Using the 504 Program to Build America's Manufacturing Future (Senate Small Business Committee hearing, September 17, 2025)
Summary
The Senate Committee on Small Business and Entrepreneurship, chaired by Joni Ernst, met on September 17, 2025 (S. Hrg. 119–170) on how the SBA's 504 Certified Development Company loan guarantee program can support investment in small manufacturers. Chair Ernst said the program is the SBA's primary way to help owners buy major fixed assets such as buildings, equipment and machinery, with long-term fixed rate financing of up to 25 years. The witnesses were Karl E. Swanson of PCT Ebeam and Integration, David P. Raccio of CDC New England, Jean Wojtowicz of Indiana Statewide CDC and Hilda Kennedy of AmPac Business Capital.
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“Using the 504 Program to Build America's Manufacturing Future (Senate Small Business Committee hearing, September 17, 2025).”
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S. HRG. 119–170
USING THE 504 PROGRAM TO BUILD
AMERICA’S MANUFACTURING FUTURE
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
SEPTEMBER 17, 2025
Printed for the use of the Committee on Small Business and Entrepreneurship
(
Available via the World Wide Web: http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
61–659 WASHINGTON : 2026
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED NINETEENTH CONGRESS
JONI ERNST, Iowa, Chair
EDWARD J. MARKEY, Massachusetts, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina CORY A. BOOKER, New Jersey
TODD YOUNG, Indiana CHRISTOPHER A. COONS, Delaware
JOSH HAWLEY, Missouri MAZIE K. HIRONO, Hawaii
TED BUDD, North Carolina JACKY ROSEN, Nevada
JOHN R. CURTIS, Utah JOHN W. HICKENLOOPER, Colorado
JAMES C. JUSTICE, West Virginia ADAM B. SCHIFF, California
JON HUSTED, Ohio
MEREDITH WEST, Republican Staff Director
SEAN MOORE, Democratic Staff Director
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CONTENTS
SEPTEMBER 17, 2025
OPENING STATEMENTS
Page
Joni Ernst, U.S. Senator from Iowa ....................................................................... 1
Edward Markey, U.S. Senator from Massachusetts ............................................. 2
WITNESSES
Mr. Karl E. Swanson, President, PCT Ebeam and Integration, LLC, Dav-
enport, IA .............................................................................................................. 5
Prepared Statement ......................................................................................... 7
Mr. David P. Raccio, Senior Vice President and Director of SBA Lending,
CDC New England, Wakefield, MA .................................................................... 13
Prepared Statement ......................................................................................... 15
Ms. Jean Wojtowicz, Executive Director, Indiana Statewide CDC, Indianap-
olis, IN ................................................................................................................... 23
Prepared Statement ......................................................................................... 25
Ms. Hilda Kennedy, Founder and President, AmPac Business Capital Ontario,
CA .......................................................................................................................... 34
Prepared Statement ......................................................................................... 36
ADDITIONAL LETTERS/STATEMENTS FOR THE RECORD
TMC Financing
Testimony Dated September 17, 2025 ............................................................ 60
QUESTIONS FOR THE RECORD
Mr. David P. Raccio
Responses to questions submitted by Senator Hirono ................................... 64
Ms. Jean Wojtowicz
Responses to questions submitted by Senator Young ................................... 66
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USING THE 504 PROGRAM TO BUILD
AMERICA’S MANUFACTURING FUTURE
WEDNESDAY, SEPTEMBER 17, 2025
UNITED STATES SENATE,
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP,
Washington, DC.
The committee met, pursuant to notice, at 2:31 p.m., in Room
428A, Russell Senate Office Building, Hon. Joni Ernst, chair of the
committee, presiding.
Present: Senators Ernst [presiding], Hawley, Husted, Markey,
Shaheen, Coons, Rosen, and Hickenlooper.
OPENING STATEMENT OF SENATOR ERNST
CHAIR. I call the Committee on Small Business and Entrepre-
neurship to order. We are here today to discuss the role that the
Small Business Administration’s 504 Certified Development Com-
pany, or CDC, loan guarantee program can play in supporting in-
vestment in America’s small manufacturers.
Over the course of this year, the committee has examined the
staggering decline of America’s manufacturing sector. 40 years ago,
factories across the country roared with activity, towns thrived,
and America felt unstoppable. We were truly unrivaled as a nation.
Today many of those same factories stand idle, communities that
once depended on them fade and struggle, and millions of jobs have
vanished.
Today, we’re seeing some of the lowest levels of manufacturing
employment that we’ve seen in nearly a century. Sadly, we’re los-
ing more than just jobs. We’re losing America’s knowledge, talent,
innovative edge, and tradition of industrial excellence.
By neglecting our manufacturing sector and infrastructure, we’ve
crippled our own ability to scale new technologies, leaving us less
competitive on the international stage. Simply put, we’ve let our
guard down, and it’s our adversaries like China who stand to ben-
efit.
To restore our economic resilience and global dominance, we
must empower our small manufacturers to lead the way. That
starts by providing them with the resources they need to reverse
this decline and rebuild our domestic productive capacity.
In prior hearings, we have explored how we can channel more
capital into American manufacturing, whether through private cap-
ital committed as part of the Small Business Investment Company
program, or through 7(a) loans guaranteed by the SBA.
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Today, we’re focused on one program that is uniquely suited to
helping small manufacturers build and expand: the 504 Loan Pro-
gram. The 504 Loan Program is the primary way that SBA helps
small business owners buy major fixed assets like real estate build-
ings, equipment, and machinery, and even construct facilities from
the ground up. It gives borrowers long-term fixed rate financing of
up to 25 years. That kind of predictability is exactly what small
manufacturers need to establish or modernize their operations.
Thanks to the work of participating CDCs, the 504 Program has
been able to maintain a low default rate of under one percent per
year. In the last five years, it has been under half a percent. That
is the hallmark of a loan program that is safe, reliable, and deeply
impactful.
But it isn’t perfect. Stakeholders have made clear that improve-
ments can be made to eliminate red tape in the closing process and
provide more flexibility to borrowers, especially for rural busi-
nesses.
This committee has continually looked at ways to build upon the
program’s success, including consideration of legislation introduced
by Senator Young aimed at streamlining the Office of Credit Risk
Management’s oversight of CDCs.
Another way to strengthen our manufacturing future is by pass-
ing the Made in America Manufacturing Finance Act, which I in-
troduced in April alongside Senator Coons. The committee reported
out the bill in July. This bipartisan legislation would double the
504 loan limit from $5 million to $10 million for small manufactur-
ers who need that capital to modernize, grow, and train a new gen-
eration of American workers.
I know from the countless conversations I’ve had with small busi-
ness owners, that this makes a real difference. Many companies
could have expanded faster, hired more workers, and invested in
new technologies if only the loan limits had allowed it. CDCs tell
us the same thing. Clients are forced to slow their growth or seek
outside funding on less favorable terms simply because their needs
couldn’t be met by what is currently allowed.
I’m grateful that we’re joined today by our panel of CDC lenders
and program participants. I look forward to hearing from them
about how Congress can improve the 504 Program and give Amer-
ican entrepreneurs what they need to build a stronger, more resil-
ient manufacturing future.
And I now recognize Ranking Member Markey for his opening
statement.
STATEMENT OF SENATOR MARKEY
Senator MARKEY. Thank you, Madam Chair. [Technical issue.]—
manufacturers faring in the Trump economy. Well, the Institute for
Supply Management reported that the manufacturing sector
shrank for the sixth consecutive month in August as supply prices
continue to rise.
