[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                      A REVIEW OF THE SBIC PROGRAM

=======================================================================

                                HEARING

                               BEFORE THE

        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                            OCTOBER 27, 2021

                               __________
                               
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 117-038
             Available via the GPO Website: www.govinfo.gov
             
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-938                 WASHINGTON : 2022                     
          
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                          JARED GOLDEN, Maine
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                         MARIE NEWMAN, Illinois
                       CAROLYN BOURDEAUX, Georgia
                         TROY CARTER, Louisiana
                          JUDY CHU, California
                       DWIGHT EVANS, Pennsylvania
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                          ANDY KIM, New Jersey
                         ANGIE CRAIG, Minnesota
              BLAINE LUETKEMEYER, Missouri, Ranking Member
                         ROGER WILLIAMS, Texas
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                        CLAUDIA TENNEY, New York
                       ANDREW GARBARINO, New York
                         YOUNG KIM, California
                         BETH VAN DUYNE, Texas
                         BYRON DONALDS, Florida
                         MARIA SALAZAR, Florida
                      SCOTT FITZGERALD, Wisconsin

                 Melissa Jung, Majority Staff Director
            Ellen Harrington, Majority Deputy Staff Director
                     David Planning, Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Sharice Davids..............................................     1
Hon. Dan Meuser..................................................     2

                               WITNESSES

Ms. Holly Huels, Founder and Managing Partner, Holleway Capital 
  Partners, LLC, St. Louis, MO...................................     5
Ms. Carmen Palafox, Partner, MiLA Capital, Chatsworth, CA........     6
Mr. John Mickelson, Managing Partner, Midwest Growth Partners, 
  West Des Moines, IA............................................     8

                                APPENDIX

Prepared Statements:
    Ms. Holly Huels, Founder and Managing Partner, Holleway 
      Capital Partners, LLC, St. Louis, MO.......................    22
    Ms. Carmen Palafox, Partner, MiLA Capital, Chatsworth, CA....    27
    Mr. John Mickelson, Managing Partner, Midwest Growth 
      Partners, West Des Moines, IA..............................    31
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    New America Alliance.........................................    35
    Mr. Carl Kopfinger, Senior Vice President, TD Bank, 
      Philadelphia, PA...........................................    37

