[House Hearing, 107 Congress] [From the U.S. Government Publishing Office] NAVIGATING THE SMALL BUSINESS ENVIRONMENT: CHALLENGES AND OPPORTUNITIES ======================================================================= HEARING Before the COMMITTEE ON SMALL BUSINESS HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS SECOND SESSION WASHINGTON, DC __________ APRIL 2, 2002 __________ Serial No. 107-50 __________ Printed for the use of the Committee on Small Business U.S. GOVERNMENT PRINTING OFFICE 79-720 WASHINGTON : 2002 ________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON SMALL BUSINESS DONALD MANZULLO, Illinois, Chairman LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD, ROSCOE G. BARTLETT, Maryland California FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois SUE W. KELLY, New York BILL PASCRELL, Jr., New Jersey STEVE CHABOT, Ohio DONNA M. CHRISTENSEN, Virgin PATRICK J. TOOMEY, Pennsylvania Islands JIM DeMINT, South Carolina ROBERT A. BRADY, Pennsylvania JOHN R. THUNE, South Dakota TOM UDALL, New Mexico MICHAEL PENCE, Indiana STEPHANIE TUBBS JONES, Ohio MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas DARRELL E. ISSA, California DAVID D. PHELPS, Illinois SAM GRAVES, Missouri GRACE F. NAPOLITANO, California EDWARD L. SCHROCK, Virginia BRIAN BAIRD, Washington FELIX J. GRUCCI, Jr., New York MARK UDALL, Colorado TODD W. AKIN, Missouri JAMES R. LANGEVIN, Rhode Island SHELLEY MOORE CAPITO, West Virginia MIKE ROSS, Arkansas BILL SHUSTER, Pennsylvania BRAD CARSON, Oklahoma ANIBAL ACEVEDO-VILA, Puerto Rico Doug Thomas, Staff Director Phil Eskeland, Deputy Staff Director Michael Day, Minority Staff Director C O N T E N T S __________ Page Hearing held on April 2, 2002.................................... 1 Witnesses Alvarado, Alberto, District Director, U.S. Small Business Administration................................................. 5 Anderson, Colleen, Area Vice President, Wells Fargo Bank......... 7 Peterson, Regina Grant, Long Beach Area Certified Development Corporation.................................................... 10 Tambakis, Paul, Southern California Hub Director, U.S. Commercial Service........................................................ 12 Duran, Isabel, Director, Capital Partners Program Management..... 15 Venable, Phyllis Moore, Business Development Officer, City of Long Beach Representing the City and Small Business Council, Chamber of Commerce............................................ 27 Unangst, Pat, Workforce Investment Network....................... 29 Borden, Phil, Women's Enterprise Development Corporation......... 32 Brown, Rolina, Regional Director, Small Business Development Center......................................................... 34 Appendix Opening statements: Issa, Hon. Darrell........................................... 40 Millender-McDonald, Hon. Juanita............................. 42 Prepared statements: Alvarado, Alberto............................................ 52 Anderson, Colleen............................................ 61 Peterson, Regina Grant....................................... 67 Tambakis, Paul............................................... 70 Duran, Isabel................................................ 78 Venable, Phyllis Moore....................................... 81 Unangst, Pat................................................. 83 Borden, Phil................................................. 89 Brown, Rolina................................................ 98 NAVIGATING THE SMALL BUSINESS ENVIRONMENT: CHALLENGES AND OPPORTUNITIES ---------- TUESDAY, APRIL 2, 2002 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 10:00 a.m., in the Carson Community Center, Hall B, 3 Civic Drive, Carson, California, Hon. Darrell E. Issa [chairman designate of the committee] presiding. Mr. Issa. Okay. If I could ask everyone to please take their seats. I want to thank everyone for coming here today. And although this is an official hearing, because we are not in Washington and in the interest of trying to have the freest flow of communications, we will be a little less formal than we would be in Washington. We will ask that the opening statements for all of us be limited to 5 minutes if at all possible. If you run a little over, we are understanding. And one formality we have to observe is, that without objections, all testimony will be placed into the record. All written testimony will be placed in the record. So if you do not either exactly follow your written testimony or if you are cut short, you will still have your entire statement as submitted. And you have 5 business days after this hearing if you would like to revise, extend. Perhaps questions that come out during the hearing you may want to add to. So you can supplement thoroughly in writing. So you do not have to feel like you have to get everything in now, because many staff members will pour over for weeks ahead anything that you supply in writing. I think it is worth noting that small business represents the backbone of our economy, that over 99 percent of all business is small business, and that small business employs more than 52 percent of the workforce. This Committee has held during this year hearings in Pennsylvania, New York, New Mexico, New Jersey, South Carolina and now here in the Los Angeles area. It is our intention here today to concentrate on the impact of small business on our economy, but more importantly, focus on areas such as women-owned businesses, minority opportunities and some of the areas in which the Small Business Administration can positively impact that. We have representatives here today from the field offices, and I will not recognize all of them, but suffice is to say that there is a great deal of interest by the Administration and by the Small Business Administration in this hearing and what you will all have to say here today. I want to thank you again for taking your time out of your day, both the witnesses and a sell-out crowd in the audience. Thank you for being here today. I would like to talk in a positive way also about Representative Millender-McDonald. We never call each other by our last names except in these kinds of events. Because her staff really did the hard work to get this together to convince the Chairman to allow for this hearing today and to prepare and meet with the witnesses. So with that, I would like to yield to the Ranking Member for her opening statement. [Mr. Issa's statement may be found in appendix.] Ms. Millender-McDonald. Thank you so much. And I would like to thank you and welcome you to the 37th Congressional District, Congressman Issa. And I will call you Darrell in just a short time. He and I are very dear friends, and I can say one thing about this gentleman to my right--to my right, yes. Mr. Issa. We can switch places if you want. Ms. Millender-McDonald. I had an amendment on a bill that I wanted to get out to raise the appropriation for women business centers. And, of course, the Chairman was a little tough on our putting any amendments on a bill. It was Darrell who spoke so firmly that we needed that to the degree that it did pass out of Committee without any resentment or anything else after the Chairman saw that Darrell, who is Republican, said we need this. And so this type of gentleman just represent one of many on the Small Business Committee. So we welcome you, Darrell. I would like to also welcome the staff from Washington, the counsel and others, the Democratic staff Michael Day and the subscriber who, as the Congressman has told you, this is an official hearing and now we are in Los Angeles whereas we have gone over many states. I would like to thank my staff coming in from Washington, my legislative director, as well as many other staff members who are outside who came in to make sure that this would happen. And thanks to all of you for being here today as well. I would like to make note of one elected official in the city of Carson who has come in for a short time, and that's our City Clerk Helen Helanoe. Is Helen still here? There she is in the back. The best City Clerk in the nation, Helen Helanoe. And I would like to thank the Chairman of our full Committee, Representative Don Manzullo and the ranking member representative Nydia Velazquez for their support of my request for their field hearing. I welcome all of the witnesses today and, of course you in the audience for this field hearing and hope that the information sharing will lead to a greater opportunity for success in your future endeavors. In the aftermath of the terrorist attacks of September the 11th there is an ever greater need for the services provided by federal agencies and lenders for small businesses. Traditionally, small businesses have been the engine that drives our economy, but they have been devastated by the economic fallout from the combination of the attacks of September the 11th and the resulting downturn in the economy. In response to the current economic realities, the Small Business Committee offered legislation HR 3230 that will provide support to small businesses. This bill authorizes the SBA to make disaster loans to small businesses that have experienced economic injury from September the 11th. HR 3230 also provides grants to small businesses to enable them to bounce back. It also provides a provision I authored that I spoke to you about that this gentleman was just so generous and sensitive to my requests for 2.5 million in the appropriation for women's business centers. Now this bill, hopefully, should be coming to the Floor soon. Today's hearing is an excellent opportunity to hear testimony from small business experts and to have them share some of their experiences and some of their challenges. We will gain perspective from the SBA and the Department of Commerce as to what they are doing to support small business, many of which are female and minority owned. In addition, we are fortunate to have lenders who can speak on what is necessary to secure funding for your businesses and other pertinent information. Our second panel will feature individuals who can provide unique perspectives about the types of technical assistance provided to businesses. I have heard countless testimony about how critical it is for small businesses to be able to acquire the necessary technical support and management assistance that will assist them in the overcoming of hurdles for developing business plans, performing inventory analysis, projecting growth or even conceptualizing starting a business. As we address today's theme I wish to highlight some of the Small Business Committee successes which members of the Committee fought to improve in the 2003 budget. We were able to secure $253 million increase in the budget proposal which will support loans, entrepreneurial development and technical assistance. We were also successful in cutting the cost of the 7(a) loan programs so that it is more affordable. However, there are still battles that need to be resolved. Minority and low income communities continue to suffer from the priorities outlined in the budget. Although this budget represents movement forward, there is much room for improvement. Two glaring problems remain. First, this budget fails to provide any solution to the growing problem of a subsidiary rate while also falling short in funding the SBA's flagship 7(a) general business loan program. Second, low income communities and minorities have been disadvantaged relative to critical programs that have been drastically under funded or simply eliminated. The programs for investment in micro-entrepreneurs, which is an important technical assistance program that helps small businesses before they receive an SBA loan, once again, has not been funded. Business Link, which creates cooperative agreements between small and large business were zeroed out. Minority entrepreneurs have been cut out from assessing larger market places for their products. New markets which would provide millions in venture capital to growing businesses in low income communities has not received funding for the FY 2003, as of yet. The One Stop Capital Shop initiative which began in 1994 to support the President's Economic Empowerment Zone and Enterprise Community initiative, a central initiative in the effort to revitalize targeted under served communities, has not received any funding. Clearly there are many hurdles that make it difficult for small businesses to prosper; however the hallmark of any good business person is being tenacious and resourceful. Today's hearing is intended to provide small businesses and aspiring business owners with a sense of what types of programs and resources are available to them so that they can grow their businesses and fuel America's economy. I wish to thank this distinguished panel and look forward to the other panel and your testimony. And, Mr. Chairman, thank you so much for this statement. [Ms. Millender-McDonald's statement may be found in appendix.] Mr. Issa. Thank you, Juanita. I am going to break the rule I made, because the advantage of being sort-of the acting chair here, and introduce an old friend, a colleague of Juanita's and my former assemblyman, Bruce Thompson. If you would stand up for a moment. If I am correct, Bruce is also our first panelist's boss, and is the President's designee