An Examination of the SBA's COVID-19 Programs

Full text

U.S. GOVERNMENT PUBLISHING OFFICE
WASHINGTON :
44–922
2022
AN EXAMINATION OF THE SBA’S COVID-19
PROGRAMS
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
HEARING HELD
MAY 26, 2021
Small Business Committee Document Number 117–015
Available via the GPO Website: www.govinfo.gov
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(II)
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELA´ ZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
MELISSA JUNG, Majority Staff Director
ELLEN HARRINGTON, Majority Deputy Staff Director
DAVID PLANNING, Staff Director
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(III)
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Vela´zquez .............................................................................................
1
Hon. Blaine Luetkemeyer .......................................................................................
3
WITNESS
Hon. Isabella Casillas Guzman, Administrator, United States Small Business
Administration, Washington, DC ........................................................................
6
APPENDIX
Prepared Statement:
Hon. Isabella Casillas Guzman, Administrator, United States Small Busi-
ness Administration, Washington, DC ........................................................
43
Questions and Answers for the Record:
Questions from Hon. Vela´zquez ......................................................................
49
Questions from Hon. Golden ............................................................................
54
Questions from Hon. Tenney ...........................................................................
55
Questions from Hon. Van Duyne ....................................................................
58
Questions from Hon. Salazar ...........................................................................
61
Questions from Hon. Fitzgerald ......................................................................
64
Questions from Hon. Luetkemeyer .................................................................
66
Additional Material for the Record:
CWALAC - Concerned Women for America Legislative Action Committee
77
CUNA - Credit Union National Association ...................................................
79
Letter from Hon. Blaine Luetkemeyer to Hon. Isabella Casillas Guzman ..
81
Letter from Hon. Blaine Luetkemeyer and Byron Donalds to Hon. Janet
L. Yellen and Hon. Isabella Casillas Guzman ............................................
83
Letter from Hon. Blaine Luetkemeyer and Roger Williams to Hon. Janet
L. Yellen .........................................................................................................
86
NAFCU - National Association of Federally-Insured Credit Unions ...........
88
SBIA - Small Business Investor Alliance .......................................................
90
Secretary Yellen Schedule ...............................................................................
92
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(1)
AN EXAMINATION OF THE SBA’S COVID-19
PROGRAMS
WEDNESDAY, MAY 26, 2021
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., via Zoom,
Hon. Nydia Vela´zquez [chairwoman of the Committee] presiding.
Present: Representatives Vela´zquez, Davids, Phillips, Newman,
Bourdeaux, Carter, Chu, Evans, Delgado, Houlahan, Kim of New
Jersey, Craig, Luetkemeyer, Williams, Hagedorn, Stauber, Meuser,
Tenney, Garbarino, Kim of California, Van Duyne, Donalds, and
Salazar.
Chairwoman VELA´ ZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a recess at
any time.
I want to thank everyone, especially our witness for joining us
today.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during remote pro-
ceedings. All Members are reminded that they are expected to ad-
here to these standing rules including decorum when they are par-
ticipating in any remote event.
With that said, the technology we are utilizing today requires us
to make some small modifications to ensure that Members can fully
participate in these proceedings.
House regulations require Members to be visible through a video
connection throughout the proceeding, so please keep your cameras
on. If you participate in another proceeding, please exit and log
back in later.
In the event a Member encounters technical issues that prevent
them from being recognized for their questioning, I will move to the
next available Member of the same party and I will recognize that
Member at the next appropriate time slot provided they have re-
turned to the proceeding.
Should a Member’s time be interrupted by technical issues, I will
recognize that Member at the next appropriate spot for the remain-
der of their time once their issues have been resolved. In the event
a witness loses connectivity during testimony or questioning, I will
reserve their time as staff address the technical issue. I may need
to recess the proceedings to provide time for the witness to recon-
nect.
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Finally, remember to remain muted until you are recognized to
minimize background noise. In accordance with the rules, staff
have been advised to mute participants only in the event there is
inadvertent background noise. Should a Member wish to be recog-
nized, they must unmute themselves and seek recognition at the
appropriate time.
Before we get started, let me take a minute to welcome our new-
est Member, Troy Carter, from the Second District of Louisiana.
Mr. Carter is a dedicated public servant having enjoyed a distin-
guished career at nearly every level of state and local government.
He previously served in both the Louisiana House and Senate and
also as New Orleans city councilman. Mr. Carter has a track record
as a successful entrepreneur. We think this will serve him well and
our Committee, and I look forward to working with him. Welcome,
Mr. Carter.
Administrator Guzman, welcome to the Small Business Com-
mittee, and thank you for being here today. First and foremost, I
want to commend you for the tremendous work you have done for
our nation’s small businesses.
It is important to point out that you took over the helm of SBA
in the midst of an unprecedented crisis for our nation’s small firms.
In 2020, COVID-19 closed more businesses than any other year
on record and left countless other entrepreneurs clinging for their
survival. I appreciate the fact that you are here today in compli-
ance with statute.
Unfortunately, Treasury Secretary Yellen has declined to appear
before us in complete disregard for the law, which requires her to
do so. Without her at the table, this Committee cannot properly ful-
fill our oversight responsibilities to American taxpayers nor the na-
tion’s entrepreneurial community.
While she and her team may believe their role in PPP and other
small business COVID relief programs is dwindling as we move to-
wards economic growth and economic rebirth, they are sorely mis-
taken. In light of the feedback we have received about the MOU
between Treasury and SBA, it is incumbent upon Secretary Yellen
to fulfill her statutory requirement and appear before this Com-
mittee. I look forward to working with Chair Cardin and Ranking
Members Luetkemeyer and Senator Paul to find a mutually agreed
upon date for Secretary Yellen to appear before our Committee
with Administrator Guzman in the near future.
Congress has passed eight small business relief bills, allocating
more than $1 trillion to small firms during their darkest hour. The
federal government’s efforts to save small business were extraor-
dinary, but distributing this aid was a monumental task for SBA.
The $1 trillion-plus in federal funding represented more than 10
times SBA’s annual budget. As a result, the agency administered
more aid during the COVID crisis than it had for all other disas-
ters combined during its 67-year history.
To that end, it is important to recognize SBA employees for their
tireless work in getting these programs up and running. The agen-
cy’s efforts made an undeniable impact on entrepreneurs’ lives and
helped millions of small businesses and nonprofits avoid permanent
closure.
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Yet, the massive scale of PPP and other relief programs, coupled
with a quick rollout, overwhelmed the agency at times and resulted
in a number of problems. My hope for today is that we will not
blame but instead work constructively in a bipartisan manner to
assess the current programs and partner with SBA to make im-
provements where needed.
One of my top priorities has been increasing equity in relief pro-
grams. Early on, evidence emerged showing the smallest of firms
were not getting the same access as their larger counterparts with
ties to big banks. That is why I fought hard for PPP modifications
last year.
Additionally, under the Biden Administration, SBA has taken de-
liberate action to deliver relief to underserved communities. These
efforts have proven to be effective in reaching those that were left
behind in the initial round of PPP.
With the current round of PPP, SBA has approved more than 6
million loans for a total of nearly $266 billion, with an average loan
size of approximately $44,000. This is a substantial improvement
compared to an average loan size of $199,951 during the first
round of PPP in 2020.
I also look forward to hearing more about the Targeted EIDL
Program, Restaurant Revitalization Fund (RRF), and the Shuttered
Venue Operating Grant Program (SVOG), three new programs that
are awarding direct grants to small firms hit hard by the pan-
demic.
Another issue that has plagued both PPP and EIDL has been
fraud and abuse. Unfortunately, to get loans out the door, the pre-
vious administration lowered guardrails and fostered an environ-
ment ripe for fraud and abuse. GAO added PPP and EIDL to its
annual ‘‘High-Risk List’’ in March of this year, meaning there is a
need for better management and oversight. I am pleased that
under your leadership, the agency has confronted these issues
head-on. It is vital that SBA combats fraud and protects taxpayers’
dollars.
For over a year, small businesses have persevered through a
once-in-a-lifetime crisis. Today, thanks to our collective efforts,
small firms have hope. Across the country, customers are returning
and business conditions are normalizing thanks to vaccines and
public health measures. Though the pandemic may be receding, we
must continue to work as a Committee to see small businesses to
the end of the crisis and help facilitate a strong recovery.
I now yield to the Ranking Member for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chair. And thank you
for calling this important hearing.
While I am glad we will be having a conversation with Small
Business Administrator Guzman, I am deeply disappointed and
concerned that Secretary Yellen is not with us today.
As you spoke, she is required to be here by law, and I will not
state the law but it is supposed to be at least 120 days after enact-
ment of the law. She is supposed to be here at least twice a year.
This is very troubling and it is in complete violation of the law. I
appreciate your comments, Madam Chair, and I would like to work
with you to make sure that the law is followed and that we sched-
ule time in the future for Secretary Yellen.
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To that end, I have a letter here that has been signed by all the
Members, the Republicans on the Committee, as well as a list of
events and the schedule of Ms. Yellen over the last 2 months that
I would like to enter into the record. I have a couple things——
Chairwoman VELA´ ZQUEZ. Without objection. Without objection.
Mr. LUETKEMEYER. Thank you, Madam Chair.
And the list of activities I have no problem with. I think that she
is doing her job. Probably doing it well. But there are a couple of
events on here that are actually political activities. And again, I do
not have a problem with her doing it except that it shows that she
is prioritizing political activities over her job which is by law sup-
posed to be in front of us. That cannot happen.
The Paycheck Protection Program (PPP) was established in a bi-
partisan manner to be administered by the SBA and the Depart-
ment of Treasury. With reservation, Secretary Mnuchin testified
before this Committee last Congress. His testimony was critical as
it helped Members on both sides of the aisle export questions from
their constituents and assisted Members with next steps for the
COVID relief programs. It is a clear sign that this administration’s
Treasury Department, one of the biggest in the federal government,
is ignoring America’s small businesses. Simply put, if the Treasury
Secretary and Biden Administration truly cared about the nation’s
small businesses and their employees, Secretary Yellen would be
testifying today.
Despite the Treasury secretary not being with us, we have much
to discuss. COVID-19 was devastating to our nation’s small busi-
nesses, entrepreneurs, and startups. Without precedence, state and
local shutdown orders forced small businesses to operate either
under restricted capacity numbers or close their doors to the public
all together.
Responding to the backbreaking impact on small businesses,
Congress and the Trump Administration quickly focused on assist-
ing small business workers. According to SBA’s Office of Advocacy,
small business employees represented approximately half the na-
tion’s workforce. Importantly, one program that was front and cen-
ter for struggling small businesses was the Paycheck Protection
Program, which private sector lenders delivered to small businesses
many, many, many loans and all the dollars in those loans.
PPP offered potentially forgivable loans in the dollars that were
used and on payroll and a few other eligible expenses and millions
and millions of small businesses took advantage of the program.
And it is now concluding. The next phase of the program will focus
strictly on the PPP forgiveness.
Beyond PPP, Congress also activated the EIDL program. But un-
fortunately, this program, which is administered as a direct loan
program through SBA, has been riddled with fraud. The SBA In-
spector General Report highlighting $78 billion in fraudulent activ-
ity to a report released 3 weeks ago where the inspector general
found over 800,000 EIDL applications that were flagged for iden-
tity theft concerns, it is clear the program is not safeguarding
American taxpayer dollars.
Any amount of fraud is absolutely unacceptable. However, this
level of fraud shows the SBA is not suited to administer any direct
lending program.
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On top of the fraud issues, the EIDL program is slow to reach
small businesses in time of need. Historically, the SBA turn time
to small businesses has always been at a snail’s pace. In stark con-
trast, the PPP, unlike the EIDL program, was set up to capitalize
on the efficiencies of private sector lenders, not the SBA. In addi-
tion to the turn time, the PPP also protected taxpayer dollars more
effectively compared to EIDL due to lenders having responsibility
to know their customers and know how to underwrite loans.
As we continue to explore the SBA programs, we must look to
the private sector to find efficiencies and innovations. The SBA’s
ability to make direct loans to small businesses must be studied.
In addition to making loans, the SBA has also inefficiently oper-
ated the Shuttered Venue Operator Grant Program for struggling
venues, theaters, and other cultural entities. The night before the
program launched, the SBA’s inspector general warned of a series
of concerns or serious concerns about the oversight controls in
place. Then, a few hours after the opening of the portal, the SBA
had to take it offline to troubleshoot. The program eventually re-
launched but has yet to disburse any funds to struggling venues,
although this morning, conveniently this morning, they announced
that they are going to disburse some money very shortly. Amazing
how that works.
While the SBA has been ignoring the venues program, it has
been championed by the Biden Administration’s Restaurant Revi-
talization Fund Program. The SBA celebrated the priority period
which unfairly picks winners and losers. This administration even
highlighted that the program is reaching potentially undocumented
individuals and those with an unknown immigration status over
hardworking citizens of the United States. And they are even being
sued for this discriminatory practice today.
Overall, it seems each day brings another complication from the
SBA. I know Republican Members have many of the same concerns
that I do. However, the SBA’s track record for answering our ques-
tions has been underwhelming, and at times, nonexistent. Thus
far, my colleagues and I have sent numerous letters to Adminis-
trator Guzman and received limited responses.
I would like to insert every letter that has failed to receive a re-
sponse in today’s record. The hearing record, Madam Chair. I
would like to insert some records, some letters.
Chairwoman VELA´ ZQUEZ. Without objection.
Mr. LUETKEMEYER. Thank you, Madam Chair.
I am hopeful this conversation produced results because at the
end of the day, small businesses drive our nation’s economy. We
must provide an environment for small businesses to operate inde-
pendently and as quickly as possible. Unfortunately, this adminis-
tration is threatening the small business recovery with increased
taxes and more regulatory burdens. We cannot allow these changes
to occur. The health of our nation will depend on the health of
small businesses.
And with that, Madam Chair, I yield back. Thank you.
Chairwoman VELA´ ZQUEZ. Thank you, Mr. Luetkemeyer. The
gentleman yields back.
I would like to take a moment to explain how this hearing will
proceed. You will have 5 minutes to provide a statement and each
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Committee Member will have 5 minutes for questions. Please en-
sure that your microphone is on when you begin speaking and that
you return to mute when finished.
I would like to introduce The Honorable Isabella Casillas
Guzman, who was sworn in as the 27th administrator of the SBA.
She previously served as Director of the California Office of the
Small Business Advocate in the Governor’s Office of Business and
Economic Development. From 2014 to 2017, Administrator Guzman
served in leadership of the SBA as the agency’s Deputy Chief of
Staff and Senior Advisor where she oversaw policy and new pro-
gram implementation. She earned a Bachelor of Science from the
University of Pennsylvania Wharton School of Business. Welcome,
Administrator Guzman.
Ms. Guzman, you are now recognized for 5 minutes.
STATEMENT
OF
THE
HONORABLE
ISABELLA
CASILLAS
GUZMAN, ADMINISTRATOR, UNITED STATES SMALL BUSI-
NESS ADMINISTRATION
Ms. GUZMAN. Good morning, Chairwoman Vela´zquez. Thank
you so much. And Ranking Member Luetkemeyer, as well as Mem-
bers of the Committee. I really appreciate the invitation and the