 
                      A REVIEW OF THE SBIC PROGRAM

                              ----------                              


                      WEDNESDAY, OCTOBER 27, 2021

                  House of Representatives,
               Committee on Small Business,
                   Subcommittee on Economic Growth,
                                   Tax, and Capital Access,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:01 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Sharice Davids 
[chairwoman of the Subcommittee] presiding.
    Present: Representatives Davids, Newman, Bourdeaux, Chu, 
Mr. Kim of New Jersey, Meuser, Garbarino, and Van Duyne.
    Chairwoman DAVIDS. All right. Good morning, everybody. I 
call this hearing to order.
    Without objection, the Chair is authorized to declare a 
recess at any time.
    I would like to begin by noting some important 
requirements. Let me begin by saying that the standing House 
and Committee rules and practice will continue to apply during 
hybrid proceedings. All Members are reminded that they are 
expected to adhere to these standing rules, including decorum.
    House regulations require Members to be visible through a 
video connection throughout the proceeding, so please keep your 
cameras on. Also, please remember to remain muted until you are 
recognized to minimize background noise. 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 that they have returned to the proceeding.
    For those Members and staff physically present in the 
Committee room today, in accordance with the Attending 
Physician's most recent guidance, all Members and staff who 
attend this hybrid hearing in person will be required to wear 
masks in the hearing room. With that said, Members will be 
allowed to briefly remove their masks if they have been 
recognized to speak.
    I will now begin with my opening statement.
    Small businesses are the backbone of the American economy. 
They employ nearly half the private workforce and drive 
development through groundbreaking innovations. However, to be 
successful, they need capital.
    Congress has long realized that funding on reasonable terms 
can be hard to come by for small firms. So, in 1958, Congress 
created the Small Business Investment Company program at SBA, 
or the SBIC program. The goal was to bridge the gap between 
availability of venture capital and the needs of high-growth 
small businesses.
    Under the SBIC program, SBA partners with private 
institutions to provide financing to small early-stage 
companies. Since its inception, the SBIC program has provided 
over $100 billion in capital to entrepreneurs across the 
country. These funds have helped transform small firms into 
powerhouse job-creators. Early-stage small businesses that 
received SBIC investments include Apple, Costco, FedEx, and 
Intel.
    In fiscal year 2020, SBICs financed 1,063 small businesses, 
with an average amount of just under $2 million. These funds 
helped entrepreneurs acquire new companies, refinance debt, 
conduct R&D, purchase equipment, and generally operate their 
enterprise.
    This is progress from the delays and mismanagement that has 
plagued the program in years past and our Committee has worked 
to correct. In fact, last year, the SBA licensed 26 new SBICs, 
which is up from 18. And, in 2021, they broke the record again, 
licensing 32 new SBICs.
    Despite these successes, there are still issues with the 
program that the Committee must continue to address. One such 
problem is the lack of diversity both among investors and 
portfolio companies.
    In 2007, the SBA acknowledged that women and minorities 
participated in the program at low rates. Today, the diversity 
numbers haven't budged. For example, in 2020, SBICs only made 
up around 5 percent of their total financing to minority-owned 
small businesses. The numbers were even worse for businesses 
owned by women and veterans.
    After nearly 15 years of poor diversity metrics, we must 
get serious about increasing participation for women and 
minorities in the program.
    So, today, I am looking forward to discussing ways that 
this Committee can further improve the SBIC program. I also 
look forward to learning from our witnesses who have extensive 
experience within this sector.
    I would now like to yield to the Ranking Member, Mr. 
Meuser, for his opening statement.
    Mr. MEUSER. Thank you, Chair Davids.
    And thank you to all of our witnesses here today.
    Mr. Mickelson, we appreciate you making the trip in from 
Iowa. Thank you very much.
    So, Chairwoman Davids, thank you for calling this hearing 
to examine this important issue, the SBA's Small Business 
Investment Company program.
    Before we delve too deeply into federal government 
investing programs, I want to touch on some of the realities on 
the ground that are facing small businesses nationwide, 
certainly in my district and throughout Pennsylvania.
    Unfortunately, even with a high level of demand, it is a 
tough time for small business. After the devastating blows of 
COVID-19, particularly in certain States where arbitrary 
shutdowns were forced of various small businesses on a 
relatively random basis, the nation's job-creators are facing 
rising costs, spiking inflation, trouble with finding workers, 
difficulty with keeping their shelves filled, for that matter.
    With holidays approaching, these supply-chain issues are 
bottlenecking and potentially jeopardizing what could be a 
light at the end of the tunnel for many of these small 
businesses, which is certainly their hope.
    Through all of this, the Biden administration and much of 
the Democrat leadership in the House do continue to threaten 
more government spending on the demand side of the equation, 
paid for by raising taxes on small businesses. This is a very, 
very self-defeating initiative.
    In one of the latest regulations for small businesses, on 
September 9 of this year, the Biden administration announced a 
vaccine mandate for small businesses with 100 employees or 
more. There are many businesses with less employees than that 
that think, because the guidelines haven't been issued, that 
they will be affected as well. So it creates levels of 
uncertainty, which is the last thing a business wants.
    To say the least, this announcement has left small business 
with numerous outstanding questions and concerns about 
retaining their employees, especially during such a severe 
labor crisis.
    There is no doubt these are difficult times for small 
businesses. However, the nation's smallest firms are some of 
the most resilient. We don't have to look very far to find a 
small business that received a direct hit from COVID-19 but got 
back on their feet because of their perseverance and, yes, some 
government programs, such as the PPP. Many of these businesses 
did, in fact, reinvent themselves, while others simply were 
able to meet the demand where it was to be found.
    We all, on this Committee, salute these businesses as they 
continue to work through the recovery. And they are what the 
recovery is all about.
    In addition to the economic firestorms that small 
businesses are facing, they also struggle continuously with 
access to capital and financing opportunities to grow and 
expand their businesses. That is why the SBIC program has been 
an important resource in the Small Business Administration 
toolbox.
    With the goal of injecting private equity into the small-
business ecosystem, the SBIC program and other federal programs 
have the ability to reach down to businesses that might be 
geographically overlooked, including in my district in 
Pennsylvania.
    Ensuring small businesses across our nation have access to 
these tools is important. Unfortunately, much of the investing 
is currently dedicated or siloed in certain areas of the 
country. Small businesses in rural areas often struggle with 
gaining access to capital. I am hoping that through this 
hearing we can develop pragmatic solutions to encourage more 
investment opportunities in worthy companies located 
particularly in rural America.
    This Committee should work together through regular order, 
meaning examining an issue at a Committee hearing level, 
crafting legislation together and voting on it at the Committee 
level, and, if successful, moving it to the full House of 
Representatives. Unfortunately, that process was bypassed by my 
Democrat colleagues when they drafted and took up the most 
recent budget reconciliation bill without Republican input.
    I do look forward to discussing all of these issues this 
morning with our witnesses, as well as ensuring this program 
does reach its full potential. This program really should be 
studied and examined comprehensively. As Members of Congress 
and as Members of this Committee, it is important for us to 
exercise our oversight duty to explore how these programs are 
operating year-in and year-out.
    The SBIC program has many layers, and it is worth examining 
thoroughly. I look forward to this conversation beyond this 
hearing. Again, I want to thank our witnesses for joining, and 
I yield back.
    Chairwoman DAVIDS. Thank you, Mr. Meuser.
    The gentleman yields back.
    I would like to take a moment to explain how the 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 microphone is on when you 
begin speaking and that you return to mute when you are 
finished.
    With that, I would like to introduce--I will go through and 
introduce each of our witnesses, and then we will get started.
    Our first witness is Ms. Holly Huels. Ms. Huels is the 
founder and managing partner of Holleway Capital Partners, 
which is an SBIC-licensed small-business investment company 
with offices in the district I represent, targeting small 
manufacturers in the greater Midwest and Southern U.S. Her 
insights will be critical for us to learn how SBA's SBIC 
program can play a role in helping finance the future of our 
domestic manufacturing base. She previously testified before 
the Committee in October of 2009.
    So we are pleased to be able to hear from you again 
regarding SBIC program. Thank you for joining us today, Ms. 
Huels.
    Our second witness is Ms. Carmen Palafox, a partner with 
MiLA Capital, a pre-seed and seed-stage investment fund based 
in Los Angeles. Thirty-two percent of MiLA Capital's portfolio 
companies are led by women CEOs, 58 percent are led by 
immigrants, and 42 percent address United Nations sustainable 
development goals. As a non-SBIC investment fund, she 
represents the type of investor who would be well-served by the 
Committee's recent efforts to expand licensing options within 
the SBIC program.
    Ms. Palafox is also a founding board member of LatinxVC, a 
group of experienced investors working to engage and foster the 
Latinx venture capital ecosystem.
    Thank you for joining us today, Ms. Palafox.
    The Ranking Member, Mr. Meuser, is now going to introduce 
our third and final witness.
    Mr. MEUSER. Thank you, Madam Chairwoman.
    Our next witness is John Mickelson. Mr. Mickelson is a co-
founder and managing partner of Midwest Growth Partners in West 
Des Moines, Iowa. Midwest Growth Partners is a private equity 
fund management firm that specializes in assisting and 
investing in underserved rural markets, including businesses in 
the food and agriculture, manufacturing, and distribution and 
logistics industries.
    Mr. Mickelson has an extensive background in investing and 
finance and has an undergraduate degree, law degree, and MBA 
from the University of Iowa and was also a Member of the 
school's Division I football team.
    I don't know how they did that week, but maybe we will--or 
that year, but maybe we will get into it, while you were there.
    Additionally, Mr. Mickelson is a former city councilman in 
West Des Moines, Iowa. I am looking to learning more about the 
strategic rural investing that Mr. Mickelson brings to his 
rural community.
    I want to thank again all the witnesses for joining us 
today, for taking the time away from your busy schedules.
    And I yield back.
    Chairwoman DAVIDS. Thank you, Mr. Meuser.
    And I appreciate all of you being here today.
    And, with that, I will turn it over--Ms. Huels, you are 
recognized for 5 minutes for your testimony.

   STATEMENTS OF HOLLY HUELS, FOUNDER AND MANAGING PARTNER, 
HOLLEWAY CAPITAL PARTNERS, LLC, ST. LOUIS, MO; CARMEN PALAFOX, 
  PARTNER, MILA CAPITAL, CHATSWORTH, CA; AND JOHN MICKELSON, 
 MANAGING PARTNER, MIDWEST GROWTH PARTNERS, WEST DES MOINES, IA

