[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
LONG-LASTING SOLUTIONS FOR A SMALL BUSINESS RECOVERY
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 15, 2020
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-086
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
41-297 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
Page
Hon. Nydia Velazquez............................................. 1
Hon. Steve Chabot................................................ 3
WITNESSES
Mr. Brett Palmer, President, Small Business Investor Alliance,
Washington, DC................................................. 5
Ms. Amanda Cohen, Chef and Owner, Dirt Candy, New York, NY,
testifying on behalf of the Independent Restaurant Association. 7
Dr. Lisa D. Cook, Professor, Michigan State University, East
Lansing, MI.................................................... 9
Mr. Pete Blackshaw, CEO, Cintrifuse, Cincinnati, OH.............. 11
APPENDIX
Prepared Statements:
Mr. Brett Palmer, President, Small Business Investor
Alliance, Washington, DC................................... 33
Ms. Amanda Cohen, Chef and Owner, Dirt Candy, New York, NY,
testifying on behalf of the Independent Restaurant
Association................................................ 61
Dr. Lisa D. Cook, Professor, Michigan State University, East
Lansing, MI................................................ 67
Mr. Pete Blackshaw, CEO, Cintrifuse, Cincinnati, OH.......... 70
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Blueprint for Restaurant Revival............................. 73
City Farm Corp............................................... 83
International Franchise Association (IFA).................... 84
Jaime A. Guzman-Fournier..................................... 86
Konza Valley Capital, Inc.................................... 89
Le Poisson Rouge (LPR)....................................... 95
National Association of Federally-Insured Credit Unions
(NAFCU).................................................... 97
National Independent Venue Assocition (NIVA)................. 99
The Paper Box NYC............................................ 104
Small Business Legislative Council Statement................. 106
Town Stages.................................................. 109
U.S. Hispanic Chamber of Commerce (USHCC).................... 133
LONG-LASTING SOLUTIONS FOR A SMALL BUSINESS RECOVERY
----------
WEDNESDAY, JULY 15, 2020
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 1:03 p.m., via
Webex, Hon. Nydia M. Velazquez [chairwoman of the Committee]
presiding.
Present: Representatives Velazquez, Finkenauer, Kim, Mfume,
Chu, Evans, Schneider, Delgado, Houlahan, Craig, Chabot, Hern,
Stauber, Burchett, Spano, and Bishop.
Chairwoman VELAZQUEZ. Good afternoon. I call this hearing
to order. Without objection, the Chair is authorized to declare
a recess at any time.
I want to thank everyone for joining us this afternoon for
this official remote 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 remote
hearings. All Members are reminded that they are expected to
adhere to these standing rules, including decorum.
With that said, during the covered period as designated by
the Speaker, the committee will operate in accordance with H.R.
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 throughout
a video connection during 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 I
will recognize that Member at the next appropriate time slot,
provided they have returned to the proceedings.
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 while staff
addresses the technical issue. I may need to recess the
proceedings to provide time for the witness to reconnect.
Finally, remember to remain muted until you are recognized
to minimize background noise.
In accordance with the rules established under H.R. 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.
Thank you.
Since February, the outbreak of COVID-19 has taken a
significant toll on the entire U.S. economy. This crisis has
hit America's small businesses especially hard. Three out of
four small businesses have been experiencing a decrease in
revenue since March, and an estimated 7.5 million small
businesses are at risk of permanent closure as a result of this
crisis.
As Members of this committee and as legislators at the
federal level, we have a responsibility to secure funds to help
America's small businesses survive this crisis. So far Congress
has allocated over $669 billion in grants and loans through the
Paycheck Protection Program, the Economic Injury Disaster Loan
program, also known as EIDL, and a new EIDL emergency grant
program.
From the outset, Congress intended for the PPP and EIDL
programs to provide immediate relief for small businesses to
withstand the initial economic shock caused by this pandemic.
As we approach August, we cannot ignore the reality that the
COVID-19 pandemic has morphed into a much more devastating and
extensive crisis than even some experts had anticipated, and
the rhetoric coming from this administration downplaying the
seriousness of COVID-19 undoubtedly led many states to rush to
reopen, ultimately exacerbating the problem.
We must be prepared with long-term solutions that will meet
the magnitude of this crisis as we push forward to heal as a
Nation and find better days ahead. We can start by examining
the policies adopted during and in the aftermath of the Great
Recession as a model moving forward.
While we must recognize the inherent differences in these
two devastating events for our nation, we must also remember
that back in 2008 the outlook for small businesses was
similarly uncertain.
In response to the Great Recession, Congress stepped in and
passed a series of bills that provided $1.2 billion for small
businesses through the SBA lending programs. This critical step
unlocked tens of billions of dollars in guaranteed loans to
small businesses that could not otherwise access capital when
traditional credit markets froze.
Policies enacted then proved to be a critical lifeline for
thousands of small businesses in danger of closing their doors.
At the same time the Obama administration focused on how
small businesses could help contribute to America's recovery by
accelerating entrepreneurship and unlocking capital for the
nation's smallest and youngest businesses.
This money was well spent as small businesses were some of
the largest contributors to job growth in the recovery,
especially minority-owned and women-owned businesses who alone
were responsible for the addition of 1.8 million jobs from 2007
to 2012.
The nation's investment in entrepreneurship paid off as the
United States saw more than 550,000 new businesses open since
2011 and the economy continued to grow.
Because of the economic contributions from small employers
and independent contractors after the Great Recession, it is
imperative for this committee to explore those proposals and
how we can modify them for the COVID-19 era.
I also welcome any discussion of any new ideas brought to
the table by Members to address the challenges our small
businesses are facing today.
Whether it is utilizing traditional SBA programs or
instituting innovative ideas, long-term recovery requires us to
think out of the box, but also come together in a bipartisan
fashion to provide relief to small employers.
As Congress works to explore additional ways to help
America reopen and recover, I hope we continue to prioritize
the smallest of small businesses, minority-owned and women-
owned businesses, the ones that helped rebuild our nation the
last time we found ourselves knee-deep in what felt like an
insurmountable crisis.
Again, I want to thank the panelists for joining us here
today.
I now yield to the Ranking Member, Mr. Chabot, for his
opening statement.
Mr. CHABOT. Thank you, Madam Chair. And thank you for
holding this hearing today.
On this Committee we know how important small businesses
and startups and entrepreneurs are to the economy. However, one
of the consequences of this global pandemic is that our Main
Streets are in very real danger of long-lasting damage or, in
the worst case, permanent closure.
Some have warned we could be in only the beginning of the
worst wave of small business bankruptcies and closures since
the Great Depression. We must be proactive and effective in our
attempts to not only sustain but recover and expand the
influence of America's small businesses and Main Streets all
over the country.
Recent research from universities such as Harvard, the
University of Chicago, the University of Illinois, and others
have found that some small businesses, especially
microenterprises, may be the most susceptible to permanent
closure. We must work together and listen to those like our
witnesses here today who know and appreciate that critical
segment of our economy.
As communities reopen, we hope to find solutions that lead
to fewer headlines indicating small businesses are closing and
focus more on the recovery on which we are about to embark.
I look forward to the testimony of all our witnesses here
today and to our continued partnership on this Committee.
And I thank the Chairwoman for again working with me and
for our side of the aisle in making this, I think, the most
bipartisan Committee in Congress. And that is why we are so
effective in, for example, for putting together the PPP program
and trying to reform the EIDL loan program and so many other
things.
So I want to thank the Chairwoman for her continued
cooperation.
And I yield back. Thank you.
Chairwoman VELAZQUEZ. Thank you, Ranking Member. It is a
pleasure, and it has been an example of how we need to do the
job on behalf of the American people.
Now I would like to take 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 mic is on when
you begin speaking and that you return to mute when finished.
With that, I would like to thank our witnesses for taking
time out of their busy schedules to join us.
Our first witness is Mr. Brett Palmer, the President of the
Small Business Investor Alliance. In this role he works to
foster a healthy environment for small businesses investing in
a strong and profitable lower middle market.
Mr. Palmer served in the executive branch from 2002 through
2005 as a Presidential appointee in the Commerce Department as
Assistant Secretary for Legislative Affairs, and as Deputy
Assistant Secretary for Trade Legislation. He holds a history
degree from Davidson College.
Our second witness is Ms. Amanda Cohen. Ms. Cohen is a
James Beard-nominated chef and owner of Dirt Candy, the award-
winning vegetarian restaurant in New York City's Lower East
Side in my district. Her restaurant was the first vegetable-
focused restaurant in the city and is a pioneer of the
vegetable-forward movement and is included on the list of the
ten restaurants that changed America. She received two stars
from The New York Times and was recognized by the Michelin
Guide 5 years in a row.
Welcome.
Our third witness is Dr. Lisa Cook. Dr. Cook is a professor
of economics at Michigan State University. Prior to joining the
faculty at Michigan State, she was a senior economist at the
President's Council of Economic Advisers from 2011 through
2012. She also held positions at the National Bureau of
Economic Research, the Federal Reserve Banks of Minneapolis,
New York, Philadelphia, the World Bank, the Brookings
Institution, and the Hoover Institution.
Welcome, Ms. Cook.
Now I would like to turn it over to the Ranking Member, Mr.
Chabot, to introduce our last witness.
Mr. CHABOT. Thank you very much, again, Madam Chair.
And our final witness is a fellow Cincinnatian, Pete
Blackshaw. Mr. Blackshaw is CEO of Centrifuse, a startup
incubator created by Proctor & Gamble, or P&G as a lot of
people refer to it, Kroger and Western & Southern and other
major entities in our greater Cincinnati community.