According to a July survey from the National Association of Man-
ufacturers, small manufacturers’ positive outlook for their compa-
nies has dropped to the lowest level since the height of the
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COVID–19 pandemic. And since Trump’s so-called ‘‘tariff liberation
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day’’ in the beginning of April, the United States has lost more
than 42,000 manufacturing jobs. They’ve disappeared.
And we’ve seen this before. During President Trump’s first ad-
ministration, 200,000 manufacturing jobs were lost. And to hide
the failing state of his economy, President Trump is following the
three Ds; divert, distract, and deceive. Instead of taking responsi-
bility, President Trump has fired the Bureau of Labor Statistics
Commissioner and called to end quarterly earnings reports.
But no matter how hard President Trump tries to hide the data,
it is crystal clear that it is his policies that are hurting small man-
ufacturers across our country. President Trump’s tariffs are push-
ing up prices, making it difficult for our small U.S. manufacturers
to compete. For too many small U.S. manufacturers, MAGA stands
for ‘‘manufacturers are going abroad’’. In May, our committee heard
from Julie Robbins, CEO of EarthQuaker Devices in Ohio. She told
us that she had faced tariffs as high as 185 percent forcing her to
consider moving production overseas.
President Trump’s attack on clean energy is also fueling Amer-
ica’s manufacturing decline. Trump’s SBA ended their Green Lend-
er Initiative, and the big ugly bill rolled back many of the clean en-
ergy incentives in the Inflation Reduction Act of 2022. These incen-
tives and programs contributed to the almost 700,000 manufac-
turing jobs added during the Biden Administration.
And now, President Trump’s sweeping attacks on immigrants are
crushing the manufacturing workforce from the largest manufac-
turers to the smallest of the small manufacturers in our country.
And to add to the small business’ paying, President Trump’s SBA
is adopting draconian requirements. These requirements bar small
businesses with any amount of foreign investment and small busi-
nesses, partially owned by people who are lawfully here, including
DACA recipients, assignee, and refugees from getting an SBA loan.
This breaks from at least a quarter of a century of SBA policy
that allowed small businesses, including manufacturers, 51 percent
owned and controlled by U.S. citizens, nationals, and green card
holders to receive SBA loans. These changes are creating a chilling
effect. In Massachusetts, one small business owner with a green
card who was likely an eligible SBA borrower decided not to apply
for an SBA loan because they feared their legal immigration status
would be used against them in President Trump’s America.
If President Trump were serious about growing American manu-
facturing, he would be investing in our future not burning it down.
So, I agree with raising the loan limits on SBA’s 504 Loan Pro-
gram, or as I’d like to have it be called, the Economic Development
Loan Program.
And I appreciate Chair Ernst and Senator Coons’ leadership on
this issue, and the intent of the Made in American Manufacturing
Finance Act. However, we should work to ensure that the larger
loans allowed under this legislation lead to good-paying jobs. We
should raise SBA loan limits specifically for our clean energy man-
ufacturers to supercharge our economy, make our communities
cleaner, and to create jobs.
We must return to the historic SBA lending rules that supported
immigrant entrepreneurs, and we must break down barriers and
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create programs that are tailored to help our minority entre-
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preneurs access capital. So, today, I look forward to hearing from
our witnesses about how we can accomplish these goals. I thank
you Madam Chair for calling this hearing and the legislation which
you and Senator Coons have put together.
CHAIR. Wonderful. Thank you, Ranking Member Markey. And,
again, I want to extend a warm welcome to all of our witnesses.
I will now introduce our witnesses who are testifying today. I am
thankful that you-all took time out of your busy schedules to join
us here in DC and share your expertise on SBA’s 504 Loan Pro-
gram and access to capital through Certified Development Compa-
nies, or CDCs.
First, we have Mr. Karl Swanson. He is the president of PCT
Ebeam and Integration, which is a small manufacturer of electron
beam systems in Davenport, Iowa. Mr. Swanson previously served
as director of sales and marketing at PCT Engineered Systems and
began his career as an automation sales specialist at Industrial En-
gineering Equipment Company.
He received his bachelor’s degree in electrical engineering from
University of Illinois Urbana-Champaign, and his MBA from St.
Ambrose University. And thanks for making the trip again from
Iowa. Thank you, Karl.
Ms. Jean Wojtowicz is the executive director of the Indiana
Statewide CDC. She is also the founder and president of Cam-
bridge Capital Management Corporation, an Indianapolis-based
manager of non-traditional sources of capital for businesses. She
previously served as the lead independent director on the board of
directors of Vectren Corporation, a New York Stock Exchange en-
ergy holding company serving Indiana and Ohio.
Ms. Wojtowicz who holds two bachelor’s degrees in finance and
real estate from the University of Wisconsin-Madison. I now recog-
nize Ranking Member Markey to introduce his witnesses.
Senator MARKEY. Thank you, Madam Chair. Mr. David Raccio
has been with CDC New England located in Wakefield, Massachu-
setts since 2017, and is currently the senior vice-president and di-
rector of SBA lending. CDC New England is one of the most active
504 lenders in Massachusetts. He brings deep expertise in helping
small businesses grow. He’s also a proud U.S. Air Force veteran
serving six years on active duty and in the reserves. And we thank
you so much for being with us today.
And Ms. Hilda Kennedy is the founder and president of AmPac
Business Capital based in Ontario, California. AmPac participates
in several SBA lending programs, including the 504 Program. She
is a board member of the National Association of Development
Companies, or NADCO, and she previously worked as the director
of economic development for the City of Inglewood. And we look
forward to hearing of all of the testimony that’s going to be pre-
sented today. Thank you, Madam Chair.
CHAIR. Wonderful. Thank you, Ranking Member Markey. And
briefly, I’d like to take a moment just to explain our lighting sys-
tem that is there on the boxes in front of you. There are three
lights in front of you. Green means go. Yellow means you’re run-
ning out of time. And red means to please wrap it up.
I ask unanimous consent that the witness’s full statements be in-
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cluded in the record. Without objection, so ordered. As your written
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testimony has been made part of the record, the committee asks
that you limit your oral remarks to five minutes. And with that,
Mr. Swanson, you are now recognized for five minutes for your tes-
timony.
STATEMENT OF MR. KARL E. SWANSON, PRESIDENT, PCT
EBEAM AND INTEGRATION, LLC, DAVENPORT, IOWA
Mr. SWANSON. Chair Ernst, Ranking Member Markey, and mem-
bers of the committee, I’m humbled by the responsibility to rep-
resent the interest of the hundreds of thousands of small manufac-
turers that fuel the American economy.
As you said, my name is Karl Swanson, and I grew up on my
family’s farm near Rio, Illinois. Today I’m the President of PCT
Ebeam and Integration located in Davenport, Iowa, which was
founded in 1986.
When the original majority owner was looking to retire, the most
attractive option was to be acquired by a Swiss company. The inte-
gration was unsuccessful, and when the business was getting ready
to close, I found eight of my long-term coworkers willing to join me
and buy the company back.
In November of 2018, we reached an agreement to make this a
reality and embarked upon what has been a challenging and re-
warding journey. We have experienced firsthand the advantages of,
once again, being an American owned small business. In seven
years, we have grown from 45 to 65 employees and have also reac-
quired many of the critical manufacturing capabilities that were di-
vested by the previous owner.
PCT is both a systems integrator and a manufacturer of indus-
trial electron beam systems. Our ebeam machines are used in a va-
riety of different industries where they enable energy efficient pro-
duction of prepainted steel, are used in the manufacturing of ad-
vanced medical materials, and can be used to achieve more sustain-
able production of lithium-ion batteries.
Building these specialized machines requires a skilled workforce
and specific manufacturing capabilities. 50 percent of the ebeam
systems we build are exported. Our foreign customers often require
their advanced payments to be secured by local bank guarantees.
