Burns Testimony

Summary

Written testimony of Joseph Burns, Interim State Director of the Hawaiʻi Small Business Development Center, submitted to the Senate Committee on Small Business and Entrepreneurship for a field hearing titled "Promoting a Resilient Economy for Hawaiʻi Farm Businesses" in Hilo, HI on August 18, 2023. The testimony describes the center's work with USDA guaranteed loan programs, the SBA State Trade Expansion Program (branded HISTEP), and the Treasury's State Small Business Credit Initiative (SSBCI). It suggests the USDA consider funding CPA examination opinions required for the Community Facilities Guaranteed Loan program. It reports national SBDC results of $7.7 billion in client capital acquisition and 85,094 new jobs, and says the Hawaiʻi SBDC advised 941 unique clients in the first 2 quarters of 2023. It states support for the SBDC Improvement Act of 2023 (S. 2185, 118th Congress).

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“Promoting a Resilient Economy for Hawaiʻi Farm Businesses”, August 18, 2023, Hilo, HI

Testimony of Joseph Burns, Interim State Director of the Hawaiʻi Small Business Development
Center (Hawaiʻi SBDC)

Thank you, Senator Hirono and the members of the Senate Committee on Small Business and
Entrepreneurship for your invitation to submit testimony on this crucial topic.

With respect to federal agencies which support Hawaiʻi small agricultural businesses, may I
please mention three: the United States Department of Agriculture (USDA), the U.S. Small
Business Administration (SBA), and the U.S. Department of the Treasury.

1) The Hawaiʻi SBDC continues to work in partnership with the USDA through 2 of their flagship
guaranteed loan programs: the Community Facilities Guaranteed Loan program, and the
Business and Industry Loan Guarantees. By providing business advisory services and writing
required feasibility studies, we have contributed to the funding of agricultural and rural
development projects at least over the last 13 years. Examples include:

      A coffee school with career and workforce development training on the cultivation,
       processing, roasting, and cupping of coffee
      A rural urgent care medical clinic on Kauaʻi: while not an agricultural project per se, this
       clinic helps to attract and sustain farm owners and workers by providing urgent medical
       care in the rural community surrounding it
      A cattle ranch refinance on the Big Island lowering their financing expenses and
       supporting their expansion into the agritourism sector

2) With respect to the SBA, the Hawaiʻi SBDC partners with the state Department of Business
Economic Development and Tourism (DBEDT) by providing export business advisory services
to Hawaiʻi businesses involved in the SBA State Trade Expansion Program (STEP), which is
administered as a cooperative grant to states. Branded in Hawaiʻi as the as HISTEP program,
we cover areas such as export planning, international market research, and export financing,
including the SBA’s excellent guaranteed export finance loans. These programs are particularly
helpful for local value-added agricultural product creators.

Examples of HISTEP export assistance provided by the HISBDC to to value-added agricultural
busineses include:

      A vertically integrated cacao grower and craft chocolate manufacturer and exporter
      A distiller of heirloom Hawaiian sugar cane varietals producing high-quality rum
      A manufacturer of reusable cloth food wraps using 100% Hawaiian beeswax

SBA is allowing SBDCs to select a regional goal for this next program year that will improve
economic conditions by addressing priorities in our locality. The Hawaiʻi SBDC has selected the
agriculture sector as our regional goal focus, in order to contribute to sustainable agriculture and
food security in Hawaiʻi.

3) A program we may not immediately associate with agriculture is the U.S. Department of the
Treasury’s State Small Business Credit Initiative (SSBCI). Through investments with states, the
SSBCI program provides funding support for both equity and debt access to capital programs.
In Hawaiʻi, we have established the HI-CAP capital acquisition programs funded by the SSBCI
program and administered by DBEDT and the Hawaiʻi Technology Development Corp. in
cooperation with local banks.

There is also a technical assistance element of the program under which the Hawaiʻi SBDC will
receive funding to provide business financial literacy and management improvement services to
socially and economically disadvantaged entrepreneurs and very small businesses outside of
Oʻahu. Potential participants for technical assistance in these areas tend to be farm and rural
businesses. We plan to house this effort in our Lead Center office in Hilo, and are speaking with
potential partners, such as the University of Hawaiʻi at Hilo, and a local ag-tech community
program among others.

As for how to improve federal programs that support agriculture and rural communities, one
specific idea refers to the USDA Community Facilities Guaranteed Loan program mentioned
above. There is a requirement that under certain circumstances, applicants must obtain the
examination opinion of a CPA attesting to the validity of the assumptions in the Financial
Feasibility Report. In our experience, it has been very difficult to find local CPAs who are willing
and capable to render the examination opinion when it is required. Applicants must then turn to
mainland CPA firms which in our experience are prohibitively expensive, thus creating a barrier
to completing a potentially valuable project. If there is not such a mechanism already, would the
USDA consider making available funding to facilitate the CPA examination opinion?

Lastly, the national SBDC program has nearly 1,000 local centers providing no-cost business
advisory services and low-cost training to both new and existing businesses. Small business
owners and aspiring entrepreneurs can go to their local SBDC for individualized, face-to-face
business advising and access training on a wide variety of timely and relevant topics.

As small businesses owners navigate an ever-changing and challenging environment, SBDCs
continue to support and elevate our clients. Small businesses who partner with their local SBDC
receive solutions and results that help their businesses thrive on main streets across the U.S.
SBDCs are the leaders in job creation and attributed measurable economic impact. The latest
annual national results show $7.7 billion in client capital acquisition and the creation of 85,094
new jobs. Each federal dollar invested produced $1.66 in federal revenue and $3.64 in state
revenue.
The Hawaiʻi SBDC, accredited since 1990, and hosted continuously since then by the University
of Hawaiʻi at Hilo, manages 5 service centers statewide on the four major Hawaiian Islands. In
the first 2 quarters of 2023, the Hawaiʻi SBDC advised 941 unique clients, and materially
assisted with $19,944,192 in attributed capital acquisition. Our client satisfaction rate during this
period was 96%.

We thank Senator Hirono for cosponsoring the SBDC Improvement Act of 2023, which
reauthorizes the national SBDC program, and enhances its effectiveness. We fully support this
bill (S. 2185, 118th Congress). Some important provisions of this bill are:

      Section 2 adds depth and detail to the existing mandated report to Congress with
       respect to the SBDC’s annual entrepreneurial development activities
      Section 3 allows SBDCs to use a limited amount of SBA cooperative grant funding for
       marketing purposes
      Section 7 strengthens the protection of client confidentiality

We are grateful for the Committee’s continuing support for federal programs which help to
sustain agriculture and rural businesses in Hawaiʻi for the accomplishment of the shared goals
of reducing food insecurity, removing barriers to pursuing agriculture, and providing the capital
and technical assistance needed to foster a robust agricultural economy.


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