[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                    UNDER THE MICROSCOPE: REVIEWING KEY SBA 
                     PROGRAMS WITH ASSOCIATE ADMINISTRATOR 
                     FROST

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                              MAY 15, 2024

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 118-051
             Available via the GPO Website: www.govinfo.gov
             
                              __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
55-529                  WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------                
            
                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                    
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
                          CELESTE MALOY, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                  MARIE GLUESENKAMP PEREZ, Washington
                        SHRI THANEDAR, Michigan
                       MORGAN MCGARVEY, Kentucky
                       HILLARY SCHOLTEN, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Roger Williams..............................................     1
Hon. Nydia Velazquez.............................................     2

                                WITNESS

Associate Administrator Kathryn Frost, Office of Capital Access, 
  United States Small Business Administration, Washington, DC....     4

                                APPENDIX

Prepared Statement:
    Associate Administrator Kathryn Frost, Office of Capital 
      Access, United States Small Business Administration, 
      Washington, DC.............................................    29
Questions and Answers for the Record:
    Questions from Hon. Williams and Answers from Kathryn Frost..    32
    Questions from Hon. Luetkemeyer and Answers from Kathryn 
      Frost......................................................    50
    Questions from Hon. Mann and Answers from Kathryn Frost......    51
    Questions from Hon. Velazquez and Answers from Kathryn Frost.    54
    Questions from Hon. Golden and Answers from Kathryn Frost....    59
Additional Material for the Record:
    None.

 
    UNDER THE MICROSCOPE: REVIEWING KEY SBA PROGRAMS WITH ASSOCIATE 
                          ADMINISTRATOR FROST

                              ----------                              


                        WEDNESDAY, MAY 15, 2024

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. Roger Williams 
[chairman of the Committee] presiding.
    Present: Representatives Williams, Stauber, Meuser, Van 
Duyne, Salazar, Mann, Ellzey, Molinaro, Alford, Crane, Bean, 
Lalota, Maloy, Malliotakis, Velazquez, Phillips, Landsman, 
McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Davids, and 
Pappas.
    Chairman WILLIAMS. We will pray first, and then we'll 
pledge.
    Mr. MEUSER. Lord, thanks for this hearing this morning. 
Thanks that we all get to live and serve in the greatest 
country in the world. We pray for all the small businesses out 
there. We pray for all the folks that have ideas to start small 
businesses. We pray that governments would assist when it is 
their priority. We also pray for health concerns for everybody 
in this room, friends and family as well. We love you and are 
grateful for you. Now we will do the pledge. I pledge 
allegiance to the flag of the United States of America. And to 
the republic for which it stands. One nation, under God, 
indivisible, with liberty and justice for all.
    Chairman WILLIAMS. Good morning, everyone, and I now call 
the committee on Small Business to order. Without objection the 
Chair is authorized to declare the recess of the committee at 
any time. I now recognize myself from my opening statement. I 
want to welcome you all today's hearing, which will focus on 
the oversight of the SBA's Office of Credit Risk Management. 
This office oversees the SBA's lending programs, including the 
Flagship 7a loan program. And in 2023, this program alone lent 
over $27 billion to main street businesses. In April of last 
year, the SBA finalized two rules that make drastic changes to 
the program, which many Members of this committee have 
expressed concerns over.
    The first rule removed the standardized underwriting 
procedures for 7a loans. The 7a program allows banks to offer 
loans to businesses that are on the edge of creditworthiness. 
In order for the banks to extend these loans, the government 
backs between 75 percent to 85 percent of the dollar amount. 
Since the taxpayers are on the hook if enough of these loans go 
bad, it is very important that there are guardrails in place to 
businesses that get these loans and have a realistic chance to 
pay them back. Unfortunately, the SBA removed the underwriting 
criteria that allowed the program to run smoothly for decades 
and is now allowing each individual lender to use their own 
standards. This will make oversight of the lending activities 
much more challenging for the agency and increased likelihood 
of loans going bad. The SBA is reporting that they are seeing 
an increase in small dollar loans, but at the same time, we 
have seen a sharp increase in early default rates within this 
program.
    The second rule removed the cap that limited the number of 
lenders that could participate in the government lending 
program. Only a few years prior, the SBA determined that it 
simply did not have the capacity to oversee more lenders. And 
now, even though the Office of Capital Access had been 
drastically reduced staffing levels, they changed course and 
decided to take on more responsibility anyway. So, we have 
already seen the SBA ignore some warning signs coming from the 
new lenders within the 7a program. And when SBA administrator 
Guzman testified to this committee last year. She claimed the 
SBA has a rigorous application process for the SBLC program. 
However, that claim is contradicted when seeing the SBA awarded 
license to Funding Circle. A company that had started operating 
losses had standard operating losses the year prior to applying 
for this new license and during the company's recent earning 
calls, the CEO claimed it would be too costly to get the SBA 
lending program functional. Because of this, the CEO stated 
that they are looking to sell this U.S. business line. Even 
though these comments were made during the application process, 
the SBA decided to ignore them and approve their license 
anyway.
    The final thing I am looking forward to discussing is the 
SBA's handling of the EIDL loans under $100,000. The agency 
abruptly decided to stop collecting on these loans back in 
2022, only to change course over a year later. Now, while I am 
pleased that the agency claims they will start collecting on 
these loans, I still have many questions about the long term 
servicing cost of this portfolio, the amount of taxpayer 
dollars that were lost during the year of inaction, and the 
estimated recoupment amounts from their efforts. We must ensure 
that the SBA is being a good steward of Americans tax dollars. 
Now, lastly, I ask unanimous consent, for Representative 
Malliotakis, from the great state of New York to waive to the 
committee for the purpose of asking questions and without 
objection, that is so ordered.
    I want to thank you all again for being here with us today, 
and I am looking forward to today's conversation. And with all 
that, I yield to our distinguished Ranking Member from New 
York, Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. I would like to 
start off by thanking Associate Administrator Frost for joining 
us here this morning. Ms. Frost, welcome to the committee. The 
COVID-19 pandemic opposed a historic threat to our nation's 
small businesses. The number of active business owners in the 
U.S. plummeted by 3.3 million, or 22 percent, over a two month 
period from April--from February to April 2020. The drop in 
business owners was the largest on record and losses were felt 
across all industries. Underserved small businesses were 
especially hard hit. African American businesses experienced a 
41 percent drop, while Latino business owners fell by 32 
percent and Asian business owners fell by 26 percent. 
Throughout the pandemic, the SBA stepped up and offered small 
businesses across the country a lifeline. The SBA delivered an 
unprecedented $1.2 trillion in emergency grants and loans over 
two years. That funding contributed to a historic economic 
recovery of 21 million lost private sector jobs, plus 4 million 
more private sector jobs than existed before the pandemic.
    Beginning in early 2021, thanks to the leadership of 
Administrator Guzman, longstanding anti-fraud controls were 
reinstituted and new safeguards were put in place to reduce the 
risk for potential fraud. Since then, the SBA has been actively 
engaged in reducing the risk of fraud throughout the agency by 
improving its operation and bolstering its risk management 
systems. Across all four pandemic relief programs, the SBA has 
screened 49.3 million applications, identified 4 billion in 
applications, loans, grants and awards that had had indicators 
of potential fraud, and blocked 2.46 million applications due 
to likely fraud. That being said, many of the fraudulent 
activities that occurred in PPP and the other COVID relief 
programs were conducted through fintech's. According to a study 
published by the University of Texas, Austin, 9 of the 10 PPP 
lenders with the highest rate of suspicious loans were fintech 
companies, and the most active fintech PPP lenders generated 
over $1 billion in fees from the SBA.
    Given the significant level of fraud conducted by fintech 
lenders in the PPP, there has been strong bipartisan concern 
over two final rulemakings by the SBA last year, which weakened 
the underwriting criteria and loosened affiliation standards in 
the agency's core lending programs. Most importantly, it lifted 
the decades old moratorium on the number of SBLCs, potentially 
opening this program up to fintech lenders. There are still 
outstanding questions as to one SBLC award to Funding Circle, 
and I look forward to hearing from Ms. Frost regarding this 
particular license. The SBA's mission is too important to grant 
loan making authority to a lender that is not fully committed 
to its programs. The SBA has been critical to the success of 
millions of small firms through its over 70 years of existence. 
Much of that is due to the core lending programs and their 
ability to reach businesses that have traditionally been locked 
out of the capital market. I hope to hear more about how 
Congress can strengthen and improve these programs. Mr. 
Chairman, I yield back.
    Chairman WILLIAMS. The lady yields back and I now will 
introduce our witness. It is my privilege today to introduce 
Ms. Katie Frost. Ms. Frost is the Associate Administrator of 
the Office of Capital Access at the Small Business 
Administration. And at the SBA, Ms. Frost leads the agency's 
Office of Capital Access, which oversees major programs like 
the 7a lending program. Prior to the current position at the 
SBA, Ms. Frost serves as Deputy Associate Administrator of the 
Office of Capital Access as well as Policy Advisor and Senior 
Advisor for the Office of the Administrator. Ms. Frost holds a 
Bachelor of Arts political science degree from UCLA, the Bruins 
right?
    Ms. FROST. Go Bruins.
    Chairman WILLIAMS. And a master's in public policy from 
Harvard's Kennedy School. Ms. Frost, thank you for joining us. 
And I am looking forward to today's conversation. And before 
anything else, I would like to remind you that your oral 
testimony is restricted 5 minutes in length. And if you see the 
light turned red in front of you, means your 5 minutes have 
concluded and you should wrap up your testimony. And if you 
don't, I will remind you with a little tap on the gavel. Okay? 
I now recognize Ms. Frost for her 5 minute opening remarks.