and appointee here in California. So, it just sort of shows the level to which the Administration considers these hearings. And to be honest, a lot of what we hope to discover here today of importance. And with that, I would like to introduce--and I will introduce you all very quickly and then we will go through with each of your statements and then we will go through with questions, if that is all right with everyone. Sort of minimize the back and forth where everyone says ``When am I going to get my turn.'' But Albert Alvarado is the District Director for the Small Business Administration. And again if you can indulge, normally in Washington we would tell you a great deal about his many years, the many times he was the acting head between political appointees and so on. We will dispense with all that here today so we can get right to testify. Then Ms. Colleen Anderson, who's the Area Vice President of Wells Fargo Bank, my bank for my entire business career here in California. Full disclosure is always required. Ms. Regina Grant-Peterson is a Long Beach Area Certified Development Corporation representative. Mr. Paul Tambakis, that is a great Greek name. I will work on it. Southern California--let me put my glasses on and I will be a little bit less---- Ms. Millender-McDonald. That is right. Mr. Issa [continuing]. Hub Director, the U.S. Commercial Service. And last on the first panel, Ms. Isabel Duran, Director Capital Partners Program Management. And I do not know more about that, but I will look forward to learning more. And with that, Mr. Alvarado, if you would begin. STATEMENT OF ALBERTO G. ALVARADO, DISTRICT DIRECTOR FOR THE SMALL BUSINESS ADMINISTRATION Mr. Alvarado. Mr. Congressman, just as an aside, let me say that not only is Mr. Thompson my boss, but he is the best boss I have ever had. He said to me, ``Alberto, I have heard you say that before.'' I said, ``But I really mean it this time.'' Mr. Issa. Thank you. Especially today. Ms. Millender-McDonald. If I might just interject something. He and I served in the state assembly together. And while he has a big R behind his name, he is one of the finest that I served with. So it is great to see Bruce back here and in that capacity. Mr. Issa. Absolutely. Ms. Millender-McDonald. Now, I will bug him to death. Mr. Alvarado. Thank you very much Chairman Issa and Congresswoman Millender-McDonald. I am Alberto Alvarado, District Director of SBA's Los Angeles office. It is a pleasure for a kid from the barrio of East LA to have the honor to testify before you. I am proud to report that SBA staff has been recognized on many occasions for thinking outside the box, either as the ``Outstanding Capital Access Division,'' or just last week, for example, as the recipient of the President's award from the Greater Los Angeles African-American Chamber of Commerce. We have even been honored with a White House Presidential Rank Award. While my comments today reflect considerable activity in the areas of access to capital technical assistance and procurement, Administrator Barreto and I understand much remains to be done in reaching out to our emerging markets, engaging our banks to increase lending, utilizing new technologies and in refining our products. Our LA office is SBA's number one lending office. During the past four years we have provided $2.8 billion, that is billion with a B, to 9600 businesses. We also led the country in lending to both minority entrepreneurs with 1.4 billion to 5100 businesses, 569 million to 2200 women entrepreneurs. In a similar four year period, Congresswoman, we provided 170 million to 479 businesses in your district. This has been accomplished through a proactive community lending and outreach campaign where we take bankers on bus tours to see the money making opportunities that await them and where we meet with Asian-American bank presidents to reiterate the importance of lending to all communities. In Watts, for example, we held a ``Hit-the-Streets'' event where we mobilized 50 financial service professionals going door-to-door to visit businesses. These ``Hit-the-Streets'' events are aimed at changing the federal government's image to one where residents come to believe that government can make a difference. Among our area capital access success stories are Carson's Southland Bagel Company, a past Small Business Person of the Year; Angela Walton owner of Melador Technologies, who just received a multi-million dollar contract from Northrup; and Spectrum Plating, a Torrance start-up, which now has 18 employees and a 20,000 square foot shop. Our vast technical assistance network involves multiple partnerships with local organizations and chambers of commerce, such as Torrance, Lynwood and Long Beach. Our Women's Business Center also in Long Beach provides business counseling in multiple languages. One of our technical assistance clients, Victoria Lowe, has become the largest women owned business in Los Angeles County, a sterling accomplishment for this community-minded African- American woman. Our high tech business information center at MidWilshire has been SBA's number one ranked center serving 5500 largely minority clients per year. Our small business development center program assists entrepreneurs in preparing themselves to approach lending institutions. Our pre-qualification loan program has become an agency model in packaging 399 loans for $42.4 million. We have assisted 7 local organizations including Vermont Slauson Economic Development Corporation in helping micro enterprises in low income communities. In the area of procurement whether it is through our 13 HUBZone workshops attended by 1,000 area entrepreneurs, or through our ``Small Business Showcases'' before major prime contractors such as Boeing, TRW, Raytheon and Northrup Grumman, we inform our businesses on how to access federal buyers and in turn those buyers about the expertise of our small businesses. Our High-Tech Procurement Conference co-sponsored with NASA's Jet Propulsion Lab featured a remarkable 708 firms and 261 procuring activities. During the past year our district's 8(a) firms received 459 million in contract awards. Several area firms: Gene Hale's G&C Equipment in Gardena, Willie Thomas' Thomas Land Clearing in Long Beach and Mary Ann Mitchell's CCOPS have been among our most successful. We are proud that in the 37th Congressional District federal government contracts worth 30.4 million, 282 contracts, were awarded. Looking back at LA a decade after the 1992 civil unrest SBA's Los Angeles District Office is proud that we have provided 1.4 billion in financing to 3000 businesses in the Enterprise Zone and Enterprise communities. Through our media campaign success stories many involving minority and women entrepreneurs have been featured in the L.A. Sentinel, La Opinion and the Korea Times, as well as on NBC Nightly News, CNN and CBS Radio. Congressman Issa, I do not want you to think that we have not been busy in your district, which is served by our Santa Ana district office. Quite to the contrary, last year we provided 173 of your constituent businesses with 54.3 million in financing. Mr. Chairman, in closing I affirm to you our commitment and that of Administrator Barreto to build an SBA that helps businesses prosper and ultimately contribute to healthy communities. I know, Congresswoman, that you know that I and our staff are dedicated to these tasks. We will work closely with your local staff to ensure that we continue to address the concerns of your business constituency. Finally, we know that many outside this beautiful hall have not been able to enjoy such wonderful surroundings and to benefit fully from the opportunities available in our great country. So it is on their behalf that we dedicate and continue our noble work. Thank you for your attention this morning. [Mr. Alvarado's statement may be found in appendix.] Mr. Issa. Thank you. Ms. Anderson. I apologize. We will have to do a little mike passing here. STATEMENT OF COLLEEN ANDERSON, AREA EXECUTIVE VICE PRESIDENT OF WELLS FARGO BANK Ms. Anderson. Good morning, Chairman Issa and Congresswoman Millender-McDonald. I am delighted to have this opportunity to present to you today the powerful partnership between Wells Fargo and small business owners. My name is Colleen Anderson, and I am an Executive Vice President of Wells Fargo Bank responsible for the company's small business lending group in California and the highest ranking executive in business banking in Southern California. I am here today as the official spokesperson for Wells Fargo Small Business Lending programs. After 26 years of serving the financial needs of Wells Fargo customers, I fully appreciate the business opportunity and economic potential represented by the small business owner. As the chairperson of Mayor Hann's LA Minority Business Opportunity Committee, the past vice chair of the Community Financial Resource Center in South Central LA, and an active participant in Latin Business Association, among many others, I represent a collective force dedicated to serving the needs of small business regardless of ethnic gender or demographic distinctions. Wells Fargo's a $308 billion diversified financial services company headquarters in San Francisco providing banking, insurance, investment, mortgage and consumer finance for more 5,400 stores, the Internet and other distribution channels across North America. With more than 1.5 million small business customers, Wells Fargo is a leading financial service provider to small business owners. In fact, as of 2000 Wells Fargo was the country's largest small business lender among banks for loans under $100,000, and we lent the most dollars to small businesses located in low to moderate income census tracks according to PCI Services, Inc. in Boston. Today Wells Fargo has over $26 billion in small business loan commitments. Wells Fargo made the most loans in California to small businesses in 2000, Wells Fargo made more than 62,000 loans totaling more than $2.4 billion in California in 2000 and lent more than 692 million to 15,000 California businesses in low and moderate income census tracks. In the Los Angeles metro area Wells Fargo is the second largest financial institution in the whole consumer and business market and the number one provider for all financial services to small businesses. We also provide significantly to the California and Los Angeles areas by being number one lender in home equity and home mortgage. Today by some counts there are approximately 30 million small businesses in the U.S. These businesses create more than half of the private workforce and half of the GDP. These businesses are responsible for about 75 percent of new jobs. Small business represents the backbone of our country's current and future economy. In 1989 Wells Fargo became one of the first major banks to form a banking division dedicated exclusively to the financial needs of small business. Studies found that the bulk of small businesses with less than $1 million in revenues and annual credit needs of $100,000 or less were grossly under served. Small businesses have found our programs extremely attractive. Since 1993 many competitors have followed suit with direct lending programs of their own. Loans obtained through direct lending are used to find working capital, payroll, tax payments, cash flow and short term financing requirements of small businesses. To date Wells Fargo has made an unprecedented commitment to supporting the development and success of small businesses. Wells Fargo has become integrated in the small business communities and in particular into the emerging market segments through various outreach initiatives. The Wells Fargo Los Angeles metro president has established a community board comprised of community leaders that meet monthly to focus exclusively on the under served markets. The forum has created partnerships between Wells Fargo and FAME Renaissance, the Valley Economic Development Center, Operation Hope, LA Mayor's Minority Business Opportunity Committee among many others in an effort to provide access to capital and aid for financial literacy to small business owners and consumers in low to moderate income communities. Wells Fargo has also maintained relationships with the Latin Business Association, the United States Hispanic Chamber of Commerce, CHARRO, the National Council of Asian American Business Associations, 100 Black Men, local Asian business associations, NAWBO and other organizations as a means to continue to connect directly with their constituencies. Our involvement with these organizations include the sponsoring of events, presenting financial workshops, partnering on research and supporting the development of their organizations. Wells Fargo partners with some of the organizations such as the U.S. HCC and NAWBO to extend the efforts of the four small business services programs that provide the emerging markets including women, Latino, African-American and Asian American small business segments information on the availability of financial services from Wells Fargo As another demonstration of Wells Fargo commitment to the small business markets emerging segments, we have publicly stated our goal to lend $16 billion to these four market segments 1995 through 2012. Our connection with small business