Congressional Hearing — The Economic Injury Disaster Loan Program: A View from Main Street (House, 2020)
Summary
This House Committee on Small Business hearing record, The Economic Injury Disaster Loan Program: A View from Main Street, covers a hearing on June 10, 2020, with Nydia Velázquez as Chairwoman and Steve Chabot as Ranking Member. The witnesses listed are Nancy Sexton of The Muse Rooms NoHo, Jerome Whack of Christian Street Pharmacy, Craig H. Gerstein of Northwestern University Feinberg School of Medicine, and Karen Kerrigan of SBE Council. In the opening statement, Chairwoman Velázquez says EIDL loans are supposed to have a maximum loan size of $2 million, and that SBA imposed a maximum loan size of $150,000.
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- Case
- Chrg 116Hhrg41292
Cite this document
“Congressional Hearing — The Economic Injury Disaster Loan Program: A View from Main Street (House, 2020).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-116hhrg41292/
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THE ECONOMIC INJURY DISASTER LOAN
PROGRAM: A VIEW FROM MAIN STREET
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
HEARING HELD
JUNE 10, 2020
Small Business Committee Document Number 116–081
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
41–292 WASHINGTON : 2020
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELÁZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
MELISSA JUNG, Majority Staff Director
JUSTIN PELLETIER, Majority Deputy Staff Director and Chief Counsel
KEVIN FITZPATRICK, Staff Director
(II)
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CONTENTS
OPENING STATEMENTS
Page
Nydia Velázquez ...................................................................................................... 1
Steve Chabot ............................................................................................................ 2
WITNESSES
Ms. Nancy Sexton, Owner, The Muse Rooms NoHo, North Hollywood, CA ....... 5
Mr. Jerome Whack, Owner, Christian Street Pharmacy, Philadelphia, PA ....... 7
Dr, Craig H. Gerstein, Assistant Professor of Ophthalmology, Northwestern
University Feinberg School of Medicine, Gerstein Eye Institute, Chicago,
IL ........................................................................................................................... 8
Ms. Karen Kerrigan, President and Chief Executive Officer, SBE Council,
Vienna, VA ............................................................................................................ 10
APPENDIX
Prepared Statements:
Ms. Nancy Sexton, Owner, The Muse Rooms NoHo, North Hollywood,
CA ................................................................................................................... 28
Mr. Jerome Whack, Owner, Christian Street Pharmacy, Philadelphia,
PA ................................................................................................................... 32
Dr. Craig H. Gerstein, Assistant Professor of Ophthalmology, North-
western University Feinberg School of Medicine, Gerstein Eye Insti-
tute, Chicago, IL ........................................................................................... 33
Ms. Karen Kerrigan, President and Chief Executive Officer, SBE Council,
Vienna, VA .................................................................................................... 37
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Asian American Hotel Owners Association .................................................... 43
(III)
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THE ECONOMIC INJURY DISASTER LOAN
PROGRAM: A VIEW FROM MAIN STREET
WEDNESDAY, JUNE 10, 2020
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 1:10 p.m., via Webex,
Hon. Nydia Velázquez [chairwoman of the Committee] presiding.
Present: Representatives Velázquez, Finkenauer, Golden, Kim,
Crow, Davids, Chu, Evans, Schneider, Espaillat, Delgado,
Houlahan, Mfume, Chabot, Balderson, Hern, Hagedorn, Burchett,
Spano, Joyce, and Bishop.
Chairwoman VELÁZQUEZ. Good afternoon. I call this hearing to
order.
I want to thank everyone for joining us this afternoon for our
Committee’s first official remote hearing. I want to make sure to
note some important requirements.
House regulations require Members to be visible through a video
connection throughout the proceeding, so please keep your cameras
on. Also, if you have to participate in another proceeding, please
exit this one and log back in later. Please remember to remain
muted until you are recognized to minimize background noise.
Over the last few months, the outbreak of COVID-19 has meant
an unprecedented public health crisis and a dire economic crisis.
We have lost over 110,000 people to the disease and 40 million re-
main unemployed.
Back in February, as the pandemic was getting worse, we knew
that we needed to take action to help our small businesses survive
the economic downturn. We started working with the SBA and gov-
ernors around the country to leverage the SBA’s disaster resources
available through the Economic Injury Disaster Loan Program, also
known as EIDL.
As the virus continued to spread, more states and local govern-
ments began enforcing stay-at-home orders and business closures.
We quickly realized Congress needed to do more to meet the full
scope of the problem, and that is when we started working on what
ultimately became the CARES Act. To help small businesses and
eligible nonprofits, Congress created the new Paycheck Protection
Program, expanded eligibility to the EIDL program, and provided
payment and interest relief for current SBA borrowers. I worked
tirelessly to secure $10 billion in funding to create a new EIDL
Emergency Grant Program which was designed to get money into
the hands of struggling small businesses quickly. Borrowers could
request a loan advance of up to $10,000 within 3 days of applying
(1)
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that need not be repaid even if the applicant was eventually denied
the EIDL.
Due to the unprecedented demand for the program, Congress in-
fused another $10 billion into the Emergency Grant Program and
an additional $50 billion in the loan program as part of the Pay-
check Protection Program and Healthcare Enhancement Act. Con-
gress also increased SBA funding for salaries and expenses to hire
staff, upgrade technology, and ultimately, respond to demand in a
timely, efficient fashion.
Besides these steps, and more than 3 months after Congress first
enacted legislation to provide economic relief to small businesses,
borrowers are still facing significant challenges with EIDL grants
and loans. For example, EIDL loans are supposed to have a max-
imum loan size of $2 million. We learned that SBA imposed a max-
imum loan size of $150,000, shortchanging millions of small busi-
nesses. Unfortunately, we also learned that SBA is limiting the
crucial grants to 1,000 per employee. Some are not even receiving
the grant at all which is simply unacceptable. This is one thing the
positive impact this program could have for small businesses that
need help the most.
We have also heard that the SBA has not communicated effec-
tively with applicants, nor has it provided them with reliable meth-
ods to check the status of their application. Applicants need to
know where they stand in the queue to approximate how much
longer they can expect to wait to receive financing. Given the cur-
rent economic climate, if they are going to be denied, they deserve
timely action so that they can explore options for capital elsewhere.
These are just some of the reports the Committee has received
with the SBA administration of the EIDL program in the COVID-
19 era. As the Committee undertakes its oversight duties, we want
to begin by hearing directly from small businesses who have ap-
plied for the program so that we can understand the successes and
challenges they have experienced.
However, in order to fully perform our work, we also need to
hear from the Small Business Administration. Without their ap-
pearance and testimony before this Committee, it would be difficult
to make additional changes to the agency’s program. Earlier today,
Administrator Carranza testified before the Senate Small Business
Committee, and it is my hope that she will testify before us soon
as well.
With that, I look forward to hearing from our witnesses about
their perspective on how Congress can keep working to improve the
EIDL program and where we should focus our oversight efforts.
I now yield to the Ranking Member, Mr. Chabot, for his opening
statement.
Mr. CHABOT. Can you hear me now?
Thank you very much. Thank you, Madam Chairwoman for hold-
ing this important hearing relative to the SBA’s EIDL Loan Pro-
gram.
Before I begin my comments though I would like to comment
about the virtual format that we are having here today. And I cer-
tainly do not hold you responsible for this, but I think the speaker
should have the House of Representatives in session. We have an
awful lot of important work to do, obviously relative to small busi-
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nesses, but there are so many other issues that the country is fac-
ing right now, Congress ought to be together. We represent the
American people in dealing with these various challenges that our
Nation has before us and we ought to be here.
Now, I happen to be in Washington right now. I am in my office
because I am also on the Judiciary Committee and we have a hear-
ing going on as I speak relative to the tragic killing of George Floyd
and the aftermath of that. I was there this morning. After I give
my opening statement I actually have to go back there because I
will be asking questions shortly here.
But again, I do not hold you responsible, Madam Chair. I think,
you know, it is commendable, a tremendous job. I would prefer it
if you were the Ranking Member rather than the Chair but, you
know, we both exchanged those positions on occasion over the
years, and I think you do a great job. But Congress should be in
session and I cannot emphasize that strongly enough.
Relative to the EIDL Loan Program, it operates within the SBA’s
Disaster Loan Program and it was already up and running as we
know long before the COVID-19 swept across the globe. It is impor-
tant to note that the SBA’s Disaster Loan Program has had its
trouble in the past, but it was consistently making improvements.
It was supposed to be a regional program that provides assistance
to small businesses after a disaster. COVID-19 has presented nu-
merous challenges to the program. The economic downturn caused
by the Corona virus crisis has completely overwhelmed the EIDL
program. As the crisis unfolded, the lines of communication from
the SBA to businesses about the EIDL program unfortunately has
deteriorated.
Additionally, the total loan amount and the grant amount avail-
able in the program continued to be uncertain. These hurdles and
roadblocks have impacted a small business’s ability to make impor-
tant and critical decisions during these uncertain times. Thus far,
the program has provided assistance to over 1 million small busi-
nesses all across the country to a tune of approximately $80 billion.