The options for a small U.S. manufacturer to comply with these re-
quirements are limited. For PCT, it is critical that we have access
to funds to support our material and labor expenses throughout the
lengthy production schedule.
The Small Business Administration has been a major source of
support for our business. From purchasing our commercial real es-
tate to expanding our export efforts following our purchase of the
business, we have the opportunity to also purchase our building
and thus secure our company’s long-term future.
The SBA 504 Loan Program was recommended by our local bank
and made this purchase possible. Following further success, we de-
cided to expand our manufacturing shop. Once again, the SBA 504
was critical in helping us finance this expansion and add more pro-
duction capabilities, facilitate better material flow, and increase
our capacity to assemble and test more ebeam systems each time
we look to invest in our long-term future. The SBA 504 gave us a
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financing solution that was both accessible and affordable. Our ex-
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perience shows how central the SBA 504 is to long-term business
growth and competitiveness.
But as that growth leads to bigger opportunities and our busi-
ness takes on larger and more complex projects, we have experi-
enced limitations in SBA’s financing programs that impose undue
constraints on the organic and profitable growth of manufacturing
firms like ours.
The biggest limitation we faced was when our financing needs
intersected with SBA aggregate program caps. For example, we re-
ceived a multimillion-dollar order from a customer in Brazil. We
needed to provide bank guarantees equal to the value of advance
payments received before shipment.
The SBA 7(a) Export Working Capital Program would’ve been
the ideal solution, but after securing $2.956 million in SBA 504 fi-
nancing, only $794,000 remained available under the SBA 7(a)
guarantee cap. These limitations create constraints not only for our
business, but also for lenders who want to support U.S. manufac-
turers competing in global markets.
The Made in America Manufacturing Finance Act of 2025 intro-
duced by Chair Ernst to increase the maximum total loan size to
$10 million would directly address our situation. Having access to
this additional loan capacity would provide PCT with a cost-effec-
tive means of supporting more export business, which in turn im-
proves our competitiveness in foreign markets, enables us to accel-
erate further investments in additional staff and production equip-
ment domestically.
Another limitation we experienced was SBA loan approval times.
The pace of business is fast, and America’s small businesses must
be able to move quickly to remain competitive. An agile SBA,
equipped to scale staffing in response to loan volume and deliver
timely approvals is essential to supporting the growth and success
of our nation’s entrepreneurs.
I respectfully request that you continue your efforts to strength-
en and simplify the SBA 504 Program to ensure that growing man-
ufacturers can expand capacity, compete internationally, and create
more U.S. jobs.
Thank you for considering these requests to improve the valuable
support the SBA provides to American manufacturers through the
504 Loan Program.
[The prepared statement of Mr. Swanson follows.]
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CHAIR. Thank you. And now, Mr. Raccio, you are recognized for
five minutes for your testimony.
STATEMENT OF MR. DAVID P. RACCIO, SENIOR VICE PRESI-
DENT AND DIRECTOR OF SBA LENDING, CDC NEW ENGLAND,
WAKEFIELD, MASSACHUSETTS
Mr. RACCIO. Chair Ernst, Ranking Member Markey, and distin-
guished members of the committee, thank you for the opportunity
to testify today. I am honored to join my colleagues from the CDC
industry to discuss the SBAs 504 Loan Program.
My name is Dave Raccio and I serve as the Senior Vice President
and director of SBA lending at CDC New England, which is located
in Massachusetts. We provide SBA 504 loans across five New Eng-
land states, which include Massachusetts, Connecticut, Rhode Is-
land, Vermont, and New Hampshire. And we are consistently
ranked in the top 15 CDCs nationwide. Since our funding in 1982,
we have delivered more than 1,600 loans totaling over $1 billion in
SBA financing, helping to create and retain more than 25,000 jobs.
The SBA program is unique. It provides small businesses with
long-term, fixed rate capital for real estate and major equipment
purchases while requiring measurable economic impact. In short,
the program fuels growth, creates jobs, and strengthens commu-
nities, all while operating at zero subsidies to taxpayers, and a re-
markably low one-year charge off rate of 0.08 percent.
As an industry, CDCs are proud of these accomplishments. That
said, modernization is needed. I’d like to highlight four key areas
where immediate reforms could expand impact. Number one; clean
energy. In June, 2025, the SBA reimplemented an arbitrary $16.5
million cap on energy projects and provided no data to support the
need for such a cap. I recommend this cap be lifted to meet growing
demand. We often have repeat customers, and we want to make
sure they have continued access to capital to continue to grow their
businesses.
A prime example of a business we assisted with the 504 energy
efficiency program was the SBO Sports Center in Massachusetts.
This company has been an outstanding corporate partner, not only
providing free clinics for children of all ages, but also generating
significant economic activity and local jobs.
To date, they have received three separate 504 loans and con-
tinue to grow their business. Today, in recognition of these con-
tributions, the company was honored as a 2024 Massachusetts fam-
ily-owned business of the year.
Number two; manufacturing and standard 504 limits. As an in-
dustry, we support increasing the SBA 504 loan maximum from $5
million to $10 million for manufacturers. If we are serious about
revitalizing U.S. manufacturing, we must provide the capital tools
needed for expansion. We also must address inflation in the loan
limits for traditional 504. The current statutory caps have not been
raised in more than 15 years. I recommend increasing these limits
to $7.5 million for standard 504 loans and $10 million for manufac-
turers and renewable energy projects. This will account for infla-
tion and continue to provide businesses with the capital they need
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to grow and create jobs.
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Number three; citizen verification. New SBA rules require busi-
nesses to be 100 percent owned by U.S. citizens, nationals, or long-
term lawful permanent resident. This change is already shutting
out otherwise strong businesses.
We recently saw a stone importer, which was 85 percent owned
by a female U.S. citizen denied financing because 15 percent of the
ownership was held by her father from Brazil who provided the
original startup capital. This policy unfairly blocks U.S. citizens
from accessing growth. Capital SBA should revert to its long-
standing more reasonable guidance.
Number four; down payment assistance. Our CDC provides down
payment assistance designed to reach underserved borrowers and
businesses in low to moderate income areas. For example, we re-
cently helped an African American women-owned business secure
$100,000 down payment to purchase her building for her school
serving children with autism.
With this support, she was able to move forward, and today her
school is thriving, expanding, and providing stability and jobs for
the families who depend on it. We also worked with a business
owner in East Boston whose project qualified as both minority-
owned and located in a low to moderate income community. With
down payment assistance, he was able to expand his business and
successfully repurpose a mixed-use property.
These stories show just how powerful targeted support can be
with the 504 Program. Small businesses don’t just grow, they build
stronger, more resilient communities.
In conclusion, the SBA 504 Program is one of the most effective
federal tools for supporting small business, creating jobs, and
strengthening communities without taxpayer subsidy. By lifting
outdated loan limits, restoring fair citizenship rules, and expanding
down payment support, we can ensure the program continues to
serve America’s entrepreneurs for decades to come.
I thank the committee for your leadership on small business
issues and look forward to your questions.
[The prepared statement of Mr. Raccio follows.]
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CHAIR. Thank you very much, Mr. Raccio. And now, we will rec-
ognize Ms. Wojtowicz. And you are recognized for five minutes for
your testimony.
STATEMENT OF MS. JEAN WOJTOWICZ, EXECUTIVE DIREC-
TOR, INDIANA STATEWIDE CDC, INDIANAPOLIS, INDIANA
Ms. WOJTOWICZ. Thank you, Chair Ernst, Ranking Member Mar-
key, and distinguished members of the committee. Thank you for
inviting me to join you today. I’m honored to represent the Cer-
tified Development Company industry to discuss the 504 Loan Pro-
gram, which is firmly focused on economic development and job
creation.