owners is also extended through our branch network. In Southern California we have a total of 418 store locations. We reach our customers via 247 traditional stores, 153 locations in supermarkets and 18 business centers. We have adopted a format in favor of fully staffed outlets in order to provide complete and one-to-one service in our various types of store configurations. In line with our philosophy to out local of the nationals, we have balanced our national outreach to emerging markets specific initiatives. We have tailored the approach to accommodate new entrants into the U.S. Our staff is completely bilingual in our branches in the cross border locations of San Ysidro and Calexico. We are now accepting the Matricula card as a form of identification to open consumer and business accounts in our stores nationwide. Wells Fargo has worked hard to provide financial services to a broad range of customers including small business owners. The Internet has been an effective vehicle to get busy small business customers information and the ability to transact and apply for products that make them successful without having to visit a branch. The Resource Center for Small Business Owners on the wellsfargo.com site provides solutions with products and services as well as helpful information and a dedicated section called ``Business Tips.'' Wells Fargo has been especially involved in providing alternative forms of credit products to small businesses. Beginning in 1994 Wells Fargo bank has been the primary driver of the California Capital Access Program or CALCAP, and we even received recognition from the California State Treasurer's Office for our leading role. CALCAP provides loan insurance in the form of loan loss reserve co-funded by the borrower, the bank and the state. The loss reserve encourages the lender to extend credit to small businesses that otherwise would not qualify under standard loan underwriting. As of the end of 2001 Wells Fargo has made 1,845 loans totaling $301 million in California, 763 loans totaling $138 million in Los Angeles to small business owners through the CALCAP program. Wells Fargo is similarly committed to working with the SBA to provide financing to companies that do not meet standard bank loan underwriting criteria. Unlike most SBA lenders who only offer variable rate loans, Wells Fargo's SBA's programs provide adjustable or fixed rate interest rate financing which many small business owners prefer. As a preferred lender in 2 of the 23 states where we have banking operations, Wells is the leading SBA 7(a) and SBA 504 lender in many of the markets we serve. Our SBA loans have enabled thousands of small and women-owned businesses to expand with an average loan size of $231,500. In 2001 Wells Fargo has funded 4,128 7(a) loans totaling $87 million in California, of which 165 were to women and minority-owned businesses. Likewise, Wells Fargo funded 250 7(a) loans totaling $49.5 million in Southern California with 84 loans to emerging markets totaling $23.5 million. Wells Fargo strives to provide access to capital and financial solutions to small business owners through a variety of approaches. SBA lending is one approach among others that we have used to address the needs of small business owners. A reduction of the funding appropriation for 7(a) loans will limit one of these options, particularly in Southern California which currently represents over 10 percent of the $9.9 billion in SBA 7(a) loans made in the fiscal year ending September 30, 2001. If funding is reduced by 50 percent, the impact in Southern California will probably reduce SBA 7(a) lending by up to $500 million in this area. Small business is big business to our economy and to Wells Fargo. We would like to support an annual review of lending to small business in this type of forum. SBA lending is a critical component of the access to capital that we provide to small business owners. We at Wells Fargo would like to participate with the SBA in making this a less time consuming, more affordable process for lenders and the small business owners so that we can ensure that small business continues to be the engine that drives our economy. And that is not just good banking, that is good business. [Ms. Anderson's statement may be found in appendix.] Mr. Issa. Thank you. Ms. Peterson. STATEMENT OF REGINA GRANT-PETERSON, LONG BEACH AREA CERTIFIED DEVELOPMENT CORPORATION Ms. Peterson. Chairman Issa, Congresswoman Millender- McDonald, my name is Regina Grant-Peterson. I serve as Executive Director for the Long Beach Area Certified Development Corporation, which is---- Ms. Millender-McDonald. Excuse me a minute, Regina. Can you push that closer to you. Can you hear her in the back? No, they cannot. So push it closer to you. Mr. Issa. If anytime you cannot hear any of the testimony or anything that is being said, just sort of wave a hand and we will probably catch on pretty quickly. Thank you. Please continue. Ms. Peterson. I will begin again. Mr. Issa. Yes. Ms. Peterson. Chairman Issa, Congresswoman Millender- McDonald, my name is Regina Grant-Peterson. I serve as Executive Director for the Long Beach Area Certified Development Corporation, which uses the acronym CDC. The CDC is licensed and certified by the United States Small Business Administration as a 504 loan program. The CDC is a direct lender under this program and a loan packager, placement service under all other SBA programs. We also have the designation of intermediary for SBA's prequalification loan program in the Los Angeles and the Santa Ana district offices. SBA basically has three programs. The 7(a) for regular business loan loans, the 504 which is a fix asset financing program for expanding small businesses which is also SBA's only economic development program and then the 8(a) program for contracting opportunities. There is room to grow in all these programs in Los Angeles County, even though the Los Angeles District office is the top performer in 7(a) in the nation. There is room to grow in the 504 loan program and in providing greater access by minorities, women and veteran owned businesses in all three programs. In our efforts with small businesses, which are minority, non-minority, women and veteran owned, there is a variety of funding sources today which did not exist 15 to 20 years ago. However, the greatest amount of financing is still being provided by the Small Business Administration. In addition, we have more technical assistance being made available to area businesses than ever before. But more is needed as long as we do not cross that sometimes fine line and start to run their businesses. In the quest to follow that dream of owning and operating your own business, there is also the reality of becoming a success, a failure or operating a business which is just limping along. In some cases we must say no to certain requests and refer them to other resources for education, more in depth technical assistance and other types of financing. Our biggest challenge is preparing minority women and veteran owned business persons with the financing opportunities which are available. Many persons are not aware of the types of financing available and the requirements. Some persons need to understand how owning collateral can be beneficial when applying for a business loan. Some persons need credit repair and other enhancements to make their loans requests more viable to the many lenders who desire to provide more financing to qualified businesses. As businesses grow and need different types of financing, they need to work with a business like ours which can continue to grow with them. Many of our borrowers have already received their second and third loans. However, very few persons know that they can qualify for more than one SBA loan. Another challenge which we have is to make our services known to interested business persons and to walk them through the processes. In addition, we are also seeking an expansion of our SBA territory so that we can provide services to businesses on the same level playing field as our other partners who have county wide territory. The Long Beach area CDC is probably the only partial county CDC in the state of California. We only have a third of the county for 504 loans, but no area restriction on all other SBA programs. Yet we have not been permitted to expand county wide because of a perception in Washington, D.C. that Los Angeles county is well served. When we no longer have a territory restriction of assisting a qualified Los Angeles county business, we will be able to assist more area businesses and assist SBA in increasing its 504 and 7(a) loan volumes. If you can help us to ensure certain required funding levels for both the 504 and the 7(a) loan programs, and assist us in our expansion requests, we should all see greater assistance and increased loan volume for small, minority and women owned businesses in the Los Angeles County area. I thank you for the opportunity of presenting my views today. [Ms. Peterson's statement may be found in appendix.] Mr. Issa. Thank you. And thank you for being the person closest to exactly 5 minutes. Very well done. Please, Paul. STATEMENT OF PAUL TAMBAKIS, HUB DIRECTOR, U.S. COMMERCIAL SERVICE Mr. Tambakis. You mean you are timing us? Okay. Mr. Issa. I am timing you. You are not absolutely held to it. If we could be close, it will leave time for follow-up questions. Mr. Tambakis. I will try to talk fast and hopefully everybody will be able to understand me. Mr. Issa. And the balance of anything you leave off will be entered into the record. Mr. Tambakis. Okay. Ms. Millender-McDonald. And a hand is up back there indicating that they cannot hear you, so---- Mr. Issa. Paul, if you will pull it just as close as can be. Mr. Tambakis. My name is Paul Tambakis. I am the Hub Director for 8 offices of the U.S. and Foreign Commercial Service here in Southern California. And my territory stretches from as far north as Ventura County to Bakersfield and all the way down to the Mexican border and as far east as Indio. I wanted to thank both of you for the opportunity to give me this opportunity to showcase the important work that the U.S. Commercial Service does for small business of the United States. This is especially important in light of recent events that are having a profoundly negative impact in our economy and are causing great hardships to America's small businesses. WESSCO International is a real live example of difficulties experienced by small business in today's economy. WESSCO is an LA based supplier of amenities and other on-board/in-room service items sold to airlines, hotels and cruise lines. In the wake of the September 11th attacks, WESSCO encountered numerous problems in its business operations including canceled orders, stopped shipments, frozen inventory and delayed payments. WESSCO recently turned to the Commercial Service for assistance in helping them resolve a financial situation involving a large airline customer in Latin America. This real live example emphasizes the importance of the mission of the U.S. Commercial Service, and I hope that my testimony today will show what the U.S. Government, namely the U.S. Commercial Service can do to strengthen and protect our small businesses and in turn the very jobs that our economy depends on. In my testimony to you I hope to accomplish three goals. The first is to emphasize the importance of small businesses in the United States and the amazing benefits to our economy that can be realized by supporting small business exports. Secondly, I want to reintroduce the U.S. Commercial Service to the Committee members and members of the media, and public that have joined us today and give you some insight into exactly what we do to help the small businesses of America. Third, I wanted to focus on what the U.S. Commercial Service is doing for minority owned businesses in America highlighting some of our work in California. The facts speak for themselves about the importance of small businesses in our economy. For instance, 97 percent of U.S. businesses that export are small and medium-sized enterprises. Exports have accounted for 30 percent of U.S. economic growth since 1989. Exports account for 21 percent of U.S. GDP growth in 2000. Export related jobs pay wages that are 13 to 16 percent higher than other jobs. The U.S. Commercial Service is part of the Department of Commerce that is solely focused on export promotion. Our mission is to assist U.S. businesses in the exporting process and to protect the interests of American businesses abroad. This includes a special emphasis on minority owned companies, women owned firms and companies in rural communities. Incidentally, we recently in the last year opened up two one person offices in rent-free space in rural communities including Bakersfield and also co-located on a native American Indian reservation in Indio, California. We have a worldwide network of offices and trade specialists that help small and medium sized U.S. firms realize their export potential. Commercial Service officers are posted in over 150 locations abroad at our embassies and at over 100 U.S. Export Assistance Centers throughout the United States to provide one-on-one counseling for firms. We offer export counseling, market research, matchmaking services, advocacy