▶ 0:02:12>> for. The.
▶ 0:06:07Update.
▶ 0:19:51>> this morning we're. Congressman from the great state of minnesota to lead us in the pledge and the prayer. Would you stand?
▶ 0:21:00Good morning everyone. I now call the committee on small business to order. Without objection, the chair is authorized to declare a recess of the committee at any time. I now recognize myself for my opening statement. Welcome to today's hearing, pathway to capital the role of sba lending in supporting main street america. I want to thank our witness, thomas kimsey, the associate administrator of the sba office of capital access, for being here today. Thank you.
▶ 0:21:26I look forward to hearing your testimony and having a robust discussion regarding the resilience of the sba's office of capital access. The office of capital access administers the sba, government backed lending programs such as the flagship 70 program, the 504 loan program, and the micro loan program. Together, these programs make work to make capital available to small businesses would otherwise be unable to access capital on reasonable terms.
▶ 0:21:51As a lifelong small business owner myself, I know that access to capital is the lifeblood of access of success for main street america and the working families. Tax cuts and president trump's deregulatory efforts allow small businesses to grow and compete, but access to capital still remains critically important. While the sba does not lend directly to small businesses, it incentivizes private lenders to do so through government backed loans.
▶ 0:22:17Since taxpayer dollars could be on the hook to pay these guarantees, the sba lending programs must operate with incredible care. Unfortunately, that was not the case under the prior administration. The biden-harris administration undermined the integrity of the sba lending portfolio by slashing prudent underwriting standards, repaying a 40 year old moratorium on licensing new small business lending companies and making excessively risky loans, among other actions.
▶ 0:22:40Predictably, this led to rising defaults in the seven day program and resulted in the first negative cash flow for the program in over a decade, putting taxpayer dollars at risk. These decisions went against longstanding sba positions that have been held across republican and democratic administrations, and were often met with bipartisan and bicameral rebuke. The biden-harris administration's actions not only risked taxpayers dollars, but they also allowed entrepreneurs to take loans they could not pay back.
▶ 0:23:09That is why, in today's hearing, it is so important that we fully understand what the current administration is doing to clean up the sba lending programs. I appreciate the actions. Administrator loeffler and associate minister kimsey quickly took to reverse course. I look forward to exploring ways congress can close loopholes to ensure that there are no future administration transforms the sba to the detriment of the loan portfolio. I now recognize the ranking member for her opening remarks. Okay.
▶ 0:23:36We'll move on and right. We'll do that. Okay. Our witness today is Mr. tom kimsey. Mr. kimsey is the associate administrator for the office of capital access and the us small business administration. Mr. kimsey previously served as president and ceo of thomas usaf group, where he managed a portfolio of more than $100 million in government guaranteed loans each year.
▶ 0:24:04With over 30 years of experience in the sba and usda lending. It is widely recognized as a national expert in small business finance, and has been an active leader in industry associations and policy advocacy. He holds a bachelor of business administration in accounting from georgia state university. I want to thank you for joining us today again. I'm looking forward to your important conversation. We will have. So, Mr.
▶ 0:24:28Kimsey, before you proceed with your opening statement, I'd like to remind you that your oral testimony is restricted to five minutes in length. If you see the light in. In front of you, it means that your five minutes has concluded and you should wrap up your testimony. With that being said, I will now recognize the ranking member, miss velazquez, for her opening remarks. I'm gonna find her $100 for being late. >> yeah.
▶ 0:25:05>> but I'm always on time. Um. Well, thank you, Mr. chairman. Uh, president trump declared to the american people that he will fix the economy on day one, and american manufacturing innovation and job growth will be unleashed through his trade and tariff policies.
▶ 0:25:30Unfortunately, almost ten months into his second term, it is increasingly clear that the president's policies are failing and the economy is spiraling in the wrong direction. In august, employers only added 22,000 jobs after projecting, 80,000 will be added.
▶ 0:25:51June's payroll data was revised to show a downward loss of 13,000, marking the first month of job losses since december 2020 and august. Unemployment rate ticked up to 4.3%, the highest rate in four years, meaning there are 3 million more people out of work today than there were a year ago. Perhaps worse.
▶ 0:26:19Business certainty is down and employers are concerned where the economy is headed. According to the federal reserve bank of atlanta's august report on business certainty, firms remain more uncertain about future sales growth than before the pandemic.
▶ 0:26:40Nearly one third of business executives report employing or planning to employ fewer workers in 2025 due to policy uncertainty. The president's tariff policies are also reported as the largest uncertainty affecting firms employment decisions.
▶ 0:26:59When president trump was recently asked to comment on the low employment numbers and the direction of the economy, the president did what he always does obfuscates and deflects, stating, and I quote, the real numbers will be in a year from now.
▶ 0:27:19Comments like this don't inspire a lot of confidence, and american businesses, especially small ones, cannot wait a year, which makes the sba lending programs critical during downturns through programs like the flagship program, the 504 cdc program, the community advantage program, and the microloan program, the sba provides affordable capital to businesses that struggle to
▶ 0:27:50Find it in conventional markets. Yet under administrator loeffler's leadership, loans are down, defaults are up, and we still do not have a full understanding of those access to sensitive information and computer systems, and how risks and personal decisions will impact the functional operations of core loan program.
▶ 0:28:15Even the administration's signature loan initiative for the seven, eight and five of our program, which will increase the loan limit in both programs to 10 million for manufacturers, seems largely premised on a talking point and a desire to to please president trump than responding to actual needs of the economy.
▶ 0:28:36Unlike what president trump and my republican colleagues will have you believe, the manufacturing sector isn't on the cusp of growth and can be supercharged by increasing loan limits. The manufacturing sector has actually decreased for six straight months, and manufacturing jobs have fallen by around 78% this year, including 12,000 lost last month.
▶ 0:29:05Even the sba's own data demonstrates there is greater demand for smaller dollar manufacturing loans than there is for higher dollar loans. Businesses do not want programs based on talking points or what administration officials think will place the president in a press release. They want real solutions grounded in in the facts that will help them overcome the headwinds they're facing in the economy.
▶ 0:29:36Administrator quincy, I look forward to digging into many of these topics with you this morning, and hope we can finally get some real answers to the question we have been asking president trump and this administration inherited an economy that saw $1 trillion in private sector investment in manufacturing, a historic stretch of low unemployment, and an inflation rate that had come down from pandemic levels.
▶ 0:30:03Democrats stand ready to work with you and this administration to get the economy headed back in the right direction and develop real solutions to the challenges many small businesses now face. Thank you, Mr. chairman. I yield back. >> gentlelady yields back. I now recognize Mr. kimsey, uh, for his five minute opening remarks. >> good morning, chairman williams, ranking member velazquez and members of the committee, thank you for the opportunity to testify today on behalf of the U.S. small business administration.
▶ 0:30:32My name is thomas kimsey, and I'm honored to serve as the associate administrator for the office of capital access. I come to this role with more than 30 years of experience in the sba and usda lending space. I was born and raised in rural north georgia, working in my family's grocery store, and spent time in my father's commercial egg business, which was made possible by sba financing. As an entrepreneur myself, I learned firsthand the challenges of owning and operating a small business and the importance of access to capital.
▶ 0:31:01Capital is the lifeblood of america's 36 million small businesses, which means it's also the lifeblood of job creation, production, industry growth, and prosperity. As the federal government's largest guarantor of small business loans, the sba helps supply these job creators with the capital to start, grow, and expand. Under the biden administration, the sba lost sight of that mission.
▶ 0:31:24Loan programs were driven less by sound lending practices and more by social engineering and open malfeasance. The agency approved a host of non-bank lenders to originate loans. It waived fees designed to keep the program in the black, and it implemented do what you do underwriting standards that drove the defaults and delinquencies to record highs. The pre the previous administration's reckless policies and decisions.
▶ 0:31:49Reduced fee revenues undermine the seven a loan program, resulting in nearly 400 million in costs that were passed on to taxpayers in 2024. To add insult to injury, the biden administration failed to implement basic protections to stop fraud. Until this administration, the agency never had controls in place to prevent lending to illegal aliens. It's a little wonder that the sba failed to pass a financial audit for four full years.
▶ 0:32:17This mismanagement had higher costs for lenders, greater risk for taxpayers, and less confidence in the federal government's ability to act as a responsible partner in capital markets. To be clear, the reckless lending practices of the biden administration will continue to drive defaults and delinquencies, which will cost taxpayers over the lifetime of these loans, which is why from day one, this administration has taken historic action to correct course with the most significant reforms to capital access in years under the
▶ 0:32:48Leadership of president trump and administrator loeffler, we have restored pre biden underwriting standards for the seven and 504 loan programs. We have reinstated lender fees to protect the zero subsidy status of the program and safeguard taxpayer dollars. We have added a new new verification measures within our loan limits loan application process to strengthen protection against fraud.
▶ 0:33:09At the same time, we have reinstated the franchise directory to streamline loan approvals in coordination with our lenders and industry leaders. We returned our focus to delivering capital to eligible and deserving job creators, not political allies.
▶ 0:33:26We've immediately ended programs like green lender initiative and recently ordered our network of more than 5000 lenders to suspend banking practices that prevented thousands of legitimate job creators from accessing capital based on political, religious or other ideological beliefs. We're focused on supporting the america first agenda, most notably reshoring american jobs, strength and industry. Our made in america manufacturing initiative is expanding opportunities for small businesses.
▶ 0:33:55We have backed legislation to double the loan limits for small manufacturers, and we have expanded the seven a's program's ability to serve those same businesses, which make up 98% of all U.S. manufacturers. Additionally, we've launched the make onshoring great again portal, a free tool designed to help small businesses identify U.S. manufacturers and producers, which will in turn support america's jobs. Reconnect our supply chain with U.S.
▶ 0:34:22Production, and end our nation's dependance on foreign suppliers. Since january 20th, sba has approved nearly 53,007 and 504 loans for 28.3 billion in volume, a 14% increase in loan volume compared to the same period last year. The latest small business optimism index from the national federation of independent businesses show that small business confidence has risen above the 50 year average is now at a seven month high.
▶ 0:34:49As we look ahead, the sba will continue to strengthen oversight, modernize systems and expand partnerships with lenders throughout the country. We are committed to ensuring small businesses can access capital responsibly, efficiently, fairly, and cracking down on fraud. America's small businesses are the backbone of our economy. They deserve a federal partner that supports them with integrity and results. In closing, I want to thank this committee for its partnership.
▶ 0:35:18Together, we can ensure that the sba capital programs deliver opportunity for hardworking entrepreneurs while protecting taxpayers and strengthening america's economy for the future. Thank you and I look forward to your questions. >> thank you. Gentleman yields back. We'll now move to the member questions under the five minute rule. I recognize myself for five minutes. Returning manufacturing to america is a top priority that I share with president trump and administrator loeffler. My bill, h.r.
▶ 0:35:453001 74, the made in america manufacturing finance act, brings much needed access to capital for our small manufacturers. Question would be how critical is increasing the loan limit for small manufacturers to onshoring american manufacturing? >> thank you chairman. >> thank you, chairman, for that question. Uh, certainly.
▶ 0:36:05Uh, you know, the increase in limit, that's one of the big things I get, you know, as I travel across the country and hear from other lenders, is the need to increase the limit from 5 to $10 million. We know that manufacturing is capital intensive. We know that many machines cost over $1 million just in without real estate or buildings. And that need is desperately needed as we work to onshore and bring manufacturing back to the united states, we know that we've lost over 70,000 manufacturers and millions of jobs over the last 20 years.
▶ 0:36:36And as I was in utah last week, you know, meeting with lenders and a manufacturer, that was his question. I could expand and create more economic development here in my community, create jobs. But without the increase in above the $5 million, I can't do that. This is a business that's been in business for over 50 years and create could create many new jobs. >> good.
