Under the Microscope: Reviewing Key SBA Programs with Associate Administrator Frost (House Small Business Committee hearing, May 15, 2024)

Summary

Printed record of the House Committee on Small Business hearing held May 15, 2024, Under the Microscope: Reviewing Key SBA Programs with Associate Administrator Frost, Small Business Committee Document Number 118–051. Chairman Roger Williams presided, the Committee meeting at 10:00 a.m. in Room 2360 of the Rayburn House Office Building, and framed the hearing as oversight of the SBA's Office of Credit Risk Management, which oversees the agency's lending programs. The sole witness was Kathryn Frost, Associate Administrator for the Office of Capital Access, whose prepared statement and answers to questions from Williams, Luetkemeyer, Mann, Velázquez and Golden are printed in the appendix. In closing exchanges she said the Restaurant Revitalization Fund was challenging because of limited funds; the committee adjourned at 11:24 a.m.

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“Under the Microscope: Reviewing Key SBA Programs with Associate Administrator Frost (House Small Business Committee hearing, May 15, 2024).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/under-the-microscope-reviewing-key-sba-programs-with-associate-adminis-934e5b199e/, SHA-256 989e8654a71b3f342a416c6cd4c1b48d00a3ce74f06aa4629502186f8cf5af00.

Full text

UNDER THE MICROSCOPE: REVIEWING KEY SBA
PROGRAMS WITH ASSOCIATE ADMINISTRATOR
FROST

HEARING
BEFORE THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION

HEARING HELD
MAY 15, 2024

Small Business Committee Document Number 118–051
Available via the GPO Website: www.govinfo.gov

U.S. GOVERNMENT PUBLISHING OFFICE
55–529 WASHINGTON : 2024
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
CELESTE MALOY, Utah
NYDIA VELÁZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MARIE GLUESENKAMP PEREZ, Washington
SHRI THANEDAR, Michigan
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire

BEN JOHNSON, Majority Staff Director
MELISSA JUNG, Minority Staff Director

(II)
CONTENTS
OPENING STATEMENTS
Page
Hon. Roger Williams ................................................................................................ 1
Hon. Nydia Velázquez ............................................................................................. 2

WITNESS
Associate Administrator Kathryn Frost, Office of Capital Access, United
States Small Business Administration, Washington, DC ................................. 4

APPENDIX
Prepared Statement:
Associate Administrator Kathryn Frost, Office of Capital Access, United
States Small Business Administration, Washington, DC .......................... 29
Questions and Answers for the Record:
Questions from Hon. Williams and Answers from Kathryn Frost ............... 32
Questions from Hon. Luetkemeyer and Answers from Kathryn Frost ........ 50
Questions from Hon. Mann and Answers from Kathryn Frost .................... 51
Questions from Hon. Velázquez and Answers from Kathryn Frost ............. 54
Questions from Hon. Golden and Answers from Kathryn Frost .................. 59
Additional Material for the Record:
None.

(III)
UNDER THE MICROSCOPE: REVIEWING KEY
SBA PROGRAMS WITH ASSOCIATE ADMINIS-
TRATOR FROST

WEDNESDAY, MAY 15, 2024

HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams [chair-
man of the Committee] presiding.
Present: Representatives Williams, Stauber, Meuser, Van Duyne,
Salazar, Mann, Ellzey, Molinaro, Alford, Crane, Bean, Lalota,
Maloy, Malliotakis, Velázquez, Phillips, Landsman, McGarvey,
Gluesenkamp Perez, Scholten, Thanedar, Davids, and Pappas.
Chairman WILLIAMS. We will pray first, and then we’ll pledge.
Mr. MEUSER. Lord, thanks for this hearing this morning.
Thanks that we all get to live and serve in the greatest country in
the world. We pray for all the small businesses out there. We pray
for all the folks that have ideas to start small businesses. We pray
that governments would assist when it is their priority. We also
pray for health concerns for everybody in this room, friends and
family as well. We love you and are grateful for you. Now we will
do the pledge. I pledge allegiance to the flag of the United States
of America. And to the republic for which it stands. One nation,
under God, indivisible, with liberty and justice for all.
Chairman WILLIAMS. Good morning, everyone, and I now call
the committee on Small Business to order. Without objection the
Chair is authorized to declare the recess of the committee at any
time. I now recognize myself from my opening statement. I want
to welcome you all today’s hearing, which will focus on the over-
sight of the SBA’s Office of Credit Risk Management. This office
oversees the SBA’s lending programs, including the Flagship 7a
loan program. And in 2023, this program alone lent over $27 billion
to main street businesses. In April of last year, the SBA finalized
two rules that make drastic changes to the program, which many
Members of this committee have expressed concerns over.
The first rule removed the standardized underwriting procedures
for 7a loans. The 7a program allows banks to offer loans to busi-
nesses that are on the edge of creditworthiness. In order for the
banks to extend these loans, the government backs between 75 per-
cent to 85 percent of the dollar amount. Since the taxpayers are on
the hook if enough of these loans go bad, it is very important that
there are guardrails in place to businesses that get these loans and
(1)
2

have a realistic chance to pay them back. Unfortunately, the SBA
removed the underwriting criteria that allowed the program to run
smoothly for decades and is now allowing each individual lender to
use their own standards. This will make oversight of the lending
activities much more challenging for the agency and increased like-
lihood of loans going bad. The SBA is reporting that they are see-
ing an increase in small dollar loans, but at the same time, we
have seen a sharp increase in early default rates within this pro-
gram.
The second rule removed the cap that limited the number of
lenders that could participate in the government lending program.
Only a few years prior, the SBA determined that it simply did not
have the capacity to oversee more lenders. And now, even though
the Office of Capital Access had been drastically reduced staffing
levels, they changed course and decided to take on more responsi-
bility anyway. So, we have already seen the SBA ignore some
warning signs coming from the new lenders within the 7a program.
And when SBA administrator Guzman testified to this committee
last year. She claimed the SBA has a rigorous application process
for the SBLC program. However, that claim is contradicted when
seeing the SBA awarded license to Funding Circle. A company that
had started operating losses had standard operating losses the year
prior to applying for this new license and during the company’s re-
cent earning calls, the CEO claimed it would be too costly to get
the SBA lending program functional. Because of this, the CEO stat-
ed that they are looking to sell this U.S. business line. Even though
these comments were made during the application process, the
SBA decided to ignore them and approve their license anyway.
The final thing I am looking forward to discussing is the SBA’s
handling of the EIDL loans under $100,000. The agency abruptly
decided to stop collecting on these loans back in 2022, only to
change course over a year later. Now, while I am pleased that the
agency claims they will start collecting on these loans, I still have
many questions about the long term servicing cost of this portfolio,
the amount of taxpayer dollars that were lost during the year of
inaction, and the estimated recoupment amounts from their efforts.
We must ensure that the SBA is being a good steward of Ameri-
cans tax dollars. Now, lastly, I ask unanimous consent, for Rep-
resentative Malliotakis, from the great state of New York to waive
to the committee for the purpose of asking questions and without
objection, that is so ordered.
I want to thank you all again for being here with us today, and
I am looking forward to today’s conversation. And with all that, I
yield to our distinguished Ranking Member from New York, Ms.
Velázquez.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. I would like to
start off by thanking Associate Administrator Frost for joining us
here this morning. Ms. Frost, welcome to the committee. The
COVID-19 pandemic opposed a historic threat to our nation’s small
businesses. The number of active business owners in the U.S.
plummeted by 3.3 million, or 22 percent, over a two month period
from April—from February to April 2020. The drop in business
owners was the largest on record and losses were felt across all in-
dustries. Underserved small businesses were especially hard hit.
3

African American businesses experienced a 41 percent drop, while
Latino business owners fell by 32 percent and Asian business own-
ers fell by 26 percent. Throughout the pandemic, the SBA stepped
up and offered small businesses across the country a lifeline. The
SBA delivered an unprecedented $1.2 trillion in emergency grants
and loans over two years. That funding contributed to a historic
economic recovery of 21 million lost private sector jobs, plus 4 mil-
lion more private sector jobs than existed before the pandemic.
Beginning in early 2021, thanks to the leadership of Adminis-
trator Guzman, longstanding anti-fraud controls were reinstituted
and new safeguards were put in place to reduce the risk for poten-
tial fraud. Since then, the SBA has been actively engaged in reduc-
ing the risk of fraud throughout the agency by improving its oper-
ation and bolstering its risk management systems. Across all four
pandemic relief programs, the SBA has screened 49.3 million appli-
cations, identified 4 billion in applications, loans, grants and
awards that had had indicators of potential fraud, and blocked 2.46
million applications due to likely fraud. That being said, many of
the fraudulent activities that occurred in PPP and the other
COVID relief programs were conducted through fintech’s. Accord-
ing to a study published by the University of Texas, Austin, 9 of
the 10 PPP lenders with the highest rate of suspicious loans were
fintech companies, and the most active fintech PPP lenders gen-
erated over $1 billion in fees from the SBA.
Given the significant level of fraud conducted by fintech lenders
in the PPP, there has been strong bipartisan concern over two final
rulemakings by the SBA last year, which weakened the under-
writing criteria and loosened affiliation standards in the agency’s
core lending programs. Most importantly, it lifted the decades old
moratorium on the number of SBLCs, potentially opening this pro-
gram up to fintech lenders. There are still outstanding questions
as to one SBLC award to Funding Circle, and I look forward to
hearing from Ms. Frost regarding this particular license. The SBA’s
mission is too important to grant loan making authority to a lender
that is not fully committed to its programs. The SBA has been crit-
ical to the success of millions of small firms through its over 70
years of existence. Much of that is due to the core lending pro-
grams and their ability to reach businesses that have traditionally
been locked out of the capital market. I hope to hear more about
how Congress can strengthen and improve these programs. Mr.
Chairman, I yield back.
Chairman WILLIAMS. The lady yields back and I now will intro-
duce our witness. It is my privilege today to introduce Ms. Katie
Frost. Ms. Frost is the Associate Administrator of the Office of
Capital Access at the Small Business Administration. And at the
SBA, Ms. Frost leads the agency’s Office of Capital Access, which
oversees major programs like the 7a lending program. Prior to the
current position at the SBA, Ms. Frost serves as Deputy Associate
Administrator of the Office of Capital Access as well as Policy Advi-
sor and Senior Advisor for the Office of the Administrator. Ms.
Frost holds a Bachelor of Arts political science degree from UCLA,
the Bruins right?
Ms. FROST. Go Bruins.
4

