a
lot of pressure to respond here.
But 6 days ago, I sent a response, again, asking for
someone, please, to help this constituent, and I am sitting
here today and still we have no response. And I am a Member of
Congress. I can't even imagine what is happening on a daily
basis inside the customer service group.
And so, you know, I just want to make sure no one is
sugarcoating this for you, because I am not going to sugarcoat
this for Minnesotans or for the American people. The
administration of this program has been absolutely terrible.
I just want to say also that, you know, I understand this
meeting is about EIDL. And I didn't come here today--I came
here to ask a question, but somebody has to tell the truth
about what our constituents are facing.
And I appreciate the hard work you have done, Madam
Chairwoman, to finally get a member of the SBA to come in front
of this committee.
I have sent a number of letters to the Administrator, Ms.
Carranza. And I want to make sure that, during this hearing, I
also have an opportunity just to say that the response on the
PPP program has been equally unacceptable.
I understand that, for a recent GAO report, your
Administration waited until the very last day to respond to
requests for data to the Government Accountability Office and
only replied when that data had already been made public.
Why are loan-level data not being released at this time,
even to the Government Accountability Office?
We need a commitment to release a comprehensive list of
firms who applied for and received aid under the PPP. We need
to make sure that transparency is essential to understand that
these funds went to good use. See, that is our role as Members
of Congress, to make sure that we are doing the best job that
we can to oversee the use of taxpayer dollars.
So, Mr. Rivera, I want to just say, I appreciate you being
here today, number one. I know that this isn't going to be all
that much fun. But I want to make sure you understand that what
has been happening, understanding there have been a lot of
challenges with the volume, is simply unacceptable.
Mr. RIVERA. So, thank you for your comments. We don't take
it lightly when we are not providing the customer service that
we need to do. If we can talk offline, we can see whatever the
issues are.
As I mentioned, you know, this morning's report. We get
individuals on the loan side through in 5 days; grants, 2 days.
Was the service slower before? Yes. Are we still getting--you
know, we passed 7 million calls at the call center yesterday.
A lot of work for a lot of individuals, and we are doing
the best we can. And if there are opportunities on how you can
help us or if we need to get better service with you, just let
us know; we will be glad to provide that service.
Ms. CRAIG. That is what I was told a month ago.
Mr. RIVERA. Okay. Well, I will continue to do my best. I
don't know what else to tell you from that perspective.
Ms. CRAIG. Thank you, Madam Chairwoman. I yield back.
Chairwoman VELAZQUEZ. The Chair recognizes the gentleman
from Oklahoma, Mr. Hern.
Mr. HERN. Thank you, Madam Chair.
Thank you for being here today and answering questions
regarding the EIDL Program.
I always find it interesting when we complain about
inefficiencies of government yet have colleagues who want to
make it bigger. It has always been perplexing. Because I have
been around, as you can tell from a few gray hairs, a while, in
business for 35 years, and I can't think of any agency in
government that has ever been very efficient, as compared to
industry that is accountable directly to a customer for its
existence.
With all that said, we have spent a lot of time--in fact,
all of our time--here today talking about the current history
of the program and how it has compared to other programs that
you have been involved in, with either 9/11 or geographies,
wind disasters, and things like that.
I would ask you to compare those two. I have heard a lot of
this, as it pertains to business interruption insurance, why it
is not viable for a national pandemic or a national disaster
versus a localized geography disaster.
One thing I would ask you--and I think this would be a very
bipartisan request that shouldn't be controversial at all. It
should give you a chance to perform at a very high level. There
is very fresh, this is very raw, these comments coming from
here and from your customer base, the people applying for the
loans.
Could you commit to us between now and the end of the
quarter, now that we are in a new quarter, Q3, so prior to any
potential administrative changes, you know, people running the
agencies or whatever, could you commit to us about assembling
best practices that you have learned from this that you could
apply?
It is very difficult to take--and I know you have done it
with your experience--try to take a localized disaster and
extrapolate that across a national disaster. You have tried to
do that, and you are a little behind the eight-ball on that, or
a lot behind the eight-ball in certain areas. But it would be
very easy to take a national pandemic disaster and localize it.
So if we could get from you a commitment from you at this
hearing today that you and your team could put together a
playbook, if you will, for a simplistic term, that would
identify things you should do better, like who you should
communicate to and when you should communicate it and what
should be communicated.
Because we can all sit here and talk about learning, as we
did in our office, about the $150,000 cap from The New York
Times or The Wall Street Journal or the Washington Examiner, we
could go through all of these different things; it doesn't
solve our problem, and it doesn't prevent those problems from
happening in the future.
We need, kind of, skin in the game, a commitment in the
game, because then that carries on beyond the ideas and the
things that are going to make it work in the future when this
happens again--and we hope it is a long time and none of us are
here when it happens again--but those in the future. Because I
think history matters. It matters a lot. It identifies what we
shouldn't do again and what we should do right the next time.
If you could help us put that into a format that could be
given to this committee so that we can hold each other
accountable and remind each other of what we need to be doing
as we go forward. Can you commit to that?
Mr. RIVERA. Absolutely.
Mr. HERN. So September 30, 2020?
Mr. RIVERA. Absolutely.
And if I can just have, like, 15 seconds.
Mr. HERN. Sure. You can have a minute and 34 seconds.
Mr. RIVERA. Okay. Thank you.
COVID--viruses were not in the Small Business Act before
March the 15th. We weren't responding to COVID.
We do have a playbook. You know, we have the Disaster
Preparedness and Response Plan. It is for natural disasters. I
think we have proven ourselves when it comes to a Harvey, Irma,
Maria footprint. You know, we had a 15-, 20-day response----
Chairwoman VELAZQUEZ. Not in Puerto Rico.
Mr. RIVERA.--for----
Mr. HERN. Mr. Rivera, if I may, though. I would acknowledge
that you have those. And that is because we have all had to
deal with regional disasters.
But now we have, in our lifetime, in our legislative
lifetime, in your administrative lifetime, executive branch
lifetime, you have a national pandemic. And we don't have that,
from 1918 Spanish Flu, to rely on now. Because I would imagine,
many of the things that we had then, sans the technology, would
be doing the same. We would be communicating in a different
format then, but we had the ability to instantly communicate.