In my home state of Ohio, for example, it has provided over
25,000 loans for a total of $1.7 billion. Today, communication is
slowly improving but certainly, more work needs to be done, and
I commend you, Madam Chair, for holding this hearing in order to
assist us in getting that job done and sending letter to the SBA
that they just have to improve. We obviously sent the letter to-
gether in a bipartisan manner just recently urging the SBA that
they have a lot of things they have to improve on.
It is critically important that we have this discussion to under-
stand how small businesses have fared during this crisis and how
Congress can work to make improvements. Throughout this entire
crisis, I have joined dozens of my House colleagues on conference
calls and town hall meetings and a whole range of calls and con-
ference calls with small businesses in their districts. Questions on
the EIDL program were raised on a great many of these calls. Now,
obviously, their principal interest was in the PPP, the Paycheck
Protection Program, but the EIDL Loan Program is still there and
dramatic improvement is needed.
Congress has worked in a bipartisan manner to improve the Pay-
check Protection Program. We must now work together to ensure
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that the EIDL program is operating efficiently and effectively for
small businesses during this pandemic and following it. I look for-
ward to discussing solutions and next steps with all of our wit-
nesses today. It is important that we move forward with practical
reforms that deliver for small businesses in my district and your
district and districts all across the country.
And Madam Chair, I mentioned that following my opening state-
ment I have to go back to the Floyd and Judiciary hearings, so I
will be heading over there. I am not sure if I will be back in time
for the question part, but I want to thank you for holding this
hearing, and I yield back.
Chairwoman VELÁZQUEZ. Thank you, Mr. Chabot.
Unfortunately for you, you might have to wait a little longer.
Mr. CHABOT. Okay.
Chairwoman VELÁZQUEZ. To go from ranking to Chair.
I would like to take a moment to explain how this hearing will
proceed. Each witness gets 5 minutes to provide a statement, and
each Committee Member will have 5 minutes for questions. Please
ensure that your light is on when you begin speaking and that you
return to mute when finished.
With that, I would like to thank our witnesses for taking time
out of their busy schedules to join us.
With us today we have Ms. Nancy Sexton, the Owner of the
Muse Rooms, a co-working space in the Los Angeles area. After a
career in the Arts, she conceived her co-working business in August
of 2015 and taught herself how to write a business plan to get
started. In just 4 years, her business successfully grew into two lo-
cations right before COVID-19 struck. She applied for an EIDL but
encountered many of the challenges that have been reported with
the program. Ms. Sexton, thank you for joining us today and for
sharing your experience.
I now would like to recognize the Vice Chairman of the Com-
mittee, Mr. Evans, to introduce our second witness.
Mr. EVANS. Thank you, Madam Chair. I like the sound of that.
Mr. Jerome Whack is a pharmacist and an owner of Christian
Street Pharmacy located in the diverse neighborhood of South
Philadelphia. He has owned and operated the pharmacy since he
graduated from pharmacy school 33 years ago. Mr. Whack is a life-
long resident of Philadelphia where he attended two of my district’s
many excellent colleges, Temple University and the Community
College of Philadelphia, my alma mater. I could not ask for a great-
er representative for my district to speak to the Small Business
Committee on this important topic. I commend your commitment
to serving and supporting the amazing citizens of Philadelphia and
thank you for participating in this hearing.
I yield back to the Chairwoman.
Chairwoman VELÁZQUEZ. Thank you, Mr. Evans.
Now I would like to recognize Mr. Schneider of Illinois to intro-
duce our third witness.
Mr. SCHNEIDER. Thank you, Madam Chairwoman.
It is my great pleasure to introduce my constituent, Dr. Craig
Gerstein, and to thank him for sharing his perspective with us
today. Dr. Gerstein lives in Highland Park and has practiced oph-
thalmology in the Chicago area for the past 20 years. I will share
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that story a little bit in a bit, in a moment. He runs the Gerstein
Eye Institute jointly with his father, Melvin, who started the prac-
tice more than 50 years ago. Dr. Gerstein earned his medical de-
gree from the Chicago Medical School. In addition to his practice,
Dr. Gerstein also serves as an assistant professor of ophthalmology
at Northwestern University Medical Center. I have known Craig
for many years and appreciate him sharing his perspective as a
small business owner navigating both the complexities of this pan-
demic, but also the challenges he faced with his EIDL loan. Thank
you for joining us today, Craig.
Chairwoman VELÁZQUEZ. Thank you, Mr. Schneider.
Now I would like to turn it over to Mr. Bishop to introduce our
last witness.
Mr. BISHOP. Thank you, Madam Chairman.
Our next witness is Karen Kerrigan. Ms. Kerrigan is the presi-
dent and chief executive officer of the Small Business and Entre-
preneurship Council, also known as the SBA Council. Ms. Kerrigan
has multiple decades of advocating for small businesses and the en-
tire small business ecosystem. With an expertise in startup funding
and business growth, Ms. Kerrigan serves on numerous boards and
coalitions. Ms. Kerrigan, welcome.
And Madam Chairman, I yield back.
Chairwoman VELÁZQUEZ. Thank you.
Now I would like to recognize Ms. Sexton for 5 minutes.
STATEMENTS OF NANCY SEXTON, OWNER, THE MUSE ROOMS
NOHO; JEROME WHACK, OWNER, CHRISTIAN STREET PHAR-
MACY; DR. CRAIG H. GERSTEIN, ASSISTANT PROFESSOR OF
OPHTHALMOLOGY, NORTHWESTERN UNIVERSITY FEINBERG
SCHOOL OF MEDICINE, GERSTEIN EYE INSTITUTE; KAREN
KERRIGAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
SBE COUNCIL
STATEMENT OF NANCY SEXTON
Ms. SEXTON. Thank you, Madam Chairwoman, and the entire
Committee on Small Business for asking me to come here today
and share with you the challenges that I faced when applying and
receiving the EIDL loan.
And like she said, my name is Nancy Sexton and I own and oper-
ate The Muse Rooms. It is a co-work ing space in North Hollywood
in California. I am not from L.A. I was born and raised in Ohio.
I lived in New York for almost 12 years, and I lived in Italy for
4. I have had a lot of great accomplishments in my life, but outside
of marrying my husband, nothing has made me prouder than open-
ing The Muse Rooms.
Now, just so you know, The Muse Rooms is a working space, and
we provide a workspace for entrepeneurs, creatives, and small busi-
nesses. We offer desk space, offices, and meeting rooms.
The Muse Rooms started with my idea in August of 2015, and
within 3 months we opened. We were so successful that that sum-
mer we decided to open our second location in Burbank. And then
we were able to go back and expand our first location, and within
4-1/2 years, we have expanded to 14,000 square feet with over 120
members.
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The COVID hit. We shuttered our doors on March 17th prior to
Mayor Garcetti’s stay-at-home order. And at this time we sus-
pended our billing because how can you charge somebody if they
cannot use your service?
Then the SBA announced their loans, and then I worked with
the LASBDC network to get all my ducks in a row to apply because
there was a ton of paperwork that was required. On March 23rd,
I started the EIDL loan process, and this is when I started
uploading my documents.
And over the course of the next 7 days, I was on hold for more
than 25 hours and I had uploaded my application, I had faxed it,
I had emailed it, and each time I was told, oh, no, no, no, you are
doing the wrong thing. Until finally on the 30th I was told, you
have just got to go to this new portal. Super easy. It only takes 5
minutes. You do not even need documents.
So I went to the new portal, and it was super easy. So easy, in
fact, that I did not even get an email confirmation that I had ap-
plied. Now, I was smart enough to write down my loan number so
that when I called back I had a point of reference. When I called,
I mean, I was only told, look, these are the next steps. You are
going to get an email to log into the portal. Then you are going to
be able to talk to somebody. They are going to look at your docu-
ments and they are going to tell you how much money you are
going to get. And it should be two and a half times your monthly
bills.
Now, remember, I am not making any money and my bills are
stacking up. So on the 21st of April, I finally received my advance.
It was only a grand because I do not have employees. And I was
super psyched because my neighbor next door, now he had already
gotten funded and he had received more than what he thought.
So over the next 10 days I called several times wondering what
was happening because nothing was being communicated. No
emails. No letters. And when you call you get a different answer
each time.
Now, on May 1st, my credit was pulled, and I got really excited.
I have got two landlords with their hands out. I have no income.
I called. I get the same story. You are going to get an email. You
are going to talk to somebody. You are going to submit loan docu-
ments. Do not worry.
May 16th, I got that email. And when I logged in to see the
amount that was being offered, it did not even cover one month of
my expenses. So, I called, and I was told by the woman on the
phone, she read a statement to me for people who were calling in
requesting more money than what was being offered. And she told
me this; that in order for all businesses to get a little money, they
were limiting the amount distributed. And remember, this is when
they were supposed to be giving up to 150K.
I was taken aback. I was pretty upset. I mean, I had no one to
talk to. I could not call anybody and no one to plead my case to.
So the SBA EIDL loan that I thought was going to save my busi-
ness has now put me in a position that guarantees that I am going
to have to close one of my locations. And I do not know how long
that will last.