STATEMENT OF KATHRYN FROST, ASSOCIATE ADMINISTRATOR, OFFICE OF 
         CAPITAL ACCESS, SMALL BUSINESS ADMINISTRATION

    Ms. FROST. Good morning, Chairman Williams, Ranking Member 
Velazquez, and Members of the committee. On behalf of 
Administrator Guzman and the entire agency, thank you for the 
opportunity to appear before you today. I serve as the 
Associate Administrator for the Office of Capital Access, where 
I am responsible for the agency's business loan programs, 
including our 7a, 504 and microloan program, the agency's 
surety bond program, SBA's direct disaster loan program, and 
several of our pandemic programs, including the Paycheck 
Protection Program, the COVID EIDL program, and the Restaurant 
Revitalization Fund.
    Collectively, these programs connect creditworthy small 
businesses to capital so that they can start, grow and expand 
resilient businesses. There's never been a better time to start 
a business than under the Biden Harris administration. Since 
2021, we have experienced a small business boom in this 
country, with more than 17 million Americans filing new 
business applications, and this is being led by women and 
people of color. This isn't an accident. It is thanks to 
intentional policy and program implementation, including 
improvements to SBA's loan program. SBA has increased lending 
to Latino owned businesses by 80 percent since the start of the 
Biden Harris administration, and we have more than doubled SBA 
loans to black owned businesses since 2020. We have also 
invested in modern technology like MySBA and the unified 
lending platform, as well as Lender Match to improve the lender 
experience, the borrower experience and reduce loan processing 
times. But one of the persistent problems for small businesses 
has been accessing capital, especially small dollar loans. 
These loans tend to be less profitable and harder to get on the 
conventional market, and small SBA loans, those under $500,000, 
fell by 40 percent during the previous administration. 
Reversing this decline has been one of administrator Guzman's 
top priorities, and beginning in `22 into `23, she modernized 
SBA loan policy with sweeping reforms to strengthen the network 
of SBA lenders and to make it a little easier to work with the 
SBA.
    In August of last year, those changes went live. To make it 
easier to work with SBA, we simplified underwriting 
requirements for loans under $500,000 so that they align with 
industry norms. We removed unnecessary frictions, including the 
complex affiliation rule and complex requirements for 
documenting equity injection. And at the same time, SBA 
established the most robust front end fraud control system in 
the history of the program, something that's been applauded by 
our inspector general. To strengthen the network of SBA 
lenders, we created the new community advantage small business 
lending company, or CASBLC license, bringing 142 mission-based 
lenders into the program, and that included 30 new lenders last 
fall. We also added three new SBLC's for the first time in four 
decades, each of which has a focus on a particular market gap 
in SBA lending that includes small dollar loans, lending to 
native owned businesses and entrepreneurs, and lending in 
persistent poverty counties and rural areas.
    We now have nine months of performance data after the 
implementation of these reforms, and I am pleased to report on 
behalf of Administrator Guzman that the changes are working. In 
fiscal year 2024 to date, SBA has approved 22,000 7a loans 
under $150,000. That puts us on pace to nearly double the 
number of small loans approved in the final year of the 
previous administration. Everyone, that is about 1,000 more 
small businesses getting a small loan every month compared to 
just a few years ago. 7a loans under $500,000 are similarly up 
25 percent, and community advantage lending is up 17 percent 
compared to this time last year. For this progress, we give 
credit to our partners in the lending community. They have 
embraced this opportunity, and they have seized it to put more 
money in the hands of America's small businesses.
    And yet, despite this notable progress, it is still too 
hard for many Americans to access capital. The Federal 
Reserve's 2024 report showed that half of employer firms who 
sought capital did not receive what they needed. So SBA 
continues our work to help. In April, our nation celebrated 
second chance month, and SBA expanded access to our capital 
programs for returning citizens. In May, we expanded the use of 
the 504 loan program for projects that reduce energy 
consumption. And in March, we raised the cap on SBA's surety 
bond program for the first time in 11 years. The president's 
2025 budget establishes a path to deliver on the Small Business 
Act's long standing directive of directly lending to credit 
worthy small businesses who are unable to secure credit in the 
private sector. We have extensive experience with direct 
disaster lending, including successfully lending nearly $3 
billion to over 43,000 borrowers last year. I know there are 
many other issues you would like to discuss, and I look forward 
to your questions. Thank you.
    Chairman WILLIAMS. Thank you. And now we will move to the 
Member questions under the 5 minute rule. I recognize myself 
for 5 minutes. In this year's congressional budget 
justification, I was disappointed to see that plans that the 
SBA requested to establish a direct lending program. The SBA is 
supposed to be the lender of last resort and not compete with 
the private sector. When the Administrator testified on the 
Hill last month, she made it clear they would take an act of 
Congress to set up a direct lending program. So, Ms. Frost, do 
you agree with the administrator that the SBA will not be able 
to set up a direct lending program without Congress 
involvement? And will you commit that you will not take any 
actions to skirt this statutory check on the SBA's ability to 
set up the program in the future?
    Ms. FROST. The Administrator said during her testimony last 
month that we would begin a direct lending business program if 
given the tools to do so. Of course, we have had a longstanding 
direct disaster loan program for decades, including lending 
over $3 billion in the direct disaster loan program last year 
to about 43,000 borrowers.
    Chairman WILLIAMS. The SBA offered two different loan 
options to small businesses during the COVID-19 pandemic, and 
the Paycheck Protection Program offered forgivable loans for 
businesses and was administered with the help of private sector 
lenders. And the COVID EIDL program offered a long term, fixed 
rate loan that were distributed with the SBA. That was the main 
difference. Now, both of these programs helped main street 
businesses stay afloat during the pandemic. But we now need to 
reflect on both of these programs to figure out what do we do 
moving forward on them. So the COVID EIDL portfolio is still 
staying in the government balance sheet, which equates to over 
$400 billion. And when an independent consulting firm looked 
into what to do with this portfolio back in 2021, they said the 
agency should sell all or a portion of the portfolio.
    The agency ignored this advice, and since then, the loans 
have become less collectible and therefore less valuable to the 
private sector. The SBA has requested hundreds of millions of 
dollars from Congress each year to continue servicing these 
loans. So even though we have requested an analysis of the sale 
of the EIDL portfolio for months, we have repeatedly been 
stonewalled and told to just look at the PPP data. Well, we 
know these programs are fundamentally different, and the 
comparisons don't even make sense. So I am going to ask you 
once again, has the agency conducted a new analysis of just the 
EIDL portfolio to determine if it should be sold? And when will 
the committee be able to see the analysis.
    Ms. FROST. So the PPP and the COVID EIDL programs were both 
first of their kind, brand new programs. And so, of course, the 
agency has paid special attention to both programs in terms of 
finding the best way to manage these loans and responsibly move 
the programs forward. We are finalizing our analysis on a 
potential COVID EIDL sale, and we will share that with the 
committee when it is complete.
    Chairman WILLIAMS. Now, when the SBA changed the 7a lending 
rules, Members of this committee repeatedly voice their 
concerns that changing the underwriting standards would lead to 
increased default rates. Now, the data is now starting to come 
in, and it is very troubling. The early default race currently 
sits at 0.86 percent, which is over two times higher than the 
rate one year prior, which was 0.39 percent. So this not only 
increases the risk the taxpayers have to bail out the program, 
but it is a death blow to the businesses that attempted to take 
out a loan to grow their businesses before they were ready. So, 
Ms. Frost, what recourse does the agency have to reverse this 
trend? And how will you ensure that lenders are using more 
stringent underwriting standards to prevent these defaults?
    Ms. FROST. So, using modern technology, we are able to keep 
a constant pulse on our loan programs portfolio and how all of 
those portfolios are performing. I think it is important to 
note that during the pandemic, with a lot of government money 
out in our economy, there was a historically low default rate 
in our pandemic programs. And what you are referencing right 
now, sir, is a regression to the mean, a return to normal, a 
return to what we saw in the pre pandemic baseline of what we 
kind of expect as a default rate for our loan programs. We're, 
of course, keeping an eye on this and other critical metrics. 
And we have strong oversight of all of our lenders, with 
appropriate enforcement tools and supervision to ensure that 
the program stays on track.
    Chairman WILLIAMS. Okay. All right. I yield back my time. 
And now, recognize Ms. Velazquez for her questioning.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. Associate 
Administrator Frost, in response to a September 2023 IG report, 
the SBA rerun the analysis for referrals to the Treasury 
Department for loans for $100,000 or less. Can you explain this 
analysis and why the SBA changed its referral decision?
    Ms. FROST. Absolutely. SBA is a data driven organization, 
and we are going to make decisions based on the best data 
available at the time. The initial analysis that was conducted 
on the collectability of these small dollar loans was conducted 
in early 2022. Actually, before repayment had even started. So 
it was modeling, right. Based on some projections. As the data 
came in, we actually updated that analysis three additional 
times. And the latest analysis in December of last year showed 
that it was likely going to be cost effective if we took that 
final collection step of referring to Treasury. And so we began 
doing so. And as of today, we have referred over 920,000 COVID 
EIDL loans to treasury. That's all of the COVID EIDL loans that 
are in default.
    Ms. VELAZQUEZ. For the record, isn't it true that the IG 
has cleared out that recommendation?