He previously served as global head of digital marketing
and social media at Nestle's global headquarters in
Switzerland. He recently served as Chairman of the board of the
National Council of Better Business Bureaus and is now chairing
a recently chartered supply chain and new commerce restart
committee.
Pete is a graduate of Harvard Business School and the
University of California, Santa Cruz.
I recently had the pleasure of meeting with Pete via an
online platform with the Cincinnati Chamber of Commerce and I
was truly impressed with his forward thinking ideas on the
recovery. I hope he was impressed, too, on the call.
I know he will provide valuable insight to the Committee,
and I look forward to hearing all the witnesses here today.
And I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
Thank you all for being here today.
I would now like to begin by recognizing Mr. Palmer for 5
minutes.
STATEMENTS OF MR. BRETT PALMER, PRESIDENT, SMALL BUSINESS
INVESTOR ALLIANCE, WASHINGTON, DC; MS. AMANDA COHEN, CHEF AND
OWNER, DIRT CANDY, NEW YORK, NY, TESTIFYING ON BEHALF OF THE
INDEPENDENT RESTAURANT ASSOCIATION; DR. LISA D. COOK,
PROFESSOR, MICHIGAN STATE UNIVERSITY, EAST LANSING, MI; AND MR.
PETE BLACKSHAW, CEO, CINTRIFUSE, CINCINNATI, OH
STATEMENT OF BRETT PALMER
Mr. PALMER. Thank you, Madam Chairwoman. Thank you to the
Committee for giving me the chance to share SBIA's view on how
the small business investment companies can accelerate the
recovery and create jobs for the long-term.
My name is Brett Palmer and I am president of the Small
Business Investor Alliance, a trade association representing
small business investors, including SBICs. SBICs are SBA-
regulated venture capital and private equity funds that provide
long-term capital into American small businesses.
For many, but not all, our economy was doing well prior to
the pandemic and the ensuing government-mandated shutdowns. The
economic disruption has exposed, amplified, and intensified
preexisting problems faced by the Nation's small businesses. It
has also created new ones. These amplifications affect vast
numbers of small businesses but the pain is not evenly spread
by geography, industry sector, stage of business, or even race.
It is also important to remember that the job losses and
business injury we have experience are only first-order effects
of the pandemic. There is more coming, but we just don't know
what.
We have faced hardship before. We know what good public
policy can do to help bring the economy back faster and
stronger and to benefit more Americans.
Now is the time to improve existing government programs to
make sure they provide maximum benefit to as many Americans as
possible. So policy adjustments should be made to address the
immediate needs of small business in a way that takes into
account past efficiencies and also meets future needs.
Instead of normal stimulus spending where the benefit is
temporary, Congress now has the chance to focus on the long
term and to empower and amplify the private sector that
provides outsized job creation and sustainable benefits to
communities by fully utilizing the SBIC program.
Our economic problems are intense and will be long-lasting,
but access to patient capital is the core to many of the
solutions to the challenges we face.
Improving the SBIC program will address some of these
problems that previously existed:
Challenges accessing patient capital, which is particularly
acute in low-income areas, both rural and urban, and even more
acute for equity capital;
The massive concentration of venture capital and growth
capital in only a couple of areas of the country, leaving the
rest of us behind;
Large disparities in accessing startup and growth equity;
Underinvestment in domestic manufacturing and domestic
production;
Underrepresentation by women and minorities in both funds
and in small businesses accessing capital;
And there are too few small funds which provide smaller
investments that would fit in smaller communities and less
dense communities.
There are a host of new problems as well: massive
unemployment and failure of many small businesses. And some
estimates are that 22 percent of small businesses are now out
of business, with the catastrophic failure of minority-owned
small businesses with some estimates of 32 percent of Hispanic-
owned businesses and up to 41 percent of Black-owned businesses
lost. That is a national catastrophe.
The American entrepreneurial spirit is strong, but to
reemerge and recover, small businesses will need to access
patient capital. And patient capital is equity capital. It is
long-term debt and equity-like debt, which is capital that can
sustain the ups and downs and the fits and starts in any
economy, even the pandemic.
We also need to remove unintentional barriers to minorities
and women forming SBIC funds, and more SBIC funds need to be
formed that are smaller and serving more parts of the country,
because smaller funds really are able to handle smaller markets
and serve smaller businesses.
So the SBA's framework is a good one, but this experience
is a very different experience than the last recession and
needs a tailored response to meet both the old needs that were
unfulfilled and the new needs. So modifying the existing
programs is faster and more affordable and effective than a lot
of other things we could be doing.
So SBIA proposes a couple of changes to the existing
program, not creating new programs, just modifying them. We
would ask Congress to authorize an on-ramp to forming more
first-time SBICs. A MicroSBIC license would remove
unintentional barriers to minorities and women entering the
program, while providing needed smaller-dollar investments
across the country.
The SBIC program should also be modified to enable SBICs to
provide more of the most patient, the most impactful, and the
most job-creating capital: equity. When the Library of Congress
looked at the SBIC program, they found that equity investments
by small business investment companies commonly created over
400 or sometimes over 500 new jobs per investment, and we need
those jobs.
There are also existing SBIC tools that provide patient
equity-like capital, but they are currently limited by
geography. These geographic restrictions should be lifted and
made available to all small businesses?
And SBA should encourage and enable SBICs to look for
opportunities to make investments in underserved communities,
both rural and urban, by making additional leverage available
for investments in LMI areas and in underserved communities.
And, finally, it would be very if SBA's Office of
Investment and Innovation would be fully staffed and have the
technology they need to be fully effective. They have been held
back from that for years, and I think there is an opportunity
for us to do more, and that would be a long-term investment
that would provide long-term benefits.
I would also like to thank the Committee for having an
oversight hearing on the SBIC program last fall. It was
probably an oversight committee the likes of which I know I
have never seen before in 25 years, but it was very helpful.
And under Administrator Carranza's leadership it has been
transformative and positive, and she has brought in Christopher
Weaver to run the program, and it is really turned around and
doing great.
So thank you for your oversight. Thank you for this
hearing. I look forward to answering any questions.
Chairwoman VELAZQUEZ. Thank you, Mr. Palmer.
Now I would like to recognize Ms. Cohen.
Please let me remind Members you need to keep your cameras
on. Thank you.
Welcome, Ms. Cohen, for 5 minutes.
STATEMENT OF AMANDA COHEN
Ms. COHEN. Chairman Velazquez, Ranking Member Chabot, and
distinguished members of this Committee, thank you so much for
inviting me to testify today about my experience with the
Paycheck Protection Program, the experience of other
independent restaurants, and what this industry needs to
survive the rest of the year and beyond.
My name is Amanda Cohen, and I am the chef and owner of
Dirt Candy on the Lower East Side of Manhattan. Chairwoman
Velazquez has been a longtime advocate for business owners like
me, and I am honored to appear today as a voice for so many
voiceless businesses.
Dirt Candy is a fine dining vegetarian restaurant in New
York with about 40 seats and a bar. We started back in 2008
with just 18 seats but quickly outgrew our first location. And
in 2015, we moved to this new one on the Lower East Side.
I am also honored to represent the leadership team of the
Independent Restaurant Coalition, a newly formed coalition of
thousands of chefs and restaurateurs across the country in
every congressional district who organized for the first time
in response to the pandemic.
We represent America's nearly 500,000 restaurants and
nearly three-quarters of all dining establishments in the
country who don't have the same access to significant debt
instruments or private equity as corporate-owned businesses.
Today I am going to share the story of independent
restaurants, how we use the PPP, and what we need to do to
survive, which is really your help.
Dirt Candy reopened a week ago today for outside seating,
the first time since New York's shutdown orders. Outdoor dining
has forced us to dramatically alter our menu and processes for
serving customers. A number of our dishes are really not
conducive to heat, the rain, wind. And our seating is on a ramp
to the Williamsburg Bridge, which really isn't the most
romantic location.
I wasn't able to pay my employees during the shutdown. So
many went on to unemployment or took other jobs. While I
received a Paycheck Protection Program loan, I chose not to use
the money at the start because it was unclear when we could
reopen again. And if my fixed costs of running a business don't
change and demand for dining out remains low, there is
absolutely no way Dirt Candy can survive because there is a
larger issue: Going out to a restaurant is not considered to be
safe.
When the pandemic hit, I laid off all 35 employees at Dirt
Candy. About 6 weeks ago, I rehired one person to help get the
restaurant ready to reopen in its current form. As of today, I
have only rehired 17 percent, or six, of my employees, and I
don't plan on rehiring others for the foreseeable future.
This was only possible because of the PPP. In fact, the
changes to the effective date of the PPP that this Committee
worked on and which went into effect in June are the only
reason I could afford to reopen Dirt Candy at all.
But even if my doors are open, there are still 29 more
people who used to count on Dirty Candy for their well-being
who are out of work.
Some independent restaurants cannot access the PPP because
their bank took care of other customers first or rejected their
applications. Others were afraid to use the loans they received
and returned them because they could not afford to make a
mistake and take on more debt.
Those who received and used the PPP loans are seeing them
run out or not bridge the time needed to fund operations in
this uniquely affected industry.
The one thing that would be enormously impactful for the
restaurant industry is passing Congressman Earl Blumenauer's
RESTAURANTS Act. The Chairwoman has cosponsored this bill, for
which I am exceptionally grateful, as have eight more members
of this Committee.
Independent restaurants generate $271 billion in direct and
indirect economic activity. Passing this bill would reduce the
unemployment rate by 2.4 percent. As many as 85 percent of
independent restaurants say they will close without direct
help. Passing this bill would help avoid this disaster.
Restaurants need your help. As you can see from my
testimony above, the PPP, with the significant changes Congress
made in late spring, is an 8-week solution to an 18-month
problem for restaurants. My PPP loan allowed me to reopen, but
it is not going to allow me to stay open even if it is
forgiven.