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The stress of COVID was bad enough. I mean, seriously. This
SBA loan experience, 58 days of not knowing anything on top of
COVID, this has been the most stressful period I have ever experi-
enced, ever. It has been horrendous. My entire business is built on
customer service. Good communication is king. And let me tell you,
without that you are sending businesses into absolute chaos.
And I thank you for my time.
Chairwoman VELÁZQUEZ. Thank you, Ms. Sexton. Your time
has expired.
Now we recognize Mr. Whack for 5 minutes.
STATEMENT OF JEROME WHACK
Mr. WHACK. Hello. Can you hear me?
Chairwoman VELÁZQUEZ. Yes, we can hear you.
Mr. WHACK. Thank you for the opportunity to testify before
your Committee today. And I do apologize for the problem I am
having with my camera. I am very computer illiterate. My son set
this up, and of course today it is not working. It worked last night.
We did a dry run.
But I would just like to thank you and to just basically highlight
the testimony that I wrote, and I hope you have it in front of me.
Very quickly, as Congressman Dwight Evans stated, I am a long-
time resident of Philadelphia, Pennsylvania. I came here very
young, as an infant, with the great migration from the South. My
folks were from South Carolina. They left after my father got out
of the Navy, after World War II, and came to Philadelphia. He
wanted to have a better life for me and my other seven brothers
and sisters.
I have been here at Christian Street Pharmacy since about 1987,
and over the years this area has changed tremendously. When I
came down here it was known for, the word was ‘‘moral hazard.’’
They would not even give me insurance on the building because it
was predominantly Black and redline.
Fast-forwarding to 2020, it is about 90 percent White. It has
been gentrified by what I call landlocked. I have CVS two blocks
away from me, Rite-Aid four blocks away from me, Walgreens two
blocks away from me, and I am still in the process of holding on
to the clients that I had prior to this.
Pharmacy unfortunately is a very narrow profit margin business
today with the competition that I just stated to you. It is very dif-
ficult normally with the very low rate of reimbursement. It is par-
ticularly hard with the copays. Many of the people that I serve are
poor. They are part of the 25 percent of the people that the Chari-
table Trust identified as being at or below the poverty level of
Philadelphia, and yes, most of them look just like me and Dwight,
Congressman Evans.
So what we do characteristically, and we have been doing, is we
have been giving free deliveries, and we run what they call tabs.
Folks who do not have the copays to cover their medicine, we show
it and they are able to access their funds the first of the month
with Social Security or whatever insurances they have, they will
come and straighten their tab out.
Well, in view of what has happened in the country with the
COVID-19 crisis, many of these people are very financially
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strapped. They are unable to pay their copays, and for the most
part we have had to eat it. When I say ‘‘eat it,’’ we forgo the copays
and still continue to fill their prescriptions and we are operating
at a loss. The profit margin for an independent retail pharmacy in
today’s climate according to the National Committee of Retail Phar-
macists is around 3 to 5 percent. So a very, very narrow profit mar-
gin. And when you couple that with the loss of copays, the fact that
the PBM, pharmacy benefit managers, like Medco, CVS Caremark
have for some reason slowed down. I do not know why. Slowed
down on the reimbursement. It is like being caught in a three-way
street. You cannot get your copays. You are not being properly re-
imbursed. And on top of that, I was turned down for the SBA loan.
So it is a matter of trying to stay afloat and navigate through these
very difficult times.
To give you a quick, quick kind of summary of what I am saying,
a small pharmacy bills up to say 50 prescriptions a day. A medium
pharmacy is between say 100 and 200 prescriptions a day. A high-
volume pharmacy would be showing greater than 200 prescriptions
a day. So what that means is, let’s make it simple. If you filled 50
prescriptions a day at the lowest copay, $2, potentially, you could
lose $100 a day. This is, you know, over and above the other cash
crunches that you are dealing with.
So it has put me in a pretty hard position this way, not to men-
tion the kinds of expenses that you need just to operate. Philadel-
phia Electric Company, Philadelphia Gas Works, the water,
Verizon, and the like.
Can you hear me?
To let you know, it has been very difficult. I did go through the
process to apply for the SBA loan, and I had great difficulty. It took
me like a couple weeks roughly, and then they started to advertise
that you could go to your local bank. They have some kind of portal
or some kind of mechanism to go through the bank and apply for
the loan. And finally I did that one evening. I believe it was on the
weekend.
So basically, it has been a challenge, and I do ask the Committee
members if you would kindly look into the reason that SBA is uti-
lizing a credit check too either deny or allow someone to receive an
SBA loan.
Thank you so much.
Chairwoman VELÁZQUEZ. Dr. Gerstein, can you unmute?
Dr. GERSTEIN. Yes, I am on mute.
Chairwoman VELÁZQUEZ. Okay, please, you are recognized for
5 minutes.
Dr. GERSTEIN. Thank you.
STATEMENT OF DR. CRAIG H. GERSTEIN
Dr. GERSTEIN. Madam Chairman and members of the Com-
mittee, thank you for inviting me to speak today regarding my ex-
perience with the SBA in respect to the EIDL program.
First, I would like to introduce myself. My name is Dr. Craig
Gerstein. I am an ophthalmologist who has been in private practice
on the Northside of Chicago for the past 20 years.
The pandemic’s enormous disruption of my practice required that
I needed assistance in order to survive. It was at that time I lis-
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tened to a webinar on small business resources hosted by Congress-
man Schneider. On that call, a representative of the SBA detailed
the EIDL program and the application process. I spent most of that
evening locating the necessary forms, and the next day, on March
24th, I began the process to apply for the loan. Despite several
crashes of the website and countless hours waiting on the SBA help
line, I was able to complete my application 13 hours later.
Subsequently, I received an email from the SBA that my applica-
tion had been received and another email saying that my applica-
tion was under review. Throughout the following 3 week waiting
period, I called the SBA help line to ask questions, only to be told
that my loan was pending and in 3 weeks a loan officer would con-
tact me regarding my approval and discuss the amount I needed
and could borrow.
Three weeks from the date of my complete application, the status
on my portal changed from pending to please reapply to complete
your self-certification. After following the required instructions and
submitting my application online, I was being told 3 weeks later
to reapply.
I completed the new self-certification form hoping that it was an
addendum, but then I received a new application number. I imme-
diately called the SBA help line trying to figure out why I had two
numbers. I was concerned that I was going to lose my position in
line as the loans were said to be a first come, first serve basis. The
help line representative was unable to explain what had happened.
I wrote a detailed email to the SBA customer service and never re-
ceived an answer to my question. Instead, I received a response
that directed me to three options: either connect to the website ap-
plication page, call the help line, or write another email.
After weeks of waiting in uncertainty, the SBA could provide no
answers and left me in a helpless position. I could not use the
website which had been removed. The help desk had no answers
and could not address my concerns. And the email service offered
nothing but an automatic reply. In desperation I continued to send
several emails, and I contacted Congressman Schneider’s office for
help in navigating this situation.
While the congressman’s office attempted to get information from
their SBA liaison, I once again called the help line almost 4 weeks
out. At that time, the SBA representative explained that the loan
applications submitted prior to the newest version of the CARES
Act were disregarded and that individuals needed to reapply. I fi-
nally received an email response from the Disaster customer serv-
ice on April 25th that simply stated you had to reapply because
SBA developed a new streamlined application process, and those
who applied before had to reapply. I received this notification as
the SBA ran out of funds from its first round of applications, and
thus, shut down their application process. I was left unknowing if
my completed application that had once been ‘‘processed’’ would
ever be considered and what having two applications meant for my
position in line for the loan.
Uncertainty kills small businesses, and this placed an extreme
pressure on my practice. We do not have the luxury of time. In-
voices, rent, utilities, health and malpractice insurance payments,
and the salaries of my staff continue to accumulate with no realiza-
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tion on how I would be able to cover those expenses. I needed the
information and loan details that would have allowed me to decide
to keep going or to close up shop, decisions that needed to be made
in real time with concrete answers. Unfortunately, hope does not
pay the bills and put food on the table.
Fortunately, after 6 weeks I received an email notification that
I was approved for a loan, yet I was not given the opportunity to
discuss the amount distributed. I accepted the loan and sent an
email with documentation to support a greater need for additional
funds but to this date I have not received an answer from the SBA.
I hope my experience highlights while the SBA and the CARES
Act were designed to aid small business needs, the lack of infra-
structure and transparency surrounding the SBA contribute to
stress that I and other business owners were experiencing during
this economic uncertainty. The reality of the process in dealing
with the SBA, and specifically, the EIDL program fell significantly
short of what was promised with rhetoric and reassurances. I hope
in the future there is more done by Congress to hold these loan
programs accountable and to ensure that the SBA is able to prop-
erly allocate the needed funds and communicate to millions of
small business owners during a time of great uncertainty.
Thank you for allowing me the time to address this Committee.
Chairwoman VELÁZQUEZ. Thank you.
Now we recognize Ms. Kerrigan for 5 minutes.