                    STATEMENT OF HOLLY HUELS

    Ms. HUELS. Thank you, Subcommittee Chair Davids, Ranking 
Member Meuser, and Members of the Subcommittee.
    My name is Holly Huels, founder and managing partner of 
Holleway Capital Partners. We are a small-business investment 
company headquartered in St. Louis, Missouri, with an office in 
Kansas City, Kansas. I am also a former Chairwoman of the Small 
Business Investor Alliance, a national organization that 
represents small-business funds and their investors in the 
lower-middle market.
    Holleway Capital focuses on investing in small 
manufacturers and distributors throughout the Midwest, High 
Plains, Rocky Mountains, and Southern regions of the United 
States. Our investment strategy targets small businesses with 
annual sales between $10 million and $75 million.
    Holleway specializes in working with small-business owners 
who want to sell, most commonly because they want to retire. We 
help these sellers align with buyer management teams to tailor 
an ownership transition and investment structure to each 
company's needs, market position, and future opportunity.
    With Holleway as a partner, the business has the capital 
and management to update technology, purchase capital 
equipment, and expand into new markets. Without our capital, 
many of these businesses would simply shut down or have their 
operations consolidated into another company.
    We are proud that we help these businesses remain 
independent, modernize, grow, and build a brighter future for 
their employees and communities. I have highlighted the success 
of two of our recent SBIC portfolio company investments in my 
written statement.
    I am happy to report that the SBIC program is fulfilling 
its mission. As this Subcommittee knows, the program had 
several years of suboptimal management, but, thanks in part to 
bipartisan congressional oversight, this SBIC program is 
helping more small businesses than ever before. On behalf of 
the SBICs across the nation, thank you for your critical and 
ongoing oversight role.
    The SBIC program, administered by the U.S. Small Business 
Administration, is largely working well. But I would like to 
point out, as with any federal program, targeted improvements 
can help strengthen the program's ability to expand the 
benefits of free enterprise to more people and places.
    First, SBA's SBIC information technology needs an 
investment upgrade. This is a $34 billion program essentially 
running on Microsoft Office software. SBA's limited IT 
technology cripples productivity and creates unnecessary 
taxpayer risk. SBA has an incredible amount of data but cannot 
convert it into useful information to make informed decisions 
or to educate Congress.
    Second, SBIC's primary regulators are called Operations 
Analysts, who are supposed to carry 10 to 12 SBIC funds per 
analyst. Staffing shortages currently have individual Analysts 
juggling as many as 50 SBICs. Regulated entities do not 
normally ask for more regulators, but we are. SBA needs the 
resources, both human and technological, to ensure SBA can run 
this successful program, provide necessary oversight, and 
remain responsive.
    Last, small businesses need access to more equity capital 
because it is the most patient form of capital. It is also a 
critical resource for domestic small businesses to keep U.S. 
businesses competitive and to strengthen supply chains. If the 
SBA had the tools to allow SBIC equity investment, this would 
be an incredible advantage to small businesses experiencing 
high growth or surviving the bumps that they face.
    I would also like to add that, since I last testified 
before this Committee in 2009, there has been a meaningful 
increase in women SBIC fund managers. Our trade association has 
11 women on the board. And, while I was the first to Chair the 
board, several women have also served as Chair behind me, and 
several more are in line to serve as Chair in the years to 
come. Thanks to Congress, the SBIC program is serving as a 
great program for women fund managers to thrive.
    Thank you for the opportunity to testify on the state of 
the SBIC program and offer recommendations to help maintain the 
program's critical role to provide much-needed capital to 
domestic small businesses.
    I am happy to answer any questions you may have.
    Chairwoman DAVIDS. Thank you, Ms. Huels.
    And the Chair now recognizes Ms. Palafox for 5 minutes.

                  STATEMENT OF CARMEN PALAFOX

    Ms. PALAFOX. I appreciate the opportunity to testify before 
you today.
    I dedicate a lot of time and effort to expanding economic 
growth and capital access. I founded 2045 Ventures in 2020 to 
fill persistent gaps in the market for underrepresented 
founders and invest in sectors that will drive our future, 
including climate tech, fintech, and health tech.
    I serve on the National Venture Capital Association Board 
of Directors, and I am a founding board Member of LatinxVC. As 
a founding board Member at LatinxVC, I focus on creating 
opportunities for emerging fund managers like me.
    I was born and raised in San Diego, California, and moved 
to Los Angeles to study economics at the University of Southern 
California. I spent 15 years at Dimensional Fund Advisors, a 
global asset management firm, and gained deep appreciation for 
capital markets.
    I left Dimensional in 2011 to pursue an executive MBA at 
Berkeley Haas. There, I was immersed in venture capital and 
startups and recognized the industry's increasing importance to 
our economy.
    After graduating from Berkeley Haas in 2014, I wanted to 
launch a fund to invest in underrepresented founders, but I was 
too early. The ecosystem supporting women and underrepresented 
founders and emerging managers wasn't as robust as it is today.
    So, instead, I joined two business partners and launched a 
venture capital fund, an accelerator, and innovation lab to 
invest in hardware technology startups. Our firm reached 
entrepreneurs in 70 countries and 33 States. We invested in 22 
startups across sectors including ed tech, digital 
therapeutics, climate tech, and space tech. And some of our 
startups were beneficiaries of government grants and R&D scale-
up manufacturing.
    In October 2020, I launched 2045 Capital to fill gaps in 
the market. 2045's thesis is that diverse teams outperform, a 
view supported by data. The data shows that startups with 
ethnically diverse teams return 30 percent more capital to 
investors and startups with at least one female founder 
outperform all-male teams by 63 percent. And a quarter of all 
our U.S. science and technology firms are founded by 
immigrants. So 2045's objective is to invest in startups where 
at least one founder is a woman, an immigrant, or a founder of 
color.
    So, in terms of the state of venture capital, it continues 
to be a powerful industry. The most recent third-quarter 2021 
PitchBook and NVCA Venture Monitor reports that venture-
capital-backed startups are at the top of the public markets. 
VC-backed IPOs accounted for more than two-thirds of the total 
U.S. listings year to date. In addition, 2021 is on a track 
record for another breaking year for venture investment, exit 
activity, and fundraising, with a total of $238.7 billion.
    The VC ecosystem is thriving for most, but not for women 
and minorities. This inequity is unsustainable when you 
consider the changing demographics of our nation. The Census 
predicts that by 2045 there won't be a racial majority in the 
United States, which is the case in five States today. Already, 
there isn't a racial majority for youth under 18, and 25 
percent of Gen Z are Latinx.
    In L.A., where I reside, 45 percent of the population is 
Latinx, but only 2 percent of VC capital investment goes to 
Black female founders and 3 percent to Latina founders. 
Furthermore, there is only less than 1 percent of female check-
writers like myself in Los Angeles.
    So programs such as SBIC can help women and 
underrepresented fund managers grow their presence, activate 
more investment into startups, and generate other benefits to 
society. Women and underrepresented managers are more than two 
times as likely to invest in female and underrepresented fund 
entrepreneurs----
    Chairwoman DAVIDS. Thank you. Thank you, Ms. Palafox. We 
will return to you for questions after we yield to Mr. 
Mickelson for 5 minutes.

