Capital Access for Minority Small Businesses: COVID–19 Resources for an Equitable and Sustainable Recovery (Senate Small Business Committee hearing, July 23, 2020)
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Transcript of the Senate Committee on Small Business and Entrepreneurship hearing Capital Access for Minority Small Businesses: COVID–19 Resources for an Equitable and Sustainable Recovery, S. Hrg. 116-517 (GPO 46-603), convened July 23, 2020 during the 116th Congress, Second Session. Chairman Marco Rubio and Ranking Member Benjamin L. Cardin delivered opening statements. Witnesses were Talibah Bayles of TMB Tax and Financial Services in Birmingham, AL; Ronald Busby Sr. of U.S. Black Chambers, Inc.; Fabiana Estrada of ACCION in Miami, FL; and Marla Bilonick of the Latino Economic Development Center. The appendix includes prepared statements from the American Indian Alaska Native Tourism Association and the Coalition to Help Everyone Access Resources to Thrive (HEART), plus responses to Senators Cantwell, Hirono and Duckworth.
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“Capital Access for Minority Small Businesses: COVID–19 Resources for an Equitable and Sustainable Recovery (Senate Small Business Committee hearing, July 23, 2020).”
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S. HRG. 116–517
CAPITAL ACCESS FOR MINORITY
SMALL BUSINESSES: COVID–19 RESOURCES
FOR AN EQUITABLE AND SUSTAINABLE RECOVERY
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
JULY 23, 2020
Printed for the Committee on Small Business and Entrepreneurship
(
Available via the World Wide Web: http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
46–603 PDF WASHINGTON : 2022
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SIXTEENTH CONGRESS
MARCO RUBIO, Florida, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
MEREDITH WEST, Republican Staff Director
SEAN MOORE, Democratic Staff Director
(II)
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C O N T E N T S
OPENING STATEMENTS
Page
Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida ............................... 1
Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from Maryland .. 3
WITNESSES
Bayles, Ms. Talibah, Founder and CEO, TMB Tax and Financial Services,
Birmingham, AL ................................................................................................... 6
Busby Sr., Mr. Ronald, President and CEO, U.S. Black Chambers, Inc., Wash-
ington, DC ............................................................................................................. 14
Estrada, Ms. Fabiana, Director of Lending Southeast Region, ACCION,
Miami, FL ............................................................................................................. 24
Bilonick, Ms. Marla, Executive Director and CEO, Latino Economic Develop-
ment Center, Washington, DC ............................................................................ 29
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
American Indian Alaska Native Tourism Association
Prepared statement .......................................................................................... 68
Bayles, Ms. Talibah
Testimony .......................................................................................................... 6
Prepared statement .......................................................................................... 10
Bilonick, Ms. Marla
Testimony .......................................................................................................... 29
Prepared statement .......................................................................................... 32
Responses to questions submitted by:
Senator Cantwell .......................................................................................... 74
Senator Hirono .............................................................................................. 76
Senator Duckworth ....................................................................................... 82
Busby Sr., Mr. Ronald
Testimony .......................................................................................................... 14
Prepared statement .......................................................................................... 16
Cardin, Hon. Benjamin L.
Opening statement ........................................................................................... 3
Coalition to Help Everyone Access Resources to Thrive (HEART)
Prepared statement .......................................................................................... 83
Engine Advocacy
Prepared statement .......................................................................................... 89
Estrada, Ms. Fabiana
Testimony .......................................................................................................... 24
Prepared statement .......................................................................................... 26
Responses to questions submitted by:
Chairman Rubio ............................................................................................ 94
Senator Cantwell .......................................................................................... 95
Senator Hirono .............................................................................................. 96
Inclusiv
Prepared statement .......................................................................................... 97
National Association of Federally-Insured Credit Unions
Letter dated July 22, 2020 to Chairman Rubio and Ranking Member
Cardin ............................................................................................................ 100
(III)
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IV
Page
Rubio, Hon. Marco
Opening statement ........................................................................................... 1
The Spirit of Enterprise U.S. Chamber of Commerce
Prepared statement .......................................................................................... 102
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CAPITAL ACCESS FOR MINORITY
SMALL BUSINESSES: COVID–19 RESOURCES
FOR AN EQUITABLE AND SUSTAINABLE
RECOVERY
THURSDAY, JULY 23, 2020
UNITED STATES SENATE,
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP,
Washington, DC.
The Committee met, pursuant to notice, 10:07 a.m., in Room SD–
430, Dirksen Senate Office Building, Hon. Marco Rubio, Chairman
of the Committee, presiding.
Present: Senators Rubio, Scott, Ernst, Young, Kennedy, Romney,
Hawley, Cardin, Cantwell, Shaheen, Booker, Coons, Hirono,
Duckworth, and Rosen.
OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN,
A U.S. SENATOR FROM FLORIDA
Chairman RUBIO. Good morning. Today’s hearing on the Senate
Committee on Small Business and Entrepreneurship will come to
order.
I want to thank everyone for joining us, both in person and vir-
tually, for this hearing and sort of getting used to this new normal
of doing hearing this way.
I just want to alert everybody. We have two votes. One just start-
ed now at 10:00, and so what will happen here at some point is
you will see members shifting in and out to try to get into the tim-
ing of it. That’s the explanation for why you’re seeing it.
So I’m going to abbreviate my opening statement just to be able
to accommodate all that. Obviously, we don’t need to convince ev-
eryone about what impact this pandemic has had on all Americans
from a health care perspective certainly, but also from an economic
perspective.
I also don’t think we need to do a lot to convince people that
small businesses have been disproportionately impacted by this
pandemic, and all small businesses of every kind have been hurt
by it across the country.
The purpose of this hearing is to focus specifically on the even
greater impact that the pandemic has had on minority-owned small
businesses. Bad as it is for all small businesses, it is catastrophic
and terrible. It has been even worse, if you can imagine it, among
minority-owned businesses.
(1)
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Part of this disparity can be explained by the sectors that have
been hit hardest by the COVID crisis. Construction, restaurants,
hotels, transportation, these are sectors of our economy in which
minority ownership is high, higher than it is in other sectors.
But the data from the Census Bureau suggests that only 27 per-
cent of small businesses have enough cash on hand to cover 3 or
more months of operations. Those numbers, of the number of busi-
nesses that have enough cash, is much smaller than 27 percent
when we are talking about minority-owned businesses.
So today the major question we face is one of uncertainty. What
happens next as communities—some are reopening, partially re-
opening. Some have reopened and have had to pull back. We are
telling people not to go out. We are telling people not to go to
places. So, in essence, we are—and they are following our advice,
hopefully, but as they do, it has an economic toll. It is hurting all
small businesses, but again, we are seeing that disproportionate
impact is even higher among those that are minority-owned.
So the two goals we have specifically to address is this disparity
and the damage that is being done but also the concern that there
will be a disparity in the recovery, that if some of these businesses
go under, they will not be there to be able to recover and thrive.
Part of what we have already talked about and continue to talk
about as we try to prepare the next round of assistance to small
businesses is not just so we can target the relief to more small
businesses, but also how do we make sure that assistance reaches
the most underserved small businesses as well.
So one of the most important lessons we learned in PPP, some
of the answers some from some of the sectors to save more jobs
than others. The overall unemployment rate has dropped in April,
from an April high of 15 to 11 percent; however, the African Amer-
ican unemployment rate remains at 15 percent. So there is just an
example of an employment disparity that we need to address.
There are some clues as to how to go after this. The first is, ac-
cording to the SBA’s data, only three sectors supported more jobs
per dollar of PPP funds in low-income areas than they did for the
Nation as a whole. So there are three sectors in which PPP funds
helped support more jobs in low-income areas than they did nation-
ally. The three sectors were manufacturing, health care and social
assistance, and retail. So that tells us there that anything we do
to be helpful to those sectors should have a positive outcome or im-
pact on these communities.
Another lesson is about access. Many minority-owned businesses
have experienced problems accessing the capital because they lack
relationships with SBA-approved lenders.
There has been progress. As a proportion of the total quantity of
loans disbursed, minority-owned businesses received PPP loans in
equal or greater volume than their share of business ownership in
the U.S. economy. I think some of that was due to some of the
changes that were made to the program as it went on; for example,
allowing as many lenders as possible to participate was key to this
progress. We will need to do more.
The CARES Act and the program within it approved 303 Com-
munity Development Financial Institutions, CDFIs, approved 171
Minority Depository Institutions, MDIs, and 19 FinTechs, financial
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technology companies, to provide these loans and more access. So
that was helpful, and it is something we want to retain and build
on.
So we recognize that right now as we talk about the future, we
are in a different place than we were in March when we first start-
ed talking about it. Some businesses will need additional short-
term relief. Others are going to need access to low-cost, long-term
working capital to recover, which was already hard for them to ac-
cess. It will be even harder after this.
PPP is basically a short-term grant to help keep a business open
and their employees on payroll, but the hit that many small busi-
nesses are taking is much deeper than just staying open to make
up for. They are not going to generate enough revenue in this envi-
ronment to stay open under the constrictions that we are facing.
So that is why one of my proposals, built on input and ideas that
Senator Young first innovated, is proposing an expansion of the
SBA 7(a) program to make available targeted long-term, low-inter-
est loans to small businesses that are located in low-income com-
munities. Obviously, that needs to be fleshed out further, but it is
something we care about a lot.
So that is what we will keep working on. Ultimately, anything
we pass will have to be bipartisan. That has been the tradition of
our work on this, both because it is better that way and because
it is the only way to get it done. That is what we intend to do. We
work very closely with the Ranking Member and Senator Shaheen
and Senator Collins who is not a member of this Committee, Sen-
ator Lankford as well, who is not a member of this Committee, and
then all the members of this Committee who have input. And that
is what we intend to continue to do because we need to do some-
thing. We need to do it soon, and we need to make sure it is getting
to the right people in the right way.
With that, I want to recognize the ranking member, Senator
Cardin, for his opening statement.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
RANKING MEMBER, A U.S. SENATOR FROM MARYLAND
Senator CARDIN. Well, thank you, Mr. Chairman. I really want
to thank you, not just for holding this hearing on access to capital
for minority small businesses, but your commitment to deal with
the inequities that minority small businesses have in our system.
You have been a leader in bringing us together to try to find ef-
fective ways to make sure that those businesses that need the help
the most, minority small businesses, small businesses in under-
served communities get the attention of this Committee.
I want to thank you for the process that we have been able to
use in this Committee to bring about not only a bipartisan product
but to get a product that can get to the finish line and provide help
to businesses.
Increasing Federal support for minority-owned small businesses
as well as small businesses in underserved communities have been
my top priority since I joined this Committee in entering the Sen-
ate in January 2007, and it has remained my priority as Ranking
Member.
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My home State of Maryland boasts the highest concentrations of
minority-owned and women-owned businesses in the country. So
this issue is particularly important to Marylanders.
Decades ago, Maryland leaders recognized the key role entrepre-
neurship had in efforts to close the wealth gap. In fact, the first
Federal set-aside for minority-owned businesses was proposed in
1977 by the late Baltimore Congressman Parren J. Mitchell, who
introduced an amendment to a $4 billion Federal public works pro-
gram that required city and State recipients to set aside 10 percent
of the funds for minority-owned businesses.
Congressman Mitchell understood that any plan to shrink the
wealth gap in America must include entrepreneurship, and that
the Federal Government has an important role to play in helping
minority entrepreneurs overcome the historic, pervasive challenges
put before them. The most pervasive of those challenges is access
to capital.
Mr. Chairman, while our hearing is focused on ensuring an equi-
table recovery, I feel the need to place today’s discussion in histor-
ical context.
During a field hearing I held on this topic in September 2018 at
Morgan State University, an HBCU in Baltimore, an executive of
Harbor Bank, which is one of the few remaining black-owned banks
in the country, stressed that lenders working with minorities need
to understand borrowers, not only where they are going, but where
they have been. It is vital that we in Congress approach this prob-
lem with the same understanding.
Minority entrepreneurs’ inability to get capital they need to oper-
ate and grow their businesses is not new, and, in fact, that minor-
ity-owned small businesses have been disproportionately harmed
by the COVID–19 recession should not be a surprise.
Prior to this pandemic, lending to minority-owned small busi-
nesses still had not returned to their pre-Great Recession levels.
The protests sparked by the deaths of George Floyd and Breonna
Taylor have further exposed the public health and economic dis-
parities in communities of color, particularly black communities
that have been made worse by the COVID–19 pandemic.
There is a common saying that I have heard many times by
black leaders in Maryland: ‘‘When America has a cold, black com-
munities have pneumonia.’’ These disparities exist because Civil
Rights and true equity are still the unfinished business of America.
More than 50 years ago, the nonpartisan Kerner Commission cre-
ated by President Lyndon Johnson warned of the negative con-
sequences of continued inequality. The commission wrote in its re-
port that America was headed toward two societies, one black, one
white, separate and unequal.
It is no question that our country has made progress in the dec-
ades since the Kerner Commission released its report, but there re-
mains a rooted economic divide between communities of color and
white America.
In 1968, a typical middle-class black family had less than one-
tenth of the wealth of the typical middle-class white family. It is
the same today. For black small business owners and minority en-
trepreneurs, the wealth gap has worsened the disparity in lending.
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5
Minority business owners are two to three times more likely to
be denied a loan than nonminority business owners and are more
likely to receive less funding and pay higher interest rates on the
loans they do receive.
Mr. Chairman, it was with this inequality in mind that Senator
Shaheen and I drafted the CARES Act provision instructing SBA
and the Treasury Department to issue guidance to financial insti-
tutions participating in the Paycheck Protection Program to
prioritize loans for underserved small businesses.
Unfortunately, the administration did not issue that guidance,
which led to the SBA’s IG’s finding that the implementation of PPP
did not fully align with congressional intent in the CARES Act.
Implementation of PPP was not the only program in which the
administration failed to use every tool in its toolbox to prevent mi-
nority-owned businesses from falling behind during this crisis.