Chairman WILLIAMS. And a master’s in public policy from Har-
vard’s Kennedy School. Ms. Frost, thank you for joining us. And I
am looking forward to today’s conversation. And before anything
else, I would like to remind you that your oral testimony is re-
stricted 5 minutes in length. And if you see the light turned red
in front of you, means your 5 minutes have concluded and you
should wrap up your testimony. And if you don’t, I will remind you
with a little tap on the gavel. Okay? I now recognize Ms. Frost for
her 5 minute opening remarks.
STATEMENT OF KATHRYN FROST, ASSOCIATE ADMINIS-
TRATOR, OFFICE OF CAPITAL ACCESS, SMALL BUSINESS AD-
MINISTRATION
Ms. FROST. Good morning, Chairman Williams, Ranking Mem-
ber Velázquez, and Members of the committee. On behalf of Admin-
istrator Guzman and the entire agency, thank you for the oppor-
tunity to appear before you today. I serve as the Associate Admin-
istrator for the Office of Capital Access, where I am responsible for
the agency’s business loan programs, including our 7a, 504 and
microloan program, the agency’s surety bond program, SBA’s direct
disaster loan program, and several of our pandemic programs, in-
cluding the Paycheck Protection Program, the COVID EIDL pro-
gram, and the Restaurant Revitalization Fund.
Collectively, these programs connect creditworthy small busi-
nesses to capital so that they can start, grow and expand resilient
businesses. There’s never been a better time to start a business
than under the Biden Harris administration. Since 2021, we have
experienced a small business boom in this country, with more than
17 million Americans filing new business applications, and this is
being led by women and people of color. This isn’t an accident. It
is thanks to intentional policy and program implementation, in-
cluding improvements to SBA’s loan program. SBA has increased
lending to Latino owned businesses by 80 percent since the start
of the Biden Harris administration, and we have more than dou-
bled SBA loans to black owned businesses since 2020. We have also
invested in modern technology like MySBA and the unified lending
platform, as well as Lender Match to improve the lender experi-
ence, the borrower experience and reduce loan processing times.
But one of the persistent problems for small businesses has been
accessing capital, especially small dollar loans. These loans tend to
be less profitable and harder to get on the conventional market,
and small SBA loans, those under $500,000, fell by 40 percent dur-
ing the previous administration. Reversing this decline has been
one of administrator Guzman’s top priorities, and beginning in ‘22
into ‘23, she modernized SBA loan policy with sweeping reforms to
strengthen the network of SBA lenders and to make it a little easi-
er to work with the SBA.
In August of last year, those changes went live. To make it easier
to work with SBA, we simplified underwriting requirements for
loans under $500,000 so that they align with industry norms. We
removed unnecessary frictions, including the complex affiliation
rule and complex requirements for documenting equity injection.
And at the same time, SBA established the most robust front end
fraud control system in the history of the program, something
5

that’s been applauded by our inspector general. To strengthen the
network of SBA lenders, we created the new community advantage
small business lending company, or CASBLC license, bringing 142
mission-based lenders into the program, and that included 30 new
lenders last fall. We also added three new SBLC’s for the first time
in four decades, each of which has a focus on a particular market
gap in SBA lending that includes small dollar loans, lending to na-
tive owned businesses and entrepreneurs, and lending in persistent
poverty counties and rural areas.
We now have nine months of performance data after the imple-
mentation of these reforms, and I am pleased to report on behalf
of Administrator Guzman that the changes are working. In fiscal
year 2024 to date, SBA has approved 22,000 7a loans under
$150,000. That puts us on pace to nearly double the number of
small loans approved in the final year of the previous administra-
tion. Everyone, that is about 1,000 more small businesses getting
a small loan every month compared to just a few years ago. 7a
loans under $500,000 are similarly up 25 percent, and community
advantage lending is up 17 percent compared to this time last year.
For this progress, we give credit to our partners in the lending
community. They have embraced this opportunity, and they have
seized it to put more money in the hands of America’s small busi-
nesses.
And yet, despite this notable progress, it is still too hard for
many Americans to access capital. The Federal Reserve’s 2024 re-
port showed that half of employer firms who sought capital did not
receive what they needed. So SBA continues our work to help. In
April, our nation celebrated second chance month, and SBA ex-
panded access to our capital programs for returning citizens. In
May, we expanded the use of the 504 loan program for projects
that reduce energy consumption. And in March, we raised the cap
on SBA’s surety bond program for the first time in 11 years. The
president’s 2025 budget establishes a path to deliver on the Small
Business Act’s long standing directive of directly lending to credit
worthy small businesses who are unable to secure credit in the pri-
vate sector. We have extensive experience with direct disaster lend-
ing, including successfully lending nearly $3 billion to over 43,000
borrowers last year. I know there are many other issues you would
like to discuss, and I look forward to your questions. Thank you.
Chairman WILLIAMS. Thank you. And now we will move to the
Member questions under the 5 minute rule. I recognize myself for
5 minutes. In this year’s congressional budget justification, I was
disappointed to see that plans that the SBA requested to establish
a direct lending program. The SBA is supposed to be the lender of
last resort and not compete with the private sector. When the Ad-
ministrator testified on the Hill last month, she made it clear they
would take an act of Congress to set up a direct lending program.
So, Ms. Frost, do you agree with the administrator that the SBA
will not be able to set up a direct lending program without Con-
gress involvement? And will you commit that you will not take any
actions to skirt this statutory check on the SBA’s ability to set up
the program in the future?
Ms. FROST. The Administrator said during her testimony last
month that we would begin a direct lending business program if
6

given the tools to do so. Of course, we have had a longstanding di-
rect disaster loan program for decades, including lending over $3
billion in the direct disaster loan program last year to about 43,000
borrowers.
Chairman WILLIAMS. The SBA offered two different loan op-
tions to small businesses during the COVID-19 pandemic, and the
Paycheck Protection Program offered forgivable loans for busi-
nesses and was administered with the help of private sector lend-
ers. And the COVID EIDL program offered a long term, fixed rate
loan that were distributed with the SBA. That was the main dif-
ference. Now, both of these programs helped main street businesses
stay afloat during the pandemic. But we now need to reflect on
both of these programs to figure out what do we do moving forward
on them. So the COVID EIDL portfolio is still staying in the gov-
ernment balance sheet, which equates to over $400 billion. And
when an independent consulting firm looked into what to do with
this portfolio back in 2021, they said the agency should sell all or
a portion of the portfolio.
The agency ignored this advice, and since then, the loans have
become less collectible and therefore less valuable to the private
sector. The SBA has requested hundreds of millions of dollars from
Congress each year to continue servicing these loans. So even
though we have requested an analysis of the sale of the EIDL port-
folio for months, we have repeatedly been stonewalled and told to
just look at the PPP data. Well, we know these programs are fun-
damentally different, and the comparisons don’t even make sense.
So I am going to ask you once again, has the agency conducted a
new analysis of just the EIDL portfolio to determine if it should be
sold? And when will the committee be able to see the analysis.
Ms. FROST. So the PPP and the COVID EIDL programs were
both first of their kind, brand new programs. And so, of course, the
agency has paid special attention to both programs in terms of
finding the best way to manage these loans and responsibly move
the programs forward. We are finalizing our analysis on a potential
COVID EIDL sale, and we will share that with the committee
when it is complete.
Chairman WILLIAMS. Now, when the SBA changed the 7a lend-
ing rules, Members of this committee repeatedly voice their con-
cerns that changing the underwriting standards would lead to in-
creased default rates. Now, the data is now starting to come in,
and it is very troubling. The early default race currently sits at
0.86 percent, which is over two times higher than the rate one year
prior, which was 0.39 percent. So this not only increases the risk
the taxpayers have to bail out the program, but it is a death blow
to the businesses that attempted to take out a loan to grow their
businesses before they were ready. So, Ms. Frost, what recourse
does the agency have to reverse this trend? And how will you en-
sure that lenders are using more stringent underwriting standards
to prevent these defaults?
Ms. FROST. So, using modern technology, we are able to keep
a constant pulse on our loan programs portfolio and how all of
those portfolios are performing. I think it is important to note that
during the pandemic, with a lot of government money out in our
economy, there was a historically low default rate in our pandemic
7