▶ 0:36:59>> uh, earlier this congress, the house passed another one of my bills assisting small business and not fraudsters act to stop fraudsters from getting sba loans by a vote of 405 to 0. And the bill is currently with the senate for their consideration. However, just last month, I was alarmed to learn that a former sba employee pled guilty to approving fraudulent loans for herself and family members. So my question is how? How was this allowed to happen?
▶ 0:37:25And do you think sba employees should be strictly prohibited from working on loans for family members to prevent an obvious conflict of interest? >> yes. Thank you, chairman, for that question. Obviously, yes. They shouldn't be allowed to do that. And certainly under the leadership of president trump and administrator loeffler, we have a robust fraud risk framework in place, and it's very robust. Uh, we're currently expanding that across all government agencies. Interagency. That's never been done before.
▶ 0:37:54Uh, to add additional safeguards from dhs, safe data checking citizenships to ssa identify, identify and that do not pay abs, nbs. So it's a very robust program. Uh, we have the the systems in place. And as administrator loeffler has said from day one, uh, fraud is a huge priority. And we're working diligently to make sure none of that happens again. >> that's great. Taxpayers money at risk. >> yes, sir.
▶ 0:38:20>> uh, president trump, administrator loeffler have recognized that much of the political banking was done by private lenders at the behest of the federal government. And president trump's executive order guaranteeing fair banking for all americans combats politicized and unlawful banking. Can you discuss the efforts your office is taking to identify politically charged bank banking decisions? >> yeah. Thank you again, chairman, for that question. Certainly.
▶ 0:38:44You know, it's very unfortunate, you know, as a small business owner that you're being debanked, I mean, small business owners trying to operate and run a business without their lender being, uh, banking them under the guise of reputational risk. And I think that's very unfortunate.
▶ 0:38:58We saw that for president trump and administrator loeffler, both were debunked and under the sba, under the administrator loeffler, you know, we've certainly taken that executive order, and we've notified over 5000 lenders that, you know, we're not going to allow any type of banking and disfranchizing, uh, from banking. And so, uh, we're working with our stakeholders, other, uh, institutions and the auditors and regulators to address that and get feedback on that subject.
▶ 0:39:29>> I'm glad you're doing that. From a personal standpoint. I was debanked, so I know what that's like. Uh, under the 504 lending program, the sba designates certain industries such as surgery centers, nursing homes, and farms as special purpose properties, which imposes higher financial burdens on them, according to the data we've received, special purpose properties often pose no greater risk to default when compared to general 504 loans.
▶ 0:39:52So in the short time that we've got left in the light of this, do you believe it is time to revise or eliminate this list? >> thank you, chairman, for that question. Certainly, 504 is a priority. Administrator loeffler and mine, and we're working to make improvements to that. Uh, certainly appreciate, uh, your, uh, you know, question on the additional 5% equity.
▶ 0:40:13I think that's one of the areas that we'll be looking at, along with other areas within the 504 program to make improvements and modernize it, because we know it's a great cost, cheap cost to capital. >> okay. Um, thank you for that. I now recognize the ranking member for five minutes for questions. >> thank thank you, Mr. chairman.
▶ 0:40:31Administrator kinsey, uh, welcome to the committee, sba on data shows a sharp decrease in seven and eight originations over the last several months. In june, there were only 3800 loans approved, a 50% drop from may and the lowest number since early 2022. July was also half of what we saw in may. What do you attribute as the cause for this decline?
▶ 0:41:02>> uh, ranking member velazquez, thank you for that question. Um, certainly from the office of capital access, the numbers that I'm looking at show, we've got record numbers from from january 20th. Our numbers are up over 14% compared to last year. And we're very confident in what we're doing, uh, under the office of capital access to make providing sufficient capital all small businesses. Uh, so we're very confident in supporting those. And, you know, as I've traveled around, I've, you know, worked with a lot of lenders.
▶ 0:41:31And I can tell you the excitement from our lending community couldn't be more robust. >> I hear I hear you, um, I disagree according to your own numbers that I have here. Long or origination is down. And according to the consumer bankers association, decreased and demand for seven loans is because of trade and economic uncertainty.
▶ 0:41:58Similar to the findings for the conventional market. President trump has been in office for almost ten months now. He owns this economy and the warning lights are flashing red. Mr. uh, Mr. chairman, I want to enter into the record.
▶ 0:42:18Uh, the consumer bankers association report explaining why the seven loans are down and a political article explaining why seven eight originations loans are down. Mr. kimsey, the whole purpose of the seven eight and other capital access program is to help small businesses overcome barriers in the conventional markets. What are you doing to increase the number of loans?
▶ 0:42:49>> thank you, ranking member velazquez, for that question. Again, uh, under the leadership of administrator loeffler and president trump, we're working very hard. And as I've traveled around, you know, meeting with many lenders and borrowers, uh, the lending community couldn't be more excited. Where we're at. I get calls and daily, weekly from lenders that are most excited about what we're doing here at the office of capital access. Unlike before, uh. Thank you. They're very. >> thank you for your answer.
▶ 0:43:18According to a recent fox news article, the us manufacturing sector lost about 12,000 jobs in august, a significantly steeper decline than the 5000 predicted. So I question the effectiveness of these initiatives, because I don't expect the manufacturing industry to be looking to take on more debt. But let's move on.
▶ 0:43:44In addition to declining seven eight originations, data obtained by the committee shows that defaults in the seven eight program are rising at an alarming rate. What steps are you taking to reduce the number of defaults in the seven eight program? >> thank you again, ranking member velazquez for that question. Certainly, I would just point back to the the biden administration that the last six quarters of their years show over 600 million in in negative cash flow.
▶ 0:44:13Uh, the uh, projected negative cash flow from the biden years for cohort years is 2.2 billion. And that's certainly what I've got to manage over my next several years, is managing that risky portfolio that they put in place with do what you do. So it's quite a task for me from and that's where we're seeing the early defaults. I can go back and look at the reports from day one and look at the charts in the early default rate is up tremendously and it's very disturbing what they did under do what you do.
▶ 0:44:44>> well, there's not yet sufficient information to the, uh, to determine if biden rules, which I also question, are contributing to the rising default. Default defaults are on the rise because of loans made during the years 2018 and 2019, which are defaulting at 5.3%.
▶ 0:45:09And because of loan defaults made by several lenders in the program. Mr. dempsey, according to our information, there are ten lenders with seven eight loan default rates of more than 5% in 2024 and six lenders with rates between 710%. Is sba stepping in to evaluate these lenders?
▶ 0:45:36>> thank you again, ranking member velasquez for that question. Certainly, the office of credit risk management monitors all our lending partners, and we take those, uh, very seriously. And we're looking at that very seriously and looking at all lender portfolios. >> are you considering reevaluating? Time is up. >> time is up. And now, uh, recognize, uh, Mr. fenstad from the great state of minnesota for five minutes. >> thank you, chairman williams.
▶ 0:46:06Uh, thank you for holding this hearing today. And thank you to associate administrator kimsey for being here. Um, just want to start out, I find it somewhat laughable, if not probably expected, that for the four years of the biden administration, as we as a country suffered economically, we we saw inflation, we saw disruption in the supply chain. We saw businesses that were hurting, families were hurting. You know, at least the democrats were consistent during those four years because they would, you know, always say it was trump's fault.
▶ 0:46:32And now we're ten months into the trump presidency and it's trump's fault. So they're consistent with with, you know, everything, uh, is trump's fault. But but I will tell you that representing southern minnesota, the heart and soul of of the midwest, uh, we have a strong small business community, really the lifeblood of our economy.
▶ 0:46:52And and so it's it's important that we, we in congress and you at the sba are, are digging in and making sure that the sba is there to serve on the front line to to those that are providing for, for our communities. And so we've seen this administration take important steps to rightsize sba. And I look forward to continuing to work to ensure that the sba serves its intended customer. Our nation's small businesses.
▶ 0:47:15When I talk to small businesses in southern minnesota, um, and really rural america as a whole, I previously served as the rural development state director for usda under the trump administration. And I heard quite often folks say that, you know, when it comes to sba, rural america is kind of fly over land. Our real connection to the sba is our community lenders. Uh, and so our the strength of our programs really are the delivery at our banks.
▶ 0:47:45And so my question as we, you know, streamline the sba to make it more user friendly, to make sure we're serving the customers that that we're called to serve. Uh, how is the relationship been and what's what's kind of the plan moving forward to really strengthen the relationship and streamline the, uh, approach with our local lending communities? >> thank you, congressman, for that question. Certainly, our community banks are very important to administrator loeffler and to president trump.
▶ 0:48:13Uh, it's vital, uh, something that's important to me growing up in a rural community, uh, access to capital is critical. And we know that so many of our community banks have closed there. So we're working very diligently with those community banks to make sure we can increase lending. How do we support them? How do we support and provide more access to capital? Uh, certainly. You know, getting that capital to main street america is vitally important into our rural areas.
▶ 0:48:39Uh, you know, I spent a lot of time, uh, you know, in addition to sba working on usda projects and certainly, uh, you know, the collaboration there. But we have to do a better job. And we're certainly working, uh, to do that, to streamline the programs and to modernize them. And, uh, that's one of the things that I've been doing is traveling around talking to our lender community. But I can tell you, again, the excitement that we see from our lending community. You know, I had a lender call me last night, just say thank you for what you're doing. >> I appreciate those comments.
▶ 0:49:10And I'm hearing that too, you know, with with the certainty now, uh, with the working families tax cut and the opportunity for businesses to invest in their businesses and grow their businesses. Now with the tax climate that makes sense to them. Uh, it's more important now than ever that the sba stands ready with those tools to help finance expansions and create new opportunities in rural america. So I'm happy to hear that.
▶ 0:49:31Uh, maybe last question I have is, what can we, on this committee, uh, uh, focus on in the future here to ensure that we are helping rightsize sba and ensure that it will effectively serve small businesses across this country. >> well, thank you again, congressman, for that question. Certainly, the support of this committee and what you're doing. Chairman williams, we certainly appreciate that here at the sba. And administrator loeffler, uh, your support is greatly appreciated.
▶ 0:49:57You know, as we as we continue to work to get things back in order from, uh, getting away from do what you do, uh, the disaster of that. So we appreciate the support, and we look forward to working with this committee and working with chairman williams to advance those, uh, updates that we need to streamline the programs. >> thank you. Thank you for being here today. And, Mr. chairman, I yield back. >> gentleman yields back. I now recognize Mr. mcgarvey from the great state of kentucky for five minutes. >> thank you, Mr. chairman.
▶ 0:50:24I want to address some things that were just said. I also live in what some people might refer to as flyover country in the great commonwealth of kentucky, where we have a lot of wonderful things happening. But every single business owner I talked to right now, every single one, is nervous. They're worried.
▶ 0:50:44The chaos, the uncertainty created by trump's policies right now, whether it's the tea company in my district, they make 1.2 billion tea bags per year in louisville, kentucky. They do everything. They're on 17 machines that produce 360 tea bags per minute. But you can't grow the tea in the united states.
▶ 0:51:06This is hurting their business and their growth, their planning for my community, the bourbon industry, a $9 billion industry in the state of kentucky, they're hurting right now because of the economic policies of the trump administration. Guess what? You can't make bourbon anywhere else in the world. It has to be made in the united states of america. 95% of it's made in my state.
▶ 0:51:28In kentucky, the fireworks stands that were opened over the 4th of july were complaining to me about how much more it is costing them, and can they pass this on to their consumers? Literally every type of business, even the small businesses that are relying on some of the de minimis exemptions, the manufacturers, even the big guys. We have over 10,000 united auto workers in louisville, kentucky that make every single ford f250 and above and every single ford escape in north america, right in louisville, kentucky. They're nervous. They're uncertain.
▶ 0:51:57These policies are reflected in the numbers that the trump administration themselves are providing. Just in the last couple of weeks, we've seen that the jobs are not growing, as predicted, that the jobless rate is up, that inflation is moving up because of these policies. That, of course, gives us a job as a small business community. What are we going to do to continue to help our small businesses, which are the backbone of the american economy, and help them grow and help them provide jobs in our community?