And I had people calling me, like many others did. They
thought they were going to apply for a $2 million loan. They go
through all the process and told $150,000, and, in their mind,
they have wasted a lot of time. They could have gone to a bank
and stood up their business quicker.
So there was just this lack of communication, which is
usually what destroys most relationships and everything that we
do. So if we could just get a communication process plan that,
again--and I took a minute and 20 seconds of your response
time.
But I am acknowledging that you have good regional disaster
plans, because we, unfortunately, have to deal with them time
and time again, year after year. But it could be 20, 30, or 40
years again, but we will indwell forever in the congressional
records and possibly through legislation a process for how to
handle national epidemics/pandemics as we go forward.
Mr. RIVERA. Yes, sir.
Mr. HERN. Thank you.
Mr. RIVERA. Thank you.
Mr. HERN. I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now we recognize the gentleman from Minnesota, Mr.
Stauber.
Mr. STAUBER. Thank you, Madam Chair.
And I appreciate, Mr. Rivera, your being here.
You know, we know that the Small Business Administration
was really given a nearly impossible task. Overnight, they were
asked to assist every single small business across our Nation
that fell on hard times. And I commend the work you have done
thus far, but there is a lot more to do.
I do want to share some concerns that were brought up here
earlier from my constituents. It seems that the SBA has taken
some liberties to reduce the cap of loans given out, from $2
million to $150,000. While this is likely to ensure the maximum
number of businesses receive some sort of funding during this
crisis, my constituents are rightfully upset. They feel they
are being cheated out of what they were promised by our
government.
With that said, I will be focusing my line of questioning
on the portal.
Can you share with us what the SBA is reviewing exactly
when an applicant sees, quote, ``Processing'' in the EIDL
portal?
Mr. RIVERA. Sure.
This is the first time--because we used a streamlined
application--we actually identity-proofed every small business
that came in. So, for example, the business name needed to be
the same as the name on your checking account. We identity-
proofed addresses. We identity-proofed a lot of these
processes.
As we moved the small business from the application portal
into the loan portal, that was a quick credit check based on a
credit score. And once you passed that credit score, then we
determined economic injury, 6 months of working capital.
That is what the loan was based on--working capital,
economic injury. It is pretty simple. It is sales minus cost of
goods sold, so whatever the gross profit was. That is basically
your loan, from that perspective.
The EIDL loan program is meant to pay for fixed operating
expenses. It is not for expansion or, you know----
Mr. STAUBER. Right.
Mr. RIVERA.--similar to 7(a), 504s.
But those were some of the requirements that we looked at.
Mr. STAUBER. Okay. With that being said, what is the
average time between an application being submitted and the
decision being made?
Mr. RIVERA. Currently, we are running 41 days. For the 5.5
million applications we process, we are running 41 days.
Mr. STAUBER. So what is the hurdle that slows this process,
from the time the applicant----
Mr. RIVERA. Well----
Mr. STAUBER.--comes to 41 days?
Mr. RIVERA. Yeah. The staff, the amount of volume, standing
up the portal.
We had three stops in this process that is included in the
41 days. We ran out of money. We had $7 billion; then we got
the additional $50 billion.
We had to build the portal for--we had to stop and do a new
application when we got the grant program. We had to stop and
do a new application when we got the ag component to it.
So, there have been three hard stops in that process.
Mr. STAUBER. So my colleague from Minnesota brought up a
good point. When you have an application and they have waited
days and days and they call and you have said it wasn't filled
out correctly, is there a faster way to do that immediately?
Mr. RIVERA. Yeah. So, we have learned a lot when it comes
to filled out correctly. We weren't requiring tax transcripts.
We weren't requiring any other due diligence. It is a self-
certified form, from that perspective.
So, I need your help if you have examples of where you say
that somebody said it wasn't filled out correctly. I am kind of
curious to see what exactly they are being asked for.
We are very crisp on, when we do the decision, we decision
it and then we move on. And then they have the opportunity to
come back for reconsideration.
Mr. STAUBER. What is the SBA doing to ensure applicants
have the most access to the information, guidances, status
updates, and other important information during this economic
downturn?
Mr. RIVERA. Yeah. So that is one of the things--looking
back, specifically for the EIDL Program, we didn't have a
transparent portal for the small-business owners as we do with
the Disaster Loan Application Portal. Congress gave us that
directive years ago, so we built this portal so you can go in
and you can figure out where you are at in the queue, from that
perspective. We didn't do that. In hindsight, we should have
done that. And, you know, that is a lesson learned that we
have.
Mr. STAUBER. Well, I appreciate you being here and taking
our questions. I mean, the goal is, when you know better, you
do better. This pandemic came to our shores through no fault of
our own, and we are going to get through this together. But we
need you and other members at the SBA to really understand
livelihoods are at stake, much of our economy is at stake, and
small businesses are the engine of our economy, and we are
going to need much more help.
And I yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now we recognize the gentleman from Florida, Mr. Spano,
for 5 minutes.
Mr. SPANO. Thank you, Madam Speaker. I appreciate that.
And I just would like to associate myself with many of the
comments related to concerns expressed about communication. I
will say, in my district, I got literally hundreds of calls
with respect to the frustration that business owners were
having getting information and not having questions answered
and so forth, not knowing about the status of their
applications. And so, just want to reiterate that. We can do
better, and we have to, frankly.
What is the current level of funding that remains under the
EIDL Program?
Mr. RIVERA. So, we have $360 billion, and we have loaned
$130 billion----
Mr. SPANO. Okay.
Mr. RIVERA.--so what is that?
Mr. SPANO. About----
Mr. RIVERA. 230.
Mr. SPANO. 230. Okay.
Mr. RIVERA. Yes, sir.
Mr. SPANO. Do you have any projections as to how long those
resources will last, given the current run?
Mr. RIVERA. We do that in-house daily. We have a meeting
with the Chief of Staff, with the Chief Financial Officer, with
the Chief Operating Officer. There is a team of about five, six
individuals, and we do that analysis daily, from that
perspective.
We have a queue of 8 million. We feel that we can--there is
room with 8 million, at some point. I am not sure when.
Mr. SPANO. All right.
Mr. RIVERA. But we do that analysis daily.