And Dirt Candy does not stand alone in this. Our restaurant
support farmers, vintners, brewers, liquor purveyors, and an
entire supply chain. Most other restaurants can add fishers,
ranchers, and other parts of the supply chain to this list.
And imagine planning a trip to New York, Chicago, San
Francisco, Charleston, Atlanta, or Washington, D.C., without
being able to visit the great restaurants that they are known
for.
Independent restaurants draw millions of tourists from all
around the world. In 2019, total spending by domestic and
international travelers on food services in the United States
was $279 billion. That is more than double the amount spent on
either recreation or retail.
Thank you again for the opportunity to be here and to share
the story of independent restaurants with you. I sincerely hope
that you will find a way to help independent restaurants with
all the hard work you are doing on behalf of small businesses
across the country.
Chairwoman VELAZQUEZ. Thank you, Ms. Cohen.
Now I would like to recognize Dr. Cook for 5 minutes.
STATEMENT OF LISA D. COOK
Ms. COOK. Chairwoman Velazquez and Ranking Member Chabot,
thank you for the opportunity to address the Committee on Small
Business on the topic of ``Long-Lasting Solutions for a Small
Business Recovery.''
The coronavirus pandemic and the resulting human, economic,
and financial crises are unfolding at breakneck speed, and, as
a result, small firms are in crisis. The quick action of
Congress has gone some way to lessen or postpone the pain
associated with this pandemic-induced recession.
Specifically, assistance to small businesses to keep paying
for employees through the $670 billion Paycheck Protection
Program, PPP, the largest ever investment in small businesses,
was a critical lifeline for many small businesses.
Prior to the pandemic, most small firms reported being in
good shape and 73 reported that their financial health was good
or stable. Nonetheless, the financial health of small firms
varied greatly, depending on the race or ethnicity of the
owner. Compared to 27 percent of small White firms reporting
that they were at risk or in distress, 49 percent of small
Hispanic firms and 57 percent of small Black firms reported
being at risk or distressed. Black and Hispanic firms were less
prepared to weather an adverse shock like this pandemic.
According to the Federal Reserve, distressed firms are
three times more likely to close relative to healthy firms due
to a 2-month revenue shock. Further, the concentration of small
minority-owned firms in certain sectors makes them more
vulnerable in the wake of COVID-19. These sectors in which many
small minority-owned firms are overrepresented are
accommodation and food services, personal and laundry services,
and retail.
By early May, it is estimated that 100,000 small
businesses, or 2 percent of small businesses, had already
closed. By mid-June, of the businesses that are listed on Yelp,
140,000 of those closing since March 1 were still closed by
mid-June. Thirty-five percent of shopping and retail businesses
listed have closed their doors temporarily. Fifty-three of
restaurants listed have closed their doors permanently.
The burden of small business closures is also unevenly
distributed. Forty-one percent of African American businesses
reported being closed compared to 35 percent overall.
In the only survey providing demographic data on PPP loan
recipients, the Color of Change reports that 45 percent of
Black and Latino businesses will close by the end of the year
without more relief.
Minority-owned businesses also report not being able to
access PPP loans due to the heavy reliance on large banks, with
whom they have had historically poor relationships.
Over a third of small businesses reported paying reduced
rent or deferred rent payments.
In FiveThirtyEight's most recent survey, the majority of
macroeconomists believe that there will be a partial rebound in
economic activity and a slow recovery, rather than a V-shaped
sharp recovery.
With a slower-than-anticipated recovery and with the
experience of PPP, I would urge this Committee to consider what
it might do in the short and long run to address the small
business crisis.
Now, I would support policy action that would modify PPP to
work alongside the enhanced unemployment insurance benefits
under the CARES Act. The Rebuilding Main Street Act, from
Senators Van Hollen, Merkley, and Murphy, proposes such a
modification. This would provide grants to especially hard-hit
small firms to cover fixed costs and expenses if the employers
use short-term compensation arrangements or a system such that
the employers avoid layoffs and instead reduce hours worked by
each employee at the firm. Employees would then continue to
receive unemployment insurance on a prorated basis to
compensate for reduced wages.
No matter what the modification, demographic data should be
collected at the loan or grant application phase in any future
modified PPP effort, not just on the back end of the program.
These data were supposed to be tracked such that the most
vulnerable firms would be prioritized. Not only should these
data be collected, any current and additional relief should be
targeted at these firms.
Policymakers should consider in the long run distribution
channels for aid in the future that could provide aid to small
firms directly rather than via banks or other lenders.
Most importantly, the human and technological capacity of
the SBA to process and implement swiftly and efficiently such a
program as the PPP should be increased significantly.
Given the longstanding importance of small businesses as an
entry point to the middle class and their contribution to the
economy overall, this capacity building should have happened
long ago. And this won't be the last natural disaster or
economic and financial crisis, and SBA will need to be better
equipped to meet these challenges.
Thank you.
Chairwoman VELAZQUEZ. Thank you, Dr. Cook.
Now let's recognize Mr. Blackshaw for 5 minutes.
Welcome. Thank you.
STATEMENT OF PETE BLACKSHAW
Mr. BLACKSHAW. Thank you, Chair Velazquez, Minority Ranking
Member Chabot, members. Thanks for the opportunity.
I just have one core message, and that is that the best way
to help small business owners thrive in this very uncertain
world is to help them think and act like startups.
And When I say startups, I don't mean Silicon Valley or Ivy
League entrepreneurs. I am referring to the next generation
taking on big, unsolved challenges in every sector of our
society and turning them on their head.
And many of the startup founders are women and minorities.
A growing percentage, I say with pride, are coming from the
Midwest. And we are living in an age of unending just
disruption in which economic, social, health-related shocks are
going to become more common.
Some call this VUCA--volatile, uncertain, complex, and
ambiguous--and a VUCA world requires VUCA leadership, precisely
what a startup mindset enables.
To be clear, there are urgent needs, as we have heard
today. Small business owners need help right now, paycheck
protection, access to capital, streamlined regulation and
policies, all critical and necessary.
But we also need to look beyond the present to a future
that is going to be even more demanding than the moment that we
are living in today and to do so with urgency.
Now, many of us talk about reskilling or even upskilling.
Neither in my view is enough. We need startup skilling.
A startup mindset prizes speed, rapid prototyping, constant
iteration, failing fast to learn fast. It is obsessed with
data, what to see in it, and how to exploit it. It is very,
very digital.
I think startup skilling should be a national priority, led
perhaps by the SBA and involving corporations, universities,
and startup ecosystems.
Now, what does startup skilling look like? First, it is
showing small business owners how they can apply startup
thinking, technologies, and practices to their own ventures.
So, for example, at Cintrifuse we hosted a program called
NITRO! in partnership with JPMorgan Chase. Over one weekend, we
startup skilled several dozen minority-led businesses. We gave
them access to mentors. We showed them how to leverage
technologies. We brought in Google. We taught them the
principles of startup leadership. And I think this is something
that we should be doing constantly, every weekend, in fact.
We are also seeing a promising movement in what is known as
micro-credentialing, aimed at urban and rural areas. Miami
University of Ohio, for example, is one such school that is
kind of taking their faculty outside of the ivory tower,
bringing them into the community with different types of
credentialing, focused on new business skills, basic skills in
finance, marketing, and accounting. We need a lot more of this.
We need to encourage the universities to do that.
Second, I think it is about learning from the digital
natives, the kids who have grown up digital. As we speak,
Cintrifuse is sponsoring a virtual summer entrepreneurial
academy. It is way oversubscribed. And these students, high
schoolers and college, they are developing startup ideas to
help address pressing challenges related to COVID,
sustainability, social justice. And we are challenging them to
explore ways in which radically more transparent supply chains
might be part of a better future.
Thirdly, I want you to think about mobilizing and re-
platforming small business services. Don't shoot the messenger,
but I spent hours before this testimony reviewing government
and SBA digital apps and websites--you name it. And I think the
SBA in particular needs a digital startup infusion.
I would encourage you to consider: why can't government
create an open innovation platform to crowdsource easier, less
bureaucratic online solutions for small businesses. It is not
just about money. It is about time and simplicity. So why not
take greater advantage of audience-rich big tech, Google,
Microsoft, Amazon?
Facebook, for example, has more than 3 billion users,
including tens of millions of small business users. And I know
they are taking lots of heat for issues I am not going to get
into here. But why not invite them to codevelop the next
generation hub for small business services and startup
skilling, not a page or an ad campaign, but SBA on steroids?
That would be a game changer overnight.
My final observation is that I think there is little
distinction between a tech startup and a mom-and-pop small
business. They are both based on an idea, a problem that needs
to be solved, an entrepreneurial spirit, and the desire to take
a shot and carve out your own path. And whether we are talking
about scalable technology or small-town service, we are talking
about the same things.
Business is built on the ingenuity, passion, and
persistence of people who simply want to make the country
better by finding a better way. That is American
entrepreneurialism. And I would say the bumper skill is ``Let's
Startup Skill America.''
Thank you.
Chairwoman VELAZQUEZ. Thank you, Mr. Blackshaw.
Now I recognize myself for 5 minutes.
Dr. Cook, Congress responded to the Great Recession by
making a couple of changes to SBA loan programs, including
increasing the guarantee on 7(a) loans and reducing fees in
both the 7(a) and 504.
As Congress weighs long-term recovery proposals for small
businesses, would you recommend similar changes to SBA lending
programs right now going forward?
Ms. COOK. I would, because this has to be encouraged. Take-
up has to be encouraged.
But I would also echo what Mr. Blackshaw would say, that
the digital transformation of SBA is something that I was
promoting when I was at the White House in 2011/2012. I think
this has absolutely, given the speed of this crisis, I think
this has got to be matched with the speed of digital
infrastructure and human capacity building at SBA, yes.