My name is Jean Wojtowicz, I am the executive director of Indi-
ana Statewide CDC. Through this entity, we have funded more
than $750 million in 504 loans, and leveraged more than $2.2 bil-
lion to over 1,500 Indiana companies, many of them manufacturers
and companies located in rural areas. I’m also a past chair of
NADCO, the trade association that advocates for the 504 Loan Pro-
gram, and serve on the board of Eagle Compliance, which is the fis-
cal agent that sells the debentures that fund these loans.
CDCs are SBA-certified organizations dedicated to creating jobs
and growing local businesses by delivering the 504 Loan Program.
Many CDCs also deliver other federal, state, and local lending
products and must invest in economic development beyond the 504
Program. This highly successful public-private partnership is struc-
tured with 50 percent provided by a private lender, 40 percent
through the SBA backed CDC debenture, and 10 percent by the
borrower.
This structure supports liquidity, retention and working capital
preservation as a result of the low down payment, with terms con-
ventional lenders rarely provide. The structure and terms provide
certainty and help borrowers manage cash flow fluctuations that
come with expanding a business and employing more citizens in
their communities.
On March 10th of this year, Administrator Loeffler, along with
Senator Young, and others, kicked off the Made in America tour in
Indianapolis at Aerodyne Engineering, who utilized the 504 Loan
Program four times to support their growth and expansion. It is
companies like Aerodyne that are the backbone of growth, innova-
tion, and the creators of jobs for citizens all over our country.
The CDC lending industry is proud of the work we’re doing to
support these companies, and we know the 504 Loan Program can
do more. We have several recommendations that would enhance
the program and allow us to serve more growing businesses.
Number one; pass the Made in America Manufacturing Finance
Act. The CDC industry supports increasing the manufacturing loan
size for borrowers to $10 million. This statutory change would sup-
port the scaling of domestic manufacturing since a $10 million 504
loan could support a total project cost of up to $25 million.
Number two; reduce the equity contribution from manufacturers
from 10 percent to 5 percent. Manufacturing is capital intensive,
and reduced equity requirements will encourage investment and
job creation while preserving critical working capital. These compa-
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Number three; modernize the 504 loan size limit for all bor-
rowers. We would ask you to consider raising the cap for all bor-
rowers to $7.5 million and index it to inflation reflecting the
growth since the last adjustment was made in 2010.
Number four; eliminate the extra 5 percent borrower equity in-
jection requirement for special purpose properties. This require-
ment negatively impacts borrowers and SBA’s charge off data
shows that these properties do not present a higher credit risk.
And number five; continue separating the 504 and 7(a) loan pro-
grams as they have separate purposes. The 504 Program is focused
on fixed asset financing, supporting job creation, and economic de-
velopment. The ‘‘credit elsewhere test’’, which is a 7(a) program re-
quirement, should not apply to the 504 Program.
In conclusion, since 1986, the 504 Program has assisted over
200,000 small businesses with nearly $140 billion in loans, and a
total investment of almost $400 billion and the creation of 3.3 mil-
lion jobs. And it has done so with a charge off rate of only 0.08 per-
cent for the most recent year. Enacting these recommendations will
make the program more effective and accessible, allowing more
small businesses to grow, create jobs, and strengthen our economy.
Thank you for your leadership on small business issues and the
opportunity to testify today. I look forward to your questions.
[The prepared statement of Ms. Wojtowicz follows.]
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34
CHAIR. Thank you very much. And finally, we will hear from Ms.
Kennedy. You are recognized for five minutes.
STATEMENT OF MS. HILDA KENNEDY, FOUNDER AND PRESI-
DENT, AMPAC BUSINESS CAPITAL, ONTARIO, CALIFORNIA
Ms. KENNEDY. Thank you, Chair Ernst, Ranking Member Mar-
key, and distinguished members of the committee. I’m delighted to
be here as well to represent the CDC industry and is to discuss the
504 Loan Program, the agency’s premier economic development
program.
This year, AmPac proudly celebrates 20 years of service com-
mitted to serving small businesses and targeting those who control,
own, and control little productive capital. As stated in the Small
Business Act of 1953, through our partnership with SBA, AMPAC
has leveraged the SBA 504 Program to provide more than $2 bil-
lion in loans and creation of over 7,700 new jobs.
I want to focus my comments on three primary areas; energy effi-
ciency, down payment assistance, and citizenship. The Congres-
sionally authorized energy policy goals signed into law by President
Bush in 2007 are delivering significant results. In California,
where we serve Dahdoul Textile, a family-owned wholesaler and re-
tailer of consumer goods, is a shining example.
They’ve used the SBA financing multiple times and have created
new jobs with each expansion. In the last two years, they acquired
two locations using the 504 energy public policy goal. They in-
stalled solar panels, and benefited from greater cost savings. With
these two recent projects, Dahdoul created 33 new jobs, and revital-
ized two vacant stores.
SBA’s current $16.5 million cap on energy-related 504 loans limit
businesses like Dahdoul from additional SBA financing to expand,
reduce energy costs and create jobs. Eliminating the cap would en-
sure that small businesses can fully leverage energy efficiency and
long-term growth and sustainability.
As noted, the 504 Program follows a basic structure. 50/40/10. 10
percent represents borrower equity. However, many small busi-
nesses, especially first-generation entrepreneurs and first-time
commercial real estate buyers, may have 10 percent down, but the
working capital is not there for growth. At AmPac, we launched
our first ‘‘It Is Possible’’ down payment assistance loan program to
help small businesses.
And I want to tell you about Jerry. He’s the owner of Riggins
Urban Barber College. He’s a Navy veteran who’s dedicated his life
to giving young men and women a second chance by training them
in barbering. As a first-generation entrepreneur, when he bought
his building, AmPac’s down payment assistance helped him to re-
store cash to support his expansion and add for new jobs.
I recommend establishing a pilot program under the 504 loan
program for first-time commercial real estate buyers to qualify with
5 percent down, which would act as a floor and not a ceiling, and
allow CDCs’ flexibility to make credit decisions that also maintain
our 0.21 percent default rate as noted in Fiscal Year 2024.
I want to also highlight recent changes in the SOP regarding citi-
zenships. That’s limited to 100-owned by U.S. citizens, U.S. nation-
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als, and lawful permanent residents. I fully support SBA resources
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35
going to U.S. citizens, but this change has negatively impacted
some majority-owned and controlled U.S. citizen businesses.
One such business is a private school in Orange County, founded
by three partners, two U.S. citizens, and a minority partner with
6.5 percent stake. The schools were looking for a 504 loan, but we
were not able to help them because of this change.
I recommend restoring the SOP language that allowed SBA fi-
nancing for businesses that were majority-owned and controlled by
U.S. citizens by addressing citizenship, clean energy, and down
payment assistance, as well as a thoughtful adjustment such as in-
creasing 504 size limit and for manufacturing businesses.
The SBA can fulfill its Congressional mandate to fill market gaps
for America’s entrepreneurs and build on the economic develop-
ment mission of the 504 loan program.
Thank you so much for the invitation, and we welcome your
questions.
[The prepared statement of Ms. Kennedy follows.]
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48
CHAIR. Wonderful. Thank you very much. And now we will go
into our question and answer portion of today’s hearing, and I will
recognize myself for five minutes for questions.
And I’ll start with Mr. Swanson. So, Mr. Swanson, thank you for
making the trip to Washington, and for representing Iowa small
businesses. In your testimony, you describe how you bought your
business from an international owner and then used the SBA’s 504
loan program to both purchase your business’ building, and then
expand your operation in Iowa.