▶ 0:52:27We have to do that, and we have to recognize the impact that some of these policies are having. I want to switch gears a little bit and talk about something else we're facing. It's natural disasters. I know this sounds weird from the small business perspective, but you're familiar with what I'm talking about. In the last five years alone, kentucky has been hit by multiple once in a generation disasters, devastating floods in eastern kentucky, tornadoes in west kentucky. Uh, we had record flood in my hometown of louisville, kentucky, as well as an ef one tornado that touched down in west louisville.
▶ 0:52:58Um, I got some numbers yesterday from our fema joint field office. In fiscal year 24, the sba approved slightly over 3.3 million disaster funding for the commonwealth of kentucky in fiscal year 25. That number is nearly $37 million. That's a ten fold increase. And it's not just happening in kentucky.
▶ 0:53:15We've seen terrible weather events everywhere, from texas to california to north carolina to hawaii, small business owners in kentucky and around the country deserve to know that the sba will be there for them when the worst happens, that their federal government will be there for for them and their neighbors. So I just want to dig into a few recent changes in the time we have left in the disaster processing center, the sba administrator kimsey, according to the sba, published information from february to june of this year.
▶ 0:53:41The disaster processing center within the office of capital access shed, 196 people. Were these jobs transferred to the office of disaster recovery and resilience, or were they eliminated entirely? >> thank you, congressman, for that question. Uh, certainly, uh, again, under president trump and administrator leflore's leadership, you know, we've rightsized the agency, we've taken it back to pre-covid levels to make sure it's streamlined and operating efficiently and certainly. >> transferred or eliminated entirely.
▶ 0:54:09>> and I would just remind you, you know, under the biden administration that. >> transferred or eliminated entirely. >> this led this congress. >> with the committee for disaster. >> solvency program and. >> where the jobs. >> and we're doing we're performing very well. >> I reclaim my time, Mr. chairman, this is a simple answer because we have just limited time here. I know you're filibustering. I appreciate it, but I want to answer these questions because they impact the businesses in my community. Were they transferred? Were they eliminated entirely? >> again, we've streamlined the program to take it back to pre-covid.
▶ 0:54:38>> on top of this diminished capacity, according to the sba's july 2025 disaster loan report, the sba has a disaster loan account balance of 2.75 billion and anticipates a depletion depletion date of october 11th. What happens if that funding lapses as of today? Do you still anticipate the october 11th to be the drop dead date? Uh, we've had significant storms in texas and elsewhere since the report was published. >> uh, again, I'm confident in our disaster loan program. I'm.
▶ 0:55:06>> so does the october 11th date still stand? >> and I'm confident in our our delivery of disaster dollars very much. >> do you not know? The answers are just not one answer. >> as I remind you, I'm answering the question as I remind you that, you know, it was the biden administration that misled this committee in congress to the solvency. >> but you're here, and I'm asking you questions. You haven't provided a single answer. What I'd love to do is get that. Can we get this information from you? >> I'll be glad to work with your office. >> thank you, Mr. chairman. I yield back, gentleman.
▶ 0:55:36>> yields back. I now recognize miss king hines from the northern mariana islands for five minutes. From the great islands for five minutes. >> thank you very much, Mr. chairman. First of all, I want to say thank you so much for taking time out the other day to come and visit the office and to discuss how we can work together to expand lending opportunities for small businesses in the commonwealth of the northern mariana islands. Um, we also made some several. We also made several asks, uh, in which you were incredibly responsive.
▶ 0:56:05And so I want to I want to say thank you on behalf of the small business development center, whom you, um, um, have addressed, uh, their concerns and issues. So thanks for that. Um, I want to take this opportunity to bring about some situational awareness.
▶ 0:56:22So, you know, the marianas right now is in a state of economic crisis, and we are working really hard with president trump and the interior to figure out a long term sustainability sustainability plan. So we only have one industry, which is the tourism industry, and we have not been able to see its recovery to pre-pandemic levels. So, you know, the economic decline began during the pandemic.
▶ 0:56:50Right now, during the pandemic, there's a lot of people who took out economic injury disaster loans. And one of the the biggest issue that is being raised by most of the small businesses back home is, you know, their inability to be able to meet, uh, those payment requirements. Right? They took out these loans responsibly.
▶ 0:57:13But the issue right now is that the tourism industry, every every small business is tied into the tourism industry, and they're just not seeing the customers. Now, as we worked with the trump administration to figure out how to revive that industry, I wanted to be able to collaborate with you and the administrator to figure out how, um, we ensure that these small businesses don't default on those loans. And so I don't really have questions for you. I just want to say thank you for being so responsive to our needs.
▶ 0:57:41But I'm looking for areas of opportunities to collaborate to ensure that these small businesses don't shut down. Thank you. >> yeah. Thank you, congresswoman, for that question. We certainly look forward to continue to work with your office on how we can assist you and the islands to support small business and provide that capital that's much needed.
▶ 0:57:59Uh, you know, as I shared, I recently talked to my my friend that was out there, as I shared with you, that I think we both know and certainly, uh, you know, I had the opportunity to travel out to guam several years ago, uh, did not make it to the northern mariana islands. Uh, we had planned on that. But again, uh, that's an important for me. Any, uh, any area. Um, you know, rural america is important to me. And I look forward to continuing to work with you on that. >> thank you, I appreciate it. I yield my time, gentleman.
▶ 0:58:30>> gentlelady yields back. I now recognize miss mciver from the great state of new jersey for five minutes. >> thank you, chairman and ranking member, for having this hearing. And thank you to administrator kimsey for coming before this committee today. We are thankful that you're here. The sba's office of capital access is central to ensuring that small businesses across the nation can secure the financing, financing they need to start to grow and to recover from challenges they face.
▶ 0:58:56From the seven day loan program to the 504 slash community development program, and even the community advantage and micro loans. These sba initiatives serve as a lifeline for entrepreneurs who might otherwise struggle to access capital through traditional lenders.
▶ 0:59:15Currently, small businesses face increasing challenges in getting the help they need from sba loans and programs intended to support their growth or recovery from disasters are becoming harder to access, slower to access as well, and more confusing than they should be. Congress needs to make sure that sba actually works for small businesses. That means fully funding programs and focusing on helping the businesses that need it the most.
▶ 0:59:42With that administrator kimsey, a survey earlier this year found that 62% of small business owners say inflation is their biggest source of stress. Since that survey, we have seen even even weaker job numbers, further increases in inflation and clear signs that the economy is heading towards a recession. Despite this, the administration wants to cut more than half $1 million from sba's office of capital access.
▶ 1:00:10Will you commit to reporting back to this committee if these cuts result in fewer loans, fewer approvals or harm to vulnerable businesses because we know they will? >> thank you, congresswoman, for that question. You know, the office of capital access, we look forward to working across all of america and all make sure all small businesses have access to capital that includes all communities, everyone. And we certainly under the administrator lefler's leadership, we're doing that.
▶ 1:00:40We're providing record capital. As I said, our lenders are more excited than we've ever seen. >> reporting back to this committee about the cuts that are going to take place from the decrease in your budget. >> I'm not I'm not aware of those cuts. >> okay. I'm going to take that as a no. Um, according to sba published information from february to june, the disaster processing center within the office of capital access eliminated 196 people in those five months. Can you explain why so many positions within the disaster processing center were lost?
▶ 1:01:11>> thank you, congressman, for that question. You know, as I mentioned before, under president trump, administrator loeffler, you know, we're rightsizing the agency. We're getting it back to pre-covid levels. Uh, it was bloated. And we're making. >> do you have an answer to the question about the 196 personnel that was let go? >> as I mentioned, we're rightsizing it, making it more efficient, protecting taxpayers dollars and the program. >> okay, I'm going to take that as no, you're not going to respond to me.
▶ 1:01:37Um, it doesn't even matter about my follow up for you to explain about the elimination of those personnel, um, cuts, how they have delayed the processing for businesses and made it more difficult for businesses, businesses to access support from your department. Um, another, uh, item administrator kinsey. Um, as we've been discussing here this morning, donald trump announced in march that the sba would be taking over the trillion dollar federal student loan portfolio.
▶ 1:02:02Yet when the sba administrator was here, um, she has proposed a 43% reduction in sba staff and sba's budget, as I just was talking about, for physical school for fiscal year 26, it represents a 42% decrease from fiscal year 25 enacted levels. How does slashing staff and reducing budgets help prepare the sba to successfully take over the management of $1 trillion student loan portfolio?
▶ 1:02:32>> thank you, congressman, for that question. Again, certainly the the sba were rightsizing it back to pre-covid levels. It was bloated. We had more staff, and we're operating very efficiently as I've traveled around. Our centers are operating very well. We're meeting the demand, our numbers are up, and we're very confident with our staffing levels that we have. And the sba performs very well with you. Talk about. >> the the new management of the trillion dollar student loan portfolio. That's my question.
▶ 1:03:02>> the student loan program has not come over to the sba, and certainly the sba performs very well with our guaranteed loan programs. We perform and deploy over $40 billion of capital annually. >> and the president announced that you guys will be taking over the trillion dollar student loan program. So you're telling me that you guys are not managing, that. >> we're not managing the student loan program? >> okay. Um, I'm I'm. I just lot of laugh. Um, first of all, thank you so much for being here.
▶ 1:03:32I'm going to stop with my questions now. Um, because it's like, you guys want to come here and play in our face. With that, I yield back. Thank you. >> thank you. >> gentlelady yields back. I now recognize Mr. muazu from the great state of pennsylvania for five minutes. >> uh, thank you very much, Mr. chairman. Mr. kimsey, thank you for being here. You've quite a great background for this position. Thank you for your service.
▶ 1:03:54Because you had a very successful private sector career, as you mentioned, with your family grocery store, but then with your finance background and then, um, being vice president of a local bank where you launched the sba department, uh, broadening the bank's ability to serve small, uh, customers. And you did that for 25 years. So you're enormously well qualified. And we, uh, and you were president and ceo of private finance company, head of $100 million plus and usda and sba loan production. So it's great.
▶ 1:04:24Thank you for your service. Um, you know, under, um, the biden administration, the, uh, just to clarify some numbers prior, the workforce at the sba was, uh, 3200. And under the biden administration, they thought it was a wonderful idea to bring it up to 6500, doubling it. And by the way, we took a couple of trips. So more than doubling it, okay. Over a four year period, that's a lot of people to hire.
▶ 1:04:55I don't even know how you find 3300 more people, uh, to, to hire during that time frame. It must have been just, just, just a scorched earth policy of hiring. And, um, the, um, and we took a little field trip over to the sba, and nobody was there. Um, there were the administrator was there, uh, and as well, they informed us that, oh, no, no, no, no. And this is a year and a half ago, uh, barely that, Mr. chairman, two years ago. And they formed us.
▶ 1:05:24Oh, and within six months, we're going to have 40% of the workforce show up for work. I'm not sure if that ever happened, but they thought that was a wonderful thing. So clearly the numbers where you mentioned $2.2 billion default rate, we had $400 million in bad loans that that only went out because of the mismanagement of the loan program, relaxing underwriting standards and removing guardrails.
▶ 1:05:48Uh, that's a that's a great idea for, uh, you know, for an audit system of, of loans. So the increased regulations, the high rates of inflation, by the way, under the biden administration, the inflation was 20%, whether it was 19.999 or 20.01, and what it is cumulative under the trump administration is 1.9%.
▶ 1:06:14Okay, we're at 2.9 cpi, but the growth has been 1.9% over the last ten months. So let's just get you know, let's just get some of the numbers straight. So, uh, we're restoring integrity. We're reinstating prudent underwriting standards. We're focused on on the businesses that can grow or you're helping as many, particularly rural businesses as possible. Uh, my recent bill, all of america act, helped expand that. We appreciate your support. So let's get into some questions.
