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[Senate Hearing 115-322]
[From the U.S. Government Publishing Office]




                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE


                             SECOND SESSION


                              MAY 15, 2018


    Printed for the Committee on Small Business and Entrepreneurship

  Available via the World Wide Web: http://www.govinfo.gov

 30-925 PDF              WASHINGTON : 2018             


                    JAMES E. RISCH, Idaho, Chairman
              BENJAMIN L. CARDIN, Maryland, Ranking Member
MARCO RUBIO, Florida                 MARIA CANTWELL, Washington
TIM SCOTT, South Carolina            HEIDI HEITKAMP, North Dakota
JONI ERNST, Iowa                     EDWARD J. MARKEY, Massachusetts
JAMES M. INHOFE, Oklahoma            CORY A. BOOKER, New Jersey
TODD YOUNG, Indiana                  CHRISTOPHER A. COONS, Delaware
MICHAEL B. ENZI, Wyoming             MAZIE K. HIRONO, Hawaii
MIKE ROUNDS, South Dakota            TAMMY DUCKWORTH, Illinois
          Skiffington E. Holderness, Republican Staff Director
                 Sean Moore, Democratic Staff Director
                            C O N T E N T S


                           Opening Statements


Risch, Hon. James E., Chairman, and a U.S. Senator from Idaho....     1
Cardin, Hon. Benjamin L., Ranking Member, and a U.S. Senator from 
  Maryland.......................................................     2


McMahon, Hon. Linda E., Administrator, U.S. Small Business 
  Administration, Washington, DC.................................     4

                          Alphabetical Listing

Businesses for Net Neutrality
    Letter submitted.............................................    34
Cardin, Hon. Benjamin L.
    Opening statement............................................     2
McMahon, Hon. Linda E.
    Testimony....................................................     4
    Prepared statement...........................................     6
    Responses to questions submitted by Senators Risch, Cardin, 
      Cantwell, Shaheen, Scott, Heitkamp, Booker, Enzi, Hirono, 
      and Duckworth..............................................   142
Risch, Hon. James E.
    Opening statement............................................     1
Warnick, Kathleen, National Association of Women Business Owners 
    Statement dated May 15, 2018.................................   140

                      THE STATE OF SMALL BUSINESS

                  IN AMERICA: AN UPDATE FROM THE U.S.



                         TUESDAY, MAY 15, 2018

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 3:31 p.m., in 
Room 428A, Russell Senate Office Building, Hon. James Risch, 
Chairman of the Committee, presiding.
    Present: Senators Risch, Scott, Ernst, Inhofe, Young, 
Cardin, Cantwell, Shaheen, Markey, Coons, and Hirono.

                       SENATOR FROM IDAHO

    Chairman Risch. The meeting will come to order.
    Good morning. Today we are going to hear from the 
    Linda, it's so good to see you back here again. You know, 
it's been over a year now--gosh, where does time fly?--since 
you've been sworn in as the SBA Administrator, and we're happy 
to have you here again today.
    This hearing will focus on the state of small business in 
America, and the Small Business Administration's efforts to 
support entrepreneurs. By many measures, small business owners 
today are optimistic and forward looking. The National 
Federation of Independent Business' Small Business Trends 
Survey for April reached a near-record reading of 104.8, and 
also saw 61 percent of small businesses say they are increasing 
their capital expenditures. The payroll provider Paychex has 
recorded a nearly 3 percent increase over the past 12 months in 
wages paid by small businesses. The MetLife and U.S. Chamber of 
Commerce Small Business Index for the first quarter of 2018 
found that 61 percent of small business owners are expecting 
increased revenues, and nearly a third are expecting increased 
hiring. This is all great news for America and for the American 
    The Tax Cuts and Jobs Act, which was passed last year, has 
already been a big win for small businesses and, more 
importantly, their employees. As I just noted, many small 
business owners have already begun hiring more workers and 
making new capital investments in their businesses. For the 
first time since 1982, the NFIB reported the fewest number of 
small businesses citing taxes as their number-one problem.
    While small business owners are doing better than they have 
in over a decade, small businesses in Idaho continue to talk to 
me about difficulties and challenges accessing capital and 
complying with and understanding a seemingly never-ending 
number of regulations, all of which Administrator McMahon has 
been working on.
    The SBA is at the forefront of all these issues, assisting 
small business owners across the Nation with its various loan 
guarantee programs, its excellent technical assistance and 
resource partners, and its contracting and set-aside offerings. 
In her time at the SBA, Administrator McMahon has traveled 
around the country as part of her Ignite Tour to better 
evaluate the small business environment and to hear directly 
from small business owners and SBA employees. Impressively, she 
has completed over half of her tour, visiting 44 out of the 68 
SBA district offices, and many, many small businesses in each 
of those districts. I'm delighted to say that Idaho was on the 
tour, and we were happy to meet with the office there and with 
a number of small businesses.
    The Administrator visited Boise last September, and she and 
I had the opportunity to visit with several small businesses in 
the Treasure Valley, including Cravin's Candy Emporium and 
Winspear Construction. We were all pleased to show her just a 
part of what makes Idaho such a great State for small business.
    Administrator McMahon, I welcome you, and I look forward to 
hearing about your perspective on the sensational small 
business environment in this country today, your experiences 
thus far at the SBA, and your ideas on how the SBA continues to 
improve for the good of America's small businesses.
    With that, Ranking Member Cardin.


    Senator Cardin. Well, thank you, Mr. Chairman. Thank you 
very much for convening this hearing.
    Administrator McMahon, it's a pleasure to have you back 
before our committee. I applaud your leadership on behalf of 
small businesses in America. I join the Chairman in 
acknowledging your commitment to visit each of the 68 district 
offices across the country. That's an incredible commitment. 
But I do think there's no substitute for meeting one-on-one 
with the people that are in the field carrying out the 
important responsibility of the Small Business Administration. 
So I thank you for that commitment.
    Two weeks ago I had the opportunity to attend the ribbon 
cutting of the Baltimore Small Business Administration's 
office. Now, I want to tell you, it was not a difficult task 
for me to do this since it's located in the same building as my 
Baltimore office is located in. I just had to go down seven 
flights of stairs, so it wasn't that difficult. But it's very 
impressive to see the operations we have in our Baltimore 
office, for most of Maryland is done out of the Baltimore 
office. We also have a Washington office that handles Prince 
Georges County and Montgomery County, and they do just great, 
great work. I thank you for the attention that you've paid.
    Like you, Administrator McMahon, I celebrated National 
Small Business Week last week and highlighted the outstanding 
entrepreneurs and small business owners in Maryland who are 
creating jobs, driving innovation, and increasing America's 
competitiveness, and that is my focus on the committee, helping 
small business access the tools and resources to better compete 
in the 21st-century global economy.
    SBA has helped countless businesses start and succeed, so 
I'll just brag about one of those loans that took place in 
1996, where the Small Business Administration took a chance and 
lent money to a University of Maryland student on an apparel 
idea, and that business grew from $17,000 in sales in 1996 to a 
multi-billion-dollar global performance brand company, Under 
Armour, that today employs thousands in Baltimore.
    There are success stories like this all across our country, 
and the importance for the SBA, the work that you do. But there 
are some issues I hope we can examine today. Like Chairman 
Risch, I am concerned about the challenges that are facing 
small businesses today. I want to ensure small businesses have 
equal access to Federal procurement and contracting 
opportunities, particularly our women-owned, minority-owned, 
and veteran-owned businesses.
    In Maryland, we are fortunate to have a good number of 
local credit unions and community banks serving the small 
business community. However, these institutions can only do so 
much to meet the growing need for capital, especially in an 
environment where banks are consolidating and may prevent them 
from reaching small business customers. I am interested in your 
thoughts in how to get more community and independent banks 
participating in SBA programs.
    A priority for me is helping small businesses export and 
sell products overseas. We talk about a global economy, and we 
are in a global economy. But if you're a small business, it can 
be almost impossible to try to get through the bureaucracies of 
international trade. This is an area with tremendous upside for 
small businesses, and I hope we can talk about your efforts to 
strengthen export finance programs.
    I'm concerned about the Administration's efforts to cut the 
SBA budget. Now, I applaud the bipartisan effort in Congress to 
make sure that the budgets were restored to an appropriate 
level, but I am concerned about the cuts being proposed by the 
Trump Administration as to how it could affect your ability to 
carry out this important responsibility.
    And then finally, too many small businesses remain unaware 
of SBA programs, particularly the free and low-cost counseling 
opportunities. So I hope you can address your efforts to raise 
    Administrator McMahon and I appeared at the same small 
business panel last week where we were together and talking 
about the small business programs. I listened to your remarks, 
and many of your observations I completely agree with, 
particularly with regard to the implementation of tight labor 
markets, workforce training, and access to capital challenges 
facing small businesses. That's why I am particularly pleased 
that you're here today, so that we can work together in order 
to increase the opportunities for small businesses in this 
country, and I look forward to your testimony.
    Chairman Risch. Thank you very much.
    Administrator McMahon, the floor is yours.