opportunity to be here to discuss SBA’s programs in response to
the COVID pandemic.
When I appeared before you as a nominee, excuse me, when I
have been meeting with you all over the past couple of months
since I have been in office, I have mentioned how this unprece-
dented crisis for our nation’s 30 million small businesses and inno-
vative startups has created a sense of urgency at the SBA to work
harder, think more creatively and build more collaboration to meet
the desperate need presented by this moment. And in my first 100
days as SBA administrator, I can tell you that my motivation to
deliver for our entrepreneurs has only intensified. And I have to
share how proud I am of my incredible mission-driven team at the
SBA who despite having had to scale at a high intensity the past
year-plus remained incredibly committed to our nation’s entre-
preneurs. They have been working around the clock to deliver all
the components of the American Rescue Plan’s crucial relief pro-
gram to ensure our small businesses can survive this disaster and
get on the path to recovery, growth, and resilience.
We are making significant progress, particularly in our efforts to
reach small businesses owned by women and people of color, who,
because of longstanding barriers to capital, markets and networks
have suffered disproportionately from this pandemic and by many
accounts were not able to access relief.
We are seeing the impact. The latest economic reports show that
small business jobs have begun to rebound, and proprietors’ income
levels have begun to recover. And, we are hearing from the small
businesses we serve that both our traditional and our new relief
programs have created vital lifelines.
Earlier this month, we successfully launched the $28.6 billion
Restaurant Revitalization Fund. As of Monday, when the applica-
tion portal closed, we have received more than 372,000 applications
representing over $76 billion in requested funds, and more than
half of those applications came from food and beverage businesses
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owned by women, veterans, and people of color, who as directed by
Congress, received priority access to the program. And we are
reaching the smallest of the small food and beverage businesses,
with one-third of the total funds set aside just for them, including
a specific set-aside I created for businesses with revenues of
$50,000 and under. I am proud of how we have rolled out this pro-
gram in under 2 months while focusing on my key priorities of
meeting small businesses where they are and integrating a cus-
tomer-first, technology-driven, and equitable approach.
We also launched the $16.2 billion Shuttered Venue Operators
Grant Program. As of May 25, the SVOG program has received
more than 13,000 applications for approximately $11 billion in re-
quested funds. We started awarding our SVOG funds this week
and we hope to continue to help our nation’s venues hold on until
they can bring back the performances and experiences that are the
lifeblood of the American culture.
Through our Paycheck Protection Program and Economic Injury
Disaster Loan Program, we have now gone beyond $1 trillion in re-
lief, and so far in 2021, 95 percent of PPP loans have gone to small
businesses with fewer than 20 employees.
Our priority across all of our relief programs is to get funds into
the hands of small businesses swiftly, efficiently and equitably. At
the same time, we are also committed to maintaining a high level
of oversight to minimize fraud and abuse while elevating trans-
parency and open communication. We have implemented controls
and oversight to better achieve that balance and reverse some of
the previous fraud challenges that initially plagued the PPP and
EIDL programs.
I was pleased to hear both GAO’s Bill Shear and SBA’s Inspector
General Mike Ware say in a recent House Committee hearing that
transparency at the SBA has improved under my watch and that
our relationship is off to a very good start. There is a lot of work
to do but we are working diligently to ensure this relief gets into
the hands of the businesses for whom it was intended.
Beyond our COVID relief program, we are also looking to the fu-
ture and our nation’s economic recovery with an eye toward equity.
Small businesses are starting to reopen but they are still reeling
with major revenue losses, and most expect recovery to take more
than 6 months. This means that we will continue to see the need
for capital, which is why the SBA is exploring all options to open
up capital access, including direct lending.
Additionally, we know that the best thing we can do for our
small businesses is to help our nation recover from COVID and get
our marketplaces and main streets back to normal. With more than
61 percent of adult Americans who have taken at least one shot of
the COVID vaccine, we are making progress. The SBA is doing its
party by getting the word out about the American Rescue Plan tax
credit available to small businesses that provide paid leave to em-
ployees receiving or recovering from a COVID vaccination.
There is so much more work to do. As the voice for America’s
small businesses and innovative startups, I will be leveraging every
tool at my disposal to bring businesses back, create jobs, and build
an equitable economy that works for everyone. I look forward to
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partnering with you all to give entrepreneurs the tools they need
to start, sustain, and grow into the future.
Thank you so much, Chairwoman Vela´zquez, Ranking Member
Luetkemeyer, and Members of the Committee, for the opportunity
to appear before you today.
Chairwoman VELA´ ZQUEZ. Thank you, Ms. Guzman.
I will begin by recognizing myself for 5 minutes.
Ms. Guzman, Administrator, we will hear a lot today about
fraud, which has been a concern since the relief programs opened.
Since you took over as administrator on March 17, how has the
agency worked to prevent fraud, waste, and abuse in its pandemic
response programs, both old and new, like restaurants and shut-
tered venues?
Ms. GUZMAN. The administration has made it a priority to im-
plement all of our relief programs with integrity and transparency,
and SBA has been implementing a holistic approach to fraud miti-
gation to ensure consistency across all of those programs. It is a
high priority of mine as well. As I said, I want to get these funds
into the hands of those businesses it was intended to serve. So my
staff is aware that I take this seriously in cooperation with the GA
and IG has been of high importance for us to make sure that we
are implementing best practices and doing the most that we can to
prevent fraud, waste, and abuse.
I have directed my team to look at best in class practices, adopt-
ing technology where it works to ensure that we are aligned with
bets practices that the IG and GAO have recommended, and we
have been implementing controls and evaluating it.
Chairwoman VELA´ ZQUEZ. Thank you. So you are open to pro-
viding any information required by the IG, GAO, providing data
that they must access in order to make an assessment as to if the
programs are working as they were intended by law?
Ms. GUZMAN. That is correct.
Chairwoman VELA´ ZQUEZ. The Restaurant Revitalization Fund
has a 21-day priority period for grants to women- and veteran-
owned businesses and socially or economically disadvantaged firms.
Who would this program help to ensure the equitable distribution
of pandemic relief?
Ms. GUZMAN. We have worked really hard to do extensive out-
reach across the board for restaurants, reaching our smallest busi-
nesses, as well as those priority groups across the board. We have
reached over 100,000 people in multiple events. And so that is re-
flected in the large number of applicants that we have seen come
through the system. We believe that that outreach, that connection
to resources is most critical to make sure that businesses of all
types can access this program.
In addition though, we tried to streamline, put ourselves in the
customers’ shoes, and adopt technology to make sure that this proc-
ess was as simple as possible for them to access. And we have seen
those results come into play because on average, about 20 minutes
to fill out the application. There are technology prompts throughout
to help businesses, and they have gotten assistance with greater
customer service in over 17 languages.
Chairwoman VELA´ ZQUEZ. Thank you.
Ms. GUZMAN. And we have done a lot.
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Chairwoman VELA´ ZQUEZ. Yes. I have another question and too
many to ask.
In the first round of the PPP, large companies took advantage of
the emergency relief, squeezing out the neighborhood restaurants
and ‘‘mom and pop’’ shops. Could you discuss how the set-asides for
community lenders and small businesses in LMI areas can ensure
that the capital was made available to the smallest of the small
businesses and truly underserved businesses?
Ms. GUZMAN. Based on the performance that we have seen with
these community financial institutions, our CDFIs and CDCs, and
minority depository institutions, we know that they oftentimes
reach those businesses that have been underserved. And so those
priorities have enabled businesses to access the program. And as
I shared that we have seen in 2021 that the PPP has been accessed
more by LMI communities, as well as rural and those underserved
marketplaces.
Chairwoman VELA´ ZQUEZ. Thank you. The pandemic has ex-
posed the systemic inequalities facing women- and minority-owned
small businesses, which have been particularly hard hit this past
year. What steps are you taking to address these inequalities and
to make sure all small businesses have access to SBA resources?
Ms. GUZMAN. I have instructed my teams to really position
themselves in the customers’ mindset. I mean, understanding what
their financials look like, what their situation is. Businesses have
been transformed especially during COVID. Their situations are
quite different. So we are evaluating all our programs to make sure
that they can serve all constituencies equitably and everything is
on the table. In addition, we are focusing on the outreach and the
Community Navigators Pilot Program will be just another tool that
we can make sure that our businesses are connected to the re-
sources that they need.
Chairwoman VELA´ ZQUEZ. Thank you. I really want to com-
mend you for raising the limit on the EIDL program to $500,000
as one of your first actions as administrator.
My time has expired and now I recognize the Ranking Member,
Mr. Luetkemeyer, for 5 minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair. And welcome,
Administrator Guzman.
As we all know and we discussed here, COVID hit our country
and caused all sorts of unprecedented things within our economy
to happen, shut down the economy, and as a result, lots and lots
of small businesses were in dire straits. Some of them going out of
business, some of them temporarily postponing their ability to have
their businesses open. And we put in place the PPP program and
the EIDL program but they had dramatically different outcomes.
The PPP program, which was run by and administered by the fi-
nancial institutions did a really, really good job. When you look at
over $800 billion going out the door and the minimal amount of
fraud and theft, identity theft that went on, it is in a ten-thou-
sandths of a percent, which by any measurement that is very suc-
cessful. The EIDL program to contrast that was over $200 billion
and roughly a third according to the SBA’s Inspector General as in
my opening remarks, has either been pointed out as potential fraud
if not documented fraud, identity theft in particular, with that pro-
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gram. Over 800,000 applications have been flagged for identity
theft. There is a difference in the way these two programs are ad-
ministered. One is through the private sector which has law and
rules with regards to knowing your customers. They have processes
and procedures in place. They know how to administer loans, make
loans. And then the SBA was totally in charge of the EIDL pro-
gram.
Do you believe or do you acknowledge that the private sector
lenders from the community banks, the CDFIs and MDIs, effi-
ciently delivered funding to small businesses during COVID, Ad-
ministrator Guzman?
Ms. GUZMAN. Our partners have done a great job as they have
across our historic programs in implementing the PPP. Yes, I
would agree with that. And then in terms of the EIDL, specifically,
note that there were some challenges in the way the program was
designed, which is why I have informed my staff that we need to
look at fraud controls from inception of design and implementation.
For example, by statute, we are not allowed to collect tax returns,
which is one of the biggest controls that we can use as a tool. So
without some of those controls in place in the beginning, of course,
that has now shifted and we have adopted controls in place to pre-
vent fraud in order to really meet the needs of these small busi-
nesses to make sure it gets into the hands of the right folks.
Mr. LUETKEMEYER. Do you think incorporating some private
sector lenders in the middle of that would be helpful?
Ms. GUZMAN. I know that across the board our private sector
lenders are great partners across the board. But in terms of the in-
terest in providing disaster assistance, historically, they have not
been interested. It has been too costly for them to adopt this type
of relief and that is why the government has stepped in to provide
assistance.
Mr. LUETKEMEYER. Well, maybe we can work together, ad-
ministrator, to iron out that little problem there in that a third of
the money could be susceptible to fraud is totally, totally unaccept-
able. Something has got to change structurally within what is
going on in the EIDL program. And it looks to me if you just com-
pare PPP to the EIDL program, the template is there for how to
fix this. But I want to work with you on that. We have got a huge
problem. Together we can come up with some solutions. Thank you.
Ms. GUZMAN. I look forward to that.
Mr. LUETKEMEYER. The PPP program, I just want to talk
about it for a little bit with regards to the forgiveness aspect of it.
We just got a letter back from Mr. Kelly within your office there
and he was telling us that there is still roughly a little over 36,000
PPP loan forgiveness applications that have now exceeded the 90-
day window requirement within which the SBA should begin to ad-
minister this forgiveness program. What is your solution on that?
How can we get this fixed?
Ms. GUZMAN. For context, the SBA has processed over 60 per-
cent of the 2020 PPP loans for forgiveness. That 36,000 represents
about 1 percent of the total and we are committed to trying to work
through those issues with the lenders. The Office of Capital Access
obviously has been collaborating with the lenders to try to figure
out how we can help their review process. On average, it takes
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about 6 days for the SBA to process forgiveness once the lender has
signed off. And so we are working in partnership with them to
solve this issue.
Mr. LUETKEMEYER. Is there an ability to contract that out so
we could speed that up? Because the next round of forgiveness is
just around the corner here with this last tranche of PPP money.
Is there a way we can speed that up, make sure that this gets done
in a more timely fashion? Would contracting it out be helpful?
Ms. GUZMAN. I am not sure that contracting out would be help-
ful but we have been working with the lender groups. I have been
meeting with them myself, as well as Patrick Kelley to come up
with solutions to try to streamline this system. Obviously, we have
a simplified process so that $150,000 to $2 million loan sizes are
obviously what we are looking at to try to streamline it. The de-
mand is going to increase if we shift towards forgiveness. So I look
forward to partnering with you on that.
Mr. LUETKEMEYER. Very good. Because I know we appro-
priated lots and lots of money over the last two or three bills here
to be able to do this. So we either need to be hiring more people
or we need to be contracting this out so this can get done in the
timely fashion the way it is supposed to. So I look forward to work-
ing with you on that, Administrator Guzman.
With regards to communication, we started out I think on the
right foot and it took about a week to get our first call set up but
we finally got that done and we were able to respond pretty quickly
to my first initial letter. But yesterday, or I guess last week, we
finally got a letter in response to something we did 2 months ago.
And I know my colleagues are very concerned. You are going to get
a lot of questions on this today about communication.
Chairwoman VELA´ ZQUEZ. Mr. Luetkemeyer?
Mr. LUETKEMEYER. Yes, ma’am.
Chairwoman VELA´ ZQUEZ. Time has expired.
Mr. LUETKEMEYER. Okay.
Chairwoman VELA´ ZQUEZ. You have it.
Mr. LUETKEMEYER. We will send this question in written form
to the administrator.
We thank you, Madam Chair, and yield back.
Chairwoman VELA´ ZQUEZ. Thank you. The gentleman’s time
has expired.
Now the gentlelady, Ms. Davids, from Kansas, is recognized for
5 minutes.
Ms. DAVIDS. Thank you, Chairwoman. And thank you for hold-
ing this hearing. I also want to say thank you to Administrator
Guzman for joining us today.
We know that even with the rising numbers of vaccines and vac-
cinations getting into people’s arms, even with the decreasing num-
bers of infections that many small businesses are still feeling the
impacts of this pandemic and there are still a lot of financial and
logistical hurdles that face small businesses throughout the eco-
nomic recovery and reentry. And I know that Ms. Guzman and our
Committee and all my colleagues remain committed to supporting
our small business community through all of these challenges.
I am going to piggyback a little bit on some of the comments that
the Ranking Member shared. In February, my office raised con-
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cerns with the SBA about the fraud and abuse and the PPP and
EIDL programs. In part, it is because a number of Johnson County
residents, which is in the Third District in Kansas, have been the
victims of identity theft and fraud that took place in the EIDL pro-
gram. And I have urged the SBA to focus on these cases, and it
sounds like you are. Because they are not only a misuse of tax-
payer funds but also directly and personally impacting the con-
stituents in my community.
Ms. Guzman, or Administrator Guzman I should say, I would
love to hear you talk a little bit about the work that the SBA is
doing to eradicate the fraud and waste and abuse from the EIDL
program. And then if you could also talk a bit the ways that the
SBA is working with the victims of identity theft and fraud that
is taking place through either EIDL or PPP just to ensure that