                  STATEMENT OF JOHN MICKELSON

    Mr. MICKELSON. Thank you, Chairwoman and Ranking Member, 
and thank you, distinguished Members of the Subcommittee.
    My name is John Mickelson, and I am the co-founder and 
managing partner of Midwest Growth Partners, located in West 
Des Moines, Iowa, with an additional office in Omaha, Nebraska. 
Midwest Growth Partners is a USDA-licensed Rural Business 
Investment Company, or an RBIC, and we raise dollars from the 
private sector to make succession planning and growth 
investments in food and agricultural, manufacturing, and 
distribution businesses in rural communities across the U.S.
    Like the SBIC program, RBICs make investments in small 
businesses where institutional capital is scarce, particularly 
in non-coastal communities. Our investors include Members of 
the Farm Credit System, rural electric co-ops, ag trade 
organizations such as the Iowa Corn Growers, and commercial 
banks.
    Starting with 7 after our first acquisition in 2014, 
Midwest Growth Partners' portfolio companies have over 2,600 
employees today, employed in and often living in rural 
communities. These jobs all pay above the living wage, provide 
benefits, and generated more than $7 million in federal, local, 
and state withholding taxes in 2020.
    While we are proud of the impact these portfolio company 
jobs provide, we are just as proud knowing that many of the 
jobs provide off-farm income, allowing one spouse to remain 
farming while the other spouse secures benefits for the family.
    Since inception, Midwest Growth Partners has grown the 
employment at its portfolio companies by 25 percent, on 
average, from the date of its original investment by making 19 
investments in rural areas totaling more than $100 million of 
much-needed private capital.
    A real-life example of Midwest Growth Partners' capital at 
work is our investment in Fast Ag Solutions, located in Windom, 
Minnesota, population 4,400. Fast Ag manufacturers sprayers and 
liquid fertilizer applicators. Midwest Growth Partners 
partnered with the Fast Ag management team to purchase the 
company in the fall of 2020, and we have grown full-time 
employment from 52 to 73 since then.
    This type of economic development in rural areas would not 
be possible without programs like the RBIC, but more can be 
done. Examples include: providing support for the Rural Capital 
Access Act, which would enable RBICs to utilize leftovers funds 
from the SBIC program; the creation of a Micro-SBIC license, 
which will create a more inclusive pool of talented 
entrepreneurs to invest in underserved communities; the 
creation of an SBIC working group to increase the number of 
SBIC applicants, specifically those located in underserved 
communities and underlicensed States; and, finally, the 
creation of an SBA Office of Rural Affairs.
    Unfortunately, all the success that has been made and the 
promise of the critical programs mentioned above could be muted 
because of current issues facing small businesses. PPP was a 
critical lifeline during the COVID-19 pandemic in 2020, but now 
businesses are facing a new set of challenges in 2021.
    Our portfolio companies are facing 30- to 40-percent price 
increases in raw materials used to make goods, and that is if 
they can even secure the materials at all. Supply-chain 
constraints are having a direct impact on sales and profit 
margins, which constrict the ability to reinvest in our 
business and hire more employees.
    The prospect of higher taxes of all forms is delaying 
business decisions necessary for long-term business planning. 
Midwest Growth Partners has experienced these challenges daily 
in the work we do in rural communities with small businesses.
    On the passthrough income tax side, these proposals aren't 
impacting only billionaires but small-business owners, who, 
when faced with the prospect of a tax increase, will forego the 
hiring of additional workers, even one or two, or an investment 
in capital goods, such as something as simple as a forklift.
    Possible increases of capital gains rates or to the 1202 
Code have already created unnatural business outcomes, as 
owners and investors accelerate or indefinitely delay decisions 
related to their personal succession planning and growth 
investment strategy. Possible changes to the carried-interest 
model will disincentivize fund managers from making investments 
in all areas, including rural and other underserved 
communities.
    Businesses in rural areas, and small businesses generally, 
already face a scarcity of capital access, negatively impacting 
the lives of millions of Americans. As we near the hopeful end 
of the COVID-19 pandemic, these businesses are optimistic to 
grow and create prosperity for their employees and communities.
    Small and rural business owners and investors are used to 
facing headwinds. No day is ever easy. But adding additional 
regulatory and cost burdens is not in their best interest and 
definitely not in the best interest of the communities they 
operate in and the millions of employees who provide goods and 
services which make our country the land of opportunity.
    Thank you, and I would welcome any questions that you have.
    Chairwoman DAVIDS. Thank you, Mr. Mickelson.
    I will now recognize myself for 5 minutes for my first 
question.
    Ms. Huels, your fund invests primarily in manufacturing 
companies throughout the Midwest, including from one of your 
offices in Overland Park, Kansas, which is in the Third 
District.
    This Committee passed a section of the Build Back--I can 
take my mask off. This Committee passed a section of the Build 
Back Better Act which included funds for the SBIC program to 
provide capital for underserved markets and small 
manufacturers.
    Can you speak to the challenges that small manufacturers 
face in accessing capital and what more the SBIC program could 
be doing for these small businesses? I know you made a few 
recommendations related to information technology, the number 
of operations analysts and equity investments, and I would be 
curious if you want to go into any more detail about that.
    Ms. HUELS. Well, we invest primarily, as you said, in 
manufacturers and distributors in the middle part of the 
country, and we really see two broad trends.
    Companies are coming back from COVID, and they are in need 
of growth capital to respond to the marketplace. And, as Mr. 
Mickelson said, there are challenges with regard to that with 
employees and supply chain.
    But then there is also this acceleration of baby boomers 
who are late in their career and they are looking for what they 
are going to do with their business in order to retire.
    So we are managing the portfolio companies that we have, as 
well as the substantial amount of need for capital, which is--
you know, there is a very strong demand for capital in the 
market for both growth and for transition as people are trying 
to get in front of any kind of capital gains tax change that 
may happen in the future.
    I hope that answers your question.
    Chairwoman DAVIDS. Yeah.
    And then I am curious--just a quick followup, and then I 
will move on to the next question--about the ways that--because 
the pandemic has exacerbated various issues, when we are 
thinking about some of the considerations, whether it is the 
capital gains, this sort of thing, how has the pandemic, like, 
either highlighted or maybe brought to the forefront the way 
that folks are thinking about that?
    Ms. HUELS. Well, the pandemic--I agree with Mr. Mickelson, 
the PPP was an incredible resource to keep our companies and 
many, many companies viable through the pandemic. Now that they 
have survived that, the next big issue is the supply chain and 
lack of talent in the market, lack of employees in the 
marketplace.
    So I would say probably the biggest struggle of most of our 
companies at this point--and we have companies in places like 
Wichita, Kansas, and Montgomery, Alabama. These are small-
market-type businesses that are really struggling to, you know, 
fix supply-chain issues and find talent, employees.
    Chairwoman DAVIDS. Okay. I appreciate that.
    And then I guess my next question really has to do with--