The administration also failed to implement the EIDL and Emer-
gency Grant Program in a way that would benefit more minority-
owned businesses.
So, Mr. Chairman, as we discuss how to ensure an equitable re-
covery for small businesses today, we must think about the prob-
lem historically. We must invest in the programs that we know
work—the Minority Business Development Agency, which is the
only Federal agency dedicated to supporting minority-owned busi-
nesses; the 7(a) Community Advantage Pilot Program, which has
a long record of successfully getting capital to minority-owned busi-
nesses. I have introduced legislation to make both of these vital ini-
tiatives permanent and codified because right now they are not.
We cannot stop there. I was proud to work with Senator Booker
to release a plan outlining steps Congress can take to provide
greater help for small businesses in underserved communities with
regard to startup and operating capital, as well as technical train-
ing and mentorship.
The aim of our plan is to ensure that when we make it through
this pandemic and we have the next economic downturn, we will
have the institutions, programs, and knowledge in place to support
underserved small businesses in a timely way.
Mr. Chairman, I want to thank you again for calling this overdue
hearing, especially as we in Congress continue to negotiate and de-
bate the next round of economic stimulus.
Last time, we got the funds out the door quickly and helped a
lot of people, but far too many minority-owned businesses were left
behind. The truth is that even with the CARES Act, there was in-
equality in how resources were allocated, including inequality in
some of the basic underpinnings of the PPP. The primary use of
traditional financial institutions to disburse capital meant minor-
ity-owned businesses would have a harder time obtaining these im-
portant loans, and the focus on payroll made the program less use-
ful to many minority-owned businesses, which not only have fewer
employees on average, but are less likely to have any employees at
all.
This next stimulus gives us an opportunity to improve the suc-
cess of the CARES Act and do a better job of providing help to mi-
nority-owned small businesses. Let us take advantage of this op-
portunity to avoid the consequences predicted by the Kerner Com-
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6
mission 50 years ago, so America is not two societies, separate and
unequal.
Thank you, Mr. Chairman, and I look forward to hearing from
our witnesses.
Chairman RUBIO. Thank you.
So let us move to the witnesses. As I said, there is a vote that
started now. It will probably end around 10:45, and then there will
be a second vote. So we will try to time it out so someone will be
here. I think if we stop and try to restart, it is going to be more
complicated.
Our witnesses today are Talibah Bayles. She is the founder and
CEO of TMB Tax and Financial Services, which is a full-service tax
and revenue planning firm that assists small businesses with fi-
nancial strategies promoting growth and stability. She sits on the
city of Birmingham’s Inaugural Small Business Council serving as
the chair of the Women Minority and Disadvantaged Business En-
terprise Subcommittee, belongs to the National Small Business As-
sociation Leadership Council and the National Association of
Women Business Owners.
That is a lot of meetings.
Mr. Ron Busby serves as the president and CEO of USBC, which
supports African American chambers of commerce and business or-
ganizations in their work developing and growing black enter-
prises. He currently serves on the Pfizer Small Business Counsel,
the National Newspaper Publishers Association Foundation board
of directors, and the White House African American Leadership
Council.
Ms. Fabiana Estrada is the director of Lending for South Florida
ACCION. ACCION is a Community Development Financial Institu-
tion helping connect underserved communities to needed capital.
She was recognized by the U.S. Small Business Administration in
2018 with the Mission-Based Lender Award.
Ms. Marla Bilonick is the executive director of the Latino Eco-
nomic Development Center. She previously worked at Seedco sup-
porting businesses in Lower Manhattan that were affected by Sep-
tember 11th. She is a member of the board of directors of the Na-
tional Association of Latino Community Asset Builders, the Mont-
gomery County Comprehensive Economic Strategy Advisory Group,
and the Institute for Community Economics.
I thank you all for being here. Why don’t we begin with Ms.
Bayles because you are here. Thank you for being here. We will
begin with your opening testimony and then go to Mr. Busby. We
will do it in the order in which I presented, but thank you so much.
STATEMENT OF TALIBAH BAYLES, FOUNDER AND CEO,
TMB TAX AND FINANCIAL SERVICES
Ms. BAYLES. Good morning, Chairman Rubio, Ranking Member
Cardin, and members of the Committee. My name is Talibah
Bayles, and I am the founder and CEO of TMB Tax and Financial
Services, a 100 percent black and woman owned firm located in
Birmingham, Alabama.
As a small business owner and a small business advocate, I
thank you for the opportunity to speak on today’s hearing focus of
capital access for minority small businesses.
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TMB Tax and Financial Services is a full-service tax and revenue
planning firm with clients across the United States. We are on a
mission to help small businesses thrive with air-tight financial
strategies and tools such as small business tax preparation, tax
planning, bookkeeping and payroll, and business credit and financ-
ing coaching.
I started this company here in the D.C. Metro Area while work-
ing for the Department of Justice where I worked for over 12 years.
Prior to working for the Department of Justice, I was an employee
right here in the Senate, where I worked for 3 years. With over 15
years of Federal Government and small business experience, I
made the decision to relocate back home to Birmingham as a full-
time entrepreneur. And my company has hit the ground running.
So today I have come full circle and am extremely honored to have
a seat at the table from this view.
Today’s focus on equitable and sustainable small business recov-
ery is vital to the fabric of local, State, and Federal economies. As
you know, small businesses employ nearly half of the Nation’s
workforce. Small businesses have traditionally created approxi-
mately 2 million jobs a year.
In Alabama, there are over 400,000 small businesses, which rep-
resents 99.4 percent of the State’s total business count. However,
since the official COVID–19 declaration of emergency on March 13,
2020, small business job creation has declined nationally by 17 per-
cent.
Small business legacies are disappearing. Companies like mine
have found themselves on a battlefield trying to assist troops who
are fighting without the proper armor.
Of course, there were challenges that existed prior to COVID–19.
In the interest of time, I will only highlight two that I believe are
the greatest challenges for minority-owned businesses.
The first is the small business survival rate. Eighty percent of
small businesses survive their first year. That number drops, how-
ever, to 70 percent at the end of the second year. By year five, if
businesses are still around, there are approximately 50 percent of
small businesses that are still operating.
The second greatest challenge is the credit profile of a typical
small business owner. According to NAV’s Small Business Amer-
ican Dream Gap Report from 2015, one in five business owners
who applied for funding in the last 5 years were denied, and 82
percent of all business owners surveyed did not know how to inter-
pret their credit scores.
I believe the root of both challenges is a small business financial
literacy failure. Even further, inequitable access to information and
expert-level technical assistance should be the focus on this Com-
mittee.
Without the information provided to small business owners
through the services of small business tax preparation, book-
keeping and payroll, and financial planning, there will continue to
be a lack of access to capital for minority-owned businesses.
Equitable access to information and expert-level technical assist-
ance, it properly equips the small business troops on this COVID–
19 battle because now they can see what they are fighting against.
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8
Said differently, equitable access to information allows business
owners to see the areas that they need to fortify in their business.
If the deficiency is becoming compliant with taxes, well, now they
know and now they know how to do it.
If the deficiency is not having an accounting software so that
they can produce a profit and loss or a balance sheet to show the
health of their business, well, now they know it and now they know
how to do it.
If the deficiency is the need to restore personal credit or to build
business credit so that they can actually be approved for funding,
well, now they know it and now know how to do it.
Equitable access to information and expert-level technical assist-
ance yields equitable access to capital for minority business own-
ers.
TMB Tax and Financial Services has become the perfect blend of
small business financial literacy and trusted financial services.
Therefore, through my business, I have launched a movement to
Get Bankable, and we have experienced wins for our clients during
this COVID–19 crisis.
I am a part of a team of six other black women in accounting,
financial planning, and bookkeeping that has collectively accom-
plished over $1.5 million in CARES Act funding for minority-owned
businesses. And with a couple more weeks left of PPP, we will sur-
pass this accomplishment.
My clients’ high PPP approval rates were accomplished as the re-
sult of year-round technical assistance in the areas of tax prepara-
tion, bookkeeping, and payroll. Well before this COVID19 crisis, we
provided small business financial literacy to our clients.
For our Schedule C entrepreneurs, we trained tax compliance
and small business tax strategies. We not only focused on the im-
portance of year-round recordkeeping of business income and ex-
penses, but most importantly, we discussed the importance of re-
flecting a positive net income on the Schedule C tax form.
We deployed what we call the ‘‘leave something for investors and
the underwriters’’ strategy. Without advising our clients of this
strategy, we found that most Schedule C entrepreneurs were in-
clined to ‘‘write off’’ as much of their expenses as possible which re-
sults in either a very low net income or a negative net income for
the business on the Schedule C tax form.
Those clients that actually deployed the ‘‘leave something for in-
vestors and underwriters’’ strategy obtained PPP loans, and those
loans ranged between $4,000 all the way to $15,000 for those who
applied as Schedule C or Sole Proprietor applicants.
And I think it is very important to note that clients that were
approved for the smaller PPP loans were just as happy as if they
had received a million dollars because it motivated them to keep
their doors open if just for a little longer.
For our corporation entrepreneurs, we trained on the importance
of having a formal payroll system in place. We stressed the impor-
tance of payroll tax withholding and compliance and the adverse ef-
fects of paying through other platforms that do not account for pay-
roll tax compliance.
And because my company is also a payroll provider, we were able
to create and maintain formal payroll structures for these small
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9
business owners, and this actually allowed business owners to have
those quarterly 941 tax forms and other payroll documentation
that was required by the PPP process.
So those clients that deployed the strategy for implementing a
formal payroll structure, they obtained loans, and some of those
loans were between $7,000 to $250,000. So for these approved ap-
plicants, that amount translated in the ability to cover payroll and
to divert the money saved by that loan into keeping the doors open
and other expenses paid for just a while longer.
PPP was a necessary short-term lifeline for small businesses, and
it certainly addressed an immediate need for the business owners
that were approved. However, to weather the storm over the long
run, it is critical that business owners have access to flexible long-
term working capital.
Minority businesses often do not have significant cash reserves
or access to traditional capital, and any effort of Congress to pro-
vide long-term loans with low interest will help sustain these busi-
nesses, and I wanted to add that especially coupled with a blend
of expert technical assistance with real financial tools so that these
business owners can actually be approved for these long-term
loans.
In closing, the information that I have shared with everyone
today is from the front line. I again state equitable access to infor-
mation and expert-led technical assistance grants access to capital
that businesses owners need.
Small business owners are ready for it, and we expect it. Small
business owners whisper stories of courage and strength into the
fabric of the American dream.
I grew up seeing the American dream of small business. I prac-
tically grew up in my parents’ office supply business, Bayles &
Company, which was once located on Second Avenue North in Bir-
mingham, Alabama. And today my daughters are practically doing
the same thing in my office, with the original Bayles & Company
sign donned on the wall. The grit, the successes, the failures, the
motivation, the legacy of the small business entrepreneur.
Again, thank you for the opportunity to come full circle and tes-
tify today. I wholeheartedly offer my blended background to a con-
tinued discussion on what this very important topic is and what it
means, and I look forward to working with this Committee in the
future.
[The prepared statement of Ms. Bayles follows:]
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14
Chairman RUBIO. Thank you.
Mr. Busby?
[No response.]
Chairman RUBIO. I think your microphone is muted. Just stand
by one second. There we go.
STATEMENT OF RONALD BUSBY SR., PRESIDENT AND CEO,
U.S. BLACK CHAMBERS, INC.
Mr. BUSBY. Thank you, Chairman Rubio, Ranking Member
Cardin, and distinguished members of the Committee for the op-
portunity to share testimony with you this morning. Again, my
name is Ron Busby, and I am the president and CEO of the U.S.
Black Chambers, Inc., where we serve 145 black chambers located
in 42 states, with a membership base of 332,000 members.
U.S. Black Chambers, also known as the USBC, for the past dec-
ade has been providing committed, visionary leadership, and advo-
cacy in the realization of economic empowerment. Through the cre-
ation of resources and initiatives, we support black chambers of
commerce and business organizations in their work of developing
and growing black businesses.
As the leading voice for black business owners in the Nation,
U.S. Black Chambers stands on our five pillars of service to foster
entrepreneurial growth and wealth creation within the black com-
munity. Our five pillars of service are advocacy—the U.S. Black
Chamber fights for legislation that promotes small business
growth, particularly policies that address the challenges of black
business owners. Access to capital. The USBC works with financial
institutions with a strategic focus on black-owned institutions to
create avenues in which black businesses can gain greater access
to capital, credit, and other financial institutions. Three, con-
tracting. The U.S. Black Chamber educates members on contract
opportunities, helping them increase their capacity to vie for large-
scale contracts and offering resources and information that en-
hance black owners’ abilities to compete. Four, entrepreneur train-
ing. The USBC provides quality educational opportunities and pro-
fessional development resources that help our members manage
and grow successful businesses; and five, chamber development.
The USBC leverages our roles as the national organization to pro-
vide technical assistance and leadership training to member cham-
bers, assist with establishment of new black chambers, and facili-
tate the sharing of best practices and industry data amongst our
members.
Decades before the advent of the coronavirus pandemic, historical
discrimination has consistently distorted the advancement of black
America. The structural and systemic racism continues to this day.
Unfortunately, the ongoing economic and health crisis sparked by
the pandemic have drastically exacerbated preexisting disparities.
Many of them have been stated.
For example, the coronavirus-related labor losses have been espe-
cially devastating for black America due to the historical struggles
from higher unemployment rates, lower wages, lower income, and
the resulting higher poverty rates.
On the health disparities front, black Americans still face the
brunt of the crisis. Across the country, black citizens experience
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COVID–19-related deaths at rates nearly twice that are present in
the population. Remarkably, the rate is three or more times greater
in some States.
Clearly, the pandemic and resulting economic disruptors have
proved particularly disastrous for the Nation’s small business com-
munity. Notably, the onslaught of coronavirus closed over 3.3 mil-
lion, 22 percent, of businesses within a 2-month period from Feb-
ruary to April. In that time, black firms suffered at a greater dam-
age among other demographics, as we lost 41 percent of black-
owned business, nearly 450,000.