programs. And what you are referencing right now, sir, is a regres-
sion to the mean, a return to normal, a return to what we saw in
the pre pandemic baseline of what we kind of expect as a default
rate for our loan programs. We’re, of course, keeping an eye on this
and other critical metrics. And we have strong oversight of all of
our lenders, with appropriate enforcement tools and supervision to
ensure that the program stays on track.
Chairman WILLIAMS. Okay. All right. I yield back my time.
And now, recognize Ms. Velázquez for her questioning.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. Associate Admin-
istrator Frost, in response to a September 2023 IG report, the SBA
rerun the analysis for referrals to the Treasury Department for
loans for $100,000 or less. Can you explain this analysis and why
the SBA changed its referral decision?
Ms. FROST. Absolutely. SBA is a data driven organization, and
we are going to make decisions based on the best data available at
the time. The initial analysis that was conducted on the collect-
ability of these small dollar loans was conducted in early 2022. Ac-
tually, before repayment had even started. So it was modeling,
right. Based on some projections. As the data came in, we actually
updated that analysis three additional times. And the latest anal-
ysis in December of last year showed that it was likely going to be
cost effective if we took that final collection step of referring to
Treasury. And so we began doing so. And as of today, we have re-
ferred over 920,000 COVID EIDL loans to treasury. That’s all of
the COVID EIDL loans that are in default.
Ms. VELÁZQUEZ. For the record, isn’t it true that the IG has
cleared out that recommendation?
Ms. FROST. Yeah, there were a couple recommendations. I be-
lieve they’re either cleared or will be cleared shortly.
Ms. VELÁZQUEZ. As you are no doubt aware, there has been
significant bipartisan concern around the SBA decision to award
Funding Circle an SBLC license. Can you explain the SBA decision
to continue to move forward with the award to Funding Circle,
even after the CEO’s announcement to sell its U.S. operations?
Ms. FROST. It was important to note that we had a strong, ob-
jective and career driven process to select the three new SBLC’s.
And that process actually had three phases. I’d like to walk
through them quickly. The first was the due diligence committee,
which were subject matter experts on my team who reviewed each
and every loan.
Ms. VELÁZQUEZ. Ms. Frost, can you talk to me about just
Funding Circle? Because I have too many questions. I don’t want
to hear the story of the other two, but specifically the one that the
CEO made the announcement to sell its operation in the U.S.
Ms. FROST. Absolutely. So all applicants went through the same
process. But speaking specifically to Funding Circle, they were se-
lected for a reason. They met SBA’s requirements. They had a
strong business plan that was going to help fill a market gap of
small dollar loans across this country. And we are eager to work
with Funding Circle to deliver on the promises in that application.
Ms. VELÁZQUEZ. Okay. Yes or no? Did the company share its
intention to sell its U.S. operation with the SBA prior to the
award?
8

Ms. FROST. At the time of the award, we were not aware of
that, no.
Ms. VELÁZQUEZ. You were not?
Ms. FROST. At the time of they were selected last fall, we were
not aware.
Ms. VELÁZQUEZ. If Funding Circle had expressed that inten-
tion, would the SBA have considered that as part of their applica-
tion?
Ms. FROST. You know, I don’t know about a hypothetical sce-
nario in which, you know, we would have had different information
at the time.
Ms. VELÁZQUEZ. It is very real now.
Ms. FROST. Well, I can tell you at the time that they were se-
lected, we were able to review full company financials, including
audited financial statements, their management team, their experi-
ence, as well as their business plan.
Ms. VELÁZQUEZ. Yes or no? Now that the SBLC licenses have
been granted, has the SBA had any discussion with Funding Circle
about its decision to sell it is U.S. operation?
Ms. FROST. Yes. My team is regularly in contact with Funding
Circle and the other SBLC’s, including kind of regular oversight
conversations, onboarding, conversations about technical capabili-
ties, et cetera.
Ms. VELÁZQUEZ. Have you had any discussion with Funding
Circle about its decision to sell its operation?
Ms. FROST. Yes, we have. My team reached out to them the
night after their earnings call, when they made that public, and we
have had several follow on discussions.
Ms. VELÁZQUEZ. Yes or no, has the SBA had any discussion
with Funding Circle about its potential acquisition by a third
party?
Ms. FROST. Yes.
Ms. VELÁZQUEZ. Am I correct in my understanding that the
other licenses are currently available to be purchased or trans-
ferred?
Ms. FROST. Yes, they are. So there’s, of course, 14 historic SBLC
licenses. Those have traded hands through private sales for over 40
years. And SBA regularly conducts an overview of each and every
change of control for an SBLC license.
Ms. VELÁZQUEZ. According to Funding Circle, the U.S. sub-
sidiary is amply funded. Do you agree with that statement?
Ms. FROST. During their application, they showed that they
were amply funded.
Ms. VELÁZQUEZ. When was the last time that the SBA exam-
ined capital levels?
Ms. FROST. So I know that we had to actually see money in the
bank for them before they signed their 750 agreement, which was
done about a month ago.
Ms. VELÁZQUEZ. A month ago. Funding circle also expected to
start lending in April. Have they started making any loans?
Ms. FROST. They have not yet.
Ms. VELÁZQUEZ. Has Funding Circle signed a 750 agreement
with the SBA?
9

Ms. FROST. They have signed, and we would like them to start
making loans as soon as possible.
Ms. VELÁZQUEZ. Does the SBA have any plans to award any
additional licenses beyond the three that were just awarded?
Ms. FROST. We have awarded three at this time, and that is our
plan.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. I yield back.
Chairman WILLIAMS. Lady yields back. I now recognize Rep-
resentative Mann from the great state of Kansas for 5 minutes.
Mr. MANN. Thank you, Mr. Chairman. Associate Administrator
Frost, thank you for being here. Your engagement with this com-
mittee is important. I represent the Big First district of Kansas,
which is 60 primarily rural counties in the western central, a little
bit in the eastern part of our state. My district is home to more
than 20,000 small businesses, and more than 80 percent of our em-
ployees in the Big First district are employed by small businesses,
which help drive our economy and define the American dream. Un-
fortunately, I’ve heard time and time again from small business
owners in the Big First who’ve been forced to shut their doors and
end their livelihoods because of an aggressive, overly intrusive, and
politically charged federal government. Specifically, I’ve personally
met with one of several mom and pop firearm dealers in my district
who the ATF forced to surrender their licenses and their way of life
and stop contributing to their communities over minor cleric or
clerical errors, like misspelling a name or using a county abbrevia-
tion in their documentation, which the President has declared zero
tolerance for. I am concerned that parts of the federal government
are being used as a bludgeon to stamp out small businesses that
may or may not align with administration on a given political
issue, especially with respect to brick and mortar gun stores on
main street. This should not be a political issue. It is fundamen-
tally un-American to crush small businesses simply because they
do not agree with those in power on politics. A handful of ques-
tions. Are federally licensed firearm retailers eligible for SBA
loans, and if so, which type of loans are they eligible for?
Ms. FROST. So, our loan programs at SBA support all types of
small businesses across all different industries to include those who
would sell firearms.
Mr. MANN. Does the SBA have any policy that applies addi-
tional eligibility requirements to federally licensed firearm retail-
ers?
Ms. FROST. We do not. We have additional policy requirements
on many different types of small businesses, for example, gas sta-
tions, but we do not have any on firearms firearm sales.
Mr. MANN. How many loans does the SBA have with federally
licensed firearm retailers, and are they separately tracked, or how
do you review, monitor, and oversee those loans?
Ms. FROST. So we track by NAICS industry code, but I don’t
know offhand, don’t have the numbers in front of me in terms of
how many, maybe two businesses that sell firearms.
Mr. MANN. Could you maybe get that for me through the NICS
code? If you could get to my office, the number of SBA loans that
exist with our mom and pop, our smaller, our small businesses that
are federally licensed firearm dealers, that would be very helpful.
10

Ms. FROST. Happy to work with you on any agency requests.
Mr. MANN. And we can follow up on that. Are you aware of fed-
erally licensed firearm retailers being singled out in any way by
the administration?
Ms. FROST. You know, I am laser focused on giving loans to
American small businesses, and so that is what my office does and
where my attention is.
Mr. MANN. Where have you seen loan growth while you’ve been
in your position? In other words, what industries or segments have
you seen that is growing, specifically in terms of new loans that are
being generated?
Ms. FROST. Yes, we have seen tremendous growth in small dol-
lar loans. So small dollar loans are up overall during the Biden
Harris administration and looking this period of this year so far to
last year, we’re up about 25 percent in loans under $500,000 to all
sorts of industries. Some of the core industries that our loans sup-
port would be things like restaurants and other mom and pop
shops in downtowns across America.
Mr. MANN. Great. Thank you, Mr. Chairman. With that I yield
back. And thank you again for being here this morning.
Chairman WILLIAMS. Gentlemen yields back. I now recognize
and welcome back Mr. Representative Phillips from the great state
of Minnesota.
Mr. PHILLIPS. Thank you, Mr. Chairman. And greetings, every-
body. Ms. Frost, I recognize that about 85 percent or so of the
EIDL and PPP loans that are subject to fraud were made under
the last administration. So it is hard to hold all of you accountable
for that. But I want to be prospective and ask where the $349 mil-
lion that’s been requested for fiscal year 2025 to support oversight,
how specifically that will be used? As detailed as you can provide
us.
Ms. FROST. Yes. There’s two things I’d like to highlight about
our budget request with regard to the kind of pandemic programs
in the COVID EIDL portfolio. One would be for COVID EIDL serv-
icing center, and that is to ensure that we have excellent customer
service for the millions of Americans and small businesses who
hold COVID EIDL loans, and that we’re appropriately recouping
that money through repayment and other collection activities. And
the second thing I’d like to highlight is——
Mr. PHILLIPS. Can I ask? I want to hear the mechanics, the
how, is it human? And one of my questions is AI. Is there any in-
tention or interest in using artificial intelligence to do the work of
perhaps thousands of people to actually assess these loans and
identify which ones might be fraudulent?
Ms. FROST. Yeah, the rest of the—another portion of the budget
request will go to the OIG to kind of track down these fraudsters.
We actually, during the pandemic program under the Biden Harris
administration, stood up a machine learning tool to help automati-
cally screen all of the pandemic loans, including those done under
the previous administration. And we used that really as a triage
to help kind of best use our human led resources for human man-
ual reviews.
Mr. PHILLIPS. And was that successful?
Ms. FROST. I believe it was very successful.
11