those victims are not held personally liable and that they are made
whole.
Ms. GUZMAN. Thank you for that. As I had shared, we are im-
plementing controls and evaluating on an ongoing basis, an
iterative process to stay best in class, to prevent fraud. And that
happens at the program design phase 41:23xxx way. So we are
really committed to this issue. We have obviously put in a lot of
specific frameworks in place across our capital access programs, in-
cluding PPP and the Restaurants program. And then within our
Office of Disaster Assistance on the Shuttered Venues, as well as
the EIDL program. We are really committed to making sure these
funds get into the hands of those businesses as it was intended and
we are seeing enormous drops now that we have implemented
those controls.
However, in February, we did impellent a process to help busi-
nesses through identity theft issues as clearly that was a huge
problem in the beginning of these programs. And so we want to
make sure that businesses are supported through that process.
There is now a support system and a process in place for them to
reach out to the SBA, get assistance in fighting that specific iden-
tity theft case. And we actually have hundreds of investigators on
support with the IG to help prevent, help investigate and actually
pursue any cases of fraud as we take all cases very seriously.
Ms. DAVIDS. Thanks. I appreciate that.
If necessarily, our office, of course, will reach out if we are hear-
ing things that continue to be of concern so that you are aware of
it and are able to address it. I appreciate that.
And then the second thing, you mentioned a little bit about res-
taurants. Restaurants, bars, the shuttered venues have obviously
been hit especially hard during this time, which is why we targeted
resources towards those small businesses. I know the demand for
those funds are oversubscribed.
I am curious if you could talk a little bit about the expansion of
eligibility or allowing for additional funds to continue these pro-
grams. In your view, does that make sense? And is it something
that we should be working toward?
Ms. GUZMAN. We have seen a huge demand as I said. Over $76
billion in requests on the Restaurant program. On the Shuttered
Venues program, over $11 billion but it looks like applications are
still coming in. We are still accepting applications but it looks like
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there might be enough funding for that in addition for them to get
supplemental. But on the Restaurant Revitalization Fund, we are
happy to provide any data and support Congress if they make that
decision to replenish that fund and support restaurants through
this time. We are still seeing obviously a huge demand and this as-
sistance is helping them keep their doors open.
Ms. DAVIDS. Thank you, Administrator. I appreciate you being
here and your testimony today.
And Madam Chair, I yield back.
Chairwoman VELA´ ZQUEZ. The gentlelady yields back.
The gentleman from Minnesota, Mr. Hagedorn, is recognized for
5 minutes.
Mr. HAGEDORN. Thank you, Chairwoman Vela´zquez. I appre-
ciate you bringing up the fact that Ms. Yellen was not here today.
Thank you for doing that on behalf of the Committee.
Administrator Guzman, as a Member on the Republican side of
the aisle, I can assure you that every colleague that is on the Com-
mittee that I have served with in both the last Congress and this,
has tried to in a bipartisan way pass bills that are going to help
all of the American people, particularly our small businesses in this
instance, get from one side of the coronavirus to the other. And we
did that in a number of ways with a bunch of different programs
but we wanted to treat everyone equally. And just last Thursday,
I, along with my fellow Republicans, sent you a letter talking about
the Restaurant Revitalization Fund. And we do not really believe
that everyone is being treated equally when it comes to that par-
ticular program.
For whatever reason, the Biden administration, the Democrats
put together a priority list which prioritizes a lot of different res-
taurant owners, and they are great and we want to help them all.
But for whatever reason, the priority list, the people who were not
on that list were not allowed to be funded at this time because you
closed the whole portal the very day that the priority list was set
to end sending in applications.
For the record, can you explain to us the characteristics of the
people that are barring restaurant owners who were not on the pri-
ority list?
Ms. GUZMAN. Sure. Of course. The initial outreach that SBA
did was extensive with the National Restaurant Association, as
well as the Independent Restaurant Coalition, to reach all of the
businesses. We informed everyone that this was ‘‘first come, first
serve’’ and that everyone should apply, despite what the processing
priority was going to be for those first 21 days. And I think that
is reflected in the 372,000 applications. Only 214,000 of those are
for the underserved or priority groups which includes, of course,
veterans, women, and socially and economically disadvantaged in-
dividuals.
Mr. HAGEDORN. Who is not on the priority list? That was my
question.
Ms. GUZMAN. Well, the priority list includes women, veterans,
and socially and economically disadvantaged individuals.
Mr. HAGEDORN. Who is not on the priority list?
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Ms. GUZMAN. Those individuals that do not fall into those cat-
egories, if they are not socially or economically disadvantaged as
outlined.
Mr. HAGEDORN. I will reclaim my time.
It would helpful if we would just be honest about it.
So anyway, the portal closes. The only people at that point who
are going to be funded are people on the priority list. One hundred
thousand or more bar and restaurant owners across the country
that are not part of the priority at this point will not be funded.
They happen to be, let’s just be honest with it, White men that own
bars and restaurants. Those are the folks. How is that not discrimi-
natory or even outright racist?
Ms. GUZMAN. Well, you know, White men who either have part-
ners who fall into those categories, it is not 100 percent ownership.
It is, you know, 51 percent. In addition, veterans are able to access
this program. And what I would say is that the priority, while the
applications closed, we have all these applications and we are be-
ginning to process all applications, nonpriority as well. There were
also small business set-asides and so some of those small business
set-asides remain and so those will also, you know, businesses that
fall into those categories will have an opportunity to be funded.
Mr. HAGEDORN. But those are the only people who were not
part of the priority. So it makes sense to me that that would be
discrimination in any sense.
The other thing I would add is that how can we be sure that ille-
gal aliens are not receiving this money before U.S. citizens?
Ms. GUZMAN. We know that restaurants are job creators, clear-
ly, and immigrant entrepreneurs just as much so, they are all job
creators. They are all taxpaying. You have to be based in the U.S.,
a tax paying entity in order to access this program and that is the
threshold that we follow.
Mr. HAGEDORN. So there is no assurance of that.
Look, I think it is bad enough that when a government, federal
government picks winners and losers, that is socialist policies. And
to do so based on race, and even putting illegal aliens ahead of U.S.
taxpayers to me does not make any sense. We should all be treated
equally. We should all have the same opportunity. And right now
it does not seem it. It seems like there is a big segment of our pop-
ulation who happen to be bar and restaurant owners who are not
being treated equally. And I hope that we would reject that type
of racial politics. I yield back.
Chairwoman VELA´ ZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Mr. Phillips,
for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair. Welcome, Ms.
Guzman. All of us are hearing about the current programs—PPP,
EIDL—not meeting the needs of certain heavily impacted small
business industries. Fitness and wellness being a good example.
Has the SBA considered recommendations to this Committee on
some alternative solutions perhaps to buoy these small businesses?
Ms. GUZMAN. We do. We hope to continue to serve PPP until
it is over, the smallest of the small businesses, and including those
highly impacted industries referenced. And so we do believe that
there is opportunity to access that program as it was opened up
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15
more for sole proprietors and independent contractors to change
the way that we assess the dollar amounts of that program. So I
do believe that is still an opportunity.
In addition, of course, you have your targeted EIDL Advance Pro-
gram that we have been pushing out. There are specific eligibility
requirements across that program, but in early June, we will be
opening up that program more broadly to all those in the eligible
categories outside of those who previously applied for EIDL Ad-
vance. And so we think that is another opportunity to support
these underserved businesses, impacted industries that still need
relief.
Mr. PHILLIPS. Okay. And Ms. Guzman, any potential to expand
the SVOG program to include fitness operators?
Ms. GUZMAN. The statute on the SVOG was very specific in
many ways and very restrictive about the eligibility requirements,
and SBA is following that guidance from Congress.
Mr. PHILLIPS. Okay.
Ms. GUZMAN. At this time there is no way to expand that.
Mr. PHILLIPS. Okay. I just wanted to make sure my advocacy
is clear relative to certain industries that really have struggled dis-
proportionately.
My next question is about the Restaurant Revitalization Program
as it relates to closed locations in determining eligibility. Despite
the SBA indicating that closed business locations are ineligible,
which is I think on Form 3172, Item 3, some are being shut out
from receiving the funding to keep the businesses afloat because
the forms require them to count closed locations amongst their op-
erating entities. So will the SBA provide any guidance and updates
in its forms that reflect that restaurant locations not doing busi-
ness as of March 13, 2020, and those permanently closed will not
prevent a group from qualifying for the RRF?
Ms. GUZMAN. I will go back with my RRF Team to explore that
issue and get back to you.
Mr. PHILLIPS. Okay. I appreciate that.
Lastly, when the Committee heard from the GA and SBA Inspec-
tor General, we learned that while millions of America’s small busi-
nesses have benefitted from the programs, SBA was repeatedly
warned that the speed in which the programs were implemented
left the agency with limited safeguards to identify and respond to
risks such as improper payments and clearly fraud. I am concerned
about the potential for fraud in the Restaurant Program as well,
as some of my colleagues have already indicated. With the Ranking
Member of the Subcommittee on Oversight, Investigations, and
Regulations, the two of us have introduced legislation to require
the SBA to report to Congress on the plan, their plan, your plan,
and the steps that have been taken to ensure that the resources
within the program reach the businesses in need.
Can you share with us, the entire Committee, what steps, if any,
that you have taken so far relative to oversight?
Ms. GUZMAN. On the Restaurant Revitalization Fund specifi-
cally, we have implemented industry best practices, as well as
strong controls, fraud controls in place to ensure that there is lim-
ited fraud. In the program, we have reviewed our full plan with the
IG and GAO and feel comfortable with the current process that we
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are following to reduce that and minimize that risk wherever pos-
sible. And it is an iterative process and we continue to look at up-
grades as we move forward.
Mr. PHILLIPS. Okay. If anything, it unifies Democrats and Re-
publicans in this case. It surely is relative to prevention of fraud
and assured dollars are being used appropriately, effectively, and
efficiently. So we thank you for your attention to that.
With that, Madam Chair, I yield back.
Chairwoman VELA´ ZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Mr. Stauber.
Mr. STAUBER. Thank you, Madam Chair. And Administrator
Guzman, I appreciate you being here today.
I am extremely frustrated with Secretary Treasurer Yellen not
following the law. As the Chairwoman eloquently stated, it is her
responsibility to follow the law and be here. And I equate my frus-
trations with both the Chairwoman and Ranking Member Luetke-
meyer for the comments against Yellen for not showing up. It is
just unconscionable that she is not here, blatantly not following the
law which says, I think, a lot about the individual.
Now, Administrator Guzman, how many small businesses are or-
ganized as a subchapter C corporation?
Ms. GUZMAN. I do not have those exact numbers. It represents
more of the employers than small businesses as a whole.
Mr. STAUBER. Can you give us a guess? Can you give us a
guess?
Ms. GUZMAN. I cannot give you a guess. I apologize. I do not
have those numbers off the top of my head. Of course, I have
looked at it because obviously, it is not, you know, there are some
tax benefits we have looked at before and small businesses cat-
egory.
Mr. STAUBER. Would you say hundreds of thousands?
Ms. GUZMAN. Oh, I am sure.
Mr. STAUBER. Okay. Has the Biden administration proposed in-
creasing the corporate tax rate, thus increasing taxes on these one
hundreds of thousands small businesses that are organized as a
subchapter C corporation?
Ms. GUZMAN. You know, I know that small businesses across
the board have average revenues that are very small. I mean, if
you look at the Office of Advocacy’s report, under $50,000——
Mr. STAUBER. And Administrator Guzman, because my time is
limited, the question was, has the Biden administration proposed
increasing the corporate tax rate on these subchapter C corpora-
tions?
Ms. GUZMAN. Those should not. We are focused on trying to re-
move some of those loopholes for the larger entities. We do not in-
tend to affect the small entities.
Mr. STAUBER. Is that a yes or a no?
Ms. GUZMAN. To my understanding, we are not focused on the
small entities. We are focused on the larger corporations and the
loopholes that exist for some of those entity types.
Mr. STAUBER. Administrator Guzman, how many small busi-
nesses are organized as pass-through businesses?
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Ms. GUZMAN. Again, I do not have those numbers offhand and
I could not share those with you. But I am happy to follow up with
your staff and we can have a more——
Mr. STAUBER. Administrator Guzman, there is approximately
95 percent of small businesses that are pass-through. Has the
Biden administration proposed rolling back the Section 198 deduc-
tion on these pass-through incomes, thus potentially increasing
taxes on some 95 percent of small businesses that are organized as
pass-through businesses?
Ms. GUZMAN. I am not familiar with the specifics so we will
have to follow up. But I appreciate the question and, of course,
small businesses seek simplicity. They are obviously, you know, it
is critical that we are able to help them both on the revenue side
of the equation as well as support them with a tax structure that
does not favor large corporations.
Mr. STAUBER. Will the Biden administration increase taxes on
pass-through corporations?
Ms. GUZMAN. Again, I do not have those specifics.
Mr. STAUBER. How will a substantial increase in a capital gains
tax and regulation help small businesses ‘‘build back better’’?
Ms. GUZMAN. I appreciate the line of questioning around the
tax issues for small businesses. Obviously, it is really critical that
our economists continue to look at ways that we can improve the
economy and help those small businesses, you know, across the
board. Again, the focus is on traying to ensure that the system is
equitable for our small entities, as well as large corporations and
ensure that——
Mr. STAUBER. Administrator Guzman, in light of time, I just
have 30 seconds.
Ms. GUZMAN. Sure.
Mr. STAUBER. Will the increase in the capital gains tax help or
hurt small businesses?
Ms. GUZMAN. It will depend on the size and scale of those in-
vestments. So I cannot peak specifically. I do not have the analysis.
Mr. STAUBER. So you cannot answer the question whether cap-
ital gains will help or hurt small businesses?
Ms. GUZMAN. I do not have the full analysis, economic analysis
on that.
Mr. STAUBER. Madam Chair, I yield back.
Chairwoman VELA´ ZQUEZ. The gentleman yields back.
This is the reason why we need Secretary Yellen here. The SBA
administrator is in charge of programs that have nothing to do
with tax policies.
Now we recognize Ms. Newman from Illinois for 5 minutes.
Ms. NEWMAN. Thank you, Chair Vela´zquez. And thank you,
Ranking
Member,
for
putting
this
together.
Administrator
Guzman, welcome.
So I am just going to refer to my colleague’s comments just right
before me. By and large, when you have spoken to the Biden ad-
ministration at length, they are making sure that small business
is not affected by any tax increase of the largest of companies. And
again, I stress that the Biden administration has made—in fact,
that is a line in the sand I would be willing to commit to from the
Biden administration. So that for the record.
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And then secondly, capital gains has been studied time and time
again. It never affects small businesses. So I encourage him to look
that up.
But my question for you, Administrator Guzman regards two
things. I know that you have hit the ground running since March
17th. A lot going on very obviously. But structurally, the first thing
you do when I have gone into an organization is to look at the
structure of the organization. Have you made enhancements or im-
provements across your leadership? And you do not have to get into
hiring/firing, but have you reorganized in any way that will help
address some of the issues that have been cited? Right? Data integ-
rity. There is a little bit of fraud out there, and some of the other
bigger issues. So if you can talk broadly about your structural
reorg.
Ms. GUZMAN. Well, the number one thing is that we continue
to look at the symptom process and that includes the structure and
how our departments are functioning under the leadership. How-
ever, across the board what we have tried to implement is an en-
terprise-wide approach. You know, breaking down some of those
silos and increasing collaboration across the board. A great exam-
ple is in the EIDL and PPP programs. Our Office of Capital Access
and Officer of Disaster Assistance are working more collaboratively
now with the Office of Field Operations so that those boots on the
ground at the SBA and district offices across the country are able