▶ 1:06:44Um, so we saw the increase in early defaults in the years after the biden administration. Um, what policies in particular drove this increase? >> thank you, congressman, for that question. Certainly. You know, I was shocked when I got here to the sba to find out that we were, you know, had a policy in place of do what you do, uh, really no guardrails. Uh, you know, you could get a loan, no collateral, no equity.
▶ 1:07:12Uh, if you didn't want to guarantee it, get somebody else to guarantee it. Uh, so I was really shocked and to learn that, you know, right out of the gate that we're, you know, losing hundreds of millions of dollars per quarter, which was very shocking to me, uh, that we would be operating a loan program, uh, that way, uh, not sustainable. And those losses, as I've spoken about today, uh, you know, the projected cash flows from those four cohort years is a -2.2 billion.
▶ 1:07:38I mean, the numbers speak for themselves, and we put the guardrails in place to stop that from day one under president trump and administrator loeffler's leadership. >> so if you can be a little bit more specific on june 1st, your sba, uh, and administrator loeffler issued sop 5010, which revised the rules for lenders within the seven a and 504 loan programs. Can you describe how the changes the programs, uh, help taxpayers and decrease risk? >> sure.
▶ 1:08:06I mean, we just put back in the fundamental guardrails. I mean, those are just time tested, what I call blocking and tackling that you do when you're making loans. And without those, uh, you know, you're going to have substantial losses like we're seeing and we're trying to work through today. I mean, in my years of banking, I mean, it's just just basic stuff. I mean, this isn't rocket science. It's basic blocking and tackling. Yeah. >> uh, well, thank you.
▶ 1:08:30If there are some programs that you think legislative, we can assist you in your office of capital access, uh, please let us know. Please don't hesitate. Look forward to meeting with you. Uh, one on one one of these days. And again, thank you. Thank you for your work, Mr. chairman, I yield back. >> thank you. >> gentleman. Yields back. Now, I recognize doctor morrison from the great state of minnesota for five minutes. >> thank you, chairman williams and ranking member velazquez for holding the hearing. Thank you, administrator kimsey, for being here today.
▶ 1:08:57I'm glad to have the opportunity to hear directly from you about the many changes that are being made to sba's office of capital access since you were appointed recently, we've seen horrific flooding in texas devastated devastating hurricanes in north carolina and florida. We've seen wildfires in california and around the country. We know that natural disasters are increasing in frequency and intensity.
▶ 1:09:22These natural disasters not only cause billions of damages, billions of dollars in damages, but also destroy communities. Rebuilding after natural disaster can be slow, painful and costly, which is why the sba administration, the small business administration's disaster loan program, is so critical to helping small businesses recover after one of these natural disasters.
▶ 1:09:44So my question for you, sir, is what steps is sba taking to prepare for the increase in natural disasters and with it, the increased need for disaster loans, especially amidst the staffing reductions that have been already referenced by my colleagues. >> thank you, congressman, for that. That question. I certainly look forward to being in your state next week as well. Uh, so excited about that. Certainly. Again, uh, from the disaster standpoint, uh, you know, we're very well prepared for that.
▶ 1:10:13We have, uh, a lot of, uh, you know, substantial capital in place. We've got the folks in place, the center. I was out in the center, uh, a few months ago. I know they're prepared. Uh, we've got, again, sufficient staff to address that, and we're very confident in our ability to deploy the capital that's needed when those folks need it the worst.
▶ 1:10:37And we've shown that since we've been here for the fires in california, where we've deployed billions of dollars and we've been on the ground in other situations, and we're very committed to those that need that capital when it's desperately needed. And I'm very confident in our ability to continue to deliver that disaster capital. >> I'm relieved to hear that. Administrator. So do you believe that natural disasters are increasing in frequency and intensity? >> uh, thank you for that question.
▶ 1:11:04I'm I'm not a, you know, scientist or meteorologist, so I, I can't say one way or the other from a disaster increasing perspective. >> I think that the evidence would, would tell us that they are um, so given that, I think we can both agree that the disaster loan program must be prepared to meet that growing demand. So with that in mind, what is the office of capital access doing to ensure that small businesses are able to access disaster loans amid those changing circumstances? >> thank you for that question.
▶ 1:11:35Certainly the office of capital access and our our disaster loan program is is prepared, it's in place and we're deploying, you know, millions of dollars every day to those that need that and that, that systems perform extremely well since we've been here. And I'm confident that we'll, you know, continue to perform. And we've we've done very well in our disaster program. We have great, uh, you know, great folks over there to deploy it. My counterpart, uh, is very well prepared and, uh, we're confident in that.
▶ 1:12:06>> thank you. Um, it's incredibly important for all of our small businesses, no matter where they're located, can access that disaster assistance. But a gao report found that small businesses in rural areas face additional challenges in accessing disaster relief. Um, what is sba doing to ensure that rural small businesses are able to access disaster assistance in the wake of natural disasters? >> again, thank you for that question. Certainly our our rural areas are important.
▶ 1:12:33We know that, um, you know, again, as I've said, that's vitally important that they're they're able to access that. And we've been robust in our responses to disasters that have happened so far to make sure we've got those centers that are open. I mean, we've we've, um, been very proud of what we've done under the leadership to meet the disaster needs of those victims that need it the worst. I mean, those are the days that are they need it the worst.
▶ 1:12:59And we've been there at the sba to make sure that they're getting that capital that's needed to help them get restarted and rebuild. That's been, uh, it's just a terrible when that happens. >> thank you. You know, I know last question. I know you told my colleague that sba is not taking over the student loan program. Um, but in march, president trump did announce that sba would be taking over management of the federal student loan portfolio, effective immediately.
▶ 1:13:24And administrator loeffler stated that the sba is prepared to, quote, restore accountability and integrity to the student loan program. While a transfer of this program would still require an act of congress. Is the office of capital access, the office expected to be charged with overseeing, processing and servicing federal student loans. >> uh, thank you again, congress, for that question. Certainly, I think the office of capital access, we do a great job deploying capital. Uh, as you see, we deploy over 40 billion a year.
▶ 1:13:53And, uh, so I think we could do a great job at deploying capital, if that's what's needed. >> and what steps have you taken to enable sba to do that? >> I again, the the programs, the seven a and 504 programs perform very well. Uh, we're uh. >> gentlelady's. Time is up. >> thank you, Mr. chair. I yield back now. >> recognize miss van dine from the great state of texas for five minutes. >> thank you so much, Mr. chairman. I want to thank our associate administrator, kinsey, for joining us today as well.
▶ 1:14:25Your colleague, associate administrator shimkat, joined us at our north texas job fair earlier this summer. And I must say, it's been great getting to know you. Her, um, administrator loeffler, and seeing how you're really turning the sba around and really starting to get it steered in the right direction again, as you know, the last eight months have been crazy. Uh, it's full of radical change for the better. Uh, we have seen profound action to restore our government to its core function and sba to its core function.
▶ 1:14:52Uh, unfortunately, under the biden-harris administration, the sba basically abandoned its core mission. They loosened underwriting standards, they waived lender fees, they turned the essay seven, seven, eight program into a money losing operation for the first time in over a decade. Defaults, delinquencies almost doubled, guardrails were eroded. Taxpayer dollars were wasted, and ineligible borrowers were able to access sba backed loans. Uh. By contrast, just 50 days into his second term, Mr.
▶ 1:15:22Trump, president trump and administration lefler had already restored common sense lending criteria, ended reckless die based programs, and taken took action against politicized and unlawful banking, which we already talked about earlier today. I'd say these reforms, combined with the tax relief that we passed and regulatory reforms that we are currently advancing, will unleash main street to its full potential.
▶ 1:15:47I am especially glad that my bill, the american entrepreneurs first act, passed the house earlier this year and builds on this effort by codifying president trump's executive order and ensuring that sba backed loans are reserved for american citizens only, not for people who are here illegally. And I think initiatives like this are how we keep the sba focused on serving these small business owners who are the engine of our economy.
▶ 1:16:12As someone who is greatly concerned about the government's increasing deficit, I want to ensure that our sba guaranteed lending programs remain subsidy free, as required by law. How would you describe the situation that led the seven day program to have a negative cash flow under biden? >> thank you, congresswoman, for that question. Certainly. Uh, again, I was, you know, shocked that, uh, we were operating under do what you do with no guardrails in place.
▶ 1:16:38I mean, in all my career, uh, banking, uh, you have to have fundamentals. You have to have guardrails. You have to, you know, just fundamental underwriting, time tested to make sure programs that you don't have loan losses. And when you don't have those in places, you know, you see what we have here. You know, we've got, uh, defaults that are increasing. I mean, I could look back when I got here and looked at the early defaults, and it was clear prior to me getting here, the early defaults were rising.
▶ 1:17:06Uh, but without those guardrails being in place and the amount of volume that was going through the program, uh, we're going to be dealing with this for the next several years, several, probably decades, actually, uh, to try to manage this. >> I appreciate the answer. Um, I'm also co-chair of the congressional franchise caucus, and I prioritize protecting the, uh, sorry about that. I said, as co-chair of the congressional franchise caucus, I prioritize protecting the opportunity of franchises.
▶ 1:17:34Uh, and I want to ensure that this business model remains an option for small business investors across the country. So the biden administration's decision to arbitrarily shut down the directory created uncertainty and barriers to sba blocked lending for franchisors and franchisees. Uh, I am thankful that our current administration reinstated the directory in june, but do you believe that congress should codify the franchise directory so that future administrations cannot arbitrarily shut it down? >> no. Thank you for that question.
▶ 1:18:03Yeah, that was one of the number one items that I got when I got here was the franchise directory. It's vitally important. Again, that's one of the tools that's much needed that so franchise ease know that it's an approved franchise on the sba. And our lenders know that. Uh, so it's a it's a vital tool. And we certainly look forward to working with you on that. >> getting back to the question, though, do you think that congress should actually work to codify that? >> I will leave that up to you in this committee. >> all right. Thank you. >> thank you.
▶ 1:18:33>> uh, in 2023, the sba finalized a rule that allowed for do what you do underwriting standards. In doing so, lenders could then apply existing underwriting practices used for non sba loans to sba guaranteed loans. Could you describe how damaging that was to the capital access program and how the sba policy has changed since then? >> yeah, thank you for that question. Certainly been able to shift the risk to sba is not good. Uh, and again, uh, that just created additional risk for us.
▶ 1:19:00And uh, again, you just see that from the defaults we're seeing in the early, early defaults, our default rates up. And as I said, we're going to continue to have to manage that. Uh, that's the you know, really what keeps me up at night is knowing that this portfolio is such in poor shape from the do what you do. Uh, and it's unfortunate. >> thank you. And I yield back. >> gentlelady yield now recognize Mr. cisneros from the great state of california for five minutes. >> thank you, Mr. chairman.
▶ 1:19:29And I want to thank you and the ranking member for putting this hearing together today. And, uh, Mr. kimsey, thank you for, uh, for being here to answer our questions. Um, so, first of all, I want to ask about sba cuts after it was announced that the sba would cut 43% of its staffing, what has been the impact in the office of capital access? >> thank you, congressman, for that question.
▶ 1:19:56Uh, under leadership of president trump and administrator loeffler, that was one of the things that we did. We wanted to streamline and right the ship under the sba and certainly getting, uh, the sba back to pre-covid levels where it was bloated. That's what we've done. And as I've traveled and met with our centers, uh, met with our staff, uh, we're operating at a very efficient manner. Uh, we're service is great from from our feedback from our lenders.
▶ 1:20:25And, uh, the levels are at a, you know, a streamlined level that we needed, uh, we don't need to be bloated. We don't need to be at pre pre-covid levels, uh, to support the volume that we have. And we're at a good number right now. >> so you're saying by cutting nearly 50% of your staff that you can still provide the same type of service that was provided before? >> yes. That's correct. We are providing that same service and our volume and our numbers are up.
▶ 1:20:55Uh, and we're able to do that. And, and our lenders are, are very uh, again, I couldn't express the excitement I see from our lender community about the leadership of this administration and administrator loeffler. I mean, it's, uh, the excitement's there, uh, many lenders are leaning in to increase their. >> why has there been a sharp decrease in the origination of seven loans over the past several months? >> thank you again for that question.