you know, we held a hearing in the last Congress to review the 
management of the SBIC program and had heard a lot of concerns 
about delayed processing and inefficiency. And I am curious if 
you have seen in the last 2 years any improvements or what your 
experience and what you have seen with that program.
    Ms. HUELS. Yes, candidly, as you are aware, the program was 
struggling for several years. And I can say that the program is 
back. The management is excellent. The career folks at the SBA 
are excellent and do a fantastic job. And the management of SBA 
is doing--or the management of the OII and the SBIC program are 
in a great place now. Really happy with the improvements. So 
thank you.
    Chairwoman DAVIDS. I am glad to hear that, and just would 
also encourage you and other folks who are participating in the 
SBIC program to, you know, keep the lines of communication 
open. Let us know if you continue to see issues with the 
program, because we want to make sure it is running well.
    And, with that, I will yield and recognize the Ranking 
Member, Mr. Meuser, for 5 minutes.
    Mr. MEUSER. Thank you again, Chair Davids.
    Thanks again to our witnesses.
    So what I would like to try to get through in my 5 minutes 
here is, what can we do for you? And then let's talk about what 
you can do for us, as far as legislation or strengthening the 
SBA, the SBIC, the RBIC as well, overall.
    So, Mr. Mickelson, I will start with you. You stated that 
there are various businesses that are underserved by 
institutional capital. You initially thought there would be 100 
opportunities, and turned out there were many more that you are 
evaluating, 230 or so, and you might have the capacity that 
there may be far more than that.
    So let's just talk about what--and Ms. Huels mentioned 
about the IT systems, which I know usually government agencies 
could use some real upgrades there.
    So give me a little bit more on what you would need from 
the SBIC or, Mr. Mickelson, in your case, the RBIC that would 
be helpful to you--and, Ms. Huels, I am going to follow up with 
you, as well, on the same question--for the rural communities.
    Mr. MICKELSON. Yeah, thank you, Ranking Member.
    As you mentioned, when we got started in 2013, we told our 
investors that we hoped to see 100 opportunities a year, 
because they were concerned in rural areas there wouldn't be 
enough investment opportunities. In the first full year of 
operation, we saw over 230. And, for this year, 2021, we will 
evaluate over 800 investment opportunities.
    And so there are a ton of wonderful businesses out in the 
rural areas. And because capital is concentrated in places 
other than those rural areas, it is a tremendous opportunity 
for us and other participants in the RBIC program. And I think 
there should be more funds. When we went through our licensing 
process for the RBIC in 2018, we were the fourth fund to fully 
go through the process, and now I believe there are 10, but 
there could be several more.
    So one of the things that I think would be helpful for 
RBICs would be additional support. Similar to what we have 
heard on the SBA side, the USDA has wonderful people that are 
working there and overseeing the program. However, there are 
not many of them. And as I think there is more need for capital 
in these rural areas, I think there will need to be more 
oversight and funding for that program.
    I mentioned in my remarks the Rural Capital Access Act. 
Right now, the RBIC program does not have access to leverage, 
like the SBIC program does. And if a fund like us had that 
tool, we could deploy additional capital into rural markets. 
And, as I have stated earlier, there is definitely a need for 
it, and there are not a lot of institutional capital providers 
like us that are focused on that area.
    Mr. MEUSER. You mentioned to me earlier it is successful, 
it is working out well, your returns are pretty good--or very--
you know, what you anticipated, because you are a smart 
investor. And the SBIC----
    Mr. MICKELSON. Thank you.
    Mr. MEUSER. Well, yeah. The RBIC--you are as good as your 
last deal, as it says, right? The RBIC is a good partner for 
you. Do you focus on startups? I mean, the risk factor would be 
a little bit more there, but give me 20 seconds on how you 
relate with startups.
    Mr. MICKELSON. Yeah, yeah, we don't. We focus on food and 
agriculture, manufacturing, and distribution. Part of that is 
our collective background as a management team, and then part 
of it is just the part of the country that we are in. And so, 
in these rural markets, you don't see a lot of startup tech 
funds like you would see on the coasts.
    Mr. MEUSER. Okay.
    Mr. MICKELSON. And so we are well-suited, uniquely 
qualified to chase the market that we chase. We would not be as 
well-suited to go after the technology companies.
    Mr. MEUSER. Okay.
    Ms. Huels, same question, and maybe you could answer 
something related to startups. We are looking at how we can 
expand, right, in a market-oriented, relatively risk-free 
manner that your organizations seek, right? So, please, Ms. 
Huels, if you would respond.
    Ms. HUELS. Yeah, I think the SBA does a pretty good job 
with dispersion of SBICs and diversity, but it is always 
something that needs focus, needs improvement, as more fund 
managers gain experience within a fund or in some other job 
experience and to be able to bring that into a fund management.
    I think there needs to be continued focused from the SBA to 
find small fund managers in geographies that are less served 
than the large markets. And I know it is definitely part of 
their criteria that they look at, as new fund managers are 
coming into the market. But supporting emerging fund managers, 
you know, is definitely--you know, there is a risk and a reward 
to that, and the SBA can manage that risk by allowing smaller, 
diverse management teams into the program and metering out the 
amount of leverage that they give those fund managers as they 
create a track record within the SBIC program.
    You know, they have to be able to raise private capital, 
but to be able to supplement that with SBA debentures is a very 
powerful way to get capital to small markets, especially if the 
investor is in that small market. They have a tendency, as we 
do as well, to----
    Mr. MEUSER. Excuse me. Thank you, Ms. Huels. We ran out of 
time, but we will----
    Ms. HUELS. Okay. Sorry.
    Mr. MEUSER.--cover this, perhaps, later.
    Thank you, Madam Chair. I yield back.
    Chairwoman DAVIDS. Thank you.
    The gentleman yields back.
    The Chair will now recognize Ms. Newman.
    Ms. NEWMAN. Thank you, Madam Chair, and thank you, Ranking 
Member, for putting this on today.
    So I would like to ask a couple questions. One is to Ms. 
Palafox and then to Ms. Huels.
    So, Ms. Palafox, thank you so much for your data in your 
testimony. I would like to share one of your pieces of 
testimony, because it is very concerning to me, and I also 
experienced it.
    I will raise the analysis from reports that 64 percent of 
VC firms in the U.S. with more than $25 million in assets under 
management have zero--I will quote again--zero female check-
writers and, of the women that became investors in 2020, only 
one self-reporting as African American and zero as Latinx.
    So, quick aside: I twice have been involved in startups 
where, in fact, there was--on the folks that were assessing our 
businesses, there was not one female and not one person of 
color. And I pitched my business to over 75 VCs, PE, and early-
stage investors and angels. So I can attest to that personally.
    So my question for you is, what can Congress do to change 
that horrifying statistic?
    Ms. PALAFOX. Thank you for that question. I represent 0.1 
percent of the whole market as a Latina investor, and so I do 
recognize the issue. It is a big problem. And 2020, as you 
mentioned, was a backslide for many of us, as a lot of 
institutional investors fled to traditional names.
    I do invest in startups. I invest early. I invest pre-
revenue, pre-product. I am willing to take those risks. And I 
don't do so just geographically in California; I do that across 
the United States.