    Ms. McMahon. Thank you, Chairman Risch, Ranking Member 
Cardin, and members of the committee. I appreciate the 
opportunity to testify today and talk about the state of 
America's small businesses.
    Last week we all celebrated National Small Business Week. I 
began the week by honoring the National Small Business Person 
of the Year. That distinction was given to one of Senator 
Duckworth's constituents, the owner of a pest management 
business in Illinois.
    Following the award celebration, I was off on a bus tour 
that started in Florida and ended in North Carolina. The trip 
was similar to my travel over the past year. Soon after being 
sworn in as Administrator, I set out on a goal to visit all 68 
of SBA's district offices, as you've kindly mentioned. Our 
field staff make up close to half of the agency's employees, so 
the purpose of my travel has been two-fold: one, I wanted to 
provide leadership and direction to SBA's workforce and visit 
them in their offices on their turf; two, I want to see the 
front line of where SBA interacts with America's small business 
    To date, this Ignite Tour has taken me to 44 district 
offices across 38 states. I've met with our district staff and 
leadership, as well as SBA's resource and community partners. I 
have also had the opportunity to engage over 700 small business 
owners through roundtable discussions and site visits. I've 
toured a lot of facilities, sampled a lot of products, and I've 
ridden a lot of equipment. Along the way, I've been honored to 
make these visits with several of you.
    Last fall I enjoyed visiting several businesses in Boise 
with you, Mr. Chairman. In November, Senator Shaheen and I 
hosted a small business roundtable in Manchester. And in 
January, Senator Coons and I toured a manufacturing facility in 
Wilmington. These visits have reinforced to me the valuable 
role small businesses play in our economy and the importance of 
SBA and our resource partners helping them to succeed.
    My tour has also allowed me to hear directly from business 
owners about what is on their minds. Among the frequent things 
I hear are the burden of Federal and State regulations, and 
complexities of health care and taxes, and recently workforce 
and labor challenges.
    When I look back on last year, in addition to my travel and 
small business engagements, I also reflect on the agency's 
response to Hurricanes Harvey, Irma, and Maria. From the 
arrival of Hurricane Harvey in Texas to our continued work 
today, I'm incredibly proud of our staff. Since last summer, 
SBA has deployed over 5,000 personnel. We have staffed over 400 
disaster centers. We fielded over 1 million calls for 
assistance, and we approved 130,000 loans totaling $6.7 billion 
in lending. Our disaster efforts might be best summed up by a 
comment from the mayor of Port Aransas, Texas, located on the 
Gulf Coast. At the National Small Business Week dinner, he 
commented that SBA was the first one in and the last one out.
    While such comments are reassuring to our team, we still 
have a lot of work to do, especially in Puerto Rico and the 
U.S. Virgin Islands. We have a significant amount of staff on 
the ground there, and we will remain as long as necessary to 
continue to help disaster survivors.
    SBA is also active in other areas across the country. 
Within the last week, disaster declarations were made for 
Illinois and Indiana as a result of severe storms and flooding. 
A declaration was also announced for Hawaii in response to 
April flooding and the ongoing lava flows.
    In my written testimony I highlighted some of our agency's 
successes. Our 7(a) program, the key tenet for access to 
capital, had a record year in Fiscal Year 2017. In addition, 
access to mentorship was high, as our SBA network reached 1.4 
million people. Some other areas of positive developments 
include our efforts to expand opportunities through our women 
business centers. We recently made announcements to expand 
centers in certain states like North Dakota, and want to 
establish centers in states that do not have a presence like 
Idaho and South Carolina.
    Elsewhere in our micro-loan program, I am pleased to see 
that over 40 percent of those loans have been made to 
minorities. In our veterans program, more than 17,000 veterans 
were trained in Fiscal Year 2017. In our Emerging Leaders 
Program, we've increased the number of locations and are 
expanding a record number of participants.
    And lastly, the agency has worked hard to address 
management challenges. From 2017 to today, we have closed over 
170 outstanding Inspector General recommendations, and 
addressed and closed over 20 GAO recommendations.
    In closing, Mr. Chairman, I want to thank you and members 
of the committee for your ongoing support of the agency. I feel 
we have a shared mission to foster growth and develop our 
Nation's small businesses, and I look forward to our continued 
work together toward that goal.
    I appreciate very much the opportunity to come and testify, 
or, as I like to think about it, to chat with you all this 
    [The prepared statement of Ms. McMahon follows:]
    Chairman Risch. Well, thank you so much for coming in. 
That's a great report for us. You have obviously hit the ground 
running pretty hard over this year and got a lot of things 
done, and we're happy to hear that.
    We're going to do a 5-minute round of questions, and I'm 
going to start.
    As you know, Senator Sullivan and I have worked with you on 
the 8(a) program, and we've had lots of discussions in that 
regard, so I'm going to give you a question. If you want to 
take it now, you can, but I would certainly accept a response 
for the record if you'd like to do that. We're going to hold a 
field hearing in Alaska at the urging of Senator Sullivan 
because of the issues that surround the 8(a) program. Do you 
have any comments on that now, or do you want to take that 
question for the record? I'm hoping you can attend the field 
hearing, if you can, and we'll take your answer.
    Ms. McMahon. In the spring?
    Chairman Risch. It will be this summer.
    Ms. McMahon. This summer?
    Chairman Risch. Yes.
    Ms. McMahon. Better than next winter.
    Chairman Risch. That's true. It will be light when we're 
    Ms. McMahon. I was in Alaska at the invitation of both 
Senators Sullivan and Murkowski. I learned so much about the 
State when I was there, and it was end of last summer, I think, 
when I was there.
    I think the 8(a) program is incredibly important and 
beneficial to Alaska. It's a very different State, that's for 
sure, in how it's set up, and our 8(a) in charge of our 
government contracting office just returned I think yesterday 
or today. So they were up again visiting to see what programs 
were in place, how could they better the 8(a) program, et 
cetera. So that's kind of a general response. As to specifics, 
I'd like to wait until I hear from the hearing, and if possible 
I would love to be there as well.
    Chairman Risch. Thank you so much.
    Senator Cardin.
    Senator Cardin. Well, once again, thank you for your 
    I want to drill down a little bit on a challenge, 
especially in those small businesses that need loans under 
$250,000 in which women and minorities are finding it very 
challenging to get financing. When we take a look at the 7(a) 
program, your own data from 2017 reflects that only 4 percent 
of the 7(a) approvals and 2 percent of the 7(a) dollars went to 
African American businesses.
    Now, the pilot program Community Advantage has a much 
higher success rate in that regard. The African American number 
is 13 percent of approved loans and 14 percent of the dollar 
values. This isn't the micro-lenders. It's the loans up to 
$250,000. It's the community development finance institutions.
    The pilot program is scheduled to expire in 2020, and the 
Urban League has urged us to increase the limits from $250,000 
to $350,000.
    So can you just let us know your commitment to reach 
minority communities, women-owned communities, particularly in 
these smaller loans, and whether this pilot program should be 
expanded and continued?
    Ms. McMahon. I like very much the pilot program. I think it 
did give us an opportunity to test the waters. That micro-loan 
program, women have participated I think in good numbers, and 
our African American outreach is strong. You can loan up to 
$50,000. Most of those loans are averaging about $14,000. 
Sometimes it's that little bit you need, a little bit to get 
started, and we've really found that what's as important as 
anything, as the access to capital, is also the mentoring that 
goes on to help the people in those communities.
    Through the micro-loan program, we do have the intermediary 
that the money goes to, and then they make the loan, the non-
profit. At one time we were going to look at different kinds of 
programs that we thought might enhance those programs. We've 
tried to develop more of the non-profits in those areas so we 
could have a little bit stronger outreach.
    So I think we've had good success there. I'd like to wait a 
little bit closer to the expiration of the pilot program to see 
if that's one to continue to focus those efforts. But what it 
looks like to me is that those are good programs, and we would 
like to continue them.
    Senator Cardin. I think the micro-loan program has been 
very successful. We had the challenge on the next size loans of 
$350,000, and that's the area that I think we need to have a 
little more permanent program to help particularly minority 
businesses and women-owned businesses.
    There was a mission rating that would judge the performance 
of lenders based upon their reaching small businesses in the 
most critical business apps. These include small loans of less 
than $350,000, rural loans, loans to small businesses that are 
majority owned by minorities, women, veterans, new businesses, 