▶ 1:21:21And certainly our numbers that support that we've got increased volume. We've seen that the 14% increase. And uh, you know, you can't just look at one month as, as a data point and, and the numbers show that our numbers are up. And, uh, again, our lending community, uh, couldn't be more excited to as to what the leadership is doing here at the sba. I mean, I, I hear from them weekly. Well, they're certainly excited to deploy more capital. >> we're seeing different numbers.
▶ 1:21:49So we'll take a look at that. But um, we'll talk to you about that later on. But um, I would say many of us on this side of the aisle, uh, called for the need for smaller dollar loan products from the sba. It's one of the reasons we believe the community advantage program has been so successful. Uh, unfortunately, that trend in the seven day program has been the opposite. Higher value loans.
▶ 1:22:12Uh, what steps is the sba taking, sba taking to reverse the trend and increase the number of small dollar loans? >> thank you for that question. Certainly. Large. Small, uh, we know that our large loans typically support our small dollar loans, and our average loan size is about 450,000. And we certainly want to support those small dollar loans along with our large dollar loans. And we're we're continuing to do that. >> I think it's important. Right.
▶ 1:22:41The micro loans are important. Not everybody needs $450,000 or more higher. Sometimes they may only need ten, 20, $30,000. Um, it is important for us to ensure that those businesses that need those are being supported as well. Can you assure me today that you will continue to, to work on those to ensure that there are going to be micro loans processed? >> we're certainly committed to the micro loan program, along with all the other loan programs, to make sure that all small businesses have access to capital. >> all right. Uh, last question.
▶ 1:23:13Uh, you know, the sba rescinded the policy allowing noncitizens with lawful status to receive loans. Um, you know, that had different implications, right? Those that are here legally, those that have green cards, uh, are here not able to get loans, but also us citizens, um, who happen to be married to a, a foreigner, um, here legally or have also been denied these loans because of this recension of that policy. Um, you know, love holds no bounds.
▶ 1:23:42You know, we can't always say you're going to fall in love with a us citizen, right? So, um, how are you advocating or at all right, to kind of fix this, this issue where now us citizens are being denied loans because simply because of who they married and who they fell in love with? >> thank you for that question. I certainly think verifying citizenship is very important. And that's one of the things that we put in place, is to verify 100% of the ownership. And, and, and we make sure we think that's very important.
▶ 1:24:12It's a vital management tool. >> but that doesn't solve the problem or the issue of somebody, you know, a us citizen married to a non-citizen, that they own the company 100% now because just simply because they're married to a foreigner, they're no longer guaranteed this loan. And to me, that's unfortunate. And with that, I yield back, Mr. chairman. >> gentleman yields back. Uh, I now recognize Mr. stauber from the great state of minnesota for five minutes. >> thank you very much. Uh, it's great to see you, uh, Mr.
▶ 1:24:43Kimsey, and, um, I appreciate you being here and, uh, your your testimony. I think my my good friends and colleagues on the other side of the aisle, I do believe, uh, that they truly support small businesses. I only wish they would have helped us get the working families tax cut across the finish line. Uh, as a small business owner for 31 years, I understood the importance of small businesses. Uh, you you mentioned, uh, or answered a question from Mr.
▶ 1:25:13Cisneros on, um, you cut 50% or you removed 50% of the staff, and the output was the same. Um, I think that's exactly what this administration is looking to do. Continue and increase the output, but remove some of the bureaucracy.
▶ 1:25:30Uh, and you're doing that, you know, in northern minnesota, access to steady right sized credit can decide whether shop in hibbing as a second shift or whether their family manufacturer on the iron range buys the equipment that keeps, uh, their home there. Or a small business in forest lake if they can keep their doors open for rural entrepreneurs in the community, lenders who serve them in greater minnesota, one of the top issues of concerns, uh, is the time it takes to get sba loans approved.
▶ 1:25:58Uh, the sba under the biden administration, however, waived landing fees and slashed underwriting standards. This allowed lenders to provide government backed loans to unqualified borrowers. Mr. kimsey, uh, could you share with us the steps you are taking or have taken to address the issue of timeliness while preventing a repeat of lax standards that led to higher delinquency rates? >> yeah. Thank you, congressman, for that question.
▶ 1:26:24Uh, certainly under the leadership of president trump and administrator loeffler, you know, we've taken decisive action with the 58 that we put in place june 1st to get rid of the do what you do, uh, nonsense that was going on, where we've driven up defaults and early defaults and delinquencies and, uh, decisive action to correct that. So, uh, we did that. Uh, it's quite amazing what we've been able to get done in the first few days that we've been here.
▶ 1:26:51First, uh, and, uh, we're very, you know, with the streamlining and rightsizing the agency, uh, it's just quite amazing the things that we've done in the short period of time to get it back on track, to get rid of do what you do and to put the fundamentals in place, as I've said, I mean, it's just basic fundamentals. It's not anything that you wouldn't think you would be doing from a lending program. And that's what we've done. >> and increase the output. Mr.
▶ 1:27:22Kimsey, what concrete steps have you taken to what metrics are you tracking to ensure the seven and 504 programs are back to sensible underwriting and operating at zero subsidy for taxpayers? >> well, again, thank you, congress, for that question. Certainly, one of the first things we did to to continue to operate at zero subsidy credit model was to put the fees back in place. Uh, you know, that was the other item you had, uh, no underwriting standards.
▶ 1:27:47You had no fees, uh, which created the, uh, you know, hundreds of millions of dollars in losses. And that's what we've done to put that back in place. And we're certainly with sop 58, we've, you know, working to modernize the seven eight program and as well as the 504 program to make those more streamlined and efficient. >> thank you. You know, just over a year ago, this committee heard from the office of capital access.
▶ 1:28:10Uh, your your predecessor avoided my questions, providing little context to the direct relationship with the biden sba, uh, had with the lending with a lending organization which had direct influence on the expansion of the sblc licenses. In 2023, the sba finalized a rule that lifted the sba self-imposed 40 year moratorium that limited licensing on new small business lending companies.
▶ 1:28:35Splc's, could you explain briefly what splc's are are the potential risks and the danger? The biden-harris administration added, by increasing the number of splc's? >> yeah, thank you for that question. Certainly the small business lending companies were greatly expanded like never before. Um, and creating additional additional risk, uh, for us at the office of capital access.
▶ 1:28:58And as we've seen, uh, with that increase, there have been very, very little increase in loan volume, uh, what they were designed for. But what we've seen is the opposite, you know, is additional risky loans and additional increase that we're monitoring from a default and an early default perspective. And they've not performed very well.
▶ 1:29:18>> does sba have the oversight capabilities to effectively regulate new splc's and allow unlimited new entrants into the program, or is maintaining the existing cap the more prudent approach? >> thank you for that question. Certainly, the office of credit risk management, uh, maintaining the existing cap is the most prudent step we should be taking. >> thank you very much for your testimony. Thank you. Appreciate it. I yield. >> the gentleman yields his time back. I now recognize Mr. tran from the great state of california for five minutes. >> thank you chairman.
▶ 1:29:47Thank you. Ranking member for today's hearing. Uh, Mr. kimsey, thank you for being here. Uh, in its congressional budget justification for fiscal year 25, the sba requested congress to increase the loan limit for manufacturing loans in the 504 cdc program to 7.5 million, which be which would be the loan limit based on the rate of inflation since the last time the limit was raised.
▶ 1:30:13Yet now the sba has requested congress to raise the loan limit for manufacturers in both seven a and 504 loan program to 10 million. Can you explain how the sba arrived at the 10 million loan limit for both programs, expanding on the circumstances or new evidence the sba has been presented with in the last year to warrant increasing the loan limit to 10 million. >> thank you, congressman, for that question.
▶ 1:30:40Starting as you said, the loan limits haven't been increased since 2010. Uh, we know that manufacturing is very capital intensive and requires additional capital. Uh, the $5 million mark just doesn't get to where we need to be. Uh, with manufacturing being such capital intensive. And, uh, we think the $10 million limit is a is a good number.
▶ 1:31:03Uh, that will be much needed for many manufacturers across the country, as I've heard from, uh, many that have spoken with and traveled and met, uh, the $10 million limit gets us there. Uh, I think certainly, uh, the need for additional capital, uh, could potentially be higher, uh, because it is very capital intensive. >> yeah. And it is. And I agree with you, administrator. Uh, was there any analysis or evidence that supported the $10 million increase.
▶ 1:31:32>> as far as the the budgeting and analysis? I would have to, uh, get back to you on that. With our budget people and our modeling group. >> would you mind sharing that with my office? >> be glad to work with your office. >> thank you so much. And, Mr. kimsey, uh, other members of congress on both sides of the aisle have introduced bills such as h.r. 1893 and h.r. 4153. That would increase the full loan limit adjustment to 10 million for both seven a and the 504 program. Uh, but not just for manufacturers.
▶ 1:32:00Is the legislation. Um, is this type of legislation something that administration supports? >> I would leave that to this committee and congress to decide on that limit. Okay. >> um, I, I appreciate that and I very much support it. Um, just wanted to know from your standpoint, if the sba is going to support something, uh, that expands past just manufacturers when it comes to the 10 million loan. >> again, you know, the loan limits haven't been increased.
▶ 1:32:30Uh, I'm going to leave that to this committee and, and you in congress to to make that determination. >> and Mr. kimsey, uh, my colleague rep cisneros kind of touched on this, but one prominent sba lender has expressed to the committee a situation where their institution was unable to modify an sba loan for a small business customer, which was owned by a husband and wife, in which the business was majority owned by a us citizen.
▶ 1:32:54Shortly after the sba citizenship policy was implemented because one of the individuals in the couple was a citizen of a european company. Uh, I probably represent a minority district where many small businesses in orange county are in this exact same situation. And I'm deeply concerned that this change risks shutting out.
▶ 1:33:17This change would risk shutting out huge swaths of small business owners in my district, especially in the little saigon area, from the very programs that were designed to support them. It means fewer restaurants are reopening after a fire. This means fewer family run stores or surviving a turndown. This means fewer jobs and limited growth in communities that rely on these entrepreneurs to thrive. Uh, do you believe that the sba citizenship requirement was meant to do exactly this?
▶ 1:33:47>> thank you for that question. I think it's important that we verify citizenship. I think it's important that we have we know 100% of the ownership of all businesses that was not being done before. Um, and I think that's vitally important from a number of standpoint, just from a underwriting, uh, fraud perspective, but just the basics of knowing, uh, you know, who the ownership is.
▶ 1:34:10>> uh, and my point is turning away businesses or constraining small business growth because a non us citizen owns a minority share in the company. Uh, is just not right. Um, just as follow up, have you been in communication with sba lending partners over this new citizenship policy? >> thank you for that question. Uh, we've certainly had uh, I haven't personally, but I know, you know, the office has had communication, uh, with that. >> uh, what's the general feedback from our, our partners?
▶ 1:34:40>> uh, I think the general feedback from our lending partners are that they're very, very happy with the work that we're doing. They they like knowing that identifying the 100% ownership because they know, uh, who those individuals are, and it helps prevent fraud. >> thank you for your testimony, Mr. administrator. Uh, Mr. chairman, I yield back. >> gentleman yields back. And now recognize Mr. alford from the great state of missouri for five minutes. >> thank you, Mr. chair and ranking member, for holding this important meeting today. And Mr. kimsey, thank you so much for being here.
▶ 1:35:09Good to see you. Today's hearing is about one of the most important lifelines for small businesses, and that is access to capital. You know, for decades, the sba lending programs have played a vital role in helping main street's businesses start, grow and weather challenges along the way. But we also know that under the biden-harris administration, the sba's integrity was severely undermined. Guardrails were slipped, stripped away, underwriting was watered down.