    One of my recommendations for the program is that you focus 
on outcomes. So, if you want to move the needle in terms of 
having more representation of women and minorities, then you 
have to focus there and be intentional about it.
    I would say that you also have to just take out a lot of 
the requirements that prevent, for example, solo managers for 
accessing these capital--for SBIC. There are many female solo 
managers. SheVC has done a great job of highlighting managers, 
female managers, that start their own funds independently. 
Often, these managers raise $5 million to $25 million in 
private capital. They have diverse backgrounds, coming from 
investment banking or, like me, asset management, and they 
invest with intention.
    Ms. NEWMAN. That is fantastic.
    Do you have any other ideas about how we can bring more not 
just female and people-of-color investors into the fold but how 
we can make that known to them?
    So things like raising the cap on some of the funds, I 
think, helps a lot, but what do you think are some ways that we 
can work with this community to make sure that they have equal 
representation in the investment community and through the 
SBIC?
    Ms. PALAFOX. Right. So, since 2015, there are many 
organizations that support female and underrepresented 
managers. I have named and listed many of them in my written 
testimony. These include All Raise, which is focused on female 
founders and funders; Women in VC, which was established in 
2015; Transact, which is a group of female general partners 
established in 2018; LatinxVC; BLCK VC; and Venture Forward, 
which is a part of the NVCA.
    Ms. NEWMAN. Outstanding. Thank you for your very helpful 
answer.
    And then I will turn my attention to Ms. Huels.
    A similar question to you, but I will focus it on your 
organization.
    So, understanding you work directly with SBIC and can 
certainly--we know some of the things that we have to do, but 
what could your organization do to make sure that not only 
there are more investors that are women and people of color in 
your programs but also that women and people of color are 
recipients of your investments?
    Ms. HUELS. Well, I have been active in the SBIC program for 
over 25 years, and when I first joined the SBIC program, I was 
with a different fund, and I am proud to say that I gained a 
lot of experience during my time with that fund. But I used 
that experience and relationships, and a former partner and I 
broke away to be able to form a women-owned SBIC, but we had to 
get that experience to get into the program. It is a long 
track--you know, it took a long time to get a track record.
    So I think one thing that could be done is to have the SBA 
consider investors like myself but maybe with a slightly 
shorter track record to get more entrants into the program, 
people of color and women.
    And I would say, what my fund specifically is doing----
    Ms. NEWMAN. Thank you, Ms. Huels. I am so sorry.
    Ms. HUELS. Okay, that is fine.
    Ms. NEWMAN. I yield back.
    Sorry, but thank you very much for your answer, Ms. Huels.
    Ms. HUELS. No problem.
    Chairwoman DAVIDS. Thank you.
    The gentlelady yields back.
    And the Chair now recognizes Rep. Garbarino from New York 
for 5 minutes.
    Mr. GARBARINO. Thank you, Chairwoman, and thank you, 
Ranking Member, for hosting this hearing.
    Thank you to the witnesses for being here.
    My first question is for Ms. Huels.
    I was reading through your testimony, and you state that 
your firm specializes in working with small-business owners 
that are interested in selling. Can you expand on this?
    Ms. HUELS. Sure. Businesses go through a continuum. They 
start with Carmen and early-stage investing and getting a 
company started. And then, you know, we are focused on 
manufacturing and distribution companies; they go through a 
lifecycle of growth and meeting market demands. But, 
ultimately, an owner or founder or a couple of founders have to 
decide what they are going to do with that business at the end 
of their career, and that is really where we can step in.
    That owner has a couple of choices. They can liquidate that 
investment and turn their life's work into cash by selling the 
assets. They could sell it to a corporate buyer, who may or may 
not leave the company in their current location; it may get 
absorbed into another facility. Or they can work with their 
management team to create a transition to keep the company in 
its current location, keep the employees, and find new markets 
to grow that business.
    And that is really when Holleway steps in, to partner with 
those management teams to give the capital to the retiring 
owner and allow, you know, growth in the business, purchase of 
capital equipment, and growth into new markets where they might 
not have been able to go with their former owner.
    So there are needs for capital across the continuum. We, 
because of our background and experience, serve the later-
stage-type businesses that are going through that kind of 
transition.
    Mr. GARBARINO. That is fascinating. I appreciate your 
answer there.
    And just turning to something else, you said you have been 
with SBIC or you have been part of the program for over 25 
years now. How do you think it is running now compared to--you 
know, there have been some hiccups along the way, but, I mean, 
is it working well? What could we do better, if we are not 
doing something better?
    Ms. HUELS. Well, I will just take the time to say that the 
career staff is excellent. They do a fantastic job working with 
the fund managers, licensing new funds. You know, the career 
staff does great.
    There have been periods of time where leadership of the 
office has been fantastic, and then there have been times where 
it has been suboptimal, as I said. And, thankfully, right now 
we are in a period where the program is really running strong, 
I am happy to say.
    Mr. GARBARINO. So is this something that we should just 
leave alone, since it is running well now, and just let it take 
its course?
    Ms. HUELS. Well, new licensing is running well. There is 
definitely room for--a need for new or additional operations 
analysts. I think they are swamped. The number of new fund 
managers and just the staffing is short-staffed. I definitely 
think that is something that could be fixed.
    As I said, the technology element is definitely something 
that needs some focus and investment. You know, the SBA has a 
lot of portfolio companies under their domain, and I think 
being able to gather data would, frankly, give folks like 
yourself more information about how many companies and how 
successful the program is. It is hard for them to gather that 
data using their current systems.
    Mr. GARBARINO. I appreciate that.
    I can testify, myself, to the staffing level. I had a 
breakfast--I think it is just short everywhere. I had a 
breakfast this morning with a bunch of equipment salesmen, and 
they were just saying, between the supply chain and staffing, 
you know, it is just very hard for them to grow. And they said, 
even if supply-chain problems didn't exist, they wouldn't have 
the staff to take care of it.
    Are you hearing that from your small businesses? You 
discussed staffing, supply-chain issues, and, I guess, costs as 
well. And if those are problems, you know, would we want to add 
new taxes onto that now? I know there are discussions about 
possible new taxes coming on businesses. You know, would that 
add to part of the problem that we are seeing right now with 
some of the growth of small businesses?
    Ms. HUELS. Certainly raising taxes discourages investment 
into long-term, illiquid investments, which is what we do--
long-term, illiquid investments. And capital gains rates 
increasing could deter, will deter, investors from investing in 
long-term asset classes like ours for sure.
    Mr. GARBARINO. Yeah.
    Ms. HUELS. And in terms of the employees, employees and 
supply chain are the two things we hear from our portfolio 
companies every day.
    Mr. GARBARINO. I appreciate your answers.
    And I only have 10 seconds left, so I yield back, Madam 
Chair.
    Chairwoman DAVIDS. Thank you.
    The gentleman yields back.