    Ms. FROST. Yeah, there were a couple recommendations. I 
believe they're either cleared or will be cleared shortly.
    Ms. VELAZQUEZ. As you are no doubt aware, there has been 
significant bipartisan concern around the SBA decision to award 
Funding Circle an SBLC license. Can you explain the SBA 
decision to continue to move forward with the award to Funding 
Circle, even after the CEO's announcement to sell its U.S. 
operations?
    Ms. FROST. It was important to note that we had a strong, 
objective and career driven process to select the three new 
SBLC's. And that process actually had three phases. I'd like to 
walk through them quickly. The first was the due diligence 
committee, which were subject matter experts on my team who 
reviewed each and every loan.
    Ms. VELAZQUEZ. Ms. Frost, can you talk to me about just 
Funding Circle? Because I have too many questions. I don't want 
to hear the story of the other two, but specifically the one 
that the CEO made the announcement to sell its operation in the 
U.S.
    Ms. FROST. Absolutely. So all applicants went through the 
same process. But speaking specifically to Funding Circle, they 
were selected for a reason. They met SBA's requirements. They 
had a strong business plan that was going to help fill a market 
gap of small dollar loans across this country. And we are eager 
to work with Funding Circle to deliver on the promises in that 
application.
    Ms. VELAZQUEZ. Okay. Yes or no? Did the company share its 
intention to sell its U.S. operation with the SBA prior to the 
award?
    Ms. FROST. At the time of the award, we were not aware of 
that, no.
    Ms. VELAZQUEZ. You were not?
    Ms. FROST. At the time of they were selected last fall, we 
were not aware.
    Ms. VELAZQUEZ. If Funding Circle had expressed that 
intention, would the SBA have considered that as part of their 
application?
    Ms. FROST. You know, I don't know about a hypothetical 
scenario in which, you know, we would have had different 
information at the time.
    Ms. VELAZQUEZ. It is very real now.
    Ms. FROST. Well, I can tell you at the time that they were 
selected, we were able to review full company financials, 
including audited financial statements, their management team, 
their experience, as well as their business plan.
    Ms. VELAZQUEZ. Yes or no? Now that the SBLC licenses have 
been granted, has the SBA had any discussion with Funding 
Circle about its decision to sell it is U.S. operation?
    Ms. FROST. Yes. My team is regularly in contact with 
Funding Circle and the other SBLC's, including kind of regular 
oversight conversations, onboarding, conversations about 
technical capabilities, et cetera.
    Ms. VELAZQUEZ. Have you had any discussion with Funding 
Circle about its decision to sell its operation?
    Ms. FROST. Yes, we have. My team reached out to them the 
night after their earnings call, when they made that public, 
and we have had several follow on discussions.
    Ms. VELAZQUEZ. Yes or no, has the SBA had any discussion 
with Funding Circle about its potential acquisition by a third 
party?
    Ms. FROST. Yes.
    Ms. VELAZQUEZ. Am I correct in my understanding that the 
other licenses are currently available to be purchased or 
transferred?
    Ms. FROST. Yes, they are. So there's, of course, 14 
historic SBLC licenses. Those have traded hands through private 
sales for over 40 years. And SBA regularly conducts an overview 
of each and every change of control for an SBLC license.
    Ms. VELAZQUEZ. According to Funding Circle, the U.S. 
subsidiary is amply funded. Do you agree with that statement?
    Ms. FROST. During their application, they showed that they 
were amply funded.
    Ms. VELAZQUEZ. When was the last time that the SBA examined 
capital levels?
    Ms. FROST. So I know that we had to actually see money in 
the bank for them before they signed their 750 agreement, which 
was done about a month ago.
    Ms. VELAZQUEZ. A month ago. Funding circle also expected to 
start lending in April. Have they started making any loans?
    Ms. FROST. They have not yet.
    Ms. VELAZQUEZ. Has Funding Circle signed a 750 agreement 
with the SBA?
    Ms. FROST. They have signed, and we would like them to 
start making loans as soon as possible.
    Ms. VELAZQUEZ. Does the SBA have any plans to award any 
additional licenses beyond the three that were just awarded?
    Ms. FROST. We have awarded three at this time, and that is 
our plan.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. I yield back.
    Chairman WILLIAMS. Lady yields back. I now recognize 
Representative Mann from the great state of Kansas for 5 
minutes.
    Mr. MANN. Thank you, Mr. Chairman. Associate Administrator 
Frost, thank you for being here. Your engagement with this 
committee is important. I represent the Big First district of 
Kansas, which is 60 primarily rural counties in the western 
central, a little bit in the eastern part of our state. My 
district is home to more than 20,000 small businesses, and more 
than 80 percent of our employees in the Big First district are 
employed by small businesses, which help drive our economy and 
define the American dream. Unfortunately, I've heard time and 
time again from small business owners in the Big First who've 
been forced to shut their doors and end their livelihoods 
because of an aggressive, overly intrusive, and politically 
charged federal government. Specifically, I've personally met 
with one of several mom and pop firearm dealers in my district 
who the ATF forced to surrender their licenses and their way of 
life and stop contributing to their communities over minor 
cleric or clerical errors, like misspelling a name or using a 
county abbreviation in their documentation, which the President 
has declared zero tolerance for. I am concerned that parts of 
the federal government are being used as a bludgeon to stamp 
out small businesses that may or may not align with 
administration on a given political issue, especially with 
respect to brick and mortar gun stores on main street. This 
should not be a political issue. It is fundamentally un-
American to crush small businesses simply because they do not 
agree with those in power on politics. A handful of questions. 
Are federally licensed firearm retailers eligible for SBA 
loans, and if so, which type of loans are they eligible for?
    Ms. FROST. So, our loan programs at SBA support all types 
of small businesses across all different industries to include 
those who would sell firearms.
    Mr. MANN. Does the SBA have any policy that applies 
additional eligibility requirements to federally licensed 
firearm retailers?
    Ms. FROST. We do not. We have additional policy 
requirements on many different types of small businesses, for 
example, gas stations, but we do not have any on firearms 
firearm sales.
    Mr. MANN. How many loans does the SBA have with federally 
licensed firearm retailers, and are they separately tracked, or 
how do you review, monitor, and oversee those loans?
    Ms. FROST. So we track by NAICS industry code, but I don't 
know offhand, don't have the numbers in front of me in terms of 
how many, maybe two businesses that sell firearms.
    Mr. MANN. Could you maybe get that for me through the NICS 
code? If you could get to my office, the number of SBA loans 
that exist with our mom and pop, our smaller, our small 
businesses that are federally licensed firearm dealers, that 
would be very helpful.
    Ms. FROST. Happy to work with you on any agency requests.
    Mr. MANN. And we can follow up on that. Are you aware of 
federally licensed firearm retailers being singled out in any 
way by the administration?
    Ms. FROST. You know, I am laser focused on giving loans to 
American small businesses, and so that is what my office does 
and where my attention is.
    Mr. MANN. Where have you seen loan growth while you've been 
in your position? In other words, what industries or segments 
have you seen that is growing, specifically in terms of new 
loans that are being generated?
    Ms. FROST. Yes, we have seen tremendous growth in small 
dollar loans. So small dollar loans are up overall during the 
Biden Harris administration and looking this period of this 
year so far to last year, we're up about 25 percent in loans 
under $500,000 to all sorts of industries. Some of the core 
industries that our loans support would be things like 
restaurants and other mom and pop shops in downtowns across 
America.
    Mr. MANN. Great. Thank you, Mr. Chairman. With that I yield 
back. And thank you again for being here this morning.
    Chairman WILLIAMS. Gentlemen yields back. I now recognize 
and welcome back Mr. Representative Phillips from the great 
state of Minnesota.
    Mr. PHILLIPS. Thank you, Mr. Chairman. And greetings, 
everybody. Ms. Frost, I recognize that about 85 percent or so 
of the EIDL and PPP loans that are subject to fraud were made 
under the last administration. So it is hard to hold all of you 
accountable for that. But I want to be prospective and ask 
where the $349 million that's been requested for fiscal year 
2025 to support oversight, how specifically that will be used? 
As detailed as you can provide us.
    Ms. FROST. Yes. There's two things I'd like to highlight 
about our budget request with regard to the kind of pandemic 
programs in the COVID EIDL portfolio. One would be for COVID 
EIDL servicing center, and that is to ensure that we have 
excellent customer service for the millions of Americans and 
small businesses who hold COVID EIDL loans, and that we're 
appropriately recouping that money through repayment and other 
collection activities. And the second thing I'd like to 
highlight is----
    Mr. PHILLIPS. Can I ask? I want to hear the mechanics, the 
how, is it human? And one of my questions is AI. Is there any 
intention or interest in using artificial intelligence to do 
the work of perhaps thousands of people to actually assess 
these loans and identify which ones might be fraudulent?
    Ms. FROST. Yeah, the rest of the--another portion of the 
budget request will go to the OIG to kind of track down these 
fraudsters. We actually, during the pandemic program under the 
Biden Harris administration, stood up a machine learning tool 
to help automatically screen all of the pandemic loans, 
including those done under the previous administration. And we 
used that really as a triage to help kind of best use our human 
led resources for human manual reviews.
    Mr. PHILLIPS. And was that successful?
    Ms. FROST. I believe it was very successful.
    Mr. PHILLIPS. Okay, so any plans to further integrate such 
technology?
    Ms. FROST. I will say there are lots of ideas. We do not 
have any concrete plans at this time.
    Mr. PHILLIPS. Okay. Anyway, so back to the use of the 349 
million.
    Ms. FROST. Yeah. So the two things I'd like to highlight 
there would be the work of our COVID EIDL servicing center 
based in Fort Worth, Texas. And as I mentioned, also requesting 
additional support for the OIG so that they can go after these 
fraudsters. We have referred millions of loans to the office of 
the inspector general. They've got a big job, and they need 