▶ 1:35:38In fact, we kind of had an oprah winfrey loan program. You get a loan, you get a loan, you get a loan, taxpayer dollars were put at risk, default rates spiked, and the program ran at a loss for the first time in more than a decade, violating its core statutory requirement of operating at zero cost to taxpayers.
▶ 1:35:59Thankfully, the trump administration has acted swiftly to restore common sense standards, protect taxpayer dollars, and refocus the sba on its true mission of serving main street, not political agendas. I've got news for everyone watching or listening. Right now. The sba is getting on the keto diet, and you're part of that. Instead of no carbs, it's no fraud.
▶ 1:36:25Instead of high protein, it's high responsibility and high protection of taxpayer money. We're going to get lean and mean together. You see, we have an opportunity now, Mr. kimsey, to go on the offense. Small manufacturers are the backbone of rebuilding america supply chains and creating good paying jobs right here at home. And that's why I strongly support both the made in america manufacturing finance act and the strong act.
▶ 1:36:51It would double the maximum loan limits under the sba seven a and 504 programs. Raising those capitals is critical because the reality is, as you've pointed out, that in today's small businesses, they often need more capital than the outdated $5 million ceiling allows. Supporting main street means giving entrepreneurs the tools they need to succeed, while also safeguarding taxpayer dollars.
▶ 1:37:17I look forward to hearing from you today. Uh, we already have, but I do have a couple of questions for you, Mr. kimsey. Uh, in your opening remarks and written statement, you said since january 20th, the sba has approved nearly 53,504 seven day loans, $28.3 billion in volume, a 14% increase in loan volume compared to the same period last year. I this is a remarkable success story, sir.
▶ 1:37:46Under the direction of president trump and administrator loeffler, you guys are doing remarkable work there. How do you cut down on the fraud like you have done? Uh, given greater security through underwriting and these loan programs and still have a 14% increase? How do you do it? >> thank you, congressman, for that question. Exactly. Under president trump's leadership and administrator loeffler, we've been able to do that because of our lender excitement.
▶ 1:38:12And just the leadership here of of wanting to get back to lending to main street america. I mean, that's what our lending community says to me and what I hear when I talk to them. I just had one last night. Call me, say thank you for what you're doing. We're going to lean in and do more lending under the sba programs. And as I traveled last week, I heard the same thing because they know what we're doing. We're focused on main street lending, providing capital. None of the political things that were going on before.
▶ 1:38:39And we just and just knowing, you know, getting away from do what you do, that's another thing they've shared, uh, that we have principles in place, guardrails in place so they know what's expected of the sba. And that's what's driving the volume. And that's what's going to continue to drive lending to small manufacturers and small businesses across this country, because we are going to create this manufacturing boom. >> no one likes going on a diet or getting in shape. I'm proof positive of that.
▶ 1:39:08It requires a little bit of pain, doesn't it? We are going through a little bit of pain now for a long term gain for our economy, for the small businesses in america. You are a part of that. Can you explain how the made in america manufacturing finance act, or mof will strengthen domestic manufacturing and benefit us manufacturers? >> thank you for that question. Certainly, again, under president trump's leadership, we're going to bring manufacturing back to this america, to america.
▶ 1:39:33We've lost, you know, over 70,000 manufacturers over the last 20 years and millions of jobs. And we desperately need manufacturing in this country. We should quit relying on foreign resources for our our for our products. And that's exactly what president trump's doing. And thank you for, you know, the support of this committee, uh, bringing back the increase and increasing the loan limit from 5 to $10 million, that's going to be vitally needed.
▶ 1:40:01As I spoke with the manufacturer last week, and I hear that weekly from manufacturers, from borrowers, when is the increase coming? We need the additional capital. >> Mr. kimsey, I just want to say thank you. I know it was a shocker when you got in there and started looking at the books to see how much fraud and, uh, lack of oversight for these loan programs created a really hardship for the american taxpayers.
▶ 1:40:25But you, uh, administrator loeffler and president trump, thank god we have someone in there looking after the taxpayers dollars. And I look forward to working with you as part of this committee and chair of the oversight subcommittee to make sure that this made in america, america first agenda continues through the small business committee. Thank you sir. >> thank you. >> gentleman. Yields back. I now recognize miss goodlander from the great state of new hampshire for five minutes. >> thank you, Mr. chairman. And thank you, Mr.
▶ 1:40:55Kimsey, for being here today. Um, you've got a really important job, and this is a really important hearing. We know this, and we all agree on this because reliable, usable lending programs really are a lifeline for small businesses. And our small businesses are the lifeblood of our economy. Access to capital is a major issue in my state of new hampshire.
▶ 1:41:17It's this hearing is equally important because in my state of new hampshire, lenders, the best lenders in the business are themselves small businesses. And right now in america, the five biggest banks control the market thanks to consolidation and monopolies policies. But the best lenders for america's small businesses are themselves small businesses. And last month, I convened an extraordinary group of small business lenders from across my district.
▶ 1:41:44We met in the great town of salem, new hampshire, at salem cooperative bank. And what I heard from them, two overwhelming concerns. And they both have to do with the word that's come up a lot today uncertainty, economic uncertainty that is really being driven by president trump's tariffs, which are so hard to follow for small businesses and have have really caused them to pay in ways they didn't expect.
▶ 1:42:12It's impossible to plan with this kind of economic uncertainty. At the same time, regulatory uncertainty has been a major, major challenge for small businesses, and I want to come back to, uh, the standard operating procedure that's come up a couple of times. 50, ten, eight and on the 21st of april, administrator loeffler announced changes to this standard operating procedure. I know you're familiar with this document. Can you tell us how many pages is this sop?
▶ 1:42:45>> thank you, congresswoman, for that question. The sop is approximately 400 pages. I don't know. >> 467 pages. Now, I love administrative law. I taught administrative law 467 pages is I tried to read this document. I'm a lawyer, but when I hear from my small business lenders, they tell me, you've got to have an army of lawyers and experts to be able to interpret this document. Now, I know that the sba issued information notice 5008 66746.
▶ 1:43:13I got to tell you, it didn't provide much more clarity to small businesses who are trying to navigate the rules of the road and be partners with us in lending. So can you tell me how is a small business supposed to get clarity and answers to questions, basic questions they have about the rules of the road? One answer is they go to and this is what they told me.
▶ 1:43:40They go to the sba office in new hampshire, where we had for many, many years people who really knew these rules of the road, these way to complex rules of the road. And I want to ask you, would you be willing to work with us to clarify and make these rules more usable in the sop? >> thank you for that question. Certainly, that's one of our number one priority. >> thank you. Well, I really look forward to working with you on that. I my time is limited. And I just want to ask you the staffing cuts across the board at sba.
▶ 1:44:09For me in new hampshire, the biggest concern is our is our field office. The people who have worked with these small businesses, small business lenders and and small businesses across the board to make the programs that are theirs taxpayer funded programs accessible and usable. We've seen in my state a 70% reduction in the sba workforce.
▶ 1:44:35I know that in other parts of america, there have been special dispensations to hire more people in field offices. But right now we are operating with a 70% reduction in the patriotic women and men who have made these programs accessible. Do I have your commitment that you will work with me to make sure that the new hampshire sba office is fully staffed, so that we can make your the programs you administer usable to small businesses. >> no. Thank you for that question.
▶ 1:45:02We certainly want to make sure capital is accessible to all small business borrowers. >> do you agree? Do you do you understand what I'm what I'm hearing from my small business lenders that they need experts in the field with the sba who can help them navigate these programs. They can't afford to hire an army of attorneys. They just can't afford it. And they shouldn't have to to use these programs. So do you do you acknowledge and will you work with me to get this office fully staffed? >> now? We look forward to working with you and others.
▶ 1:45:32And we will do, um, you know, uh, we'll be happy to work with you, but we certainly want to make sure small businesses are getting the capital they need. >> and we share that goal. >> and the sop that we're working through and working to streamline and make this sba loan program more efficient is what we're doing. And that's my number one priority is to make it more streamlined, more user friendly. And that's what we're doing. And I certainly our lending community that I hear from are very grateful for what we're doing, and they're very grateful for sop 58.
▶ 1:46:02>> well, I did not hear any good reviews of the sop because a 467 page document that it takes an army of lawyers and experts to understand is not something our small business lender should have to deal with. Thank you. And I yield back. >> gentlelady yields back. I now recognize Mr. petronas from the great state of florida for five minutes. >> thank you. Chairman. Uh, administrator, thank you for joining us today. Um, a little housekeeping.
▶ 1:46:28Um, there was a couple questions asked regarding transfer of student loans to y'all. Um, that was struck down by a court this month. So none of that's happening. I don't think anybody google searched it. Um, but I think it's important to note you don't have the program because the court stopped you from having it, so you have no opinion of it.
▶ 1:46:47So, um, I thought it was kind of frustrating how that question kept on coming up and over and over, and internet search would have told them whatever the answer they wanted was, um, not having a lot of of knowledge of how the sba works with the large loan side of things. I'll give you an example. And I'm just kind of just want you to walk me through it. Um, my district in florida susceptible to hurricanes.
▶ 1:47:13So when we get hit by a storm, I know the small dollar loan programs get deployed out. But in some cases, you have businesses that, you know, they they operate from month to month or quarter to quarter, and they're servicing their debt. And I had a constituent bring it up to me, he says. He says, jimmy, I've got my business back up and running. But it's obvious I've got to get some some stability to my lending.
▶ 1:47:40Um, he says, is, is is am I eligible for a large size sba loan? And I think in his case, it's over $1 million. Is that also a typical type of client that y'all would entertain when it comes to recovery? Post a disaster? I just don't know. >> yeah. No. Thank you, congressman, for that question. Certainly getting getting those that have been affected by disasters, you know, is vital. And sba plays a vital role in making sure they have the capital.
▶ 1:48:07And we certainly would, you know, look forward to working with them to see how we can assist them with additional capital through the seven day program, whether it's working capital or what that may be, to assist them to get back on their feet, but they would certainly be eligible to work through that with their local lender. >> yes, I'd done some google searching on it, and I guess, uh, I guess it's typically the larger financial institutions that are who are going to process that scale of a loan.
▶ 1:48:35Um, and is it just where he needs to find who he's comfortable with, you know, work with him, make an application. Do you all have a, a list of of which banks or financial institutions are capable of managing that type of application? >> yeah. And I thank you for that question. Certainly what I would always tell, you know, small business owners, if they have a local community bank, those are the they they know them and start there. But we do have lender match that they can go to on the sba website.
▶ 1:49:02And they can enter in their information. It'll send their information out and get that out to many lenders. But I would certainly, uh, work with their local lender on to that. Know their business. >> sure, sure. It may be a, um, a shared or I guess, a bank into banking type of transaction. Um, and last thing I'm kind of curious about, um, I feel transitions, uh, and administrations, you've inherited a lot.
▶ 1:49:28Um, I'm just kind of curious if and I think my colleagues already gone now, but as she talks about the the enormousness of some of these documents, I'm assuming some of this stuff was inherited it. How easy is it to to clear up the bureaucracy? How easy is it to to make access to capital? How much of it is our responsibility?
▶ 1:49:53Because the laws were written by us, or how much do you have the flexibility to do that on your own? >> uh, thank you for that question. Yeah, certainly. Uh, you know, a lot of it is, uh, you know, some of it's statutory, some of it's sop and, uh, you know, one of the things that we're doing under the leadership, administrator lefler, is to streamline the loan program to make it more streamlined, more efficient.
▶ 1:50:15And, uh, you know, that's one of the things I really look forward to doing and working with this committee to do, uh, you know, being in this space for a number of years, uh, we want to make it more efficient, more streamlined. I think we've done that. I think the sop 5010 has done that. It provides clarity where there was no clarity under do what you do. And that's the big thing I get. There was no clarity. The lending community didn't know. What do you do under do what you do. What is that? Can anybody tell me what do what you do is no, nobody can tell me.