STATEMENT OF KAREN KERRIGAN
Ms. KERRIGAN. Thank you so much, Chairwoman Velázquez. It
is really an honor to be here today. Let me thank you for your lead-
ership of the Committee and everything that you and the Ranking
Member and all the Committee members are doing to help small
businesses during this very, very challenging period. We appre-
ciated your early work in getting information out about what need-
ed to be done to change the PPP program. Obviously, all of the
members of the Committee and you listen to small business own-
ers, and we are just so pleased that the Paycheck Protection Pro-
gram Flexibility Act is now the law of the land. It is going to help
a lot of small businesses, but we continue to work to make even
more improvements because there is a lot more that needs to be
done.
As a membership organization with 100,000 members throughout
the country and being around now for over 25 years, when I listen
to Craig and Nancy and Jerome, I am hearing the members, the
stories of my members as well. I mean, what they went through
in terms of the program mirrors everything that our members have
gone through. And as an organization, again, that has worked with
the Small Business Administration for the past 25 years on a lot
of its programs, its education, training programs, special initia-
tives, we do not take any pleasure in pointing out the problems and
challenges with the EIDL program. And all of us knew that the
SBA had a heavy and unprecedented lift in launching this pro-
gram. We at SBE Council and all the other small business advo-
cacy organizations that we work with, we understood that there
was going to be massive demand for capital in the small business
community but limited funds available, especially in that first
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tranche of money where the EIDL program really leaves a very,
very, very small amount.
And even given many of the challenges in execution and commu-
nication, our members in small businesses that eventually received
funds are grateful for this needed capital. But as you well know,
there are many small businesses that got lost in the queue that did
not receive funds when they needed it or expected it. And of course,
were surprised by the dollar limit placed on the maximum loan
amount and the per employee advance limitation.
As I expressed in my written testimony, we believe that a fair
amount of this angst experienced by small business owners, includ-
ing our witnesses today, about the problems, the communication
that was generated by the program really could have been avoided
through transparent and immediate communication about these
changes.
On paper and as advanced by Congress in the CARES Act, the
EIDL loans were ideally suited for many types of small businesses.
Business owners and entrepeneurs were pleased to see a program
pass Congress that would meet their immediate capital needs, pro-
vide some flexibility in using these funds, and would, as advertised,
deliver this capital with speed. EIDL’s breakdown as commu-
nicated by our members, small business owners across the country
and, of course, our witnesses today, was and continues to be very
sad to hear. Most small business owners were obviously shocked by
the effects of COVID-19, and just the dramatic actions that hap-
pened afterwards, the plunge in demand and revenues, and they
were desperate to identify sources of capital that could act as a
bridge to their reopening. These areas of concern as noted by our
written testimony included the lack of information about applica-
tion status, hearing no communication from the SBA for long
stretches of time, the shrinking advance based on employee num-
bers, the much smaller loan cap than advertised by the program
and provided for by the CARES Act, confusion about how loan
amounts were determined by the SBA, and then, of course, eventu-
ally them being shut out of the program due to the agricultural
window that was established.
So no doubt this crisis has been like none other, and unfortu-
nately, many small businesses needing help through the EIDL pro-
gram experienced these frustrations with the program when every
minute of your time was valuable. Focusing on productive work
and activity that would carry them through the shutdown period
and on to recovery.
Chairwoman VELÁZQUEZ. Thank you, Ms. Kerrigan. Your time
has now expired.
I want to really thank all of the witnesses for everything that
you have shared here with us.
I will start by recognizing myself for 5 minutes.
Dr. Gerstein, I understand that you were drawn to the EIDL pro-
gram by the $2 million maximum loan size and that you were dis-
appointed to learn of SBA’s $150,000 cap. I understand the unprec-
edented demand for the program and for SBA to make some dif-
ficult decisions, but they must still be operating according to the
law. Can you share with us how the smaller loan amount has af-
fected your business?
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Dr. GERSTEIN. Yes. Thank you. Thank you, Madam Chair-
woman.
I will tell you, the first issue is the continued uncertainty. Many
of us did not even know if we were going to get any money at all,
and then we were counting on at least being able to communicate
with someone what type of needs we had and how that loan was
going to eventually help us. The $150,000 that I was granted was
barely enough to cover my expenses for a month. And at this time,
I am still not operating at 100—not even close to my normal pre-
COVID level. In fact, for the last 2 months we have been seeing
maybe 15 percent of my normal patient volume, and we were not
operating until approximately about 3 weeks ago. So to not know
what is happening and then finally just to be given a certain
amount of money with no answers, with no recourse to try to ap-
peal, really kind of sets me as a small business—now I have to ex-
plore other avenues. Now I am starting from the beginning again
trying to look at different aspects that I can get capital in order
to maintain my business.
Chairwoman VELÁZQUEZ. Thank you, Dr. Gerstein.
Ms. Kerrigan, I agree with you that we probably need to do
more. We might have to do another relief package. We do not know
how this program has worked. We do not have any data. There are
no explanations that have been provided to us as to the decisions
that were made, like changing the loan size from 2 million to
150,000. Then like Dr. Gerstein and Ms. Sexton explained, they
were not able to get any answers, any information as to the status
of their loan applications. Do you agree with me that as Members
of this Committee, we cannot move to make any other changes or
expand the program without the administration coming before the
Committee and providing the information that is required for Mem-
bers of Congress to do our job, and that is oversight, and that is
to get to the bottom of what happened so that might require us to
make some legislative changes?
Ms. KERRIGAN. Well, I agree totally. We need that information,
that data from the SBA. And we need what went into the decision-
making in terms of going off course from what was actually in the
CARES Act. And yes. I mean, in order to do your job, it would be
great if we had more money. It would be great if we could make
those small businesses whole that did not receive the $10,000 grant
as they were promised, and perhaps more money can be provided
for that. But yeah. I think taxpayers, the American public want
you to have as much information as possible. Data, feedback in
order to know what is the path forward with this program abso-
lutely is critical, critical, critical.
Chairwoman VELÁZQUEZ. Thank you so much.
Mr. Whack, would it be helpful for applicants if SBA clearly com-
municated its credit minimum so applicants would know exactly
where they stand prior to applying for a disaster loan?
Mr. Whack?
Mr. WHACK. Can you hear me?
Chairwoman VELÁZQUEZ. Yes, now.
Mr. WHACK. Okay. I think that would be a good first step be-
cause in addition to waiting like a couple weeks to be able to get
onto the website, you are in such a state of anxiety not even know-
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ing if you are going to be approved. And when they did give me
a response, that was also not that great. It took them like almost
a month later to give me a response and then it was kind of vague.
I mean, unsatisfactory credit did not really mean a lot to me. I
mean, is 600 the cutoff? Is 400? I mean, what was it? And was
there something I could have done perhaps in filling out the appli-
cation that would have made me change the way that they looked
at the application?
Chairwoman VELÁZQUEZ. Thank you, Mr. Whack.
My time has now expired.
Now I recognize Mr. Balderson for 5 minutes.
Mr. Balderson?
Mr. BALDERSON. Thank you, Madam Chair. I am sorry, you
cut out there, so I did not hear my full name there, so I apologize.
Thank you, everyone, for being here.
And my first question will be for Ms. Kerrigan. Thank you for
joining us today.
My question is, as you know all of us here are too aware this has
been a devastating time period for our Nation. Small businesses
have been forced to severely reduce their operations, or in many in-
stances, sadly, have had to close their doors.
I have been in constant communication with small business own-
ers in my district around the many challenges they face during this
time, and something these constituents routinely bring up is also
something you have highlighted in your testimony: access to capital
now and in the near future.
From the research done by the SBE Council and your own per-
spective, how have the fairly funded programs benefitted American
small businesses?
Ms. KERRIGAN. They have benefitted some. I mean, there have
been a lot of small businesses who have not been able to benefit
from these programs. I mean, if you look at the PPP program, for
example, when it first started it was those that were largely, you
know, connected to their banks and to their financial institutions.
I think more banks came online, community banks, credit unions.
And even the addition I think potentially of Fintech, you know, the
big Fintech companies, there is like a big difference in getting this
capital to a lot of those who did not have sort of that commercial
banking loan relationship, you know, with their banks or with their
financial institutions.
So as the programs went on, both PPP and EIDL, they got better
in terms of their communication and in terms of their funding. I
think with the EIDL program, you know, it is a different animal
because with PPP you do have many players in the private sector
that are involved, right, with the distribution of that capital and
more players involved, whereas the EIDL, it is the SBA alone. If
we want to do something like this moving forward because, you
know, it is apparent that the SBA did not have the capacity, the
technology, the artificial intelligence, all of that needed to do this
very, very rapidly and quickly. And that is what small businesses
needed, whether it was PPP or EIDL was rapid access to capital.
So, I mean, hopefully, we will not have an event like this moving
forward, but we might, and we have got to be prepared for it.
Given that we do have technology and all the innovation, I do not
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see why we cannot do this rapidly, more rapidly. And I think that
is the big issue, is giving this money to businesses rapidly and
being able to communicate with them so that they can make deci-
sions about where they are going to be going forward and help
them navigate which, you know, this recovery period.