Chairwoman VELAZQUEZ. This is one of the things that we
need to keep in mind, especially the administration when they
submit the budget, because it takes resources in order for them
to implement those changes.
Ms. Cohen, as the virus continues to spread in our country,
we have seen states who had once reopened restaurants and bars
now shut them down again. How have the multiple closures
impacted the hospitality industry?
Ms. COHEN. Madam Chairwoman, multiple closures are
devastating for restaurants. We lose staff. We lose food. We
lose our customers' good will. We lose our hope. A second round
of full closures will finish off a number of independent
restaurants permanently.
Chairwoman VELAZQUEZ. Thank you.
There have been calls for proposals targeted to certain
sectors that may face a long road to recovery or who may face
reoccurring shutdowns like the hospitality industry. Why do
SBA's current economic relief programs not address the
hospitality industry needs? Why is targeted relief necessary?
Ms. COHEN. The hospitality industry has unique issues. We
depend on gathering a lot of people in a small place to
generate revenue.
So long as people are not in my restaurant, I will not be
able to pay suppliers, continue to employ my staff, or generate
revenue. I cannot take on any more debt with any of these other
programs. I need something that specifically--or we need
something that specifically works for the restaurant industry
that allows us to get back up on our feet without any debt.
Some of the programs have worked.
Chairwoman VELAZQUEZ. Thank you. Thank you.
We have a short period of time to ask all the questions
that we need to ask.
Mr. Palmer, the congressional efforts that we have seen so
far to provide relief for small businesses have focused on bank
financing, specifically the PPP program.
As our local economies begin to slowly reopen and recover,
can you walk us through what some small businesses will need in
terms of long-term capital and the role that the Small Business
Administration, or SBIC, program can play for providing that
capital?
Mr. PALMER. Thank you, Madam Chairwoman.
I think Amanda, the other witness, nailed it pretty well. A
lot of businesses are up to their eyeballs in debt, and they
are really going to be looking for patient capital. They are
going to need something that isn't going to cause the banks,
that are already in forbearance and calling on their loans, to
provide capital. And they are going to need either equity or
they are going to need equity-like capital.
And there is some tools that exist in the SBIC platform,
particularly the LMI debenture, that are very patient, where
you can draw a loan but there is no payments for 5 years and
then you pay after that. And that operates at zero subsidy.
That is a proven tool right now, but it is limited in
geography. So a lot of places can't use it.
Opening up some tools like that, I think, would be very
helpful in the recovery of businesses. As you add more SBICs,
being able to offer those I think would be even more
beneficial.
Chairwoman VELAZQUEZ. Thank you.
My time has expired. Now I would recognize the Ranking
Member, Mr. Chabot.
Mr. CHABOT. Thank you, Madam Chair.
And I will begin with Mr. Palmer.
Mr. Palmer, you have testified before our Committee many
times. We appreciate you being here again today.
How important is it that we evaluate current government
programs to reduce duplication in order to ensure that our
programs are the most effective that they can be?
Mr. PALMER. I think it is critical, and I think right now
Congress has the time to really focus. When the CARES Act was
created the PPP was a lifesaver, and it is a brilliant program
and thank you for doing it, but certainly there were some
problems with it because it was written at the front end of an
economic tornado hitting.
Now you have the time to really look at it and make sure
things are effective, not duplicative, and that they are really
adjusting to the different industry sectors and geographies
that need different types of capital. So I think it is
necessary.
Mr. CHABOT. Thank you.
I think I will go to Mr. Blackshaw next.
How can the NITRO! program that you mentioned serve as an
example for future efforts? And was there anything that you
felt could have been improved or any recommendations that you
would make to us?
Mr. BLACKSHAW. Thank you for the question.
My first regret is that we treated it episodically, in just
one weekend. But looking back, I mean, we can do that nonstop.
And I want everyone here to think about, just think about
this hearing right now. Our ability to kind of scale services
and scale intimacy in the form of any type of training has gone
up exponentially.
So it is really easy to parachute in an expert who can help
a small business owner to pick up a critical skill. And there
are very critical, foundational types of entry, digital
capabilities that even the ice cream shop needs to understand
to be competitive in the marketplace today.
So I think the big opportunity revolves around scaling. I
think there is a big opportunity to get more companies to
subsidize the effort. This isn't just about getting the
government to kind of pay for it. I think there is a win-win
for everyone.
But we have to bring that startup mindset, more for less,
digital kind of agility. And then definitely leverage this
power of virtual. Not to take away from the offline, there is
still some power there, but we can serve a lot of critical
needs really, really fast.
Mr. CHABOT. Thank you very much.
And I think I will go to Ms. Cohen next.
Ms. Cohen, in your testimony you discussed how people still
feel unsafe going to restaurants. The same can be said for the
tourism industry as well.
What can we do to help people to feel a sense of safety and
security again so that your restaurant and others will be
moving in the right direction?
Ms. COHEN. Unfortunately, I am not sure we can get anybody
to feel safe until we have a vaccine. I mean, that is the
reality.
In the meantime, not forcing restaurants to have to open up
more tables than they feel comfortable with, or hotels or
anybody. We cannot congregate too many people in one place. We
have to make people feel safe.
It is my job as a restaurateur to make my customers feel
safe and to know that I have made my employees feel safe so
everybody can come and dine and feel relaxed, which is what
they should do in a restaurant. But I can't do that if I am
looking at my bottom line instead of my payroll.
Mr. CHABOT. Thank you.
Dr. Cook, you had said that you felt that we were likely to
experience a slow recovery. If you had to pick just one thing
to change that, what would it be?
Ms. COOK. I would echo the sentiments of Amanda Cohen, that
there has to be attention paid to COVID-19 first. That is
absolutely it. There is, like, there is nothing else. If I had
to choose one thing, it would be that we would provide, say,
relief to businesses, to the American people that had to do
with addressing the healthcare crisis.
Mr. CHABOT. Thank you.
And I think I have got time to squeeze one more question
in.
So, Mr. Blackshaw, I will go back to you again. We are
obviously both in the Midwest here, and you mentioned the
Midwest. What specifically is encouraging startups in our part
of the country in the Midwest, at least prior to the COVID
crisis, and how can we continue to fuel that startup culture
that we have been seeing?
Mr. BLACKSHAW. I think it is critical to lower barriers of
entry for entrepreneurs. Cost structure contributes to that. I
am a native Californian, so I don't want to disparage my former
State. But there is a cost structure that can get in the way of
being able to kind of jump in early, test, and learn.
I located my first startup in Cincinnati. The burn rate
extended much longer. I think there is a quality of life that
typically gets overlooked. And there is a wonderful synergy,
especially in greater Cincinnati but also northern Kentucky
with the large companies that are very, very open in a very
humble way, if I may.
Let's work with startups because they can solve big
challenges that we can't figure out. Maybe we are too
bureaucratic and we need an external focus that I am seeing
more in the Midwest than I have seen in other locations.
I think those are just a few of the factors that really
play out. I think wherever you are, building a supportive
ecosystem is critical, and that is public, that is private
universities. Those formulas can work.
Mr. CHABOT. Thank you.
Chairwoman VELAZQUEZ. Thank you. The gentleman's time has
expired.
Now we recognize the gentleman from Maryland, Mr. Mfume,
for 5 minutes.
Mr. MFUME. Thank you very much. Madam Chair, I want to
thank you, I want to thank the Ranking Member, obviously, for
convening this particular hearing. I think it is an extremely
forward-looking topic that has to be dealt with after, I agree,
we have been able to deal with the major topic, which is this
pandemic.
Madam Chair, I apologize for just getting on. Recently, as
you know, the Democratic Caucus is underway. And I am on the
hearing of the Oversight Committee. So I jumped on be on. It
has been an interesting discussion. I would reserve any time or
the right to ask questions at this moment so that I am not
deliberately or undeliberately redundant in what I would like
to talk about.
And I will yield back and welcome the discussion that
continues.
Chairwoman VELAZQUEZ. The gentleman yields back.
I now recognize the gentleman from Oklahoma, Mr. Hern, for
5 minutes.
Is Mr. Hern on? Okay.
Mr. Stauber, the gentleman from Minnesota, is recognized
for 5 minutes.
You need to unmute.
I think that he is having technical difficulties.
Mr. STAUBER. Again, Madam Chair, can I get back in, in a
minute?
Chairwoman VELAZQUEZ. Sure.
Mr. Burchett is recognized for 5 minutes.
Mr. BURCHETT. Can you all hear me?
Chairwoman VELAZQUEZ. Yes.
Mr. BURCHETT. Thank you. I appreciate the testimony, and
appreciate the Chairlady and Ranking Member.
Dr. Cook answered this question for me, but I would like to
know from Mr. Palmer, in your testimony you mentioned that up
to 22 percent of the small businesses will fail due to the
COVID-19, but that number rises to an estimated 41 percent of
Black-owned small businesses.
That is a huge disparity and that troubles me greatly. My
whole life I have worked in and around our community and
business community and lots of Black folks and I am concerned
about that. How do you think we could address or rectify the
problem?
Mr. PALMER. It is a real problem. And once we sort of get
the economy stabilized with health, which is sort of the
foundational issue--and I will just set that aside--I think we
really need to look at really equity capital.
There was an excellent article by Eddie Brown in The
Washington Post this last week, the founder of Brown Capital,
and he called equity capital the rocket fuel for job creation
and he highlighted how little of it is in the hands of Black
entrepreneurs.
I think we need to form more SBIC funds that have more
Black fund managers and more women fund managers. And that is
part of that SBIC, the MicroSBIC model, where we can form funds
by broadening out the funnel of who can come in, and then we
can harness the private investment that comes in and amplify it
in a way that really creates jobs and ownership of businesses.