export businesses.
    That was rescinded last August by the SBA, and in 
rescinding you stated that the SBA continues to explore ways to 
encourage 7(a) lenders to further SBA's mission to expand 
access to capital for all small businesses, including those in 
underserved and emerging areas.
    Do you have a game plan now to make sure that we get those 
types of activities in those areas?
    Ms. McMahon. One of the reasons that I do like to go out 
and visit with all of our district offices is because not every 
district is the same, and the needs in district offices vary 
all over the country. What we are trying to do, clearly, is to 
increase the number of our lenders. We want to give them 
support and understand how important our programs are.
    I think one of the things that we have done over the last 
year to do that is a program that we developed called Lender 
Match, which if you go on our website and you look at Lender 
Match and you can put in the kind of company you are, what your 
needs are, and it will list the lenders in your area. So that's 
one great step to be able to see where lenders are that you as 
a potential entrepreneur can go to.
    However, I think the continuing development and support of 
our resource partners, our SCORE offices, our women's business 
centers, our SBDC centers, our veterans outreach, all of these 
are so important to give the support to our entrepreneurs as 
they start to develop and grow their businesses. So it's that 
interaction, I think, with our lender specialists in our 
district offices who are constantly working with our lenders in 
the community to help them understand the needs of our 
potential entrepreneurs.
    Senator Cardin. I'll just conclude with this observation. I 
agree with all the efforts that you're making in all these 
program areas, but the bottom line is the 7(a) program is the 
largest program we have, and the numbers there are 
unacceptable. It didn't happen under your watch. It's been 
unacceptable for a period of time. We've got to get those 
numbers more reflective of the demographics of this country. 
Thank you.
    Chairman Risch. Thank you, Senator Cardin.
    Senator Ernst.
    Senator Ernst. Thank you, Mr. Chair.
    Thank you, Administrator McMahon. It's good to see you and 
have you here today.
    Over the past year we've made significant progress towards 
removing a lot of barriers that our small business owners face, 
and most notably, of course, we passed the Tax Cuts and Jobs 
Act, which allows our job creators of all sizes to grow and 
reinvest in their employees.
    In Iowa, over 99 percent of our employers are small 
businesses. So I visit with a number of them as I travel out on 
my 99-county tour, and really there is a great sense of 
optimism out there. I've heard from a lot of those small 
businesses from all over the State, and they're providing their 
employees with bonuses, with wages, they're giving increased 
retirement benefits. I heard from an employer today that 
they're adding additional paid time off for all of their 
employees. Surveys show a record number of business owners plan 
to boost their hiring; and, of course, as I just said, increase 
wages, and expand their businesses.
    As you're out and about, I know you're visiting a lot of 
those employers as well. Can you share some input that you 
might have received in regards to the Tax Cuts and Jobs Act?
    Ms. McMahon. Thank you. Yes, you're absolutely right, that 
feeling of optimism is clearly there. I think it was Chairman 
Risch in his opening statement that talked about not only some 
of those benefits that you talked about, but also I believe it 
was just this week or late last week the NFIB also published 
information that businesses are going to experience or are 
already showing signs of having profitability increases that 
they haven't seen before. So profits are on the rise, business 
growth is on the rise, and really helping that happen has 
really been tax cuts, rollback of the regulatory environment.
    When I first started out last year--I'll just digress for a 
second--and I was talking to some of these 700 business owners, 
and I was talking to them about what is your main issue, and I 
would have these business roundtables or tour their businesses, 
and it was taxes, taxes, tax cuts, almost all the time. That 
was first and foremost.
    I don't hear that now, but the optimism level is still 
there, optimism for growth and how they're going to expand 
goods and services, they're going to hire more people. In fact, 
when I was visiting one business up in Braintree, 
Massachusetts, a bread baker there, when I was in his plant and 
he was baking all this wonderful bread, and it smelled so great 
when I was in there, and he said, you know, the tax write-off 
provision is going to allow me to buy another one of those 
ovens, and they're $1.5 million. I'm going to be able to buy 
one. I'm going to hire more people. I'm going to bake more 
bread. I'm going to increase my facility. And, he said, I'm 
really going to grow my business.
    So those were really hard examples of how it is being 
beneficial. So I'm very pleased to hear the benefits of the tax 
    Senator Ernst. That's great. No, and that's perfect.
    You did mention rolling back regulations as well, the 
regulatory environment, and we have worked as Congress on 
rolling back a number of harmful regulations, those that impact 
small businesses, and what we are seeing is tens of billions in 
savings for taxpayers and businesses because of that.
    But over-regulation still does remain a pretty high concern 
with a lot of our Iowa job creators, and on average our small 
business owners across the country, they spend about $12,000 
annually conforming to those regulations. So I did introduce 
the Prove It Act, which does strengthen the voice of small 
businesses in the rulemaking process and improve the quality of 
agency certifications and analysis of a rule's impact on small 
    What steps are the Small Business Administration taking 
right now to ensure small businesses do have a stronger voice 
in that rulemaking process?
    Ms. McMahon. You know, it's interesting, when I first 
became the Administrator of SBA, and as I started doing some 
touring around the country, what I really realized is that the 
SBA is the best-kept secret in the country because not all 
businesses understand that not only do we help provide access 
to capital, but it is the mentoring aspect of what we do, the 
support system, the encouragement, the helping to develop 
business plans through the resource partners that we have.
    So I made it a goal--it's still my goal--that SBA doesn't 
remain the best-kept secret. In order to let businesses know 
how we can be their advocates during the rulemaking process, I 
want to collect information from them. I tell them all, look, 
I'm out here. There are about 30 million small businesses in 
the country. One of my jobs and functions is to be your 
advocate in Washington. So I want them to tell me some of the 
    When I talk to them, I don't often hear it's this 
particular regulation, you've got to get this one off the 
books. It is regulation in general. Albeit, some of that is 
State and municipal combined with Federal, but you mentioned 
the number of almost $12,000. It's like almost $12,000 per 
employee. That is a huge number for a small business owner to 
have to absorb. So thank you for your work in that regard, and 
we'll keep bringing back information that we have.
    Senator Ernst. Excellent. I appreciate it.
    Thank you, Mr. Chair.
    Thank you, Administrator.
    Chairman Risch. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chair.
    Good to see you.
    Keeping on that theme, the women business centers, I'm 
assuming you think we should reauthorize those?
    Ms. McMahon. Yes, I do, very definitely. In fact, we're 
adding nine new centers this year. There will be some in states 
that have a center already but need expansions. Others are for 
states in which we have no presence at all. We're looking to 
make sure that we can have more of those centers. So that will 
bring us up to about 109 centers around the country.
    Senator Cantwell. Thank you for that.
    Switching gears to a more specific sector in the timber 
area, we've operated with the Forest Service with two different 
types of logging contracts, but the SBA's set-aside only 
applies to one of them. That was maybe okay a few years ago 
because you didn't have as many of the contracts that we were 
using for stewardship, but now stewardship contracts are 
    So do you think the SBA set-aside should apply to both 
types of logging contracts so that small businesses get access 
to both?
    Ms. McMahon. You know, Senator, may I get back to you on 
that? I honestly am not familiar with the different kinds of 
contracts in your State on that, but I will be happy to look 
into it and get back to you.
    Senator Cantwell. Well, I thank you for that. I know that 
the Small Mill Association and others, they very much care 
about this issue, and I think people just want certainty and 
predictability, so we'd certainly want to see the SBA working 
to implement that set-aside requirement across all of the 
Forest Service.
    Thank you.
    Chairman Risch. Thank you, Senator.
    Senator Scott.
    Senator Scott. Thank you, Mr. Chairman.
    Good afternoon, Administrator McMahon. I hope you're doing 
    Ms. McMahon. Thank you.
    Senator Scott. Let me start by thanking you for taking the 
time to come through South Carolina during your National Small 
Business Week tour. It was certainly a pleasure to have you in 
Columbia, and I was in Columbia at the same time you were 
    I recall a story from 2015. We had a 1,000-year flood in 
Columbia, South Carolina. It was a devastating incident that 
imperiled a lot of small businesses, frankly. One business in 