towards foreign governments on behalf of U.S. business in numerous business creation opportunities with trade missions and trade events both in the United States and abroad. Just a few of the important programs we offer. There is a wide range of services, everything from the Gold Key program where we setup appointments for companies overseas, which you are familiar with, Congressman, to a fairly new program called BuyUSA, which is a new e-commerce service provided for American businesses by the Commercial Service in conjunction with the IBM. This is an international electronic marketplace, a ``one- stop'' export assistance web site that brings U.S. and international companies together to export U.S. products and services. There is really no web site like it in existence. BuyUSA integrates the one-on-one export counseling of the U.S. Commercial Service with the latest in business-to-business technology critical for competing in today's global e-economy. The site offers a small business the ability to find international partners, identify sales leads and make an actual international transaction. And this is really critical for small businesses that have good products and services that can not afford the time or money it takes to travel abroad. We also have very strong partnerships with the Small Business Administration and the Export Import Bank. And this allows the Commercial Service to assist small businesses in finding the working capital and finance programs they need to begin exporting for the first time or to expand their overseas presence. Our work with Visual Matrix of Burbank, California is a perfect example of this collaboration between agencies. And this is a success story that recently crossed my desk late on Friday, so it is not in your written testimony and I will add it as soon as possible. Visual Matrix is a developer and manufacturer of professional video products that can be found in television broadcast facilities, video production and post production in studios worldwide. Mora Kim in our West Los Angeles office was first introduced to the client by a referral from our Ex-Im Bank local representative. Mora invited the client to a seminar on the Small Business Administration's export express loan program. As a result of following up with contacts made at the seminar, the client received a significant SBA export express loan close to the maximum allowable amount under the program. The loan proceeds have been utilized for, among other things, export promotion, advertisements in trade journals and exhibiting at overseas trade shows as the National Association of Broadcasters Show in Sidney, Australia. By working with SBA the company also received the combined line of credit covering both preshipment and post-shipment financing. Our client has also worked with Ex-Im Bank and received an Ex-Im export credit insurance policy which allows them to sell on an open account basis to overseas customers. As a result of participation at all these trade promotion, coordinating counsel agency programs, Visual Matrix in the past months reports significant sales to Australia, China, Germany, France and the Netherlands. I next wanted to briefly touch on the program that we have in place focusing on minority small businesses. It is called our Global Diversity and Women's Initiative. Additionally we have the Rural Export Initiative that focuses on rural community small businesses throughout the United States. The Global Diversity and Women's Initiative is designed to greatly increase the probability of minority and women owned companies achieving export success. Maria Cino, our Assistant Secretary and Director General of the U.S. Commercial Service, continues to lead overseas trade missions abroad for minority and women small businesses with one coming up to Southern Europe in July, and which a strong focus will be placed on recruiting companies from Southern California. Also in my written testimony I have provided at least ten examples of minority business enterprises we have assisted in the last year to export successfully. Also, to increase our outreach efforts to minority enterprises, the U.S. Commercial Service is in the process of developing promotional marketing material on our services that will be translated into Spanish and will add other foreign languages by next fiscal year. In conclusion, we have made some huge inroads into assisting the minority business community find overseas business opportunities all across America. The key is for all of us to continue to work together to educate companies about the support and assistance available to small and medium size enterprises. We continue to work hard to make the Commercial Service part of our elected officials resource network so that when international trade questions arise, you will refer your constituents to us. A good example of some of the most recent work we have done with minority businesses was the program that we put on yesterday in Los Angeles on the African Development Bank. Over 100 companies attended, 90 percent of those were minority businesses from the Los Angeles area with our keynote speaker being Congressman Ed Royce. The recently instituted Export Achievement Certificate will help to recognize first time minority exporters and encourage other companies to pursue international business opportunities. We are all working hard to spread the word about the great work that all of us in the local trade community do day in and day out. Together as partners we will reach out to more American businesses and increase the number of minority businesses exporting profitably. Thank you. [Mr. Tambakis' statement may be found in appendix.] Mr. Issa. Thank you. Ms. Duran. Oh, and if you can share the mike. STATEMENT OF ISABEL DURAN Ms. Duran. Good morning. Can you hear me? Mr. Issa. Yes, we hear you fine. Ms. Duran. Okay. Mr. Issa. Everyone in the back hear okay? Ms. Duran. Thank you, Chairman Issa and Congresswoman Millender-McDonald. Thank you for the opportunity to hear my humble testimony. I am Isabel Duran, and I am the manager of the Capital Partners Loan Program for Community Financial Resource Center. Community Financial Resource Center was incorporated in 1992 by the Los Angeles Community Reinvestment Committee. This is Los Angeles' first public and private partnership between the city, financial institutions and the community. Established as a 501c-3 nonprofit corporation, CFRC opened its doors in March of 1993 with the express purpose of providing financial services and counseling for residents and businesses located in South Central Los Angeles and later expansion to distressed communities throughout Los Angeles county. CFRC is a one stop of service providers. Individuals may choose from the following types of services: Business lending programs; business plan guidance; technical assistance services in English and in Spanish languages; consumer and business development workshops; home ownership preparation and counseling; business automation technology development, computer training; and money management counseling. Our loan programs are in three categories. We have the business expansion loan program from 25,000 to 250,000. It is a flexible lending program for businesses that have sustained operations for a minimum of three full years and are unable to obtain adequate financing from the convention private sector. We have the micro-loan program from 5,000 to 25,000 which provides micro-loans to newly operated businesses with a minimum of 2 years seeking small amounts of capital for leasehold improvements, working capital and fixed assets. Capital Partners loan program, 500 to 5,000. A comprehensive program that offers loads, business training and education, group support and networking opportunities to self employed business owners and entrepreneurs with limited access to working capital. Loans are offered in graduated amounts from 500 to 5,000. Our track record is as follows: Since 1993 we have served over 49,000 residents in the Los Angeles County area; CFRC has invested $3.1 million in businesses located in South Los Angeles; we have leveraged over $4 million from area banks for co-lending loans; the average loan amount is $85,000. CFRC and its banking partners combined have invested more than $6 million in South Los Angeles businesses. Since 1993 CFRC has assisted in creating or expanding approximately 200 small businesses. Over 442 jobs have been created and/or saved through our programs. We are certified California finance lender, certified by the United States Treasury Department as a Community Development Financial Institution, and certified California Community Development Financial Institution. Thank you. [Ms. Duran's statement may be found in appendix.] Mr. Issa. Thank you. Was not ready for that brevity. One announcement I would like to make is we have had some requests for questions from the audience. If you have questions that have come up as a result of testimony or maybe you came with questions, if you would write them down and then would-- hold up your hand again. He has had to miss in the crowd. And Andy whose a little less tall will come by and pick them up and bring them up so that your questions will not fail to be incorporated into any questions we ask. The procedures require that this is not a public gathering in the sense that questions from the audience be asked, but we will incorporate them into our questions if you have any. And while someone may be thinking of some, I just have one quick comment and then I am going to yield to Juanita and let her do most of the heavy lifting on the questions. And that really is for comment from Mr. Tambakis. I am sorry to mess up a wonderful name. I did not receive in my own company an SBA loan, never applied for one. But I did receive consulting from the SBA and I did receive some low cost advertising and opportunities to work on some of the overseas pavilions that 20 years ago were being provided, I think still are, where you set up at some of the trade shows. And in my case that allowed our company to go from $7,000 in start up capital to, with me gone last year, doing about $1.3 million, and at one time more than 50 percent of my sales were export as a result of the U.S. Government's making those opportunities available for me to be known in Australia and other areas that would not otherwise, never have done it. So, I want to thank you for being here today, Paul. And I think that is part of the reason that I sought to be on the Committee on Small Business. And I think it is also one of the reasons that, as Juanita said, it is a very bipartisan committee. It is one of the few committees in the Congress where it is us on the Committee against the ill-informed the rest of the Congress sometimes. So, again, I want to thank the panel for being here and helping us at least produce some additional information for the body of Congress as a whole. And with that, I would yield to the ranking member---- Mr. Tambakis. May I make a quick comment on that? Mr. Issa. Please. Mr. Tambakis. Yes, we still are in the business of helping companies to participate in overseas trade shows and other overseas missions, but we are also seeing recently an influx of businesses coming from overseas to our shows here in the United States and delegations coming from many different countries. Last week, in fact, we hosted a delegation from Vietnam and China in Orange County. So what we are doing, and particular as an assistance to the small businesses, is being able to offer them briefings and appointment setting at local events right here in the United States. Mr. Issa. Excellent. Thank you. Ms. Millender-McDonald. Thank you so much, Mr. Chairman. As you know, in the House when there are congressional hearings like this, the majority has to be in the forefront. And I think Darrell for allowing me to kind of be in the forefront here in my own district and raising questions on issues that are critical to us. Before I say this, there is a critical issue. The restrooms are outside; women to the right, men to the left right outside in the corridor. And I have asked for coffee and tea to be brought in because it is rather cool here, and you might want to do that in between panels. You have also packets that were given to you that would contain mostly all of the testimony which is really the case of our having the field hearings and other pertinent information in those packets. So if you have not gotten your red folder, there is one outside for you. Paul, you have raised a question that is so important to my constituents. Because as e-commerce comes into further awareness, small businesses are very nervous about this concept. Because a lot of them really do not understand the concept. Secondarily, they do not feel that they are equipped to do e-commerce or even exports. With that said, how much of an outreach, and I will be asking all of you this because I have taken notes and I need to ask, with all of this money that is flowing here this panel is the one for access to capital; we need to know how we can reach you? What is your outreach efforts? Where are you? We do not want you just in Orange County, want you just in Ventura County, we want you in LA County and we want you in the South Bay. South Bay is going to be the engine that drives, sorry to say