Mr. PHILLIPS. Okay, so any plans to further integrate such
technology?
Ms. FROST. I will say there are lots of ideas. We do not have
any concrete plans at this time.
Mr. PHILLIPS. Okay. Anyway, so back to the use of the 349 mil-
lion.
Ms. FROST. Yeah. So the two things I’d like to highlight there
would be the work of our COVID EIDL servicing center based in
Fort Worth, Texas. And as I mentioned, also requesting additional
support for the OIG so that they can go after these fraudsters. We
have referred millions of loans to the office of the inspector general.
They’ve got a big job, and they need some additional resources so
that they’re actually able to pursue the fraudsters and get this
money back for the federal government.
Mr. PHILLIPS. Okay, appreciate that. A question about, you
know, the decision that was then changed about the loans under
$100,000, to pursue those. Can you just talk about how that deci-
sion was first made and why it was changed?
Ms. FROST. Yeah. So the decision was first made in early 2022
based on the best data and modeling available at that time. But
actually, none of the portfolio had entered repayment. And so, we
have updated that analysis now several times. And, you know, the
longstanding policy of the agency has been to use all cost effective
collection mechanisms to recoup the money from the COVID EIDL
program on all sizes of loans. What changed is the analysis
showed, based on updated data, wasn’t previously available, that it
would likely be cost effective to conduct that final step of collections
of referring to Treasury. And so we have begun doing so.
Mr. PHILLIPS. And lastly, with your experience so far at SBA,
if you could wave a magic wand and change anything that you’ve
seen so far quickly, what would that be?
Ms. FROST. I would love better access to IRS tax data.
Mr. PHILLIPS. Okay, thank you. We’ll get to work. With that I
yield back, Mr. Chair.
Chairman WILLIAMS. Gentlemen yields back. I now recognize
Representative Crane from the great state of Arizona for 5 min-
utes.
Mr. CRANE. Thank you, Mr. Chairman. Appreciate you being
here. Ms. Frost. Ms. Frost, what is the SBA’s number one form of
capital generation?
Ms. FROST. You know, I believe that our loan programs are
powerful tools to support American small businesses.
Mr. CRANE. I said capital generation. Do you guys generate any
capital? Ms. Frost, where are you getting all this money that you
are so excited here today to give out to American small businesses?
Ms. FROST. So, one of the incredible things about our loan pro-
grams is that they’re subsidy neutral. It is one of the most impres-
sive public private partnerships in America. And so, we partner
with our loan, our loan, private sector lenders, and through fees
and recoupment on our loan program, it actually operates at zero
subsidy to the taxpayer. It is really an incredible partnership.
Mr. CRANE. So you guys don’t have a product or a service that
we don’t know about at the SBA, that you guys are selling?
Ms. FROST. We——
12

Mr. CRANE. Little tchotchkes, hats, t shirts, anything like that?
Ms. FROST. No, we manage our loan programs under my office
as well as the surety bond program.
Mr. CRANE. So is it fair to say, Ms. Frost, that you guys take
money from the American taxpayer and then redistribute it to
small businesses that you guys deem priority?
Ms. FROST. I don’t think that’s quite accurate. However, our di-
rect disaster loan program does not operate at zero subsidy. That
one is subsidized by the taxpayer to help small businesses across
the country who’ve been impacted by devastating disasters.
Mr. CRANE. So you guys don’t generate any money, right?
Ms. FROST. No, actually, the programs generate funding
through fees and then recoupment on loans.
Mr. CRANE. Okay, Ms. Frost, what would you have to say to
Americans that are paying their taxes, that fund these lending pro-
grams that aren’t starting, small businesses that feel like they’re
being left out and they don’t benefit at all from them?
Ms. FROST. I think that the entire economy and the entire coun-
try benefits from a vibrant small business economy. You know, if
you are visiting restaurants, if your child goes to childcare, you
know, if you kind of do recreational activities, you are benefiting
from America’s small businesses, and I am incredibly proud to sup-
port them.
Mr. CRANE. Yeah. Do you feel like they’re benefiting from the
inflation that the record high inflation that we’re seeing right now,
Ms. Frost?
Ms. FROST. I believe inflation’s about 3 percent right now, and
it is fallen significantly.
Mr. CRANE. Yeah. Okay. Ms. Frost, how much was the SBA de-
frauded during COVID?
Ms. FROST. The agency’s best estimate on pandemic program
fraud is $36 billion.
Mr. CRANE. $36 billion. I’ve heard the numbers are quite a bit
higher than that, to the tune, there was about $200 billion worth
of fraud.
Ms. FROST. So some confusion, there is, there’s a difference be-
tween what we’d consider potential fraud and then likely fraud.
And the way to best think about this is it is kind of like a metal
detector, right? When you first walk through a metal detector and
it goes off, you need to look into it a little further, but you don’t
actually know if it is something dangerous or if it is just a big belt
buckle. So that potential fraud is like that metal detector going off.
SBA found over $400 billion in potential fraud through our auto-
mated screening. That was the first of our four step process. Our
second step was using data analytics, including that machine
learning tool I just mentioned, to refine that fraud down or refine
the potential fraud down so we could conduct manual reviews. That
was our third step. We conducted millions of manual reviews on
pandemic loan programs. And then the fourth step is referring that
over to OIG. So you can think about it much like the metal detec-
tor. Maybe the metal detector’s going off a lot, but you have to ac-
tually investigate each and every one to get a sense of what’s real
and what’s just a big belt buckle.
13

Mr. CRANE. Okay, so your claim is $36 billion. Is that what you
said?
Ms. FROST. That’s the agency’s best estimate, yes.
Mr. CRANE. Okay. Is there any chance that you guys will recoup
any of that?
Ms. FROST. You know, so recoupment for fraud is done through
the law enforcement community. That starts with the SBA, Office
of the Inspector General. It includes the Secret Service, the Depart-
ment of Justice, et cetera. And I know the President’s budget re-
quested additional funding for the SBA OIG for exactly that pur-
pose, to go after the money.
Mr. CRANE. Ms. Frost, you said in your testimony, under the
Biden Harris administration, there has never been a better time to
start a small business. Is that correct?
Ms. FROST. That’s correct.
Mr. CRANE. The Bureau of Labor Statistics reports that since
Biden took office, we have $7 trillion added to national debt, 36
consecutive months of inflation above 3 percent, producer price
index is 19 percent increase. Consumer price index, 19.4 percent in-
crease. Credit card interest rates, 20.75 percent increase. House-
hold debt for every American is $18,100 increase in taxpayer, and
then 100 million working age people not participating in the work-
force. Do you still stand by that statement?
Ms. FROST. I do. And I think that the data supports that. Amer-
icans across this country are starting businesses. The past three
years have been the three highest business start years on record,
and we have had over 17 million new business filings since the
start of the Biden administration.
Mr. CRANE. Well, what about those statistics I just read you?
Ms. FROST. I think it is incredibly difficult to be a small busi-
ness owner in America. And I admire each and every one of them
for the tenacity that they have to continue working, regardless of
the condition, to support their communities.
Mr. CRANE. Thank you, Ms. Frost. Thank you, Mr. Chairman.
I yield back.
Chairman WILLIAMS. Gentlemen yields back. I now recognize
Representative Pappas from the great state of New Hampshire for
5 minutes.
Okay, he’s not here. All right. We now recognize Representative
McGarvey from the great state of Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman. Thank you for
being here, Ms. Frost. Like Ranking Member Velázquez and so
many of my colleagues here today on this committee, I remain fo-
cused on increasing capital and access to capital for those who lack
it, and ensuring that everyone does have that chance at the Amer-
ican dream of starting a business, of having it be successful. I’d like
to spend some time today on the changes the SBA made to lending
programs and its April 2023 rules on business lending. The final-
ized affiliation and lending criteria rule removed the concept of
control of one entity over another as a basis for finding affiliation,
arguing that the concept of control has proven particularly burden-
some for applicants and lenders to understand and implement. As
part of that change, the SBA stopped publishing its franchise direc-
tory. About a fifth of SBA lending goes to franchising, and SBA
14

