Testimony of Chris Pilkerton, Accion Opportunity Fund — Senate Small Business Committee, April 26, 2023

Summary

Written testimony of Chris Pilkerton, Chief Legal Officer at Accion Opportunity Fund, for the Senate Small Business Committee hearing "Oversight of SBA's Implementation of Final Rules to Expand Access to Capital" on April 26, 2023. The testimony describes his prior service as general counsel and Acting Administrator of the U.S. Small Business Administration and his later work on small business access to capital. On the rule lifting the SBLC moratorium and creating a Mission Based SBLC category, it recommends delaying implementation until an independent study of lender guidelines and procedures, and raises concerns about agency staff capacity. On the affiliation rule, it urges Congress to consider unintended consequences of removing that standard.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

 Senate Small Business Committee Hearing- “Oversight of SBA’s Implementation of Final
                   Rules to Expand Access to Capital,” April 26, 2023

      Testimony of Chris Pilkerton, Chief Legal Officer at Accion Opportunity Fund
                            _____________________________

Thank you, Chairman Cardin, Ranking Member Ernst, and all of the committee members. I am
honored to receive the invitation to this hearing, as I believe that thoughtful support for small
businesses must be a bipartisan priority.

Over the last several years I have spent my career focusing on issues related to the small business
community- with a particular focus on underserved populations. I served as the general counsel of
the U.S. Small Business Administration under Administrator Linda McMahon, serving from 2017-
2020, as well as the Acting Administrator of the agency from April 2019 into early 2020. During
my tenure as Acting Administrator, I was particularly proud of our efforts to lead workforce
development programs for too often marginalized citizens- such as those returning from
incarceration, young adults aging out of foster care, as well as workforce opportunities for disabled
individuals. In March of 2020, I was asked to join the White House to lead a program called the
Opportunity Now initiative, which included significant outreach to underserved communities on
the topics of access to capital and technical assistance through state and local officials, as well as
webinars with minority- focused trade organizations such as the National Minority Supplier
Diversity Council.

Since leaving government, I have continued this work in various capacities. First and foremost, I
serve as the Chief Legal Officer for Accion Opportunity Fund, the leading nonprofit community
development financial institution focused on small business lending to communities of color and
low-to-moderate income borrowers all across the country. I have also co-founded and developed
an initiative called the Small Business Corps - a private- sector led program to provide underserved
small businesses with specific goal-focused technical support provided by fellows who are recent
college and business school graduates. That program is housed at the Georgetown University
McDonough School of Business and includes D-M-V engagement from schools such as
Georgetown, Johns Hopkins, Old Dominion, as well as HBCUs Howard, Morgan State and
Norfolk State. I have also worked closely with the performing artist Ice Cube in his work to identify
and secure opportunities for Black-owned businesses in the corporate supply chain. Our most
recent success was a commitment from the National Football League to provide $150 million in
contract opportunities to several Black-owned businesses, including Fearless- a technology
company located in Baltimore, Maryland that has gone on to incubate other minority and women-
owned companies in that city.

We all agree that increased access to capital for underserved communities is important, but l ike
anything, there is the goal and the execution of the plan to achieve that goal. I will begin with
addressing the rule regarding the lifting of the SBLC moratorium and creation of the new Mission
Based SBLC category. While I understand the intention of the rule, it does not speak to the critical
need to establish a consistent approach to responsible lender review, but rather highlights that the
agency needs flexibility in its lender evaluation to address unforeseen circumstances. While I
appreciate the need to be flexible on certain components of such a program, underserved borrowers
need the certainty of publicly articulated standards to ensure that they are dealing with responsible
and vetted lenders. As SBA Inspector General Hannibal Ware, for whom I have tremendous
respect, said in a House hearing last week in response to this issue, he has concerns with the

                                                  1
 Senate Small Business Committee Hearing- “Oversight of SBA’s Implementation of Final
                   Rules to Expand Access to Capital,” April 26, 2023

      Testimony of Chris Pilkerton, Chief Legal Officer at Accion Opportunity Fund
                            _____________________________

inclusion of any lender that doesn’t have clear rules, internal control structures and a proper
oversight mechanism in place. In short, appropriate inspection and oversight on the front end can
limit investigations, enforcement proceedings and harm to borrowers on the back end.

As such, I recommend that in consultation with Congress, the implementation of this rule be
delayed until there has been an independent study about the necessary guidelines and procedures
that should be in place in order to secure a safe and responsible lending environment for these
small businesses and provide clear and consistent rules to participating lenders that may in fact be
new to the SBA landscape. In fact, in Inspector General Ware’s testimony, he indicated that his
office has a forthcoming report outlining what the proper control environment should look like.
Further, when it comes to lending to underserved communities, other responsible lending
frameworks, such as Treasury’s CDFI certification program, are already in place and could
certainly be valuable data points for consideration.

I also have concerns about the bandwidth of the agency to oversee the influx of program
participants contemplated by the rule. The SBA career staff are some of the most dedicated public
servants I have ever worked with, but with limited resources, they may very well be stretched
beyond their capacity. The agency needs to ensure that the staff has the resources they need to
implement a program that can be sensibly and consistently regulated. I believe a thoughtful
independent analysis could calculate the required resources and provide necessary confidence to
the marketplace.

As to the rule on affiliation, I think it is important that this body consider the potential unintended
consequences of removing this standard from SBA’s analysis. The reason that the affiliation rule
is in place is to ensure that the taxpayer guarantee is truly going to those statutorily-mandated
independently owned and operated small businesses that need this unique government program-
and is not a subsidy program for larger corporations - who already have a competitive advantage.

The combination of these changes to the program as currently written – coupled with the trusted
imprimatur of the SBA - could undoubtedly result in a significant flow of capital, but I believe a
thoughtful, independent study around these program changes would help ensure the integrity of
the admitted lenders, maximize the flow of responsible loans to small businesses and minimize the
potential for fraud. The results of such an analysis could ensure that Congress, the agency and the
American taxpayer have clarity on how the scope of this program can truly support our country’s
underserved communities in a way that is both responsive and responsible. Thank you.




                                                  2


File and source

File

Pilkerton_Testimony.pdf

Size

137,979 bytes

SHA-256

142df2196fab7e99c6e8d8c8c94f5613a0462327a2448c52acc20427fa7bc80e

Our copy

Pilkerton_Testimony.pdf

Original

No public link identified.