But we have to be deliberate about the real barriers,
because most Black entrepreneurs just have less capital. The
amount of startup capital that a Black entrepreneur has versus
a White entrepreneur is about 1/36th, and that is a barrier.
And so they need external capital.
We need more small private venture funds and more small
private capital funds around the country and not just
concentrated in the three areas where they spend most of it
now.
So I think getting more of those that are regional or local
will be of very beneficial help.
Mr. BURCHETT. What I have found a lot of the time here is
that in Tennessee is that funds are available but, dadgummit,
nobody knows how to get to them. And I guess you have got the
good old boy network, but also it is just a method of educating
folks, and we do that through the Urban League or chambers of
commerce or what have you.
I just see a huge duplication, and I don't see anything
getting done. I just see the people in these organizations
driving nice cars and having nice offices, and I am not seeing
anything done.
Mr. PALMER. I think that there have been some studies done
that a lot of Black entrepreneurs don't get loans and part of
it is because they don't ask for them because they think they
are going to be turned down. They don't have that connection in
the community or in that region.
And I think that the financial providers, both SBIC funds
and banks and others, need to do a far better job of doing
outreach and letting folks know how to access the capital,
because it is there in many cases.
Mr. BURCHETT. What do you think nonprofits in the private
sector can do to increase access to capital and promote
recovery?
Mr. PALMER. I think the private sector is the driver for
it. Nonprofits, there are lots of different nonprofits that can
be facilitators and educators and provide roles. And Mr.
Blackshaw, as a witness, is an example of that as far as
training those entrepreneurs about how to access that capital,
how to ask for the right kinds of capital, the right amounts,
how to be prepared for it to increase your likelihood of
success.
But ultimately we need tax policy and regulatory policy
that really encourages and augments and doesn't create barriers
to accessing that capital.
So we need both working together in a deliberate fashion.
Mr. BURCHETT. Okay. Thank you.
Ms. Cohen, I dig your enthusiasm. I have never been to New
York before, as you can probably tell from my accent. I am not
even from the north part of Tennessee.
But I was wondering about the ripple effect that will occur
in our communities with the restaurant industry operating below
full employment. What can we do to limit these effects and make
our economy recover faster, ma'am?
Ms. COHEN. Well, first off, you are invited to my
restaurant anytime that you are in New York.
Mr. BURCHETT. Did you say is it a vegetarian restaurant?
Ms. COHEN. It is a vegetarian restaurant. It is a vegetable
restaurant. But it is delicious.
Mr. BURCHETT. Okay. If you say so.
Ms. COHEN. So the best thing you can do is actually support
our RESTAURANTS Act. That will put more money back into my
restaurant and then I can put it back out into the economy and
I can start supporting my suppliers again. That is what I
really need to do, I need to help get them back up on their
feet, and the only way I can do that is if I have some money to
spend on them.
Mr. BURCHETT. How much time do I have left, Chairlady? Have
I run over?
Chairwoman VELAZQUEZ. Almost. Two seconds.
Mr. BURCHETT. Do what?
Chairwoman VELAZQUEZ. Two seconds.
Mr. BURCHETT. Okay. Well, I will yield back the remainder
of my time. And thank you so much. And, once again, I am glad
that my wife is not here to see you because if she saw that
wonderful outfit you are wearing, I knew on the way home I
would have to be looking for that.
Chairwoman VELAZQUEZ. Thank you.
Mr. BURCHETT. Thank you so much, ma'am. And you are always
so hospitable to me. Thank you, ma'am.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now the gentlelady from California, Ms. Chu, is recognized.
Ms. CHU. Yes. Mr. Palmer, I am so glad that you are here to
express how important SBIC is and how much more potential it
has to address our COVID-19 economic crisis.
Since its inception, SBICs have created or sustained nearly
10 million jobs, and yet this program operates at extremely low
risk to the taxpayer. Even though there is an SBA guarantee the
private investors' capital has to be completely exhausted
before that guarantee is even impacted and, as a result, this
program operates at zero subsidy.
So because of this success, I introduced H.R. 116, the
Investing in Main Street Act, to allow banks to invest more of
their capital in SBICs, and the legislation passed the House in
this Congress but it still awaits further action in the Senate.
Can you explain what made the SBIC program so successful
during the last economic recovery and how the investing
community made SBICs more effective as our economy recovers
from the COVID pandemic?
Mr. PALMER. Well, thank you very much for that question and
for your support of SBICs and making that correction that would
allow more banks to put capital into SBICs.
And I will mention that there are a couple of reasons why
the program works. First, it works because it passes all the
private sector requirements. And second, it works because it
fills a public policy purpose.
The program really puts the taxpayer in second loss
position and the private capital in first loss position as it
always should be, and I think that makes it work.
I really think right now one of the things that is coming
out, we have the pandemic, but we also have massive social
unrest and an awakening to some problems that existed before.
We need more smaller SBIC funds and I think we need more
smaller funds serving minority communities. And you have the
banks that are very interested in doing that now. And so we
want to take away any barriers that would be in place that
might limit the ability for capital providers to get capital
where it is clearly needed and recreate those jobs that have
been lost and restart up those businesses that may be
mothballed at the moment and re-empower those entrepreneurs.
So that is what we do. We would like to do more of it. And
your legislation is a critical part of it. So thank you very
much for your support of it.
Ms. CHU. Thank you so much.
Dr. Cook, people of color have suffered disproportionate
health and economic impacts during the COVID-19 pandemic. As
you mentioned, business owners of color are at higher risk of
permanent closure, which makes SBA's failure to collect
adequate demographic data on participants in recovery programs
like the Paycheck Protection Program especially harmful.
For example, SBA failed to collect any racial demographic
data for 94 percent of the nearly 500,000 PPP loans under
$150,000 that were made in California. That means they only
collected on 6 percent of the businesses that actually got
those loans, while given California's diverse population. That
is unacceptable.
One thing I know, these businesses need help. So I plan to
introduce legislation to authorize SBA's Community Advantage
Loan Program, which provides access to affordable government-
backed capital to underserved markets, and under this
legislation businesses owned by minorities, women, and
veterans, and also provide some technical assistance.
Can you talk about the role of the programs that programs
designed to reach underserved small businesses should play in
our long-term recovery?
Ms. COOK. Well, one of the key features of entrepreneurship
in America is that it has been a path to the middle class, and
it has been a path to wealth. And certainly for minority
businesses, given the losses they suffered--minority suffered--
especially blacks and Hispanics suffered--during the Great
Recession, this would go some way to close the racial wealth
gap.
So I think entrepreneurship is just so critical to the
American experience to both income and wealth. The kind of
attention that would be given to it, I think, would be well
worth it.
Ms. CHU. And why is the demographic information so
important?
Ms. COOK. I am sorry. I didn't hear the last part, why is
the demographic----
Ms. CHU. Information so important to have.
Ms. COOK. Oh, it is because, as I mentioned in my delivered
remarks, the Black and Hispanic businesses especially were
already vulnerable. So if you want to really make sure that you
are making sure that the recovery is even, they should be
targeted. And this was--I mean, you all articulated that they
should be prioritized and for good reason. So I think any
extension, any additional relief going to small businesses,
make sure to target these businesses and collect the data, the
demographic data.
Ms. CHU. Thank you.
Chairwoman VELAZQUEZ. The gentle lady's time has expired,
and now we recognize the gentlemen from Minnesota, Mr. Stauber.
Mr. STAUBER. Thank you, Madam Chairwoman Velazquez, and
Ranking Member Chabot.
Mr. Blackshaw, how do you think we most effectively bring
the, quote, ``STARTUP-SKILL'' you mentioned in your testimony
to rural America?
Mr. BLACKSHAW. Thank you for the question. The first thing
we need to continue to take a close look at, internet,
broadband access in rural districts, and I think anything we
can do to kind of equalize access, I think, is really
important.
I think in the State of Ohio, there is a big concerted
effort on that, and I think that is good for any type of kind
of startup layer. There is no question that digitalization
pervades everything, and so I think getting that piece work is
absolutely critical.
I think one of the great things about what we are all
experimenting with right now is if the digital infrastructure
is in place, there is infinite access to training, experts
parachuted in, virtual mentoring, you name it. And I just
challenge us to think about how we can move that new
environment what we are doing right now, on steroids, into a
completely different model of access even in rural communities
where I think the one opportunity in certain rural districts
is, you are going to get to invent everything from scratch. You
are not burdened by a lot of legacy practices in terms of how
technology is used.
You basically put in a whole new broadband pipe and you are
kind of inventing, almost as a startup would, with a clean
sheet of paper, so.
I am very bullish about the opportunity there, but there is
clearly some investment on technology required and obviously
probably some funding as well.
Mr. STAUBER. Yeah. You know, one of the biggest issues that
has been exposed during this pandemic is limited access to
broadband in rural America. It has been talked about for many
years, but many are seeing just how bad it is for the very
first time.
So when we come to these hearings and hear the many
wonderful ideas of how we can help businesses pivot their
models and help them mobilize and re-platform, it feels that
the businesses in rural America are not considered. And I think
it is high time that we actually take that step forward and
start investing. We need to take steps to bring parity to these
rural businesses so they can be more resilient in, and as you
mentioned, Mr. Blackshaw, a volatile, uncertain, complex, and
ambiguous world. It is critically important.
And I would just say from your words, Mr. Blackshaw, let's
definitely work together to bring that start, quote, ``STARTUP-
SKILL,'' to rural America.
We are seeing the digital divide, the negative effects of
the digital divide. We have schoolchildren in rural America
that have to--their parents have to drive them to a bus that is
a hotspot, so they can download their homework and get their
homework. That is unacceptable.