    The Chair will now recognize Ms. Chu from California for 5 
minutes.
    Ms. CHU. Ms. Huels, thank you so much for mentioning my 
bipartisan legislation, the Investing in Main Street Act, which 
has been favorably reported by this Committee for the past 
three Congresses and has actually passed out of the House in 
past Congresses.
    And what it does is increasing the amount of capital that 
could be invested in the SBICs, particularly from banks. Under 
current law, the Small Business Investment Act of 1958 
prohibits SBICs from taking investments from banks that have 
over 5 percent of their capital invested in SBICs already.
    But bank regulations already permit the exact same 
institutions to invest up to 15 percent of their capital and 
surplus into SBICs. So this bill would simply align the 
outdated small-business investing law with current banking law 
and unlock up to three times as much investment capital for 
SBICs at no additional cost.
    So what impact would this policy change have on the SBIC 
program and institutions such as yours?
    Ms. HUELS. Representative Chu, I agree with you, there is a 
regulatory mismatch between the banking regulations and the 
SBIC regulations. I think bringing them into parity would be 
supported and would definitely bring more capital into the 
market--it would provide clarity to investors of how much they 
can invest into SBIC funds, which would allow more capital to 
flow to fund managers, which would ultimately allow more 
capital to go to small business.
    I think it is definitely a regulatory mismatch that should 
be fixed. Thank you for supporting it.
    Ms. CHU. Thank you so much.
    Ms. Palafox, your story is so impressive. And as a 
Representative of the Los Angeles area myself, I am so glad 
that you came before the Committee today to tell your story.
    As you know, the SBIC program has historically struggled to 
reach underserved businesses and to license funds operated by 
women and people of color. CRS research finds that SBICs 
provide about 5 percent of their total funding to minority-
owned businesses, about 3 percent to women-owned businesses, 
and less than 1 percent to veteran-owned small businesses.
    These low numbers led SBA to have the Library of Congress 
research this issue, and they found that racially diverse SBICs 
make more investments in minority-led and minority-owned 
portfolio companies, as well as in women-led and women-owned 
businesses, than non-racially-diverse SBICs.
    So, to address the lagging diversity in the SBIC program, 
the House Small Business Committee's section of the Build Back 
Better Act includes almost $10 billion in investments in the 
SBIC program, largely to ensure that it reaches more 
underserved businesses.
    It would establish a new Venture SBIC program to provide 
capital to underserved markets and small manufacturers, create 
an Emerging Managers Program to help less experienced fund 
managers get an SBA license, and implement a new MicroCap SBIC 
license subprogram to increase SBIC diversity.
    So can you talk about the challenges that somebody from an 
underserved group would have to get this venture capital and 
how these particular kinds of programs in the Build Back Better 
Act could address this?
    Ms. PALAFOX. Thank you for that question.
    You know, Los Angeles is the third-largest tech ecosystem 
in the United States, but, as I mentioned, it is not working 
for women and underrepresented minorities, and that is because 
there is this funder-founder gap. We don't have enough women 
check-writers. We don't have enough minority check-writers.
    And so we do need to act quickly. We need to issue licenses 
quickly, and we need to allocate the billions of dollars that 
you talk about. As I mentioned in my statement, $238 billion 
was invested in venture capital year to date. That is just year 
to date.
    So, in order to have meaningful progress, we need to move 
quickly. We need to work with organizations that are supporting 
women and emerging managers. There are so many out there now, 
today, that can be helpful in this process to reach these 
communities.
    I, myself, am considered a first-time manager, but I have 
invested in over 25 startups at day one. These companies have 
gone on to raise over $210 million and are doing meaningful 
work for our country.
    Ms. CHU. Thank you.
    I yield back.
    Chairwoman DAVIDS. Thank you.
    The gentlelady yields back.
    The Chair will now recognize Rep. Van Duyne, the Ranking 
Member of the Subcommittee on Oversight, Investigations, and 
Regulations, for 5 minutes.
    Ms. VAN DUYNE. Thank you very much. I really appreciate you 
having this hearing today.
    I do have a question for Mr. John Mickelson.
    First of all, I want to thank you for your work as a city 
council Member. I, too, served on city council for 6 years. I 
think you will agree it is one of the hardest jobs that we have 
had but also one of the most personal and meaningful. As a 
result, I am sure you had opportunities to talk to business 
owners and employees in your city to figure out what their 
needs are and can tell about that firsthand.
    One of the SBIC program goals is to improve and stimulate 
the national economy and the small-business segment in 
particular. I would be remiss if, while discussing how to 
stimulate our economy, we didn't touch on the current economic 
situation for small businesses.
    Record inflation and hiring shortages are severely 
impacting our small businesses. NFIB reports that 51 percent of 
small businesses have employment openings that they can't fill 
and 90 percent of small businesses are experiencing supply-
chain troubles.
    And this doesn't make light of the fact that small 
businesses are also awaiting potential tax hikes and increased 
regulatory burdens that this administration is pushing. So, 
when considering the success of small businesses, do you find 
that this current business environment, primarily due to an 
overactive administration, is more challenging than it needs to 
be?
    Mr. MICKELSON. Thank you, Congresswoman, for the question. 
And thank you for your comments on the city council. It was a 
good, wonderful time in my life.
    Yeah, there is no question that the current challenges 
facing small businesses--as I mentioned in my remarks, 
inflation, a hiring shortage, the potential for a vaccine 
mandate which will impact companies with more than 100 
employees, and then uncertainty around tax, both for 
passthrough businesses but then also on the capital gains 
side--is really just creating uncertainty. And uncertainty is 
bad when planning a business.
    So, this time of year, all of our businesses are going 
through a budget process to plan for 2022 and what kind of 
investments they can make in people and in capital goods. And 
because so many of these things are sort of in flux, it is very 
hard to plan. And that makes it very inefficient to run and 
operate a business.
    Ms. VAN DUYNE. Okay. I appreciate that.
    I have spoken to businesses of all sizes, and a common 
concern that they have shared with me is the upcoming vaccine 
mandates that are being imposed by the Biden administration.
    While we are experiencing, as I just mentioned the numbers, 
a significant labor crisis, how do you think that the vaccine 
mandate will affect small businesses' ability to be able to 
manage their current staff, to hire, and to grow?
    Mr. MICKELSON. Yeah. Thank you for the question.
    You know, in rural communities and predominantly blue-
collar environments, there is a lot of hesitancy as it relates 
to getting the vaccine. And, whether that is right or wrong, 
that is just the facts that we are dealing with today.
    And I know several business owners, including our portfolio 
companies, that are concerned, should this pass--I think it was 
announced on September 9, and we haven't been given a lot of 
guidance since then--but, should this become law, they will 
have up to 50 percent of their workforce leave and go find jobs 
elsewhere.
    And so the business owners are concerned that the 
obligations that they have made to fulfill contracts for things 
that they have agreed to build or to do in their business for 
customers they won't be able to do, because they just simply 