some additional resources so that they're actually able to 
pursue the fraudsters and get this money back for the federal 
government.
    Mr. PHILLIPS. Okay, appreciate that. A question about, you 
know, the decision that was then changed about the loans under 
$100,000, to pursue those. Can you just talk about how that 
decision was first made and why it was changed?
    Ms. FROST. Yeah. So the decision was first made in early 
2022 based on the best data and modeling available at that 
time. But actually, none of the portfolio had entered 
repayment. And so, we have updated that analysis now several 
times. And, you know, the longstanding policy of the agency has 
been to use all cost effective collection mechanisms to recoup 
the money from the COVID EIDL program on all sizes of loans. 
What changed is the analysis showed, based on updated data, 
wasn't previously available, that it would likely be cost 
effective to conduct that final step of collections of 
referring to Treasury. And so we have begun doing so.
    Mr. PHILLIPS. And lastly, with your experience so far at 
SBA, if you could wave a magic wand and change anything that 
you've seen so far quickly, what would that be?
    Ms. FROST. I would love better access to IRS tax data.
    Mr. PHILLIPS. Okay, thank you. We'll get to work. With that 
I yield back, Mr. Chair.
    Chairman WILLIAMS. Gentlemen yields back. I now recognize 
Representative Crane from the great state of Arizona for 5 
minutes.
    Mr. CRANE. Thank you, Mr. Chairman. Appreciate you being 
here. Ms. Frost. Ms. Frost, what is the SBA's number one form 
of capital generation?
    Ms. FROST. You know, I believe that our loan programs are 
powerful tools to support American small businesses.
    Mr. CRANE. I said capital generation. Do you guys generate 
any capital? Ms. Frost, where are you getting all this money 
that you are so excited here today to give out to American 
small businesses?
    Ms. FROST. So, one of the incredible things about our loan 
programs is that they're subsidy neutral. It is one of the most 
impressive public private partnerships in America. And so, we 
partner with our loan, our loan, private sector lenders, and 
through fees and recoupment on our loan program, it actually 
operates at zero subsidy to the taxpayer. It is really an 
incredible partnership.
    Mr. CRANE. So you guys don't have a product or a service 
that we don't know about at the SBA, that you guys are selling?
    Ms. FROST. We----
    Mr. CRANE. Little tchotchkes, hats, t shirts, anything like 
that?
    Ms. FROST. No, we manage our loan programs under my office 
as well as the surety bond program.
    Mr. CRANE. So is it fair to say, Ms. Frost, that you guys 
take money from the American taxpayer and then redistribute it 
to small businesses that you guys deem priority?
    Ms. FROST. I don't think that's quite accurate. However, 
our direct disaster loan program does not operate at zero 
subsidy. That one is subsidized by the taxpayer to help small 
businesses across the country who've been impacted by 
devastating disasters.
    Mr. CRANE. So you guys don't generate any money, right?
    Ms. FROST. No, actually, the programs generate funding 
through fees and then recoupment on loans.
    Mr. CRANE. Okay, Ms. Frost, what would you have to say to 
Americans that are paying their taxes, that fund these lending 
programs that aren't starting, small businesses that feel like 
they're being left out and they don't benefit at all from them?
    Ms. FROST. I think that the entire economy and the entire 
country benefits from a vibrant small business economy. You 
know, if you are visiting restaurants, if your child goes to 
childcare, you know, if you kind of do recreational activities, 
you are benefiting from America's small businesses, and I am 
incredibly proud to support them.
    Mr. CRANE. Yeah. Do you feel like they're benefiting from 
the inflation that the record high inflation that we're seeing 
right now, Ms. Frost?
    Ms. FROST. I believe inflation's about 3 percent right now, 
and it is fallen significantly.
    Mr. CRANE. Yeah. Okay. Ms. Frost, how much was the SBA 
defrauded during COVID?
    Ms. FROST. The agency's best estimate on pandemic program 
fraud is $36 billion.
    Mr. CRANE. $36 billion. I've heard the numbers are quite a 
bit higher than that, to the tune, there was about $200 billion 
worth of fraud.
    Ms. FROST. So some confusion, there is, there's a 
difference between what we'd consider potential fraud and then 
likely fraud. And the way to best think about this is it is 
kind of like a metal detector, right? When you first walk 
through a metal detector and it goes off, you need to look into 
it a little further, but you don't actually know if it is 
something dangerous or if it is just a big belt buckle. So that 
potential fraud is like that metal detector going off. SBA 
found over $400 billion in potential fraud through our 
automated screening. That was the first of our four step 
process. Our second step was using data analytics, including 
that machine learning tool I just mentioned, to refine that 
fraud down or refine the potential fraud down so we could 
conduct manual reviews. That was our third step. We conducted 
millions of manual reviews on pandemic loan programs. And then 
the fourth step is referring that over to OIG. So you can think 
about it much like the metal detector. Maybe the metal 
detector's going off a lot, but you have to actually 
investigate each and every one to get a sense of what's real 
and what's just a big belt buckle.
    Mr. CRANE. Okay, so your claim is $36 billion. Is that what 
you said?
    Ms. FROST. That's the agency's best estimate, yes.
    Mr. CRANE. Okay. Is there any chance that you guys will 
recoup any of that?
    Ms. FROST. You know, so recoupment for fraud is done 
through the law enforcement community. That starts with the 
SBA, Office of the Inspector General. It includes the Secret 
Service, the Department of Justice, et cetera. And I know the 
President's budget requested additional funding for the SBA OIG 
for exactly that purpose, to go after the money.
    Mr. CRANE. Ms. Frost, you said in your testimony, under the 
Biden Harris administration, there has never been a better time 
to start a small business. Is that correct?
    Ms. FROST. That's correct.
    Mr. CRANE. The Bureau of Labor Statistics reports that 
since Biden took office, we have $7 trillion added to national 
debt, 36 consecutive months of inflation above 3 percent, 
producer price index is 19 percent increase. Consumer price 
index, 19.4 percent increase. Credit card interest rates, 20.75 
percent increase. Household debt for every American is $18,100 
increase in taxpayer, and then 100 million working age people 
not participating in the workforce. Do you still stand by that 
statement?
    Ms. FROST. I do. And I think that the data supports that. 
Americans across this country are starting businesses. The past 
three years have been the three highest business start years on 
record, and we have had over 17 million new business filings 
since the start of the Biden administration.
    Mr. CRANE. Well, what about those statistics I just read 
you?
    Ms. FROST. I think it is incredibly difficult to be a small 
business owner in America. And I admire each and every one of 
them for the tenacity that they have to continue working, 
regardless of the condition, to support their communities.
    Mr. CRANE. Thank you, Ms. Frost. Thank you, Mr. Chairman. I 
yield back.
    Chairman WILLIAMS. Gentlemen yields back. I now recognize 
Representative Pappas from the great state of New Hampshire for 
5 minutes.
    Okay, he's not here. All right. We now recognize 
Representative McGarvey from the great state of Kentucky for 5 
minutes.
    Mr. MCGARVEY. Thank you, Mr. Chairman. Thank you for being 
here, Ms. Frost. Like Ranking Member Velazquez and so many of 
my colleagues here today on this committee, I remain focused on 
increasing capital and access to capital for those who lack it, 
and ensuring that everyone does have that chance at the 
American dream of starting a business, of having it be 
successful. I'd like to spend some time today on the changes 
the SBA made to lending programs and its April 2023 rules on 
business lending. The finalized affiliation and lending 
criteria rule removed the concept of control of one entity over 
another as a basis for finding affiliation, arguing that the 
concept of control has proven particularly burdensome for 
applicants and lenders to understand and implement. As part of 
that change, the SBA stopped publishing its franchise 
directory. About a fifth of SBA lending goes to franchising, 
and SBA Capital is an important source of startup funding for 
franchisees. So Associate Administrator Frost, now that the 
rule is final and the SBA no longer publishes the franchise 
directory, have you seen a change in the speed of approval for 
franchisee lending applications?
    Ms. FROST. I would need to go check with the data to look 
specifically at the speed for franchisees, but I can tell you 
that the turn times in our loan processing centers are down. 
They're very quick right now, and I am very proud of the team.
    Mr. MCGARVEY. Awesome. And has the SBA's decision to 
eliminate the directory led to, I should ask, what positive and 
negative changes have occurred as a result of the SBA's 
decision to stop publishing the franchisee directory?
    Ms. FROST. I think our changes on the affiliation rules 
should be celebrated as a way that government has reduced 
unnecessary friction in our loan programs. You know, the 
concept of affiliation is this inherently governmental concept 
we developed for the SBA loan programs. And our lenders would 
constantly say, you know, they had to hire a team of lawyers to 
work through it. Now it is clear, it is based simply on 
ownership. Who owns the business and who does the business own? 
A business owner can understand it. Our lenders can understand 
it, and it is clear for everyone involved.
    Mr. MCGARVEY. From serving as a legislator for a long time, 
I know that sometimes even the best intended policy has 
unintended consequences. Have you seen any unintended 
consequences from this change?
    Ms. FROST. We have not at this time, no. Small dollar 
lending is up tremendously since last year, about 25 percent 
for loans under $500,000.
    Mr. MCGARVEY. Thank you. Several of my colleagues and I 
have expressed concern to Administrator Guzman about the SBA's 
decision to award an SBLC license to Funding Circle. When she 
was before this committee in March, there were significant 
questions about Funding Circle's capital, adequacy, and 
performance prior to them obtaining the SBLC license. Are we 
setting a precedent where lenders with inadequate capital 
levels and significant losses can be let into that program?
    Ms. FROST. I think it is important to note that in 
selecting the new three SBLC's, including Funding Circle, we 
reviewed full financial audited statements for each of the 
applicants to include Funding Circle, and they were 
appropriately capitalized. Now, every SBLC needs to meet our 
standards, and should there be any change in ownership or 