Mr. BLACKSHAW. I agree.
Mr. STAUBER. And we also know that rural America, this
broadband is going to help keep our rural schoolchildren
competitive, our rural hospitals open, and it is going to bring
the rural economy. People are going to move to rural America
for our quality of life, and I think we have to--it is time now
to invest in rural America and the broadband to bring those
STARTUP-SKILLS to everyone, including, and not only rural
Minnesota, but rural America, and would you agree with that?
Mr. BLACKSHAW. Not only that, I am signed up to help in any
way. I think it is critically important, it is overdue, and the
opportunity and the upside, the pay-out, will be massive if we
make that effort.
Mr. STAUBER. Yep. That is an investment that needs to
happen.
And Madam Chair, I yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back. I now
would recognize the gentleman from Pennsylvania, Mr. Evans.
You need to unmute, Mr. Evans.
Mr. EVANS. Thank you, Madam Chair.
Ms. Cohen, many of my constituents in Philadelphia are
restaurant owners like yourself and are barely surviving.
Coming from a city where nearly half of the population are
minorities, I am interested in solutions that can help as many
groups as possible. That is why I support the Restaurant Act.
Minorities make up over 40 percent of the overall
restaurant workers. Restaurants employ more minority managers
than any other industry. One in three restaurant owners come
from a minority background.
Ms. Cohen, can you tell me why do you think the Restaurant
Act would be more beneficial to restaurants than the EIDL or
the PPP program?
Ms. COHEN. I think that it is more beneficial to us--and
thank you for the question--because both those programs put us
into debt. And restaurants operate willingly on a very slim
margin. We put a ton of money back into the economy. And I
think it is unfair, at this moment, to ask us to take on more
debt.
So the Restaurant Act allows us to receive money without
debt, and put it back into the economy, and that is why it is
the best program for restaurants at this moment.
Mr. EVANS. Okay. Mr. Palmer and Dr. Cook, the Benjamin
Franklin Technology Partners, which is an initiative of the
Pennsylvania Department of Commerce and Economic Development,
suggested an idea to my office on how to increase SBIC
investment. The SBIC investments have a low, fixed interest
rate while private investors often negotiate a much higher
interest rate for its portion of the investment.
However, private investors must wait until the SBA has been
fully repaid on this portion of the investment before they can
start to receive investment. This means that private investors
often wait years before seeing any return. Can you give me your
reaction to that idea?
Mr. Palmer or Dr. Cook.
Mr. PALMER. Sure. I don't know the full details, but I
think that--I am actually working with Benjamin Franklin
partners to use the SBIC program more broadly and make it more
accessible to small venture funds like theirs across the
country.
The private investors that drive these things, who do
demand a certain rate of return, and we need to make sure that
whatever products we are offering actually passes the market
filter there to drive that private capital to them, to make
sure that the capital is there. Because if it is not, they just
won't do it.
But I don't know the specific structure, but I would be
happy to work with you and your staff on it, because I think
Benjamin Franklin Funds serve Pennsylvania well. I think they
are a model for lots of other States, and we would love to make
the SBIC program more flexible to serve more funds like that in
more places in Pennsylvania.
Mr. EVANS. Dr. Cook, any reaction?
Ms. COOK. I would say that anything that pushes private
investors to invest in African American entrepreneurs, in
particular, is well worth it.
Only 1 percent of African American founders receive venture
capital funding. So anything that will increase that, that kind
of private capital, I think, would be well worth it.
Mr. EVANS. Okay. Mr. Palmer and Dr. Cook, real quick, three
States--California, Massachusetts, and New York--saw over 70
percent of all venture capital investment from 2014 to 2018. In
that same period, my home State of Pennsylvania received less
than 5 percent of the total venture capital. What suggestions
would you have that we could do in Pennsylvania to make it more
appealing?
Mr. PALMER. I would suggest, and not just for Pennsylvania
but to the diversification and democratization of venture
capital is, reimagine an equity platform for the SBICs. When
the SBICs were able to do more early stage plat--investing,
they were all over the country, in much smaller cities, and
outside those three concentrated areas.
We can do that in a way that is protective of the taxpayer
and that would fix a lot of that problem. I think that is one
of the things that the SBA can do and that you have authority
on this Committee over.
Mr. EVANS. Dr. Cook, real quick, do you have any thoughts
on that?
Ms. COOK. I would say that one of the things that would
attract capital to areas like yours, like mine in Michigan,
like Blackshaw's in Ohio, would be to invest in digital
infrastructure. I hate to keep going back to this.
I work on the economics of innovation, but the digital
divide between rural and urban, for example, or from the coast
and other places in the country, it is critical that this be
built out. We are not going to be competitive--any kind of a
competitive economy if we don't do this. So I think this is a
deep investment that has to be made and be made quickly.
Mr. EVANS. Thank you, Madam Chair. I yield back.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize the gentleman from North Carolina, Mr.
Bishop, for 5 minutes.
Mr. BISHOP. Thank you, Chairwoman Velazquez and Ranking
Member Chabot. Thank you for the hearing. Thank you to the
witnesses for lending their expertise. I appreciate the
interesting discussion about some new and long-term solutions,
some of them potentially expensive, but I hope to address
briefly one beneficial policy change we can make right away to
an existing program so more small businesses remain standing
once this crisis is over.
Two weeks ago our Committee heard from SBA Associate
Administrator James Rivera on the implementation of the
Economic Injury Disaster Loan Program in the course of the
pandemic. To be frank, I believe SBA's rationale for limiting
the size of EIDL loans to $150,000, to have left a great deal
to be desired.
This decision not only sorely disappointed the expectations
of businesses hoping to receive relief, it was an
incomprehensibly bad credit decision. After all, if a business'
intrinsic financial circumstances warrant the $2 million loan,
to extend it a $150,000 loan is a futile act, which guarantees
not only failure of the business but, of course, a default on
the inadequate loan as well. And that, in turn, negatively
impacts U.S. taxpayers.
Unfortunately, it is up to Congress to fix SBA's error.
When reflecting upon our hearing and talking to constituents,
one idea suggested was to allow EIDL borrowers to go back for a
second EIDL, or modify the EIDL loan balance to receive a
higher amount. The idea would be, if the business received an
EIDL for less than the appropriate amount, it could receive a
supplemental loan for the difference between the appropriate
amount, according to SBA underwriting standards, and the amount
previously loaned under SBA's misguided $150,000 limitation.
For example, if company X would have qualified for an EIDL
for a million dollars to help it weather this crisis but only
received $150,000, Congress would allow that business to reply
for a second EIDL worth up to $850,000.
To restore constituents' faith in our relief efforts and
those of SBA, it is important, I submit, that we provide them
the relief that was promised to them on the front end.
To the panel, Mr. Palmer, we have had good conversations.
You have always supported and been open about commonsense
solutions. Do you think this idea of allowing businesses
effectively to double-dip on EIDL would help more businesses to
weather the short-term storm?
Mr. PALMER. I am not sure I would call it double-dipping
because the statutory language, I think, was a $2 million cap.
I mean, I think there is an obligation for agencies to follow
the explicit language of the law written by the legislative
branch.
Chairwoman VELAZQUEZ. That is correct.
Mr. PALMER. One thing, I think it is just the right thing
to do legally, we are a Nation of laws, but two, there is clear
expectations from small businesses. If small businesses were
dedicating their limited time and resources to accessing amount
that the law specifically allowed and didn't know they could--
but they really couldn't access it, that is not really fair to
them.
And this disaster has gone on longer than expected. So I
think allowing people to go back to get the caps that they
need, knowing the damages that they have, seems perfectly
reasonable to me.
Mr. BISHOP. Thank you, Mr. Palmer.
And I agree. I think my choice of term is probably a poor
one. It really is a simply going back and allowing them to have
what was intended in the first instance.
Dr. Cook, would you agree with Mr. Palmer's assessment of
that idea?
Ms. COOK. Yes. Yes, I would.
Mr. BISHOP. Ms. Cohen, I heard what you said about the
restaurant legislation that would provide grants, and I am sure
that would be your preference, but do you know of any
additional restaurants that could take advantage of the ability
to go back and get the full EIDL amount, or something closer to
it, depending on its own circumstances, that that would be a
welcome opportunity for some?
Ms. COHEN. I can't speak for all restaurants, but I
certainly know that no restaurant I know at the moment could
possibly sort of fathom the idea of taking on more debt while
we are still trying to climb out of the situation that we are
in, unfortunately.
Mr. BISHOP. Do you think if they had a choice between
additional indebtedness that would allow them to operate and
capital to continue, or not receiving any benefit, they would
prefer they would like to have that opportunity?
Ms. COHEN. That is a tough choice.
Mr. BISHOP. Yeah, okay.
Ms. COHEN. Little bit of a Sophie's Choice there. I am not
sure. I mean, yes, I think most restaurateurs would like to
stay open, but I also know that it seems impossible to work
with this unbelievable debt hanging over your head----
Mr. BISHOP. Right.
Ms. COHEN.--at a time it seems like we might never be able
to actually open at full capacity again.
Mr. BISHOP. Yeah. Thank you, Ms. Cohen.
I think ultimately that choice is--that debt is going to be
hanging over somebody's head, over the taxpayers or over the
business owners.
Thank you, Madam Chairwoman. My time is expired, I think or
just about.
Chairwoman VELAZQUEZ. The gentleman's time has expired, and
now we recognize Mr. Schneider from Illinois.
Mr. SCHNEIDER. Thank you, Madam Chairwoman, and I want to
thank you and the Ranking Member for having this hearing and
obviously the witnesses for sharing your perspectives today. I
know this is a difficult situation for everybody. For anyone
who is going through the health crisis and has lost somebody,
it is unfathomable.