this, sir, but will be the engine that drives the economy in California and bring it up. Mr. Issa. We will follow along. Ms. Millender-McDonald. With the ports after the dredging and all of that. So, Paul, if you can just tell the constituents and the fine business people who have come here, how does one access this information? And what degree should business deem itself viable to go into exporting? And your whole notion on the minority concentration, the Global Diversity and Women's Initiatives, we need to know about that. Where are you? Where can we access you? Where can we find you and how can you come here in this region to give us the information that is critically needed as you recruit Southern California small businesses for international business? Mr. Tambakis. Okay. I think I got most of that. First of all, for clarification, in the two years that I have been in this position before being the Director for Orange County, I have really focused on under served communities. And, hence, the opening of the two additional offices out in the rural community, but as well we have an office in downtown Los Angeles and we also have another office in West Los Angeles. Ms. Millender-McDonald. Could we get an address for the one in downtown Los Angeles? Mr. Tambakis. Yes. It is on Olympic, but I can provide that for you. And also you can go to our basic web site. It is buyUSA.gov. And you can click on offices and get access to all the Southern California offices. It has a map and you can click on the office that you want and it will lead you there. It will lead you to trade specialists who will talk with you one-on-one whether or not the companies comes in the office or we are frequently going out 90 percent of the time meeting at the company's location. Ms. Millender-McDonald. Now, Paul, if a small business does not have, regretfully to say, computer hookups or that type of thing, they are really just starting out but they do find that international trade is something that they want to do, what can they do? Because what you are saying might be a little more advanced in some of the smaller businesses and maybe we need to define what businesses are you looking for in terms of the global trade? Mr. Tambakis. We are as far as the Global Diversity Initiative, we targeted about 135 minority businesses this year to work with under this program. And the basic criteria is a company that has been in business for one year; that has a marketing plan; that whose products are at least 51 percent U.S. manufactured. We also work with service companies as well including the travel and tourism industry to help bring in inbound visitors into the United States. And also the program is ideal for the small minority business because education is a big component of it where we are setting up teleconferences, we are doing a lot of hand holding, we are taking the companies to local domestic trade shows; doing everything to get them to a level of export readiness with our goal of getting them into their first overseas market within 12 months. Ms. Millender-McDonald. Could the teleconferencing be at places like on campus at colleges if, in fact, small businesses do not have the wherewithal for teleconferencing? Because I have done teleconferencing at Cal State Dominguez Hills on other issues. A lot of this, and I am not downplaying any of the small business, but a lot of this stuff is Greek to some people in terms of how do they access the teleconferencing, how do they contact you or you contact them, or just what can be done. Because we recognize that this region will be kicked in with international trade big time and small businesses must play a part in that, but how can they do that? Mr. Tambakis. I think Maria Cino is correct when she says that the Commercial Service is the best kept secret in government, and we are trying to change that. We are trying to work with you to help get the word out. We are asking you to communicate to your constituents through newsletters, through any sort of regular communication that you have with them to tell them about the services that we have to offer. And then any referrals that come from your office, we will definitely follow up with the companies. Also, I just wanted to mention that we have webcasts available by going on to the commercial service web site. And also usatrade.gov is another source for information on trade resources of the U.S. Government. And these are great programs. They work. If companies come to us, we are going to spend time with them, we are going to access their level of export readiness, see if they are viable for the Global Diversity Initiative, and also there is other partner organizations that we work with in the community such as the Center for International Trade Development and the Small Business Development Centers that are very useful in providing education to these companies. And the SCORE Executives, retired executives. Ms. Millender-McDonald. So, Paul, I am going to try to get to all of them. Can you tell me, send information to me so that I can get it out to the people here in the audience and others where and what can, and how can and when can you and I get together so you may know small business folks in trying to reach the level of Global Diversity Initiative that you are talking about? Mr. Tambakis. We would love to sit down with you and workout a strategy for---- Ms. Millender-McDonald. Bring the people together again. Mr. Tambakis. Exactly. Ms. Millender-McDonald. This is just one of many. Mr. Tambakis. Whether it is a program we want to do together; it is very common that we do that with our congressional representatives. Ms. Millender-McDonald. Okay. Fine. Thank you. Isabel, if I can just quickly ask you, you have given about $1 million in loans and leveraged about 4 million. And you have reached about 49,000 residents. However, in talking with some of my small businesses they think $5,000 and $25,000 is just nothing in terms of expanding their businesses or even try to survive. What can you tell them in your micro-loan, although you are a micro-loan program so I guess this is more geared for persons who have home business or what? You know, $5,000 and $25,000 just does not cut the mustard. Ms. Duran. That is a really good question and I am always asked that when I do the orientations about our $500 loan; what can you do? And we try to give them a little bit of hope that you can use $500 to do research on the business you are going to start, you can start creating your marketing materials and look for clients. And as you pay back the $500, you can graduate up to $1,000 and $2,000. Most of them are home based businesses or they partner with other business owners in a coop type of a shop. But as they graduate up to $5,000, we are requiring more documentation, more information, more financial information that they have already been trained when they were at 500, 1,000, 2,000. Ms. Millender-McDonald. You know, I am thinking about Lulu Desserts, because Lulu started in her home. Ms. Duran. Right. Ms. Millender-McDonald. And that is now a million dollar business. We can not shy away from the small numbers that we are talking about, but the whole notion of just looking at 5,000 or 25,000 it has to be kind of geared for then the home based business, more or less? Ms. Duran. Well you could look at the small shoe repair business. You know, they can buy a tiny little office or a little space for $500 a month or $1,000 a month, or they share that space with a beauty salon. Ms. Millender-McDonald. Now anyone who wants to contact you for this type of loan, where can we find you? I know where to find you, but there are a lot of folks who need to know where to find you. Ms. Duran. Right. Right. Our web site is www.cfrc.net, but our telephone number is 323-233-1900. And we have a toll free number. I think it is 866-222-CFRC or 2372. Ms. Millender-McDonald. And you are geared, more or less, for the home based businesses or those who need to have some few improvements? Ms. Duran. I specialize in people who are starting small business or who are wanting to start a small business. Our loan program incorporates a lot of training. So we tell people if you stay with our program for at least a year and a half, you can become bankable. Ms. Millender-McDonald. Okay. For Regina, you spoke about the 7(a), 8(a), 504. I am sure most of the people here understand the differences between those programs. Is there anyone who needs further explanation of those programs out there? I do not think so, because you are small business people. But you spoke about you are unable to expand due to perceptions in Washington. What are those perceptions Ms. Peterson. First of all, we have always had support from our friends at the local SBA office in Glendale. But the problem has always been at the central office level. The bar is constantly being raised or the last standard that was imposed is that as long as the area is making one loan per 100,000 population that the area is well served. But if you take the same standard and look at what is being accomplished up and down the state of California in the northern area and then just south of us in the Santa Ana district office as well as the San Diego district offices, those offices have a much higher 504 loan volume than Los Angeles County does when Los Angeles County's population greatly exceeds all of those areas. Ms. Millender-McDonald. So what can we do then to alleviate this problem that you have? Ms. Peterson. I need to have the persons making the decision at the national level to take another look at Los Angeles County. In my view, Los Angeles County is probably one of the last or greatest under served areas in the nation. The reasons that we had problems in '65 and '92, some of those same problems still exist today. If we were to have another problem, we would undergo the same types of problems that we had before. Ms. Millender-McDonald. So can you then send me a letter outlining all of those concerns so that I can pass them on to Alberto and pass them on to Bruce, and pass them on to folks back in Washington and see what we can do? Ms. Peterson. I would be happy to. Ms. Millender-McDonald. Yes? Mr. Issa. If I could just ask if it also includes, if one per 100,000 is a very low bar, give us your suggestions of where you think the goal should be? Should it be one in 50,000, one in 20,000, one in 10,000? Because I think that also would help us in understanding just how far we are away from where supporting entrepreneurism we should be. Ms. Peterson. Okay. Thank you. Ms. Millender-McDonald. Lastly, few people know you said that they can qualify for such loans. What is your outreach on this? How can you make them further aware of the loans? Now, most people can not do loans because they do not have the money and the wherewithal to pay it back. What they want are grants. And so while you specialize in just loans, no grants---- Ms. Peterson. Yes. SBA specializes in loans, and that is our focus is to be a partner with the SBA. Ms. Millender-McDonald. Well, you know, we have been trying to beat up on the Small Business Chairman and all to make more grants and less loans. And so we need to beat up on them back there, too. Mr. Issa. We will surround him when we get back. Ms. Millender-McDonald. I know that is right. We will now that they know Bruce is here at the helm. Colleen, you mentioned---- Ms. Peterson. Congresswoman, before you go to the next person, may I please interrupt? Ms. Millender-McDonald. Yes. Ms. Peterson. May I have an opportunity to let your constituents know how they may contact us? Ms. Millender-McDonald. Oh, please. Please. I did not ask for that. Yes. Ms. Peterson. We are located in downtown Long Beach at 11 Golden Shore, Suite 630, and that is just a half block south of Ocean Boulevard. They can also phone us at area code 562-983-7450. Our web site address is www.longbeachareacdc.com. Our email address is [email protected]. For business persons, they are welcome to walk in to visit us anytime between 8:00 and 5:00 Monday through Friday. Ms. Millender-McDonald. Okay. Ms. Peterson. If it is more convenient for them to continue operating their businesses, then we will be happy to come and visit them. Ms. Millender-McDonald. Okay. Thank you so much. Colleen, you said something that is very critical and you said it critical ``Less time, more affordable funding for businesses.'' Ms. Anderson. The process, yes. Ms. Millender-McDonald. We need to know what you mean by that and what is done to give us less time, more affordable answers or the wherewithal. And secondly, less paperwork. I think people do not want to get bogged down in a lot of application and paperwork. And we also want to know about your committee that meets monthly to look at how under served communities can be served. Who is on that committee from this area? You spoke about all of those great folks we know in the Los Angeles area. We need to have someone down here looking into our interests. And you have loans of $26 billion in small businesses commitments in what? FY 2002? FY 2003? Ms. Anderson. That is what on the books today. Ms. Millender-McDonald. That is what is on the books today? Ms. Anderson. Be total commitments. Ms. Millender-McDonald. And you have a $16 billion commitment. To whom are you going to commit