control for Funding Circle or any other SBLC, we review the 
kind of buyer, if you will, to ensure that they still met our 
standards. And we have conducted reviews like that as these 
previous licenses changed hand in the private markets over 40 
times over the past few decades.
    Mr. MCGARVEY. And as you guys have looked at this and 
what's happened, have there been any discussions about the SBA 
changing its metrics when considering applications for SBLC 
licenses going forward.
    Ms. FROST. I believe we had a strong and objective process 
for selecting our SBLC's. Kind of had three phases. The first 
phase was the due diligence committee, where subject matter 
experts on my team reviewed each and every application that 
came in, and they basically binned those applications as 
recommended for consideration or not recommended. Then it went 
to phase two, which was the review committee that included 
experts from around the agency to include legal, like our CFO's 
office, the Office of Investment, and we discussed and debated 
the recommendations of the due diligence committee. Right. You 
ask questions, you bring in other experience. And then finally, 
the third phase was the license committee vote. That was five 
career Members of our senior executive service, and they voted 
unanimously to select the three SBLC's that were selected last 
fall, which are Arkansas Capital Corporation, McKinley Alaska 
Growth Capital, and Funding Circle. And so that's kind of our 
process. I think it was a very strong, career led process, and 
I am proud of the team.
    Mr. MCGARVEY. Thanks. And the last 30 seconds, just sort of 
an open ended question. What would you like to see from this 
committee that you would think help continue to grow small 
businesses in this country?
    Ms. FROST. I think there's a lot that we can continue to do 
to improve our loan programs. We're regularly talking with our 
lenders and Members of your staff to do that. So some of the 
areas that we're excited to continue focusing on include what 
can we do for refinance capability within the 504 loan, and 
what can we do to improve line of credit products under our 
loan programs overall.
    Mr. MCGARVEY. Thank you, Mr. Chairman. I yield back.
    Chairman WILLIAMS. Gentlemen yields back. I now recognize 
Representative Davids from the great state of Kansas for 5 
minutes.
    Ms. DAVIDS. Thank you, Chairman. And thank you to you and 
the Ranking Member for holding this hearing today. And thank 
you to Associate Administrator Frost for being here to testify. 
Sorry I am short. I definitely appreciate the work that you and 
the folks at the Small Business Administration are doing to 
help our nation's entrepreneurs. You know, one of the top 
concerns we hear about from small businesses in our districts, 
and you've already heard it today, is access to capital. And I 
know your office is absolutely critical in ensuring that our 
main street businesses have the lending opportunities that they 
need to succeed. And with that in mind, I do want to touch on 
the Community Advantage Program.
    And as folks know, this is a mission based lending program 
that was transitioned into the small business lending company 
program last year. In doing so, the SBA is attempting to 
support lenders that are better able to reach underserved 
entrepreneurs. That includes veterans, women, folks in rural 
areas, native owned small businesses. And this is with smaller 
dollar loans. So I am curious if you could tell me, to date, 
what progress have these mission based lenders made in 
improving access to capital for the underserved entrepreneurs 
that you all are trying to reach? And what kind of generally 
are SBA's goals for the community advantage lenders in the 
coming year or so?
    Ms. FROST. Thank you for bringing up the Community 
Advantage Program. Mission based lending holds a special place 
in my heart, and I am proud of the that we did last year to 
create the community advantage small business lending company 
license, where, as you mentioned, we brought 142 lenders onto 
that license so they can now conduct 7a lending that included 
30 new mission oriented lenders last year. We have been clear 
that our top priority this year is getting those 142 lenders up 
and settled in the program. We developed a strong training. It 
was a 16 hours training, I believe, for each of them, and they 
have been working through it. I think we're either done or very 
nearly done with all of them on that. And community advantage 
lending is also up about 17 percent through quarter two of this 
year compared to the same time last year. We believe that the 
community advantage lenders are embracing the permanency of 
this license such that they're able to plan technology, 
recruitment and funding to better support these mission driven 
loans in the hardest to reach communities around the country.
    Ms. DAVIDS. And then are there any aspects of that that you 
think that we probably need to know about as you move forward 
with continuing to implement and get the training going and 
that sort of thing, are there any issues that you are seeing 
yet or anything that we should be aware of as we plan?
    Ms. FROST. I think that our smaller lenders and our mission 
based lenders face a lot of challenges, including kind of 
finding the business, bringing them in, as well as securing 
sources of funding for lending. So SBA is always interested in 
how we can support smaller lenders, and especially our 
community driven lenders in liquidity. So just having the money 
to conduct the loans, that's something that we're really 
interested in.
    Ms. DAVIDS. Okay, thank you. And then I know in your 
testimony, you mentioned the SBA's revamped Lender Match tool, 
which includes the community advantage lenders. And the tool is 
important in connecting small businesses to SBA backed lending 
opportunities. But I do often hear from our kind of local small 
business owners and entrepreneurs that the SBA's tools and 
programs can seem daunting or complicated, which you actually 
kind of spoke to earlier. I am just curious how SBA has 
incorporated that feedback and has been reworking the Lender 
Match tool or other systems, if there are other systems that 
you've been reworking, to help those platforms specifically for 
access to capital work better?
    Ms. FROST. So we relaunched Lender Match this past spring 
under the MySBA platform. Lender Match is an incredible tool. 
About 50,000 small businesses each month come into Lender Match 
looking for capital, and they can match with about 1,000 SBA 
lenders, including, as you mentioned, over, I believe, 250 or 
so community based lenders who can provide those loans. We kind 
of serve as the matchmaker through this process, and our 
relaunch this spring had tremendous improvements for our 
smaller lenders and our community driven lenders. Most notably, 
we went from what we'd consider a cold lead to a generated 
lead. So we ran all these small businesses through our risk 
mitigation framework to check for core elements of fraud and 
eligibility. Some of the big lenders could already do that sort 
of thing on their own, but now everybody gets that information, 
and we now have a 48 hour window for all of our lenders to look 
at the kind of leads coming in from these businesses and act on 
them. Previously, it was a kind of quickest draw wins, or at 
least quickest draw gets an advantage, which, of course, would 
advantage larger lenders who were able to hire staff on that 
topic. Now, everyone has the same 48 hours window.
    Ms. DAVIDS. Thank you. I appreciate that. We might follow 
up a little bit after this, but I yield back.
    Chairman WILLIAMS. The lady yields back. And I now 
recognize Representative Meuser from the great state of 
Pennsylvania for 5 minutes.
    Mr. MEUSER. Thank you very much, Mr. Chairman. Thank you, 
Ms. Frost. Appreciate you being here. So, there are some 
lenders who feel that they are inaccurately or inappropriately 
not receiving their funding for their guaranteed loans that 
they extended. As you and I had a conversation, and they feel 
as if they followed the four requirements which you outline and 
know extremely well. Confirm receipt of bar of certifications, 
confirm receipt of information that a bar was eligible, confirm 
the dollar amount, follow applicable BSA requirements. So, are 
you aware that there are lenders who feel they've fully 
complied with these four requirements, but are seeing denials?
    Ms. FROST. So I am aware of these lenders, and I've 
actually had one on one or private conversations with many of 
them. But I think it is also important to note that SBA had 
clear underwriting standards for the PPP program. They were 
significantly less than the underwriting standards for our 
traditional 7a loan program, as it was an emergency program. 
But those underwriting standards were published in the IFR, the 
Interim Final Rule, in April of 2020, and stayed consistent. 
And we are ensuring that all of our lenders met those standards 
for underwriting before granting guarantee purchase.
    Mr. MEUSER. But there are some that feel that the 
proverbial goalposts have moved and the documentation 
requirements have somewhat changed. Can you commit to honoring 
the guarantees made to lenders who complied with the 
requirements laid out in statute and regulation or in the FAQ's 
at the time the loan was made?
    Ms. FROST. We will absolutely honor the guarantee for all 
lenders who met the requirements for the program.
    Mr. MEUSER. Sure. Okay. So what is the timeframe for some 
of these disputes?
    Ms. FROST. So when we're conducting a guarantee purchase 
review, it is depending on the risk rating of the file. It is a 
loan by loan review, and we request documentation from our 
lenders in many instances so that we can continue to move 
through the loan file. So we need to work in partnership with 
our lenders. They need to submit those documents to us in a 
timely fashion, and our team needs to review them quickly, and 
our team stands ready to conduct that work.
    Mr. MEUSER. Work if we know of some very serious issues 
where some lenders may go out of business, or so they claim, 
can we make specific requests to you, and can you provide to 
them in detail what it is you need from them in order to 
properly assess their funding?
    Ms. FROST. Absolutely. We have been consistent and clear 
about what meets the standards for underwriting for the PPP 
program in our guarantee purchase review, and we will pass that 
information along to you and your team, as well as any lenders 
who are seeking it.
    Mr. MEUSER. And can that be done within like a three to 
four week period if we were to submit that to you?
    Ms. FROST. We can get that done quickly.
    Mr. MEUSER. Okay, that's great. So, changing subjects. The 
CEO of Funding Circle, one of the three companies to be awarded 
a new SBLC license, reported two months ago that they basically 
couldn't handle it wasn't worth it, et cetera. The question is, 
is it common practice? And I assume it is not common practice, 
but why would the SBA approve an SBLC for a company with 
mounting losses and unwillingness to provide capital, as 