But it is also an economic crisis, and the impact it is
having on our businesses, but in particular, our small
businesses, as was noted earlier, I think it is somewhere
upwards of 75 percent of all businesses have had a negative
impact on their revenues, on their business.
None more so, Ms. Cohen, than what you talked about in the
restaurant industry, especially our local restaurants, that are
so much a part of the neighborhoods, the communities that we
all live in, and they are struggling. And I am happy to be a
cosponsor of the Restaurant Act because I understand how
important that is.
But I also will say share the thought with Mr. Bishop. And,
Mr. Palmer, thank you for saying it is not double-dipping, that
the law said that these businesses had an opportunity to get
loans up to $2 million. The $150,000 decision was an arbitrary
decision. I often use the analogy is, if you build a bridge
halfway across the river, you may feel good for a while, you
are still going to get wet, and not make it to the other side.
We have got to provide a bridge for our economy. Our
economy is made up of the businesses and the workers in those
businesses. We have got to be doing everything we can to help
them.
And Ms. Cohen, what you were saying, I can't think of any
small restaurant that is in a position to take on more debt.
They are just trying to barely hang on, whether it is takeout
service, delivery service, a few are able to open. But it is
going to be fits and starts.
Mr. Blackshaw, I loved your acronym, VUCA, volatility,
uncertainty, complexity--you might add ``chaos'' into it right
now--and ambiguity. It is a tough time, and having been in
business, I understand that, and we are looking forward.
And I forget who said it, but the idea of an 8-month
solution for--or 8-week solution for an 18-month problem is one
of our challenges. So maybe I will turn to the two business
owners, Ms. Cohen and Mr. Blackshaw.
Looking forward with this uncertainty, what can Congress do
to help give some stability, some confidence to help you make
the hard choices to risk capital, to risk your and your
employees' future to try to make it to the other side?
Ms. COHEN. Well, first of all, thank you so much for
supporting the Restaurant Act. I am deeply grateful for that.
And not to sound like a broken record, but the best thing that
Congress can do is support the Restaurant Act. Let's get more
members to support the Restaurant Act. That is the only way
that I know and other restaurants know that we can open up
safely. We don't have to put too many people in our dining room
at once. We can keep our employees safe, and we can keep our
customers safe.
Mr. SCHNEIDER. Mr. Blackshaw, you are in a different type
of business. What would you suggest?
Mr. BLACKSHAW. Listen, I think anything Congress can do to
reward, recognize, credential--you know, innovation in this
environment is critically important, and some of that is just
really eyes wide open to what is already happening. I think a
lot of the answers are out there. We just need to really
smartly graft the ideas that are taking place maybe in a lesser
known region and turn it into a big national idea.
That is what I love about the digital Natives. You know,
whether we like TikTok or Instagram or not, they are brilliant
at finding sources of inspiration across the world and scaling
it. And I think we have this golden opportunity to find those
programs, those initiatives, those more-for-less ways of
delivering services and turn them into big opportunities.
Congress can play a very, very key role, shining a light on
that. I think that the whole issue of reinventing your
platforms is so important. It is not enough to say that the SBA
site is improving 20 percent per year, because we have all, in
this VUCA world we have gone from, like, a hockey stick on how
we use Zoom. The expectations are so much higher, and how do we
bring out a clean sheet of paper on how services are delivered,
how you apply for loans online.
And it is all doable. We can learn, and I think a lot of
these big tech players will probably gladly co-invest. I think
they are looking for opportunities to show goodwill and--but I
think they are also genuinely concerned on the issue and they
bring know-how, and I think Congress can really make a lot of
those outcomes real.
Mr. SCHNEIDER. Thank you. And just with my last few
seconds--thanks for that--I like the idea of the STARTUP
mentality. We need to create that STARTUP. The challenges we
face I would describe it not just a hockey stick. It is a
hockey stick on a spring, bouncing on a trampoline.
The rate of change is so dynamic and so fast, government
has to keep up. In fact, we need to make sure the SBA isn't
just keeping up but leading the way, and I look forward to
working with my colleagues on this Committee to try to do that.
Once again, I thank everyone. I know how hard it is, try
and get there, keep working, together we are going to get
through this crisis.
Thanks so much. My time is expired. I yield back.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
I now recognize the gentle lady from Pennsylvania, Ms.
Houlahan.
Ms. HOULAHAN. Hi. I hope that you can hear me.
Chairwoman VELAZQUEZ. Yes, we can.
Ms. HOULAHAN. And I would also like to echo my appreciation
to the panelists and to the Committee. And I know, as an
entrepreneur myself, how very, very difficult it is in the best
of times to be an entrepreneur, and particularly I can't even
imagine how hard it is now.
And so please take my questions just as questions because I
am trying to be as thoughtful and probative as I can be on
behalf of the people that I represent.
And so my first question is regarding the restaurant bill.
You know, shortly after this call, I will be going back and
sitting with my team, with a legislative lens on, trying to
figure out what bills to get behind and what bills to not get
behind. And let me just posit this to you, to Ms. Cohen
possibly, would probably be the most likely person to answer my
question.
Many, many, many businesses have a situation that you have
right now, where you have taken the PPP loan. You may or may
not be able to use it or open on time. You may or may not have
to go in and out of operating your business over this period of
time.
I am just west of Philadelphia, and my community just
barely opened and may be closing back again in the foreseeable
future. Our businesses like live venue, live theater, are just
a few of those thanks that I could name that need just as much
help as the restaurant industry does but may not have quite as
much of a lobbying power as the restaurant industry does.
Why does this restaurant industry need the help different
than any other company? And why wouldn't it be more
appropriate, perhaps, if the PPP program has been effective, to
be able to have trigger mechanisms maybe for certain
industries, maybe for certain regions or zip codes, as we come
in and out of this problem? Why wouldn't we better be served by
taking something that is working and tweaking it for everyone,
rather than one industry?
Ms. COHEN. Thank you so much for the question,
Congresswoman.
For one, the PPP, even if it were to be extended, is still
just a bridge. It is not a long-term solution for us. And the
restaurant industry is uniquely and completely reliant on
social gatherings to generate revenue, which is why the
pandemic and public health shutdowns affected us more than any
other business.
Unlike airlines or big retailers, independent restaurants
do not have access to debt or capital markets. And as a result,
independent restaurants face the perfect storm that will force
more than 85 percent of them to close without intervention.
That would be disastrous for our Nation's roughly 500,000--
500,000 independent restaurants and the over 11 million
employees that they employ.
Ms. HOULAHAN. But wouldn't you agree that something like
live music or live theater or really almost anything live is in
just as dire straits as your industry is?
Ms. COHEN. I am not advocating against any other industry
receiving money. But I do think that we have less access to
capital. In particular, independent restaurants.
Ms. HOULAHAN. And in the situation where you would be able
to evolve the PPP loan to be able to be, as it is currently, if
you use it a certain way, it is not a loan, it is a grant, and
there is forgiveness, why wouldn't we do the same and have
tranches have multiple times, multiple dips as Representative,
I believe it was Bishop was talking about with EIDL, but
actually genuinely in this case, PPP, multiple opportunities to
access this bucket of capital, would that not in the case were
it to be converted to a grant, would that not satisfy the
restaurant industry and other industries similarly?
Ms. COHEN. I cannot speak on behalf of other industries
unfortunately.
Ms. HOULAHAN. Sure.
Ms. COHEN. But I think for restaurants, part of the PPP is
about getting employees back on the payroll, and it is
predicated on that. And that is very hard for what I am looking
at, for an 18-month problem, where we are going to have
employees come on and off. And I don't want to--on and off our
payroll. And I don't want to put employees back on my payroll
and then have to take them off again. I would rather slowly
build up to a time where we can actually get fully up and
running.
Ms. HOULAHAN. And I appreciate that. I really don't mean to
put you on the spot. I am just trying to noodle over kind of
what our opportunities are.
Do any of the other panelists, with the 39 seconds that I
have left, have anything to add or offer to that question?
Mr. PALMER. I would add something, is that, you are right,
it is not,--I mean, restaurants are taking it on the chin. They
are a massive employer. They are a significant local economic
jobs multiplier. But there are other businesses that--in
particular, staging or lighting--they really have taken it on
the chin. So your proposal on having tailored PPP now that we
have time to be thoughtful and deliberative about how we are
going to structure these things, makes some sense.
And this isn't based on the Restaurant Act, I know nothing
about the Restaurant Act. But if we can be deliberate about how
we define injury, what they can use it for, what their needs
are, what they--make it a deductible expense--a permitted
expense under PPE for forgiveness, for example, to make your
business safe, if you are getting one of these loans.
There is lots of things we can do, or we could even for
some of these other grant programs, have it where there is no
payments for the first 2 years. It is still a loan, but there
is no payments for the first 2 years because the 10-year
Treasury right now is running at what, 20 basis points?
You can do a significant amount for a very small amount of
time, and then you pay the regular payments after the first 2
years to give businesses a chance to recover that are currently
totally shut down. There are lots of creative ways we can look
at these things, but we do have the time but not a ton of time.
Ms. HOULAHAN. Thank you. I yield back. I appreciate it.
Chairwoman VELAZQUEZ. Sure. The gentle lady from Minnesota,
Ms. Craig, is recognized.
Ms. CRAIG. Thank you so much, Madam Chairwoman.
Dr. Cook, I just want to maybe just make a quick comment on
your point related to the healthcare crisis, the public health
crisis, that we are in here today.
My point from day one has been that if we handle the public
health crisis side of this well, that the economic crisis will
take care of itself.