Mr. SPANO. Your best guess would be, we are going to run
out in a month? We are going to run out in 3 months?
Mr. RIVERA. No, I am not----
Mr. SPANO. What would you say?
Mr. RIVERA. I apologize, I am not in the guessing game.
Mr. SPANO. Yeah.
Mr. RIVERA. This analysis is pretty comprehensive. It
contains a lot of factors--our approval rate, how many
applications are pending----
Mr. SPANO. Okay.
Mr. RIVERA.--from that perspective.
Mr. SPANO. Let's go this route. At the current rate, the
burn rate, what are you extending in loans per week right now?
Mr. RIVERA. We are running--and I can share this
information with you. I mean, we have had some big weeks. Last
week, we did $14 billion in approvals.
So, you know, our biggest week was the week of May 31, $24
billion. By the way, Katrina, Rita, Wilma was $11 billion, so
we did two Katrinas in a week--Katrina-Rita-Wilmas in a week.
So, you know, I haven't put the math on this $14 billion,
$15 billion, but if you are looking at 200-and-something, a
couple of months.
Mr. SPANO. Okay.
Over the last couple of weeks or several weeks in June,
let's say, has the number of loans extended gone--or the amount
of loans, given has it come down each week?
Mr. RIVERA. We have fluctuated between 200,000--I mean, the
week of May 31, we did 400,000 approvals; the week of June 7,
200,000; the week of June 14, 300,000; the week of June 21,
300,000. So, it is pretty steady-state.
Mr. SPANO. Okay.
One of the things that has been mentioned was the decision
to cap the amount of the grants at $1,000 per employee. That
was my understanding. Why was that decision made? And second
question is, was that communicated to applicants and was it
communicated to Members of Congress prior to the decision being
made?
Mr. RIVERA. So, the decision was based on--at the time, we
had $10 billion. We have approved 4.8 million applications, so
we would need $48 billion. We have 20. So we based the 1-to-10
based on, you know, some due diligence we did. We communicated
when we had the discussion with the small business committee.
Mr. SPANO. Okay.
Mr. RIVERA. We didn't communicate, you know, the 1-to-10
ahead of time, and, in hindsight, we probably should have.
Mr. SPANO. Yeah, I think that probably would have been a
good idea, because we were getting calls from our constituents
saying, I just got $3,000 dumped into my account last night,
but I have no idea why it was $3,000.
Mr. RIVERA. No, that is a really good point.
Mr. SPANO. Yeah. Yeah. So that would be helpful. I think
that goes in line, again, with the importance of communication,
I think, that some of the other members have expressed concern
about.
That is all I have. I yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now we recognize the gentleman from Illinois, Mr.
Schneider.
Mr. SCHNEIDER. Thank you, and good morning. And sorry, I
was on the floor speaking, so I am just getting here and
catching up, but wanted to touch base.
I know this has been a challenging time for the SBA over
the last several months. It is a challenging time, obviously,
for our country. I had a conversation on Monday with the
Administrator, talking about some of the issues we face with
the EIDL Program.
I know I heard from so many people about the uncertainty--
we are in uncertain times, to begin with. This virus, the
pandemic, the response has created so much anxiety for
businesses. Will they be able to get through just day to day?
And we piled on top of that, unfortunately, with so much of the
stutter steps and challenges we faced with the loans.
In my own district, as an example, we had a wonderful
webinar. The SBA folks in Illinois are working so hard and
just, you know, bending over backwards. But they told our
businesses--and there were 1,000 people on this call--that they
would have a decision within 21 days--or, the money within 21
days and the advance, $10,000 advance, within 3 days.
Obviously, that didn't happen.
So I guess where I would start with is, you know, we are
where we are now. We have the decision of the $150,000. We have
the change in how that emergency $10,000 was let out. June 30
has come; it is July 1. What do we tell to our businesses? How
do we give them the confidence that the SBA is going to be
there for them, is going to give them the information?
You know, I can order a pizza and track it from the time of
order to delivery, every step along the way, and know when it
is going to arrive. Our businesses should be able to at least
have a similar sense of, when they apply for a loan, how much
they are going to get and when they are going to get it.
Mr. RIVERA. So thank you for spending some time with the
Administrator in the call that we had on Monday.
So, today--let me fast-forward to today. Over the last--
since the beginning of time since we started this in mid-March,
we are running about 41 days to fully process these loans,
approve/decline, from that perspective.
What are we doing right now? I looked at this morning's
report. We are processing grants in 2 days. We are processing
loans in 5 days. Everything has been processed that is not in
this application portal; it is in either the loan queue or the
grant queue, from that perspective.
So, you know, in hindsight, I wish we could have been
quicker. I wish we could have maybe been a little bit more
communicative, now that I am hearing a lot of----
Mr. SCHNEIDER. This is going to come off more harsh than I
mean it, but, you know, we went through this crisis, we did try
to slam a whole lot through a small pipe in a very short time,
but, being perfectly honest, when I hear, ``We are doing really
well now,'' that is kind of like the diner saying, ``We got
crushed at lunch, but at 3:00 in the afternoon things look
fine.''
But I know there is going to be a dinner hour. I know that,
as these loans, the money that companies have borrowed is
consumed, they are going to need to come back and they need
more help. I am confident that, in a bipartisan way, we are
going to find a way in Congress to help these companies.
What is the SBA doing today, in that afternoon lull, to
make sure that when we get to the next rush that we won't fall
back into the 41-day timeframe?
Mr. RIVERA. Well, we don't consider 2 million to 3 million
applications in the queue a lull right now. I mean, we are
still working 7 days a week, you know, the 10 to 12 hours a
day.
We have learned a lot, but what I meant to say or what I
intended to say is that we are a better organization today than
we were when we started this process back in mid-March. The
system is working faster. We have individuals through the
queue. We have gone from 1,000 employees up to 7,000 employees.
We are better trained, we are better prepared, as we continue
through this journey.
Mr. SCHNEIDER. Are there specific changes that you have to
improve that? Are the changes completed and ready to go? And if
they are not completed, what is the timeline to get them
complete?
Mr. RIVERA. So, we are pretty complete from the perspective
of things we have learned as we go through. I mean, every week,
we have a different build to address a specific issue. So we
are in a good place right now, but we still do have a lot of
work that we need to complete.