Can you describe the investments that the 504 Program has en-
abled you to make, and how the program helps small manufactur-
ers secure the capital they need to expand operations and maintain
a steady pace of modernization?
Mr. SWANSON. Thank you, Senator Ernst. In our case, the struc-
ture of the 504 Program was essential for us as a relatively new
ownership group to afford even considering the purchase of the
building. And what that enabled us to do is secure the future of
our business in that location within a purpose-built structure that,
that met our needs very well.
The expansion following behind that, again, with the 504 Pro-
gram was a very attractive way that we could do that while still
maintaining enough working capital continue to hire the staff that
we were building back.
As I indicated in my comments, additionally we were in need of
bringing in more production equipment. And so, again, by having
the capacity to continue to make those in incremental investments
over the growth of our business, that is the end result of how we
use that, the program, and how it benefited us.
CHAIR. Wonderful. I appreciate that. And then modernization,
continual modernization. Really appreciate that.
Mr. SWANSON. Constantly. And we’ve made more investments
this year in some new capabilities, a laser welder, plasma table, all
things that we didn’t have the internal capacity to do before. And
it just all helps drive more of our capabilities internally.
CHAIR. Fantastic. Thank you. And Ms. Wojtowicz, over the last
five years, we have seen demand for larger loans within this 504
Program. They’ve steadily increased. In Fiscal Year 2021, only four
percent of loans reached the program maximum compared to over
nine percent in Fiscal Year 2025. Over that same period, the share
of these large dollar projects for manufacturers has grown at an
even faster rate, nearly tripling.
My Made in America Manufacturing Finance Act in conjunction
with Senator Coons—and thank you for partnering; really appre-
ciate that—would double the loan limits for small manufacturers.
So, if you could explain for us, what are the benefits of expanding
the 504 loan program’s limits for small manufacturers, and how
can we do that while also mitigating taxpayer risk?
Ms. WOJTOWICZ. Thank you, Senator Ernst, and thank you for
introducing that bill. We think it’s going to be extremely impactful
to manufacturers. Indiana is a very high level of manufacturing
state. In fact, 45 percent of our 504 loans that we’ve made have
been to the manufacturing sector. So, clearly important to our state
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and to the employees that work at those companies.
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49
If you think about the cost of manufacturing, much of this equip-
ment is multimillion dollar pieces of equipment. And for a company
to expand, like Mr. Swanson’s has expanded, and having to con-
tinue to bring current equipment in that will increase efficiencies
and keep those companies competitive, is extremely important.
And so, not only do we use the higher loan limits so that they
can build larger buildings and employ more people, but certainly
also to purchase and put into production the very large pieces of
equipment that are necessary for those companies to remain com-
petitive and to continue to grow. So, it’s extremely important to see
those loan limits increased.
CHAIR. Oh, we appreciate the feedback very much. And just very
briefly, Ms. Kennedy, I’ve always prioritized ensuring that the SBA
programs provide that meaningful support to rural small business
owners who often face substantial challenges in getting adequate
access to capital. We hear about that all the time. Could you just
briefly walk us through any efforts you’ve made to support rural
small business owners?
Ms. KENNEDY. Thank you so much, Chair Ernst. We have actu-
ally made a number of loans to rural businesses. In fact, about $70
million in 504 lending to rural businesses as well as loans to busi-
nesses for Microloans and Community Advantage loans. 2.3 million
residents in California are rural, or 5.8 percent of the population.
So, it’s a very important part of the business that we do in the
state. So, thank you for the question. Really appreciate that.
CHAIR. Thank you. And now I recognize Ranking Member Mar-
key for five minutes.
Senator MARKEY. Thank you, Madam Chair, very much. And as
I said in the opening, Senator Ernst and senator Coons’ Manufac-
turing Act is one step forward. But as I also pointed out, President
Trump’s policies are four steps backwards for manufacturers at the
same time, which is still hurting our economy.
And as I mentioned in my opening, Trump’s SBA new severe citi-
zenship verification requirements are cutting off small business ac-
cess to capital. These requirements specifically bar small busi-
nesses with any amount of foreign investments or ownership
through individuals lawfully in the United States of America, in-
cluding DACA recipients and refugees from receiving a loan.
Now, to qualify for an SBA loan, small businesses must be 100
percent owned by U.S. citizens, nationals, or green card holders.
Not even one percent can be owned by someone with a different
legal immigration status. Let’s just say your father from Brazil, one
percent, you’re up.
Mr. Raccio and Ms. Kennedy, I’m concerned about the chilling ef-
fects that these requirements will have on entrepreneurs looking
for an SBA loan. Can you expand on how U.S. small businesses
and local communities are hurt by these new requirements? Mr.
Raccio.
Mr. RACCIO. Thank you for that question, Senator Markey. It has
been challenging for many small businesses. As I alluded to in my
testimony, we did have the Brazilian family that was unable to ob-
tain a loan. We also had a more recent example in your home state
of Massachusetts with a 80 percent American citizen, a 10 percent
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two-year green card holder, as well as someone on a work visa
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50
owning the other 10 percent. That project was not able to move for-
ward based on an ownership. So, that was difficult.
While we won’t be able to completely quantify who is not apply-
ing, we are confident that we are seeing businesses not applying
due to the lack of 100 percent ownership of a U.S. citizen or lawful
permanent resident. We would urge the committee to return to the
previous rules that allowed 51 percent ownership.
Senator MARKEY. Right. And 30 percent of all companies in Mas-
sachusetts are started by immigrants. So, that’s a story across the
whole country, too. So, it gets complicated. Ms. Kennedy.
Ms. KENNEDY. Senator Markey, we too. That matter regarding
100 percent citizenship, especially in the state of California, has
been significant. And one of the examples that I included in my
written testimony was a returning SBA 504 customer that we had
served a local winery. Really a beautiful business, family-owned
business in the community.
And they have a partner that is a 30 percent owner that is a Ca-
nadian native, a Canadian citizen. And when that first loan was
done, we were able to serve that business because it’s majority-
owned and controlled by a U.S. citizen. When they came back to
us, we were not able to serve that business because of the new citi-
zenship rule.
And I agree with my colleague that if we rolled back to the re-
quirements in the SOP that this change, we would be able to serve
locally-owned, majority-owned and controlled U.S. citizens who are
creating jobs here in America.
Senator MARKEY. Okay, thank you. So, small businesses are re-
quired to use the loans to accomplish certain goals, including to re-
duce energy consumption, increase the use of sustainable designs
that reduce greenhouse gas emissions and use renewable energy.
These energy goals were passed on a bipartisan basis, signed into
law by President Bush in 2007. I know because I stood over his
shoulder when he signed it because I was the Democratic author
of the bill. So, Mr. Raccio, can you explain how loans used to meet
the clean energy goals have helped small businesses and their com-
munities?
Mr. RACCIO. Absolutely. Thank you, Senator, for that question.
We have had a lot of good success stories. One, as I mentioned ear-
lier in testimony, was SBO Sport that was able to do multiple
projects utilizing renewable energy.
As a matter of fact, they’ve had such success with the solar
project they’ve done that they’re able to feed electricity back to the
grid. So, it’s been a very nice project where they’re able to provide
other small businesses energy at peak times, all while creating jobs
and growing their own business by being able to sell some of this
energy back.
We also see many hotels that are doing this as well. They’ve got
large flat rooftops. They are traditionally capped at the traditional
504 loan amount. So, by utilizing a renewable energy project,
they’re able to put solar panels on the roof, save themselves energy
usage, and also move forward and obtain the financing that they’re
looking for.
Senator MARKEY. Thank you, Mr. Raccio. Thank you, Madam
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Chair.