particular was the Forest Lake Drapery. The Marsha family 
started that business back in 1964.
    Ms. McMahon. I toured that.
    Senator Scott. Yes, ma'am.
    Ms. McMahon. When I was in Columbia.
    Senator Scott. Absolutely. The business was decimated. They 
were nearly gone, which meant that dozens of South Carolinians 
would have been out of work because of that business. The good 
news for them is that the Small Business Administration stepped 
in and provided some assistance that was desperately needed.
    So on behalf of the challenges that we've seen in South 
Carolina and the amazing response that came from the Small 
Business Administration, we want to say thank you for the type 
of work that you all do over there at the Administration, and 
we are incredibly thankful for that, and I know the Marsha 
family was excited to have you there.
    But their story, a 50-plus-year story, has a happy ending 
because of the good work that you guys have done. I think the 
same is true, frankly, for looking at small business throughout 
America right now. We are looking at a 3.9 percent unemployment 
rate. We have a 2.9 percent increase in wages. Small businesses 
now say that--only 13 percent of small businesses say that 
taxes are the number-one issue since the tax reform. That is 
    Ms. McMahon. Yes.
    Senator Scott. The fact is that we see 21 percent of small 
business owners expect higher sales volumes--tax reform. Fifty-
seven percent of small business owners are hiring or trying to 
hire. When you get down to 3.9 percent unemployment, it becomes 
more and more difficult to find the kind of folks that you're 
looking for for your businesses, but this is a great problem to 
    A third of small businesses report increased worker 
compensation. The tightening of the market is good news for 
employees. Forty-three percent are spending more money on 
equipment. And as you suggested earlier, we're looking at a 45-
year high in optimism according to the NFIB's last survey.
    What's next, and how can we help encourage and promote even 
greater success in small businesses from your perspective?
    Ms. McMahon. Well, if I may, just going back to the Marsha 
family, the business that you cited----
    Senator Scott. Yes.
    Ms. McMahon [continuing]. I think, when you look at a small 
business like that, that has literally been so decimated----
    Senator Scott. Yes, ma'am.
    Ms. McMahon [continuing]. It speaks to what I talk about 
all the time about small businesses being the glue of the 
community and the innovators that really bring everybody 
together. What I saw there--and I'm sorry to take time for 
this, but it's just so important to me.
    Senator Scott. It's worth it.
    Ms. McMahon. Not only did this family come together, 
because it's a family owned small business, but they were going 
to shut down. Two of the younger members of the family said no, 
no, this has been our business for generations. They were able 
to come back, and it's great that SBA was able to be there with 
the loan. I'm really happy that we were able to do that. But it 
was the community, the community who came and shoveled mud out. 
It was the community who came and sat and painted walls and 
helped take away debris, and they did it almost without being 
asked. Front loaders just showed up and just started taking 
stuff away before the family even got there on the first 
morning. They said, well, we had to get it out of here, knew 
you needed help. So I think that really speaks to the spirit of 
communities and the helpfulness in our country and the support 
for small businesses.
    So what I want to continue to do as the head of the SBA is, 
again, to make sure that we have the policies and procedures in 
place so that we can help our businesses get access to capital.
    On our 7(a) program, we are up 5 percent year over year for 
this same timeframe, and I'm pleased to see those numbers grow, 
and women actually had about 30 percent of those loans, 
minority communities had about 31 percent of those loans. So I 
was really happy to see the growth in both of those areas for 
the business loans. The 7(a) loans are the flagship of what we 
do. So to be able to continue to provide access to capital for 
those small businesses is going to help the growth.
    But as I mentioned, I want SBA not to be a secret. I want 
people to know about all of the free access to mentoring and 
counseling and business development programs that there are. As 
we keep talking about it, more people will have access to that 
and know about it, and we'll continue to grow.
    Women cite more often than other businesses that they 
flourish more in an environment in which they can have 
mentoring and counseling, and so that's why our WBCs are so 
important in those areas. But not only that, our district 
offices--it's not just that you go to a WBC and you get 
counseling for women. You go to the SCORE partners that we 
have. So we want to make sure that each of these entities has 
the right amount of investment that they need to continue to go 
    Senator Scott. Absolutely.
    I know I'm out of time, Mr. Chairman, but I will close by 
saying that Forest Lake Drapery is now experiencing record 
month after month after month. There's no question that the 
community coming together and providing the glue for small 
businesses is so critically important, and it happens because 
small businesses are so ingrained within the communities that 
their identity, their DNA comes from the communities that they 
serve, and this is just such a tremendous success story on 
behalf of Forest Lake, the community where I visited after the 
2015 floods, and the Marsha family that's been dedicated and 
committed to not only staying open but staying successful.
    Thank you.
    Ms. McMahon. Thank you, sir.
    Chairman Risch. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman.
    Administrator McMahon, it's so nice to have you back.
    Ms. McMahon. Thank you.
    Senator Shaheen. Thank you for the good work that you're 
doing at the SBA.
    Ms. McMahon. And I appreciate all the support from here, 
too. Thank you.
    Senator Shaheen. Earlier this month I convened a field 
hearing with the support of the Chairman and Ranking Member and 
the good work from the staff of the committee at the University 
of New Hampshire to hear from small businesses about what the 
FCC's decision to end net neutrality means for them when it 
becomes effective in June. The people who testified expressed 
real concern that the end of net neutrality protections would 
affect their ability to compete on the internet with their 
larger competitors, and several of the witnesses talked about 
the uncertainty that's created by the end of the net neutrality 
    One witness, Robert Zakon, who is a SCORE counselor, talked 
about the businesses that he's working with and said that one 
of his clients said that the uncertainty caused by net 
neutrality repeal could be disruptive in the business planning 
and funding stages.
    So I think it's fair to say there was real concern among 
the small businesses in New Hampshire about what this means for 
them. Have you been working with the FCC, and are you concerned 
about what their decision to repeal net neutrality means? And 
what is SBA thinking about in terms of helping small businesses 
that might be affected by this ruling?
    Ms. McMahon. Thank you for bringing that up. I've not had 
any conversations with any of the small businesses that I've 
met with, or any of the roundtables that discussed net 
neutrality. I would really like, after the hearing, to get with 
you and get some further information on that. I do think 
anytime that there is indecisiveness, that's not helpful to 
small businesses because they like to know where they're going, 
they like to know where the rules--big business, too. So I know 
that that's probably an issue for them. I've not had any direct 
input from them, but I'd like to learn more and hear more about 
what their experience has been.
    Senator Shaheen. We will certainly share with you the 
testimony from that hearing.
    Ms. McMahon. Thank you, and I'll put it on my docket when 
moving around to have more conversations about that.
    Senator Shaheen. That would be great. Thank you.
    I'm also hearing from New Hampshire small businesses about 
the uncertainty around the Administration's decision around 
trade, the decision to impose new tariffs and the uncertainty 
with respect to some of our trade agreements. Last week we 
heard from a company in New Hampshire called Moonlight Meadery 
that makes mead, which is, as we know, a form of alcohol. They 
had been putting the finishing touches on a deal with China, 
and it would have doubled their output. But the tariffs that 
have been announced have effectively killed this deal. They've 
been forced to lay off six people, and it's a small business, 
so that has a real impact.
    So I wondered if you have engaged with either Secretary 
Ross or Trade Representative Lighthizer about what the impact 
of tariffs on small businesses might be, and are we collecting 
any data about what we're hearing?
    Ms. McMahon. I do have opportunity to chat with them in 
Cabinet meetings, primarily in Cabinet meetings, to talk to 
them about it and to listen to what's being said relative to 
tariffs. Again, uncertainty is not good for small businesses. 
When I was out with Secretary Perdue and we were touring some 
small farms up in Ohio, that issue came up, and Secretary 
Perdue's response, having spoken directly with the President 
about it, was that the President has indicated to our farmers 
that he's not going to let them pay the price for tariffs and 
that they can feel comfortable in that.
    So my experience so far has not been that any of the 
businesses that I'm talking to are specifically asking me about 
a specific trade, except that they would like the certainty. I 