Today’s hearing on improving COVID–19 relief resources for mi-
nority businesses is opportune, but it is really much more than
that. This is an opportunity to change the course of history in a
way our country addresses race, discrimination, and equity.
We at the U.S. Black Chambers believe that today’s discussion
should lead to the creation of equitable and sustainable Federal
policy that will address our Nation’s most marginalized and under-
served entrepreneur population, which are black business owners.
Earlier this month, I provided testimony at the House Committee
on Financial Services Subcommittee on Diversity and Inclusion
hearing entitled ‘‘Access Denied: Challenges for Women- and Mi-
nority-Owned Businesses Accessing Capital and Financial Serv-
ices.’’ I testified that despite the presence of black-owned busi-
nesses in many of the Nation’s fastest-growing markets, we still ex-
perience above the index, economic disruptions and revenue loss
before the pandemic in part because black-owned firms are over-
whelmingly represented in a high-impact industry, as was stated,
lack of accommodation of food service, personal care, luxury serv-
ice, health care, and social assistance, which I am so happy that
Senator Rubio acknowledged because we are already in a weaker
financial position.
The U.S. Black Chamber applauds the Committee’s recent work
to mitigate the pandemic economic impact on small businesses with
the CARES Act, and its subsequent relief legislation has deployed
over $518 billion to the small business community through the
Payroll Protection Plan. Likewise, the CARES Act has provided
nearly $140 billion to businesses through the Small Business Ad-
ministration and the EIDL loan program. Black business owners,
though, went largely underserved by the Federal relief programs.
In early May, the SBA’s Inspector General report on implementa-
tion of the PPP found that the Trump administration was unsuc-
cessful at prioritizing underserved and rural markets. In that same
time since, the Department of Treasury and the SBA have worked
to correct the structural barriers within the programs. Despite reg-
ulatory actions, the truth for black businesses remains. Black-
owned firms continue to be overlooked and underserved in the Fed-
eral relief measures across the board.
I will be around to address many of the questions as well as the
opportunity for a recommendation as we continue this conversation
this morning.
Thank you.
[The prepared statement of Mr. Busby follows:]
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Senator CARDIN [presiding]. Mr. Busby, let me thank you for
your testimony. As you can see, we are doing a little bit of rotating
here. There are two votes on the floor of the U.S. Senate. So Sen-
ator Rubio just went over to the floor to vote. I have already voted
on the first vote. He will wait for the two votes and then come
back. So we are going to continue with the witnesses, and we thank
you very much for your understanding and patience.
This is an extremely important hearing, and I can assure you
that we are listening to all the testimonies, and we value your
input.
We will now turn to Ms. Estrada. Glad to hear from you re-
motely. Hope you are safe.
STATEMENT OF FABIANA ESTRADA, DIRECTOR OF LENDING
SOUTHEAST REGION, ACCION
Ms. ESTRADA. Hi. How are you? Good morning, Chairman Marco
Rubio, Ranking Member Cardin, and members of the Committee.
Thank you for inviting ACCION to testify about the recuperation
phase for the small business owners during the COVID–19 pan-
demic.
As Chairman Rubio just introduced, I represent ACCION, a
Community Development Financial Institution, CDFI, whose role is
to provide financial services in the form of access to capital and
economic education in low- to moderate-income areas, LMI.
ACCION also assists underserved small business owners with
the objective to be considered by the traditional financial system in
the near future.
ACCION began funding small business owners back in 1991 in
New York City. Last year, we supported over 1,000 small business
owners with $15 million in capital through microloans, traditional
microloans and also SBA microloans, and SBA Community Advan-
tage loans. We disbursed over $1 million per month in 2019.
2020 started with the implementation of our traditional industry-
related products, like the one supported by the Tory Burch Founda-
tion for women entrepreneurs, Brewing the American Dream sup-
ported by Samuel Adams that supports food and beverage entre-
preneurs, and our Child Care Express Program which supports
child providers throughout the State. However, the pandemic im-
mediately had us to implement a recovery program. One such im-
portant program that we implemented was our Paycheck Protection
Program response.
Our response has been threefold. First, we educate our clients on
the criteria and eligibility. We found that many minority-owned
businesses were confused about the conditions on who could apply.
For example, some business owners were not aware that they could
apply as sole proprietors. Second, we created an easy process for
those borrowers who found themselves left out by their traditional
lenders. Third, we implemented a technical assistance component
to the process to help ensure that our clients’ loans are going to be
forgiven.
We worked to certify that the correct forms were completed so
that the loan amounts were accurate and effective.
In addition, our business owners needed guidance on proper doc-
umentation on how to use those funds for the loan to be forgivable
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in the near future. All these steps were done on a one-on-one basis
by our organization.
To date, in Florida we have disbursed $970,000 to 87 minority-
owned businesses. Our average loan size is around $11,000.
At ACCION, we used to say that ‘‘we offer more than a loan,’’
and during this pandemic, we have continued to live out this teach-
ing. We serve minority-owned businesses who without our support
would have been left out of the PPP program.
One such client we supported through this process was Myriam
Encio. She is the owner of Pet Avenue Grooming and Boarding, lo-
cated in Allapattah, but here it is called the ‘‘Little Santo Domingo
in Miami.’’ Myriam approached us with a business that had proven
steady gross sales that is around $200,000 yearly and a strong net
income of $63,000. However, her business had no W–2 employees,
and nobody was there to guide her with her application or to help
her think through how to sustain her independent contractor em-
ployees.
A local community organization introduced her to ACCION, and
we were able to process her PPP in the amount of $12,000 to keep
her store open. Due to the pandemic, she has to follow current
guidelines and open at a limited capacity. The PPP loan allowed
her to pay her groomers, skilled in working with furry clientele. If
not for the PPP program, Myriam would no longer have been able
to support paying her groomers. She would have lost her skilled
labor.
Due to the pandemic, Myriam had to redesign her business. She
has gone mobile for booking appointments and for managing client
visits.
A second wave of PPP will benefit Myriam and others like
Myriam with access to capital to a level where she could pay ac-
cordingly and invest in her sustainability as she works to stay open
through these very insecure times.
In conclusion, a small business owner, in particular, minority-
owned businesses, have other capital needs that has to be ad-
dressed in order to stay open and keep their employees employed.
Extending the PPP will allow organizations like ACCION to con-
tinue to play an important role in serving the most vulnerable with
a small loan amount, with SBA and microloans as well, with the
community advantage as well, and the traditional microloan pro-
gram, so business could remain open.
Furthermore, clients need advice on how to re-envision their
businesses, and here at ACCION, we can play that important role
of getting funds to those that need it most.
My last words will be for gratitude for your interest in mission-
based organizations like ACCION and to your technician and your
team that they were able to make this online meeting possible.
Thank you very much.
[The prepared statement of Ms. Estrada follows:]
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29
Senator CARDIN. Ms. Estrada, thank you again for your testi-
mony. We appreciate it very much.
Our final witness will be Marla Bilonick, who is the executive di-
rector of the Latino Economic Development Center, which is one of
the largest SBA microlenders in the State of Maryland.
Ms. Bilonick?
STATEMENT OF MARLA BILONICK, EXECUTIVE DIRECTOR
AND CEO, LATINO ECONOMIC DEVELOPMENT CENTER
Ms. BILONICK. Thank you very much.
Good morning, Chairman Rubio, Ranking Member Cardin, and
members of the Committee. It is my sincere honor to be speaking
with you all today about the challenges that minority-owned busi-
nesses are facing in light of the COVID–19 pandemic and how your
decisions can positively impact their return, recovery, and rebuild-
ing. My name is Marla Bilonick, and I am the executive director
and CEO of the Latino Economic Development Center, LEDC, and
I am also a mom. I have my daughter right here next to me.
LEDC is an organization that is 29 years old with the mission
to drive the economic and social advancement of low- to moderate-
income Latinos and other underserved communities in the D.C.
and Baltimore Metropolitan Areas as well as Puerto Rico.
We operate out of six offices, with over 50 professional and bilin-
gual staff providing top-notch, culturally competent services to our
clients. On an annual basis, we serve well over 5,000 low- to mod-
erate-income residents, 90 percent of which represent an ethnic or
racial minority.
We are an SBA Microlending Intermediary, an SBA Community
Advantage Lender, a USDA-designated Rural Lender, and certified
Community Development Financial Institution, CDFI.
Since we began lending in 1997, we have rolled out close to $20
million in capital in small business and consumer loans. We have
forged close and longstanding relationships with the businesses in
the communities we serve, and to say they are struggling given the
implications of COVID–19 would be a severe understatement.
Our businesses are fighting to stay open, keep their employees
on payroll, and work on their businesses while caring for children
that are at home indefinitely.
These blows to businesses come at the grave cost of business
owners’ livelihoods and the livelihoods of the people they employ.
The ripple effect on communities will be felt for months and years
to come.
This year, we have led the charge in our region providing PPP
loans to small businesses in the markets we serve. This was no
easy feat, as we had to hustle to fundraise for the liquidity needed
to make PPP loans on an extremely tight timeline as well as ag-
gressively assert our eligibility to provide PPP as a certified Com-
munity Advantage Lender.
An analysis of our PPP loans to dates shows that 84 percent
went to minority-owned businesses and 62 percent to women-
owned businesses. Eighty-two percent of all of our PPP loans were
made to businesses in the following six industries: food, health,
construction, consulting, cleaning, and child care.
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To give you a sense of the demand for COVID-related assistance
that we have seen, we have provided PPP loans to almost 100
small businesses since late April. For context, our organization
typically provides around 200 small business loans per year. So, in
just one quarter, we have done almost half of our traditional an-
nual volume of loans with just this one product.
We have also partnered with local governments to help deploy
their small business COVID financial assistance products. For ex-
ample, in partnership with the District of Columbia’s government,
we have provided $4.5 million in microgrants to just over 1,100
businesses since April.
Our staff has been working literally around the clock to serve as
many businesses as we can humanly support.
At the national level, the PPP program has not been as success-
ful in reaching true mom-and-pop, minority-owned small busi-
nesses as it could be. I was pleased to see the CDFI set-aside that
came into play during the second round of PPP funds in May. How-
ever, it feels like engaging CDFIs was an afterthought, which is
puzzling when CDFIs have historically been the most highly lever-
aged tool that commercial banks have used to reach the hardest-
to-reach populations in the United States. Of the more than 5,400
PPP lenders, only 303 are CDFIs as of the SBA’s July 20th PPP
report, yet in under 3 months, those very CDFIs made a total of
$7.5 billion in PPP loans.
Our average PPP loan made has been around $30,000, and our
overall PPP efforts stand to retain 373 jobs to date. As of July
20th, the Nation’s average PPP loan size was $105,000, and nearly
87 percent of all PPP loans were for less than $150,000, which is
to say that the PPP program investment stands to have substantial
impact if distributed properly and equitably.
It is extremely disheartening and disappointing to see high-
wealth individuals with direct ties to the Trump administration ac-
cepting PPP loans in the $350,000-to-$5-million range. With the
funds in just one of the PPP loans made to the likes of the Kushner
family, Elaine Chao’s family, or Kanye West, a CDFI like LEDC
could have helped more than 10 times the businesses we have been
able to support to date, retaining at least 3,700 community jobs.
This is a glaring example of the perpetuation of systemic inequality
that has rightfully propelled our country into civil unrest in the
past weeks.
In May, Senators Cardin and Booker penned a white paper that
contains practical suggestions for preventing underserved small
businesses from falling even further behind than they already have
due to the implications of COVID, disproportionate to the general
small business population. We are particularly encouraged by the
following recommendations of this proposal: the recommendation to
allocation $1 billion in emergency appropriations to the CDFI fund
to increase liquidity for CDFIs; the suggestion to create an Office
of Emerging Markets specifically focused on and more attuned to
the needs of underserved communities; recommended support for
SBA’s core programs to expand them and make them more afford-
able; the suggestion to move SBA Community Advantage from pilot
designation to permanent program status; and recommendations
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around expanded support for minority-owned, women-owned, and
returning citizen-owned businesses.
The House of Representatives has taken an important first step
by including $1 billion in grants to CDFIs in the HEROES Act.
Congressional leaders on both sides of the aisle understand that
CDFIs are the lenders to reach the businesses that have been left
out of PPP for the most part. The Senate and administration must
approve $1 billion in rapid response CDFI fund grants.
In addition to financial resources, small businesses affected by
the implications of COVID–19 require technical assistance to navi-
gate their new reality. They have sought out support from LEDC
in the areas of legal advice, which includes commercial lease nego-
tiation, accounting, and reimagining their businesses for survival
in this new time. We have helped countless clients with adding e-
commerce, take-out, and delivery options into their business mod-
els.
It is worth noting that funding made available through the
CARES Act restricts access to funding to provide entrepreneurial
assistance, 80 percent, to SBA-designated Small Business Develop-
ment Centers, the vast majority of which are operated by the uni-
versities and colleges and a small portion, 20 percent to SBA’s des-
ignated Women’s Business Centers. The legislation does not recog-
nize that SBDCs and WBCs are not the only critical elements of
our Nation’s infrastructure for providing entrepreneurial assist-
ance.
In closing, while there are many stories that make the evening
news around unicorn businesses that have turned the pandemic’s
lemons into lemonade, the distillery that is making hand sanitizer
or the T-shirt company that is making face masks, the truth is that
the majority of small businesses are in trouble.
I am very grateful to this Committee for considering my remarks
and for the time and effort you dedicate to making sure America’s
small businesses survive and thrive during these unprecedented
times.
Thank you so much for your time. I look forward to our discus-
sion.
[The prepared statement of Ms. Bilonick follows:]
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37
Chairman RUBIO [presiding]. Thank you so much.
I am going to turn it over to Senator Young to start. My only re-
quest is that apparently our—are those on the WebEx? If you
would just make sure your mic is turned up as loud as you can,
just because there are some challenges over here from time to time
listening to it, so thank you.