Mr. BALDERSON. Madam Chair, I yield back. Thank you.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Iowa, Ms. Finkenauer, for
5 minutes.
Ms. FINKENAUER. Thank you so much, Madam Chair. It is
good to see you and the folks on this Committee and the folks who
have joined us to share their perspective and help us do our job on
oversight here.
You know, one thing that I have been focused on a lot during
this pandemic is, you know, we passed these bills, the CARES Act
getting signed into law where these dollars go to these agencies,
but at the end of the day it is often up to these agencies of how
they put these dollars out, what the rules and regulations are be-
hind them. And it just underscores how important it is to do the
oversight with these agencies and make sure that they are getting
out to us maybe in the right way. So thank you, thank you, thank
you, Madam Chair, for holding this hearing today, helping us do
this the right way.
We clearly, listening to testimony today, and then also hearing
from my constituents throughout the 1st District in Iowa, have a
lot of work to do when it comes to oversight with the Small Busi-
ness Administration and how these programs have been rolled out,
and also how they are moving forward here.
So Dr. Gerstein, I actually, I would love to ask you a question.
I Chair the Rural Development, Agriculture, Trade, and Entrepre-
neurship Subcommittee on the Small Business Committee, and
something that our Subcommittee heard about when we held a dis-
cussion a few weeks ago was from a woman, Melissa Moretz Baker
from my congressional district in Northeast Iowa who is also a
farmer, and she said that many business owners did not have the
information they needed to determine which Small Business Ad-
ministration assistance program would work best for their business
model.
So how did you arrive at the decision to apply for the EIDL loan
rather than the Paycheck Protection loan? And also, in hindsight,
given that some of the challenges you faced in applying for your
loan and your award being less than you needed, would you still
have applied for the EIDL loan? And would you have applied for
any other, or would you have applied for assistance at all given
what you know now?
And I will let you answer that part first, and then I have a fol-
low-up for you.
Dr. GERSTEIN. Sure. First, I will answer, having gone through
the experience, I would not go through the experience ever again.
It was traumatic. It was stressful. There was no communication. It
took tons and tons and tons and tons of my time trying to educate
myself and trying to figure out avenues to try to get answers. And
I did apply for a PPP loan and I very consciously did not go
through the SBA simply because there was no communication with
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the SBA and I did not want to start going down that road again
of trying to get something and not being able to talk to somebody
versus a bank where you can actually make a phone call and get
an answer, to answer that part.
The way I got the information was a town hall through Congress-
man Schneider’s office. He kind of laid out certain different pro-
gramming and that was the loan that seemed to promise the most.
And that was the loan initially before the PPP was out, it was cast.
So, and what really was terrifying to a small business, especially
myself, was that constant reminder of this is going to be first come,
first serve. So, you know, you knew, you could see the need was
out there and you knew that you needed to get things done in order
to get in that line. And that is where a lot of my stress came was
because I was applying, and I did everything right. I hung in there
just to get that application in only to fall into the abyss.
Ms. FINKENAUER. I know we only have a few seconds left here,
but what additional resources would have been helpful during that
process from the Small Business Administration? And then also,
now that you know what you know now, what would you hope they
do moving forward here?
Dr. GERSTEIN. Well, the two things I can say, and I am not an
expert on running the SBA in any regard but I can tell you commu-
nication is paramount, especially with small businesses. We need
to know where we are. We need to know when we can expect a de-
cision to be made. And, I remember in the beginning I was very
upset that I could not request the amount I was asking for. There
was nowhere on the form to even say this is what my need was.
And that was very stressful. The more transparency and better in-
frastructure to deal with the small businesses is what the SBA can
do.
Chairwoman VELÁZQUEZ. The gentlelady’s time has expired.
Ms. FINKENAUER. Thank you, Madam Chair.
Chairwoman VELÁZQUEZ. Now we recognize the gentleman
from Oklahoma, Mr. Hern, for 5 minutes.
Mr. HERN. Thank you, Madam Chairwoman. And I know the
Ranking Member had to leave for his other Committee, and I really
want to thank the witnesses for being here today during these cer-
tainly difficult times.
I always like to start out this way, but as a small business owner
for over 35 years, I certainly feel the pain when we have these kind
of disasters. In 35 years I have seen a few. Obviously, nothing as
severe as what we are seeing now, and during these difficult times
we are going to have stresses on our system, and we have seen
those. And as we all know, the SBA has done about 20 years’ worth
of work in the last 12 weeks. So, you know, this oversight is good.
It gives us an opportunity to test the stress of our system, but we
also want to thank the great work that all of us have done in a
bipartisan way in getting the PPP loans out and the EIDL pro-
grams out because we all know that estimates are it saved up to
50 million jobs in America and, you know, we have got to be very
concerned about what is getting ready to happen as we roll off of
these loans.
As some of you may know, the EIDL program has done over, you
know, several hundred thousands in loans and upwards of $80 bil-
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lion in loan dollars. And in my state, it is about 7,200 loans and
almost a half a billion dollars in loans.
As we work, I think Administrator Carranza is working hard to
try to figure out and listen and the Chairwoman mentioned, she
has been in the Senate side listening to the Small Business Com-
mittee there and I, too, would like for her to come back to our Com-
mittee to hear what we have to say as well as we go through our
factfinding.
Ms. Kerrigan, you talk about some of the shortfalls in your testi-
mony and again, as a small business owner, I know that you can-
not be successful by drawing on past mistakes. We are here to
learn and move forward. Can we talk about solutions to these
issues on these mistakes? And what are some of the solutions that
you think the SBA could implement moving forward to perfect the
EIDL program and thereby helping more and more struggling
small businesses?
Ms. KERRIGAN. You are absolutely right. This crisis was un-
precedented and sort of the charge that was given to the SBA was
unprecedented; right? And so we certainly understand that. And
they have had their challenges over the years. They have had their
successes over the year.
I think the key one is communication. And as you heard through
the testimony today and as we are hearing from our members, even
if it is bad news, business owners want to hear it from the SBA
in terms of we are not going to turn around your loan or you are
not going to get the capital in 3 days as was promised; right? It
is going to take longer. There is massive demand. Or we ran out
of money or we are going to run out of money within a shortened
period of time. So I think the more communication, you know, is
better for small business owners because then, as you know, as a
business owner, you can make decisions based on that; right? So
more information is better.
You know, I think the other thing with all these programs, and
including PPP, Congressman, is that, you know, as the law is
passed by Congress, that is how it has to be implemented by the
agencies. Obviously, they should be given some discretion on things
like Congress gives them, you know, but if the law actually says,
you know, a $10,000 advance, or the amount, the max loan is $2
million, I mean, you know, the agency has to follow the will of Con-
gress on this. And if the money runs out like that, then Congress
can make the decision to fill the money again.
But the other thing is also, again, in a perfect world all these
programs would have rolled out at the same time, including the
Main Street Lending Program because, you know, they match cer-
tain businesses. They align with businesses but that did not hap-
pen; okay?
I think the other big pieces looking at this is what is the SBA,
what is their capacity, and what are they capable of doing in this
regard? And where do we need to call in the private sector and use
financial technology? You know——
Mr. HERN. Ms. Kerrigan, I only get one question before we run
out of time here.
Ms. KERRIGAN. Okay. I am going off.
Mr. HERN. No, no, no, you are fine.
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You know, we talk about SBA. I think we know that, you know,
a lot of government programs, standard programs, one size fits all
is very difficult. Can you talk about, and you alluded to it a little
bit a minute ago about what you think private industry could do
to maybe facilitate should we see this kind of occurrence again,
what private industry can do alongside the Federal government?
Ms. KERRIGAN. Well, I think you saw the power of that in the
PPP program where it was sort of like the traditional banking in-
stitutions, the financial institutions that were initially part of that,
and it took a while for the Treasury to bring on Fintech; right? But
once they did, this money moved very quickly and they were very
small loans, $15,000, $20,000 to the types of businesses that maybe
the banks do not, you know, were not interfacing with and serving.
So, I think they need to think forward. They need to be technology
driven. And I think that is the same way with these programs as
well in terms of these public-private partnerships. Bringing sort of
the power of technology and looking at financial, you know, tech-
nology as a solution to all this. I really think it needs to be incor-
porated over at the SBA.
Chairwoman VELÁZQUEZ. The gentleman’s time has expired.
Mr. HERN. All right. Thank you.
Chairwoman VELÁZQUEZ. Now we would like to recognize the
gentleman from Maine, Mr. Golden, for 5 minutes.
Mr. GOLDEN. Thank you very much, Madam Chair. And you
can hear me all right?
Chairwoman VELÁZQUEZ. Yes, we can hear you.
Mr. GOLDEN. All right. I just want to make sure.
Ms. Kerrigan, I wanted to ask a little bit more from you. I have
been hearing from a lot of constituents in Bar Harbor and Auburn,
Maine, who would like to use an Economic Injury Disaster Loan
right now but they have been shut out of the application process
because they are not agricultural businesses. I was wondering if
any of your members have been finding themselves in a similar sit-
uation of late?