So I just wanted to say, I heard you in your testimony and
in your Q&A about how critical it is that even though we are on
the House Committee on Small Business that the Congress
continues to focus on coming up with a more robust strategy as
it relates to how we handle the healthcare crisis of COVID-19.
Ms. Cohen, I also wanted to say to you that I am a strong
supporter of the Restaurants Act. I am on Representative
Blumenauer's bill. My only regret is that I didn't author the
bill first, so thank you for your advocacy of that bill.
I did, however, introduce a bill that the Chairwoman was
kind enough to also become an original on, that would allow
folks who have seen a 50 percent reduction in revenue, as a
result of COVID-19, as well as have 100 or fewer employees to
come back and get a second forgivable loan.
Can you tell me how you think about a bill like that, which
obviously is less industry-specific, versus the Restaurants
Act, and sort of compare and contrast the value of those two
actions from the part of the Congress?
Ms. COHEN. Thank you so much for sponsoring the bill, our
bill, and I think that is actually a terrific bill. I think
that the Restaurant Act takes care of more of our needs and
that it allows us to pay back our suppliers, actually, get us
back up on our feet and not just put our money--I mean, putting
our money into payroll is incredibly important, and I want to
get all my 35 employees back on my payroll.
But I would also really, really like to be able to open my
business and put money back into the economy through my
suppliers.
Ms. CRAIG. Thank you so much for that. And I will just, a
quick follow-up for you is, I know, as we have reopened here in
Minnesota, many of my restaurant owners, independent owners,
have been asked to undertake safety measures, obviously to keep
customers more safe and limit the spread of COVID-19.
I am hearing from them, even though they serve far fewer
customers, that they are required to put in place higher
staffing levels to open those doors. What can Congress and the
SBA do to help lower those burdens, at the same time, ensuring
that your employees and your customers remain safe?
Ms. COHEN. I am not sure what more that can be done. We do
have to--we have more people employed. For me, personally, I
have somebody who monitors the bathroom. We don't even have
dine-in service, but I have guests who come in, and I want to
make sure that the bathroom is as clean as possible. That is
not normal. I don't usually have a bathroom attendant in my 40-
seat restaurant.
So I am not sure what more actually can be done, unless we
get money that we can specifically use for things like the
PPP--the PPE or for hiring those extra people, and extra
cleaning, all those extra stuff.
Ms. CRAIG. Thank you so much. And I just really appreciate
your advocacy on the part of independent restaurants.
And then finally, Mr. Palmer, very quickly, do you think
certain industries, moving forward, will face unique challenges
post-COVID-19, into this recovery phase, and you know, any
thoughts that you have on specifically what Congress can do to
continue to help business recover?
Mr. PALMER. Absolutely. There is going to be definitive
variations, hospitality and events industries. Anyone who has
to do long-term planning, because right now, we just don't have
any idea what 2 months are going to look like--things are going
to look like 2 months from now, much less a year from now.
I think we need to be providing patient capital as much as
we can. I think Congress really needs to revisit our policies
as it relates to manufacturing and domestic production.
One of things that became clear out of this is that our
inability to create PPP and other critical infrastructure, the
fact that we still can't get Lysol disinfectant wipes in a
supermarket 5 months later because we don't have the chemicals,
or whatever is causing those type of shortages is kind of
crazy.
So I think we need to revisit our access to equity capital,
the patient capital, and we need to make sure we are making
this a hospitable place for manufacturing in the United States.
Ms. CRAIG. Mr. Palmer, thank you so much. I am a founding
member of the Supply Chain Caucus of the Congress, and who
would have thought that that would be a sexy topic. With that--
--
Mr. PALMER. Thank you for doing it.
Ms. CRAIG. Madam Chairwoman, I yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back.
I will go to Mr. Mfume from Maryland if he has any
questions.
Mr. MFUME. I do, and I hope everyone can hear me. Thank you
for returning back to me, Madam Chair. I just have a couple of
observations, which, to me, are significant and maybe even
poignant. It was my pleasure to serve on this Committee for 10
years during my first stint in the Congress, before I decided I
would just voluntary leave and go do something else in life.
But one of the things interesting about that is that much
has changed, and yet much still remains with respect to the
topical areas that we are dealing with, Madam Chair. And I
would--again, as I said earlier, this notion of lasting
solutions is a key phrase because this will be over one day.
The question becomes, what happens to the small businesses of
America.
And lasting solutions are going to require ingenuity and
creativity but also access to capital and access to credit,
which was the major driving force in hearings like this in 1989
and throughout the 1990s, Madam Chair, when you were a member
of the Committee. It is still a driving issue.
And I think about SBICs, which we created as a Congress in
1958, and I think about all the other initiatives, and I was
very interested in hearing the phraseology about, we need an
SBA on steroids. We really do, because we really always have
needed that.
But there are some other things that I would think
observationally that we might want to consider as we go down
the road on this topic in future hearings, one of which is
that--and by the way, Mr. Palmer, I appreciate your commentary
and your information. I would slightly disagree with you on one
matter. You said that minority businesses in many instances
were not applying for some of the structured loans and other
programs that are out there, whether it is SBIC or something
else, because they didn't always have the knowledge.
I would suggest to you that many have not applied because
they know that they are going to get turned down, as they have
been turned down repeatedly, over and over and over again. And
so my argument here is that we have to be deliberate in terms
of what we do going forward, that we need a deliberate tax
policy, a deliberate banking policy, a deliberate SBA policy,
that we have got to find a way to create small venture capital,
as someone said earlier, which is absolutely crucial. That is
within the domain of the Congress itself.
And we have got to look at some of the other smaller
things, like overly burdensome bonding requirements, the little
things that create and push businesses sometimes to the edge.
So I am looking forward, Madam Chair, actually to this
discussion continuing and going on, and I appreciate your
leadership and the leadership of the Ranking Member on this. It
is something that has fascinated me for a long time.
And now after having watched this unfold for the last 31,
32 years, since I first took an oath of office, it is
perplexing how this issue is not only vexing, but it is
repeating itself over and over and over again. So there is a
lot of work to do in this area.
This notion about making sure that we are taking care of
urban versus rural businesses is important also. I always say
``urban and rural,'' and whether we are talking about minority-
owned or women-owned businesses, there are a lot of niches here
that we have the ability, I think, under your leadership in
this Committee, to kind of cull together and put forward a kind
of policy that many of our colleagues in the House would
appreciate.
So, again, Madam Chair, thank you very, very much for your
leadership. I am going to stop filibustering as if I were on
the other side of the building right now and yield back the
time that I have.
Chairwoman VELAZQUEZ. Thank you so much and thank you for
your contributions and your history of fighting for fairness,
and especially civil rights, criminal justice reform. How do we
contribute to make an economy that is just for everyone in this
country?
Mr. Chabot, do you have any other question?
Mr. CHABOT. Madam Chair, I think this has been a very
interesting hearing. I think the witnesses did a great job, all
of them and--learned a lot, and hopefully on a bipartisan
basis, we will put some of this into action.
So thank you for holding this.
Chairwoman VELAZQUEZ. Thank you. Thank you.
Let me just say to all the panelists, thank you for your
contributions, shedding light onto what is happening, and
helping us put together an agenda that really reflects the
unprecedented crisis that we are witnessing.
People love to say that small businesses are the backbone
of America, that small business is the engine that fuels our
economy, and this is a time that has shown that they need help.
Otherwise, a lot of them are going to close their doors
forever.
Dr. Cook, I am going to take an opportunity here in my
closing remarks, to ask you a question. There are two issues
that I want to raise, and one was raised by Mr. Bishop. He is
frustrated because the EIDL program provides for loans of up to
$2 million.
However, the administration never expected the
unprecedented numbers of loan applications, and rather than
coming back to us to ask for an increase in the funding for the
EIDL, they decided to cap it to $150,000.
We are working on bipartisan legislation that will address
this issue, and Dr. Cook, right now, there is, roughly, $130
billion in the pipeline regarding the PPP, and I would like to
see that 50 percent of that money is carved out for minority
businesses and women-owned businesses.
One of the issues that we are confronting is that we don't
know how well the PPP is working, because the data was not
provided to us until last Friday at midnight.
Not only that, but by going through the data, we are
finding a lot of errors. How do you assess the possibility of
us setting aside 50 percent of the $130 billion so that
mission-based lenders will have an opportunity to make those
loans? What impact would that have?
Ms. COOK. I think that would be critical, and I think it
would be critical for several reasons. They were at the back of
the line for many reasons that Ms. Cohen was outlining, but
also because of these historical relationships, because of what
Congressman Mfume was talking about, the systemic issues that
have not yet been addressed. But I think that, yes, setting
aside 50 percent, I think, would be extremely useful.
But I think the other thing that is being missed here--I am
sorry I didn't say it earlier--is that the micro enterprises,
the newest businesses, are where innovation comes from in
America, and they are also being left behind.
So we could have a permanent ding on economic growth if we
are not attending to those that don't yet have relationships
with banks.
So I think for minorities, for the smallest businesses, I
think we really have to do more. And they should be grant-
based. There can't be this uncertainty that Ms. Cohen is
talking about, because they don't have the capacity to figure
all this stuff out, and we shouldn't put that burden on them.
Chairwoman VELAZQUEZ. Right. Micro lenders provide
capacity-building for those businesses. We fought to get them
as part of the mission-based lender in the second tranche of
money that we passed.
Well, let me again thank all of the witnesses for your
participation. I look forward to working together as a
committee to help guide our country's small business owners
through these unprecedented times.
I ask unanimous consent that Members have 5 legislative
days to submit statements and supporting materials for the
record.
Without objection, so ordered. If there is no further
business before the committee, we are adjourned. Thank you.
[Whereupon, at 2:43 p.m., the committee was adjourned.]
A P P E N D I X
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