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51
CHAIR. Thank you, Ranking Member Markey. And now, I recog-
nize Senator Jon Husted for five minutes.
Senator HUSTED. Thank you, Chair Ernst. I want to just reflect
a little bit on some of the conversations I’ve had with Ohio busi-
nesses over the past few months because they were grateful that
they have a more stable environment to operate in this country
since the passage of President Trump’s budget reconciliation bill,
which passed here and was signed into law on July the 4th, which
included expanded pass through income deductions, a hundred per-
cent immediate expensing of business investments, an R&D ex-
pense and deduction for domestic R&D costs so that we can invest
through the private sector in advancing innovation, employer-pro-
vided childcare credits and other employee benefits.
And I know that in talking with them. Like, what does this mean
to you? What does it mean? It means more cash flow. It means
more liquidity, lower compliance costs, greater incentives, and in-
centives to hire people. And because they can provide additional
benefits to their employees and it encourages them to invest so
they can compete with people around the globe.
And I know that’s hard for small businesses, but we’ve done a
great deal, and we can do more to create a better business environ-
ment in this country. But I was reflecting on Ms. Wojtowicz’s testi-
mony here. You said something that struck me. Indiana, Ohio, we
have a lot of manufacturing in our respective states, and I know
Chair Ernst touched on this as well, that we want to do Made in
America.
We say we want more manufacturing jobs in this country. We
know that all states are not made the same. Some have a high
amount of manufacturing in their respective states as a part of
their economy. And you said one of your recommendations—I want
to give you a chance to just explain why you believe this is so im-
portant.
Because I agree with you that Congress should expand access to
the 504 loan program to enable manufacturers to retain more cap-
ital by reducing the borrowing equity injection from 10 percent to
5 percent. It’s almost a penalty to be a manufacturer even though
those sites are coveted in states like ours where people want to
have access to those facilities. And just talk about how you think
that this will help boost manufacturing in your state and the coun-
try.
Ms. WOJTOWICZ. Certainly, Senator, thank you for the question.
And manufacturing is critically important to our country in every
state. And those states like ours that are heavy manufacturing-fo-
cused states, it’s even more important in the manufacturing sector.
Again, buildings and equipment are extremely expensive, and
often, those companies have working capital needs that are ex-
treme as well. So, by limiting their down payment from 10 percent
to 5 percent, they’ll be able certainly to have more working capital.
But let me take one other step on there, because many of these
manufacturing sites have rail access, which is critical to them to
be able for them to deliver goods. If a rail site is on that property,
it is currently classified as a special purpose property and they
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So, instead of in a typical manufacturing project being 50 percent
bank, 40 percent CDC, 10 percent equity, if there’s a railroad spur
on that property, the borrower has to put down 15 percent and only
get 35 percent of the very attractive SBA 504 financing with a
long-term fixed rate.
So, we’re looking for all companies that are special purpose, and
there are many, to not have to have that 5 percent penalty. And
specifically, for manufacturers, to be able to reduce their equity
contribution from 10 percent to 5 percent.
Senator HUSTED. And if you talk to a manufacturer, they need
to compete because we have higher wage rates in our country. So,
to compete, they have to have the capital to buy the new machinery
and equipment that they can to up their productivity gains so that
they can actually compete. This is an important part of them hav-
ing the capital to do that in the big scheme.
Ms. WOJTOWICZ. Extremely important. So, they not only have to
invest in that capital, and having a 10 percent down payment pulls
some of the working capital out of the business.
Senator HUSTED. I see Mr. Swanson smiling and shaking his
head. I think he wants to say something here. Would like to add?
Mr. SWANSON. Oh, Senator, I was just nodding in agreement.
There’s only one pool of capital we have available as a company.
We have to elect where to deploy that, whether it’s on equipment
purchases and modernization, or hiring more staff, et cetera. So,
my colleague’s point is exactly on target with that.
Senator HUSTED. Great. Thank you.
CHAIR. Thank you. Senator Coons.
Senator COONS. Thank you, Chair Ernst, Ranking Member Mar-
key. And thank you to our four great witnesses today.
Not everybody finds manufacturing capital needs riveting, but I
do. I’m excited about this hearing. I think this is interesting. We
all find manufacturing exciting. Some of you know I spent a decade
in manufacturing before I ever ran for office, and then as county
executive, and now as Senator, work closely with the CDCs in
Delaware and with those who help with capital lending, and who
compete globally as small and medium sized American manufactur-
ers.
So, Mr. Swanson, Mr. Raccio, Ms. Wojtowicz, and Ms. Kennedy,
thank you for what you do as small manufacturers, as CDC lend-
ers, to help deploy the resources of the 504 Program. And thanks
for helping us understand how the 504 Program helps bridge the
gap, and CDCs help originate and put together and secure these.
I am proud to work with Chair Ernst on the Made in America
Manufacturing Finance Act, recently approved by this committee
and its corollary in the House by voice vote to increase the loan
size available to small manufacturers.
Mr. Swanson, in your prepared testimony, you discussed the
challenge of competing in foreign markets. I think you spoke ear-
lier about competing in Brazil. How does the guaranteed lending
offered by the 504 Program allow small manufacturers to success-
fully compete globally?
Mr. SWANSON. Well, thank you, Senator Coons. The starting
point I would refer to would be as was discussed by allowing us to
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continue to invest particularly in the kinds of capital equipment.
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That can be extremely useful for us to offset the challenges of labor
supply, and with allowing us to, in our case, the specific require-
ments to produce the high-tech equipment that we’re manufac-
turing. We leverage those advantages in, in terms of the inter-
national markets that we pursue.
Senator COONS. I remember meeting with Miller Metal in
Bridgeville, Delaware, my first year as a Senator and seeing how
both SCORE, which is an organization founded in Wilmington,
Delaware of business executives who volunteer and consult, and
the Manufacturing Extension Partnership Program helped this
small, family-owned metal pressing and bending company figure
out what capital investments they needed to make to get a cutting-
edge bending, and welding, and punching machine. And then, they
successfully competed against a Chinese manufacturer for a small
part that went into thousands of assembled, what I would call a
Hi-Fi system, but a stereo system. It was amazing to me a com-
pany from Bridgeville could compete directly with a Chinese manu-
facturer and win.
I was concerned to hear that their funding had been held up for
months, and they were beginning to lay off people federally. They
have 10,000 volunteer mentors. It’s the most cost-effective federal
program known. I was relieved to find out today that those with-
held funds are now being released and flowing. You mentioned
SCORE and other resource partners in your written testimony.
How do they help reinforce your work delivering capital to manu-
facturers?
Mr. RACCIO. Thank you, Senator Coons, for that question. They
help on almost a weekly basis. SCORE has been a monumental
partner in helping our small businesses, whether it’s finding access
to certain SBA programs, helping them with business plans, is
often critical for our small business partners. Whether they’re look-
ing to expand or simply start and they’re not sure how to go about
it.
Specifically, in New England, we have a lot of retired executives
that have an extreme amount of industry knowledge, so it’s been
a really good partnership with SCORE. They’ll also pair up with
SBDC as well and work with them. So, they’re out at events. They
are a great product. Great set of people. I’m glad the funding was
released. But they are out there and working with our businesses
every day.
Senator COONS. Last question for anyone on the panel, if I might.
There have been proposals to cut the SBA workforce by as much
as 40 percent. At least in Delaware, I’ve seen how having the SBA
office and staff with connections, and resources, and experience
helps facilitate access, particularly to manufacturers who tend to
be overextended, and overstretched, and only know about these
programs because there’s staff available to help with the outreach.
What sort of impact do you think we would see if they actually
carry through with dramatic cuts to the total SBA staff? Anybody
jump ball? Ms. Kennedy.