Mr. SCHNEIDER. Okay. And I know this is changing week to
week, but that is one of the frustrations so many businesses
had, is that things kept changing week to week coming from the
SBA and Treasury. The instructions kept changing on the EIDL
loans. There was an Application 1 and then an Application 2,
uncertainty of whether I was going to keep my place in line if
I did the first application when I applied for the second
application.
I know we are going to have to be flexible, we are going to
have to adapt, because this virus is so dynamic. But what
confidence can you give not just me and my colleagues but every
small business in this country that the SBA is going to provide
some stability in this storm?
Mr. RIVERA. Well, I mean, we pride ourselves on customer
service. I know we have not been successful, in many
individuals' minds. But we have provided this $130 billion to
2.1 million small businesses that employ 11 million people. I
mean, so I think we have had some level of success.
Could we do better? Always. I mean, we continue to strive
to be the best. And that is why we continue to have these
weekly sessions where we try to figure out what is the
challenge that we need to address next and continue on.
Mr. SCHNEIDER. Okay. And I don't want to question your
intent or any SBA employees' intent. I know how hard everybody
is working. I know that we are asking the world of you. But, at
this moment, in this crisis, we need the world from you. And we
are here to give whatever help we can, but we really need the
SBA to step up and deliver in the next round.
With that, I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now we recognize the gentleman from North Carolina, Mr.
Bishop, for 5 minutes.
Mr. BISHOP. Thank you, Madam Chairwoman. And sometimes
there are advantages, I think, from being dead-last or close to
dead-last.
Thank you, Mr. Rivera, for being here.
I want to take a moment to say how excited I am that we are
back in our committee room or in a committee room. I think it
benefits the dynamic, and for those who can or desire to be
here, we can have that interaction in person.
I want to thank, momentarily here, Joe Hartz of our
Committee staff for his work in enabling me to do that even
when we weren't in a committee room.
And in the comments, I think, here on the topic, Mr.
Rivera--and I thank you. I was listening to the arrows coming
at you, and, you know, maybe some of them are partially
deserved, and you have to take them all.
I want to associate myself with the comments of Mr. Hern,
in particular, and I wanted to sort of strike a balance in what
I ask you. Because I do think it was striking to me, reading
your testimony--and there was one part I wasn't 100 percent
clear on. And the numbers probably would, you know, make
people's eyes glaze over a little bit. But when you talk about,
you know, all of the disaster loans approved by the SBA since
1953, you know, this was, like, by a factor of a couple more
bigger than that. I think I have that right.
And even if you get down to businesses, I think it said all
the business disaster loans up until COVID-19 are, like, 20.9
billion. And then the numbers--I don't think this is just
business loans, but the ones approved as of June 26, over 125
billion. It is just a ton of work that you were saddled with.
I do have this observation, though. As I heard, you were
talking about a 41-day turn time. When Congress--and my being a
new Member--when Congress first appropriated money in that pre-
CARES Act to the Disaster Loan Program, I was gearing up to go
out and evangelize that. And then I heard from talking to the
regional administrator in my State that it took 30 days,
roughly, to get a loan out, and I was like, ``Whoa, why so
long?'' And then I talked to a Member who said the Disaster
Loan Program is really kind of a disaster.
And so I don't know what the--I don't have the experience
to know what the background was. So I have heard the Chairwoman
speak about it here today a bit, a variety of topics that have
been raised. I think the thing is that, you know, we have a
culture in which, you know, people expect pretty good speed,
and they are dealing with the private industry, Rocket Mortgage
or whoever else, and things happen pretty quickly.
Do you try to establish standards, though, for the program,
not just in this crisis period but before, to compare
yourselves in terms of speed and efficiency and effectiveness
to the private sector?
Mr. RIVERA. We do.
As I mentioned, when I was first having this discussion
with Administrator Carranza--we have a Disaster Preparedness
and Response Plan. It has four levels: you know, zero to 50,000
applications; 50 to 250; 250 to 500; and 500-plus. We give
ourselves 15, 30, 45, 60 days. That was out of the window day
one. This COVID is not the disaster model that we have ever
followed. We had to just start from scratch.
We do use that private-sector company that does lending,
and we use that platform, but we had to stop for 2 weeks in
order to develop that platform, because, you know, I can't
survive--``survive'' is not the right word--but two loans per
loan officer per day is not acceptable. I mean, we are doing
25-plus.
So, we are trying to use as many private-sector best
practices that we can. Had we not had that Harvey-Irma-Maria
contract for surge, we would have had to have gone out.
So, we thought we were prepared. We learned a lot.
Mr. BISHOP. Yeah.
Mr. RIVERA. The level of preparedness is just something
that we need to continue to work on.
Mr. BISHOP. You mentioned one thing that struck me, that
you began to use DocuSign. And what struck me about that,
frankly, was, people have been using DocuSign with me as a
private individual for a decade maybe, maybe more. Why not
earlier on things like that--that as an example and things like
that?
Mr. RIVERA. Yeah. That is part of being the government. We
are just trying to use the money as judiciously as possible.
But it is a proven fact now, we can get a disbursement out
in a day. So everything is digital from that perspective. The
platform is there. We just haven't gotten around to spending
the money for that, but now that we have that, I mean, that is
the path forward.
Mr. BISHOP. I think, bottom line--I will say this--I think
some of the blame is borne by Congress. We appropriated money
to that program. I was ready to go out and sell it, tell people
that was a path for relief. I think those Members in Congress
had a reason to know that that was going to be a problem, and
those expectations were, in part, created here.
I do commend you, and I encourage you to think of the
private-business way as often as possible, because I think if
you are chasing a service standard that you see in the private
sector, you are probably going to do a better job than
excluding that from your thought.
Thank you, sir.
Mr. RIVERA. I understand. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
And we are going to go to a second round for any member who
wishes to make any questions.
I have two or three questions, Mr. Rivera.
So you said before that the denial rate was 48 percent,
right?
Mr. RIVERA. Yes, ma'am.
Chairwoman VELAZQUEZ. And that represents, out of 5
million, 2.5 million people.
Mr. RIVERA. Yes, ma'am.
Chairwoman VELAZQUEZ. So what recourse does an applicant
have if they feel they were wrongly denied? Who conducts those
reviews, and what is the average processing time?