that, be committed to, whereabouts? Again, your outreach. We do not know about that down here. For some reason we get missed down here. Folks think that we are wealthy do not need it, but we need it down here like every other small business. Help us out. Ms. Anderson. Okay. Hold on then, I am trying to write all this down. Okay. First, the comment on the time and cost of the SBA 7(a). Currently, and this is not to be critical this is just, you know, we are a 150 year old institution so we have learned from our experience. And today when you talk about 7(a) program applying for a loan, it is in their own documentation states that the average time to complete the paperwork is 12 hours, and it is about a 30 page process. Is it not, Alberto? Mr. Alvarado. It is what? Ms. Anderson. Thirty pages? Mr. Alvarado. No, I do not think it is quite that long. Ms. Anderson. I think it is close. And the point is that when you are targeting the really small companies, and a lot of the 7(a) customers or borrowers are start ups or companies that, you know, small companies that do not qualify for other conventional lending, often times these are one or two people shops. And, you know, you are HR, you are marketing, you are sales, you are bookkeeping, you are accounting, you are ops, you are everything. And to be able to invest that much time in the process probably causes a lot of companies or business owners not to apply. I also think some of the guarantee fees for the smaller companies may cause some companies not to be able to apply. And I think the example is a $250,000 loan request, I think the guarantee fees are like $3,750. And our point is not to be critical, because we are very good partners with the SBA---- Ms. Millender-McDonald. Now wait a minute. You say for $250,000 loan you have to a $3,000 assessment fee? Ms. Anderson. I think the guarantee fee is $3,750. Yes. Ms. Millender-McDonald. Heavens to Mergatrode. Ms. Anderson. And, again, I don't want to be critical. These are our partners. But my point is is that we have learned a lot in starting out and doing very conventional underwriting and then streamlining our processes where, for example, under $100,000 ours, I believe, it is still one page document that you can do through the mail, you know, fax, over the Internet and in person. So the comment was to say we would very much like to take our 150 years of experience and partner with the SBA and other lenders to see if we can not, not at any incremental risk to the program, but streamline the process so that the SBA, the private sector lenders and the borrowers and potential borrowers would be more likely to apply and be able to afford. Ms. Millender-McDonald. Do you ever have just an access to capital workshop? Ms. Anderson. Sure. Ms. Millender-McDonald. When can you do one of those in this region? Whenever we ask. Ms. Anderson. Anytime you want me to. Ms. Millender-McDonald. Okay. Fine. So tomorrow--no. Ms. Anderson. We might probably shock you, but we would be here. Mr. Issa. I think the question is, do you have the room all day? Ms. Anderson. That is right, it will take all day to do that. Mr. Issa. No, no. I just thought that immediately following the panel at noon, we would just go right into one of your opportunities right here. We already have everything set up. Ms. Anderson. We would be delighted to do it. Ms. Millender-McDonald. Well, we certainly do need to know, though, rather swiftly and do want to encourage all of you to have conferences right here in this great conference centers and conference centers in Long Beach and other parts of the 37th. People need to see you and people need to see you up close. They see you too far away and you do not seem to be a tangible item. So we have got to make sure that happens. Quickly to Alberto. Alberto, now you know you and I have been friends through the last Administration and even before. Again, your outreach, you have this money flowing in both the Congressman's district and my district, a combination of about $39.5 million. Who knows about it? What kind of out reach have you given here so that my people will know about it, the people of the 37th? Mr. Alvarado. First, let me introduce to you my staff---- Ms. Millender-McDonald. Got to get the mike. Mr. Alvarado. Sorry. Our management team and staff, stand up for a second. Ms. Millender-McDonald. My God. Mr. Alvarado. Now, all of these fine men and women have money with them. Do not take no for an answer. Close the doors, do not let them leave. So they are here, as they often are, available today. Our web site, sba.gov, is really an award winning web site where people can access some very, very good information. We have two handouts today. One is a magazine format, all of you need to pick one of these up. It has phone numbers, information on local centers that have SBA information. We also have this handout here. ``You Could Be Next,'' the number of businesses that have received assistance in your district, Congresswoman with the phone numbers to our staff and marketing specialists. Let me give you my phone number: 818-552-3201. We have money available. So, we are working continuously with the organizations, with your staff to bring our staff to the community to work with the local organizations. Our marketing is clearly very, very important. Ms. Millender-McDonald. And I think that is the operative word, ``our bringing you'' or the statement ``our bringing you to them'' on a more frequent basis. We need to just have these things through the Federal Register, and all of those other things. You just tend to think small businesses are going to access that Federal Register when really we need to bring you out here so that they can touch you, feel you and talk with you. And that is what we are going to do. I have three questions quickly, Mr. Chairman. One is I am thankful for the government's involvement with business development. I believe if government can do it, than businesses can do it better. Question: Have you given thought to the value of public/private partnerships as a mean of developing the California small business community? Example, a mentorship program where major corporations would lend assistance to small business on all levels from start up to sustained growth. Any of you, well those of you who can. Mr. Alvarado. Well, let me say, Congresswoman, that is a tremendous idea. We surely employ that concept. In reaching out to communities, for example, we will often ask Wells Fargo and other institutions to come and sponsor events in the community. We also work with our organizations and successful businesses whether they are from our contracts program or loan recipients to mentor other firms. So we utilize that synergy of the public/private partnerships quite a bit. And that really is a way of maximizing some of the limitations in our budgets so that we can reach out. Ms. Millender-McDonald. So we do have that type of public/ private partnership that we need to bring in here. This is another workshop that we need to do and bring in here along with Paul, so that together we can have that type of synergy going. And so the next question is a question by Alfonso C. Webb. Now, Alfonso did not have any problems letting you know what his question is. Global Internet trade course teacher at King Drew Magna School in my district of Watts. The World Business Exchange Network and the International Trade Association has developed a global Internet trade course for students that have been implemented in several high schools and elementary schools throughout California. What can organizations such as these do to increase the cooperation between local manufacturers, politicians and educational institutions for the purpose of preparing our youth to make a smooth school to career transition? Do any of you have any of those programs for this type of need? Mr. Tambakis. I think that we should give him an opportunity to be involved in our seminar that we are planning together. Ms. Millender-McDonald. Okay. So---- Mr. Tambakis. And that sounds like a gentleman Reggie Robbie that I have before here in the Los Angeles area who also has similar programs. I think it is excellent to get the youth involved in understanding international trade and, you know, transitioning them up the career ladder. And I do want to mention that for those students that do make it to the university level, we have some great entrantship programs available at the Commercial Service office's locally where the students come in and work basically on a volunteer basis, but they earn college credit. And it is an excellent vehicle to---- Ms. Millender-McDonald. I need to get that information right away, because we have really the CAMS program on the campus of Dominguez Hills, these students, 98 percent of them go to the ivy league schools. Also the Charles Drew Magnet School for math and science; these kids are our brightest and best. I want to get that internship information. The last question: Will any money or is there any money currently to assist business owners in continuing their education at universities, junior colleges or trade schools? Are there any loans or grants for this specific reason? I believe that we would agree that growing as a business person is just as important as expanding the business itself. Thank you. And this is Danny Bayone. Promote this. Mr. Alvarado. We have an Executive Education Program, for our 8(a) firms, our procurement firms. It's in my written testimony, Pacific Harness in Lynwood, one of your firms, was selected last year for example for the Executive Education Program at Clark Atlanta University. And that is a program that we make available, continuing education. We find that, obviously, management is a very, very significant issue for a lot of our small businesses who maybe very good technicians but often lack in management type skills. Ms. Millender-McDonald. But you know what, Alberto? And that is great, because you talked about one of the HBCUs, and that is critically needed. But we need to have something that's closer here that we can utilize. And once you do one business, it appears to me, and I guess it gets back to what Regina was saying, you think that is the top of it all when we need several of these programs and several businesses coming into play so that we can then expand this whole notion of entrepreneurialship, creating wealth, if you will, to the extent of wealth. But you must put this information in the hands of more people in California, in this region. South Bay has been neglected. I can see that with an assessment that I have done. Because people just think that we have made it. No, we have not. We need the same type of programs that you have, the same type of support that we do right here in this region as in all other regions. Mr. Alvarado. Let me just state, and I think that is very valid, and we are going to pursue that. Through our SBDC program we also provide a lot of direct technical assistance. Many of those programs done in conjunction with local universities, Southwest Community College, for example. And we find that that's another very, very vital source of direct training to our businesses. Ms. Millender-McDonald. And Southwest Community College is a great college. I know its President. But we also have great colleges such as Compton College, Harbor College, Long Beach City College. We have got to come further into this region and promote it. Because you know what? This is the engine that is going to kick it up for California. Thank you so much, Mr. Chairman. Mr. Issa. Juanita, I know you could see me posed at the mike. Ms. Millender-McDonald. I know. Mr. Issa. I want to thank the panel for this in depth discussion. I think you have enlightened us a great deal. And, hopefully, as you are thinking back on what you have said here today, more things will come to mind. Please feel free to include them in correspondence. I am going to ask in closing both panels, but this panel right now, I have one pet project. And I do not think that a Chairman should use pet projects at a time like this to ask in depth questions, but I have had a couple of companies within my own Congressional District who have bid for what I call ``beltway bandit jobs,'' jobs which, they are small businesses, they bid for them and they somehow come up just a little short even though they are priced the same amount because either they (a) do not have the experience, which is a way of saying you are not the existing inside the beltway known entity. Especially a lot of these are consulting, although some are product. Or (2) it would be more expensive to go all the way out here versus a closer to the source type contract. As each of you deal with companies, at anytime now or in the future, I would appreciate it if you run into similar situations in which, when dealing with the government, somehow a company is disadvantaged because they are small and they can not get unbundled, the contract, or because they're determined not to have the experience even though their product or service may be equal, and lastly any kind of a hint of a geographic skew toward the sourcing agency's point. Because in this day and age I am a believer that at least within the continent of the United States we should not assume that geographic distance should make any difference at