Funding Circle has disclosed?
    Ms. FROST. So it is actually pretty common in the financial 
industry for businesses to take a loss for a couple years 
during, for example, a growth period, or at the start of a new 
loan fund program. So losses for a specific period is not in 
and alone itself considered a huge negative indicator. You do 
want to, of course, ensure that the company is properly 
capitalized, that they have appropriate loan loss reserves, and 
that they have prudent lending standards. Funding Circle did 
meet all of those requirements.
    Mr. MEUSER. Okay. But it didn't work out for them very 
well.
    Ms. FROST. I mean, I know that Funding Circle has expressed 
they may sell, but that may happen and it may not.
    Mr. MEUSER. So we have had questions about Michigan 
registration initiatives in cooperation in partnership with the 
SBA. Do you feel, A, that that's appropriate, and B, are there 
taxpayer funds being utilized to register voters, specifically 
in areas that seem to benefit one party over another?
    Ms. FROST. So I should be clear that I do not work 
specifically on this issue. But I understand from colleagues 
that this is simply providing information, much like a DMV, 
motor voter law, kind of just a link on our website.
    Mr. MEUSER. Yeah, it is more than that. I mean, there's 
active engagement, there's kiosks, there's talk. There's 
certainly, even if it is a dollar, would you agree that even if 
it is $20 of taxpayer money, that is inappropriate?
    Ms. FROST. Sir, as I mentioned, I don't work on this 
program. From what I understand, it is simply helping very, 
very busy small business owners get easy access to the state, 
kind of nonpartisan place to register to vote.
    Mr. MEUSER. I am over my time. Thank you, Mr. Chairman. I 
yield back.
    Chairman WILLIAMS. Gentlemen yields back. I now recognize 
Representative Scholten from the great state of Michigan for 5 
minutes.
    Ms. SCHOLTEN. Thank you so much, Mr. Chair. And thank you 
to Associate Administrator Frost for coming today. In your 
testimony, you discussed several ways in which the SBA, of 
course, is working to increase access to capital, something 
very important to me. My colleague, Mr. Meuser, and I just 
passed a great bill addressing this issue. In regards to 
establishing services such as the My SBA loan portal, how do 
these technologies assist small businesses who need more 
support, and are there improvements you are looking to make to 
these systems moving forward?
    Ms. FROST. So the MySBA platform is an incredible kind of 
one stop shop or single entry point to SBA that will eventually 
cover all of our programs. We're kind of bringing them on, you 
know, as we're able. And so, for example, our disaster loan 
program is now on the unified lending platform under MySBA, 
this provides a modern, mobile first application for our 
customers so that small businesses are able to interact with 
the SBA using modern tools. They can do things like paying 
online, setting up recurring payments. They can make kind of 
some basic servicing actions, do that on their own in the app, 
and we have easy access to a messaging portal and our customer 
service center if they need a little more help.
    Ms. SCHOLTEN. That's great. In your testimony, you also 
talk about significant progress that the SBA has made in making 
small dollar loans more available. However, you also note that 
half of the employer firms who applied for more capital didn't 
receive what they needed. Can you speak to any common issues 
that cuts across this group of firms and what prevented them 
from receiving the capital they requested? And are there areas 
in which the SBA can expand support to these businesses? What 
is it doing to address it, in other words?
    Ms. FROST. Yeah, so the report that I mentioned where half 
of the businesses seeking funding did not receive it. To be 
clear, that wasn't just SBA loans. That was a Federal Reserve 
study, their employer firm study they do every year that looks 
at small businesses across America seeking access to credit 
through a number of different means. I actually think that the 
SBA loan products play a critical role in expanding access to 
credit overall in this country, and I want to make sure every 
business knows about them and our Lender Match tool as an easy 
way to get connected to SBA lenders.
    Ms. SCHOLTEN. Making sure that small businesses know about 
the products that are available is also a passion of mine. We 
encounter numerous businesses all the time saying, you know, I 
didn't know about that. What are you doing to make sure that 
they're aware specifically about these products?
    Ms. FROST. So my team works closely with several other 
teams at SBA who support getting the information out about SBA 
services and programs. That includes our field office. We have 
68 field offices around the country, our Office of 
Entrepreneurial Development, who works in close partnership 
with resource partners around the country to reach America's 
small businesses and support them through SBA programs and 
through all other programs available to support small 
businesses.
    Ms. SCHOLTEN. That's great. Lastly, I really appreciate the 
work that the SBA has done to prevent instances of fraud, 
including implementing new technologies to better provide 
screening and close collaboration with the Inspector General 
and other law enforcement agencies. It is also police week here 
on the Hill, and I wonder if you could tell us more about your 
work with law enforcement agencies to combat fraud. And are 
there ways that Congress can help support this work?
    Ms. FROST. The way that our risk mitigation framework now 
works is that when the business submits information, we use a 
number of private sector and public databases, private sector, 
excuse me, and public, like government only sometimes 
databases, to check the information provided to validate it 
against these third party databases. Basically, to check that 
it is true and correct. We then are able to move those loans 
forward that are either if there's a hold, we're able to clear 
it, or we're able to say that there's no potential fraud 
concern. This is all done pre origination. And this risk 
mitigation tool was launched for our business loan programs for 
the first time ever last August. You know, traditionally, it 
was the lender's responsibility only to kind of prevent fraud. 
SBA thinks that we are stronger when we work together in 
partnership with our lenders, so they're going to keep doing 
their part. Now we're stepping up to do our part. And of 
course, anything that looks potentially fraudulent, or likely 
fraudulent, we refer to the office of the Inspector General. 
And the president's budget request did request additional 
funding for OIG so that they can go after the fraudsters, 
especially those who committed pandemic fraud.
    Ms. SCHOLTEN. Thank you. I yield back.
    Chairman WILLIAMS. Gentlelady yields back. I now recognize 
Representative Stauber from the great state of Minnesota for 5 
minutes.
    Mr. STAUBER. Thank you, Mr. Chair and Ranking Member 
Velazquez. Ms. Frost, we have a Minnesota business supporting 
227 good paying jobs that has had a miserable and disappointing 
experience with the SBA's PPP audit and appeals process. The 
primary frustration with this process has been the lack of 
clarity and communication from the SBA throughout the entire 
process. Not only has the SBA failed to respond to two letters 
submitted by impacted organizations, but the SBA has also 
failed to respond to two elected officials from the state of 
Minnesota, Senators Klobuchar and Congressman Emmer, 
respectively. Ms. Frost, what is the SBA's procedure for 
following up on inquiries made by appealing parties?
    Ms. FROST. So, we, of course, take all agency requests from 
Members of Congress and other elected officials seriously. You 
know, my office responds to them, and then, of course, it moves 
through an interagency concurrence process. So we work closely 
with our colleagues on any of those requests.
    Mr. STAUBER. Okay, so the business requested a response. 
Senator Klobuchar requested a response, and so did Congressman 
ever. No response. Can you commit today you'll work with them?
    Ms. FROST. Absolutely. Happy to work on any agency 
requests. And if you pass along the name of that small 
business, I will get it to my team so that we can look into it.
    Mr. STAUBER. Thank you very much. Now, on to something. 
Another concern that I have with the SBA's procedures. Ms. 
Frost, when was the last time that you talked to Patrick Kelly?
    Ms. FROST. I had lunch with Patrick a few months ago.
    Mr. STAUBER. A few months ago? Explain. Two months ago? 
Three months? Do you remember?
    Ms. FROST. I don't remember offhand.
    Mr. STAUBER. A couple months ago?
    Ms. FROST. Yeah. Maybe December or so.
    Mr. STAUBER. Okay, December. Has Patrick Kelly spoken to 
you about any policy changes since he departed from the SBA?
    Ms. FROST. You know, Patrick and I don't speak regularly, 
but when we had lunch, we talked primarily about our families. 
I have a young daughter, and he has two children.
    Mr. STAUBER. So you didn't talk about any policy changes 
since he departed from the SBA?
    Ms. FROST. We talked about some of the work that we had 
done together, but we primarily focused on personal matters.
    Mr. STAUBER. Okay. Has Patrick Kelly spoken to you about 
Funding Circle in any capacity since he departed from the SBA?
    Ms. FROST. No.
    Mr. STAUBER. Do you know what Funding Circle is?
    Ms. FROST. Yes, of course. Funding Circle is one of our new 
SBLC's.
    Mr. STAUBER. One of the three new ones, correct?
    Ms. FROST. That's correct.
    Mr. STAUBER. That he lobbied for? Correct.
    Ms. FROST. I am unaware of any contact between Patrick and 
Funding Circle, or any connection.
    Mr. STAUBER. Has Patrick Kelly ever given you or any 
employee at the SBA either political or career, any 
instructions or advice relating to Funding Circle receiving an 
SBLC license?
    Ms. FROST. No.
    Mr. STAUBER. Not at all. Not at all?
    Ms. FROST. No, not at all.
    Mr. STAUBER. Are you aware of Patrick Kelly working with 
Funding Circle in any capacity?
    Ms. FROST. I am unaware of any connection between Patrick 
and Funding Circle.
    Mr. STAUBER. Are you aware of any type of consulting 
agreement that Funding Circle has with government forward where 
Mr. Kelly is currently employed?
    Ms. FROST. I am unaware of any connection between Patrick 
and Funding Circle.
    Mr. STAUBER. Per Funding Circle's own statements, it 
intends to sell its license, as it has intended to do since 
before the SBA officially awarded it. Since the agency 
continues to ignore Congress, today, I feel compelled to pass 
on a clear warning. If the license ends up in the hands of a 
former SBA employee, there will be an investigation into such a 
clear ethical violation. I hope we will not have to provide 
such oversight. And with that, Mr. Chair, I yield back.
    Chairman WILLIAMS. Gentleman yields back. I now recognize 
Representative Gluesenkamp Perez from the great state of 