to access information on those loans for our constituents and be
able to help them through the process. Previously, that was shut
down and so we reimplemented that as an example. So that cross-
collaboration, enterprise-wide approach, I have definitely already
been started and we will continue to look at other improvements
specifically in departments as we move forward.
Ms. NEWMAN. Thank you for that.
Second question is with regard to Community Navigator. I
thought this was a brilliant program. You know, about 80 percent
of my GDP in Illinois 3 are companies under 15 employees and
under $2 million in net revenue. And therefore, these folks, the
owners, and they are largely family owned, are working very hard
every day on their business and do not have time to navigate oner-
ous documents. And so the Community Navigator Program I think
is brilliant but I know that we are not quite there yet. Can you
give us an update on when those navigators will be available and
if you are going to use consultants and volunteers and the like. So
if you can share.
Ms. GUZMAN. Yes. On the Community Navigator Pilot Program,
the Notice of Funding Opportunity was released yesterday. We
have a 45-day open period for nonprofits, both national, as well as
local, regional, to apply to either be a hub or a spoke in the system.
Obviously, the ultimate goal is to get hyperlocal with authentic and
competent local organizations who can help businesses navigate the
resources that are available to them and hopefully better access in
the future.
Ms. NEWMAN. Great. Thank you very much for your time.
Thank you for being here. And I yield back.
Chairwoman VELA´ ZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Texas, Mr. Williams.
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Mr. WILLIAMS. Thank you, Madam Chairman.
I am a small business owner. Have been for 51 years. I am also
the author of the Save Our Stages bill that we have been talking
about today.
Madam Chairman, you are the head of the Small Business Ad-
ministration; correct? Can you hear me, Madam Chairman?
Ms. GUZMAN. Are you speaking——
Mr. WILLIAMS. You are head of the SBA; right?
Chairwoman VELA´ ZQUEZ. Administrator.
Ms. GUZMAN. Yes. Administrator.
Mr. WILLIAMS. Okay. All right. So my question is, have you
ever met a payroll? Have you ever started a small business? Have
you ever drawn a line of credit? Have you ever sold a product?
Ms. GUZMAN. Yes, I have. I come from a family of small busi-
ness owners and I grew up working.
Mr. WILLIAMS. Okay. And just to help you along the way, let
me tell you, on these taxes you are getting asked about, just re-
member this: low taxes helps business, high taxes hurt business.
Now, I sent you letters on February 4, February 25, March 18,
April 9, April 15, and April 19 to try to give my constituents an
update on the Save our Stages and the PPP Program. And like we
have heard today, to date I have not received one response, even
with the Chairwoman being on these letters with us. So what you
are doing, you are ignoring my requests. You are blowing me off.
You are blowing 700,000 people off in my district in Texas that
sent me to Washington to help fix problems.
So Madam Administrator, when we spoke on the phone last
month, you said that these communication problems would be fixed
and yet nothing has changed. Not only for me, but for others. So
what are you going to do to get these communication issues fixed?
Or should we just talk to lobbyists? I mean, we are hearing more
from the lobbyists than we are from your office. So should we talk
to you or lobbyists? How are you going to get this fixed, and with
a short answer, please.
Ms. GUZMAN. I remain committed to transparency and collabo-
ration. And we have done over 100 briefings to date. We are pro-
viding weekly/monthly reports.
Mr. WILLIAMS. Okay.
Ms. GUZMAN. An increase in outreach to our Oversight Com-
mittee.
Mr. WILLIAMS. But you have failed to call me back.
Second question. Today marks 151 days since the Shuttered
Venue Operator Grant Program was signed into law by President
Trump. I am the author of that. We have seen countless music
venues and movie theaters go out of business while the rest have
been struggling to keep their doors open until this 1:04:58xxx as-
sistance hits their bank accounts. And as these businesses have
been waiting while the Small Business Administration struggles to
get the program off the ground, the agency turned all their focus
to the Restaurant Revitalization Fund and got funds in bank ac-
counts within 7 days of the application opening. To the date that
now has sent nearly $28.6 billion out the door while the Save Our
Stages program has delivered absolutely zero. Nothing. So it is
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hard to classify the SBA’s rollout of this program under your watch
as anything but a total disaster and a total failure.
So on behalf of 12,000 venues who have waited over 5 months,
when will these businesses see the money? We understand today
through the lobbyists, we have learned that, and was the problem
this way because this was a President Trump thing and you just
pushed it to the side like we saw so many with the Biden adminis-
tration? So why can we not get it right like we did with the res-
taurants?
Ms. GUZMAN. I appreciate that question. And to clarify, the
Shuttered Venues Operator Grants Program is being administer by
a whole different team, our Office of Disaster Assistance. We actu-
ally placed the Restaurant Revitalization Fund in a different office
to ensure resources were available for both.
Mr. WILLIAMS. Then Madam Chairman, why do you not give it
to that group and let them get it out?
Ms. GUZMAN. Actually, this team has been working really dili-
gently around the clock. They are capable and being effective in
terms of finally overcoming some of the initial technical issues that
we experienced with the vendor of this program. Obviously, we
have had over 13,000 applications and we are working through
those as quickly as possible. This was a much more complex pro-
gram as written. Some of those learnings, yes, were taken as the
RRF was written so that we had some simplification in the proc-
ess——
Mr. WILLIAMS. I hear you. I have got another question but it
is going to be hard to tell those people that. Okay?
Now, thirdly, building off this last question, when we say that
there has been zero money delivered to Save Our Stages, that is
just talking about the first priority group. There are two more
groups that will likely be waiting until July to receive any money
at the rate we are currently moving. So additionally, we saw the
RRF that the money ran out for the first priority group after they
were able to apply.
So Administrator Guzman, can we expect to see the same num-
bers in the Save Our Stages Program with a great deal of busi-
nesses being left out of any assistance at all as we did with the
Restaurant Revitalization Fund or should we just ask the lobby-
ists?
Ms. GUZMAN. We actually have applicants from all of those pri-
ority groups. You know, the 1:07:39xxx. We have about 4,000. We
have another couple of thousand in the 70 percent and another
4,000 in the 25 percent. So we encourage everyone to apply. We do
not anticipate that this money will run out.
Mr. WILLIAMS. They do apply but they cannot get the money.
Ms. GUZMAN. Correct. We are processing them as we go in
those priority categories. However, based on the demand so far that
we have seen, we do believe that we have enough funding.
Mr. WILLIAMS. Well, you need more people then, I guess, to
help get it done.
Anyway, I think my time is up. Madam Chairman, I yield back.
Chairwoman VELA´ ZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Georgia, Ms. Bourdeaux.
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Ms. BOURDEAUX. Thank you, Chairwoman Vela´zquez, and
Ranking Member Luetkemeyer. And thank you, Administrator
Guzman, for joining us today and for reaching out to the many
small businesses in my district and holding a forum here to help
them as you rolled out the Restaurant Revitalization Program.
The Paycheck Protection Program, as you know, has provided
millions of small businesses with a lifeline to keep their doors open
and employees on the payroll over the past 14 months. But now
that the PPP funds are virtually exhausted, we are hearing from
more and more small business owners who will be seeking loan for-
giveness in the coming months. Nearly 2 million 2020 PPP loan re-
cipients have yet to apply for forgiveness, and I know that they are
anxious to better understand how they can obtain this.
So I was just wondering how the SBA is working with lenders
to reengage borrowers and ensure that they understand how to
apply for loan forgiveness. And have you observed a difference in
the speed or manner in which the large versus small PPP lenders
have processed their borrowers’ forgiveness applications?
Ms. GUZMAN. We are working closely with the lenders to just
make sure that we have the systems in place to support the for-
giveness applications that will be coming in. In addition, we are
looking to be creative about how we can find innovative ways to
streamline that process as we move forward into forgiveness, espe-
cially for, as I mentioned previously, the $150,000 to $2 million
range that does not have the expedited process.
And what we have seen in the past is that it is all different sizes
of forgiveness loans of the 60 percent that we processed so far from
2020 loans. And so we have not seen any specific trends. I think
just overall, folks are looking for simplicity, looking for assistance,
and we hope to continue to provide the outreach necessary to sup-
port them.
Ms. BOURDEAUX. Okay. Well, thank you.
One other question here. EIDL. About the EIDL program. It has
provided over $200 billion in relief to small businesses since last
March but less than $10 billion in new loans have been approved
since February. And you mentioned in your testimony that the
Small Business Administration still has about $263 billion in loan
program authority remaining.
Do you have information on the amount of unspent funds appro-
priated for the COVID-19 subsidies?
Ms. GUZMAN. Yes. And what we are doing on EIDL, obviously,
I made that initial change increasing the limit from $150,000 to
$500,000. We saw $1.5 billion in demand come through from just
that change alone. And as I committed, we will be increasing that
to $2 million, which is the true authority of the EIDL program so
that we can continue to support businesses that need that assist-
ance. There is $263 billion in authority left and we will be focused
on making sure that those businesses who are interested in it can
access the program.
Ms. BOURDEAUX. Just to follow up, the $263 billion in loan au-
thority represents how much in the funds appropriated that are
used to support that $263 billion? How much remains of the funds
appropriated in that program?
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Ms. GUZMAN. I will have to follow up with you and get those
specifics.
Ms. BOURDEAUX. Okay. We appreciate that.
And if the maximum loan amount is increased to $2 million as
you mentioned in your testimony, how much of those funds do you
anticipate will be used?
Ms. GUZMAN. We are not sure yet of that demand as we roll
out that program by July. We are hoping to finalize the technology
to accommodate for those increases. We will start to get a better
sense of those numbers and can share that with the Committee at
that time.
Ms. BOURDEAUX. Okay. Thank you so much.
I yield back the balance of my time.
Chairwoman VELA´ ZQUEZ. The gentlelady yields back. Now we
recognize the gentleman from Pennsylvania, Mr. Meuser, for 5
minutes.
Mr. MEUSER. Thank you very much, Chairwoman. And thank
you, Administrator, for being with us. And certainly, thanks to our
Ranking Member Luetkemeyer.
So the PPP loans were quite successful. They were not perfect.
They were a lifeline. We did a lot. It was a very holistic approach
to assuring that they were as efficient, valid, purposeful as pos-
sible. Secretary Mnuchin and many Members and banks and small
businesses. It was very inclusionary on how to get it right. It still
is very important, of course, and I am hearing from many busi-
nesses as well as banks that there are problems with the forgive-
ness initiatives, primarily related to loans between $150,000 and
$2 million and the loan forgiveness over $2 million. I am not sure
any have been forgiven as of yet. Now, we all understand that
there is going to be an audit of the loans over $2 million, but Ad-
ministrator, is there a plan? Because currently, it is a problem for
banks and businesses. We are not seeing a real process for forgive-
ness of loans in these categories.
Can you comment on that, please?
Ms. GUZMAN. For the over $2 million loan categories, yes, there
is a specific process. It is an individual review. Obviously, those
were flagged for SBA loan review due to the amount. And there is
a process that SBA is following to review those within the same
partnership. And so I know that those, obviously, this is a huge
task that the SBA is taking on and will increasingly do so as those
payments come due. So we are hoping to try to come up with a
streamline process as well for those $150,000 to $2 million bucket
as well as you mentioned to make sure that those can be processed
efficiently and give us the time and resources to be able to address
those individual 1:14:36xxx.
Mr. MEUSER. Sure. Thank you.
Is it a priority? And will we see some sort of plan that will be
put into effect?
Ms. GUZMAN. Yes, it is a priority. We are working on that cur-
rently. And so hopefully we can follow up soon with some specifics.
Mr. MEUSER. Great.
Administrator, Representative Stauber brought up the 20 percent
business income deduction that occurred in the Tax Cuts and Jobs
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Act. Many small businesses are concerned about the Biden admin-
istration’s plans for tax increases.
Can you tell us what you think about the 20 percent removal
from small businesses? And are you weighing in with the Biden ad-
ministration on behalf of the millions of small businesses in our
country to assure or do what you can to keep that deduction in
place? Because that deduction, I think you know, was not a gift to
the wealthy. It helped small businesses expand, get stronger, and
hire more employees as we saw with a 3.5 unemployment rate.
Your thoughts on the 20 percent?
Ms. GUZMAN. Yeah. I mean, I closely collaborate with the Office
of Advocacy as well. It has the economists that can do the research
as well. Clearly, I am not a tax expert. That is not my forte. I am
administering these programs on behalf of the Small Business Ad-
ministration, relief for small businesses. So I continue to try to
track those issues and report up our findings to the necessary
channels.
Mr. MEUSER. It is a major interest and a factor for small busi-
nesses’ growth, survival and just maintaining and working through
the recovery. So I think the SBA administrator should be very
much an advocate for the health of small business.
As well, you know, it came up before about capital gains. And
that is very important. The idea that the Biden administration
wants to raise capital gains from 20 percent to 43 percent does
have a great effect. If a small business is looking for a partner and/
or thinking about selling and retiring and passing the business
along, that transfer has to take place. That is going to cost them
23 percent, which is $23,000 per $100,000. So it is not a trivial
thing. It is very important.
The other thing I want to bring up, please, is the unemployment
compensation. Ninety percent of my small businesses in my district
are literally diametrically opposed to President Biden’s comment
that the additional supplement of unemployment compensation as
the president said is not measurable for the level of workforce
availability. And I will tell you this. I do weekly business calls with
dozens of small businesses and virtually 100 percent say it is the
number one issue, if not the number two issue that they face. A
headwind that they face.
Can you comment on that? Do you believe that where some of
this is being targeted in some states and, you know, it is going to
by law continue to supplement through August. Again, as an advo-
cate for small businesses, I would hope you would recognize that,
be inclusionary, talk to the small businesses and get directly from
them what their concerns are and work on their behalf.
Chairwoman VELA´ ZQUEZ. The gentleman’s time has expired.
Mr. MEUSER. I yield back, Madam Chair. Thank you.
Chairwoman VELA´ ZQUEZ. Now we recognize the newest Mem-
ber on the Committee, the gentleman from Louisiana, Mr. Carter.
Welcome to the Committee.
Mr. CARTER. Thank you very much, Madam Chair. Thank you
very much for your very warm and gracious welcome. I am honored
to be a part of this Congress. Honored to be a part of this Com-
mittee. Ranking Member Luetkemeyer, good morning. Or good
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afternoon I should say. Well, I guess it is still morning. Thank you
all very much.
And Administrator Guzman, I would like to personally thank
you. I know your job has been difficult. I feel the frustration of all
of the Members here. I share their frustration, but I also recognize
that you have a very difficult task. There is nothing in the play-
book to address a worldwide pandemic, the pain that it has caused
for many of the people throughout our country. Certainly in the
Second Congressional District we are no different. So I applaud
your efforts. I feel the frustration of my colleagues who expressed
concerns about the availability of funds, the rapid nature of getting
those funds, and the frustration that we hear from our
businesspeople.
So at the risk of being redundant, I will try to not repeat ques-
tions that have been asked. But I will share that, as you know, I
represent the Second Congressional District, which is Louisiana,
home of the Historic French Quarter and our beautiful river par-
ishes up and down the river from West Jefferson to West Baton
Rouge Parish.
One of the issues that I hear repeatedly from small businesses
is the ability to access PPP as rapidly as some of the larger compa-
nies that have access to lawyers and consultants and accountants.
What plans, if any, do we have to address perhaps in the next
round of resources to assist small businesses who oftentimes miss
out because they do not have access to the resources of accountants
and consultants to prepare paperwork?
Ms. GUZMAN. Yes. And obviously, once the Community Naviga-
tors Pilot Program is launched and those organizations are brought
on board to fully help the SBA and communicating resources and
supporting businesses through process of relief, that will obviously
make a big difference. But I will submit that on the Restaurant Re-
vitalization Fund Program, we were able to effectively, through
partnerships, reach to all different size businesses, as well as from