Senator Young?
Senator YOUNG. Thank you, Mr. Chairman.
I know all of us feel a share of ownership for the PPP program,
but I want to commend you and members of your team for helping
to put that program together and get it done. It has provided major
relief to thousands of hardworking Hoosiers.
Of the nearly 80,000 Indiana businesses that have received PPP
loans, over $9 billion in total, over 85 percent of these businesses
received loans under $150,000. So we know that this program has
fulfilled its intent, helping those smaller enterprises.
Ms. Bayles, you have experience working with a diverse mix of
small businesses, particularly those firms who have been applying
for PPP loans. In your testimony, you state that PPP was a nec-
essary short-term lifeline; however, to weather this storm over the
long run, you indicate it is critical that business owners have ac-
cess to flexible, long-term working capital.
I could not agree more, which is why I introduced the RESTART
Act to provide low-interest, long-term loans, which allow small
business owners greater flexibility.
Can you expand, Ms. Bayles, on the need for minority-owned
businesses to have broader access to relief, longer-term loans, and
greater flexibility for expenditures and loan forgiveness, as I pro-
pose in my RESTART Act?
Ms. BAYLES. Absolutely. As I mentioned in my testimony, the
PPP was an immediate fix, and so having the flexibility to have
funding that will last, larger amounts will definitely go a longer
way because nothing is more frustrating than getting just a short
toss in the pot. So having that long-term flexibility, larger amounts
would greatly be appreciated.
The biggest piece that I stress in my testimony that I add and
that has been mentioned by the other witnesses and other Senators
is really just going to be that technical assistance, because even for
a long-term loan, you still are going to have the credit challenges.
You still are going to have the financial documentation challenges.
So any sort of funding opportunity is going to have to be matched
with equal access to technical assistance to actively get those busi-
nesses prepared.
Senator YOUNG. And when you think about barriers that minor-
ity-owned businesses face with respect to PPP access and financial
services education, is this what you are speaking to——
Ms. BAYLES. Yes.
Senator YOUNG [continuing]. or are there other barriers that we
should be thinking about?
Ms. BAYLES. Well, for PPP, the challenge was a formal payroll
system, and so getting out there and proactively providing the tools
to businesses so that they know the advantages of using a formal
payroll structure would have certainly maximized the amount of
minority-owned businesses that qualify for the PPP.
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38
But the Schedule C option did certainly help. So just going down
that road in a more refined fashion, I think, will have the greatest
impact.
Senator YOUNG. So this Committee should be aware of what you
have discussed as we try and support the SBA in advancing minor-
ity business-related services.
Ms. BAYLES. Yes.
Senator YOUNG. I think that is really important.
Ms. Bilonick, in your testimony, you know the critical role that
NDIs and CDFIs play in providing the needed sources of capital to
minority- and women-owned businesses, but also as related to what
Ms. Bayles said, but also as educators on financial services and
lending tools.
We can authorize new forms of funding, but it is community
lenders such as yourself that will ensure the underserved have true
access to these opportunities.
So, Ms. Bilonick, my time is running a bit short, but can you
briefly speak to the importance of prioritizing these kinds of insti-
tutions as in my RESTART proposal when extending credit to busi-
nesses operated by traditionally underserved entrepreneurs?
Ms. BILONICK. Absolutely. Thank you for the question.
You know, I would say I think there is sort of a narrative going
around that the challenge or the main challenge for underserved
businesses in terms of accessing PPP is a challenge around filling
out the application, gathering the necessary documents, and while
that may be true for a subset of our clients, I really think the chal-
lenge was around accessing the product.
We had many, many clients come to us that sort of had a false-
start attempt with their bank and never got to the end of the proc-
ess because they just simply were not a high enough priority for
their commercial bank based in terms of their depository accounts
or other factors that put them lower on the list of priority.
So what I really think is that Community Development Financial
Institutions working in neighborhoods, working in communities
where we have the trust, where we have the track record. We are
the resource that small businesses in our communities are going to
trust and come to first and rightfully so. This process has just been
an example that underlies the fact that commercial banks often
turn away our clients who are perfectly viable loan clients.
Senator YOUNG. Thanks so much.
Chairman RUBIO. Thank you.
Senator Coons, are you ready?
He just arrived.
Do you need to catch your breath, or are you ready to go?
Senator COONS. I am happy to proceed, if I might, Mr. Chairman.
Chairman RUBIO. All right.
Senator COONS. I just want to take a second and thank all the
witnesses and thank you, Mr. Chairman and Ranking Member
Cardin, and to my colleagues from Indiana. I just spent time on the
floor discussing the RESTART Act with our lead co-sponsor and
look forward to figuring out with you how we might find a path for-
ward together.
I just wanted to share by my own opening, if I might, that I am
really grateful we are having a constructive and bipartisan hear-
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39
ing. I am grateful, Mr. Chairman, that this has been a broadly con-
structive bipartisan part of what has otherwise been a very difficult
process for responding to the pandemic and moving forward.
I recently spoke with Blanche Jackson. She is the CEO of Step-
ping Stones Federal Credit Union in the East Side in Wilmington.
They are also a CDFI, Community Development Financial Institu-
tion, and they provide their services at no cost to low-income com-
munities in Wilmington.
They became a PPP lender. They provided over $1 million to
small businesses and nonprofits, overlooked by other PPP lenders,
even those seeking loans under $10,000. So I was encouraged to
hear that at least in that instance, this worked out very well.
Let me direct a question, if I could, to Ms. Bilonick. In my experi-
ence in the conversations I have had in Delaware, it is clear from
Stepping Stones and other CDFIs in my home State that additional
funding to the CDFI fund is critical getting this assistance out to
underserved communities.
I am advocating in this next package for $1 billion for certified
CDFIs. How do you see additional funding for CDFIs actually af-
fecting the viability of the survival, short term and long term, of
minority-owned businesses?
Ms. BILONICK. Well, first, let me thank you in advance for advo-
cating on behalf of additional funding to CDFIs. Of course, that is
a self-serving compliment, but I do really think that that is where
the money needs to go.
From our perspective, it would be extremely helpful, both in
terms of additional liquidity, that we could then put out to our cli-
ents.
As I mentioned in my comments, we really struggled initially be-
cause we did not have sufficient liquidity to take on this new de-
mand, and so luckily, we had three partners who stepped up and
were able to provide us with the capital to be able to do the addi-
tional lending. But, obviously, funding through the CDFI fund,
which is one of our primary sources of capital, would be extremely
helpful and then in addition to support our operations. So those
would really be the two pieces of what would help us to be able to
serve our businesses even in a more robust way.
Senator COONS. If I could, Ms. Bayles, I have heard—and you
have testified—there is a lack of community outreach in some of
these relief programs.
A program that was actually founded in my hometown of Wil-
mington, Delaware, called SCORE in Delaware has done a great
job at providing easy accessible outreach in terms of getting a busi-
ness plan done, getting started.
How can we reach business owners more broadly? How can we
do a better job of outreach in terms of connecting available SBA re-
lief programs to minority businesses?
Ms. BAYLES. Thank you, Senator.
I would say that the training and the technical experience needs
to be more diversified to finding businesses where they are.
So SCORE, as you highlighted, focuses on a business plan and
sort of the startup functions of a business. That is definitely help-
ful. That is vital.
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However, my experience, particularly during this round of
CARES Act funding, you are dealing with businesses that are al-
ready started. They are already open. They are trying to keep their
doors open, so sort of a more advanced approach covering things
that I testified on, payroll compliance, tax withholding compliance,
so a more refined technical assistance that finds businesses where
they are. So it is a little past the startup phase. That is where we
have had the most success.
Senator COONS. Mr. Chairman, how much of your patience can
I prevail upon, given the absence of other members? Because I
have got two other questions, I am happy to ask, but——
Chairman RUBIO. Go ahead and do those.
Senator COONS. Thank you.
Ms. Estrada, if I might. Just interested in whether or not author-
izing another round of PPP lending, as I am sure you have heard
from Senators Cardin or Shaheen, we have been working hard on
a bill to prioritize Paycheck Protection Program, which would pro-
vide a second forgivable loan to the smallest and hardest hit busi-
nesses with a set-aside for firms of 10 or fewer. And I know we
have been in active conversations with the Chairman and others.
But I just would be interested, Ms. Estrada. If Congress author-
izes another round like that of PPP lending to the smallest and
hardest hit, how do we make sure that underbanked businesses ac-
tually are aware and participate?
Ms. ESTRADA. Thank you for your question, and it is true. There
is some need in reference of making the awareness, in reference of
the CDFI, that we are the ones that we could have the relationship
with the business owner. And we are the ones that we are working
close to the minority business owner.
So the idea for these funds, it will be that we need to make sure
that this money is going to be in the right hands for the ones that
they are looking for this assistance, or the ones that probably they
already covered the payment for the employees, and they need
right now just to have some additional working capital.
So every business is different, and every business is run dif-
ferent. Probably, a major lender, a credit union, maybe they do not
have the ability to understand in detail what is the real need of
the business. So the CDFI with the SCORE, with SBDC, we are
the ones that we are providing this technical assistance, this finan-
cial allocation, like we used to call it, and that is the reason it is
important to make this program available for the near future.
Senator COONS. Well, thank you, Ms. Estrada. Thank you, Ms.
Bayles. Thank you to the audio system which just kicked in.
Let me just in closing say that in addition to the prioritized Pay-
check Protection Program I just spoke about, which I am excited
to work with Senators Cardin, Shaheen, and others on, I also think
an extension of the Small Business Debt Relief Program would
make a great deal of sense. It is already pay the interest and prin-
cipal for nearly 300,000 SBA 7(a) and 504 borrowers, which are, a
quarter of them, minority business owners. Black-owned businesses
are two times more represented among SBA borrowers than among
small businesses more broadly. I think we should extend this crit-
ical debt relief program and finalize a competitive entrepreneur-
ship fellowship program that would focus on distressed areas, both
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41
urban and rural, providing a living stipend, mentorship, and cap-
ital access. And I am hoping that I can work with my colleagues
on that.
Thank you very much, Mr. Chairman, for your indulgence, and
to you and the Ranking Member, I am excited to work with you
on what I think is a critical part of this next bill.
Chairman RUBIO. Thank you.
Senator Kennedy?
Senator KENNEDY. Thank you, Mr. Chairman, and I want to
thank all of our witnesses today.
I would like each of you to give me a one minute summary of
your testimony, and specifically, here is what I have in mind. In
the first 30 seconds, if each of you could tell me why you think
there is an absence of access to capital, and number two, what laws
would Louisiana—or rather the Congress should pass, not just im-
pacting Louisiana, but impacting every State?
And I will ask our Chairman to designate the order in which the
witnesses should go.
Chairman RUBIO. Well, we will start with Ms. Bayles. She is sit-
ting right in front of us, and then we will go from there. It gives
everybody else a chance to think about how to put all that in 1
minute.
Ms. BAYLES. I know. Great. I get to start off. Okay.
So I would say, just to reiterate what was in my full testimony,
is access to information. So there is a huge busy, congested infor-
mation highway that is out there, and there are numerous factors
that would prevent a small business owner from being able to
grasp that, first of all, and then interpret that exactly to the fit of
their business.
So that information is then inequitable, and so again, opening up
and clarifying all the information that is out there through the
technical assistance is going to be something that I will continue
to emphasize, and that technical assistance has to be diversified to
fit more businesses than at the startup phase.
So as far as the particular laws, I would have to say without see-
ing the individual proposals that are currently on the floor, what
we have discussed so far, and that is providing long-term options
for financing and more flexible terms for those applications is a
step in the right direction.
Chairman RUBIO. Ms. Estrada?
Ms. ESTRADA. Yes. Thank you, Chairman.
It is a really interesting question just to give an answer in one
minute, but what we are seeing is that we cover certain gaps, the
CDFI, in the financial invitation, education, in reference of how it
is going to be the process for the PPP.
But we are seeing right now that there is—okay. We pay the em-
ployees right now. We have this covered, but I need money. Just
for example, right now in Florida, we are expecting a storm. So we
have people that they are doing the landscaping, and they need
probably money just to buy equipment. And you know what? There
is nobody who will be doing a loan under these terms. If this per-
son, this business owner is going to their bank, there is no way
that he could get a microloan. Do not think about it, something for
$10,000 or maybe $15,000, and if they are coming to us, we are in
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42
a really tough position where we need more money just to allocate
in the right hands of the business owners.
So it will be a program where we could have the amount of
money that they need in reference to continuing operation with
flexible terms, something that we could help with the cash flow.
Remember most of the business owners, they were financing
their business with credit cards. So the interest rate that they are
paying is really very high, a lot of confusion, because they were ap-
plying for the EIDL. They received the advance. They do not know
if they have to apply. So the information is there.
We have the ability to digest the information for the small busi-
ness owner, but anyway, we need to guide them through the proc-
ess, because what we are seeing, if we are not guiding them
through the process, predatory lenders, payday lenders, they are
going to take advantage of the ones that are working hard. And
they are the ones that are moving our economy. So that would be
something that we need also to consider.
Chairman RUBIO. All right. Mr. Busby?
Mr. BUSBY. Thank you so much. I will try to make it quick.
Seven quick points. First, transparency. We must understand the
information early on.
Second, the information must be clear when we get it, and it
must be early.
Third, we must monetize the CDFIs. We understand that 70 per-
cent of loans made to black homeowners and black businesses come
through CDFIs. So when we fund CDFIs, we are, in fact, funding
our citizens, and are funding our communities.
Third, the 8(a) program. We understand that many black busi-
nesses have gained great deals of revenue and success through the
8(a) program, but we are asking for the program to be extended for
black-owned businesses. Currently, it is 9 years: 5 years of growth,
4 years of entrepreneurship, and then exit. We are looking for a
much longer program, especially during the years of 2021 to 2026
for particularly black-owned businesses.