think, though, what I have heard primarily from our small 
businesses is that they want the opportunity to compete in a 
marketplace, and they want to feel like they're being dealt 
with fairly as well. They want to make sure that the trading 
market for those that are involved in exports, that there is a 
level playing field for those who produce products like the 
company you cited that utilize products that tariffs may be 
placed on.
    So I think the sooner that we can finalize our trade 
policies and our tariffs will be much better for our 
businesses, because they will know how to go forward. But I 
think we are well served by an Administration that wants to 
have fair and free trade and reciprocal trade that benefits all 
of our economy.
    Senator Shaheen. Well, I'm out of time, but I appreciate 
that. I hope you will be a strong voice to advocate for that. 
Over the last five years in New Hampshire, our exports are up 
46 percent, and they attribute support from the STEP program as 
being the reason that they're up so high. So I hope that you 
will continue to advocate for increased funding for the STEP 
program as well.
    Thank you, Mr. Chairman.
    Chairman Risch. Thank you, Senator.
    Senator Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman.
    Nice to see you again and to be with you.
    Ms. McMahon. Thank you, sir.
    Senator Inhofe. Just an observation. This morning I was on 
the Axiom program talking about the effect of this thing. This 
is actually right now the infrastructure. They're kind of 
celebrating that. I see a relationship here because I was 
commenting there that when you look and see the regulations, 
we've been talking about that for quite a while now, and the 
imposition that is on not just small businesses but large 
businesses, too. I think that right now--in fact, I keep score 
on these, and one reason I do it is because the first CRA that 
was successfully done was my bill. So we had a signing ceremony 
with the President.
    But when you go through these things, we realize that the 
prosperity that we're in the middle of right now is really due, 
in my opinion, to some things that you're involved in. Number 
one, the regulations that we're trying to relax; and the other 
is the tax ramifications.
    Now, there is a direct relationship, and I think most 
people have not realized this when we talk about it, and I know 
that Senator Markey and I talk quite often about what we're 
going to do with our highway bill and our infrastructure 
efforts that we've worked so closely on in the past, that we're 
going to be in a position to get some of these things done and 
done successfully. But at the same time that we're doing this, 
we're also freeing up a bunch of money that can be used for 
    The whole idea of reducing the tax rates was not a 
Republican idea, it was a Democratic idea. It was 1964, and it 
was John Kennedy when he was President. He said--and this is a 
quote--he said, ``In order to keep up the Great Society 
programs that we've started, we need more tax revenue, and the 
best way to increase tax revenue is to reduce the marginal 
    Well, that worked. As a matter of fact, it went up from the 
total amount of revenue coming in of $900 billion at that time, 
up to $1.8 trillion. It doubled the amount. The same thing 
happened when President Reagan came along. The total amount of 
money that came in at that time to run this government was $469 
billion, and that translated at the end of that period of time 
to almost doubling that amount.
    So all of that is happening right now, and I see a lot of 
prosperity that's come in, which I really am excited about. So 
as you go around--and I've been following your tracks. You've 
been spending a lot of time, not in Oklahoma, but all the 
    Ms. McMahon. I've been to Oklahoma.
    Senator Inhofe. Oh. Well, you didn't call me.
    Ms. McMahon. I believe I did.
    Senator Inhofe. But I know that you've been around, and 
what kind of experiences have you heard anecdotally, 
experiences that they've had as a result of the regulations 
being relaxed in terms of their prosperity as you visit the 
small businesses?
    Ms. McMahon. As I mentioned a couple of minutes ago, I have 
not heard from small businesses about a single particular 
regulation that's been rolled back, but it's been in terms of 
in general the regulatory environment being lifted so that they 
don't have to focus so much, they being business owners, on 
compliance issues relative to regulations, and they have more 
money in their pockets to invest in their businesses, and they 
have more time to focus on their businesses. So it's the 
compliance cost not only in dollars but compliance cost in 
terms of time, and they're very happy that the regulations are 
being rolled back.
    Senator Inhofe. Okay. There is one area that I have not 
heard you talk about. As you know, in Oklahoma we've had a lot 
of wildfires. We've had two sessions right now. I get my 
airplane and go over, and you see the cows being burned alive. 
It's really a tragic thing, and we try to do everything we can 
to help the people. Right now FEMA, for example, they don't go 
beyond the help with a residence. So you have all the damage 
that's being done that's not being addressed. We have 
legislation that's going to allow our community banks to be 
free from some of their regulations to allow them to do things 
that are not being done now.
    But the SBA is involved in a program that I don't think we 
fully utilize. What types of loan programs do you have in cases 
of disaster such as the tornadoes and the wildfires that we 
have so many of in Oklahoma?
    Ms. McMahon. Once the disaster declaration has been made by 
SBA at the governor's request, and then we make the 
declaration, SBA goes in to evaluate a situation, and it is the 
time that SBA actually loans the money, not only for businesses 
but also for homes. So there are mortgage loans to be made, 
there are business loans to be made. These are low interest 
rates and long term, and we pride ourselves on being able to 
process these loans very quickly so we can start to get money 
in the hands of those homeowners and those business owners. So 
if the declaration has been made for that area, those loans are 
    Senator Inhofe. And that's filling a void that's there 
right now, so we appreciate that very much. Thank you.
    Ms. McMahon. Thank you.
    Chairman Risch. Thank you, Senator.
    Senator Markey.
    Senator Markey. Thank you, Mr. Chairman, very much.
    Senator Inhofe and I, we are committed to agreeing on an 
infrastructure bill.
    Ms. McMahon. I'm sorry. On what?
    Senator Markey. Senator Inhofe and I are committed to, 
somehow or other, reaching an agreement on an infrastructure 
bill, not a chimerical of a superhighway but a real highway 
that we can----
    Senator Inhofe. It's very effective. They say when you and 
I can both agree on something, there's got to be something 
    Senator Markey. And our disagreement on climate changes 
proves how rare, and as a result correct, our agreement is.
    Chairman Risch. Your time is almost up, Senator.
    Senator Markey. So I'm going to ask you about net 
neutrality. I asked you about that at your confirmation hearing 
a year ago, and you said you needed more time to learn about 
the issue of net neutrality because I talked to you about how 
many small businesses are able to be created because of this 
incredible online culture that we have, and you said you needed 
more time. But in response to Senator Shaheen just 10 minutes 
ago, you said you needed more time to learn about net 
neutrality a year later.
    So from my perspective, I think that was a mistake on your 
part, that you did not learn more about it, because last year, 
I will tell you, half of all venture capital in America went to 
software and internet startups--all, by definition, small 
businesses--all across our country. That's half of all venture 
capital. And as we know just from our service on this 
committee, most new jobs in America are created by small 
businesses. So that flow of revenue into those companies 
clearly was something that was helping to generate the new job 
creation in our country.
    I have here with me letters from 6,000 small businesses in 
America that, Mr. Chairman, I would ask unanimous consent that 
I can put in the record.
    Chairman Risch. Without objection.
    [The information referred to appears in the Appendix 
Material on page 34.]
    Senator Markey. And it is from these small businesses that 
we received kind of a recommendation that the Federal 
Communications Commission made a mistake in taking net 
neutrality off of the books, and they support putting the FCC 
rules on net neutrality back on the books, and we're going to 
have that vote tomorrow on the floor of the United States 
Senate. And as we think about the 21st century, it's hard to 
think of a business that's not dependent upon net neutrality on 
the internet.
    So again, please try to respond to this issue of net 
neutrality, the role that it's played in the creation of 
thousands of companies, tens of thousands of companies, and 
your view on the issue.
    Ms. McMahon. Well, to be clear--thank you for asking that. 
To be clear, in my conversation I believe with Senator Shaheen, 
what I was saying to her was that I had not spoken to many 
businesses who had raised the issue with me, and I'd be very 
interested in getting the information from her from her 
roundtable, and I would be very interested in looking at the 
letters that you have received.
    Senator Markey. I guess my question to you is did you raise 
the question given how prominent it is in terms of venture 
capital going into that sector of the American economy for 
small businesses? Have you raised the question yourself?
    Ms. McMahon. Well, I have been focused on dealing with 
small businesses with the issues they brought to me so that I 