won't have the people there to do that.
    So, at a minimum, providing some further information, some 
guidance for businesses, would be extremely helpful for small 
businesses.
    Ms. VAN DUYNE. In representing a rural district, I have had 
a lot of opportunities to speak with folks who actually are in 
the shipping area. And I am assuming a lot of your small 
businesses are relying on that. Part of this vaccine mandate is 
going to definitely affect pilots of shipping for supplies.
    So, given the fact that we already have such a supply-chain 
shortage now and issues with that, do you see the vaccine 
mandate being able to hurt small businesses, specifically in 
the rural areas, because of the hiccup in transportation?
    Mr. MICKELSON. Yes. The definition of ``social distancing'' 
would be being by yourself in a semi truck, hauling goods and 
services--or hauling goods for customers.
    And so I know that many of these trucking companies have 
more than 100 drivers and they have a chronic shortage of 
drivers. And so, to the extent that they lose, you know, up to 
half of those drivers overnight, it will have catastrophic 
impacts on getting raw materials to manufacturers, like the 
ones that we are invested in, to go and build further products.
    Ms. VAN DUYNE. I appreciate that. And, actually, I think it 
was UPS, as well, that said they were going to have a dramatic 
impact on the commerce in the United States if this mandate 
were to go through as well.
    I appreciate your time.
    And I yield back.
    Chairwoman DAVIDS. Thank you.
    The Chair now recognizes Rep. Bourdeaux for 5 minutes.
    Ms. BOURDEAUX. Thank you, Chairwoman Davids and Ranking 
Member Meuser.
    In this committee, we frequently hear from small-business 
owners and advocates dealing with issues of accessing capital. 
Access to capital is very much at the top of the list in terms 
of issues that I hear about when I talk to small businesses in 
my community. And the SBIC program really does offer a vital 
source of capital for these folks. In Georgia alone, SBICs have 
invested more than $1.7 billion in 332 small businesses since 
2011.
    Just a couple of questions.
    Ms. Huels, I noticed that you got cut off when you were 
answering Congresswoman Newman's questions about getting more 
women involved in the SBIC program, and would love to take a 
minute, just if you could flesh out some of your ideas there 
about how to do that.
    Ms. HUELS. Thank you for circling back. I appreciate that.
    What I was really just going to say is, we, as a fund, have 
taken the challenge of getting more women into the program very 
personally. My partner and I have been--or, we have two 
analysts--we are a firm of five people, and myself and our 
associate and senior associate are all women. We are trying to, 
you know, use our little corner of the world to try to support 
more women coming into the program and getting experience.
    As a check-writer, as Carmen has said, as a check-writer in 
the program and becoming a qualified investor, you need to get 
experience hopefully early in your career. So we have done that 
by using the two positions that we have, and both of them are 
women, and we are really happy about that.
    Ms. BOURDEAUX. Okay.
    You mentioned something about, you know, should we think 
about adjusting the standards; we want to make sure that women 
are in there, that they are qualified, though, when they do it; 
and, you know, shortening the time where, you know, women are, 
you know, learning the ropes, as it were.
    Is there anything like that that we should just think 
about?
    Ms. HUELS. Well, there are qualified women out there who 
may not have exact SBIC experience, and I think and I am 
hopeful that the SBA takes that other experience into account 
as they are looking at these emerging managers.
    So to give someone a license either with no leverage or 
limited leverage as they learn the program, make investments, 
and build a track record, I think, is definitely something the 
SBA could look at or look at further, if they are not already, 
to be able to manage taxpayer risk by metering leverage, the 
amount of leverage, to the smaller or emerging fund managers 
who may not have quite as much experience.
    Ms. BOURDEAUX. Okay. Thank you so much on that.
    And then one other issue really of interest to me is around 
manufacturers----
    [Audio interruption.]
    Sorry about that. We have all sorts of internet problems. I 
think I froze there for a second.
    Interested in the manufacturers. And you said about a third 
of all program funds are invest in small manufacturers.
    What makes the SBIC program well-suited to investing in 
manufacturing firms? And what can we do to make it more 
attractive to continue and build those investments in the small 
manufacturers?
    Ms. HUELS. Did you direct that question toward me? I am 
sorry.
    Ms. BOURDEAUX. That was--yes, yes.
    Ms. HUELS. Oh, okay.
    Ms. BOURDEAUX. Sorry. It might have gotten lost in the gap.
    Ms. HUELS. No, that is okay.
    Yep, manufacturing companies are the heart of what we--our 
entire investment thesis and strategy is around manufacturers 
and distributors, in the middle part of the country 
specifically. We are, as I mentioned, going to places like 
Wichita and Montgomery, Alabama, and other, sort of, off-market 
places, and there are a lot of really great manufacturing firms 
that are in this transition phase that I have mentioned a 
couple of times.
    And the way to support them with growth and capital is to 
allow them to transition away from a retiring owner, give that 
person the value of the business, but backing the management 
team to continue to operate in the locality that they are and 
grow with additional capital to support the additional markets. 
It is a really important source of capital that many SBIC fund 
managers----
    But the definition of--we are a debenture fund, so we need 
interest income, so these need to be cash-flowing, typically 
later-stage business that have cash flow available to pay 
interest so that we can pay the SBA debentures. So a more 
equity-oriented investment needs a different kind of a tool 
than what the SBA structure is currently--debenture program is 
currently structured to support.
    Ms. BOURDEAUX. And what would be a more equity-oriented-
type program? What would that look like?
    Ms. HUELS. There are several equity-oriented programs on 
the, you know, docket that are being looked at that would use 
the SBIC infrastructure to make longer-term investments in 
companies that may not yet have the cash flow available to 
serve this interest but take a more equity-oriented longer term 
to give companies time to create cash flow.
    Ms. BOURDEAUX. Okay. Got it. Thank you so much.
    And I yield back.
    Chairwoman DAVIDS. Thank you.
    The gentlewoman yields back.
    Well, first of all, I want to say thank you to all of our 
witnesses again for being here today. Your testimony is 
certainly critical as our committee takes steps to enhance not 
just the SBIC program but other areas where we can increase 
access to capital, particularly in rural areas, as we heard 
today, and then, of course, build on years of success that the 
SBIC program has seen.
    This program is essential. It is providing billions of 
dollars to small businesses seeking investment capital, 
facilitating economic growth, and helping to create jobs in 
that process. And it is why we have to address the program's 
shortcomings and ensure that it is operating as efficiently as 
possible as well.
    You know, by making critical reforms, we can expand 
licensing options to investors funding the 21st-century 
entrepreneurs, facilitating more small-business growth. And I 
am definitely looking forward to collaborating with Committee 
Members to reach this goal.
    And, with that said, I would ask unanimous consent that 
Members have 5 legislative days to submit statements and 
supporting materials for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
committee, we are adjourned. Thank you.
    [Whereupon, at 11:08 a.m., the Subcommittee was adjourned.]
                            
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