Ms. KENNEDY. Senator Coons, thank you very much for the ques-
tion. You know the SBA staff is so resilient. We’ve just found them
to be so committed to getting the work done and partnering with
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other economic development organizations like CDCs that we
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54
would all have to jump in because small businesses are that impor-
tant to our local economies and to creating jobs.
And so, certainly, cuts always hurt, but the rally for small busi-
nesses is absolutely there in our local communities, and we want
to make sure that those employees are there for serving our com-
munity, but as well as having those partners like SCORE. So, that
was really good news to hear. So, thank you for delivering that, too.
Senator COONS. Thank you. And thank you, Madam Chair, for
the chance to work with you to help provide more capital to Amer-
ica’s small business manufacturers.
CHAIR. I’m so glad to partner with you. Thank you. And, Senator
Shaheen.
Senator SHAHEEN. Well, thank you, Madam Chair, and thank
you to all of our witnesses today. We’re really delighted to have you
here and to have your experience to share with us. Just following-
up on Senator Coons’ question about staffing shortages. One of the
things that I’ve heard from some of my constituents in New Hamp-
shire is that 504 approvals are taking longer in large part due to
staffing cuts, and the loss of some of the experienced staff that
have been working on these kinds of loans for a long time.
Can any of you speak to what difference it makes when it takes
longer to get a 504 loan approved? What does that mean for the
small businesses who are affected?
Mr. RACCIO. Thank you for that question, Senator. Absolutely, it
impacts our businesses and their ability to close on loans, whether
it’s real estate that needs to be purchased. For example, we had a
recent deal where there was a 1031 real estate exchange which is
a federally-timed product where we have to close. And we’re wait-
ing, and the business is very nervous if they’re going to get the ap-
proval.
So, that’s just one example of where when there are time delays
it’s very sensitive to the businesses, and it often leaves them feel-
ing anxious, noticeably so. So, anything we can do to increase turn-
around time, and have that accountability and predictability for the
small businesses that they know, whether it’s 5 days or 10 days,
that would be immeasurable to the small business to know when
they start their loan application with us, in this certain amount of
time, they’re going to have a decision.
Senator SHAHEEN. Thank you. Does anybody want to add to
that?
Ms. KENNEDY. Senator, it’s a great question. And again, I would
say to you that SBA staff is so resilient in terms of trying to make
sure they serve small business. They’re committed to that. But I
agree with my colleague, time matters, and time kills deals. And
so, it’s really important to have that level of certainty when they
submit a loan that we can get that approved in a timely manner.
Senator SHAHEEN. Thank you. I appreciate that. And I would
agree with you, the SBA field staff in New Hampshire is tremen-
dously resilient and do a great job. And my experience is that all
of the other SBA folks that we’ve worked with are in that category.
I know that Senators Young and Klobuchar have worked to-
gether on some improvements to the 504 Program. One change in
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particular that they’ve proposed that I think is really important is
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shifting the occupancy rates to make it easier to use a 504 loan for
mixed use building.
New Hampshire, like so many states is really an affordable hous-
ing crisis. There are a lot of New Hampshire towns that have main
street buildings that are no longer occupied that could really ben-
efit from investment to allow them to be used as housing, as well
as commercial space.
So, I know, Mr. Raccio, or at least I understood, that you may
have looked into this issue and maybe others have as well. Do you
think that changing those occupancy requirements would be help-
ful as we’re looking at how do we address both small business
issues but also some of the housing challenges that we have in
states?
Mr. RACCIO. Thank you, Senator, for that question. Yes, we
would absolutely love to be able to change the occupancy require-
ments to a 50 percent owner-occupied versus 51 for existing and 60
for ground up new construction. What that would really do is it
would allow more SBA borrowers to get access to these capital
funds to purchase real estate.
We’re often involved as a panel with customers that are buying
much like you mentioned, Senator, buildings that may have two
floors, you know, might have some investment space to it, which
is great for our borrower to have some of that accountability.
And believe it or not, sometimes, especially in New England
where I lend, we have a lot of buildings that are identical up and
down. So, you’re stuck at 50 percent. Yes, we understand that can’t
move forward. So, it would be really nice to be able to have it be
50/50, and be able to have more access for capital to borrowers.
Senator SHAHEEN. So, you said 50/50 on existing buildings, but
what did you say about new buildings?
Mr. RACCIO. Same. 50/50.
Senator SHAHEEN. Do others want to address that? Ms.
Wojtowicz.
Ms. WOJTOWICZ. Thank you, Senator. I would like to just add a
little bit of clarification, because the current SOP also requires that
even if it’s at 51 percent, that over a period of time, they occupy
up to 80 percent. So, that would not allow those kinds of projects
to go forward unless we address both sides of that issue.
Senator SHAHEEN. Oh, that’s a really good point. Thank you very
much for that. Thank you-all very much for your testimony.
CHAIR. Thank you. Senator Rosen.
Senator ROSEN. Well, thank you. Thank you, Chair Ernst, Rank-
ing Member Markey, for holding this hearing. I love to see every-
one is smiling and agreeing. And this is a—you know, this com-
mittee, small businesses, the backbone of our country. And in Ne-
vada, we have 280,000 small businesses. That’s 99 percent of busi-
nesses in Nevada are small businesses. And right now, we have al-
most 100 approved 504 loans for, I think, over $120 million total.
And we want to keep that going. So, thank you for all being here.
And I know supporting clean energy businesses has been brought
up by Senator Markey. I want to build on that a little bit because
we know a little something about that. Nevada and some more,
supporting small business in the clean energy SEC sector is bene-
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ficial for local national economies. Seeing these benefits firsthand.
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Nevada is a leader in clean energy with the most solar jobs per
capita of any state. We got plenty of Sun. We farm the Sun, Iowa,
you’ve got the corn. Nevada, we’ve got the Sun, right? We farm
what we can, and we’re still growing. Last year, Nevada had its
greatest expansion of solar capacity in a decade, which will create
even more economic opportunity for clean energy small businesses.
So, this means a cancellation for funding streams like solar for
all program and cuts to the clean energy tax credits in the recently
enacted reconciliation bill. Well, it’s going to have a devastating im-
pact on the small businesses. We have tons of small businesses
that make all the pieces and parts that go into building solar pan-
els, a solar field, and all that support. And it’s really important. We
have a lot of businesses for our broader clean energy economy. So,
due to these cuts, businesses in Nevada, they’re uncertain. Will
they close? Will they stay? Will they go? And it’s a very, very
stressful time for us.
So, Ms. Kennedy, you mentioned in your testimony a successful
clean energy project in Reno. Thank you very much. It utilizes 504,
maybe one of these nearly 100 programs. Can you speak to the im-
portance of directing investment to emerging industries like clean
energy and the ways we can make it easier, especially for those?
We have wind, water, solar, geothermal, that’s what Nevada has,
our geography and geology and we want to be able to leverage that
504 funding.
Ms. KENNEDY. Well, thank you so much, Senator. And we cer-
tainly agree with that. When we think about that Somerset Reno
project where we were able to assist a business that had gotten
multiple SBA loans in California and moved into Reno. To do an-
other Memory Care facility that included some senior housing as
well, being able to get access to the SBA energy public policy goal
and open up another location, creating over 70 jobs, a very signifi-
cant project in Reno.
And so, being able to eliminate that cap, which was already in
place in the previous administration, it really will make a dif-
ference for clean energy and energy cost, or increasing in states
like California with all of the fires. And so, being able to sell back
to the grid, as my colleague mentioned, being able to create that
clean energy at solar and reduce energy costs is such a win-win for
small businesses already dealing with so many additional costs.