could advocate on their behalf. Relative to the internet, I 
don't disagree with you at all about how important the internet 
is for reaching the rural areas, for providing a platform for 
information, for having commerce to sell goods and services. So 
we are in agreement that the internet is incredibly important 
for the growth of sustaining businesses.
    Senator Markey. Well, if you had asked the question, which 
I think you should have, by the way, I think that should have 
been something that you did given the incredible role it plays 
in job creation in our country in the 21st century, that 
without net neutrality it's harder to raise money because 
there's uncertainty with regard to your ability to not have 
your service throttled or blocked, that you'd have to pay 
    So we know from not just these 6,000 companies but tens of 
thousands of companies across the country that net neutrality 
is critical, because small businesses don't want to be in a 
slow lane compared to a big company. Do you agree that that's 
absolutely essential, that from an online culture perspective 
that they not have to pay more, and that they also don't have 
to be in a slow lane, that they need protections so that they 
can compete against big companies?
    Ms. McMahon. Well, I do think that businesses need to have 
access to the internet, and I think one of the issues we ought 
to look at more----
    Senator Markey. But the issue isn't access to the internet. 
    Ms. McMahon. Excuse me, sir. Would you let me finish? I 
would like to respond.
    Senator Markey. Okay, sure.
    Ms. McMahon. Thank you very much. I think it's very 
important that businesses have access, so I think we need more 
infrastructure. I do think we need to be building out into 
those areas where we don't have it, and I think those 
businesses, those companies that are going to do the build-out 
on that infrastructure are going to be looking to invest their 
capital there to provide that access.
    Senator Markey. But slow lanes don't help a small company 
against a big company.
    Ms. McMahon. I think access is more important, and I do 
believe that businesses need that access to be on the internet 
for information and for their commercial purposes. That's what 
I've heard from the small businesses I've spoken to. But I am 
clearly interested in speaking to more of them about the issue 
if it becomes something they would like to discuss with me as 
well. I want to make sure I advocate on their behalf as well.
    Senator Markey. Well, I don't think you're doing that today 
because there's been an incredible outcry from small businesses 
in America to keep net neutrality rules on the books.
    Thank you, Mr. Chairman.
    Chairman Risch. Thank you, Senator Markey.
    We will go to Senator Young.
    Senator Young. Administrator, great to see you.
    Ms. McMahon. Thank you.
    Senator Young. Thank you so much for the hard work that you 
and your team are engaged in to support our doers, our 
dreamers, our entrepreneurs. I see so many of our small 
businesses around the State of Indiana, and they often ask 
about the Small Business Administration and how it can be 
helpful, and I enjoy spreading that word.
    During your nomination hearing we discussed a few different 
things, and I'd like to follow up in each of these areas.
    First we discussed the Office of Advocacy. You had an 
intention to evaluate, as you communicated to me, how the 
Office's operations might be improved, and if there are 
additional authorities or resources required to advocate on 
behalf of our Nation's small businesses. Do you have any 
findings that you can report to the committee today with 
respect to this topic?
    Ms. McMahon. Well, we are still waiting for the approval of 
our permanent head of advocacy there, our acting head there, 
who I think is doing a good job.
    Senator Young. For the record, that's on us. We need to get 
that done, working with this Administration.
    Ms. McMahon. That was just a little push. Thank you.
    Senator Young. We need to do that.
    Ms. McMahon. But the role of advocacy really is a quasi-
independent part of SBA. It's not something--I don't manage the 
head of advocacy. It is an independent acting agency, and it is 
their role to make sure that, as all the agencies are passing 
or promulgating rules and regulations, that small businesses 
have a seat at the table to understand the impact of that.
    I think advocacy is doing well. They actually did invite me 
to attend one of their roundtables--two of their roundtable 
discussions out of Wisconsin, which I did. So I was able to 
listen to some of the complaints that came out of the small 
businesses there--issues. ``Complaints'' maybe is the wrong 
word, but where they needed help, and they were primarily the 
same issues that I heard from the roundtable discussions that I 
was having, which at the time were taxes, which were 
regulations, and health care came up. I can tell you that more 
and more often now today, the issue of workforce and workforce 
development is very prominent.
    Senator Young. Well, to the extent in your dialogue with 
the quasi-independent Office of Advocacy you and they identify 
new authorities or resources that are required to advocate on 
behalf of our small businesses, please let our office know, let 
this committee know. We'd be grateful for that, and we'll 
continue to stay in touch in that regard.
    What opportunities--another issue we covered in your 
confirmation hearing--have you found to streamline within the 
Small Business Administration, already by reputation a fairly 
lean agency in comparison to others? And have you implemented 
any of those findings?
    Ms. McMahon. We did. It was one of the reasons I wanted to 
get out into the field. I really don't think that you can 
adequately manage what I would call satellite offices out of 
headquarters if you don't understand and feel what it is they 
feel and experience on a day-to-day basis and how they're 
    One of the issues I heard across the board was that the 
district offices felt that they were disconnected from 
headquarters. So we made a huge effort, we spent six or seven 
months making sure that my vision from headquarters was the 
vision that was shared with every district office, that 
everyone operated under the same rules and regulations, 
everybody had the same directives, everyone had the same 
accountability, and everyone got on board with that. The 
district director, the deputy district director, now we have 
our regional administrators, everybody has the same song sheet.
    Senator Young. I just call that good leadership, so thank 
you very much for taking that approach. That's quite 
    Ms. McMahon. Thank you. Not only has productivity 
increased, morale has been boosted.
    Senator Young. I believe it.
    Ms. McMahon. So I think we're on a good start. I've been 
there 15 months. I think we've set some good pins. Now we have 
to follow up.
    Senator Young. So, Administrator, the last topic we 
addressed in your nomination hearing that's really important to 
me is taking best practices, which might be occurring at the 
local level or the State level, and seeing whether we at the 
Federal level can play a constructive role in elevating those 
best practices. Are there steps that the SBA has taken to 
identify best practices with respect to starting a small 
business or growing a small business that could be replicated 
by other states or localities in America?
    Ms. McMahon. Well, I think most of those conversations are 
held in our resource partner offices, our SCORE offices that 
are manned by retirees, sometimes by active members in 
business, and also our women's business centers and our SBDCs 
that are affiliated typically with universities. They are the 
ones formulating a lot of the actual programs to coach and 
mentor the entrepreneurs who are there to start.
    I think what I'm seeing as those programs grow, and they 
are adopting more and more of best practices, is they look at 
what's happening through digital technology, how that's being 
implemented, are we making sure that we are coaching our 
entrepreneurs on stock ownership in their companies, are we 
making sure that they're looking at other programs that are 
going to benefit them moving forward, are they aware of cyber 
security and the steps they need to take, because a lot of 
entrepreneurs starting a business, they don't think about 
somebody coming in and stealing their information.
    So those are some of the kinds of things that I think 
weren't on the burner before that we are trying to push through 
    Senator Young. Thank you.
    Chairman Risch. Thank you.
    Senator Hirono.
    Senator Hirono. Thank you, Mr. Chairman.
    Administrator McMahon, it's good to see you.
    Ms. McMahon. Thank you.
    Senator Hirono. I appreciate the fact that you spoke today 
about SBA's work helping businesses impacted by natural 
disasters because we've had a number of them, especially in the 
context of last year's hurricanes and floods, and you mentioned 
Hawaii. As you know, several communities in Hawaii are 
currently responding to or recovering from a number of natural 
disasters. Last month, East Honolulu and Kawai's north shore 
experienced severe flooding that damaged homes, businesses, and 
public infrastructure. In fact, torrential rainfall on Kawai 
set a new national record of nearly 50 inches in a 24-hour 
period. So you saw cars floating in the ocean. You saw cars 
full of mud. So, that was rather historic.
    And now Hawaii Island is experiencing volcanic activity 
that is destroying homes, businesses, and schools; and new 
volcanic fissures are opening on a near-daily basis, and 
families are facing the added danger of noxious gases and air 
particulates that threaten public health. So small businesses 
in all of these communities must completely rebuild, and 