Capital is an important source of startup funding for franchisees.
So Associate Administrator Frost, now that the rule is final and
the SBA no longer publishes the franchise directory, have you seen
a change in the speed of approval for franchisee lending applica-
tions?
Ms. FROST. I would need to go check with the data to look spe-
cifically at the speed for franchisees, but I can tell you that the
turn times in our loan processing centers are down. They’re very
quick right now, and I am very proud of the team.
Mr. MCGARVEY. Awesome. And has the SBA’s decision to elimi-
nate the directory led to, I should ask, what positive and negative
changes have occurred as a result of the SBA’s decision to stop
publishing the franchisee directory?
Ms. FROST. I think our changes on the affiliation rules should
be celebrated as a way that government has reduced unnecessary
friction in our loan programs. You know, the concept of affiliation
is this inherently governmental concept we developed for the SBA
loan programs. And our lenders would constantly say, you know,
they had to hire a team of lawyers to work through it. Now it is
clear, it is based simply on ownership. Who owns the business and
who does the business own? A business owner can understand it.
Our lenders can understand it, and it is clear for everyone in-
volved.
Mr. MCGARVEY. From serving as a legislator for a long time,
I know that sometimes even the best intended policy has unin-
tended consequences. Have you seen any unintended consequences
from this change?
Ms. FROST. We have not at this time, no. Small dollar lending
is up tremendously since last year, about 25 percent for loans
under $500,000.
Mr. MCGARVEY. Thank you. Several of my colleagues and I
have expressed concern to Administrator Guzman about the SBA’s
decision to award an SBLC license to Funding Circle. When she
was before this committee in March, there were significant ques-
tions about Funding Circle’s capital, adequacy, and performance
prior to them obtaining the SBLC license. Are we setting a prece-
dent where lenders with inadequate capital levels and significant
losses can be let into that program?
Ms. FROST. I think it is important to note that in selecting the
new three SBLC’s, including Funding Circle, we reviewed full fi-
nancial audited statements for each of the applicants to include
Funding Circle, and they were appropriately capitalized. Now,
every SBLC needs to meet our standards, and should there be any
change in ownership or control for Funding Circle or any other
SBLC, we review the kind of buyer, if you will, to ensure that they
still met our standards. And we have conducted reviews like that
as these previous licenses changed hand in the private markets
over 40 times over the past few decades.
Mr. MCGARVEY. And as you guys have looked at this and
what’s happened, have there been any discussions about the SBA
changing its metrics when considering applications for SBLC li-
censes going forward.
Ms. FROST. I believe we had a strong and objective process for
selecting our SBLC’s. Kind of had three phases. The first phase
15

was the due diligence committee, where subject matter experts on
my team reviewed each and every application that came in, and
they basically binned those applications as recommended for con-
sideration or not recommended. Then it went to phase two, which
was the review committee that included experts from around the
agency to include legal, like our CFO’s office, the Office of Invest-
ment, and we discussed and debated the recommendations of the
due diligence committee. Right. You ask questions, you bring in
other experience. And then finally, the third phase was the license
committee vote. That was five career Members of our senior execu-
tive service, and they voted unanimously to select the three SBLC’s
that were selected last fall, which are Arkansas Capital Corpora-
tion, McKinley Alaska Growth Capital, and Funding Circle. And so
that’s kind of our process. I think it was a very strong, career led
process, and I am proud of the team.
Mr. MCGARVEY. Thanks. And the last 30 seconds, just sort of
an open ended question. What would you like to see from this com-
mittee that you would think help continue to grow small businesses
in this country?
Ms. FROST. I think there’s a lot that we can continue to do to
improve our loan programs. We’re regularly talking with our lend-
ers and Members of your staff to do that. So some of the areas that
we’re excited to continue focusing on include what can we do for
refinance capability within the 504 loan, and what can we do to im-
prove line of credit products under our loan programs overall.
Mr. MCGARVEY. Thank you, Mr. Chairman. I yield back.
Chairman WILLIAMS. Gentlemen yields back. I now recognize
Representative Davids from the great state of Kansas for 5 min-
utes.
Ms. DAVIDS. Thank you, Chairman. And thank you to you and
the Ranking Member for holding this hearing today. And thank
you to Associate Administrator Frost for being here to testify. Sorry
I am short. I definitely appreciate the work that you and the folks
at the Small Business Administration are doing to help our na-
tion’s entrepreneurs. You know, one of the top concerns we hear
about from small businesses in our districts, and you’ve already
heard it today, is access to capital. And I know your office is abso-
lutely critical in ensuring that our main street businesses have the
lending opportunities that they need to succeed. And with that in
mind, I do want to touch on the Community Advantage Program.
And as folks know, this is a mission based lending program that
was transitioned into the small business lending company program
last year. In doing so, the SBA is attempting to support lenders
that are better able to reach underserved entrepreneurs. That in-
cludes veterans, women, folks in rural areas, native owned small
businesses. And this is with smaller dollar loans. So I am curious
if you could tell me, to date, what progress have these mission
based lenders made in improving access to capital for the under-
served entrepreneurs that you all are trying to reach? And what
kind of generally are SBA’s goals for the community advantage
lenders in the coming year or so?
Ms. FROST. Thank you for bringing up the Community Advan-
tage Program. Mission based lending holds a special place in my
heart, and I am proud of the that we did last year to create the
16

community advantage small business lending company license,
where, as you mentioned, we brought 142 lenders onto that license
so they can now conduct 7a lending that included 30 new mission
oriented lenders last year. We have been clear that our top priority
this year is getting those 142 lenders up and settled in the pro-
gram. We developed a strong training. It was a 16 hours training,
I believe, for each of them, and they have been working through
it. I think we’re either done or very nearly done with all of them
on that. And community advantage lending is also up about 17 per-
cent through quarter two of this year compared to the same time
last year. We believe that the community advantage lenders are
embracing the permanency of this license such that they’re able to
plan technology, recruitment and funding to better support these
mission driven loans in the hardest to reach communities around
the country.
Ms. DAVIDS. And then are there any aspects of that that you
think that we probably need to know about as you move forward
with continuing to implement and get the training going and that
sort of thing, are there any issues that you are seeing yet or any-
thing that we should be aware of as we plan?
Ms. FROST. I think that our smaller lenders and our mission
based lenders face a lot of challenges, including kind of finding the
business, bringing them in, as well as securing sources of funding
for lending. So SBA is always interested in how we can support
smaller lenders, and especially our community driven lenders in li-
quidity. So just having the money to conduct the loans, that’s some-
thing that we’re really interested in.
Ms. DAVIDS. Okay, thank you. And then I know in your testi-
mony, you mentioned the SBA’s revamped Lender Match tool,
which includes the community advantage lenders. And the tool is
important in connecting small businesses to SBA backed lending
opportunities. But I do often hear from our kind of local small busi-
ness owners and entrepreneurs that the SBA’s tools and programs
can seem daunting or complicated, which you actually kind of
spoke to earlier. I am just curious how SBA has incorporated that
feedback and has been reworking the Lender Match tool or other
systems, if there are other systems that you’ve been reworking, to
help those platforms specifically for access to capital work better?
Ms. FROST. So we relaunched Lender Match this past spring
under the MySBA platform. Lender Match is an incredible tool.
About 50,000 small businesses each month come into Lender Match
looking for capital, and they can match with about 1,000 SBA lend-
ers, including, as you mentioned, over, I believe, 250 or so commu-
nity based lenders who can provide those loans. We kind of serve
as the matchmaker through this process, and our relaunch this
spring had tremendous improvements for our smaller lenders and
our community driven lenders. Most notably, we went from what
we’d consider a cold lead to a generated lead. So we ran all these
small businesses through our risk mitigation framework to check
for core elements of fraud and eligibility. Some of the big lenders
could already do that sort of thing on their own, but now everybody
gets that information, and we now have a 48 hour window for all
of our lenders to look at the kind of leads coming in from these
businesses and act on them. Previously, it was a kind of quickest
17

draw wins, or at least quickest draw gets an advantage, which, of
course, would advantage larger lenders who were able to hire staff
on that topic. Now, everyone has the same 48 hours window.
Ms. DAVIDS. Thank you. I appreciate that. We might follow up
a little bit after this, but I yield back.
Chairman WILLIAMS. The lady yields back. And I now recognize
Representative Meuser from the great state of Pennsylvania for 5
minutes.
Mr. MEUSER. Thank you very much, Mr. Chairman. Thank you,
Ms. Frost. Appreciate you being here. So, there are some lenders
who feel that they are inaccurately or inappropriately not receiving
their funding for their guaranteed loans that they extended. As you
and I had a conversation, and they feel as if they followed the four
requirements which you outline and know extremely well. Confirm
receipt of bar of certifications, confirm receipt of information that
a bar was eligible, confirm the dollar amount, follow applicable
BSA requirements. So, are you aware that there are lenders who
feel they’ve fully complied with these four requirements, but are
seeing denials?
Ms. FROST. So I am aware of these lenders, and I’ve actually
had one on one or private conversations with many of them. But
I think it is also important to note that SBA had clear under-
writing standards for the PPP program. They were significantly
less than the underwriting standards for our traditional 7a loan
program, as it was an emergency program. But those underwriting
standards were published in the IFR, the Interim Final Rule, in
April of 2020, and stayed consistent. And we are ensuring that all
of our lenders met those standards for underwriting before grant-
ing guarantee purchase.
Mr. MEUSER. But there are some that feel that the proverbial
goalposts have moved and the documentation requirements have
somewhat changed. Can you commit to honoring the guarantees
made to lenders who complied with the requirements laid out in
statute and regulation or in the FAQ’s at the time the loan was
made?
Ms. FROST. We will absolutely honor the guarantee for all lend-
ers who met the requirements for the program.
Mr. MEUSER. Sure. Okay. So what is the timeframe for some
of these disputes?
Ms. FROST. So when we’re conducting a guarantee purchase re-
view, it is depending on the risk rating of the file. It is a loan by
loan review, and we request documentation from our lenders in
many instances so that we can continue to move through the loan
file. So we need to work in partnership with our lenders. They need
to submit those documents to us in a timely fashion, and our team
needs to review them quickly, and our team stands ready to con-
duct that work.
Mr. MEUSER. Work if we know of some very serious issues
where some lenders may go out of business, or so they claim, can
we make specific requests to you, and can you provide to them in
detail what it is you need from them in order to properly assess
their funding?
Ms. FROST. Absolutely. We have been consistent and clear about
what meets the standards for underwriting for the PPP program in
18