Fourth, prompt pay program. During the Obama administration,
there was a program that said government contractors, they need
to get paid within 15 days. That would change the outcome of
many businesses that have to go and, in fact, get a loan just to
cover the government’s float. We think that is something that dur-
ing these difficult economic times, it could definitely be changed.
Next, codify MBDA. It is the only agency in the United States
that has the word ‘‘minority’’ in it. We have got to make sure that
they have the resources and the funds that they need to have long
term.
And then lastly, fund chambers of commerce, as we have dis-
cussed. They have boots on the ground. They understand the im-
portance of entrepreneurial training, relationships, contracting, and
making sure that there is a connect between what happens in
Washington, DC, as well as what goes on, on their local commu-
nities and local businesses.
Thank you very much.
Chairman RUBIO. Ms. Bilonick?
Ms. BILONICK. Thank you. Yes.
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I would concur with the comments that I made and that my col-
leagues made, but I would also add that just sort of in a nutshell,
the point that I would like to drive home is that because the major-
ity of PPP loans that are going out are in the $150,000-and-below
range, that with equitable distribution of the PPP program, there
is a high impact to be expected with regard to retaining jobs.
I would say sort of legislatively that the most important rec-
ommendation that I would make is around the investment of a $1
billion emergency appropriation to the CDFI fund to pass through
two CDFIs that are on the ground working with small businesses
to access this and other Federal programs.
And lastly, to answer your question around why there is no ac-
cess, I think we still are struggling with discrimination in our
country, and I think that is one of the primary reasons why our
clients are not accessing PPP through the commercial banking sys-
tem and going to CDFIs and other alternative lending resources.
Thank you.
Senator KENNEDY. Thank you, Mr. Chairman.
Chairman RUBIO. Senator Cardin?
Senator CARDIN. Well, let me thank all four of our witnesses for
their testimony, and I think that your answer to Senator Kennedy’s
question really pinpoints an agenda. And I certainly agree with the
CDFI points that have been raised.
Mr. Busby, I want to drill down on what we could do within the
SBA. They have an Office of Capital Access, but there is no specific
point person to deal with access to capital for minority businesses
or women-owned businesses or businesses in underbanked commu-
nities in rural America.
Senator Duckworth and I have introduced legislation, and one of
the things it would do, it would set up an office to deal with those
underbanked communities.
Do you have recommendations as to how we can sensitize the
SBA itself to be more aggressive in helping the underbanked and
underserved communities?
Mr. BUSBY. Great question. Thank you so much for the oppor-
tunity to speak to that.
A couple things. One, currently, there is no real certification for
a black business owner. The government as well as private sector
understands the importance that the role that business owners
play in their local communities as it relates to moving our agenda
forward, but right now if you ask the government or private-sector
firms how much they are actually spending with black firms, they
cannot really tell you because there is no SBA certification cur-
rently that says I am a black-owned business. It states that I am
a minority or a woman or a small business, which I am none. I am
black when I wake up. I am black in the evening when I go to
sleep. We have to make sure that we are counting the black busi-
nesses that are participating in these programs.
Next, there was $130 billion that was left in the Payroll Protec-
tion Plan, but at the same time, we lost 441,000 black-owned busi-
nesses. It is not because they did not understand the program or
did not need the funds. It was about early participation, clarity of
the program, and ensuring that they knew where and how to get
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the funds. We think that many black-owned businesses now have
the opportunity to grow through mergers and acquisitions.
Again, we lost nearly half a million firms. We have now got to
go and find those firms, those contracts, and make sure that those
revenue dollars are staying in our communities, and that is going
to need a different type of funding. It is not going to be based on
payroll but based on opportunity as well as growth. So we would
like to look at the difference that the next funding has in reference
to how do we move our communities forward, keep the businesses
that we currently have, as well as make sure that there is new op-
portunities for new businesses to grow.
Senator CARDIN. Thank you.
I want to ask Ms. Bilonick the same question, but I also want,
if you could, to expand on your point about mom-and-pop minority
businesses.
What effort can we make to deal with the really small, small
businesses which are more likely to be a higher percentage of mi-
norities in addition, if you could, respond to whether there is a
need for a point person within the Office of Access Capital?
Ms. BILONICK. I think it would be very effective to have a point
person. I think any sort of deliberate and thoughtful way of ap-
proaching access for minorities, small, black, Hispanic, however
you want to break down the pie, businesses, can only be a positive.
I think that one area of focus—and I mention it in my remarks—
is to try to funnel through agencies not only CDFIs but also tech-
nical assistance providers that work directly in communities. I
think that is how we will really reach the mom-and-pops.
I understand that a lot of the dollars were funneled to SBDCs,
and with all due respect to SBDCs that are doing fantastic work
in the communities that we serve, there are some limitations
around what they are able to do and their reach. And so I would
say if there were a way to perhaps take the SBA PRIME recipients
of the past 4 or 5 years and funnel dollars through them, I think
it is just a little bit of an oversight to suggest that the SBDCs are
the primary technical assistance provider in communities when
there are organizations that are doing this work fully entrenched
and sort of very deeply enmeshed in the community.
Senator CARDIN. One of the reasons why we focus on the
CDFIs—and I would also put MDIs, minority depository institu-
tions—is that to make a smaller loan is not as attractive to lenders
as larger loans, and when we deal with the smaller the small busi-
nesses or you are dealing with minority-owned businesses that
tend to be smaller loans. It is not quite as attractive.
So one of the things I think we need to do is how do we focus
on making it more attractive for the smaller loans to be made by
traditional lending institutions.
Ms. Bilonick, do you have a suggestion on that?
Ms. BILONICK. Yeah. I almost wonder if there would be a way to
sort of designate different lenders in different ranges for lending.
So, for example, the CDFIs could be lending in a certain range. As
I mentioned, our average loan size is $30,000 under PPP. So I do
not know many banks that would be chomping at the bit to make
that kind of a deal.
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So if there were a way to sort of concentrate the higher-dollar
loans perhaps the commercial banking sector, those that are in the
millions of dollars, and then keeping those, you know, even
$150,000 and below, having sort of designated tranches.
Now, this is just what is coming off of the top of my head right
now. I would happily discuss it further with your team and really
fully flesh it out.
Senator CARDIN. I would just point out we have allocated certain
funds to smaller lenders as part of our efforts. Senator Coons has
suggested walling off a certain amount of money for the smaller
small businesses.
I think there are ways that we can try to work together to do
this, but there is also the need to look at making it more finan-
cially attractive for lenders to make loans to smaller companies.
Thank you, Mr. Chairman.
Chairman RUBIO. Senator Cantwell?
Senator CANTWELL. Thank you, Mr. Chairman.
I wanted to see if I could ask Mr. Busby a question. Obviously,
we want to have a variety of voices communicating about what the
capital needs are from various aspects of our society and certainly
have worked on these issues in the past when I was the chair of
the Small Business Committee, women and minority businesses
getting such a small percentage of access to capital.
So that told us that you needed larger voices to communicate to
people about the programs and make the programs work, all of the
above.
But one of the things, Mr. Busby, that we are facing is that Afri-
can American news sources are also being challenged by the
COVID crisis. They are being challenged by the fact that adver-
tising revenue is falling off. They are being challenged by consoli-
dation of newspapers, and when they get consolidated, they do not
always—let us just say they are not always investing in diversity
of local news and opinion.
So one of the things that we would like to fix in the next COVID
package is a provision that at least the House has considered,
which would allow those radio stations or TV stations that are
owned by a larger consortium to get funds if they are going to in-
vest in local content.
Unfortunately, newspapers and broadcasters owned by larger
groups were left out of the Paycheck Protection Program. That
means African American radio stations that are part of Urban One
and Spanish language stations that are part of Univision could not
get much needed relief.
I have been pushing to change that along with Senators Ernst
and others and still believe we need to find a way to help them in
the next round of COVID assistance and I hope Chairman Rubio
and Ranking Member Cardin will help as well.
So, Mr. Busby, what about that issue?
Mr. BUSBY. That is a great point. Many of our businesses across
the country said that the reason that they did not either apply for
payroll protection or the EIDL program was just lack of informa-
tion.
We have partnered early on in our existence with NNPA, the Na-
tional Newspapers Publishers of America, which are the black
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newspapers, and last year, we partnered with NABOB, the Na-
tional Association of Black-Owned Broadcasters, which represents
roughly 170 to 180 black-owned radio stations and roughly 12
black-owned TV stations.
It is important, especially during these times, for us to get the
information that is out timely, accurate, and most importantly that
is coming from individuals and voices that we know and trust. So
for there to be an opportunity for the black media to participate in
this, I think, is a very positive step in the right direction to ensure
that our businesses have the opportunity to compete and have sus-
tainability in our communities going forward.
Senator CANTWELL. Thank you.
Could you just expound on that trust issue for a second? Because
I think it is not fully understood how important these radio sta-
tions and newspapers are.
I would say in my State, the Asian publications have the same
force of veracity. I would say in Indian Country, the same thing.
People listen to information that—I am sure in the Chair’s case,
there is probably Hispanic publications all throughout Florida that
are the go-to source of information.
Why is having this trusted source so important?
Mr. BUSBY. It has been gaining that trust over decades, and for
most of us, it is not just the entertainment piece of it, but it really
is the information, the data that has been shared.
And I will give you a great example. The U.S. Black Chambers
was touting and yelling at a lot of our voices, about 35 to 40 per-
cent of black-owned businesses, we felt were going to be closed dur-
ing the pandemic. No one really heard that, and then it came out
to our black media that the Bloomberg Report came out and actu-
ally said that we had lost 450,000, almost 41 percent of our busi-
nesses.
The information that we get is reliable based upon who is telling
it, and for black communities, black citizens, that information com-
ing from black media is trusted. It has been tried, and over the
decades, we have learned and gained relationships with them to
make sure that our voices are being heard as well as our concerns
are being brought both back to D.C. as well as from D.C. to local
communities around the country.
Senator CANTWELL. Thank you.
I hope that the Chair and Ranking Member will work with us
on this important issue. Senator Ernst and other members of this
Committee are big supporters of this concept, and to me, I think
it is just something that is a little misunderstood. And if people are
going to make the investment in local content, I think we should
try to help them.
So thank you.
Mr. BUSBY. Agree. Thank you.
Senator CARDIN. Mr. Chairman, if I might just thank Senator
Cantwell for her leadership on this issue. This is an extremely im-
portant issue, and I hope we all can work together on this.
Chairman RUBIO. Thank you.
Senator Hirono?
Senator HIRONO. Thank you, Mr. Chairman.
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47
This is a question particularly for Ms. Estrada and Ms. Bilonick
because you are both direct lenders.
So even in normal times, pre-pandemic times, it was really hard
for minority-owned businesses to have access to capital. So based
on your experience, because of this pandemic, what have you ob-
served? What have you learned? What can we do to streamline the
process, create some new methods, whatever we need to do? Be-
cause, as I say, even in normal times, it was really hard for minor-
ity-owned businesses.
And I think that, Ms. Bilonick, if I heard you correctly, you said
that part of the issue was that there has been discrimination——
Ms. BILONICK. Yeah.
Senator HIRONO [continuing]. against minority-owned businesses.
So, anyway, going forward, what can we do as a result of this
pandemic to lessons learned? What can we do to improve access to
capital for minority-owned businesses?
Ms. BILONICK. I can jump in, Fabiana, if that works, unless you
want to go.
Ms. ESTRADA. Okay.
Ms. BILONICK. Great.
So I was just going to say something that is interesting in this
time period is that, yes, it is always a challenge for small and mi-
nority-owned businesses to access capital, but I think that right
now, CDFIs and community lenders are actually able to do loans
that traditional banks are not—well, we are always able to do
loans that traditional banks do not have an appetite for, but I
think right now, we are even doing our normal lending.
We have businesses that are taking advantage of new opportuni-
ties that are provided by this strange new world that we are living
in, and I think there are lessons that can be learned from CDFIs
that perhaps traditional lenders could take a look at around more
flexibility, around credits or alternative sources of judging credit,
more flexibility just in general.
I mean, I think that nonprofit organizations are known for being
agile and flexible, and that is really what these times demand.
So to the extent possible, it is feasible that traditional lenders
could sort of take a page out of the CDFI playbook and be a little
bit less rigid around their requirements.
Of course, we have a higher appetite for risk, but it often comes
with a great payoff at the end.
Ms. ESTRADA. If I may, I would like to add as well that our en-
trepreneurs, they need to understand the process for the loan ap-
plication aspect because most of the time, in the older times, we
have our entrepreneurs that they visited the CDFI or the banks,
and they are asking for a large amount, let us say $50,000, and
probably, they are not ready for that loan amount because they do
not have the financial allocation that our colleague mentioned,
taxes, or there is an issue with cash flow. So we need to work with
programs that probably could feed different realities.
In one point of myself being a business owner, maybe I need
$5,000. There is no need for me to get a loan for $50,000, and also
the flexibility in reference of inside the allocations for the payment,
low-interest rates, requirement deferments or maybe grace period
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48
that it will be okay just to avoid affecting the cash flow issues with
the borrowers.
So, anyway, there is a lot of work that we are doing at the CDFI
level because most of the time when we—let us say in January this
year. We were working with entrepreneurs, that we are frustrated
because that were applying for 150- to $50,000, but they were not
having the capacity to repay this loan. So, as well, we need to un-
derstand our business. We need to understand our credit. We need
to understand our cash flow. So we need to continue providing the
financial allocation.
And the ones that they are doing during this pandemic, that
probably, unfortunately, they have to close down doors because
there is no way that they could recuperate, the idea for us, the
CDFI and all the community organizations, it will be to provide a
friendly hand just to close business with their pride, taking the
right tact, because we do not want for them eventually in 2 months
or 3 months, reopening another type of activity, and they have
something negative on credit or they were not able to close down
their credit cards. So we need to also try to avoid in certain cir-
cumstances, as well any major decision, that it will be affecting the
life of this program or for the future.