Ms. KERRIGAN. Yes, absolutely. Absolutely they have. And you
know, again, it is dispiriting. And I mean, we have farmers and
members of the agricultural sector, small businesses that are part
of the SBE Council. I think what the SBA wanted to do was to
compensate, right, for them being shut out of the program earlier.
But at the same time you are shutting out, you know, a whole
slash, right, of the business sector, diverse businesses. And again,
it goes back to, look, the program should be open to everyone. If
it runs out of money, once we know the data, and once we know
where we need to go then, you know, it can be refueled or refunded
based on that. So yeah, that was sort of a little bit of the govern-
ment picking winners and losers in the marketplace, although we
love our farmers and our members who are farmers, for sure.
Mr. GOLDEN. Yeah, certainly we do.
You know, you were talking a little bit about implementing the
program the way that it is drafted in statute and then, you know,
if the money runs out, you come and you make that strong case for
the back in the business community for more funding, similar to
what we saw with the Paycheck Protection Program, although they
obviously took a little leeway in the rulemaking process there as
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well but, you know, I had businesses, like an independent trucker,
tourism businesses in my district reach out frustrated, feeling like
they had experienced a bait and switch when the EIDL was both
downsized in regard to the amount that they could receive for those
kind of more capital-heavy businesses, but also when they were
told that they were limited to $1,000 per employee on the grant
side because that was part of the original reason why they were
so interested in going after EIDL instead of pursuing PPP in the
early weeks was knowing that that grant was going to be out there
and they just wanted access to some revenue as quickly as possible.
Ms. Sexton, I also wanted to recognize your frustration with the
repeated delays that you experienced processing your EIDL appli-
cation. I know in my office we heard from businesses all over the
district who had a lot of similar experiences. And all of you have
made the point about the importance of clear communication so
that you can at least make informed decisions which is what I have
been hearing and what my staff have been hearing from businesses
here in the state of Maine. Often it was waiting many weeks, you
know, that was the most disturbing because it delayed them from
making other potential decisions and pursuing other means of sur-
viving through this. It is not to say that these were not important
programs and that they have not worked to help businesses, you
know, when they have worked smoothly. But I just want to ac-
knowledge the frustration that you have all shared and thank you
for sharing it with us. I think the key point there is, as you have
all said, communication not only between SBA and the Committee
in Congress but also SBA and the ultimate client, which is the
small business community. So thanks for taking part in this today
and sharing that. I have no doubt that the SBA is listening to your
testimony today and making note and that they are going to be en-
gaging with their clients, the business community, and the lenders
out there for feedback on how they could improve these programs
going forward.
With that I would yield back, Madam Chair.
Chairwoman VELÁZQUEZ. Thank you. The gentleman yields
back.
Now we recognize the gentleman from Tennessee, Mr. Burchett,
for 5 minutes.
Mr. BURCHETT. Am I unmuted? Can you all hear me? Okay,
great.
I have heard from everybody, and I appreciate everybody for the
excellent testimony given. I also wanted to welcome new member
Mr. Mfume to the Committee. I have watched him from afar and
I am looking forward to getting to know him.
I have heard what has gone wrong, and I have actually heard all
those complaints from my constituents. And I am wondering if each
of you all could briefly tell me what has gone right in what we have
been trying to do. Maybe we can amplify some of that.
And I will yield to the folks.
Ms. KERRIGAN. Well, I will start that, Congressman, and say
for the businesses, the small businesses that were able to access
the EIDL money, they are very grateful for that support, for that
capital. I think with the PPP program, it was really good to see the
pivot that was made on that in terms of making the modifications
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and changes that would make the program flexible, practical, and
relevant, you know, for small businesses, particularly given, you
know, the extension of the shutdowns and what was happening on
the ground. From our perspective, we would have loved those PPP
changes to come more quickly, but they happened and that is good.
So you all were listening to small businesses and you made those
changes. And I think that needs to happen over at the SBA, too,
but again, this is a whole different program and I do think now
Congress needs to look forward and say, you know, is this some-
thing that SBA should be doing as an agency? And do they have
the capacity to do that? But, look, for the businesses that got the
money because of the early intervention and the tax credits and all
those other things, those are making a big difference for small
business.
Mr. BURCHETT. Any of the others?
Dr. GERSTEIN. Yeah. What I would say is what was done right
was that Congress definitely, there was an emphasis on helping
small business. It was not just helping individuals. It was really an
attempt to help small businesses out there that were through no
fault of their own were shutting down or operating at very limited
capacity. Unfortunately, what seemed like a great idea and the exe-
cution did not match. And the frustration was listening to the
promises and being excited about the idea and then the reality
really of not being able to access the funds or not get your ques-
tions answered. But the intent was there.
Ms. SEXTON. Now, I could say that for me what went right was
unfortunately very little. What did go right was my ability to react
very quickly when I saw that SBA dropped the ball. We started a
Go Fund Me campaign which actually that is what saved me. The
SBA money helps, sure, and I got a little bit of PPP but, I mean,
I feel like giving PPP back because how am I supposed to pay that
back? It is over 2 years. I mean, it puts a burden on me more than
it is helping me. So, and look, I do not want to be complaining. I
hear your question. What it did right was once I did get approved
my loan was delivered very quickly. That was right. But I am
sorry; they got so much wrong I do not really, at this point, I am
so frustrated what they got right is kind of irrelevant.
Mr. BURCHETT. Thank you.
Any others?
Great.
Chairlady, thank you so much. I yield back the remainder of my
time.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from California for 5 minutes.
You need to unmute.
Ms. CHU. Thank you.
Ms. Sexton, as a congress member representing Los Angeles
County, I thank you for sharing your experience as a Los Angeles
business owner, a sole proprietor, and a former creative profes-
sional. It is clear from you and the other witnesses here today that
SBA’s administration of EIDL has been unacceptable at a time
when small businesses need this really more than ever. I also
imagine that many of your clients are also self-employed individ-
uals working in creative fields like the music industry. And like
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you, the sole proprietor, self-employed, and independent contractors
constitute a significant part of Southern California’s economy, and
they have been adversely impacted by the SBA’s cap on EIDL
emergency grants of $1,000 per employee. This cap is just not re-
flective of the congressional intent and hurts individuals like you
who despite not having employees have high overhead costs like
thousands of square feet of leased property.
So can you describe the impact the SBA cap on the emergency
grant has on sole proprietors, self-employed, and independent con-
tractors like you and your clients, and give us some sense of the
unique burdens that these type of workers are facing during the
COVID-19 crisis? And also, you described so many problems get-
ting this emaciated loan. What would you do, what would be your
top priority and things that need to be changed in the EIDL pro-
gram?
Ms. SEXTON. Well, thank you. Thank you, Congresswoman.
Those are tricky questions a little because there are so many.
You know, out of 120 members, we have got like 60-70 people who
have their own businesses; right? And so right away one of the
things that I did was, because I had so much access to small busi-
ness assistance because I am so heavily involved in the Chamber
of Commerce and working with a lot of different organizations, I
was able to put a resource page together on my website to assist
my membership. And a lot of the people were just frustrated. They
would call me with the same frustrations that I was having, and
then I would be calling my contacts, especially those from the
LASBDC, who were fantastic by the way, and asking them to help
me understand what was happening. But quite honestly, things
changed so fast in the law, or I mean, not in the law, in the appli-
cation process that even the industry, even the organizations that
were helping us try to understand what was happening, they could
not keep up. And so what happened was, when you would be get-
ting an answer from somebody and have already heard that it
changed, and then you would just be frustrated going, like man,
where are you? Why are you not keeping up with this? Why is this
burden on me? But my whole idea was, like, look, if I can keep
these people in their positions, and if I can keep them working and
keep them getting money, then I can keep my business; right? I
mean, because that is what I do. I provide a workspace for them.
The frustration falls in the lines of just general stuff. I mean,
lack of communication, not knowing what was happening. Some
people were not smart enough to write down that loan number and
19 what? And then they would call people and the operators were
misinformed giving bad direction to people on what the next steps
were. And then it falls onto, you know, look, it falls onto looking
for other money. And the PPP for me, because I do not have em-
ployees, is whatever. You know? I mean, you look at that and I am
super organized. I have everything ready and then I get nothing.
And so I think the biggest thing quite honestly that the SBA
could do is just communicate. Be honest with people. I need to
know what I have to do because, and I believe the other gentleman,
Mr. Gerstein said that, like, our bills are stacking up. We have got
rent to pay. I mean, I can extend it. Sure, I can postpone payments
but that does not mean they are going away. So what am I sup-
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posed to do, you know? And so I really thought the EIDL loan, like
I said before, I really thought it was going to save us. I really did.
I mean, man, I was hoping on that. And now I am like, if it was
not for my Go Fund Me, I would be out of the game. I would have
to shut completely.
Ms. CHU. I appreciate the fact that you talk about the SBDCs
in such a positive way.
Ms. SEXTON. Yep.
Ms. CHU. And it seems to me that if the SBA is overwhelmed
in terms of being able to answer back to these loan applicants, why
do they not deputize the SBDCs to inform people on the status of
the loans?
Ms. SEXTON. I would agree that that would be an awesome
idea.