▶ 1:50:45And the lenders don't like that. It's a gotcha game. Sure. And we just put back in the the fundamentals, the guardrails, the things that you. So you know what to do. >> sure, sure. Well, um, thank you for your service. Thank you. I appreciate your your answers. >> thank you. >> gentleman yields back. I now recognize doctor conaway from the great state of new jersey for five minutes. >> uh, thank you, Mr. chairman. And thank you. >> Mr. kimsey, for presenting yourself to the committee today. Um, the seven day loan program is the flagship capital access program offered by the sba.
▶ 1:51:15As you know, these loans provide small businesses with the access to capital that is necessary for small businesses to thrive. And ultimately, these capital access programs enable lenders to offer more affordable loans with better repayment systems in order to help small business borrowers overcome potential economic pressures and drive employment and growth in our economy. As you know, um, as a as a banker yourself, a small businesses is really the backbone of our economy in this country.
▶ 1:51:44Many small businesses, um, small businesses, export goods overseas, receive for their products that they make here, imports from overseas. And so the tariff policy certainly is wreaking havoc on them. And I have seen that, um, among the many business people with whom I've spoken since taking, uh, since having taken office here in january, my home state is new jersey, and there have been 76, uh, I'm sorry, 2640, 64 approved 70 loans in fy 25, uh,
▶ 1:52:17With a loan size of $411,955. Uh, and as I mentioned, these are lifelines. Uh, and I'll just comment that it's hard to imagine how a 43% cut in workforce and we can see there's differential impacts on this cuts across the country depending on where you are. I'm sorry to hear what's happening in, in, uh, in new hampshire.
▶ 1:52:41Um, but, uh, it's hard to imagine how that flagship program and the other important loan programs that are so important to small business can run, uh, with those kinds of cuts. You've mentioned efficiencies here multiple times. And mindful of my time, could you just describe, um, can you just mentioned, uh, changing this sop?
▶ 1:53:01Um, and of course, we've heard from her experience as a, as a teacher, administrative law and having to deal with um, members in her own community and sba in new hampshire, uh, that you need to hire a lawyer in order to figure out how to comply with those rules. And that's that's always a problem that that does suggest complexity. I, I looked at an sba loan myself with, uh, with a person who worked in banking for a number of months, decided it wasn't something that made sense to do.
▶ 1:53:29And I and I suspect my my own personal situation is not unique. But could you describe, uh, some of those efficiencies that you've brought to the program so that I can understand exactly what you're what the sba is doing over there? >> yeah. Thank you, congressman, for that question.
▶ 1:53:46Certainly, you know, rightsizing and streamlining the program is what we're doing, you know, to bring efficiencies to put under sop 5010 eight, uh, to put the fundamentals to get back away from do what you do so our lenders know what's expected based on the sop, the guardrails that are in place. It's not under do what you do. Nobody knew what to do. >> okay. Just reclaiming my time for a minute because you raise this, do what you do. Point. Um, several times.
▶ 1:54:14And I've just been trying to figure out what it means, but as I understand it from staff, is that when a lender has a long established relationship with a business person, um, that, uh, some of the flexibility that apparently is, uh, common practice across the banking system is to allow that background knowledge, that intimate knowledge with a customer to to allow them to make some decisions which are which one might describe as loosening some of these requirements so that these
▶ 1:54:45Loans can actually get done. That sounds like a positive thing to do. Now, you've mentioned it sounds like a pejorative, but we know that relationships are important, uh, to business. Um, and established relationships will mean that people will understand you've been successful, you've done this, you've done that. You might not meet, you know, the the archetype of a of a, you know, a one, a person, if you will, coming in to get a loan. But because of our relationship, we're going to move forward and get you going. Is that a wrong thing to do?
▶ 1:55:14>> I think certainly when you you're working with your community banker and you know, you know that, you know that that borrower and you know their business. But I think when you nobody knows what do what you do is I don't know what do what I don't I don't know, I mean. >> what is it. It is incredible. Let me just because my time is limited. Um, I know, and we've heard it over and over again about, um, these attacks on, on, on persons of color in programs and advantage, taking advantage of the programs that are available to the country.
▶ 1:55:42New jersey is a very diverse state, and while it has become pejorative now, um, but I would say that the policy which would uh, which would block, uh, all of us in this country, no matter what your race or religion or background is, is not good for small business. It's not good for the prosperity of our country.
▶ 1:56:03And in, uh, the light of these cuts, uh, how does reducing the sba programs like the women's business center score veterans business outreach centers helpful for small business? Um, which impressed me that it can't be. And you can. The terminal allows you to answer. That's fine. If not, I'll just put that on the record and be done. Thank you, Mr. chairman. >> gentleman yields back. I now recognize Mr. weed from the great state of wisconsin for five minutes. >> well, thank you, Mr. chairman. And thank you, Mr.
▶ 1:56:32Kimsey, for testifying with us here today. As a former small business owner, I know that the ability for a small business to access capital can make or break a business, whether it's through their 7 or 504 loan programs or even their micro loan program. The small business administration provides critical capital backing for entrepreneurs at little to no cost to american taxpayers.
▶ 1:56:54Unfortunately, under the biden administration, these important programs and their financial security were put at significant risk due to mismanagement and a complete disregard for the lending standards that had made these programs successful under the previous administration's. Republicans in the trump administration are committed to returning these important sba programs to a fiscally sound position to ensure they are able to continue for decades to come.
▶ 1:57:21I'm pleased to see the work administrator loeffler and her team have already done to reform these important lending programs, and I look forward to working with my colleagues on this committee to refocus the sba back to supporting small businesses. As a former franchisee, I know that many of the unique struggles franchisees owners face when looking to start or expand their small business. Recently, the sba restored their franchise directory. How does the directory help expedite franchisees loan applications?
▶ 1:57:52>> no. Thank you, congressman, for that question. Certainly, the franchise registry was an important, uh, addition that, you know, I got a lot of questions for when I first got here. And by adding that back on, you know, it let's, you know, let's the franchisees know that it's an approved franchise under the sba. And certainly without knowing that, uh, under the prior administration, as a lender and as a franchisee, you didn't know what was eligible and what wasn't eligible.
▶ 1:58:20And, uh, we're very proud that we've reinstated that. And I know the lending community, the franchisees are very happy about that as well. >> well thank you. It's always a good idea to make it, uh, you know, more efficient and easier for our small businesses to, to, to get the capital that they need to, of course, support their local economy. So, so thank you for doing that. And wisconsin's eighth district manufacturing is a key industry, with almost a quarter of the working population in the district.
▶ 1:58:49You know, many of these manufacturers are excited about republicans commitment to reshoring manufacturing. Uh, in our district, how will the newly announced seven manufacturers access to revolving credit, that program? Uh, how will that help with onshoring? >> sure. Thank you for that question. Certainly, the, uh, program provides additional working capital to our manufacturers. And as we all know, small businesses, working capital is critical.
▶ 1:59:18And certainly from the manufacturing perspective, uh, providing this much needed capital as they expand and grow and giving them the flexibility, uh, flexible terms, uh, not only for them, but for our, our lending partners will provide much needed working capital that's needed. And we're excited. Alongside the proposed increase in limits that this will work really well together, uh, providing, you know, not only working capital but long term permanent financing that the sba program does so well.
▶ 1:59:49>> well, thank you, Mr. kimsey, for the great work. And, uh, with that, Mr. chairman, I yield back. >> thank you. >> gentleman yields back. I now recognize miss simon from the great state of california for five minutes. >> thank you sir. Uh. Thank you, chair and ranking member velazquez. And thank you to associate administrator kimsey for testifying today. I was able to listen in to a bit more of your testimony and answers, uh, while in another meeting. And thank you so much. This has been a wonderful conversation.
▶ 2:00:18Uh, according to the sba leaders in california, 38% of small business borrowers in my district are minorities, and nearly 50% are women. The same lender reports unusually high. Excuse me? The same lender reports unusually high demand for sba capital in my district, which is berkeley and oakland, california.
▶ 2:00:43San leandro, piedmont, and for three other cities, nearly 20,000 loan applications in the past decade alone. I am proud to represent an area that reflects such entrepreneurial ambition and embodies the american spirit of amazing innovation, and that spirit was on full display display last month when I hosted a small business owners summit from across my district, and it was extremely successful, and we heard firsthand how
▶ 2:01:15Small business owners in my district want to grow their businesses, want to pay their staff more, and expand to other areas, but so often can't access the capital necessary to do so. And I'm deeply troubled by our administration's attack on programs designed to expand credit access for women owned businesses and minority owned storefronts. And so with that in mind, administrator kimsey, can you talk about the concrete steps, uh, that are being taken?
▶ 2:01:45Uh, the office of capital access, what you all are doing, uh, to expand access and credit and capital to historically underserved small business owners. >> thank you, congresswoman, for that question. And to your small businesses. You know, I had the opportunity last week to be in utah for a minority deposit institution for a grand opening and be there for the ribbon cutting. And it was really good to to work with them. And as they stood up an sba department, they're going to be working with other minority institutions.
▶ 2:02:14So we're very proud to be there, to lean in, to make sure that they know that we're here to help serve the minority communities. And I know they've already submitted a couple of loans. So we're very committed to that. And I look forward to working with them and many other minority deposit institutions and banks to make sure we're providing that capital. Those small business owners and storefronts. >> Mr. kimsey, I'm so excited to hear that. And, um, well, first of all, thank you for being a very friendly voice to small business owners around the country. Uh, what?
▶ 2:02:42I have been so excited about being on this committee. Um, there are so many communities around the country. Well, we're about six years post covid. Um, there are so many main streets that have yet to flourish. Um, that's changing. And we hope that the sba continues again in this commitment. Can you tell me a little bit more, uh, about, uh, what you all are standing up for, for these business? What kind of businesses, what kind of opportunities are there for minority, small owned businesses? >> thank you for that question.
▶ 2:03:12Certainly from, you know, the minority communities, all the communities. You know, we want to make sure that the access to capital is readily available. And that's one of the things, you know, uh, as I've traveled around and listened to small businesses and lenders, community, you know, what do we need to do? What are we doing? And certainly making sure that that capital is readily available.
▶ 2:03:32I think working on the, uh, loan program, particularly the sop 58, again, that put the guardrails back in place so our lenders know what's expected, not do what you do. And that's certainly a tool, uh, that's in place. And again, our lending community couldn't be more excited as to what we're doing under the leadership. I mean, I hear it weekly and there's certainly, uh, that's what's been enlightening for me is the re-engagement of our lending community to deploy more capital.
▶ 2:04:02>> you know, it was I appreciate you saying that at our summit, we brought together a number of community banks, um, that were extremely excited to be in spaces. And I would encourage the sba and particularly the regional leaders, your regional leaders, to work with other members, regardless of their on this committee or not, to bring small business owners together with your regional leaders, community banks, uh, and, you know, state resources to ensure that what's on your website is getting out there.
▶ 2:04:28I will say, in closing, one of the things that has been very difficult for our small business owners who have been calling our office, um, they're having a very difficult time reaching, uh, sba with limited staff and oftentimes pretty prohibitive wait times in terms of getting emails returned. We really, really need sba to figure out.
▶ 2:04:53With all of the layoffs and the firings that have happened, how to increase contact and representation within our districts, what is done is done. I realize that, um, that said, the infrastructure of the sba on the local level is so extremely important to small business owners, so we'd love to continue to work with you. Thank you for being here. >> thank you. >> gentlelady yields back. Now, I now recognize Mr. bresnahan from the great state of pennsylvania for five minutes. >> thank you, chairman and.
▶ 2:05:23>> the ranking member for holding today's hearing. >> uh, I appreciate hearing from your testimony this administration's commitment to responsible management of various sba lending programs. Uh, during the prior administration, perhaps some of the decisions, uh, were different than what we are currently working on. But one decision I want to focus on is the 2023 sba rule that lifted the agency's 40 year moratorium on licensing new small business lending companies. Splc's.