So the ones that they continue working, continue helping them
out with flexible terms and conditions, and the ones that they prob-
ably—they need to face the reality to close down business, also give
them the hand to close in the proper ways.
Senator HIRONO. All right. So I have one question, Mr. Chair-
man, for Mr. Busby.
I know that you have participated in the 8(a) program. I am a
big supporter of the 8(a)’s, but you mentioned just now that we
need to start thinking about a different kind of funding not based
on payroll because, as you noted, that half a million or so of black-
owned businesses have already gone under.
You mentioned that we should be looking at some sort of a pro-
gram to create new opportunities for them to restart businesses or
something along those lines.
So I would like you to talk a little bit more about what you had
in mind.
Mr. BUSBY. Sure. On the 8(a) program, we are looking to extend
that past the 9 years that it currently operates for a business
owner. We think that it could go anywhere from 16 years up to 20
years for black-owned businesses. We feel like this will provide
some generational wealth for a 9-year business, and then to be
placed on your own really provides challenges that many of those
firms cannot handle.
If you look at the Black Enterprise Top 100 list, every year, the
top 10 to 20 firms, many of them fall off because of their no longer
opportunity to be in the 8(a) program. So as soon as we get and
gain opportunities in statute, we are forced out of the program. We
would like to——
Senator HIRONO. So we want to change the statute, the 8(a) stat-
ute, so that it is a longer timeframe for them to be participating?
That would be a big positive for black-owned——
Mr. BUSBY. We think so, and then we think the program would
also be a big factor, something that could easily be done and would
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49
then provide real access to capital that many business owners do
not have to go and get a loan. They could actually just live off of
the cash flow that the Government is now making them go and get
credit for.
Senator HIRONO. Thank you very much for that very specific sug-
gestion, Mr. Busby.
Mr. BUSBY. You are welcome.
Chairman RUBIO. Thank you.
Senator Duckworth?
Senator DUCKWORTH. Thank you, Mr. Chairman.
I just want to thank all the witnesses who are here today.
I do want to sort of focus a little bit more on some of the provi-
sions the Microloan Program Enhancement Act of 2019.
Ms. Bilonick, as you know, several microlenders have seen an up-
tick in need for microloans, in particular, including intermediaries
in Illinois. Senate Democrats have released proposed changes to
the microloan program, many of which are included in the
Microloan Program Enhancement Act. That bill would give inter-
mediaries additional funding for technical assistance and lending.
It would increase an aggregate and annual lending cap, and it
would repeal the 155th rule that restricts lending in the first half
of the year.
Can you discuss how these changes, Ms. Bilonick, would help
intermediaries, such as yours, get dollars into the hands of bor-
rowers more efficiently and give you the increased resources you
need to save micro borrowers, particularly at a time when there is
increased demand such as we are in right now?
Ms. BILONICK. Absolutely. Thank you, Senator Duckworth.
I think these changes would be extremely helpful. One thing I
note, I do appreciate sort of the parallel with technical assistance
as well, which we find to be useful with regard to getting our busi-
nesses in the queue and funded.
While I said that our PPP average loan amount was $30,000, our
traditional, even though we do go all the way up to $250,000 as a
community advantage lender, is more in the 13- to $17,000 space.
So the microloan program is extremely helpful for us. It is the most
reasonable debt that we have to be able to turn back over to our
clients versus from either foundations or commercial sources, and
so it would hugely expand our capacity to lend from the microloan
program.
I would also just say with regard to that, the 155th rule, we are
in support of striking that. It sort of creates a false bottleneck that
does not need to be there with regard to distributing money equi-
tably during the whole course of the fiscal year, rather than split-
ting it up with the first half and second half, and so we would cer-
tainly view that as a positive for our lending ability.
Senator DUCKWORTH. Thank you.
And I want to touch also on the need for the SBA to dedicate re-
sources toward minority business owners. We have already touched
on that, on this so far, my colleagues from Maryland, but I want
to come back to this. We know that small businesses, borrowers of
color, had a harder time receiving adequate capital from traditional
lenders prior to COVID–19, and unfortunately, this pandemic has
only made this issue worse.
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Last month, SBA and Treasury created additional set-asides in
the Paycheck Protection Program for CDFI lenders to better serve
borrowers of color. While this is a step in the right direction, more
must be done when it comes to helping these folks have access to
lenders and capital.
And I will give you an example. I was just in East St. Louis just
last week meeting with small business owners, and one of them
was a black-owned business. All the others were white-owned busi-
nesses. Some of them were women-owned, but they were all white-
owned. They, for the large part, received all the PPP loans through
the full amount that they asked for, and yet this black business-
man who had a better balance sheet and a longer track record only
got a small percentage of what he applied for. And he could not fig-
ure out why he would have gotten a smaller percentage.
In this discussion, it was very interesting because they were com-
paring their backgrounds, how much capital they had. They were
on similar businesses, and there was no other reason where he was
different from the others. In fact, he had more experience, had bet-
ter balance sheets, except that he was a black-owned business.
So, Mr. Busby, can you discuss what additional changes Congress
must make to PPP and to traditional lending structures to make
sure borrowers of color can access small business loans and capital?
You touched on this before, but I want to give you more time to
really emphasize this issue because it is very real. And I am seeing
it on the ground today.
Thank you.
Mr. BUSBY. Thank you so much for the question because it is a
real concern. Access to capital is the number one, number two,
number three concern for black business owners. Discrimination
exists, and so we are asking for all barriers for access to capital to
be removed for black-owned businesses.
We also know that 70 percent of black firms that applied got de-
nied, of U.S. Black Chamber members, and 96 percent of our mem-
bers that applied that did get some funding did not get what they
requested. So either they did not get it, or if they did get it, they
did not get what they need. And we found that to be historic. That
is not just now. That is a historic pandemic as it relates to our
community in reference to access to capital. Thus, we cannot grow,
so we cannot hire, and if we cannot hire, then we cannot continue
to have sustainability in our communities.
The credit scores need to be twice as high as our white friends.
When we go in and ask for a loan, we only get 40 percent of the
funds that we ask for. We have to have twice or somewhat almost
twice the credit scores of our white peers.
I could own my home. My white peer could own their home. I
could go in with a great business plan looking for $100,000. I will
walk out with $40,000, praising to God for allowing me to get that
$40,000, only understanding that 90 percent of businesses fail
within the first year, and the majority of the reasons is because
they did not have the access to the capital that they needed when
the first emergency happened.
The average black family has less than $400 for an emergency.
The average black business, only 30 percent of them have any cred-
it at all, and so when we are in situations where things come unex-
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51
pectedly, it is only going to exacerbate the problems that black
business owners have during pandemics and just regular chal-
lenges of businesses itself.
Senator DUCKWORTH. Thank you.
I yield back, Mr. Chairman.
Chairman RUBIO. Thank you.
And before I turn to Senator Scott, Mr. Busby, just to clarify, the
figures you gave, the 70 percent were denied and 96 percent got
less, was that for PPP?
Mr. BUSBY. That was for PPP. Yes, sir. That was our members
of the United States——
Chairman RUBIO. I want to address that when I get to my—I am
trying to give everybody a go, but I want to talk to you about that.
I just want to make sure we are talking about PPP. Got it.
Mr. BUSBY. Yes.
Chairman RUBIO. Senator Scott?
Senator SCOTT. Thank you, Mr. Chairman. Thank you for your
interest and your passion around helping small and minority busi-
nesses have access to the Paycheck Protection Programs.
As we look at this pandemic, the one thing that we can conclude
without question is that 41 percent of African American-owned
businesses from February through April declined. We know that
those numbers are stunning, frankly, especially when you com-
pared to other groups. Hispanics declined by about 32 percent,
Asians around 26 percent. So that means that this pandemic not
only created a health crisis, which African Americans, unfortu-
nately disproportionately impacted by this global pandemic, and
then on top of that, the employers started vanishing.
Mr. Busby, I think this is an accurate depiction?
Mr. BUSBY. Very accurate, Senator Scott. Things that were being
challenged for our community just exacerbated through the pan-
demic, and so for many of us, we said the country was willing and
able to write a $2 trillion check for a stimulus package. The black
community is saying, ‘‘Hey, where is our support that we des-
perately need to continue to have sustainability in this country?’’
Senator SCOTT. And I will say to answer that question, in part,
I just finished an Instagram Live with Secretary Mnuchin talking
about the important role that CDFIs and MSIs play, especially in
the second tranche or the second iteration of the Paycheck Protec-
tion Program, working with folks like Robert Smith and others. We
were on the call with Secretary Mnuchin and redesigning the sec-
ond half of the PPP. I think if that part of the story was in isola-
tion, that part of the story is a far more positive part of the story
than the overall story because we were able to put the focus where
it needed to be, and if we do that in this next round, we may have
far better success than we did in the first iteration.
Is that about right, Mr. Busby?
Mr. BUSBY. That is fair to say. I just think that it needs to be
very transparent, and it needs to be a commitment from both the
financial institutions that are making the loan as well as the Gov-
ernment to ensure that there is accountability to the organizations,
the banking institutions, to ensure that there is equity in loaning
and the individuals that they reach out to make sure that all busi-
nesses have opportunity.
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Senator SCOTT. Thank you.
I will say this. I think accountability and responsibility goes on
both sides because I have been an African American-owned busi-
ness for 15-plus years and started three or four other businesses,
and we definitely have to address some of the challenges from the
beginning into the crisis as well as the crisis on as it relates to mi-
nority-owned businesses.
One of those challenges is that our banking relationships, frank-
ly, as African American businesses were weaker. So when you come
into an institution and they are prioritizing their clients, too often
we found ourselves frankly in the back of that line, and I do not
think that is an overstatement. I think that is an accurate state-
ment.
And that lack of relationship creates a domino effect throughout
the entire Paycheck Protection Program but frankly through the
entire life of a small business, having been one, and I can tell you
it is painful when you need something and you are trying to get
in line after the crisis starts.
But what I did realize during this crisis—and I think this is a
part of the silver lining and the good news to come—is that
FinTechs and technology can be an equalizer when the relationship
is not there.
So if you would help me understand how the PPP and the EIDL
is in a better place when we have FinTech and technology as a part
of the solution. Can you speak to the importance of that?
Mr. BUSBY. I think there are some benefits as well as some chal-
lenges when FinTech gets involved. The benefits there are that it
is quick, but for our community, we are not as——
Senator SCOTT. Savvy?
Mr. BUSBY. No. We are not as committed to quick as we are long
term. We understand that this is not going to be the last oppor-
tunity, and what they told us is when this fund came out, they said
go to your existing banking relationship. FinTech is not a banking
relationship. That is a transaction. I want my individuals to go to
the bank, shake that banker’s hand, because understanding that
we are going to have opportunities to grow and the only way you
are going to be able to grow is to have access to capital, access to
credit, and relationships.
When I talk about the future of my businesses, I may want to
acquire. I may want to merge. I may want to do a joint venture.
I am going to need a banking partner who understands my needs
as well as the opportunities that they provide, and many times,
that does not happen over a FinTech relationship.
Senator SCOTT. Well, it is certainly harder to happen over tech-
nology, without any question, and that is part of the problem, and
it was the foundation on which we stand was not there. So when
the crisis happened, I think it only exacerbated and brought more
light to the actual challenge of banking relationships and the im-
portance of those relationships pre-crisis and frankly during the
crisis.
I know my time is out. Thank you very much, Mr. Busby, and
I look forward to having a longer conversation with you at a later
time.
Mr. BUSBY. Thank you.
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Chairman RUBIO. Senator Booker?
[No response.]
Chairman RUBIO. You are muted. Senator Booker? Go ahead,
Senator Booker.
Senator BOOKER. Thank you. Thanks.
I just want to start by thanking the Ranking and Chair. It is
clear with the attention and care that this Committee is really just
trying to focus on what is fair, focus on what is really important,
and I am just happy to hear a lot of conversation of my colleagues
today.
So I want to jump right in. The stakes are so high in this, not
only for each small business owner and employee, but really what
we are talking about today deals with the entire economy.
So a July poll just found that 7 percent, 7 percent of minority
business owners are very confident they will be able to maintain
payroll if no further Government relief is provided. Just 7 percent
have that confidence, and McKinsey estimates that black commu-
nities enjoy the same level of economic activity, if they did enjoy
the same level of economic activity as white communities, our coun-
try would enjoy a 1- to $1.5 trillion boost to our overall economy.
So this is about all of us. It is not just about making sure that Afri-
can American businesses get a fair share, fair opportunity, equal
opportunity. That is obviously important. We all have a stake in
this.
Earlier this week, Leader McConnell proposed a second round of
PPP in this next package. That is wise. That is important. I say
vital. But we cannot simply put forward the same policy again and
expect a different result.
As I see it, the PPP was successful in getting emergency assist-
ance to many small businesses to help cover payroll for a short lim-
ited time, but there are deep structural challenges with the pro-
gram that prevent it from lifting very small minority-owned busi-
nesses up. And that is the challenge I have.
Maybe, Mr. Busby, I can just ask you. Could you comment on
what I believe are facts? And if you have issues with any of these
facts, I want you to say it, but number one, unbanked and under-
banked businesses are disproportionately minority-owned, and they
are less likely to participate in PPP, given the program’s reliance
on a mainstream banking system.
For minority-owned businesses that do have actually lending re-
lationships and have been able to participate in PPP, discrimina-
tion actually still exists. If there is any doubt in that, the National
Community Reinvestment Coalition just conducted a blind test, in
fact, sending black borrowers for PPP and white folks in for PPP
and matched all the payer testers. So the black and the white, they
matched them on all the details, but they experienced widely dif-
ferent treatment when applying for PPP loans, including different
levels of encouragement to apply and different products offered by
banks, just by the color of their skin.
So we know how the fee structure works. This is hurting black
businesses. Banks also prefer to originate, say, a $5 million loan
than they would a $250,000 loan, a dynamic that really disadvan-
tages small businesses and disproportionately black businesses.