our guarantee purchase review, and we will pass that information
along to you and your team, as well as any lenders who are seeking
it.
Mr. MEUSER. And can that be done within like a three to four
week period if we were to submit that to you?
Ms. FROST. We can get that done quickly.
Mr. MEUSER. Okay, that’s great. So, changing subjects. The
CEO of Funding Circle, one of the three companies to be awarded
a new SBLC license, reported two months ago that they basically
couldn’t handle it wasn’t worth it, et cetera. The question is, is it
common practice? And I assume it is not common practice, but why
would the SBA approve an SBLC for a company with mounting
losses and unwillingness to provide capital, as Funding Circle has
disclosed?
Ms. FROST. So it is actually pretty common in the financial in-
dustry for businesses to take a loss for a couple years during, for
example, a growth period, or at the start of a new loan fund pro-
gram. So losses for a specific period is not in and alone itself con-
sidered a huge negative indicator. You do want to, of course, ensure
that the company is properly capitalized, that they have appro-
priate loan loss reserves, and that they have prudent lending
standards. Funding Circle did meet all of those requirements.
Mr. MEUSER. Okay. But it didn’t work out for them very well.
Ms. FROST. I mean, I know that Funding Circle has expressed
they may sell, but that may happen and it may not.
Mr. MEUSER. So we have had questions about Michigan reg-
istration initiatives in cooperation in partnership with the SBA. Do
you feel, A, that that’s appropriate, and B, are there taxpayer
funds being utilized to register voters, specifically in areas that
seem to benefit one party over another?
Ms. FROST. So I should be clear that I do not work specifically
on this issue. But I understand from colleagues that this is simply
providing information, much like a DMV, motor voter law, kind of
just a link on our website.
Mr. MEUSER. Yeah, it is more than that. I mean, there’s active
engagement, there’s kiosks, there’s talk. There’s certainly, even if
it is a dollar, would you agree that even if it is $20 of taxpayer
money, that is inappropriate?
Ms. FROST. Sir, as I mentioned, I don’t work on this program.
From what I understand, it is simply helping very, very busy small
business owners get easy access to the state, kind of nonpartisan
place to register to vote.
Mr. MEUSER. I am over my time. Thank you, Mr. Chairman. I
yield back.
Chairman WILLIAMS. Gentlemen yields back. I now recognize
Representative Scholten from the great state of Michigan for 5
minutes.
Ms. SCHOLTEN. Thank you so much, Mr. Chair. And thank you
to Associate Administrator Frost for coming today. In your testi-
mony, you discussed several ways in which the SBA, of course, is
working to increase access to capital, something very important to
me. My colleague, Mr. Meuser, and I just passed a great bill ad-
dressing this issue. In regards to establishing services such as the
My SBA loan portal, how do these technologies assist small busi-
19

nesses who need more support, and are there improvements you
are looking to make to these systems moving forward?
Ms. FROST. So the MySBA platform is an incredible kind of one
stop shop or single entry point to SBA that will eventually cover
all of our programs. We’re kind of bringing them on, you know, as
we’re able. And so, for example, our disaster loan program is now
on the unified lending platform under MySBA, this provides a mod-
ern, mobile first application for our customers so that small busi-
nesses are able to interact with the SBA using modern tools. They
can do things like paying online, setting up recurring payments.
They can make kind of some basic servicing actions, do that on
their own in the app, and we have easy access to a messaging por-
tal and our customer service center if they need a little more help.
Ms. SCHOLTEN. That’s great. In your testimony, you also talk
about significant progress that the SBA has made in making small
dollar loans more available. However, you also note that half of the
employer firms who applied for more capital didn’t receive what
they needed. Can you speak to any common issues that cuts across
this group of firms and what prevented them from receiving the
capital they requested? And are there areas in which the SBA can
expand support to these businesses? What is it doing to address it,
in other words?
Ms. FROST. Yeah, so the report that I mentioned where half of
the businesses seeking funding did not receive it. To be clear, that
wasn’t just SBA loans. That was a Federal Reserve study, their
employer firm study they do every year that looks at small busi-
nesses across America seeking access to credit through a number
of different means. I actually think that the SBA loan products
play a critical role in expanding access to credit overall in this
country, and I want to make sure every business knows about
them and our Lender Match tool as an easy way to get connected
to SBA lenders.
Ms. SCHOLTEN. Making sure that small businesses know about
the products that are available is also a passion of mine. We en-
counter numerous businesses all the time saying, you know, I
didn’t know about that. What are you doing to make sure that
they’re aware specifically about these products?
Ms. FROST. So my team works closely with several other teams
at SBA who support getting the information out about SBA serv-
ices and programs. That includes our field office. We have 68 field
offices around the country, our Office of Entrepreneurial Develop-
ment, who works in close partnership with resource partners
around the country to reach America’s small businesses and sup-
port them through SBA programs and through all other programs
available to support small businesses.
Ms. SCHOLTEN. That’s great. Lastly, I really appreciate the
work that the SBA has done to prevent instances of fraud, includ-
ing implementing new technologies to better provide screening and
close collaboration with the Inspector General and other law en-
forcement agencies. It is also police week here on the Hill, and I
wonder if you could tell us more about your work with law enforce-
ment agencies to combat fraud. And are there ways that Congress
can help support this work?
20

Ms. FROST. The way that our risk mitigation framework now
works is that when the business submits information, we use a
number of private sector and public databases, private sector, ex-
cuse me, and public, like government only sometimes databases, to
check the information provided to validate it against these third
party databases. Basically, to check that it is true and correct. We
then are able to move those loans forward that are either if there’s
a hold, we’re able to clear it, or we’re able to say that there’s no
potential fraud concern. This is all done pre origination. And this
risk mitigation tool was launched for our business loan programs
for the first time ever last August. You know, traditionally, it was
the lender’s responsibility only to kind of prevent fraud. SBA
thinks that we are stronger when we work together in partnership
with our lenders, so they’re going to keep doing their part. Now
we’re stepping up to do our part. And of course, anything that looks
potentially fraudulent, or likely fraudulent, we refer to the office of
the Inspector General. And the president’s budget request did re-
quest additional funding for OIG so that they can go after the
fraudsters, especially those who committed pandemic fraud.
Ms. SCHOLTEN. Thank you. I yield back.
Chairman WILLIAMS. Gentlelady yields back. I now recognize
Representative Stauber from the great state of Minnesota for 5
minutes.
Mr. STAUBER. Thank you, Mr. Chair and Ranking Member
Velázquez. Ms. Frost, we have a Minnesota business supporting
227 good paying jobs that has had a miserable and disappointing
experience with the SBA’s PPP audit and appeals process. The pri-
mary frustration with this process has been the lack of clarity and
communication from the SBA throughout the entire process. Not
only has the SBA failed to respond to two letters submitted by im-
pacted organizations, but the SBA has also failed to respond to two
elected officials from the state of Minnesota, Senators Klobuchar
and Congressman Emmer, respectively. Ms. Frost, what is the
SBA’s procedure for following up on inquiries made by appealing
parties?
Ms. FROST. So, we, of course, take all agency requests from
Members of Congress and other elected officials seriously. You
know, my office responds to them, and then, of course, it moves
through an interagency concurrence process. So we work closely
with our colleagues on any of those requests.
Mr. STAUBER. Okay, so the business requested a response. Sen-
ator Klobuchar requested a response, and so did Congressman
ever. No response. Can you commit today you’ll work with them?
Ms. FROST. Absolutely. Happy to work on any agency requests.
And if you pass along the name of that small business, I will get
it to my team so that we can look into it.
Mr. STAUBER. Thank you very much. Now, on to something.
Another concern that I have with the SBA’s procedures. Ms. Frost,
when was the last time that you talked to Patrick Kelly?
Ms. FROST. I had lunch with Patrick a few months ago.
Mr. STAUBER. A few months ago? Explain. Two months ago?
Three months? Do you remember?
Ms. FROST. I don’t remember offhand.
Mr. STAUBER. A couple months ago?
21