Washington for 5 minutes.
    Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chair. Associate 
Administrator Frost, thank you for being here today. As my 
colleagues have heard me share many times before in committee, 
before coming to Congress, I owned an auto repair and machine 
shop with my husband, and we utilized an SBA 504 loan to buy 
our shop. And that program was truly a vital source of capital 
for me, and I know it is for many other small businesses 
working in the trades. I will say we did have a hell of a time 
going through the process. When Administrator Guzman was here 
in January, I asked her about what the agency was doing to make 
the experience more navigable for first time entrepreneurs who 
don't have a year to spend on the process. I am hoping you can 
provide an update on the agency's enhanced platform now that it 
is up and operational. How has it enhanced customer service? 
And how are you fielding a Representative sample of input from 
all sizes of businesses? Mom and pops up to the big guys, not 
just the folks that have a compliance department or 
administrators. And how would that feedback be incorporated?
    Ms. FROST. Thank you for your question. I share your 
passion for making our programs accessible and easy to 
understand. And of course, the changes that we introduced last 
August, we believed really reduced some of these unnecessary 
frictions that made the program so complex, especially for 
first time folks come in to get a loan, or for anyone looking 
for those smaller dollar loans that, of course, often are 
underrepresented. Small businesses are first time startup 
businesses or businesses in the trades, rural businesses, et 
cetera. And so we're really proud of those reforms. We have 
seen small dollar lending respond, and we're up about 25 
percent compared to the same time last year. Now, I think 
there's still more good work to be done on this and would be 
happy to work with you and your team on how we can further 
improve the loan programs.
    Ms. GLUESENKAMP PEREZ. Are you aware of how applicants 
feedback might be incorporated or responded to, and how it is 
fielded? How is that feedback solicited?
    Ms. FROST. So primarily for our business programs, our 
business loan programs, they work through private sector 
lenders, or for the 504 program through our CDC partners, our 
community development company partners. And so each and every 
one of them will have kind of different setups, different 
experiences on how they interact directly with the small 
business borrower. But we believe that setting the conditions 
for success will be kind of reducing those unnecessary 
frictions for the program. Right. If the lender can then better 
understand the program, they can better explain it to the small 
business. And of course, my team regularly works with lenders. 
We're actually now setting up the first ever small business 
lending advisory council that we can connect with the lenders 
directly. And importantly, on that advisory council, we are 
reserving seats for Members of the small business community to 
be there, as you are mentioning. Hopefully all sizes of small 
businesses can be represented so we can hear directly from them 
as well.
    Ms. GLUESENKAMP PEREZ. Yeah, I would love the opportunity 
to engage on how those positions will be allocated, that it is 
not just like cute shops or big guys, that it is truly machine 
shops, auto shops, the kind of nuts and bolts of keeping our 
economy rolling. And thank you for your work. I am wondering if 
you could share how the updated tool will make it easier for 
borrowers to connect with lenders and compare rates for SBA 
backed loans. Any insight into how this might be helpful for 
rural entrepreneurs?
    Ms. FROST. Yeah, so I think that Lender Match our tool to 
support our small business borrowers and connect them with SBA 
lenders is incredibly important for our rural small businesses 
as I am sure you know, there are so many more banking deserts 
in this country about 1,700 last report that I saw, and that's 
especially true in the rural areas of this country. But now, 
anyone you know, you can, if you can access the Internet, you 
can go to Lender Match, you can put in some simple information 
about your business and the type of capital you need, and you 
are matched with up to, there's 1,000 participating lenders who 
can respond to that request. Some of the improvements we just 
made on this platform include bringing it under the MySBA 
platform. So again, that's our one stop shop. We're moving 
everything under that umbrella and also making it such that all 
of our lenders have the same 48 hours window before they're 
able to kind of click into support or opt in to a lead from a 
small business. That means from a small business perspective, 
and this is the most important perspective, after two days, I 
can log on and I can see all of the lenders who I've matched 
with, and I can select which lender I'd like to potentially get 
more information from and potentially get a loan from.
    Ms. GLUESENKAMP PEREZ. Do you anticipate any particular 
impacts on rural communities access to capital through that?
    Ms. FROST. I certainly anticipate that rural communities 
will use this tool, and I am excited to look into what we see 
and how the changes from the spring have hopefully impacted 
that program.
    Ms. GLUESENKAMP PEREZ. Okay, thank you so much. I yield 
back.
    Chairman WILLIAMS. Gentlelady yields back. And I now 
recognize Representative Maloy from the great state of Utah for 
5 minutes.
    Ms. MALOY. Thank you, Mr. Chairman. Hi. In preparation for 
this hearing, I reached out to some of the local chambers of 
commerce and regional banks in my district that spent a lot of 
time working with small businesses. And a lot of their mission 
is to try to get small businesses up and running and stable to 
help these economies in rural Utah. And when I reached out and 
asked about this hearing, I got a lot of complaints about the 
SBA, and I've grouped them into a couple of broad categories 
that I want to talk about.
    So with the Chambers of Commerce, one in particular had an 
MOU with the SBA for trying to get SBDC assistants to a lot of 
the new and emerging small businesses. And they have gone 
through a lot of hurdles and hoops and made sure that people 
are registered with the right agencies, and they filled out the 
right paperwork, and then they're not getting a lot of funding. 
And so, it is been a frustrating experience for them that they 
were really enthusiastic about having this partnership and 
thought it was going to be really helpful and now they feel 
like it is a bureaucracy without a lot of benefit.
    And then with the regional banks that specialize in lending 
to small businesses, they had a similar complaint. They feel 
like the SBA programs have a high cost of participation, a lot 
of bureaucracy, a lot of hurdles, and then not a lot of benefit 
in the end. And so they don't feel like they can recommend them 
to their customers. But then with things like EIDL loans, the 
SBA is directly competing with these same banks that are there 
and the communities, trying to make sure that our main streets 
are vibrant. And then they're competing directly with a federal 
agency that's supposed to be helping and isn't really helpful. 
And so I am going to start with the banks. How does the SBA 
view its role in relation to private banks, especially 
considering direct lending initiatives that compete with 
private sector loans?
    Ms. FROST. I believe that our business loan programs are 
one of the most incredible public private partnerships in this 
country, where we partner, we SBA partner with the private 
sector lender. They, of course, deliver the loan, and we 
provide a government guarantee on that loan. I know you 
mentioned some of the lenders you spoke with said the programs 
were cumbersome, a little clunky, and that's feedback we have 
been receiving for decades at SBA. We did take action on that 
last year to reduce some frictions, especially for smaller 
dollar loans. But I believe there's more work to be done on 
that as well.
    Ms. MALOY. So what's the best way for lenders in Utah to 
give feedback to the SBA? Because they're right there on the 
ground. They're seeing what's not working. How do we get their 
feedback to you so that we can improve these programs?
    Ms. FROST. Any lender who's interested in learning more 
about SBA loans, please send them my way to my team. We do have 
regularly quarterly calls on our key business loan programs 
where folks can submit questions, so lenders can submit direct 
questions. We have several different email addresses for each 
loan program where they can submit questions. And my team holds 
regular webinars providing information out to the lender 
community.
    Ms. MALOY. Okay, I am going to have my staff follow up with 
you as soon as we're done here, because I think they would jump 
at this opportunity because they're really frustrated with how 
it is going. And then for the Chambers of Commerce, how does 
the SBA evaluate the effects, effectiveness of partnerships 
like this, where you have an MOU with an organization and 
you've got mutual goals, but the smaller entity, the rural 
Chamber of Commerce, or the local Chamber of Commerce doesn't 
feel like it is mutually beneficial anymore. The SBA is a large 
federal entity. It is hard to adjust. How are you evaluating 
how those partnerships work and adjusting so that they work for 
local chambers?
    Ms. FROST. So I am not familiar with the particular MoU you 
are speaking about. And actually, the SBDC program is largely 
run out of the Office of Entrepreneurial Development. So a 
different office at SBA. I'd be happy to refer those questions 
over. But I can tell you I recently took a trip to Alaska to 
visit one of our new SBLC's, McKinley, Alaska growth capital. 
And there I also had the opportunity to visit some other 
lenders who support rural communities. They've got a lot of 
rural communities in Alaska, much like in Utah, as well as the 
rural communities and small businesses out there. And so, I do 
have some good firsthand perspective on how hard it can be to 
serve rural communities. And SBA is extremely interested in 
helping our capital programs better serve those small 
businesses.
    Ms. MALOY. Well, from the people I represent, there's a lot 
of frustration that the potential is there for these to be 
really helpful, but the reality, it just isn't panning out. So 
I am going to have my staff follow up with you. Let's see if we 
can get some of these things fixed. Thank you for your time 
with that, Mr. Chairman. I yield back.
    Chairman WILLIAMS. Lady yields back. And now I recognize 
Representative Landsman from the great state of Ohio for 5 
minutes.
    Mr. LANDSMAN. Thank you, Mr. Chair. Thank you for your 
testimony and all your work today. I just have a few questions. 
I mean, you know, the paperwork issue is a big one, and I am 
glad you are working on it. I wonder if you, we have a little 
more time, if you could just talk a little bit more about what 
you have found to be the biggest barriers or the feedback that 