Senator ROSEN. I agree. Thank you. And I want to move on. You
talked about affordable housing, but I’m going to move on about ex-
panding SBA loans for affordable housings because our nation is
facing a severe shortage of affordable housing. It’s forcing families
into housing insecurity. It’s creating challenges for small busi-
nesses. It’s dragging down our local economies.
And in order to address the housing crisis, we must support
small businesses in the housing industry working to tackle this
issue; home builders, contractors, all the support businesses that
do that to ensure they have the capital that they need to contribute
to their communities.
And so, I recently sent a letter to SBA and HUD urging them
to work together to better support small business in the housing
industry, including by opening up SBA capital to home building
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those developers. Affordable housing, it really makes a difference.
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So, Mr. Raccio, can you give us any stories here, discuss how
you’re working with small businesses in the housing space, and any
stories that you want to share in this time I have left?
Mr. RACCIO. Thank you, Senator, for that question. As I’m sure
you’re aware, the SBA 504 isn’t able to directly provide assistance
for housing. But we do on a daily basis provide financing for some
of those businesses to purchase their own real estate and expand.
I recently had a project up in Cape Cod, Massachusetts with a
large contractor where we were able to utilize the SBA 504 refi-
nance program and help that contractor out to refinance 19 pieces
of heavy-duty equipment such as excavators and bulldozers.
So, while we might not be able to directly provide funds to the
end user as of today, we’re certainly involved with the industry
helping them out on a daily basis.
Senator ROSEN. That’s fantastic. Thank you. Well, it’s an all of
be above approach. So, thank you all for being here. Thank you,
Madam Chair.
CHAIR. Absolutely. Thank you. And now I’ll recognize Senator
Hickenlooper for five minutes.
Senator HICKENLOOPER. Thank you, Madam Chair. This is a
treat. We’re watching you on TV. You don’t see us all here, but
we’re watching, and really appreciate. There are not that many of
us left, but I’m one the—I’m an entrepreneur in my own right. I
started out as a geologist, and then in the big long kind of infla-
tion—what’d you call it? The stagflation epics of the ’80s, our com-
pany got sold and we all got laid off. And I was out of work for
a couple years, but ended up opening a restaurant that brew its
own beer.
And our lending parameters where no one—I went to 33 banks,
and they turned me down every time. I was only trying to borrow
50 grand because the city would give us 125 grand, because we
were at an abandoned warehouse district so they wanted to stimu-
late the area.
And so, we finally got open after all these banks—actually, the
Women’s Bank was the only bank that would give us a loan. And
we had to put up about literally $150,000 worth of collateral, stock
certificates, and house deeds to get a $50,000 loan.
Got going and things took off, and we needed—we had all of a
sudden everyone copied us, and we had all these competitors. And
we had to expand, and we were going to take this big old five story
warehouse and put affordable housing up on top. Minor detail was,
I didn’t have any money still. We had a business that was doing
great and cash flowing like crazy.
Anyway, the 504 program was what we used, and it allowed us
to take the cash flow we have and then the asset. And we were
gambling. If we put these millions of dollars into it, it would be
worth this much more money. And it worked and really was—no
one else would’ve talked to us, no one else would’ve given us that
chance.
And I think if you look at so much of the good ideas and innova-
tions that come out of this country, it’s people that are not that
smart. They’re just about to lose their business, and they’re fretting
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every hour, lying awake at night figuring how you’re going to make
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payroll, how can you get more customers, how can you get a better
margin on those customers?
And that’s what creates that devotion to trying to solve your
problems. It’s is really what leads to solutions that a lot of other
people benefit from. It turned out we ended up making a whole
bunch of money out of it, but I never intended that. You know, the
only reason I was a small business person was because I didn’t
want to have a boss. [Laughter.]
Anyway, I appreciate very much all of you and what you’ve done.
And let me start off with Ms. Kennedy. You know, as I said, major
investments in things where you’ve got fixed assets. It’s amazing
resource for our businesses. And I think the renewable energy, ob-
viously, we’ve seen a bunch of that. One of our first bills that we
introduced was going to allow us to use 504 programs to invest in
energy efficiency or clean energy projects.
Sometimes it’s hard to get that improvement in cash flow to be
monetized. Now more than ever, we’re seeing them use these in-
vestments to navigate the increasing costs and the new energy
sources that will lower energy costs.
But in this past June, the SBA put a cap on 504 financing that
a business could receive for energy projects just as it were at that
point where suddenly we had a bunch of projects lined up and
ready to come through that ultimately, I think, were those small
businesses that were so neurotic and driven that they would’ve
come up with the innovations and the great ideas.
So, Ms. Kennedy, I’d ask, how have small businesses used 504
to invest in clean energy, and what does the cap do, in candid
terms?
Ms. KENNEDY. Thank you so much, Senator. As I mentioned in
my written and oral testimony, this 504 cap will hinder small busi-
nesses from continuing to use the energy efficiency public policy
goal by no longer being able to do multiple projects.
Dahdoul Textile is one of the businesses I mentioned. In Som-
erset, Reno, is another business I’ve mentioned. And we have a
number of businesses in California, in particular, who could benefit
from removal of that cap so that they can continue to grow using
the energy public policy goal. It’s really critical. In California, en-
ergy costs continue to go up because of the fires, and we need to
have access to this particular public policy goal without those limi-
tations.
Senator HICKENLOOPER. Great. Thank you. And can I steal an-
other minute?
CHAIR. I suppose. [Laughter.]
Senator HICKENLOOPER. I told too long a story, and I apologize.
Mr. Raccio, and I’ll get rid of all the flowery preamble. But how do
you describe how lenders can combine different types of financing
to support businesses, and is there something we should be doing
in Congress? Or is there something that we can kind of put our
shoulder to the wheel, and try and get the SBA to do in terms of
being innovative?
I ended up with four different loans to get that project done. And
one of the great things about the 504 was it really, it would go
below like the city loan, which just had a—it made all the dif-
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ference.
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Mr. RACCIO. Thank you, Senator. We have an amazing tool box
set of products, whether it’s the 504 for a fixed capital asset or it’s
the 7(a) to help out with working capital, a lot of the tools that the
everyday business owner is going to need. We have, I think, being
able to increase some of those limits.
And also, having some accountability with regards to timeframes
will really help to boost where we go with those products. So, I
would think the panel would agree. We’ve got a really good tool set.
Just listening to your story, listening to Karl’s story, at the end of
the day, when we’re able to do these loans, we can see the excite-
ment in your face. We really do make small business owners
dreams come true. And it’s not every day we can say that, but we
really have clients like yourself that really love what they do and
are excited about taking the opportunity to purchase real estate.
Senator HICKENLOOPER. Yeah. I appreciate that, and thank you-
all. It’s funny, I came very close to doing a brew pub in Indianap-
olis, and came very close doing one in Davenport. Rock Island actu-
ally is where we were looking, but in that Quad City stuff. So, any-
way, thank you-all. I yield back.
CHAIR. Okay. If there are no further questions, I want to thank
our witnesses for being here with us today. I ask unanimous con-
sent that the record of today’s hearing remain open for two weeks
for members to submit questions, revise and extend their remarks,
and submit additional information into the record.
Without objection, so ordered. And with that, the Committee on
Small Business and Entrepreneurship stands adjourned. Thank
you all very much.
[Whereupon, at 3:44 p.m., the hearing was adjourned.]
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File and source
- File
- CHRG-119shrg61659.pdf
- Size
- 6,531,817 bytes
- SHA-256
- 9995b6246a4a6b864fe9abc3de6287d2878cc4255677cec622958ec66c4cdf42
- Our copy
- CHRG-119shrg61659.pdf
- Original
- www.govinfo.gov