Mr. RIVERA. So, when we decline somebody, we give them
reconsideration rights.
We went off strictly a credit score. I mean, that is the
fast process that we used. When we go under reconsideration, we
ask for--if they are a self-proprietor, we ask for a copy of a
Schedule C or some type of business application that shows--
because there may be repayment ability even though you have a
lower credit score.
That is the historical approach----
Chairwoman VELAZQUEZ. Okay.
Mr. RIVERA.--so we are using that approach.
Chairwoman VELAZQUEZ. But you just said that this pandemic,
or this disaster, is unprecedented. There is no comparison. So
why is it that you didn't consider the national impact of this
pandemic? Did SBA at any time consider modifying the
underwriting minimums?
Mr. RIVERA. Well, the credit score we use is D paper, if
you look at the private sector. It is not A, B, C. It is D
paper. The credit score is pretty low. And, unfortunately, I
mean, we have to set up a standard, and that is the standard we
use. We could have lowered it, but the risk associated with
lowering it was the decision we didn't make.
Chairwoman VELAZQUEZ. Okay.
So what do you need today from us?
Mr. RIVERA. I think we are in a good spot. Obviously, we
need to do better communication----
Chairwoman VELAZQUEZ. Okay. So let me ask you, given the
fact that we have seen a spike in the virus in different places
and also that some States are either shutting down or halting
reopening, those businesses are going to be impacted. Florida,
Colorado, Arizona. Do you expect for many more millions of
businesses to apply for the disaster----
Mr. RIVERA. So the declaration period for the Economic
Injury Disaster Loan Program is 9 months. It runs from the
middle of March to the middle of December, I mean, so we will
continue to process any applications we have, you know, as long
as there is funding available.
Chairwoman VELAZQUEZ. As long as the money is there. So my
question is, do you think that, based on what is left--how much
money is left in the EIDL Program?
Mr. RIVERA. We had $360 billion, and we have spent $130
billion, so we have $230 billion.
Chairwoman VELAZQUEZ. And so are you making or doing any
economic impact of the trend that we are seeing in other
States?
Mr. RIVERA. We are responding to the 8 million applications
we have. I mean, we have not done the analysis of another
pandemic, from that perspective, I mean, but we do a daily
analysis on how much money is left and what is in the queue.
Chairwoman VELAZQUEZ. So this is the thing. You, the
Administration, requested $50 billion. I supported $100
billion, and SBA said that they needed half of that. It is
showing that you needed more than half of that.
Mr. RIVERA. I am not sure how I am supposed to respond to
that. I mean----
Chairwoman VELAZQUEZ. Okay. Well, I am just warning you.
Mr. RIVERA. Okay. I understand.
Chairwoman VELAZQUEZ. My time has expired.
The Ranking Member, Mr. Chabot.
Mr. CHABOT. Thank you, Madam Chair. I won't use the whole 5
minutes, but just a couple of followup questions.
Mr. Rivera, I think, when asked about the period of time
that it was ag only that you were accepting, agriculture only
applications, I think you said 2 weeks.
In conferring with my staff, we seem to think it was longer
than that. Maybe from mid-April to mid-June, approximately,
that it was only ag applications that you were taking. Can you
clear that up?
Mr. RIVERA. I need to fact-check myself.
Mr. CHABOT. Okay.
Mr. RIVERA. I will get back with you on that.
Mr. CHABOT. Okay. That is fine. I am not trying to put you
on the spot, but I do think it is longer than that. Because I
know we were getting inquiries not only from people in my
district but talking to other Members of Congress as the
Ranking Member of this Committee, and it was, I think, an
extensive period of time. So if you could check on that, we
would appreciate that.
And then, on that same topic, on that ag-only period of
time, just for future reference, it would seem to me that there
was maybe some more reasonable accommodation to those folks who
were not ag during that period of time.
Since ag folks didn't have access, I certainly appreciate
you might want to get more of those folks, because now they are
eligible, so you want to take care of them. That is certainly
understandable. Maybe just, you know, pulling something out of
the hat, maybe 50/50 or so, to say, okay, 50 percent is going
to be set aside for ag, because you have never had it before.
But there was still, I think, a considerable need, demand, for
non-ag small businesses who needed these EIDL loans.
So, just for future reference, I would just suggest
considering something like that or consulting with Congress.
Because we really didn't have much, if any, input. Some of
those decisions were coming out, and we were having
considerable difficulty getting our phone calls responded to--
understandably. You were very, very inundated with trying to
help people all over the country, and that was your number-one
priority. But, just for the future, we can get better, I think.
If you want to comment, go for it.
Mr. RIVERA. Understood.
Mr. CHABOT. Sure.
Mr. RIVERA. Thank you.
Mr. CHABOT. Oh, you agree.
Mr. RIVERA. Yeah, no, I agree. I think the communication
piece needs to be----
Mr. CHABOT. I appreciate that.
And then, finally--and this is something we have all said,
so I am not going to beat a dead horse here, but the
frustration on both sides of the aisle. More than anything
else, we just need to communicate better with each other--the
Administration, the Congress--so that we can communicate with
our constituents all over the country, who are, after all, the
backbone of the American economy. Half the people who work in
America work for a small business. About 70 percent of the new
jobs created in the American economy, small businesses.
So, you know, you all just need to communicate better with
us and the American people so that we can communicate better
with the American people too. Okay?
Mr. RIVERA. Okay.
Mr. CHABOT. Thank you.
Mr. RIVERA. Thank you.
Mr. CHABOT. I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now we recognize the gentleman from Pennsylvania, Mr.
Evans, for 5 minutes.
Mr. EVANS. Thank you, Madam Chairwoman, and thank you for
your leadership on this discussion.
When the EIDL Program first launched, many business owners
in my district were very excited. However, that excitement has
turned to frustration. Many constituent business owners have
reached out to my office because they are waiting weeks or
months to hear anything about their EIDL application. They were
denied EIDL loans because of unsatisfactory credit scores,
including my constituents.
Now, the Chairwoman raised this in her introduction
discussion, and the pharmacist that she talked about is someone
who is in my district who testified before this Committee.