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54
Then, finally, Ms. Busby, the last point I would like for you to
comment on is that many very small businesses have short-run,
nonpayroll expenses that exceed the 40 percent threshold per-
mitted under PPP.
All of these things combined, Mr. Busby, would you agree to
make a serious impact on the fairness that African American busi-
nesses are facing?
Mr. BUSBY. So true, Senator Booker, and thank you for the com-
ments.
Let us start with the title of the program: Payroll Protection
Plan. Of the 2.6 million African American-owned businesses today,
2.5 million have no employees. So they are not mom-and-pop. They
are mom-or-pop, single-employer firms doing great work, not be-
cause they are small, but because they have 1099s or they have
subcontractors or they work differently. And the whole idea of
young people saying, ‘‘I want to create my own business, but I want
to have the flexibility of being my own business owner. I do not
necessarily want to be your employee,’’ and so that is the way of
the future.
And now you are telling black business owners, who have grown.
If you look over the last 10 years, black businesses, particularly
black businesses, have been the fastest growing sector in the coun-
try. We have got to now look at them differently than we look at
the majority of businesses in America because we operate dif-
ferently, and as it relates to credit, again, only roughly 30 percent
of black firms have any credit relationships. And that has a lot to
do with the discrimination that we have faced over the decades of
years, the amount that we pay for the credit when we do get it and
the way in which we are treated when we go in the bank.
A couple of things, when I go in the bank, I am never called by
my last name. When I go in the bank, I never meet a bank loan
officer or a bank president. When I go in the bank, I am only hav-
ing a conversation with a teller. So for now you to tell me to go
into a bank and apply for a loan on a Saturday where the bank
is already closed due to COVID is only going to put me that much
further behind when it talks about getting the capital that I need
to make it through the most difficult times that we have seen in
this country.
Senator BOOKER. Right. Then just the study where they were
sending people in with all the same details, the only thing different
was a black person versus a white person, and they found that
while differences, all of these are just compounding. That kind of
discrimination is just compounding a lot of the structural inequities
that are already there.
So if we do not address this with a sense of urgency, that
McKinsey data I showed you before, our overall economy is suf-
fering upwards of a trillion-plus dollars annually, and so we have
to find ways of getting additional channels of capital distribution
to very small and minority-owned businesses or we will fail our
overall economy, not to mention—not just the discrimination but
compounded, because in a crisis time, so often minority entre-
preneurs or minority communities face greater levels of impact
than the overall community.
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55
So I know there is a lot of good energy on this. This is why I
am grateful for this hearing and we are having this conversation
again. I have got a bipartisan proposal, the RELIEF for Main
Street Act, that I am pleased also has the support of my fellow
Small Business Committee colleague, Senator Young. The bill
would send $50 billion to States, cities, and counties to seed and
scale small business relief funds.
We have seen that the funds that pop up in every State of this
country, but they are massively oversubscribed. These funds are
over demand, and so our bill would push funding closer to the com-
munities that they serve and allow funds to make loans and grants
to very small businesses less likely to benefit.
So I just want to thank again the Ranking and Chair for this
business. This is imminent. We are obviously coming up in negotia-
tions for this final COVID package. If we fail in this moment, we
hurt all of America. We hurt our entire economy. We hurt a consid-
erable amount of our entrepreneurs and job makers in this country,
and we perpetuate structural racism in a way that unacceptable.
We have to address this.
Chairman Rubio, thank you very much for the time.
Chairman RUBIO. Thank you.
Senator Ernst?
Senator ERNST. Thank you, Mr. Chair, and thanks to all of our
panelists for being here today.
We do know that our minority-owned small businesses play a
critical role in the success of all of our communities, and I am glad
we are having this conversation about how we can get these essen-
tial businesses the tools that they need to survive this crisis and
lead then on the front lines for economic recovery.
Earlier this month, I had the pleasure of meeting with a number
of local leaders of our black community in Des Moines, and one of
the gentlemen that I spoke with is Izaah Knox. He is the executive
director of Urban Dreams, which is a nonprofit that is focused on
financial empowerment for underserved and underrepresented pop-
ulations, very important.
I was happy to hear about Izaah’s experience receiving a PPP
loan as well as the positive impact it has had on his nonprofit. Of
course, relying on technical assistance and that longtime relation-
ship that he had developed with the bank, he was able to overcome
some of those initial obstacles to receive the loan, and he stressed
the importance, just as we have heard today, of having a lender
who knows the community and has more than just the trans-
actional relationship with the borrower as well as the training that
he had received in this area.
So we have discussed a lot about that today, but I did want to
give a shout-out because I think it has been echoed so many times
over how important it is that our local lenders, our local credit
unions have that relationship with those in our underserved com-
munities.
So what I will not do, I will not dive into that because we have
heard a significant amount about how to develop those relation-
ships, and we need to lean on our lenders to work on developing
those relationships.
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But what I would like to pivot to is an area that I am very con-
cerned about with the impact that COVID–19 is having on our
child care businesses, which has seen the significant declines in en-
rollment and revenue. Of these child care businesses, half are mi-
nority-owned. Forty-five percent of our child care workforce are
black, Latino, or Asian, and according to a recent survey, the Na-
tional Association for the Education of Young Children, two out of
five child care providers and half of minority-owned child care busi-
nesses are, quote, ‘‘certain that they will close permanently without
additional public assistance,’’ end quote.
So it is critical that we are providing additional relief to stabilize
these businesses, which is why I recently introduced legislation
that would create back-to-work child care grants, and it would pro-
vide 9 months of financial assistance for child care programs to
make sure that they can safely reopen and make it through this
pandemic.
Just very briefly, if I could ask our panelists—and maybe if we
could go to Marla. If you could answer the impact of keeping these
child care providers afloat and its impact on those minority com-
munities, that would be very helpful.
Thank you.
Ms. BILONICK. Absolutely. I did not get to it in my testimony be-
cause the written comments that I made were longer than the time
allotted, but one of the client profiles that I featured was a Latina-
owned child care business in Washington, DC, Little Angels Child
Development. They currently serve seven families and have only
had three of those seven families confirm that they are considering
continuing to use them, just given all the considerations around
COVID, both from a safety point of view and then their own eco-
nomic capacity to pay for the service.
So, yes, child care is actually one of the six industries that has
been sort of the highest hit of the PPP loans that we have made.
It is one of the six highest industries that is represented in the
portfolio of PPP loans that we have made.
We have always seen, in the Latino and African American com-
munity, this to be a very strong and vital business type, both for
starting and expanding. And it has so many ripple effects because
it is also affecting the ability of the people who use the child care
center to work.
As you may have seen earlier, I had my daughter. My daughter
is literally sitting next to me right now. I do not have child care.
My other children are in high school, so they are less labor inten-
sive. But that being said, this is a real struggle that we are all fac-
ing, and the child care centers are so essential, not just for the
owners and their livelihoods and their employees and their liveli-
hoods, but for those of us who are trying our very best and in many
cases having to work even harder than ever while juggling chil-
dren, homeschooling, all of this.
I think part of the reason why I had my daughter show her face
is because I think we are all sort of living in this fallacy that we
are not all really juggling this insane balance or lack of balance in
this time period, and so I think it is excellent that you are bringing
that bill to bear.
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Senator ERNST. Yes. Thank you very much. This is all very im-
portant, one, to be able to provide the services and lending nec-
essary for our minority communities, but then also the ability to
provide care for their little ones as well.
I struggled with that as a young mother, myself, and so we want
to make sure that all of our businesses are successful. And this is
one way that we can do it. So thank you so much.
Incredibly important topic. I appreciate it, Mr. Chair. I yield
back.
Chairman RUBIO. Did Senator Hawley drop off?
[No response.]
Chairman RUBIO. Senator Rosen?
Senator ROSEN. Thank you, Chairman Rubio, Ranking Member
Cardin. This is really an important, critically important hearing to
ensure that we are doing all we can to support our Nation’s minor-
ity-owned businesses, and I want to thank all the witnesses for ev-
erything you do and for spending your time with us today.
Over the past few months, the coronavirus pandemic has dev-
astated small businesses in Nevada, across the country, and put
millions out of work. Many minority business owners in Nevada
work particularly hard due to lack of access to capital, like we have
discussed.
Congress stood up emergency lending programs to fill in these
gaps. My office has heard countless stories from minority-owned
small businesses struggling with the SBA’s Economic Injury Dis-
aster Loan, or EIDL, and one of the common complaints is that
1,000 per employee cap on EIDL Advance grants. And it is arbi-
trary $150,000 cap on EIDL loans, a 93 percent reduction from the
$2 million level, we in Congress authorized in the CARES Act.
Small business owners. They have contacted my office telling me
that $150,000 does not provide the support they need, and that
without further help, they will likely be forced to permanently close
their businesses.
This is why earlier this week, I introduced, along with Senator
Cornyn, bipartisan legislation to address this problem, the EIDL
for Small Business Act. This bipartisan bill would prevent the SBA
from imposing any arbitrary limits on EIDL and EIDL Advance, in-
cluding providing $10,000 grants to all eligible small businesses,
regardless of their size, but also appropriate $100 billion of EIDL
and $80 billion for the EIDL Advance program.
So, with that in mind, Mr. Busby, as you know, EIDL Advance
program, well, it has run out of funds. I know that business owners
in Nevada feel this is a particular problem.
Ken Evans, he is the president of our Urban Chamber of Com-
merce in Nevada, and he supports my effort. And I want to quote
him. He said, ‘‘The EIDL for Small Business Act will help our busi-
nesses secure much needed capital to counter the impact of
COVID–19 in the Southern Nevada region.’’
So can you please discuss why it is so important for us to recapi-
talize the EIDL and EIDL Advance programs and why it is critical
that our smallest and most vulnerable minority-owned businesses
receive the full $10,000 grant, regardless of their size?
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Mr. BUSBY. Thank you so much, and also thank you to Ken who
is a member of the U.S. Black Chamber, one of our chamber mem-
bers there in Las Vegas. So, again, tell him thank you.
For us, again, many of our businesses were not able to partici-
pate in the Payroll Protection Plan. The title was difficult to under-
stand. There was a real concern about ‘‘Will I be eligible? Do I have
to pay the funds back?’’ and the transparency was really unclear.
So for many businesses, we said take the other avenue of the EIDL
loan.
The challenge with the EIDL loan was a couple of things. Credit
was tied to the EIDL loan program, and so many of our businesses
were not able to apply or to get funding because they did not have
the credit score appropriate to be able to get funding.
Secondly, I think there was an either/or conversation for most
business owners. Either I apply for PPP, or I apply for EIDL. For
us, now that we understand, all of us understand a better clarity
of both programs——
Senator ROSEN. Right.
Mr. BUSBY [continuing]. we are telling folk, ‘‘It is not an either/
or. It really should have been about both,’’ and for the businesses
that did not have payroll, the EIDL loan was a much more appro-
priate program for them. And so we are looking for that to be fund-
ed fully.
As it relates to the smaller businesses, the microloan businesses,
they should be able to apply for that in the EIDL loan, and it
should be up to $10,000. It should not be based upon other criteria.
What we heard was during the first tranche of funds, those firms
that got it did not have the same accountability, criteria, and ques-
tions that many of the small business owners are now having to
face as it relates to the EIDL loan program.
So we are asking for it to continue to be funded. We want to
make sure that it is there long term so that our businesses can be
able to participate.
Senator ROSEN. Thank you.
I just have one last quick question to everyone on the panel. How
can we strengthen these relief programs to get the money out more
quickly? Do you have a suggestion what we can do to get the
money out more quickly to those who need it?
Mr. BUSBY. I will start. I think that putting the money directly
in the hands of the CDFI that we know fund the businesses in
those local communities. Nothing wrong with the big banks, but
again, based upon the financing of those large loans, many black
businesses were not able to get it from the larger banks.
I think, again, as all of us have said, it really is about relation-
ships, and many of our businesses have those relationships with
the CDFIs. And so I would say fund directly to the CDFIs as well
as funding the nonprofits that can make the microloans and the
microgrants, I think, are extremely important.
Thank you.
Senator ROSEN. Anyone else like to give a suggestion to us quick-
ly?
Ms. ESTRADA. For me, nothing more to add because it is clear
that we have the relationship, and we know the small business
owner and where is the need. And we could provide the financial
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allocation because, again, the frustration with the disaster loan
with SBA, sometimes it is related to the cash flow, to credit, like
Ron mentioned. We need to be sure the credit, if there is something
we need to work, just to fix credit or wrong information that is in
credit.
So, again, we need to give the support, but the financial alloca-
tion is key because, if not, there is another emergency, there is an-
other situation where they are going to be set to fail. And we do
not want our small business owner to be setting to failure.
Senator ROSEN. Thank you.
I believe my time has expired. So I thank you all for being here.
I really appreciate the work you do.
Thank you, Mr. Chairman and Ranking Member Cardin. I appre-
ciate it.
Chairman RUBIO. Thank you.
So just to close the loop now, to use my turn to talk about it, let
me just first say that there are three common themes in the testi-
mony today. The first is the technical help, the assistance with all
the technical aspects of understanding who qualifies, how much do
you qualify for—talking about PPP—and where can I go get it. The
second is the access, finding the places that will actually do it for
you, and then the third is the long-term capital needs, which I
think is a critical component of it. And I want to take it in that
order.
So on the first point about the technical help, I actually think
that the point that was raised earlier, the statistic that I had asked
Mr. Busby to confirm—70 percent of black-owned businesses were
denied, 96 percent that got it got less than they asked for—is an
important point.
The way PPP works, not to be redundant here, but it is impor-
tant because it is a new program. This thing was thrown together.
Senator Cardin and I were there, Senators Shaheen, Collins, and
others. So we had to come up with something that could get out
there quickly. I assure you had we put all that money in through
an existing program, we would still be talking about 5 percent of
the people having gotten it because it is just on the infrastructure
for something that is brand-new. And there was confusion, and the
rules were thrown together. Something this big and this new is al-
ways going to have those problems.