they're severely impacted by losses in visitor revenue.
    Federal disaster declarations, as you know, have been 
approved to provide public assistance and hazard mitigation 
resources for Oahu, Kawai, and Hawaii Islands. The President 
has issued two national disaster declarations. Our immediate 
response has been focused on relief efforts, but these 
communities will require additional resources to recover from 
these disasters.
    Could you clarify for me--I think you said that after the 
President issues a national disaster declaration, that the SBA 
also has to issue a disaster declaration in order for you to go 
into the communities and help the people in those communities?
    Ms. McMahon. No, that's if the President does not and a 
governor of a State requests from SBA disaster assistance. Then 
we review the documentation. I actually sign off on that 
disaster declaration. So the President relative to Hawaii has 
signed off on the public aspect of the disaster relief.
    Senator Hirono. Yes, not the individual. That's being 
    Ms. McMahon. So SBA would typically already be on the 
ground, going in and assessing. But because of the gaseous 
fumes, that whole area has been cordoned off and we're not able 
to get in yet to start evaluating the damages that are there. 
But we have a district office there, and we're already prepared 
to go in as soon as we have access.
    Senator Hirono. Thank you. I want to continue to work with 
SBA to make sure that whatever resources can be provided to all 
those affected individuals and businesses can receive those 
    I know that you have been doing your Ignite tour. I think 
that's a really good way to frame it because you want to light 
a fire under all these businesses, and your advocacy for the 
businesses is much appreciated.
    So you have visited 44 offices. I know you haven't come to 
Hawaii yet, and we look forward to your coming to Hawaii 
because I work very closely with the SBA office in Hawaii.
    Can you tell me when you will be coming to Hawaii's 
district office?
    Ms. McMahon. I can't as I sit here because I don't have my 
    Senator Hirono. But you are going to do it, aren't you?
    Ms. McMahon. I'm definitely coming to Hawaii.
    Senator Hirono. Everybody heard that? Okay.
    Ms. McMahon. And I have to tell you, there is a long list 
of people in my office who are volunteering to take this trip 
with me to Hawaii.
    Senator Hirono. Oh, yes, of course.
    So, do you have a template or a framework for all of these 
visits that you could share with me very briefly? If you have 
something that you give to all of these district offices, 
people that you meet with. Do you meet with businesses? Do you 
meet with other stakeholders? Do you hand out certain things? 
If you have a template or a framework for all of your visits, 
I'd really appreciate receiving that from you so that when you 
do come, and I hope that you coordinate with my office too, 
that we can be ready.
    Ms. McMahon. We'll do that, and it is really left up to the 
district office as to what's important in their district.
    Senator Hirono. Okay.
    Ms. McMahon. So they do that. And what we try to do, just 
on a very general basis, I try to do local media when I'm there 
because I want people to know about SBA and why we're here and 
what we're doing. We visit businesses, I conduct business 
roundtables, and the topics of those roundtables will be 
dictated by the district office and what's important in that 
area. If there's been a declared disaster in that area, I like 
to go and visit that as well. So we'll definitely coordinate 
with you.
    Senator Hirono. I'll certainly continue to coordinate with 
Jane Sawyer of SBA.
    Now, there have been some questions asked about the impact 
of net neutrality on small businesses, and you have 
acknowledged the importance of the internet to small businesses 
and their success. So if you conclude, after you get more 
information and et cetera, that small businesses are negatively 
impacted in a significant way by the elimination of net 
neutrality, would you take a position against the FCC rule to 
eliminate net neutrality? Because you are an advocate for small 
    Ms. McMahon. I'm an advocate for small businesses, and as 
we look at the information that is coming in now, especially 
since this issue is sort of top of mind again, we'll clearly be 
looking at what the impact is.
    Senator Hirono. Yes, and if you conclude that it is 
negatively impacting small businesses, would you take a 
position against the FCC's rule?
    Ms. McMahon. If I were to conclude it's against the 
totality or the great majority of small businesses, I would 
certainly want to continue to have that conversation so that we 
could look at how is the best way to service our small 
    Senator Hirono. Well, I hope that extends to advocating on 
their behalf and to say that this is not a time to be 
eliminating net neutrality.
    Mr. Chairman, I do have some other concerns relating to 
Federal contracting opportunities and Native American outreach 
programs, 8(a) programs, minority-owned businesses, including 
women-owned businesses, so I can submit those questions for the 
    Chairman Risch. If you would, Senator.
    Senator Hirono. And veteran-owned businesses.
    Chairman Risch. I don't know if you were here, but I think 
we're going to have a field hearing this summer on 8(a) 
    Senator Hirono. Yes.
    Chairman Risch. We're going to have a hearing this summer 
on 8(a) programs, this summer in Alaska, and we'll talk with 
you a little bit about that. But I think that perhaps 
Administrator McMahon is going to be submitting something for 
the record. So if you want to submit a question, we'd be 
delighted to take that.
    Senator Hirono. Certainly, and we have a lot of 8(a) 
entities in Hawaii also, so we should contemplate a field 
hearing in Hawaii also.
    Chairman Risch. But not in the summer. How about December?
    Senator Hirono. That would be fine. December encourages a 
lot of people to show up, I would say so.
    Chairman Risch. Thank you.
    Ms. McMahon. Thank you.
    Chairman Risch. Senator Coons.
    Senator Coons. Thank you, Chairman Risch, Ranking Member 
    Welcome, Administrator McMahon. Great to be with you again. 
I want to thank you again for making a trip to Delaware in 
January of this year. Together we visited Masley Glove, a 
fantastic woman-owned business in Wilmington. Donna Masley, the 
owner, really appreciated the chance to visit and to show you 
how SBA products and assistance from Delaware's SBDC has made 
the difference as she sustained growth in her small business.
    I also appreciate your Ignite tour and your focus on the 
great work being done at SBA district offices around the 
country. I know you had a chance to meet with the wonderful 
staff in my State's district office, which happens to be in the 
exact same building that I am, which makes it easy for me to 
see just how busy they are as I go in and out during the day.
    As you know, I'm the Ranking Member on the Appropriations 
Subcommittee that funds SBA, and while much of the financial 
services bill can be controversial, SBA is not. So let's talk 
for a minute about your flagship loan program, 7(a), which 
operates at no cost to taxpayers because the fees cover costs.
    Last year, SBA's 7(a) lending supported more than 150 small 
businesses in Delaware, and I know it has an impact on many 
other member states that is much larger because their states 
are much larger.
    How will you work to ensure that the SBA continues to 
adequately serve small businesses and entrepreneurs with the 
7(a) loan program while maintaining sufficient oversight so 
that the program doesn't return to requiring a subsidy?
    Ms. McMahon. And I very much appreciate the oversight 
program, or the bill that was recently passed out of committee. 
I'm not sure--I don't think it's passed on the floor yet.
    Chairman Risch, is your bill on oversight, has that passed 
on the floor yet? I know it's passed out of committee.
    Chairman Risch. I don't think it's passed on the floor yet.
    Ms. McMahon. But in there are some really good things for 
SBA, especially one of the programs in that, one of the 
stipulations in that, I would have the ability to raise the 
amount by 15 percent, obviously with notification to Congress. 
But I think that's an important aspect of it.
    We are very pleased with where we see the 7(a) program 
today. It is year over year 5 percent ahead of where it was 
last year in terms of our lending. While that doesn't sound 
like a huge amount, it really is when we're thinking about how 
many businesses are served through the 7(a) program.
    So we want to continue to build our relationships with our 
lenders. That's incredibly important. Our website now has a 
section on Lender Match which startups or those who are already 
in business who are looking for the lender in their area can go 
online, put in information, find out exactly where those 
lenders are.
    The reason that's important is because the lenders 
themselves don't often get the outreach that they might in 
spite of the lender specialists in our district offices 
constantly interacting with them to try to build that. I think 
it's really, really important that we continue to create that 
relationship for our prospective businesses who are looking to 
have those loans.
    Senator Coons. I agree. I recently went to the SBA awards 
dinner in Delaware. We had a record lending year in Delaware, 
and I hope we'll continue to grow that together.
    There are a lot of programs we talked about: Small Business 
Development Centers; Women's Business Centers; the SCORE 
program, which I'm a real champion of because it was founded in 
Delaware; STEP, which helps with exports; all of which are 
geared towards helping small businesses and entrepreneurs meet 
specific goals.