all, other than shipping cost, in our ability to look for sources. And as a Californian, I am acutely aware, as is Juanita, of how far we are from Washington, D.C. So as those occur now or in the future, I would appreciate it if you would just drop my office a line and we will follow up wherever the person is, even if they are not a constituent. Because this is I think on an ongoing basis this Committee needs to dedicate itself to making sure it no longer happens in government procurement. And with that, I want to thank you all for your participation. Ms. Millender-McDonald. Thank you so much. Mr. Issa. And as Congresswoman Millender-McDonald has said, the coffee has arrived. We are going to take the fastest break you can imagine to get the next panel up, but if you want to get your coffee while we are getting them up, we would appreciate it. [Recess.] Mr. Issa. If we can get started now. And since you all sat patiently through the earlier session, you kind of know we are going to do this informally. We are going to be a little quicker in the second session, but I want to make sure we get all your testimony in and then an opportunity for a little bit of questioning, which means we will run late, but we will be as quick as we can. And I would only ask that you understand that our lateness is causing you to rush you a little bit, but trust me, we will make sure that no one fails to get their word out. I'll try to introduce because there has been a lot of changes here. But Rolina Brown is the Regional Director of the Small Business Development Center. Mr. Phil Borden is the Women's Enterprise Development Corporation. You are the Executive Director. And then flipping this around, Pat Unangst is Workforce Investment Network, and you are the ED there. Executive Director. And last, and not least, is Phyllis Venable. And Phyllis is not titled. What do you do there? I am sorry. You are a wonderful substitution. We are glad to have you. What do you do? You are the--pull the mike closer. Here is a chance to toot your own horn. STATEMENT OF PHYLLIS MOORE VENABLE, BUSINESS DEVELOPMENT OFFICER, CITY OF LONG BEACH, REPRESENTING THE CITY AND SMALL BUSINESS COUNCIL, CHAMBER OF COMMERCE Ms. Venable. Okay. I'm the Business Development Officer for the City of Long Beach, and I am representing the city and the Small Business Council, Chamber, today. Mr. Issa. Excellent. So there is an outreach from public/ private right now just as we asked for in the last session. And since we are doing the panel in reverse, back and forth order, Phyllis why don't we start with you and we will go this way. It is for a little bit. Ms. Venable. My name is Phyllis Moore Venable and I am the Business Development Officer for the City of Long Beach. I am representing the city today and the Chamber of Commerce. And recognizing that this is a technical assistance panel, I do want to start out by saying in my experience the most pressing problem facing small businesses today, whether they be minority businesses or disadvantaged businesses or women owned businesses is the access to capital. And I have to say that a business can be technically tight in every single way, but if they cannot get the money to do the things that they need to do, then they still have not arrived. So I would like to address in my testimony some of the ways that I feel that government can impact on this problem in a positive way, this access to capital problem. You know, small businesses had a tremendous impact on life in Southern California in a most profound way. Sixty percent of all businesses in Los Angeles County are classified small businesses, but what they deliver in terms of economic impact is no small business. They are vital to our economy. Small businesses often provide people with their first jobs. They lead the way in on-the-job training opportunities for workforce development. They generate big taxes. And making small business healthy should be at the top of our economic development list. Of course, now, we have a lot of businesses that are in trouble. We had severe economic downturns in 1990s and now we are faced with the recent economic issues related to the terrorism of September 11, 2001. On top of this the recent trend in bank mergers has created a very conservative lending market almost exclusively for businesses with strong equity contributions and long histories of positive cash flow. These conditions definitely do not favor small businesses, many of which are credit worthy but cannot meet the strict lending criteria of commercial banks, notwithstanding the fact, mind you, that such businesses on the average last longer, collectively employ more people and repay bank loans faster. And women owned businesses are especially hard hit. Women entrepreneurs earn about three-quarters as much as male entrepreneurs and their businesses tend to be smaller. They lack then in the accumulation of assets and have special difficulty in getting equity financing. What can we do about this? I have put together a seven point plan which I feel are things that government can do to begin the journey towards recognizing this severely undervalued resource, small businesses. Number one, we need to improve and coordinate alternate financing resources for small businesses. We need to aggressively seek and procure funding of public and nonprofit lenders who can create favorable lending environments for small businesses. Two, we need to toughen CRA and fair lending and other lending requirements. We need to put more pressure on merging banks to force them to commit to lending programs for credit- worthy small businesses. Three, we need to raise the profile of smaller community lenders. These banks are more likely to respond to local market conditions to cultivate closer relationship with customers. They utilize credit scoring less and personal banking more. And they need help in accessing their local markets and improving marketing and outreach. Four, we need to strengthen private micro-enterprise programs. And as much as I loved my private enterprise program that we operate in the city of Long Beach, it takes too long to get money out the door and we encumbered by a lot of regulations and red tape. We need to put this more in the private market. One, two, three, four, five. We need to increase support for training and technical assistance. Small business persons are most likely to use these resources. The training and the counseling will help to bridge the gap between where they are now and where they need to become, which is ultimately more bankable. We need modal youth entrepreneurial training programs. We need to concentrate these programs less on creating businesses and more on teaching life skills, instilling confidence and esteem in our youth so that when they become adults, they will perhaps become entrepreneurs as well. And lastly, we need encourage more small business gatekeepers in our financial institutions. We need more people, more women, more minorities who understand the plight of small businesses and can help bring about the changes necessary to create a sensitive lending environment. Let me just end by saying that the growth in small business activity has to be accompanied by a growth in sophistication, in management ability, in training and in access. We need to positively demonstrate how big impacts can follow from taking significant small little steps that give them the opportunity for many small entities. Thank you for the opportunity to testify. [Ms. Venable's statement may be found in appendix.] Mr. Issa. Thank you. Our next panelist is Patricia Unangst. STATEMENT OF PATRICIA D. UNANGST, EXECUTIVE DIRECTOR, WORKFORCE INVESTMENT NETWORK Ms. Unangst. Thank you for inviting me today. My name is Patricia Unangst, I'm the Executive Director of the Carson/ Lomita/Torrance---- Ms. Millender-Mcdonald. Excuse me. Can you hear in back? Can you bring it closer. Ms. Operator in the booth, can you raise it a little bit, the volume. Ms. Unangst. I am the Executive Director of the Carson/ Lomita/Torrance Workforce Investment Network Board, formerly known as the Private Industry Council. We operate programs as a public/private partnership with business and local elected officials. In fact, Congresswoman McDonald served as a City of Carson City Council policy board member in our initial public/private partnership back in the early '80s, and in fact appointed our incoming chair, Richard Cook, who is here in the audience today. And we are very grateful for that appointment. He, by the way, is a small business person. Our current chair is a small business person. So we have strong emphasis on getting small business together with the training opportunities. And I am glad Phyllis talked about training, because that is of course the core competency of what we do. I wanted to mention, and I had this on the back table, but one of the other speakers today is the Small Business Development Center Regional folks, and we opened in the city of Carson right next door to this facility a Small Business Resource Center so that small businesses can have access five days a week including Thursday nights to a series of resources, as well as online resources necessary to make their businesses successful. We operate three WorkSource Centers. WorkSource is a new name. You will be seeing this in and around the LA area. I do not know if it will make it down to Orange County unless the buses run through there. But WorkSource Centers are the new name for the one-stop career centers, and it is in partnership with the city and county of LA. One of the issues facing small businesses, of course, is the definition. When you go on the SBA web site there is about 77 definitions of small business. And in looking at that virtually everybody can qualify. But locally we had some statistics from the state employment service and it indicated that 92.9 percent of the businesses in our service area employ less than 50 people. 69.4 percent have less than ten. Furthermore, the U.S. Census says that countywide in Los Angeles four out of ten of LA county small companies are minority owned. So the impacts are great. They drive our local economy and create the majority of jobs, as Phyllis just said. The Workforce Investment Boards are your vehicle, Congress' vehicle to put the public/private partnership together; education, business, labor, so on, to strength the role of business and guiding our local job training programs. The Board has a business majority. We have 34 members, 20 of which are business. So it's greater than 50 percent, half of those are small business. We are working on the branding concept so that people can find us. One of the things you know in government programs is we often speak governmentese, and in doing so we often do not communicate with the customers we are very much trying to serve. Recently the eight Los Angeles area Workforce Boards along with the County Department of Social Services and the state Job Service joined together to create this branding of the WorkSource Center in a marketing campaign. It will be going on between now and the end of May. We need to speak the language the business. We need to create one-stop-shopping. Small business in particular cannot afford to go from place to place to look for resources. They need a place they can go. We established a job developers network in the South Bay which actually includes parts of Long Beach and up through the LA airport area that has over 20 agencies that meet on a regular basis so that only one time a business members needs to have a call. And only one time they have to build a relationship, but then they have access to the services of 20 agencies, 20 plus. The key to success of this network is building the relationships amongst the individuals and building that trust. If they do not trust, they do not share information and things do not happen. We also conduct a lot of business roundtables and industry cluster sessions. Just recently last week we had two small aerospace suppliers in our offices talking to a variety of these folks that are job developers about the needs of the aerospace industry. We are also going to do communications and transportation industry. We are hoping to add petrochemical because it is so large in our jurisdiction. Our Board remains active in various business organizations. We are a partner in the South Bay Economic Development Partnership. We are on several Chamber boards. And we play a lead role in the Regional Business Assistance Network which is part of the Los Angeles Economic Development Corporation. We're members of PHRA, the Human Resource Association, etcetera. Probably one of the biggest needs of small business is that of recruiting and retaining qualified workers. This is where we can play the most pivotal role. Those workers are important to the success of the business. Small businesses do not have human resource departments. They need assistance with dealing with hiring needs, labor laws and training. A single bad hiring decision has a proportionally greater impact on a small business than a large business. We can assist with screening applicants, providing the resources, providing the place to do the interviews. What do not seem widely known is that that resource is available to small and large business. The large businesses seem to be able