All except one of the constituents denied--one Black. In
fact, Black business owners in the U.S. have declined the most
of any ethnic group, at 41 percent. This is quite concerning,
coming from the city of Philadelphia, where over 40 percent of
the population is African American.
In addition, the information contained in the denial letter
from the SBA was very sparse, as SBA did not indicate what
application credit scores it was looking for.
So the question I would like to ask: The CARES Act provides
the SBA may use alternative appropriate methods to determine an
applicant's ability to repay beyond their credit score. Does
SBA consider applications based on criteria other than credit
scores? That is the question I would like to ask you.
Mr. RIVERA. So, to respond to your question, we started
with credit score as part of the streamlined application, and
if you want reconsideration, you can provide us with a copy of
your tax return. We can get a tax transcript through the IRS. I
mean, that was something that was waived by Congress.
So, we use that as an indicator. And, you know, if the
businesses come back and they ask us for additional assistance
because they were declined, we can determine cash flow based on
what they have reported, you know, to the IRS from a tax
transcript perspective.
Mr. EVANS. Uh-huh.
I would like to then follow up with a couple other
questions.
Do different staff from the Office of Disaster Assistance
handle the non-COVID disease loan applications?
Mr. RIVERA. So, we have a dedicated team that is working on
natural disasters. We have done a billion dollars' worth of
natural disasters this fiscal year. We did $500 million in
Puerto Rico from the earthquake that was earlier this year. And
then we have dedicated teams that work on the COVID effort.
Mr. EVANS. Is the processing time for these applications
still within the normal timeframe?
Mr. RIVERA. Well, according to our historical goals, we
were supposed to process 500,000 applications in 60 days. We
have done 5.5 million in 41 days. So, we are exceeding the
internal goals. But, the goal is a goal; we need to get the
assistance out as soon as possible, from my perspective.
Mr. EVANS. Is there a need for additional staff?
Mr. RIVERA. We are at 7,100 employees. We haven't stopped
hiring. We are trying to get as many staff on board--one of the
things--and let me just, if I can pivot for just a second. We
talk about the private sector. We contracted with a company
that allows us to have call agents 24/7. So we are open. And it
is just based on need.
It has been a phenomenal contract. It enabled us--of the
7,100 employees we have, I would say probably 2,000 to 3,000
are contractors. We have a traditional model where we have
1,000 core employees and we have 2,000 to 3,000 reservists.
So, you know, the combination of all these different
factors is what we used in responding. We haven't stopped
hiring, though. We will continue to hire until this event is
completed.
Mr. EVANS. One last question. If you had to rate the
program yourself, particularly relating to how the African-
American community is affected, how would you rate it at this
point?
Mr. RIVERA. So, we don't collect ethnicity or race
information in the Disaster Loan Program. We haven't collected
that information since 1994. We don't know who an applicant is,
you know, from a race perspective. We treat all applicants
equal. From our perspective, a disaster is a disaster, and we
focus on the disaster survivor and the small business, in this
case.
Mr. EVANS. Yeah, I understand that, but I guess what I am
asking is, from a processing standpoint, I am not asking if you
do it based on race, but in terms of how you think it has been
effective. Because you obviously heard people raise questions
about its effectiveness.
Mr. RIVERA. [Off-mike.]
Mr. EVANS. Hello?
Chairwoman VELAZQUEZ. He cannot hear you.
Mr. RIVERA. Sorry. We--I forgot what I said. We----
Chairwoman VELAZQUEZ. Well, time has expired, if you don't
mind. But you could answer his question.
Mr. RIVERA. So, we process--so, if I am a small business--
you know, 41 days sounds great for me. But if I am the small-
business owner and needed money in day 5, day 10, you know,
that is the relevant point. So, we are trying to get the job
done as soon as possible.
Chairwoman VELAZQUEZ. Time has expired.
And now we recognize the gentleman from North Carolina, Mr.
Bishop.
Mr. BISHOP. Mr. Rivera, I am pleased to have an opportunity
to pursue that just a little bit further. You just said 41 days
sounds good to you. And just give me a little bit more insight.
I am a layperson from the perspective of how you originate
loans.
I have heard in the course of the hearing, listening
carefully, that you were absolved of the obligation to do some
things. Like, getting a tax transcript in each case is not
necessary. You have to do some things to identify people,
confirm the identification. I get that. I don't know whether
there might be some shortcuts. I know you have to get documents
signed. We talked about DocuSign, and disbursing that could be
done pretty quickly. I heard that you have the credit score,
which is a significant piece of information.
What else has to be done by a loan officer?
Mr. RIVERA. The loan officer historically gets--in an 8-
hour day, they got 4 hours to review the credit. We now give
them 15 minutes. So we have really streamlined that process. I
think the challenge we just had was basically the sheer volume
we have experienced.
Mr. BISHOP. Okay, but what are they doing in the course of
that review? For example, if you have a range of credit scores
that are acceptable to SBA--and I am a loan officer; I don't
need 15 minutes to look at that credit score. I am trying to
understand what else they have to do----
Mr. RIVERA. Okay.
Mr. BISHOP.--to examine an application.
Mr. RIVERA. No, I understand.
So, 30 percent of our applications are what we call auto-
approved, and a team lead just needs to--it is an inherently
governmental position, that a team lead needs to approve that
application. We can't let the system do it.
So, the other 70 percent, they just go through and they
check the variables. They call the small business, and they
fact-check some of these different variables.
Mr. BISHOP. Like what?
Mr. RIVERA. Location, address. Sometimes their bank account
doesn't match their business name, so can you provide us
evidence of something that shows those things connecting, from
that perspective.
Mr. BISHOP. Okay.
So you said--and then help me with this part. So, if you
said that--I think you just said a processor gets, like, 15
minutes to look at an application. And based on the things you
just told me about, I am not sure it takes 15 minutes, but 15
minutes is 15 minutes. Help me understand, then, why 41 days
sounded pretty good.
Mr. RIVERA. Well, I am just saying, 41 days, from my
perspective, based on the traditional goal of 15, 30, 45, 60, I
mean, we beat the 60-day goal. My intent was not to say we are
satisfied with 41 days.
Mr. BISHOP. Yeah.
Mr. RIVERA. Obviously, we want to provide the fastest
assistance available based on the plan, the historical disaster
plan.
Mr. BISHOP. Yeah.