you get on these quarterly calls or wherever. In terms of just 
the bureaucracy around this, obviously we want to avoid fraud 
and we want to make sure the loans get to the right people. We 
also want to make sure that this is something that everyone can 
access, particularly those who don't have big staffs. Right. 
And so, I am curious about what you've heard and what in an 
ideal world, you would do to address those concerns. And then 
as part of that, what help do you need from this committee?
    Ms. FROST. So, as I mentioned, we are kind of regularly 
engaged with the SBA lender community, where we both share 
information and receive input back from them. So just as an 
example, last week there was a lender conference here in 
Northern Virginia that I was able to attend, as were several 
Members of my team. This one was focused primarily on our 504 
loan program, and we talked a lot about different restrictions 
around refinance opportunities in the 504 loan program, how we 
may be able to expand that. And that's something that my team 
is looking very closely at and plan to do in the near term.
    I've also started something with my team where when we're 
launching a new product or we're moving forward with a new 
capability, we're doing our user acceptance testing with some 
of our smaller, often community based lenders. So, for example, 
I've mentioned several times during this hearing that we 
launched an update to Lender Match. We worked with some of our 
CA SBLCs to kind of try that before we did the full launch. 
Right, just to get their input. Similarly, we're working to 
modernize what's called 1502 reporting, which is our monthly 
report coming from the lenders on the status of their loan 
portfolio. And we have engaged with some of our smaller and 
community lenders to get their feedback on that product as 
we're finalizing the build around it.
    Mr. LANDSMAN. Thank you very much. Can I just ask you about 
the unified lending platform? It seems to me that the 
technology, and I know this has come up already to better match 
potential borrowers with options, opportunities to do that with 
without a ton of staffing or paperwork, where you are simply 
making it easy using technology to help find some of these 
folks, but also when they search certain keywords, they find 
themselves on a platform, maybe the website, where they can 
very quickly get some questions answered and determine what 
opportunities there might be for them. Is that something that 
you envision the ULP doing, and where does this go? What's the 
next set of iterations, and what's that vision?
    Ms. FROST. Thank you for that question. I think that Lender 
Match is an incredible tool to help our small businesses match. 
As you are mentioning, using technology. Very little kind of 
regular SBA resources are needed here to conduct these 
introductions between small businesses and lenders on an 
ongoing basis. I think some of the ideas that you are speaking 
about here certainly seem worthy of additional consideration 
about how can we use technology to better explain our programs 
in an understandable way, both for the lender community and 
especially for the small businesses, and would be happy to work 
with your team as we dive into those ideas.
    Mr. LANDSMAN. We would love to work on this. I mean, I am 
on the VA committee and we're doing something similar with VA, 
which is to, you know, when a veteran goes and looks for 
something, something pops up that they're working through, 
which would just say, hey, we don't know if you are eligible 
for these things, but if you give us just basic service 
information, in this case, basic business information, we'll 
tell you very quickly what you might be eligible for. And that 
begins a conversation that doesn't exist at the moment. And so, 
if that is really an option, we'd love to work with you on 
that.
    Ms. FROST. Absolutely. And I think that Lender Match does. 
It has a lot of those same components and same ideas. So a 
small business can come into Lender Match and say, here's some 
basic information about my business, and here's the sort of 
capital that I need. They submit that in. And then our lenders, 
the thousand or so lenders we work with through Lender Match, 
including about 250 community lenders, they each set up 
profiles and they say, this is the type of small business I 
want to work with, and these are the sorts of loans I provide. 
And together, then they get matched. I believe the data, and 
we'll look this up to make sure I've got it right, is that the 
average small business is matched with nine lenders.
    Mr. LANDSMAN. Wow.
    Ms. FROST. That's nine opportunities to kind of say, hey, 
maybe this is the right lender.
    Mr. LANDSMAN. My time is up, and I want to be respectful of 
the Chairman. We'll follow up. Thank you very much. I yield 
back.
    Chairman WILLIAMS. Gentlemen, yields back. I now would like 
to welcome and recognize Representative Malliotakis, good 
friend from the great state of New York, for 5 minutes.
    Ms. MALLIOTAKIS. Thank you. Thank you, Mr. Chairman and 
Ranking Member, for allowing me to join the committee today. 
Ms. Frost. My constituent, Mr D'Andrea, runs an owner operated 
restaurant named the Roadhouse Restaurant. It is remained in 
the heart of my district in Staten Island for nearly 53 years. 
During the COVID pandemic, the Roadhouse Restaurant, like so 
many other small businesses across the country, ran into 
difficult financial times. With severe COVID restrictions in 
place by New York City, business slowed and Mr. D'Andrea looked 
to the SBA for a lifeline, and he now finds himself on the 
verge of financial ruin with his retirement. The equity of the 
building that the business resides under threat of foreclosure 
due to no fault of his own. But an admitted coding error, quote 
unquote coding error in the administration. Of the Restaurant 
Revitalization Fund by the SBA, Mr. D'Andre was granted 
$244,734 through the program on June 7th, 2021. Half of the 
initial grant, $123,857.69, was sent directly to the New York 
State Department of Taxation and Finance for payment of the 
Roadhouse's outstanding taxes. Now, Mr. D'Andrea was even given 
an assessment ID of the New York state taxes, taxes paid by the 
U.S. Department of Treasury. But on October 28th of 2021, the 
funds sent to the New York State Department of Taxation and 
Finance were returned to the Treasury because they lacked 
documentation and they had no idea what it was supposed to go 
to. They had no idea it had to go to the Roadhouse's accrued 
tax debt. So, since the return of these funds, Mr. D'Andrea's 
business has been assessed with additional taxes and penalties 
associated with the original tax debt of the state of New York. 
To date, these taxes and penalties are at a sum of $343,000.
    Now, in February of 2022, my office engaged on behalf of my 
constituent, and in numerous letters and emails with the SBA, 
my staff was given excuses for missed deadlines for response. 
They were told that Mr. D'Andrea would receive the remaining 
funds in the following RRF disbursements, which never came to 
fruition. And then half of the award was improperly distributed 
to New York State due to the coding error, they admitted this. 
Mr. Chairman, I would like to submit the email correspondence 
for the record. Using the words of SBA staff themselves in 
November of 2022, they then looked into, ``the circumstances 
surrounding Treasury's offset of part of the award to the 
Roadhouse Grill that occurred because of delinquent taxes owed 
by Mr. D'Andrea's company.'' And they said, ``that should not 
have occurred in the RRF program, but for a coding error, we 
have no way of correcting that at this stage in the program.'' 
So how is it that we have Mr. D'Andrea received only half of 
the funds he was awarded. His debts are still unsatisfied with 
the New York State Department of Tax and Finance. The SBA 
admitted that half the funds were wrongly sent to New York 
State due to the, quote, ``coding error.'' And now the SBA is 
threatening legal action on the full amount unless he perjures 
himself on the SBA portal and certifies that he received the 
$244,734, the complete amount, which he did not. So this is an 
error that the SBA--so I guess that's my first question to you.
    Ms. FROST. So the Restaurant Revitalization Fund was, of 
course, one of our pandemic programs, and it helped thousands 
of restaurants across this country find their feet. 
Unfortunately, that program was oversubscribed, significantly 
oversubscribed. And so although it was a $30 billion program. 
SBA got that money out in record time with record small amounts 
of fraud.
    Ms. MALLIOTAKIS. In this particular case, he was given the 
money, right? He was given half the money, but it was an error 
that it was sent to the state of New York and it was sent back 
to you, so you should have that money. The thing is, is that he 
should be given the money that he is entitled to. Do you agree?
    Ms. FROST. As I mentioned, the program was oversubscribed, 
and so, unfortunately, we were not able to give funding to all 
of the eligible restaurants.
    Ms. MALLIOTAKIS. He received the grant. He did receive the 
grant, right. He was part of the group that was eligible. And I 
guess my question is, you know, this was an error on behalf of 
the SBA. They admitted to it. The money was there. They gave it 
to the state. The state returned it. I don't know what you guys 
did with it, but the fact is that he's owed this money, and now 
you are trying to penalize him even further if he doesn't sign 
this form, which would be a lie. He can't sign that form 
because he didn't receive the total amount that he was due. And 
so, I can understand that you don't have the specifics, 
perhaps, of my case and front of you, but I've been working for 
four years to try to resolve this issue. This is a small 
business that's going to go out of business. His whole 
retirement is going to lose everything if you guys don't work 
with us to address this.
    Ms. FROST. So my heart goes out to the small businesses who 
are still struggling to recover from the pandemic. And I know 
that my team is prioritizing, ensuring that we are doing 
everything we can to support them. But the Restaurant 
Revitalization Fund in particular, is challenging because we 
were limited in the funds we were able to provide to eligible 
businesses.
    Ms. MALLIOTAKIS. Okay, well, I hope to have your commitment 
to try to resolve this issue.
    Ms. FROST. Happy to work with you and your team on that.
    Ms. MALLIOTAKIS. Thank you very much.
    Chairman WILLIAMS. Lady yields back. And I now like to 
thank our witnesses for your testimony, Ms. Frost, and 
appearing before us today. Without objection, Members have five 
legislative days to submit additional materials and written 
questions for the witnesses to the Chair, which will be 
forwarded to the witness. I ask the witness to please respond 
promptly if there's no further business with abject and the 
committee is adjourned.
    [Whereupon, at 11:24 a.m., the committee was adjourned.]
                           
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