Chairwoman VELÁZQUEZ. Okay. The gentlelady’s time has ex-
pired.
Now we recognize the gentleman from Florida, Mr. Spano, for 5
minutes.
Mr. BISHOP. Madam Chairman, I do not see him on the call any
longer.
Chairwoman VELÁZQUEZ. He was just there.
Okay. Now Dr. Joyce from Pennsylvania, you are recognized.
Mr. Bishop from North Carolina, now you are recognized for 5
minutes.
Mr. BISHOP. Thank you, Madam Chairman. And I will say I
greet you today from our Committee room, and it is wide open and
empty, and I certainly invite others to join me here whenever you
can.
And I think, too, Mr. Whack, in particular, it has been a bit of
a disadvantage and I apologize to you for the difficulty, sir, that
you have encountered. It may be if this is the only way that you
could appear before the Committee, then that would be better than
not being able to appear, but I certainly wish that we had been
able to just have you come in and sit down and not struggle over
things like that.
I wanted to ask, and I guess I am trying to pick who, but I was
listening to the conversation, it seems to me in order for this enter-
prise to be productive, we probably need to get beyond frustration
to diagnosis and make an accurate diagnosis of the problem. The
obvious import of the hearing is to lay blame at the SBA, but I
guess if Dr. Gerstein is still available, yeah, I see Dr. Gerstein,
maybe I could ask you. I sympathize because I have heard it many,
many times and I have actually experienced it myself. And when
I first learned about what EIDL was going to be able to do, you
have heard the notion of putting out a fire with a garden hose;
right?
Dr. GERSTEIN. Sure.
Mr. BISHOP. And so if you have got something, put a 1-inch
hose to put water through and you have got a big burning disas-
trous fire, you may not make much progress. You mentioned the
uncertainty a lot of witnesses have and I find it to be difficult to
deal with as well, but is it not an inevitability of the nature of the
problem that we have, this nationwide flatlining of the economy
with the shutdown orders of the entire economy, does it not seem
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to be that it would be hard to scale up a program that is designed
for the spawn of a tornado or hurricane to be able to operate na-
tionwide?
Dr. GERSTEIN. I am certainly not an expert in any regard. If
you want to ask me about eyes, I am more than happy to answer
any question on that. But how to implement policy in Congress, I
cannot explain what is the best thing. But what I can tell you is
the idea of the SBA giving a little bit to everybody to try to quell
the disaster is no different than coming into a room where 1,000
people are dehydrated and offering them all just little sips of water
and hoping you are going to save somebody. It just did not do
enough to enough businesses.
Mr. BISHOP. Yeah, I got that point and it is a good point. And
I just wonder if in the sense of your frustration that you experi-
enced as you were going through this, was it, did you either back
then or looking back at it now think that perhaps it was just an
impossibility to take SBA’s EIDL, normal EIDL program and sud-
denly scale it up so it could handle that sort of task? Did that go
through your mind at all?
Dr. GERSTEIN. Well, you know, part of the, you know, first
come, first serve basis that was emphasized, which showed me, and
I knew that there was going to be a lot of demand, so yeah. I knew
there was going to be a lot of demand. I did not know that the in-
frastructure and the SBA was not going to be able to handle it in
any regard. But yeah, I am not surprised by that.
Mr. BISHOP. Ms. Kerrigan, and maybe if I follow it in the con-
versation I was just having with Dr. Gerstein, because you made
reference to SBA sort of being able to scale up. You mentioned arti-
ficial intelligence. Is there some technical or technological solution
that you believe exists that you could take a program like that,
that it operated on the basis I suggested, and suddenly and accu-
rately and with efficiency scale it up to be able to handle a disaster
like this and just expect the agency to be able to do that?
Ms. KERRIGAN. Well, like I said I think both on my 5 minutes
earlier and also in my written testimony that we knew this was
going to be a huge lift for SBA because one is demand; right? We
knew there would be a huge demand for this capital. And number
two, you know, sort of the limited capital that was available. And
I think, Congressman, that the reason why we did the PPP pro-
gram was to alleviate; right? To alleviate; right? So that was sort
of the sister program of like, okay, lets get the financial institutions
involved. But they were two different programs, Congressman. You
know, you had one that was like for, one was very restricted, 8
weeks to use the money as opposed to EIDL which was 6 months.
So.
Mr. BISHOP. Let me interject because I have just got about 30
seconds left, I think.
I think your point is well taken, Ms. Kerrigan, and Dr. Gerstein,
and the other witnesses. And I wish Mr. Whack was on. I think
it would be easier if I could see him. But I think really what we
see is the PPP program being able to bring in the private sector
to leverage the government is what made a relevant success for
PPP. And that was not without frustration either.
Ms. KERRIGAN. Exactly.
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Mr. BISHOP. And so I think it would probably be helpful to deci-
pher what lessons we should be learning as opposed to just ex-
pressing frustration and leveling it all at the door of the SBA.
Madam Chairman, of course, my time is expired. Thank you, Ma’
am.
Chairwoman VELÁZQUEZ. Thank you, Mr. Bishop.
Let me just say, I welcome you for using the Committee room,
and I also want to thank the cleaning crew who will now have to
go into the room and disinfect. I also want to recognize that many
small firms are able to join us remotely to testify without undue
costs for travel, and I am glad we are able to facilitate a discussion
without burdening small employers.
With that, let me recognize Mr. Evans from Pennsylvania. You
are recognized for 5 minutes.
Mr. EVANS. Thank you, Madam Chair, again, as usual.
When the pandemic hit, business across the country were
devasted financially, especially African American home businesses
which declined 41 percent from February to April, the most of any
racial group. As a comparison, White-owned businesses declined
only 17 percent. Many Philadelphia small businesses have been
struggling to make ends meet, which is why the Small Business
Administration Economic Injury Disaster Loan is such a lifeline.
Unfortunately, many of my constituents, including Mr. Whack,
have been denied the EIDL loans because of unsatisfactory credit
scores.
Now, Mr. Whack, I am going to ask you three questions based
on my time.
Mr. Whack, what was your reaction when you received your de-
nial letter from the SBA? Did SBA provide you any further details
on your denial such as minimal credit score required? And then the
CARES Act, Congress indicated that the SBA would use the appli-
cation credit score or alternative methods to determine that appli-
cant’s ability to repay. Did SBA indicate that when it reviewed
your application it used methods other than the credit score, Mr.
Whack?
Mr. WHACK. Can you hear me, Congressman?
Mr. EVANS. Yes.
Mr. WHACK. Part of what I have been [inaudible] long wait but
when I finally did get a letter there was no other reason other than
the unsatisfactory credit report, nor was there any way in that let-
ter that I could have addressed that. I mean, how about if there
was something in my credit history that I could have corrected or
explained or whatever? It was just like something I thoroughly did
not anticipate, and other than contacting your office I really had
no alternatives. I mean, what was I supposed to do?
Mr. EVANS. So they did not tell you in the CARES Act Congress
indicated that SBA may use an applicant credit score alternative
method. They did not say that to you; right?
Mr. WHACK. I have never heard that. It was not stated, and I
pay very close attention to the news, CNN, MSNBC, and other
printed material, and I was following this to see that when I was
going to apply I had everything that I needed to do this properly
and I was just unprepared for this. That is the best way to put it
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to you. I had no notion that they were going to use your credit
score as a basis for accepting or denying an applicant alone.
Mr. EVANS. Mr. Whack, can you explain all the costs you are
now paying yourself including unreimbursement from pharmacy
benefits, when patients cannot afford their prescription?
Mr. WHACK. As I stated earlier, it is particularly bad because
pharmacy is such a difficult field now in terms of the HMOs, in
terms of you need an inventory which means you go to a whole-
saler. The wholesalers now are getting, they are ratcheting down.
I mean, my competitor, CVS, Rite-Aid, they do not have whole-
salers. See, I go to a middle person to purchase prescription drugs.
Rite-Aid, CVS, they have their own warehouse. They go directly to
Medco or SmithKline or whomever. They bypass this. And it has
put me through a tremendous stress because now the wholesalers,
when you fall behind in this industry, they put you on COD. Can
you imagine trying to be COD with 1 week’s invoices could be like
$16,000, $18,000, $20,000? That is particularly stressful, and I
have no real alternatives to deal with this. I mean, the wholesalers
who supply us with the things we need to do our job are under-
standing but they are in business after all. They are not going to
continue to extend courtesy or forbearance for any great length of
time. That is the other part of my anxiety. I do not know at what
point someone is going to call and say, listen, this is it. You cannot
order anymore. What am I supposed to do then?
Mr. EVANS. Real quick I need to, Ms. Sexton, you applied for
the EIDL loan of SBA and received much less than you requested.
Did the SBA explain why you received a lesser amount?
Ms. SEXTON. Absolutely not. No explanations were given. You
are literally just put in a position where you accept the amount
and that is that. Yeah, it is a real problem.
Mr. EVANS. I yield back, Madam Chairperson. I thank you,
Madam Chairperson for your leadership on small businesses and
everything you have done. So wherever you want to be, I am going
to be there.