different communities and regions across the country. And so real-
ly, that is reflected in the application, the interest, the access. And
I think what also was attractive was that we created a simple proc-
ess. Leveraging technology, using partners such as Square and
Toast and other point-of-sale vendors to help us access those res-
taurants who are underserved so that they can connect to the plat-
form and apply for the program. So I think that there are some
learning in our Restaurant Revitalization Fund in terms of how we
do our outreach, how we are structuring our programs so that they
are more customer friendly so that businesses of all sizes can ac-
cess the program easily. And we will be applying those types of
monies across our program as we move forward.
Mr. CARTER. And Madam Administrator, I have some thoughts
that I would like to share with you and my staff will be preparing
some documents to share with you some thoughts that I think may
assist with kind of segregating those funds to make it easier for
small businesses to access them.
One final question as my time runs out. AS you know, in Lou-
isiana, we are just about 15 years past Katrina, one of the largest
hurricanes and issues ever to hit, natural disasters that ever hit
Louisiana for certain. Many of our small businesses are still suf-
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fering and still paying back SBA loans from that situation and
have since had other situations of similar magnitude, like COVID.
What relief, if any, can we look forward to in the way of forgiveness
of some of those Katrina-related SBA loans?
Ms. GUZMAN. We did provide that relief on all our programs.
We have extended payments on any EIDL loans to 2022. But in
terms of any forgiveness, we would be happy to collaborate with
you, work with you to provide you any information that you need
about our programs and we will implement any programs that
Congress directs us.
Mr. CARTER. Very good. And finally, I would like to once again
thank Representative and Chairman Vela´zquez for governing this
meeting as smoothly as you have. And thank you, Administrator
Guzman, for making yourself available. I yield back my time.
Chairwoman VELA´ ZQUEZ. The gentleman yields back. Now we
recognize the gentlelady from New York, Ms. Tenney.
Ms. TENNEY. Thank you, Chairwoman Vela´zquez, and Ranking
Member Luetkemeyer, for holding this meeting. And I want to say
thank you to Administrator Guzman for being here. We know that
working at SBA is not an easy job right now, especially in light of
the pandemic. And I might add, thank you for being here. I am
very disappointed that Secretary Yellen has not made the effort to
be here. She did speak before Financial Services in the past and
really needs to fulfill her legal obligation to be here. So hopefully,
we will be hearing from her soon. And I am sure Chairwoman
Vela´zquez and Ranking Member Luetkemeyer will make sure that
happens.
But I wanted to just address the administrator. This is an issue
that is really big in my region. Actually, it is across the country.
I am a small business owner. Our family business is celebrating
our 75th year here. We almost did not think we were going to
make it because of the pandemic last year. So many of the pro-
grams put out by SBA and the CARS Act have been vitally impor-
tant to us.
But one of the big issues now facing every employer where I go,
every business forum. It is the number one issue, is the enhanced
unemployment insurance benefits extending through August and
how that is putting a huge impact on their ability to attract and
to get people to work and in some cases, their own employees back
to work because the benefits are so strong.
What is your opinion on that? And do you think that we can in
some way target that relief instead of having this blanket coverage
where we are hurting even seasonal employees, seasonal busi-
nesses, agribusinesses in my community. You know, ag is number
one in my region. What do you think we can do to try to minimize
that impact on small business owners?
Ms. GUZMAN. From what I have heard from small businesses,
it is the combination of factors, and definitely across the board,
small businesses want help in making sure that their work is still
safe as well to come back to work. And so that is why we have been
emphasizing heavily the vaccination rates and by emphasizing the
American Rescue Plan taxpayer, tax credit, rather, for small busi-
nesses to give time off to their employees to get that shot, as well
as recover from it. Because we know that feeling safe in the work-
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place is also a big factor. Also, just the vaccination rates would
help with the care economy and with schools being reopened fully
for the children to go back to work because I am also hearing that
that is a huge factor for a lot of the employees of these businesses
is that they not only potentially fear of COVID in the workplace
but as well that problem with having no care for children at home.
So I do believe that the Biden administration focus on fighting
COVID is going to go a long way towards helping our small busi-
nesses access workforce.
Ms. TENNEY. Can I just reclaim my time for a second? I am not
hearing that from small businesses. We have a fairly decent vac-
cination rate here, very low contraction rate, a low death rate in
rural areas here. So my concern is many businesses either shut
down entirely or invested a small fortune, which is a lot for busi-
nesses, tens of thousands of dollars into plexiglass, PPE, and other
items to make it safe for employees to go back to work. We are not
talking about our police officers, our firemen, our essential workers
and all the other so-called essential. I think every worker is essen-
tial. But people who went back to work and are back working. We
have to get our economy going. I am just concerned that if we do
not have a more targeted approach, we are going to see a collapse
in our economy and we are going to have a problem getting them
back to work. Do you not think that that should be an issue that
the Biden administration should be addressing with you as the key
administrator, one that deals with small business? I mean, look,
NFIB has said that almost 50 percent of businesses are specifically
citing the enhanced unemployment as the reason that people are
not coming back to work because they can wait it out until August.
And we know that is partly true. I know a lot of people are working
even though they might even be making less. Do you not think that
is something the Biden administration should be doing to get our
economy going again?
Ms. GUZMAN. I know that we are looking at all the tools. And
obviously, that support in the economy, those additional funds have
also propelled our economy and supported business revenue cre-
ation at the same time. So, you know, it is not my position at the
SBA to judge in terms of the best economic decisions to make over-
all for the economy but I know that that has been a shot in the
arm in the economy to have that stimulus check distributed across
the country.
Ms. TENNEY. Right. But we are running out of stimulus checks.
Just one more thing. You said you are a small business owner.
I mean, a lot of businesses are C corps. You know, our business has
been around a long time. We are small. We are a C corp. We are
hurt by taxes. I think if you are a business owner, I think you can
safely say that taxes hurt all businesses, large and small, but are
particularly harmful to small businesses. And in an area like mine,
94 percent of the jobs created in my region are from small busi-
nesses. So we do not deal with the large business problem. So these
taxes are going to really hurt our community.
Ms. GUZMAN. As I mentioned earlier, this is really President
Biden’s focus on taxpayers over $400,000 is really the priority
focus, including the S corporation taxpayers. But all of the excep-
tions that are typically benefitting small businesses—the rent, cap-
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ital gains, passive income—will continue to apply. And so the budg-
et includes provisions really to close those loopholes I reference
that allow larger corporate taxpayers with income over $400,000
from avoiding paying certain taxes. And so that is really the focus
as I reference earlier.
So I appreciate what you are hearing from the constituents. I
hear a combination of, of course, that plus the COVID issues and
the care economy issues and education. So I look forward to con-
tinuing to partner with you to help support our small businesses.
Ms. TENNEY. Thank you. I think my time is up. Thank you so
much and I appreciate your testimony and for actually being here
today. Thank you.
Chairwoman VELA´ ZQUEZ. The gentlelady’s time has expired.
Now we recognize the gentlelady from California, Ms. Chu.
Ms. CHU. Thank you, Madam Chair.
Administrator Guzman, since the start of the pandemic, I have
been extremely concerned about the Trump administration’s failure
to collect demographic data on PPP recipients. It prevented us from
understanding which types of businesses benefitted from the pro-
gram at a time when so many were struggling. And that is why
it was so significant that the Los Angeles Times had a recent in-
vestigation in which they reported an alarming finding that in
L.A., businesses in majority White neighborhoods in the early days
of the PPP loans received loans at twice the rate of majority Latino
areas, 1.5 times the rate of majority Black areas, and 1.2 times the
rate in Asian areas. So clearly there needs to be more help for un-
derserved businesses. And one of the most important lessons of this
past year is that community financial institutions can effectively
reach businesses that are not served by traditional banks and they
can do so at scale.
Now, I have long championed the Community Advantage Pro-
gram which leverages nonprofit, mission-oriented lenders and have
authored legislation to give the program long-term stability by au-
thorizing it for 5 years. So how can we expand the role of CFIs,
such as Community Advantage in the small business lending eco-
system so that we can support an equitable, long-term recovery?
Ms. GUZMAN. Well, one of the silver linings of the pandemic has
been SBA’s increased network of lenders that have been accessing
the PPP program. And we hope to continue to partner with them,
including those mission lenders, CDFIs and CDCs and others to
make sure that we are supporting small businesses that are under-
served because the data is stark in terms of access to these pro-
grams and the U.S. Chamber had a similar study which showed
that Black businesses were unable to access capital at the same
rate. Half the rate actually of White businesses. And so we con-
tinue to see that in the data and so the SBA is working hard to
try to find a solution to partner with institutions that are serving
these constituents as well as all of our traditional banking partners
to better support through SBA programs capital access for these
constituents.
Ms. CHU. Thank you for that.
Administrator Guzman, I wanted to ask about another issue
which is the Shuttered Venue Grant Operator Program. I am proud
to operate Southern California and the countless live venues, such
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as the Troubadour and the movie theaters that make our region so
special. They were the first businesses to close and will be the last
to reopen. And that is why the Shuttered Venue Program includes
this supplemental phase for businesses still experiencing deep
losses in the first quarter of 2021, like so many of the live venues
in L.A. County. But because of the program delays, SBA already
actually has the necessary data from the applicants to calculate
both the initial loans and the supplemental loans right now. So
given the delayed implementation of this program, can you discuss
if SBA can help these businesses by automatically calculating and
processing the supplemental grant awards to expedite disbursal of
these funds? And are there tools that Congress can provide to help
you do this?
Ms. GUZMAN. Yeah. I mentioned before that the Shuttered
Venues Operator Grant Program was a complex statute that we
were implementing and the program design dictated by statute ob-
viously had lots of control for eligibility requirements. There were
so many different types of entities that were eligible with very
unique requirements under each. And we worked very closely with
our vendor and cross agencies to make sure that we were
leveraging technology to the fullest and simplifying processes. And
we are continually working through some of those issues to see how
we can expedite as we go through in processing taxes and other
issues. And so while the program has been delayed, I feel confident
that we will start to roll out these funds as we have been doing
this week and we appreciate the patience from the industry. Obvi-
ously, they do not have time to wait. Their rent is due and other
expenses are critical for them so we are working and take this pro-
gram very seriously in implanting it as quickly as possible. And so
we look forward to any further input that you have specifically
with certain venues and how we can improve the experience.
Ms. CHU. Thank you. I yield back.
Chairwoman VELA´ ZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from New York, Mr. Garbarino.
Mr. GARBARINO. Thank you, Chairwoman. And thank you to
the Ranking Member for doing this. And Administrator, we appre-
ciate you being here. I want to echo my colleagues’ disappointment
in Secretary Yellen’s absence today.
But I have a question. I have been in Congress as a new Member
for a only a little under 5 months now. And prior to being in Con-
gress, with my law practice and being in the State Assembly in
New York, I dealt with SBA, the local offices, and they were very
good in answering questions when I dealt with them. But my time
now, and I have heard this from other Members as well, a lot of
questions to your office have gone unanswered or been very delayed
if they get an answer. Can you explain what is behind this
underwhelming response? And if we cannot receive a response di-
rectly from you and your team, what recommendations do you have
for us to get answers to the questions that we have? It seems like
the communication right now between the SBA and Members of
Congress is very bad. We would like to have something done in a
timely manner. How can you help us with this?
Ms. GUZMAN. Yes. And SBA is working to increase communica-
tion. It has increased dramatically in the Biden-Harris administra-
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tion. And so just to confirm, as I said, we have had hundreds of
briefings. We send out regular reports. And we continue to try to
respond to all of these letters as quickly as possible. Under-
standing, of course, that these requests require career staff time as
well as just sometimes days to pull these reports and that is dis-
ruptive to the process. Obviously, we are highly impacted by the
scale that we have had to reach in order to serve small businesses
which remains a priority and we will continue to try to get through
all of your requests as quickly as possible. So we appreciate your
patience.
Mr. GARBARINO. I understand that. And I know you try to talk
with small businesses, but a lot of small businesses contact us
when they have problems with the SBA, so we send questions over.
I spoke to the previous administrator, Ms. McMahon, and she told
several of us that she prioritized responses to Members of Congress
where she got back within several days. Is that something that we
can count on your office for, that when a request comes in, when
a question comes in from a Member of Congress that we can expect
a response from your office within a matter of days?
Ms. GUZMAN. Yes. And unfortunately, during a disaster it is a
little bit of a different situation because we are so impacted by all
these programs, unlike under Administrator McMahon. However,
yes, it is a priority. My team knows it is a priority.
Mr. GARBARINO. I think we had COVID all last year.
Ms. GUZMAN. What we have tried to do in the programs is, as
I mentioned before, is open up access to some of those portals, to
our field operations as well. And we are also in touch with our local
field office as they can also help navigate some of these specific
issues. But yes, constituent requests, those customer requests, we
are trying to open up and access more of our team Members to be
able to answer questions like this. And so, yes, we will continue to
try to work with you to speed that up. I do want to make sure that
we will reach out to you and make sure your staff is in contact with
our field office who has this expanded now access into our portals
to be able to understand where loans are in the process.
Mr. GARBARINO. I appreciate that. Thank you.
And I have another question. Dealing back with the EIDL pro-
gram and fraud, the fraud is extremely concerning, the amount of
fraud. We know that the SBA’s Shuttered Venues Grant Program
was flagged by serious problems in the beginning. It seems that
new reports come out monthly on these programs. In your response
to these reports, we know the SBA plans to inquire and implement
many of the recommendations that it gets from the SBA Inspector
General, that it gets from the Government Accountability Office re-
garding these relief programs. Out of these recommendations that
you have received from the SBA Inspector General and the Govern-
ment Accountability Office, how many recommendations have you
gotten and how many have you closed out? Which means how
many have you implemented of those recommendations?
Ms. GUZMAN. A lot of the requests, too, in a lot of the reports
that we are seeing now are unfortunately assessing the portfolio
pre in 2020. And so a lot of the controls were put in place post in
2021. And so, unfortunately, that is not reflected in a lot of the cur-
rent reports. But we are working to close out as many of the IG
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and GAO reports as possible across the board and my teams
are——
Mr. GARBARINO. Okay. I only have a few seconds. How many
have you closed out, your team, to date? I believe you have had 32
recommendations. But how many have you closed to date and how
many are open?
Ms. GUZMAN. We will follow up with you to give you that exact
number.
Mr. GARBARINO. Okay. Thank you. I yield back.
Chairwoman VELA´ ZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Pennsylvania, Mr. Evans,
for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
Madam Administrator, many small businesses in my district, es-
pecially minority-owned businesses are in desperate need of tech-
nical assistance. In your testimony, you mentioned that the Amer-
ican Jobs Plan will provide SBA the ability to create a national net-
work of small business innovators and innovative hubs and tech-