But the way the PPP works is you apply, and once you apply and
the banks have it and they run it through SBA, the banks do not
make the decision about getting it or not getting it. They cannot
deny you a loan, and if they have, then they have broken the law.
What they can deny you is the opportunity to apply, but they
cannot deny you the loan. They cannot say you cannot have a loan.
The loan is 100 percent guaranteed by the Federal Government.
There is literally zero risk for the bank. In fact, the bank pushes
its cash out the door and within 8 weeks can take it to the Fed
and sell of the loan, and they make a 5 percent fee on the smaller
loans to begin with on top of it. So there is no denial process. You
either qualify or you do not qualify.
What they can deny you is the application, ‘‘We are not doing
any more PPP loans. We do not do loans for people that are not
clients,’’ that kind of thing, or as was cited, I think, by Senator
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Booker, they can discourage you from applying at the bank level.
And that is one thing.
On the amount, the amount is automatic as well. They do not get
to decide, well, you qualify for 50, but we are only going to give you
25. If you are approved, you are approved for up to two and a half
times of payroll. There is no discretion involved there. There is no
bank decision, again, because it is not their money. They are basi-
cally acting as the intermediary between the Federal guarantee
and the pushout.
So that drives me to the point that it is—I do not know this to
be true, but I am guessing that a substantial number of those that
are a denial are actually not a denial of the loan. They are a denial
of the ability to even apply, that in essence, they went to whatever
their existing banking relationship is, and they told them, ‘‘We are
not doing any more PPP loans,’’ or they did not have ones they
could go to.
Which leads me to the second point that everyone has raised,
and that is lender access. I can tell you had it not been for regional
banks—because the way we had to do it is how do you do some-
thing like this in 6 days. Well, first, you start with a baseline of
1,000 preapproved designated lenders who are a part of 7(a), and
then you build on it. And it has built over 4,000 additional lenders,
basically everyone, FinTechs and obviously the push to get CDFIs
in later in the game as well. It was a process to get to 5,000. It
is an important stable of lenders.
But the regional banks, I think it was Senator Ernst that raised
this. Without the regional banks, this thing would not have
worked. It is just that simple. What we found out with a lot of the
bigger banks is if you were a large account, you were processed by
the commercial division. If you were a smaller account, you were
processed by the small business or the business division, and there
are a lot more business applications than commercial applications.
The commercial applications just moved a lot faster.
The other thing that I think we learned in time through all this,
is that one of the things that they did do which worked really well
is that the SBA designated like a 12-hour window in which they
would only accept applications from smaller lending institutions,
and it kind of cleared some of the backlog. It allowed those to get—
because you can imagine. I mean, these larger banks had loaded
everything up when that second tranche of funds became available,
and they just smashed the system with these automated applica-
tions and almost crashed it. So that is important.
By the way, one of the things that I did want to point out, be-
cause the mention was made of 1099 employees, they actually for
the first time ever were eligible for this sort of assistance. That is
something we added into the bill. They would qualify for two and
a half times whatever it is they make. I get it. It does not cover
all their needs, but I think that goes back to the technical assist-
ance piece, which is explaining to people these are your rights, this
is what you are eligible for, and this is where you can go. So that,
I think, highlights that. It also highlights the lender accessibility.
And then the third is the long-term figures because all of these
impediments that I say do not exist or should not exist in PPP
most definitely exist going to the market and saying I want a long-
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61
term, low-interest loan to be able to survive as a business, and that
is a piece that I think we have to address and that we have some
ideas on, others have some ideas on. But it is one we want to make
a priority.
So just on those first two points, the technical assistance and the
lender access, I think the point has been made repeatedly that
CDFIs, whether it is not just making them eligible to be lenders,
but infusing them with the cash to have the capital to transfer the
funds, because you have to have the money. Money does not come
from the SBA. It comes from the lending institution. So you have
to have the cash in your accounts to push it, and then 8 weeks
later, you could sell it. But you have to have it for 8 weeks, and
if you do not have enough of that money, it limits the number of
loans you can do. So that has come through loud and clear.
On the technical assistance piece, all of you had some different
ideas about what the appropriate organizations are, and maybe I
could just flesh out with all four of our witnesses. Obviously, all of
you are a part of that assistance process, but if we wanted to make
sure that more of these small businesses were aware of what they
could get and where they could get it—because, by the way, one
last point I would make is that is valid even now.
We have over $100 billion of PPP money sitting there right now
that has not been accessed. So there are small businesses out there
that are eligible for this that are not applying for it as we speak,
and that is through to August 6th, thanks to Senator Cardin ex-
tended it to August 6th, right?
Senator CARDIN. The 8th.
Chairman RUBIO. The 8th, August 8th. So they could still do it
today. So that tells you that there has to be—something is blocking
between eligibility of people who need it that did not get it and get-
ting after. This program has not ended, and now we are going to
go into round two of it, which is going to be more tailored for the
kind of businesses we are talking about. This impediment is still
there.
So who is it that can help really sort of create the awareness and
then the guidance to make sure your application is filled out right,
you are getting what you are entitled to, and then on the forgive-
ness side, you are getting the pieces of it forgiven?
Let me start with Ms. Bayles, who is here now, and then I will
go just down the list.
Ms. BAYLES. Thank you, Senator Rubio.
I would like to maybe provide a deeper level into the technical
assistance that my testimony did not specifically say, and that is
the role that service providers like myself play in all of this discus-
sion.
So we get the money out quickly to CDFIs. Great. We allow flexi-
ble terms, longer terms. Great. But if that business does not have
a relationship with a service provider, a year-round service pro-
vider that can make sure that all of the application requirements
you have taken care of—tax, compliance, bookkeeping, to have
those financial documents—if they do not have a relationship with
the service provider, access to a service provider, this is all for
naught, because they are not going to have the capacity because
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they are not looking at their numbers. So that is a little bit more
than technical assistance.
I am educating you on the information that is out there, how you
would qualify for the loan, but now I am also interpreting your
data so that you can remain a healthy business and have the ca-
pacity to really use those funds to the max. That comes from the
service provider perspective. That comes from companies like mine
that are actually sitting down with the employee on a year-round
basis after you have received the money or even in preparation of
the money, but you are going to have to have a relationship with
a service provider that can help you maintain the health of your
business once you get the money.
So I think I want to add that piece and make sure that piece is
not lost in this discussion, the vital role that a company like mine
plays when it comes to just making sense of all of this to the busi-
ness owner so they can stay open and really operate successfully.
Chairman RUBIO. And I would add be eligible for forgiveness——
Ms. BAYLES. That is right.
Chairman RUBIO [continuing]. because you have to be able to
document all that.
Mr. Busby?
Mr. BUSBY. Thank you.
I think that we should and could fund the Minority Business De-
velopment Agency. We have seen their work. We know that they
were created to help and support both technical as well as just
boosting their acumen in reference to business readiness.
In our letter, we have requested a $10 million financial support
to MBDA. We want it codified, and we believe that they have made
direct relationships with many chambers of commerce and other
nonprofit organizations around the country to ensure that those
smaller and many times unrepresented firms get access to the cap-
ital that they need. MBDA is great at the technical assistance as
well as the relationships, and they have boots on the ground
through relationships like the U.S. Black Chamber and our 145
chapters around the country.
Chairman RUBIO. OK. Ms. Bilonick?
[No response.]
Chairman RUBIO. Ms. Bilonick?
Ms. BILONICK. Yes. I would say that I believe the best sort of
conduits for the technical assistance would be community-based or-
ganizations and CDFIs. It would not necessarily only need to be
CDFIs. There are plenty of organizations that strictly provide tech-
nical assistance and educational services to small businesses, but
I just think the idea of funding in organizations that are en-
trenched in the community is an extremely important priority.
Chairman RUBIO. How are those normally recognized? Are those
normally (c)(6)s?
Ms. BILONICK. (c)(6)s? No. (c)(3)s.
Chairman RUBIO. (c)(3)s?
Ms. BILONICK. Yeah. Or CDFIs.
Chairman RUBIO. Okay.
Ms. BILONICK. The one thing that I wanted to add, though, just
to sort of color this is that while we are all saying that we have
really deep relationships in the community, which is true, I think
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there is an untapped market of businesses that could use our serv-
ices that do not know about the CDFI industry at all.
I was on a call yesterday where someone said it is less about
what our name it and it is more about what we do. I think the
name ‘‘CDFI’’ is not very easy to digest, and so I think it is just
an unknown resource that is out there for small businesses. I could
not tell you how many times we have had clients walk in and say
had it not been for my neighbor or had it not been for my brother,
I would have never known that this kind of organization exists.
So in cities like D.C., where we have been for 20 years, we do
not have that much of a challenge, but I do think there is some-
thing that could be done. I do not know that it is the role of the
Federal Government to do it, but there is something to be done
around broader marketing of CDFIs in general, because I believe
that there are many, many businesses that could use our services,
many more than currently use it, that are just simply not aware
that we are here.
Chairman RUBIO. Okay.
Ms. Estrada?
Ms. ESTRADA. Yes. I have to be in agreement that we need to
have more awareness about the CDFIs and what we are doing, and
remember that probably the service that we provide, we work real-
ly well with the major lenders, with the banks, because our mission
as well as for this business owner to graduate for the traditional
lending system.
Also, with our clients, that they work really very well with the
MBDA. Also, they work really very well with the SCORE. Another,
they work really very well with local community organizations. So
my suggestion, if I may, it should not be just to identify only one
organization. It should be a network of organizations, that we could
work well together because, like mentioned here today, we need to
be all together in order to sabotage the economy.
Chairman RUBIO. Okay. Senator Cardin, did you have a follow-
up?
Senator CARDIN. Yes. Thank you, Mr. Chairman.
I just really want to thank all four of our witnesses. I think this
has been an extremely important hearing.
I just want to make a brief comment. On the PPP program, we
had some challenges, but we knew from the beginning that there
were going to be challenges using existing and new lenders. And
that is why we put the language in there urging the administration
to make a special effort to deal with the underbanked community,
and we were disappointed by the initial response. We then adjusted
the program.
The Treasury was certainly much more responsive than SBA to
these issues, and we made certain changes. And it helped the
underbanked and underserved and minority communities.
But we also recognized that we needed the EIDL program in
there. Mr. Busby, I agree with you completely. The EIDL program,
we anticipated would be a program that could help the smaller
small businesses, the minority small businesses to a greater extent,
and you should not have chosen between the PPP and EIDL. Both
were available, and the EIDL was supposed to give you some grant
money up fast, quickly, and it didn’t. And the EIDL program is
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supposed to be there for filling in the gaps, and it was not avail-
able. The window was closed, and the dollar amount caps were set.
Then the information was not out there about how these two pro-
grams work together, not as an alternative.
So I just mention all of that because as we look at COVID 4 leg-
islation, the legislation that hopefully we will be considering as
early as next week, I hope that we can figure it in a way to deal
with the issues that we have talked about today, about making
sure that we get it right from the beginning, and we do what is
right for the underbanked, underserved communities that we have
seen were at a disadvantage at the beginning of the PPP program
and were not served as well as they should have been under the
EIDL program.
So whether we adjust these programs or we look at the other
programs that you talked about or we have set-asides, we have to
make sure that we do a better job from the beginning, and I think
this hearing has really helped us.
And I very much appreciate the manner in which the Chairman
manages our committee, gets the input of all of our members, and
we all share the same objective, to make sure that all businesses
in our community are served and there is access to capital for those
who traditionally have had a much more challenging time getting
access to capital.
So thank you, Mr. Chairman.
Chairman RUBIO. Thank you.
And I took want to thank the witnesses because, I mean, the goal
coming in here is the following. Set-sides were important because
it prevents you from running out of money, but I think we can all
predict that this second round of assistance will be much more nar-
rowly targeted at truly smaller businesses and those that have suf-
fered tremendously.
So there will still be pressure on money running out, but it will
not be as acute as it was the first time. It will still be significant.
So set-asides are important, but in essence, the targeting itself is
a set-aside in that way.
The bigger challenge is we are sitting here saying there are still
thousands of businesses out there that could be using this help and
are not accessing it—why is that?—answering that question, and
I think we have gone a long way today toward getting answers to
some of those questions. And they are complex. Some of it is the
organizations that could help connect them either do not have the
funding or the resources to reach them. Some of it is just aware-
ness. We take for granted how small businesses, frankly, are just
not aware of all the stuff that is out there, because they are busy
surviving as a business, especially in these times.
So I think today we went a long way toward really pinpointing
what more can we do. It is not just enough to have more lenders.
You also have to have people know they exist. You have to have
people help guide them, how to fill out the application, how to man-
age the funds once they get it so they can survive, and how to posi-
tion themselves for forgiveness as well. Otherwise, you wind up in
a situation where you actually owe some money when you should
not be because you could have easily met the criteria.
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Again, that is tough to do when the president, the treasurer, the
CFO, and the employee is the same person, and they happen to be
the only employee of the company. So the smaller you get, the
harder that is. So I really do think today’s hearing has helped us
hone in on some of those impediments.
So thank you for your patience. We are two and a half hours, as
you saw a lot of member interest in this topic. I appreciate every-
thing you have told us today. Believe me, it is meaningful. I was
taking notes and have already passed on a bunch of them, if they
can understand my handwriting, and then I will tell them what it
meant.
And for the members, the hearing record will stay open for 2
weeks. Any statements or questions for the record should be sub-
mitted by the 6th of August at 5 p.m.
With that, this hearing is adjourned. Thank you to our witnesses.
Thank you. Thank you.
[Whereupon, at 12:27 p.m., the hearing was adjourned.]
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APPENDIX MATERIAL SUBMITTED
(67)
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Æ
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File and source
- File
- CHRG-116shrg46603.pdf
- Size
- 7,209,576 bytes
- SHA-256
- 166e57907d0f52f4fb506e73de06bc649e73caafe9d125678943e1c255f14610
- Our copy
- CHRG-116shrg46603.pdf
- Original
- www.govinfo.gov