Chairwoman VELÁZQUEZ. Thank you. Thank you.
Let me again call on Dr. Joyce from Pennsylvania. Is he on?
Okay. Now we recognize the gentleman form Illinois, Mr. Schnei-
der.
Mr. SCHNEIDER. Thank you, Madam Chairwoman. And I want
to thank the witnesses for sharing your perspectives and experi-
ences. This is obviously a very difficult time for everyone but for
small businesses in particular as the witnesses have highlighted so
well today, the anxiety of trying to keep your doors open, trying to
figure out how you are going to just make it through this and to
overlay that as you have so eloquently shared with the uncertainty,
it was wonderful.
As you have attested very well, the SBA’s Economic Injury Dis-
aster Loan, the EIDL program is a vital lifeline for businesses in
a crisis. It has been in the past and it should have been that dur-
ing this COVID pandemic. But it only works if the SBA gets the
money out the door. The program can be useful for businesses in
planning for long-term future in the midst of a crisis and it is nec-
essary and should have happened that we give these owners the in-
formation that they need like the status of their loan application,
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when they can get the money they are counting on, and allow them
to make the difficult decisions if money is not going to be available.
More than a month ago I wrote a letter with Chairwoman
Velázquez joined by 100 members of the House to the SBA out-
lining our concerns with the EIDL program, calling for the SBA to
create an application queue for new applicants and to provide the
current applicants an update on their loan status. Unfortunately,
these issues still remain unaddressed.
Dr. Gerstein, I so appreciate you sharing your voice as a small
business owner from our community here in Illinois, and I am glad
that small business webinars that I and my team organized helped
navigate the process and that our caseworkers could be a resource
to you. But the detailed timeline you laid out, the long periods of
no information from the SBA was not unique and was incredibly
frustrating. I felt badly for what you were facing, and as you and
I talked about we saw it with so many other businesses around our
district. I cannot imagine what it was like living through this time
as a business owner.
As you have said and said very well, uncertainty kills businesses.
Without updating the information on loan status, contrary to being
a resource, the EIDL program, the way it was administered became
a hindrance towards achieving long-term planning because busi-
ness owners just did not know what they could rely upon.
So if you would, please, can you just give two issues from your
experience? As you were working through the process, you were
also navigating the world uncertainty that comes from operating a
business during a pandemic. How did the lack of information ham-
per your ability to make the long-term plans for your business?
Dr. GERSTEIN. Well, it paralyzed us, quite frankly. I did not
know, going through this process the initial description was 3
weeks and then 5 to 7 days that you would receive the income. And
after 3 weeks and then 4 weeks, we just did not know what to do
or if I needed to look for capital elsewhere or not, would that have
been a waste of time? You know, and then I was behind the line
of all the people who went that different avenue. So it was quite
paralyzing. And I was really kind of mired with the SBA and just
at their beckon call to see what was going to happen.
Mr. SCHNEIDER. And Mr. Whack, Ms. Sexton, was your experi-
ence similar?
Mr. WHACK. Can you hear me?
Mr. SCHNEIDER. I can.
Mr. WHACK. Okay. My experience was very similar, and I would
best characterize it as traumatic. I mean, I have been on pins and
needles trying to keep things afloat, keep going, and hoping that
I would get an answer. And when I got the answer, well, it was
no, but it was just so vague and such a strange response I just was
not ready for this.
Mr. SCHNEIDER. And I am sorry; I only have a minute left. So
Ms. Sexton, you laid it out very beautifully in your written testi-
mony about how much stress this was. Is it still stressful?
Ms. SEXTON. Yeah, I mean, of course. Of course. I mean, I have
to, I am literally, I have to close my largest location and that is
going to take out two-thirds of my income. I mean, two-thirds of
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my business that I created up to 4 years of busting and making
that happen.
Mr. SCHNEIDER. And Dr. Gerstein, you know, the other thing
we talked about is this arbitrary cap at $150,000. How has that im-
pacted your planning for the future?
Dr. GERSTEIN. At this point now I am looking at alternative as-
pects for capital. You know, I did send a letter with documentation
to the SBA. I am still to this day waiting to hear from them and
see if I am going to be granted more income. But now I have to
look at different programs through banks and other aspects in
order to try to just keep us going until we get back to normal.
Mr. SCHNEIDER. Got it.
And my time is expired. I would ask, Madam Chairwoman as we
proceed in this, one of the things I think we also have to explore
is why did the SBA think it was prudent to not disclose the infor-
mation about changing policies? Why did they not give an alert
that we were running behind? The greatest frustration sitting at
an airport is when they do not tell you why your plane is delayed.
That is an inconvenience. How that was delayed and these other
things is devasting for these businesses.
Chairwoman VELÁZQUEZ. That is why it is so important that
we have them come before the Committee, and we expect for them
to comply with our report.
Mr. SCHNEIDER. I look forward to that.
Chairwoman VELÁZQUEZ. The gentleman’s time has expired,
and now we are going to recognize Dr. Joyce from Pennsylvania.
I believe he is on the phone.
Dr. Joyce?
Now we will recognize the gentleman from New York, Mr.
Espaillat for 5 minutes.
Mr. ESPAILLAT. Thank you, Madam Chair. Let me thank you
for the great work, the lifesaving work that you are doing as the
Committee leader. When I testified before the Committee, as a
member of the Committee, I said that small businesses were mad
as hell. I was mad as hell. I am sorry to report to you, Madam
Chair, that they are still mad as hell.
The PPP program originally was a disaster. You did great work,
Madam Chair, in carving out those $60 billion so that the money
will go to CDFIs, credit unions, and local banks which I think have
a longstanding relationship with small businesses. But we saw how
the traditional banks favor their perceived customers. And some of
them have to shamefully return the money back. And so this $60
billion that you allotted was very helpful. However, it is not
enough. And of course, you know, now we see how this credit score
business is being introduced. If you have A+ credit, if you can meet
payroll, if you have liquidity and you have access capital, the bank
comes to you. You do not need to go to the bank. If you go to the
bank when your credit is hurting, when you are striving, when you
are hurting to make payroll and just squeezing by, when you have
no money to expand and you have very little collateral, that is
when you go to the bank. And so if the bank is shutting you out
then, then we are in trouble.
Now, I know that we are going to need to do far more with small
businesses, Madam Chair, and I know that your heart is in the
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right place. I work with Chef Kwame, who is an internationally ac-
claimed chef based in D.C. but is originally from the Bronx, from
Webster Avenue in the Bronx. He has won the James Beard
Award, the most prestigious award for a chief. He is a young guy,
I believe right under 30 years old, and he has an independent
group association of restaurants. Restaurants which in many cases
define the character and the reputation and the personality of a
neighborhood. We all go to a particular restaurant in Harlem, East
Harlem, Washington Heights, in Red Hook, Madam Chair, your
neighborhood, across the country because they define those neigh-
borhoods. They are hurting, and these businesses are marginal
businesses that we work our profit, you know, it is very tight to
begin with. In fact, most of them just make their money at the bar.
So I think that we are going to allot a specific amount of money
to restaurants so that we can save them. And I think there are sev-
eral businesses, areas of businesses where we are going to have to
be laser-focused to rescue. I think the Independent Restaurant As-
sociation, which has a great number of very good restaurants and
that provides thousands of jobs to people from all over the country,
we are going to need to really help out and allot some specific
money to them so they will be able to open. Most of them are going
to open and they are going to do it on the sidewalk, outside cafe
and the streets are going to be converted. But no one is going to
rush back to a crowded restaurant, so their income is going to be
limited. And unfortunately, unless we help them, many of them
will close, and as a result we will lose hundreds of thousands of
jobs. So I want to thank Chef Kwame who is a young rising star.
He is right there at The Wharf in Washington, D.C., Kith and Kin.
And so he is like a guy that is leading the movement for that busi-
ness. And there are other businesses that I think face the same
kind of challenges.
So Madam Chair, we are going to have to go back to the drawing
board and really do better for small businesses. And thank you for
your work, and I yield back the remaining part of my time.
Chairwoman VELÁZQUEZ. The gentleman yields back.
With that we are coming to the end of this hearing.
I want to take this opportunity to thank all of the Members for
participating in such an important oversight hearing. I also want
to thank all of our witnesses for their testimony and for offering
the main street view of the SBA EIDL program.
By sharing your experiences with us today, we will be able to
conduct more effective oversight and continue to optimize the EIDL
program. We have heard some rather troubling issues in your testi-
mony, and I assure you we will be following up with SBA on each
one.
I ask unanimous consent that Members have 5 legislative days
to submit statements and supporting materials for the record.
Without objection, so ordered.
If there is no further business before the Committee, we are ad-
journed. Thank you.
[Whereupon, at 2:49 p.m., the Committee was adjourned.]
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APPENDIX
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Æ
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File and source
- File
- chrg-116hhrg41292.pdf
- Size
- 1,370,859 bytes
- SHA-256
- a9b5bc7191abf4ecc95488edc8729707cd93fca0849f2a155d33b3ff70ef6775
- Our copy
- chrg-116hhrg41292.pdf
- Original
- www.govinfo.gov