nical assistance partners to ensure women, inventions, and rural
businesses basically receive what they need. Could you please
elaborate on this proposal and how it would work and the current
resources?
Ms. GUZMAN. Yeah. Obviously, the SBA has resource partners,
our Small Business Development Centers, our Women’s Business
Centers who have expanded recently, including through HBCUs, as
well as SCORE. And so with those resource partners, they play a
critical role in helping us reach small businesses. But with the
Community Navigator Pilot Program, we are going to be able to
partner more extensively and resource partners are eligible to
apply for that as well, of course. But the point of that is to create
a hub and spoke model where there is an essential source of infor-
mation and a network of more local navigators who can help small
businesses connect to resources and help them understand the
process, application process, et cetera. And so with that program,
we hope to fund national as well as regional and local organiza-
tions to create that system of disbursing information about these
programs as quickly as possible so that businesses that have tradi-
tionally been underserved will be able to access those relief pro-
grams.
Mr. EVANS. So how would you say you think it is proceeding at
this point?
Ms. GUZMAN. We have just released the Notice of Funding Op-
portunity yesterday, and so we know that we have done extensive
outreach with organizations across the country to make sure that
they were ready to apply through the grant portal process and
hopefully serve our small businesses through this system. And that
includes diverse organizations and organizations across our regions
that are underserved.
Mr. EVANS. Madam Administrator, I thank you for your leader-
ship and your organization, what they are doing. And I think the
technical assistance is probably of utmost importance. Obviously,
resources are important, but the technical assistance I believe is
very important as a priority. Again, I thank you for your leader-
ship.
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I yield back, Madam Chair.
Chairwoman VELA´ ZQUEZ. The gentleman yields back.
And now we recognize Ms. Young Kim from California for 5 min-
utes.
Ms. YOUNG KIM. Thank you, Chairwoman.
I want to thank Administrator Guzman for joining us virtually,
though I must say that I share Chair and Ranking Member and
my colleagues’ frustration, and I am also disappointed Secretary
Yellen is not testifying today to discuss how Treasury is assessing
the impact on a possible increase in taxes on small businesses.
As one of the Members of Congress who helped craft the bipar-
tisan PPP Extension Act, I wanted to follow up on some of the re-
cent funding numbers that the SBA has been reporting and the de-
cision to close the border. Let’s acknowledge that the PPP applica-
tion window will remain open for CFI lenders, so what specific
steps did you take to alert all other lenders that the portal was
going to close a few weeks back? And did you provide advanced no-
tice to the lenders? If so, how many days or weeks in advance did
you provide?
Ms. GUZMAN. We continue to communicate with the lenders
through our portal. That is how we communicate with them regu-
larly in terms of where we are at in the system. Obviously, all the
lenders have been tracking closely the remaining funds as we have
been walking through this program and reaching the end. So I do
not believe it should have come as a complete surprise to many and
we informed them in advance that we were——
Ms. YOUNG KIM. All right. Let me reclaim my time.
As a follow-up then, what should lenders do if they have an ap-
plication with an unknown status?
Ms. GUZMAN. If there are any lenders with hold codes in the
system, we are working through those still. Those funds remain for
those lending institutions and their ability to process them remains
open. And they have not been shut out from the system. If it is for
new loans, obviously, they can work through CFIs, whether it is
NDIs or CDCs or CFIs, the partner, and make sure that those new
applicants get through.
Ms. YOUNG KIM. Thank you.
The PPP Extension Act also extended application deadlines to
the end of this month but it also gave SBA extra authority days
to work through all error code issues for loans currently in the
pipeline. So can you please provide us with a detailed response on
how you envision the SBA using this 30-day period after the appli-
cation window closes? So will all eligible applications that clear
their error codes be able to proceed?
Ms. GUZMAN. I am willing to work with all the lending institu-
tions that still intend to move forward on any of their held applica-
tions to get them to completion. And so those extra 30 days will
be helpful. There is a process in place for SBA to coordinate with
the lenders to make sure that any information is cleared. That the
borrower is informed through the lender of any requests for further
information to release any of these holds.
Ms. YOUNG KIM. Okay. Thank you.
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Well, next question. How are the SBA’s entrepreneur develop-
ment programs like SBDC, WBC, VBOC, SCORE, administered to
avoid duplication and prevent fraud?
Ms. GUZMAN. Across all of our grant programs, obviously, we
take fraud seriously as well. Our SCORE partners, as well as our
SBDCs, WBCs, have very strict—and VBOC, have very strict re-
porting requirements to the agency and we follow through with au-
dits across the board as well.
Ms. YOUNG KIM. Well, let me ask one last question here.
Are there any current efforts to consolidate programs and re-
sources to make it easier for small businesses to access resources
in a one stop shop? Additionally, what efforts are you taking to
combat fraud and protect taxpayer dollars?
Ms. GUZMAN. Across our resource partners, obviously, they are
all engaged in local ecosystem building to try to support, along with
our field offices, small businesses and the support that they need.
And so we believe that it a cooperative approach is most valuable
to us and so we make sure that all of our departments are collabo-
rating with these resource partners and have open communication
to make sure that they are positioned well to support small busi-
nesses. And our field offices are really critical in bringing them all
together. And that will apply towards the Community Navigator
Pilot Program as well. We see that all these resources partners
have been inundated during COVID and have been contacted by
many new businesses for support and we hope that that engage-
ment will continue as we move forward. In terms of fraud control
or prevention of any misuse of those programs, again, our grants
program management is positioned with processes to make sure
that funds are used in how we intended them to be used to support
small businesses with technical assistance.
Ms. YOUNG KIM. Thank you. I see that my time is up. I yield
back. Thank you.
Chairwoman VELA´ ZQUEZ. Time has expired.
Now we recognize the gentlelady from Pennsylvania, Ms.
Houlahan, for 5 minutes.
Ms. HOULAHAN. Thank you, Madam Chair. And thank you all
for being here.
I have several questions, and my first one has to do with PPP
loans and the forgiveness process. Through a bill that I introduced
and that was signed into law as part of the Economic Aid this past
December, SBA is now able to provide small businesses that re-
ceived a loan of $150,000 or less with a streamline forgiveness
process using the 3508S Forgiveness form. This was really a wel-
comed change for small businesses and lenders to be able to
streamline the forgiveness process and to make it easier for our
smallest businesses to get that relief. However, based on data that
was released by the SBA, there still are a substantial number of
borrowers who have not yet submitted, nor have been approved for
forgiveness. And I have heard suggestions from advocates lately
that simplifying the forgiveness application and associated require-
ments for all PPP loans between $150,000 and $2 million would
further allow a more streamlined process. And it has also been
raised that additional resources may be needed to help the SBA ex-
pedite reviews for PPP loans greater than $2 million. So as the
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agency is beginning to move forward and move their focus from the
origination phase to the forgiveness phase, what kind of consider-
ations are being made by you all to ensure that there is an efficient
forgiveness process? Do you also feel that raising the current cap
on PPP loans eligible for streamline forgiveness from $150,000 to
$2 million would help you better serve our businesses?
Ms. GUZMAN. Thank you for that. We are looking at best prac-
tices in that $150,000 and under range because clearly that sim-
plicity is beneficial to our small businesses applying. We do want
to apply similar type streamlined processes for the $150,000 to $2
million and are exploring our options currently. And so we welcome
a partnership in trying to circle back with you once we have more
specifics to recommend. Obviously, we are talking to lenders who
have been implementing PPP to understand what they are seeing
and what they are hearing in terms of why borrowers are not pur-
suing forgiveness at this time but we know that that cliff is coming
with payments due and want to make sure that we move forward
to create a system that they will access more readily.
Ms. HOULAHAN. My apologies for my dogs in the background.
Thank you, and I look forward to working with you on that as
well.
My next question has to do with concerns that constituents in my
community have been raising with me related to—and I recognize
you are facing unique challenges with the pandemic. But with your
agency being asked to distribute federal assistance to small busi-
nesses, we are definitely hearing a lot more about customer service
and the needs to have a more effective customer service. What rec-
ommendations do you have to improve the customer experience for
those of us in our communities who are seeking assistance from
SBA?
Ms. GUZMAN. Some measures we have put into place but I have
asked my staff to be as entrepreneurial as the small businesses
that we serve. And obviously, be providing strong customer support
and service is really critical for small businesses as they seek reve-
nues every single day. And so we have tried to take that approach.
With our small businesses, they obviously need information easily
accessible as well as in simple terms. And so we have really been
partnering externally with many organizations to better reach
small businesses with authentic voices, people who can help them
navigate and translate government to better support their needs.
In addition, we have equipped our field with more information and
direct access to our programs so that they can better support our
small businesses and turn around these requests. Obviously, SBA
has been inundated but we are working to try to find better ways
with technology as well to streamline processes, including support
to give small businesses answers and resources that they need
ASAP.
Ms. HOULAHAN. And I would look forward to working with you
as well on that. It definitely is a trend, and I understand the vol-
ume that you are realizing right now with PPP and EIDL and a
number of other large programs that you are implementing, some
more successfully than others. But if there is anything that our of-
fice or this Committee can be doing to help you as you work
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through what best practices are on customer service, I would wel-
come that as well.
I only have a half a minute left so I guess I would ask how we
can be better supporting you on issues of fraud as well. If there is
20 seconds worth of ideas that you might have that we can help
on the fraud area, that would be a welcomed last couple of seconds.
Ms. GUZMAN. SBA is continuing to use resources. We have obvi-
ously scaled up on customer service, as well as our fraud teams.
And so that support, that financial support for extra administrative
funds has been helpful for that. So that continued support will be
important going forward.
Ms. HOULAHAN. Thank you. I have run out of time and I yield
back, Madam Chair.
Chairwoman VELA´ ZQUEZ. The gentlelady yields back.
Now we recognize the gentlelady from Texas, Ms. Van Duyne for
5 minutes.
Ms. VAN DUYNE. Thank you very much, Chairwoman
Vela´zquez. I very much appreciate the fact that you have called
upon and recognized the importance of getting Secretary Yellen
here to answer some of these most basic questions, and I hope that
we will continue to push her and make sure that she does have an
opportunity to speak directly to our Committee. Thank you, Admin-
istrator Guzman, for being here today.
You have been unable to answer, or unprepared to answer a lot
of the questions that have been proposed and posed to you by my
colleagues, specifically those proposed impacts of the current ad-
ministration. The impacts of increasing the minimum wage. Are
you familiar that NFIB has found that 92 percent of small business
owners felt the wage mandate would harm their businesses?
Ms. GUZMAN. You know, I am familiar. I know as well though
that there are other studies that show that there are other factors
that are impacting the workforce and small businesses’ ability to
hire.
Ms. VAN DUYNE. Oh, without a doubt. I mean, including the
enhanced unemployment benefits. I was surprised when you said
that you had not heard that so much. That what you had heard
from small business owners was their questioning of coming back
in a safe environment I think. Congresswoman Tenney was very
clear that they have purchased and invested a lot of money into
ways of making sure that they are coming back in a safe environ-
ment. So not being very clear about the enhanced unemployment
benefits and the effects that that is having on small businesses, the
increase on capital gains and the effects that that will have on
small businesses you have been unable to answer. And quite frank-
ly, not having any information about what the increase in the cor-
porate tax rate would have on small businesses. Not just on the di-
rect costs but on the indirect costs. For example, increases in util-
ity rates.
Administrator Guzman, you are charged with running the Small
Business Administration that was created to aid, counsel, assist,
and protect small businesses. And yet, you are not aware of many
of the proposed increases and tax consequences that will directly
affect small businesses that are coming out of this administration.
I guess my question is, if you are not aware of the effects and the
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impacts of these policies that are coming down from the Biden ad-
ministration, who is advising the administration for small busi-
nesses?
Ms. GUZMAN. Well, I mean, I know that, as we have discussed
this before, I have said President Biden’s plan is really focused on
closing those loopholes for the larger corporations. And I will——
Ms. VAN DUYNE. I yield back my time. I disagree. It is not just,
it may be focused but they are increasing the corporate tax rate.
When asked will that affect small businesses, what was your an-
swer?
Ms. GUZMAN. Only a very small percentage of small businesses
are C corporations. We talked about that previously.
Ms. VAN DUYNE. No, regardless of whether or not they are C
corporations, will increased corporate tax rate affect small busi-
nesses?
Ms. GUZMAN. Again, I mean, Biden’s plan is focused on those
who have earnings over $400,000——
Ms. VAN DUYNE. And I——
Ms. GUZMAN.—so yes, there will be small businesses that are
included in that.
Ms. VAN DUYNE. And——
Chairwoman VELA´ ZQUEZ. Will the gentlelady please allow the
witness to answer the questions?
Ms. VAN DUYNE. If she answers the questions I would really
appreciate it.
Ms. GUZMAN. Look, I mean, the bottom line is that, you know,
there are important provisions, President Biden has pledged to not
only—to not increase taxes on taxpayers earning less than
$400,000. And, you know, including S corporation taxpayers. All of
the exceptions as I said——
Ms. VAN DUYNE. I would really appreciate it if you would an-
swer the question.
What would be the impact, and I know it is not the focus, but
there will be direct and indirect impacts on increasing our cor-
porate tax rate, correct, on small businesses?
Ms. GUZMAN. Not on the smallest businesses. And so, again, we
are——
Ms. VAN DUYNE. On small businesses defined by your adminis-
tration and by your department. I mean, things like increases in
utility taxes and utility costs, those will be felt by small businesses;
correct?
Ms. GUZMAN. Small business, yes. Small businesses will, you
know, will continue to have to navigate the systems in place and
any increases that vendors might transfer to them. But, you know,
again, the focus on this tax reform is really to ensure that those
smallest—there is a level playing field for the smaller entities. I
appreciate that SBA supports all small businesses. You know, it
could be as large as 500 employees.
Ms. VAN DUYNE. I reclaim my time. I have 20 seconds left. It
is obvious that small businesses that you are speaking with are not
telling you what the rest of us across the country are hearing. I
would welcome you, I would invite you to come down to Texas 24
in Dallas-Fort Worth and speak with the small businesses that we
are talking to that will tell you what the problems are directly so
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that you can be more prepared and maybe then, when you are
more prepared, we have heard directly from small businesses, you
can circle back with this Committee and let us know what you are
doing to be able to really prepare and protect our small businesses
across the country as these Biden administration policies are com-
ing down.
I yield back my time. Thank you very much.
Chairwoman VELA´ ZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from New Jersey, Mr. Kim.
Let me just react to this line of questioning. First of all, the topic
of this hearing is an examination of SBA COVID relief programs
and the administrator is prepared to answer the questions related
to the implementation of those programs. There will be a time for
us to hold a hearing on any tax policies but this is not the space.
I think the taxpayers deserve answers from the administrator as
it relates to those programs that have been implemented by the
current administration. Now Mr. Kim——
Mr. LUETKEMEYER. Madam Chair, I am claiming some time
in response to your comments there. Those tax questions are fair
questions because we are talking about the COVID activities and
policies of this administration of the SBA. And tax policy on those
new programs is very important to have a basic understanding of
the tax policies’ effect on small businesses will help us understand
how these COVID policies, these programs can be helpful. If we
find out that there are more detrimental effects from the tax policy,