Ms. FROST. Yeah. Maybe December or so.
Mr. STAUBER. Okay, December. Has Patrick Kelly spoken to
you about any policy changes since he departed from the SBA?
Ms. FROST. You know, Patrick and I don’t speak regularly, but
when we had lunch, we talked primarily about our families. I have
a young daughter, and he has two children.
Mr. STAUBER. So you didn’t talk about any policy changes since
he departed from the SBA?
Ms. FROST. We talked about some of the work that we had done
together, but we primarily focused on personal matters.
Mr. STAUBER. Okay. Has Patrick Kelly spoken to you about
Funding Circle in any capacity since he departed from the SBA?
Ms. FROST. No.
Mr. STAUBER. Do you know what Funding Circle is?
Ms. FROST. Yes, of course. Funding Circle is one of our new
SBLC’s.
Mr. STAUBER. One of the three new ones, correct?
Ms. FROST. That’s correct.
Mr. STAUBER. That he lobbied for? Correct.
Ms. FROST. I am unaware of any contact between Patrick and
Funding Circle, or any connection.
Mr. STAUBER. Has Patrick Kelly ever given you or any em-
ployee at the SBA either political or career, any instructions or ad-
vice relating to Funding Circle receiving an SBLC license?
Ms. FROST. No.
Mr. STAUBER. Not at all. Not at all?
Ms. FROST. No, not at all.
Mr. STAUBER. Are you aware of Patrick Kelly working with
Funding Circle in any capacity?
Ms. FROST. I am unaware of any connection between Patrick
and Funding Circle.
Mr. STAUBER. Are you aware of any type of consulting agree-
ment that Funding Circle has with government forward where Mr.
Kelly is currently employed?
Ms. FROST. I am unaware of any connection between Patrick
and Funding Circle.
Mr. STAUBER. Per Funding Circle’s own statements, it intends
to sell its license, as it has intended to do since before the SBA offi-
cially awarded it. Since the agency continues to ignore Congress,
today, I feel compelled to pass on a clear warning. If the license
ends up in the hands of a former SBA employee, there will be an
investigation into such a clear ethical violation. I hope we will not
have to provide such oversight. And with that, Mr. Chair, I yield
back.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Representative Gluesenkamp Perez from the great state of Wash-
ington for 5 minutes.
Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chair. Associate
Administrator Frost, thank you for being here today. As my col-
leagues have heard me share many times before in committee, be-
fore coming to Congress, I owned an auto repair and machine shop
with my husband, and we utilized an SBA 504 loan to buy our
shop. And that program was truly a vital source of capital for me,
and I know it is for many other small businesses working in the
22

trades. I will say we did have a hell of a time going through the
process. When Administrator Guzman was here in January, I
asked her about what the agency was doing to make the experience
more navigable for first time entrepreneurs who don’t have a year
to spend on the process. I am hoping you can provide an update
on the agency’s enhanced platform now that it is up and oper-
ational. How has it enhanced customer service? And how are you
fielding a Representative sample of input from all sizes of busi-
nesses? Mom and pops up to the big guys, not just the folks that
have a compliance department or administrators. And how would
that feedback be incorporated?
Ms. FROST. Thank you for your question. I share your passion
for making our programs accessible and easy to understand. And
of course, the changes that we introduced last August, we believed
really reduced some of these unnecessary frictions that made the
program so complex, especially for first time folks come in to get
a loan, or for anyone looking for those smaller dollar loans that, of
course, often are underrepresented. Small businesses are first time
startup businesses or businesses in the trades, rural businesses, et
cetera. And so we’re really proud of those reforms. We have seen
small dollar lending respond, and we’re up about 25 percent com-
pared to the same time last year. Now, I think there’s still more
good work to be done on this and would be happy to work with you
and your team on how we can further improve the loan programs.
Ms. GLUESENKAMP PEREZ. Are you aware of how applicants
feedback might be incorporated or responded to, and how it is field-
ed? How is that feedback solicited?
Ms. FROST. So primarily for our business programs, our busi-
ness loan programs, they work through private sector lenders, or
for the 504 program through our CDC partners, our community de-
velopment company partners. And so each and every one of them
will have kind of different setups, different experiences on how
they interact directly with the small business borrower. But we be-
lieve that setting the conditions for success will be kind of reducing
those unnecessary frictions for the program. Right. If the lender
can then better understand the program, they can better explain
it to the small business. And of course, my team regularly works
with lenders. We’re actually now setting up the first ever small
business lending advisory council that we can connect with the
lenders directly. And importantly, on that advisory council, we are
reserving seats for Members of the small business community to be
there, as you are mentioning. Hopefully all sizes of small busi-
nesses can be represented so we can hear directly from them as
well.
Ms. GLUESENKAMP PEREZ. Yeah, I would love the oppor-
tunity to engage on how those positions will be allocated, that it
is not just like cute shops or big guys, that it is truly machine
shops, auto shops, the kind of nuts and bolts of keeping our econ-
omy rolling. And thank you for your work. I am wondering if you
could share how the updated tool will make it easier for borrowers
to connect with lenders and compare rates for SBA backed loans.
Any insight into how this might be helpful for rural entrepreneurs?
Ms. FROST. Yeah, so I think that Lender Match our tool to sup-
port our small business borrowers and connect them with SBA
23

lenders is incredibly important for our rural small businesses as I
am sure you know, there are so many more banking deserts in this
country about 1,700 last report that I saw, and that’s especially
true in the rural areas of this country. But now, anyone you know,
you can, if you can access the Internet, you can go to Lender
Match, you can put in some simple information about your busi-
ness and the type of capital you need, and you are matched with
up to, there’s 1,000 participating lenders who can respond to that
request. Some of the improvements we just made on this platform
include bringing it under the MySBA platform. So again, that’s our
one stop shop. We’re moving everything under that umbrella and
also making it such that all of our lenders have the same 48 hours
window before they’re able to kind of click into support or opt in
to a lead from a small business. That means from a small business
perspective, and this is the most important perspective, after two
days, I can log on and I can see all of the lenders who I’ve matched
with, and I can select which lender I’d like to potentially get more
information from and potentially get a loan from.
Ms. GLUESENKAMP PEREZ. Do you anticipate any particular
impacts on rural communities access to capital through that?
Ms. FROST. I certainly anticipate that rural communities will
use this tool, and I am excited to look into what we see and how
the changes from the spring have hopefully impacted that program.
Ms. GLUESENKAMP PEREZ. Okay, thank you so much. I yield
back.
Chairman WILLIAMS. Gentlelady yields back. And I now recog-
nize Representative Maloy from the great state of Utah for 5 min-
utes.
Ms. MALOY. Thank you, Mr. Chairman. Hi. In preparation for
this hearing, I reached out to some of the local chambers of com-
merce and regional banks in my district that spent a lot of time
working with small businesses. And a lot of their mission is to try
to get small businesses up and running and stable to help these
economies in rural Utah. And when I reached out and asked about
this hearing, I got a lot of complaints about the SBA, and I’ve
grouped them into a couple of broad categories that I want to talk
about.
So with the Chambers of Commerce, one in particular had an
MOU with the SBA for trying to get SBDC assistants to a lot of
the new and emerging small businesses. And they have gone
through a lot of hurdles and hoops and made sure that people are
registered with the right agencies, and they filled out the right pa-
perwork, and then they’re not getting a lot of funding. And so, it
is been a frustrating experience for them that they were really en-
thusiastic about having this partnership and thought it was going
to be really helpful and now they feel like it is a bureaucracy with-
out a lot of benefit.
And then with the regional banks that specialize in lending to
small businesses, they had a similar complaint. They feel like the
SBA programs have a high cost of participation, a lot of bureauc-
racy, a lot of hurdles, and then not a lot of benefit in the end. And
so they don’t feel like they can recommend them to their customers.
But then with things like EIDL loans, the SBA is directly com-
peting with these same banks that are there and the communities,
24

trying to make sure that our main streets are vibrant. And then
they’re competing directly with a federal agency that’s supposed to
be helping and isn’t really helpful. And so I am going to start with
the banks. How does the SBA view its role in relation to private
banks, especially considering direct lending initiatives that compete
with private sector loans?
Ms. FROST. I believe that our business loan programs are one
of the most incredible public private partnerships in this country,
where we partner, we SBA partner with the private sector lender.
They, of course, deliver the loan, and we provide a government
guarantee on that loan. I know you mentioned some of the lenders
you spoke with said the programs were cumbersome, a little
clunky, and that’s feedback we have been receiving for decades at
SBA. We did take action on that last year to reduce some frictions,
especially for smaller dollar loans. But I believe there’s more work
to be done on that as well.
Ms. MALOY. So what’s the best way for lenders in Utah to give
feedback to the SBA? Because they’re right there on the ground.
They’re seeing what’s not working. How do we get their feedback
to you so that we can improve these programs?
Ms. FROST. Any lender who’s interested in learning more about
SBA loans, please send them my way to my team. We do have reg-
ularly quarterly calls on our key business loan programs where
folks can submit questions, so lenders can submit direct questions.
We have several different email addresses for each loan program
where they can submit questions. And my team holds regular
webinars providing information out to the lender community.
Ms. MALOY. Okay, I am going to have my staff follow up with
you as soon as we’re done here, because I think they would jump
at this opportunity because they’re really frustrated with how it is
going. And then for the Chambers of Commerce, how does the SBA
evaluate the effects, effectiveness of partnerships like this, where
you have an MOU with an organization and you’ve got mutual
goals, but the smaller entity, the rural Chamber of Commerce, or
the local Chamber of Commerce doesn’t feel like it is mutually ben-
eficial anymore. The SBA is a large federal entity. It is hard to ad-
just. How are you evaluating how those partnerships work and ad-
justing so that they work for local chambers?
Ms. FROST. So I am not familiar with the particular MoU you
are speaking about. And actually, the SBDC program is largely run
out of the Office of Entrepreneurial Development. So a different of-
fice at SBA. I’d be happy to refer those questions over. But I can
tell you I recently took a trip to Alaska to visit one of our new
SBLC’s, McKinley, Alaska growth capital. And there I also had the
opportunity to visit some other lenders who support rural commu-
nities. They’ve got a lot of rural communities in Alaska, much like
in Utah, as well as the rural communities and small businesses out
there. And so, I do have some good firsthand perspective on how
hard it can be to serve rural communities. And SBA is extremely
interested in helping our capital programs better serve those small
businesses.
Ms. MALOY. Well, from the people I represent, there’s a lot of
frustration that the potential is there for these to be really helpful,
but the reality, it just isn’t panning out. So I am going to have my
25