    How important do you think these grant programs are towards 
SBA meeting its objective?
    Ms. McMahon. I think it's incredibly important. I think 
it's as important as access to capital for businesses who want 
to grow because so often businesses fail--I see it all the 
time, and I counsel entrepreneurs who are starting businesses--
most of them fail because they're under-capitalized and they 
don't know how to manage cash flow.
    Senator Coons. Yes.
    Ms. McMahon. That means they've already gotten their money. 
They didn't get enough. But now, how do you manage it? How do 
you develop your business plan? How do you develop your 
marketing plans? How do you know how to do that outreach to 
continue to grow, to hire the right kind of people and put 
those processes in place?
    So if the mentoring aspect from those resource partners was 
not there, I don't think we would see the success of the growth 
of the small businesses.
    Senator Coons. I could not agree more. Some of the winners 
at the annual dinner in Delaware gave very compelling stories 
about how SCORE and SBAC and Women's Business Centers were 
essential to their success.
    I'll just say that as I looked at the budget proposal for 
this year, if these are so important, I was puzzled by why the 
Administration continues to--and they enjoy bipartisan support. 
I was puzzled by why the Administration is continuing to 
propose cutting funding for these specific programs.
    Ms. McMahon. Well, what I've done, we've taken a look at 
them. You know, it's a little bit different when you're a CEO 
for the private sector who comes in and starts taking a look at 
what the programs are. And while we didn't go through zero-
based budgeting, which is sort of in my blood, we did take a 
look at what do we actually need to continue to grow these 
businesses, to have them operate effectively and efficiently, 
and I believe that we matched the funding that we requested for 
those to continue to provide them without reduction in services 
and without reduction in personnel. So I thought we came to a 
good place.
    Senator Coons. One last question, Mr. Chairman.
    Chairman Risch. You have one last question, 43 seconds.
    Senator Coons. Senator Risch and I will soon be introducing 
a bill to give small business access to the facilities and 
expertise at the Department of Energy National Labs. As I'm 
sure you know, we have 17 national laboratories that are 
incredibly sophisticated and have some of the most advanced 
technical machinery and equipment in the entire United States, 
and small businesses often have great innovative ideas but 
don't have the financial resources to properly test or develop 
their ideas, and the national labs have some of that equipment.
    Do you agree it would be important to promote ways for 
small businesses to be more technologically innovative by 
strengthening partnerships between small businesses and our 
robust national laboratory network?
    Ms. McMahon. Oh, it's exciting to me to hear that, 
absolutely. You know, I've been around to many different 
incubators around the country, and a lot of the businesses in 
these incubators really are high-tech, biotech fields. If they 
knew that they might be having the opportunity to be linked up 
with some of those labs, it would be incredibly exciting.
    Senator Coons. I'm excited about the bill, too.
    Chairman Risch. Senator Coons, take all the time you want 
on that subject.
    Senator Coons. There is an additional bill that Senator 
Risch and I are hoping we'll move to a markup soon and----
    To reauthorize SCORE, a wonderful program, which you know 
was founded in Wilmington, Delaware. Both of those are good 
opportunities for us to help support America's small 
    Ms. McMahon. Thank you.
    Senator Coons. Thank you for what you do, and for everybody 
at the SBA.
    Thank you for your indulgence, Mr. Chairman.
    Chairman Risch. Thank you.
    Ms. McMahon. And I just want to say thank you to the 
committee, because I do think that SBA is probably one of the--
not the only, but certainly one of the foremost agencies that 
does receive bipartisan support, and I really appreciate that 
so much.
    Chairman Risch. Thank you. I think we all feel the same 
    Administrator, just FYI, regarding the bill that you asked 
about, it passed the House, but Senator Shaheen and I are the 
co-sponsors here, and we're attempting to do the thing on a 
hotline. Now, that may not mean anything to you, but it's part 
of the arcane process over here because of the shortness of 
time. But we are cautiously optimistic.
    With that, thank you so much. You've done a great job over 
there this first year, and we really appreciate you coming and 
giving us an update and candidly answering the questions that 
people put forward.
    And with that, I yield to Senator Cardin.
    Senator Cardin. Mr. Chairman, let me just agree with your 
observation about the work of this committee, bipartisan, on 
behalf of small business.
    I want to comment on a couple of points that came up in 
today's hearing, first on net neutrality, and let me try to put 
this in context because it's more than access to the internet, 
it's the quality of the access. I say that because if you're 
selling bikes in Baltimore as a small business owner and your 
product is on the internet, but it takes more than 3 seconds 
for the consumer to see it, the consumer is off of your 
webpage. That's what studies say. The impatience of a consumer 
is dramatic. They expect to see the product immediately.
    Now, the big companies that sell bicycles will have no 
trouble getting their product before the consumer on the 
internet within that 3 seconds. So if the internet provider has 
a discriminatory pricing network against small businesses, it 
can put small businesses out of business.
    That's the reason why we all want to focus on the impact it 
has on small businesses, and we would urge you to take a look 
at it, because no one wants to put small businesses behind in 
technology, and access to that quality service is essential for 
small businesses to expand their business by the internet.
    The second point I want to bring up, me and my colleagues 
talked about the tax changes, and I'd just urge you to keep 
taxes on your agenda, because I hear from small business owners 
that they're not satisfied with the complexities of our tax 
code. They don't think they're simple, and they are concerned 
that many of the provisions of the new tax law were temporary, 
so they don't know whether it's going to be permanent or not. 
And then they look at the major provision, which is the 20 
percent reduction for pass-through income, and at least the 
initial review, it's about $415 billion of tax relief, is that 
a very small percentage of that $415 billion is going to small 
businesses or minority businesses or women-owned businesses.
    So I'd just urge us, as we focus on small businesses, 
recognize that in the tax code we still have challenges in 
complexity and in predictability and in whether we're focusing 
on the real challenges of small companies, and that's our 
mission, and we need to work together to make sure we achieve 
    I was listening on the disaster relief, and it just 
reminded me that it was 20 years ago that we passed the Pre-
Disaster Loan Mitigation Program, and I don't believe that's 
been utilized anywhere near as much as it should. We can't 
prevent disasters, but we can do pre-disaster planning, and 
there the small business has tools available that I would hope 
we recognize vulnerable communities.
    SBA was unbelievably helpful with regard to the flood that 
occurred in Ellicott City, Maryland, and I've talked about that 
several times. Ellicott City, Maryland, is flood prone. So part 
of our response to the disaster was to do pre-disaster 
mitigation, and we have, so that the shop owners who rebuild 
are less likely to be impacted again by the next flood that 
occurs, and that's part of what we do and part of your mission, 
and we urge you to work with us on that.
    And the last point, since Senator Coons mentioned Senator 
Risch and got a little extra time, let me mention Senator Risch 
and a letter that the two of us sent to you on cyber security 
that followed up a hearing that we had here that I thought was 
one of the best hearings that I participated in on any 
committee, because we thought we got concrete suggestions on 
how we could help small businesses prepare for cyber and 
security issues.
    It talked about the disadvantages that small companies have 
in putting in software to protect against cyber attacks, and we 
should be able to do a larger pool for small businesses, and 
how SBA can help in providing technical information so small 
businesses understand this. There's an embarrassment factor 
when your business has been invaded and you don't want to talk 
about it. There are things that we can do to help companies 
deal with the reality of a number of vulnerabilities we have, 
and we would ask that we work together in order to try to 
develop a strategy where we can be more effective in helping 
small businesses protect against the threat of cyber and ID 
theft and all the things that are out there.
    And with that, I'd just agree that we need to work together 
in order to achieve these things.
    Ms. McMahon. Thank you, and we will.
    Chairman Risch. Thank you so much. Thank you, Ranking 
Member Cardin.
    Again, Linda, thank you so much for coming.
    We're going to keep the record open for a couple of weeks 
from today for members who want to submit questions for the 
record. I suspect there may be some, and we would ask you to be 
prompt in responding to those. I know you will be because it 
will be helpful to us as we move forward.
    So, with that, nothing further, the committee will be 
    Ms. McMahon. Thank you very much.
    [Whereupon, at 4:52 p.m., the hearing was adjourned.]