we need to understand how that can affect the COVID policies, the
COVID programs. They are very appropriate. It is unfortunate the
administrator is unprepared today to answer basic questions about
the administration’s program. She is not representing the Small
Business Administration at the table when the administration is
talking about tax policy which is extremely alarming because if she
is not there, who is? We need to have answers because all of this
factors into how we address the COVID problem in this country.
Chairwoman VELA´ ZQUEZ. I just wish that you were so forceful
when we were conducting oversight hearings with the previous ad-
ministration as it related to the fact that ineligible businesses were
able to get assistance—relief assistance that they did not qualify
for. With that, Mr. Kim——
Mr. LUETKEMEYER. Madam Chair, we were. We were at the
table. We contacted Secretary Mnuchin and said, hey, we have got
a problem. And immediately, he took action. If you recall, he got
in the middle of this and rescinded about $280 million worth of
loans to people, to businesses that were ineligible. Yes, we were ac-
tive on this and will continue to be active, I can assure you.
Chairwoman VELA´ ZQUEZ. We will continue to be active on tax
policies and we will have Secretary Yellen at the table. We will dis-
cuss those issues. To be fair to the witness, the topic today is re-
lated to COVID-19 programs.
Mr. Kim, now you are recognized for 5 minutes.
Mr. KIM. Thank you, Chairwoman. And Administrator Guzman.
Thank you for taking some time to be able to come before our Com-
mittee.
I have been on this Committee since my time in Congress, and
we certainly are trying to maintain the tradition of bipartisanship
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on this Committee. This recognition that both parties are trying to
do what they can to be able to support our small businesses, that
is the reason why I wanted to stay on this Committee because I
felt like it was one of the few places in the last Congress where
we were able to talk with each other civilly, with respect, and talk
through a shared problem that we face with small businesses going
through some of the toughest challenges in modern history. And I
know you have a lot on your plate and SBA has been working hard
to be able to do this. Some places where it has not performed the
way that I would like but other places where I understand that it
has been a tough go.
And one place that I want to just kind of hone in on is about the
Restaurant Revitalization Fund. Now, I know that this has been
moving forward, that you have been trying to take on some lessons
learned from the launch of the Shuttered Venues Operators Grant
Program as well, and I know that the application is something that
has been tried to be simplified and easy to use so that restaurants
are able to move forward with this. And especially when it comes
to making the program accessible for the smallest independent res-
taurants and the socially disadvantaged business owners.
I am also aware that the SBA had to work within the rules set
by Congress, including how the funding amounts are calculated so
you did not have a lot of discretion to spread around the $28.6 bil-
lion that we knew would not even come close to meeting the de-
mand.
Still, I am very concerned to hear from businesses in my district,
including socially disadvantaged businesses that are supposed to be
prioritized, that their applications have been rejected without being
provided a reason or an opportunity to correct errors. I worry that
many of the most vulnerable businesses that we are trying to help
are being left out and that minor errors could mean that a business
eligible for a very significant amount of money gets nothing while
the next applicant in line gets the full amount.
So I just want to ask, can you please explain how SBA is han-
dling applications with minor errors or insufficient documentation?
And will rejected applications ever be told the reason, especially in
the event that Congress provides more funding for the program
and they may have an opportunity to reapply?
Ms. GUZMAN. Thank you. I think the challenges with first in,
first out programs is just that. And so obviously, businesses were
allowed to get back in line and reapply. But that is obviously de-
pending on the level of challenges in their application. I do not
have specifics. We would have to review specific cases directly in
terms of why individuals were rejected from the program. But I am
happy to put you in touch, your team in touch with my team to
make sure that we can work through those specific issues. But SBA
will be developing processes for businesses, assuming that there
are additional funds put in place for businesses to reapply in the
future.
Mr. KIM. I appreciate your willingness to help out but what I
just want to emphasize again, if you can kind of take it back to
your team is about just that feedback. When the businesses do not
know what it is that has gone wrong, why it is that they are not
being accepted, you know, we hear that kind of breakdown there
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in the communication, we hear that also with the PPP, for in-
stance. I know you addressed this to a point but I have also heard
from these panicked business owners waiting for PPP loans when
they receive a notice that SBA will remove all loans not approved
and further research status from their original platform by 5:00
p.m. on May 17. You know, that is something that they receive that
notice, they get very panicked about it, and we are told before that
no applications were purged. I get it. But when we are looking at
this, you know, Congress has approved more than $800 billion for
the PPP program which has funded more than 11.6 million loans,
the program has become a crucial lifeline for small businesses but
what we are trying to figure out is how is SBA addressing the con-
fusing caused by that notice? And how are we working to resolve
these remaining hold codes, complete all pending applications, and
utilize the remaining amount before June 30? So this is just some-
thing that I am continuing to hear is a problem.
Ms. GUZMAN. Yeah. And we definitely noticed the banks so that
they could take action as all of those hold codes were a minimum
over 30 days. In some cases, over 90 days. And so they needed to
take action on those loans. Again, we did not remove them from the
system in any way and so they can continue to work through those
issues with the SBA if those were actual pending loans that they
intended to take action on.
So, I definitely appreciate that we need to have more communica-
tion. That is a goal as we continue to look for improvements in the
program. And so I will take it back with my team and see how we
can improve that transparency as we move forward without——
Mr. KIM. Just letting them know what they need to do to resolve
it. That is what it comes down to. I yield back.
Chairwoman VELA´ ZQUEZ. Time has expired.
Now we recognize the gentleman from Florida, Mr. Donalds.
Mr. DONALDS. Thank you, Chairwoman, Ranking Member, for
this actually quite lively Committee.
You know, first of all, Administrator Guzman, I will tell you, you
know, I have been coached on kids. I always tell them the number
one ability is availability, so I want to thank you for making your-
self available. It is unfortunate that Secretary Yellen does not
know that the best ability is availability and so she needs to be
here to answer these questions.
I will tell you, Administrator, I mean, I get it why you cannot
frankly keep the 100 with the American people about President
Biden’s tax policies and other economic policies because you would
be in trouble with your boss. So I understand why you cannot be
100 about those things. But what most people do not know is that
my career was actually as a bank underwriter, as a credit loan un-
derwriter for many years, so I underwrote small business loans.
And I will tell you, 100 percent that increases in the corporate tax
rate, increases in the capital gains rate are going to affect small
businesses whether you are a C corp or a pass-through S corp, sim-
ply because that is what happens with increased taxes. Either it
is going to hurt them directly on their bottom line. It is going to
hurt the people that they do business with. It is going to impact
them as well. So just for the record, as somebody who has actually
been a lender that has dealt with SBA from the front lines, I will
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tell you point blank, increased tax policy is going to hurt small
businesses across the United States.
That being said, I know that in the last spending bill that was
passed in Congress, there was a change to PPP which expanded
the ability for nonprofits, specifically large nonprofits to access PPP
loans. One of the concerns by myself and other Members of the
Committee was that nonprofits like Planned Parenthood and their
affiliates will be able to gain access to the PPP program. As to this
point, has any nonprofit like Planned Parenthood or their affiliates
received PPP loans?
Ms. GUZMAN. It is SBA’s longstanding policy not to comment on
specific borrowers. But yes, there have been over 80,000 nonprofits
who have accessed the system.
Mr. DONALDS. Is there ability for this Committee to get an un-
derstanding of what nonprofits have gained access? Can you pro-
vide that to us?
Ms. GUZMAN. We have provided specific reports of all the loans,
and so that information is readily available to you if you were to
search through the system. Yes.
Mr. DONALDS. All right. We will make sure we definitely look
into that.
Real quick, I want to piggyback on something that the Ranking
Member was talking about in the EIDL program. You said that it
is really not something that frontline lenders want to do is get in-
volved in the EIDL program. It is not really in their incentive base
to do so. Have you guys actually itemized or estimated the amount
of total fraud in the EIDL program to this point?
Ms. GUZMAN. There have been estimates from the IG and we
are still working through. I mean, as an example——
Mr. DONALDS. I mean, but real quick because I have got 2 min-
utes. So what is that number? What is that number? Can you tell
us?
Ms. GUZMAN. As an example, on identify theft it is less than
1 percent of actual cases. But we continue to work through all
those flagged issues with the IG and——
Mr. DONALDS. I mean, but how much money are we talking
about? Give me dollars. Dollars and cents. I like percentages, too,
but dollars and cents, how much are we talking about?
Ms. GUZMAN. We do not have final numbers in terms of the
total fraud picture yet as we continue to investigate.
Mr. DONALDS. Let me ask you this question. Do you think it
would probably be cheaper for the United States taxpayers to
incentivize lending institutions who administer EIDL as opposed to
paying out money in fraudulent means?
Ms. GUZMAN. We would have to work through that together so
I welcome——
Mr. DONALDS. Quick question. I mean, you are the adminis-
trator now. Do you not think that is a worthwhile calculation to
perform?
Ms. GUZMAN. Yes. Once we get the final calculation of what the
actual fraud is on the program, especially knowing that we have
implemented new controls going forward that were not allowed in
previous years then, of course, we can look at that trend.
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Mr. DONALDS. All right. Real quick. The last thing I really
want to ask you about is it has also been a point in this Committee
that under Administrator McMahon the response time from SBA
was actually very, very prompt even though they have new infor-
mation. You are the administrator now, so quick, what changed?
Why have we gone from quick response times to very slow or non-
existent response times?
Ms. GUZMAN. I do not know what Administrator Carranza’s re-
sponse times were during the disaster but obviously, the team is
highly impacted in terms of their ability to respond as quickly as
possible. We have——
Mr. DONALDS. But Administrator, the pandemic was last year,
too, and the pandemic is ending this year so I am trying to under-
stand what is the difference in response time between last year and
this year?
Ms. GUZMAN. My understanding is that the comparison be-
tween the previous administration and Administrator Carranza
who was in position during COVID versus my time here that we
have been very transparent. We have tried to respond as quickly
as possible and by expediting these briefings, life briefings as well
as reports that we have been sharing with you that that has in ad-
dition provided you with more information than in the previous
times.
Mr. DONALDS. I yield back.
Chairwoman VELA´ ZQUEZ.—expired.
Now we recognize the gentlelady from Minnesota, Ms. Craig.
Ms. CRAIG. Thank you so much, Chairwoman Vela´zquez. Thank
you for being here, Administrator Guzman. For the record, I think
you are exactly the right person to be testifying as a witness in
front of us today about the SBA’s COVID relief programs since you
are the administrator of the Small Business Administration. So I
want to thank you and everyone at the SBA, and I would like to
thank those who worked in the previous administration, with the
Small Business Administration, because it is all of your hard work
over the last year obviously in implementing the various, mostly bi-
partisan programs that this Committee approved in the last Con-
gress. It was an extraordinary challenge during a public health cri-
sis. And at the end of the day, we are here to make sure that as
many of our small businesses as possible can get through this cri-
sis. And of course, we are going to learn as we go in a public health
emergency. So shame on anybody here today who would turn this
into a partisan exercise.
I especially want to commend the administrator on the creation
and implementation of the Restaurant Revitalization Fund. In fact,
I would like to thank my colleagues from across the aisle for those
of you who supported that. I have been a proud advocate of this
program since the Restaurants Act was introduced in the last Con-
gress and I was incredibly pleased to see this get across the finish
line when it was included in the American Rescue Plan.
Just last week, I heard from one of my constituents, the owner
of Tawakal Restaurant located in the great city of Burnsville, who
told me that they have already received financial assistance from
the RRF. I am pleased to see that these vital funds being disbursed
to our hardest hit small businesses are going out so quickly to
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some. However, you know there is another side of this. In terms
of the RRF applicants, such as Nick’s Diner in Cannon Falls, I am
really disappointed to learn that the likelihood of that independent
restaurant receiving assistance is incredibly small. As some of my
colleagues before me have mentioned, the RRF does not currently
have enough money to assist many of its applicants. That is why
I am working on leading a group of my colleagues and pushing
House leadership to replenish the program to fulfill current de-
mand or as many of those independent restaurants who have taken
the brunt of this public health crisis. Literally, our government
asked them to shut down during a public health crisis. We need to
work together to uphold our ongoing commitment and replenish
this fund.
Administrator Guzman, you noted in your testimony that the
RFF program has received more than 362,000 applications with a
total of $75 billion in funding requested. At the current funding
level, is there a possibility a large number of those applicants could
miss out on receiving any of those grant dollars?
Ms. GUZMAN. Yes. There will be significant demand unmet at
the close of this program once awards are finalized.
Ms. CRAIG. Administrator, is there any estimate or prediction
on how many of those applicants are not going to receive any of
those grant dollars at this time?
Ms. GUZMAN. Not the specific numbers that they work through
the specific applications and the dollar amounts for each. Obvi-
ously, we had the $9.5 billion in set-asides for the smaller entities
but the latest numbers are over $76 billion in applied, and with
only $28.6 billion available there will be a significant number of
those 372,000 applicants.
Ms. CRAIG. Administrator, do you think that Congress should
strongly consider replenishing this program?
Ms. GUZMAN. The program has been effective at reaching out
to support small businesses, restaurants, food and beverage busi-
nesses broadly. There is obviously a large pool of applicants who
are interested in this grant funding, and these are the hardest hit
industries that are big job creators in our economy. And so pro-
viding that support to them is really critical. And whatever Con-
gress moves forward with we would be more than willing to imple-
ment as expediently as possible.
Ms. CRAIG. Thank you so much for that answer. And from that
I am going to assume your answer is yes. Are you open to working
with this Committee and leadership to explore replenishing the
RRF?
Ms. GUZMAN. We would be happy to collaborate and provide
any information and intel that can better inform that decision. Yes.
Ms. CRAIG. Thank you so much. And I yield back.
Chairwoman VELA´ ZQUEZ. The gentlelady yields back.
Again, Administrator Guzman, thank you so much for joining us
today. We appreciate your testimony and your service to our na-
tion’s small businesses. I am also grateful for SBA’s responsive-
ness. The increased level of transparency and receptiveness for in-
formation has not gone unnoticed. I commend you for being more
forthcoming with this Committee.
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With that said, you have taken over the helm of SBA at one of
the most critical times in its history and the road to recovery will
be a long and winding one for small businesses. Your testimony
has also given us much to think about and we will continue to look
at the obstacles that small business relief programs face. It is im-
portant to remember that no program is perfect and we must help
them operate as effectively as possible. This hearing has made
clear that there is much work to be done and I look forward to
partnering with you on all of these efforts. I welcome your contin-
ued engagement, particularly as we look to reauthorize the SBIR/
STTR programs.
I would ask unanimous consent that Members have 5 legislative
days to submit statements and supporting materials for the record.
Without objection, so ordered.
If there is no further business to come before the Committee, we
are adjourned. Thank you all.
[Whereupon, at 12:17 p.m., the Committee was adjourned.]
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A P P E N D I X
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82
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Insert offset folio 82 here 44922.040
SBD026 with DISTILLER