staff follow up with you. Let’s see if we can get some of these
things fixed. Thank you for your time with that, Mr. Chairman. I
yield back.
Chairman WILLIAMS. Lady yields back. And now I recognize
Representative Landsman from the great state of Ohio for 5 min-
utes.
Mr. LANDSMAN. Thank you, Mr. Chair. Thank you for your tes-
timony and all your work today. I just have a few questions. I
mean, you know, the paperwork issue is a big one, and I am glad
you are working on it. I wonder if you, we have a little more time,
if you could just talk a little bit more about what you have found
to be the biggest barriers or the feedback that you get on these
quarterly calls or wherever. In terms of just the bureaucracy
around this, obviously we want to avoid fraud and we want to
make sure the loans get to the right people. We also want to make
sure that this is something that everyone can access, particularly
those who don’t have big staffs. Right. And so, I am curious about
what you’ve heard and what in an ideal world, you would do to ad-
dress those concerns. And then as part of that, what help do you
need from this committee?
Ms. FROST. So, as I mentioned, we are kind of regularly en-
gaged with the SBA lender community, where we both share infor-
mation and receive input back from them. So just as an example,
last week there was a lender conference here in Northern Virginia
that I was able to attend, as were several Members of my team.
This one was focused primarily on our 504 loan program, and we
talked a lot about different restrictions around refinance opportuni-
ties in the 504 loan program, how we may be able to expand that.
And that’s something that my team is looking very closely at and
plan to do in the near term.
I’ve also started something with my team where when we’re
launching a new product or we’re moving forward with a new capa-
bility, we’re doing our user acceptance testing with some of our
smaller, often community based lenders. So, for example, I’ve men-
tioned several times during this hearing that we launched an up-
date to Lender Match. We worked with some of our CA SBLCs to
kind of try that before we did the full launch. Right, just to get
their input. Similarly, we’re working to modernize what’s called
1502 reporting, which is our monthly report coming from the lend-
ers on the status of their loan portfolio. And we have engaged with
some of our smaller and community lenders to get their feedback
on that product as we’re finalizing the build around it.
Mr. LANDSMAN. Thank you very much. Can I just ask you
about the unified lending platform? It seems to me that the tech-
nology, and I know this has come up already to better match poten-
tial borrowers with options, opportunities to do that with without
a ton of staffing or paperwork, where you are simply making it
easy using technology to help find some of these folks, but also
when they search certain keywords, they find themselves on a plat-
form, maybe the website, where they can very quickly get some
questions answered and determine what opportunities there might
be for them. Is that something that you envision the ULP doing,
and where does this go? What’s the next set of iterations, and
what’s that vision?
26

Ms. FROST. Thank you for that question. I think that Lender
Match is an incredible tool to help our small businesses match. As
you are mentioning, using technology. Very little kind of regular
SBA resources are needed here to conduct these introductions be-
tween small businesses and lenders on an ongoing basis. I think
some of the ideas that you are speaking about here certainly seem
worthy of additional consideration about how can we use tech-
nology to better explain our programs in an understandable way,
both for the lender community and especially for the small busi-
nesses, and would be happy to work with your team as we dive into
those ideas.
Mr. LANDSMAN. We would love to work on this. I mean, I am
on the VA committee and we’re doing something similar with VA,
which is to, you know, when a veteran goes and looks for some-
thing, something pops up that they’re working through, which
would just say, hey, we don’t know if you are eligible for these
things, but if you give us just basic service information, in this
case, basic business information, we’ll tell you very quickly what
you might be eligible for. And that begins a conversation that
doesn’t exist at the moment. And so, if that is really an option,
we’d love to work with you on that.
Ms. FROST. Absolutely. And I think that Lender Match does. It
has a lot of those same components and same ideas. So a small
business can come into Lender Match and say, here’s some basic
information about my business, and here’s the sort of capital that
I need. They submit that in. And then our lenders, the thousand
or so lenders we work with through Lender Match, including about
250 community lenders, they each set up profiles and they say, this
is the type of small business I want to work with, and these are
the sorts of loans I provide. And together, then they get matched.
I believe the data, and we’ll look this up to make sure I’ve got it
right, is that the average small business is matched with nine lend-
ers.
Mr. LANDSMAN. Wow.
Ms. FROST. That’s nine opportunities to kind of say, hey, maybe
this is the right lender.
Mr. LANDSMAN. My time is up, and I want to be respectful of
the Chairman. We’ll follow up. Thank you very much. I yield back.
Chairman WILLIAMS. Gentlemen, yields back. I now would like
to welcome and recognize Representative Malliotakis, good friend
from the great state of New York, for 5 minutes.
Ms. MALLIOTAKIS. Thank you. Thank you, Mr. Chairman and
Ranking Member, for allowing me to join the committee today. Ms.
Frost. My constituent, Mr D’Andrea, runs an owner operated res-
taurant named the Roadhouse Restaurant. It is remained in the
heart of my district in Staten Island for nearly 53 years. During
the COVID pandemic, the Roadhouse Restaurant, like so many
other small businesses across the country, ran into difficult finan-
cial times. With severe COVID restrictions in place by New York
City, business slowed and Mr. D’Andrea looked to the SBA for a
lifeline, and he now finds himself on the verge of financial ruin
with his retirement. The equity of the building that the business
resides under threat of foreclosure due to no fault of his own. But
an admitted coding error, quote unquote coding error in the admin-
27

istration. Of the Restaurant Revitalization Fund by the SBA, Mr.
D’Andre was granted $244,734 through the program on June 7th,
2021. Half of the initial grant, $123,857.69, was sent directly to the
New York State Department of Taxation and Finance for payment
of the Roadhouse’s outstanding taxes. Now, Mr. D’Andrea was even
given an assessment ID of the New York state taxes, taxes paid by
the U.S. Department of Treasury. But on October 28th of 2021, the
funds sent to the New York State Department of Taxation and Fi-
nance were returned to the Treasury because they lacked docu-
mentation and they had no idea what it was supposed to go to.
They had no idea it had to go to the Roadhouse’s accrued tax debt.
So, since the return of these funds, Mr. D’Andrea’s business has
been assessed with additional taxes and penalties associated with
the original tax debt of the state of New York. To date, these taxes
and penalties are at a sum of $343,000.
Now, in February of 2022, my office engaged on behalf of my con-
stituent, and in numerous letters and emails with the SBA, my
staff was given excuses for missed deadlines for response. They
were told that Mr. D’Andrea would receive the remaining funds in
the following RRF disbursements, which never came to fruition.
And then half of the award was improperly distributed to New
York State due to the coding error, they admitted this. Mr. Chair-
man, I would like to submit the email correspondence for the
record. Using the words of SBA staff themselves in November of
2022, they then looked into, ‘‘the circumstances surrounding Treas-
ury’s offset of part of the award to the Roadhouse Grill that oc-
curred because of delinquent taxes owed by Mr. D’Andrea’s com-
pany.’’ And they said, ‘‘that should not have occurred in the RRF
program, but for a coding error, we have no way of correcting that
at this stage in the program.’’ So how is it that we have Mr.
D’Andrea received only half of the funds he was awarded. His debts
are still unsatisfied with the New York State Department of Tax
and Finance. The SBA admitted that half the funds were wrongly
sent to New York State due to the, quote, ‘‘coding error.’’ And now
the SBA is threatening legal action on the full amount unless he
perjures himself on the SBA portal and certifies that he received
the $244,734, the complete amount, which he did not. So this is an
error that the SBA—so I guess that’s my first question to you.
Ms. FROST. So the Restaurant Revitalization Fund was, of
course, one of our pandemic programs, and it helped thousands of
restaurants across this country find their feet. Unfortunately, that
program was oversubscribed, significantly oversubscribed. And so
although it was a $30 billion program. SBA got that money out in
record time with record small amounts of fraud.
Ms. MALLIOTAKIS. In this particular case, he was given the
money, right? He was given half the money, but it was an error
that it was sent to the state of New York and it was sent back to
you, so you should have that money. The thing is, is that he should
be given the money that he is entitled to. Do you agree?
Ms. FROST. As I mentioned, the program was oversubscribed,
and so, unfortunately, we were not able to give funding to all of the
eligible restaurants.
Ms. MALLIOTAKIS. He received the grant. He did receive the
grant, right. He was part of the group that was eligible. And I
28

guess my question is, you know, this was an error on behalf of the
SBA. They admitted to it. The money was there. They gave it to
the state. The state returned it. I don’t know what you guys did
with it, but the fact is that he’s owed this money, and now you are
trying to penalize him even further if he doesn’t sign this form,
which would be a lie. He can’t sign that form because he didn’t re-
ceive the total amount that he was due. And so, I can understand
that you don’t have the specifics, perhaps, of my case and front of
you, but I’ve been working for four years to try to resolve this
issue. This is a small business that’s going to go out of business.
His whole retirement is going to lose everything if you guys don’t
work with us to address this.
Ms. FROST. So my heart goes out to the small businesses who
are still struggling to recover from the pandemic. And I know that
my team is prioritizing, ensuring that we are doing everything we
can to support them. But the Restaurant Revitalization Fund in
particular, is challenging because we were limited in the funds we
were able to provide to eligible businesses.
Ms. MALLIOTAKIS. Okay, well, I hope to have your commit-
ment to try to resolve this issue.
Ms. FROST. Happy to work with you and your team on that.
Ms. MALLIOTAKIS. Thank you very much.
Chairman WILLIAMS. Lady yields back. And I now like to thank
our witnesses for your testimony, Ms. Frost, and appearing before
us today. Without objection, Members have five legislative days to
submit additional materials and written questions for the wit-
nesses to the Chair, which will be forwarded to the witness. I ask
the witness to please respond promptly if there’s no further busi-
ness with abject and the committee is adjourned.
[Whereupon, at 11:24 a.m., the committee was adjourned.]
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