▶ 2:05:51It was clear then, and remains clear now, that the decision was made without fully considering the sba's ability to oversee an unlimited amount, uh, and number of new entrants into the program. That's why I introduced the act, uh, to restore integrity to the sba's flagship seven, a loan program, by capping the number of splc's at the current level of 16. This is consistent with the actions taken by president trump at the beginning of his term, and should be codified by congress.
▶ 2:06:21Well, I think about the success of the sba lending programs. I give much of the credit to the local community, banks and credit unions such as wayne bank, dean bank, fidelity bank, honesdale national bank, uh, inside of my district. These institutions are regulated by the federal reserve, not the sba. Uh, and they have a deep knowledge of local economies and opportunities that makes them reliable and effective partners for the sba.
▶ 2:06:42The act passed the house earlier this year, and I look forward to working with my colleagues in the senate to get it signed into law so the future administrations cannot undermine the program's integrity. With that, I'll turn to my first question. Uh, can you speak more in depth on why the prior administration's decision to lift the cap on splc's was perhaps not the best course of action? >> now, congressman, thank you for that question.
▶ 2:07:09Certainly, uh, expanding that that hadn't been done, and I don't know how many years, it was quite surprising that they would just open it up and expand it to over, uh, I believe over 150 now. And certainly, as we've seen from the data, um, you know, first of all, uh, the really not performing, they're not, uh, the loan volume is not there. Um, and only a handful are actually deploying capital. Uh, that's what's happening.
▶ 2:07:36And it's unfortunate that, uh, you know, the guardrails weren't put in place to protect those, as you just mentioned, about being regulated by the federal, you know, whichever regulatory agency they are. And that's, again, another example of, uh, you know, mismanagement. >> so small manufacturing continues to play a growing role in my district and around the country.
▶ 2:07:59There's nearly 600,000 small manufacturers in the united states, uh, 99% of all manufacturing enterprises, uh, and small manufacturing employs more than 5 million people and generate more than 1 trillion in gross revenue. Uh, the average small manufacturer generates 5.4 million in annual revenue.
▶ 2:08:20Could you tell us about what the administration has done to support these businesses and jobs, and what challenges are you hearing from the sector of the economy specifically? >> well, thank you for that question. Certainly, as you said, uh, those large number of manufacturers, 69% of those employ less than 20 people. Uh, so they are truly small businesses. And I've had the opportunity to meet with many of those and see the great work they're doing.
▶ 2:08:48And certainly under the leadership of president trump and administrator loeffler, uh, to continue to to provide that necessary capital that's so intensive to these small manufacturers is vitally important. And that's what we're doing. We're we're, you know, very excited about the opportunity of seeing the loan limit increase from 5 to $10 million. And we think it's very much needed. And we're here to support those small manufacturers as we bring onshoring back to the united states, creating economic development.
▶ 2:09:17And a lot of these are in our rural communities that desperately need those small those jobs. >> so defaults under the seven a program increased significantly under the prior administration from 2022 to 2024, the rate of early loan defaults tripled, uh, exceeding over 1% in 2024. Could you talk about the impact that this has had on the long term health of the sba, and why it's important to reverse this trend?
▶ 2:09:47>> yeah, thank you for that question. You know, that was the big thing when I got here that I was, you know, quite shocked at, you know, how poor the portfolio was and the negative cash flow that we've seen for the first time in over a decade, uh, you know, it's estimated that, you know, the last six quarters of the biden administration, we saw over $600 million in negative cash flow and the projected negative cash flow, uh, during those four year cohort years is 2.2 billion. So the numbers sort of speak for themselves. >> uh, no further questions.
▶ 2:10:16I yield my time. >> chairman yields back. I now recognize miss skelton from the great state of michigan for five minutes. >> thank you so much, Mr. chair. Mr. ranking member, for holding this incredibly, incredibly important hearing. Uh, administrator kimsey, the community advantage program has been very effective in supporting startups that cannot access traditional bank credit.
▶ 2:10:41Um, one of these lenders in my state, northern initiatives, has not only facilitated a total of 2.3 million in loans to small businesses just in my district, but they serve entrepreneurs in every corner of michigan. More than 75% of northern initiatives ka loans have gone to businesses in underserved markets, with 64% of this lending going to rural businesses. And that's the impact of just one of these lenders.
▶ 2:11:09This program is so critical to the success of our entrepreneurs. What steps is the sba taking to support and strengthen the active community advantage lenders who make this possible? >> no. Thank you for that question. Certainly, uh, you know, the committee advantage is important. I do know they serve an important role in the communities. I think their average loan size is about $16,000. So we know the the role they they place and we're certainly, uh, you know, uh, I'm here to support them.
▶ 2:11:39I think what we've found is that, uh, a large number of them are not, uh, deploying a lot of capital. I think there are, to your point, there are a handful of them that are deploying a lot of capital, and I've met with some of those, and we are committed to work with them and making sure that capital to those small business owners that can't get capital through the regular seven day program are available. >> do you have any specific steps that you're you're taking to make sure that that happens?
▶ 2:12:07>> you know, just like our other lending partners, we're working with them to make sure that they're they're supported and that's what we're doing. >> okay. Um, we've been discussing here this morning the seven, a loan program. Uh, they have seen a sharp decrease in originations over the last several months.
▶ 2:12:25Recent reports have cited a new citizenship requirement made by this administration as a contributing factor, uh, to to this issue in my home state of michigan, uh, one of our largest providers of sba loans, uh, expressed real concern, um, as several of their small business applicants were unable to secure sba financing as a result of this change. To be clear, we're talking about work authorized legal immigrants who may not necessarily meet the citizenship threshold.
▶ 2:12:53Very, very clear distinction we need to make, um, within mere months of this rulemaking effect, this organization was unable to close a loan that had already been approved, and they had to turn away two prospective loans as well. Think about the impact on the economy. It's devastating. Um, was a decrease in lending a concern the sba had anticipated when developing this proposal? >> again, thank you for that question.
▶ 2:13:19Uh, I think certainly, again, verifying the citizenship is is very important, you know, that we have, uh, clarity as to who owns these small businesses. And that's that's an important to make sure that we know exactly who owns these small businesses. >> well, sure. No, I don't think anybody's necessarily questioning that. But my my question was, was a decrease in lending a concern?
▶ 2:13:38Did you anticipate that concern that, you know, this this money wouldn't be going out into the community to, you know, help these lawful individuals to be able to to access their loans? I mean, it's literally preventing eligible business owners from accessing the loans that they need. >> well, that's I'm not not aware of that. I would disagree with those statistics. >> okay. I mean, we can submit them for the record.
▶ 2:14:04Um, you know, do you have the criteria that the sba is using to determine who may or may not be eligible? >> certainly we do. It's in the sop 58, okay. >> based on immigration status. >> it yes it's there. >> okay. Uh, and and that that is the criteria that you're following. >> we certainly are. >> okay. Um, I see that my time is coming to a close here.
▶ 2:14:33So I'm going to move on to my final question. One of the strengths of the sba loan program is the variety of offerings, uh, to meet different small business needs. Uh, for example, the 504 loan program geared towards economic development. Um, I'm going to fast forward here. Can you explain the sba's decision to impose, uh, this new, uh, requirement on the 504 program? And are you concerned, um, it could reduce access to this program?
▶ 2:15:01Um, the recent changes being, uh, to the standard operating procedure, uh, extended the eligibility test known as the credit elsewhere test. >> certainly, the 504 program is a vital program. It's it's certainly, you know, cheap cost of capital. And it's certainly what we're modernizing and working to improve. And I think we're doing that. So I don't know that we're uh, that it's having an impact on on the 504 program. >> okay.
▶ 2:15:28If you have data on that, uh, that you could present to us, that would that would be incredibly helpful. So we can make sure it's not having an impact. >> certainly. Thank you. >> okay. Thank you. Thank you for your time. Thank you sir. >> thank you. Gentlelady yields back I now recognize Mr. downing from the great state of montana for five minutes. >> well. >> thank you, Mr. chair. And thank you, Mr. kimsey, for being here today. Uh, small businesses in my home district of central and eastern montana are vital economic drivers for our rural communities.
▶ 2:15:55However, as you're aware, rural entrepreneurs face unique challenges, unique struggles with accessing capital. Uh, with population centers being far apart and isolated from economic hubs, access to capital can be difficult for local small businesses. So as leader of sba's office of capital access, you're in a unique position to steward federal decision making to the benefit of rural entrepreneurs.
▶ 2:16:21So first, how can sba backed loan programs like seven day loans or 504 loans or micro loans each provide unique advantages for connecting rural small businesses with capital? >> yeah. Thank you, congressman, for that question. Certainly someone that grew up in rural america and certainly know the challenges of access to capital, rural america. Uh, you know, just an example.
▶ 2:16:42Just like my dad, you know, commercial egg business, you know, he was able to utilize the seven day program and certainly for your rural constituents utilizing the seven day program, uh, to provide that capital or the 504 for fixed assets certainly provides a lifeline that they may not be available in a traditional form or a commercial loan, and it provides that vital capital with that guarantee to that local community bank. >> right. Thank you.
▶ 2:17:07So what what what tools does sba offer to better connect rural small business owners with financial institutions that offer sba backed loans? >> yes. Thank you for that question. Certainly. Um, you know, our lender match is one of the tools that we can we utilize that connects those small business owners, uh, with with the sba program, but certainly working, you know, with their their local community banks there in the area is a great resource.
▶ 2:17:32And that's one of the number one priorities of of this administration. And administrator loeffler is making sure we're working with our community banks to outreach and meet those small business owners that need the capital outstanding. >> so what is sba doing under your leadership to better promote capital access for rural small business? >> yeah, no. Thank you for that question.
▶ 2:17:56You know, uh, we're we're diligently working across all of america and with our lending partners, whether it be the small community banks or larger banks, to make sure we're promoting the program, uh, making sure it's streamlined, as we've already shown here, making sure the programs are streamlined, streamlined, right sized, implementing modernization of through it to make sure the programs are are more streamlined. But more specifically, you know, from a lender experience, but from a borrower experience.
▶ 2:18:25That's what we're that's what we're doing. >> what do you see as their biggest barriers? >> uh, you know, as far as barriers, I think just connecting that small business owner with that, that bank that's robust and sba lending, uh, that's very, very important that they understand the robustness of the program and how that works. And those small business owners know that the sba provides that long term permanent financing that's available out there to them. >> thanks.
▶ 2:18:54Shifting gears a little bit in your testimony, you've outlined multiple biden administration policies that resulted in the degradation of the integrity of the sba lending programs. Lackluster vetting of borrowers and lenders resulted in unprecedented, unprecedented negative cash flow for these programs. So specifically, what, in your view, was the most destructive lending policy of the biden era? Sba? >> yeah, thank you for that question.
▶ 2:19:19Certainly, the do what you do was the most disastrous because nobody knew what do what you do was so just drove volume through the system and it created, uh, again, as I've stated multiple times, the negative cash flow that we saw through the program the first time in, in over a decade that took the program, uh, to a very low point. >> so so what what's the sba doing under your leadership to reverse the previous administration's policies? >> well, thank you for that question. Certainly.
▶ 2:19:44You know, within the first 100 days, we we eliminated, uh, do what you do and implemented the sop 5010 a we turned back on the feast, generating fee revenue and put in place many other policies that will that got rid of those disasters programs. >> thank you sir. So, uh, how how should congress act to prevent policy failures similar to those the last administration? >> no, we think, uh, thank you in this committee for the work you're doing to make sure that the programs are sustainable long term.
▶ 2:20:13And, uh, I appreciate your support on that. >> outstanding. Well, thank you again so much for your time and your testimony. And on that, Mr. chair, I yield. >> thank you. >> gentleman. Yields back. And I'd like to thank our witnesses for your testimony for appearing before us today. Uh, without objection, members have five legislative days to submit additional materials and written questions for the witnesses to the chair, which will be forwarded to the witness. I ask the witness to please respond. Respond promptly when that happens.
▶ 2:20:43So if there's no further business without objection, this committee is adjourned. >> thank you.