83
VerDate Mar 15 2010
10:09 Apr 01, 2022
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Insert offset folio 83 here 44922.041
SBD026 with DISTILLER

84
VerDate Mar 15 2010
10:09 Apr 01, 2022
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Insert offset folio 84 here 44922.042
SBD026 with DISTILLER

85
VerDate Mar 15 2010
10:09 Apr 01, 2022
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Insert offset folio 85 here 44922.043
SBD026 with DISTILLER

86
VerDate Mar 15 2010
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Insert offset folio 86 here 44922.044
SBD026 with DISTILLER

87
VerDate Mar 15 2010
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Insert offset folio 87 here 44922.045
SBD026 with DISTILLER

88
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89
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90
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Insert offset folio 90 here 44922.048
SBD026 with DISTILLER

91
VerDate Mar 15 2010
10:09 Apr 01, 2022
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Insert offset folio 91 here 44922.049
SBD026 with DISTILLER

92
VerDate Mar 15 2010
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Insert offset folio 92 here 44922.050
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93
Æ
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Insert offset folio 93 here 44922.051
SBD026 with DISTILLER

File and source

File

CHRG-117hhrg44922.pdf

Size

3,685,734 bytes

SHA-256

95f473ef2b0e4e8a418c7b3f1447e4bd72a98b835d18b28345ca516488d4e101

Our copy

CHRG-117hhrg44922.pdf

Original

www.govinfo.gov