Mr. RIVERA. That is what it is based on. And, you know,
there is a reasonableness from a time perspective. If we could
have done it in 15 days or 30 days, I mean, we would have done
that.
But the point today is, I mean, we are doing these in 5
days right now----
Mr. BISHOP. Yeah.
Mr. RIVERA.--for the current queue. Going back, we have
learned a lot.
Mr. BISHOP. Right. And I hear you. And I think that is
maybe the nature of the rub, if you are talking about
expectations or people being dissatisfied. The customer is
always right when--rule number two is, you know, refer to rule
number one, the customer is always right.
But I think it is hard--and even when I interact with you
as a layperson about that origination process, I go, ``Hmm.''
That seems like that could get done--particularly if you are
excused from a lot of the requirements by the legislation, you
know. Maybe, if Congress had looked at it again, they might
have said ``without regard to credit-worthiness,'' I don't
know, and excused you from having to look at the credit score.
But that doesn't seem like that takes very long. I think those
are the things that people find difficult or frustrating.
And the other thing, just to balance that--again, I think
balance is appropriate. And maybe to balance Congresswoman
Craig's comment about interacting with your congressional
liaison, we had the opposite experience in my office. That is,
we had a situation where someone's PPP loan, to make a
different reference, had gone awry, not because of anything SBA
did, but because the financial institution submitting it--there
was a snag. And they were able very quickly to tell us that
there was no loan. They followed up and said, ``You have to
give us an EIN number.'' And then they researched it and came
back, and we were able to pinpoint the problem and get it
solved for that constituent.
So I am sure there are differing stories, but that ought to
always be the objective, obviously, is to respond in a
substantive way and quickly to Members of Congress, and with
more than just a put-off or a repetition of a previous
statement. But appreciate, in that case, it worked for us.
Mr. RIVERA. I understand.
Mr. BISHOP. And any comment you have on that I would
welcome in the 30 seconds I have left.
Mr. RIVERA. And if you have any suggestions, we always look
forward to any suggestion that we can work with you on ways to
process or streamline this process. I am open.
Mr. BISHOP. My experience was positive. Thank you, sir.
Mr. RIVERA. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentleman from Illinois, Mr. Schneider, is recognized.
Mr. SCHNEIDER. Thank you, Madam Chairwoman, and thank you
for indulging us and offering a chance.
Mr. Rivera, you mentioned some numbers for the EIDL
Program. I just want to clarify them. Of the $300-plus billion
that was--you know, how much has been lent out so far?
Mr. RIVERA. As of this morning, we have loaned $132
billion.
Mr. SCHNEIDER. So more than $200 billion still left to
lend?
Mr. RIVERA. Yes, sir.
Mr. SCHNEIDER. So, I guess, I have to go back to this
arbitrary cap of $150,000. I know so many businesses who needed
more, applied for more, and were told, you can't get more. What
are they supposed to do?
Mr. RIVERA. Well, so I think, in some situations, what we
learned is--when you apply for a loan, we don't ask them what
the loan amount is. We base it on 6 months of working capital.
So, there was a little bit of a misunderstanding on the
communication piece.
We go back to what you have generated over the last 12
months, based on your sales, costs of goods sold, whatever your
gross profit margin. We took 6 months, and that is what we
loaned----
Mr. SCHNEIDER. You didn't cap it at $150,000?
Mr. RIVERA. No, what I am saying is that that is the loan
amount that was determined.
We started at 500, but I think if we would have done 500, I
don't know--the decision was--let me take you back. The
decision was, we had $50 billion. You know, leveraged it seven
times. We had 5 million applications. We could not have done a
$500,000 loan at the time.
So, there was a lot of analysis, whether it was 2 months of
working capital, 4 months of working capital, 6 months, and we
did all the variables, and the decision was made by the agency
to move forward with the $150,000.
Mr. SCHNEIDER. All right. So I don't do math that well--
actually, I do. But if you have lent out $100 billion, there is
$200 billion left. That is roughly a third of the program. If I
take $150,000, if you had done $450,000, you would have
consumed all the money. Certainly more than $150,000.
And I have talked to so many constituents, not an
insignificant number, that have said, ``We needed more money.
We have competitors who got more money than we did because they
were earlier in the queue. We are trying to compete.''
And, you know, the $150,000, I just want to be clear, that
was a cap. It was a cap the SBA set. So that leaves two-thirds
of the money still left in the program.
Mr. RIVERA. So, I mean, I guess it is how you want to cut
it. I mean, the average loan, $61,000--and, you know, we talked
about 80 percent are below the $150,000. I mean, our average
size loan for below $150,000--and I will fact-check myself--is,
40-something-thousand dollars.
We did have, as you are mentioning, 19 percent at the
$150,000. So, admittedly, they would have had more eligibility
than, you know, the $150,000. One percent are above that
$150,000. But we have had more than 80 percent--average loan is
$61,000.
Mr. SCHNEIDER. Yeah. But it is like saying we are getting
our loans out in 41 days. Sure, 80 percent is a good number,
but that leaves 20 percent of the businesses who are getting
just enough to get close to what they need, but close doesn't
count it to paying the bills that they are going to have.
Mr. RIVERA. But, remember, at the time, we also had PPP for
payroll. So, I understand--you know, the EIDL Program has
expanded--it is working capital; it is more than just payroll.
So that was kind of the dovetail approach. I mean, we had two
factors. We had, you know, the EIDL----
Mr. SCHNEIDER. All right. So I would like to explore this
separately----
Mr. RIVERA. Okay.
Mr. SCHNEIDER.--because it is a big issue, but I have a
minute and a half left, and I want to go on to another thing.
You know, you talked about, or you were asked earlier, how
would you rate the program. And I don't want to rate--I know
how hard it was, and, like I said, I know how hard everyone is
working. And I don't mean to be critical of all the employees,
who are literally working 24/7. And I know that and appreciate
that.
You know, when I did my consulting, I worked with small
businesses. I would close the door with the management team and
say, ``All right, let's start with a blank piece of paper.
Forget what you have. If you could start over, what would you
do?''
If you could start over--we are not in a private room, so
this is public. But if you could start over, if you could
design this system--because we know this pandemic is going to
last into the future--what would you do to make sure that we do
a better job supporting America's small businesses?
Mr. RIVERA. Well, I think we had the right approach with
the surge contract. I mean, that is one thing that we did good.
We probably should have had visibility in the application
portal----
Mr. SCHNEIDER. Okay, not looking back, but let's look
forward. What can we, as Congress, give you to ensure--I want
the SBA to succeed, not just to clear the threshold but to blow
it out of the water, to be so good that people are coming back
and saying, ``We thank God for the government because we were
able to weather this storm, get through this pandemic, and look
to a future to ensure that our kids and our grandkids are going
to be prosperous.''
Mr. RIVERA. I mean, I think we can always improve, but with
turning a grant in 2 days and a loan in 5 days, I think that is
pretty good service, since we had these 2 million come in, you
know, since the portal--since the June 15 timeframe.
Mr. SCHNEIDER. Okay.
I am out of time, but I do want to say, Madam Chairwoman
and Ranking Member, thank you for having this hearing. Whatever
we can do to help the SBA succeed, count me in in doing it.
I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now I recognize the gentleman from Pennsylvania, Mr.
Evans, for a question.
Mr. EVANS. Thank you, Madam Chairperson. Again, I thank
you. This is very important.
I want to go back to something you said, where applicants
who are denied the EIDL loans are given the opportunity for
reconsideration. Can you describe this process, and how long
does reconsideration take?
Mr. RIVERA. The reconsideration process is, when they
submit information for us to determine their cash flow--I mean,
I think it is 65, 70, 75 percent of the loans are based on a
lower credit score, so we ask them for a copy of their tax
transcript, or we get a copy of the tax transcript from the
Internal Revenue Service. So that is the process.
There are eligibility cases where somebody opened a
business post-COVID, you know, post- that January date.
We try to work through all these issues. We have about
100,000 applications, I think, that are in the queue right now
on reconsideration, and we continue to work these as fast as
possible. It is the manual process, or it is the DCMS 2.0
process.
Mr. EVANS. Okay. I understand. What I want to get to, that
part, you said ``manual.'' You know, how long does it take in
reconsideration? Can you quantify that?
Mr. RIVERA. Yeah. It is usually--it is taking right now--I
mean, I don't have the statistic in front of me, and I can get
back to you for the record. I think it is taking 2 to 3 weeks,
on average.
Mr. EVANS. Two to 3 weeks.
Mr. RIVERA. Yes, sir.
Mr. EVANS. So if an applicant is approved after
reconsideration but if they are no funds left in the EIDL
Program, will there be a remedy for the applicant?
Mr. RIVERA. Well, I mean, we have a couple hundred billion
left. So, I mean, it may at some point, but right now it is not
an issue.
Mr. EVANS. Okay. That is not an issue then. Right, right,
right, right, right.
The SBA is still processing EIDL and physical disaster loan
applications for non-COVID disasters, such as those related to
civil unrest, tornadoes, and flooding. Processing these loans
as they come in, is the processing time for these applications
still within the normal timeframe?
Mr. RIVERA. Oh, yes, sir. I mean, we are processing these--
I think the goal right now is, like, 10 days, on average.
We declared a couple of counties in Illinois and a couple
of counties in southern California for civil unrest, but we
have booked a billion dollars' worth of non-COVID disaster
assistance this fiscal year.
Mr. EVANS. So you have booked a billion dollars for that?
Mr. RIVERA. I am sorry, we have approved a billion dollars'
worth of disaster assistance across the board. These are all
disasters. We had this earthquake down in Puerto Rico, we have
had floods, we have had tornadoes. We have had most of those
type of disasters.
You know, we generally do about $1.1 billion a year. That
is what we put in the congressional justification. So we are
right on track, that is just the path we generally take, the
10-year average.
Mr. EVANS. So the two places you have, you said, were
California and Illinois?
Mr. RIVERA. Yes, sir. And we have a couple of----
Mr. EVANS. Yeah----
Mr. RIVERA. I am sorry.
Mr. EVANS. No, go ahead. You are saying California--there
are counties within California and Illinois you have approved
then?
Mr. RIVERA. Yes, sir, for civil unrest.
Mr. EVANS. Okay----
Mr. RIVERA. We have--I am sorry. I keep interrupting.
We have six other, I think, pending requests that the State
is working on assistance from. I don't have that information
here with me, but I can get back with you for the record.
Mr. EVANS. Yeah, I would interested, if you would relay
that to the Chairwoman and pass that on to the Committee.
I appreciate, you know, all you are trying to do, and I
know it is not easy. But I appreciate the Chairwoman for having
this hearing, because, you know, transparency and openness, as
she has talked about, is extremely important. Because you have
people out there, you know, who hear about it, and through no
fault of their own--maybe the pandemic or civil unrest, neither
one is the fault of their own.
The execution, you can understand, is something that is
very important. Am I correct?
Mr. RIVERA. Oh, yes, sir. We definitely understand that.
Mr. EVANS. Right.
I thank you, Madam Chair, for allowing me this time, and I
really appreciate all you have done on this, okay?
Chairwoman VELAZQUEZ. The gentleman's time----
Mr. EVANS. Thank you. I yield back.
Chairwoman VELAZQUEZ. Thank you.
Mr. Rivera, thank you again for your testimony on the SBA's
EIDL Program and its performance in response to COVID-19.
I understand the historic and unprecedented demand for the
program and that it may have been challenging to process
applications. However, it is July 1, and here we are.
You need to improve communications with borrowers. Customer
service, across the board, has been an issue that time and
again has been raised, whether in hearings or phone calls
coming in from constituents.
Also, you need to improve SBA communications with the
authorizing committee, both the Senate and the House. It is two
bodies; it just can't be the Senate. You have to improve your
communication with this Committee.
And as Congress continue to seek ways to help businesses
that need relief in order to survive the pandemic, I would
implore you that you send to us any request that you consider
is essential in order to perform your responsibility of
providing economic relief to the businesses that we are
supposed to serve.
So I ask unanimous consent that members have 5 legislative
days to submit statements and supporting materials for the
record.
Without objection, so ordered.
And if there is no further business before the Committee,
we are adjourned.
Thank you.
[Whereupon, at 11:58 a.m., the Committee was adjourned.]
A P P E N D I X
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