to find us, but we can provide that service. It was spoken about earlier, and Phyllis reiterated it, access to capital the number one issue followed by the qualified workers. As you have heard, it is increasingly more difficult to access. One of the suggestions we wanted to make is particularly in the area of cultural awareness many of the entrepreneurs in the South Bay area are not native born. They need materials and folks in the institutions that speak their native languages. They need to be able to communicate with them, not just in the language of business, but in their own tongue. Banks needs to look at materials that outreach that audience in the light of the ever changing marketplace. We have had good relationships recently, Community Financial Resource Center. They conduct regular business workshops since January of 2001 at our Harbor WorkSource Center every third Thursday of the month. They are designed to help businesses run more smoothly. They also run computer workshops. I will talk about that in a few minutes. WiN Business Services also works with Wells Fargo Bank. We have put on a workshop with a local employment lawyer on growing your own business along with the bank, and we are going to add an insurance company for the next session on taking your business to the next level. We create a lot of our outreach efforts through business visitations. Mr. Issa. I am going to have to ask you to sort of wrap up and then we will get to Q&A. Ms. Venable. Okay. Mr. Issa. And as I said to the first panel, your entire written statements plus anything you choose to summarize or to supplement for the next five days will be incorporated into the official report. Thank you. Ms. Venable. Okay. I just want to say something on access to technology. This is an area that small businesses often are most disadvantageous in. They do not have in-house technical advisors, they do not have IT departments. One of the things that both CFRC and ourselves do is we offer free classes in computer and in more advanced classes, as well as access to the regular classes at colleges and so on. We want to provide small business with advice. They are the backbone of our economy, but the challenges they face are daunting. Working together as partners, local organizations and federal agencies can help provide businesses with information and resources to succeed. Thank you for this opportunity. [Ms. Unangst's statement may be found in appendix.] Mr. Issa. Thank you. Please, Phil. STATEMENT OF PHIL BORDEN, EXECUTIVE DIRECTOR, WOMEN'S ENTERPRISE DEVELOPMENT CORPORATION Mr. Borden. It was initially not my intention to talk about my organization, but let me give the one minute speech about it. Since 1991 Women's Enterprise Development Corporation has been a feature of the Southern California landscape. We have touched the lives of 18,000 clients. We have helped start 1700 businesses, generating an enormous impact on the tax base and on the employment of Southern California. If we set aside the large businesses that we have started and focus on our bread and butter, which is very small businesses, they contribute about $10 million a year to the tax base each year, and we grow that by about a million dollars a year. Eighty-two percent of our clients are people of color and ethnicity, 75 percent are women. We teach in five languages. So we address some of the problems that Pat has talked about. We teach in English, Spanish, Khmer, Chinese and Korean, and we are in the process of adding Vietnamese and Armenian. That question of addressing minorities in their language and recent immigrants in their own language is very critical to us. Sixty-five percent of our money comes from federal contracts of one sort or another, and we have four SBA contracts. I will not bore you with them, but I was particularly alarmed when Congressman Millender-McDonald talked about the cancellation of the BusinessLinc program. That is a mentoring program. We have 2200 people signed up and we are teaching them technology and them how to deal directly with large companies through supply chain management software and software that has been developed under this program. To have that canceled before a year is out is a tragedy because there will be no chance to access the virtues and vices of the program. Now to my testimony. My written testimony is a detailed argument for addressing the following policy issues: The need for improved methods of communication between potential users and suppliers of technical assistance and the need for streamlining the funding and bettering the reporting processes for government technical assistance projects. I have heard a lot about access to capital. Phyllis and I certainly have been on the same page, and I thank her for giving the statistics. Although getting money is never easy, the problem for small business often is where to find it, how to get it and most important, how to use it well. Knowledge and experience together with money are what capitalize a business. With a loan in hand but no technical assistance when they need it, small and minority owned businesses simply spend themselves into penury at a faster clip. In the written statement I surveyed the massive complexity of types and delivery methods of technical assistance and furnished a list of technical service providers in the LA area, more or less off the top of my head. After excluding all by the most narrowly defined types using government dollars, I reached 60 and simply stopped. Technical assistance is a big industry. This morning I would like to focus on two key problems that plague the technical service industry and the clients it seeks to serve. Number one, the welter of government sponsored programs is wildly confusing from WMBEs in need. And number two, the funding priorities and reporting requirements of government agencies cripple providers who are seeking to help the WMBEs. In making my list I began with the Women's Business Center Program sponsored by SBA, WEDC runs two in the area. Depending on how you define Southern California, the state and SBA also fund 14 SBDCs, the Department of Commerce adds five, MBDCs the city of Los Angeles four major programs on at least 20 sites. Two county programs add six sites, two programs network other business technical service providers on at least 7 sites, and on and on. I have not counted workforce, or housing, or faith based technical assistance programs, or those sponsored by BIDs or the area's 91 chambers or the Economic Development Departments at 83 cities in the county. They would add another 300 or so entries. And if we include Internet based services, it increases ten fold again. Each of these has a geographic base, though most can operate outside of it. No two government agencies use the same geographic definitions, no two government agencies use the same definitions of small business. How can a client seeking help find the right technical assistance for her or his business needs? The answer is that often they can't. The system of competing jurisdictions and programs, and shrinking and uncertain funding like BusinessLinc create information overload, competition among entities that should be collaborating; and confusion, distraction and inaccessibility for those who need the services. The other part of the difficulty is that small businesses lack the time and personnel to attend multiple meetings, workshops, seminars and so forth of uncertain business value. In the written statement I propose more local and direct delivery of service referrals routed through local elected officials' offices. This approach addresses some of the outreach issues. I suggest a model for doing so and the training needed plus the benefits for the sponsoring office. Local business people think locally, because that is how and where they do business and because local thinking and action fits their sense of time. They call their elected representatives at every level for help. If city council, supervisorial, and/or state and federal legislative offices were to take on a leadership role in attracting such calls, then directing the callers to the right place, a great deal of confusion could be eliminated. And I'd be glad to talk about that in detail. [Mr. Borden's statement may be found in appendix.] Mr. Issa. Thank you. And we appreciate that the remainder of your testimony be placed in the record, and we hope that we can follow up in detail during the Q&A. Ms. Brown, please? STATEMENT OF ROLINA BROWN, REGIONAL DIRECTOR, SMALL BUSINESS DEVELOPMENT CENTER Ms. Brown. Good afternoon. First of all, welcome back, welcome home. I am Rolina Brown, and I am the Assistant State Director for the California Small Business Development Center Program also known as the SBDC Program. And I am honored to represented the Small Business Development Center Program Network. We believe that we are the nation's largest consulting and training group. I am pleased to have opportunity to appear to discuss problems facing Southern California small business owners and their needs in the current economy. I was especially pleased that your invitation seeks to understand the challenges of minority owned firms, especially in light of the recent economic downturn. As you are already aware, minority owned firms are the fastest growing segment of business owners in the nation. Minority owned firms are surpassing the growth rates of U.S. businesses growing at a rate sometimes six times the growth rate of all other firms. The SBDC Network is broad band service delivery network designed to make a significant strategic investment in building and enhancing local communities. I am pleased to say that we are partners with each of the representatives here. The California SBDC's mission to provide quality management and technical assistance to existing and potential small businesses resulting in the success of the entrepreneur, sustainable economic growth and prosperity for all Californians. We accomplish our missions by providing direct customer focused services. We maintain a highly dedicated flexible, diverse and enthusiastic professional and experienced staff. And we act as a catalyst for a sustainable economic development by responding to local needs. I am the representative for Santa Ana and the Los Angeles SBA districts. We build collaborative partnerships and we and we leverage resources through fundings through our match program. By virtue of the size, obviously the significant part of the California SBDC program delivery system is here in Southern California. Of course, naturally it is my opinion that the SBDC Network leads the nation in finance innovation and there is no doubt, as Mr. Alvarado has testified, that the SBDC Network in Los Angeles leads the nation in access to capital. After having said that, I am also keenly aware of the challenges that small business owners face in accessing capital and the challenge that they face in who to approach and where to go for necessary capital to just get their business started. In our findings and our evaluation and research I find that the barriers to the growth of California small businesses, and in particular minority owned businesses, is access to capital, business assistance and support such as strategic planning and marketing, effective utilization of technology, access to markets outside of their traditional areas and participation in social and business networks. Given that small businesses heavily rely on credit to facilitate the growth, the California SBDC Network has taken a leading role to create a bridge between the small owners and access to capital. Here in Los Angeles in particular we have a wonderful track record of helping small businesses. We've created an innovative program called the Rover Program which is widely respected around the nation. This program is dedicated to sending experienced business developers to address the needs of small businesses to their place of business. Access to capital remains, however, the number one problem in the region for most minorities, and in particular African- American businesses especially when it's related to race and other ethnic groups. The Rover program has increased capital to all minority owned businesses and African-Americans. However, in a partnership with the University of Southern California, the Southern California region partnered with the Harvard Business School and the Competitive Inner City initiative to take a closer look at minority owned businesses and to develop an action plan to deal with the issues of limited equity capital, asset pledges, uncertain earning streams and other barriers to minority credit accessibility. The initiative will also deliver specialized assistance to help smaller businesses gain the capital that they need to establish and grow their business, and to overcome the challenges that face minorities and women owned businesses in the inner city. The project will host a capital access team. This team will not only provide technical assistance to small businesses, but they will also educate banks and communities to help them understand the credit needs of an availability of capital to small businesses. The Southern California SBDC program will employ a new finance technology system which is designed to speed the process for loan applications by tracking the loan flow of documentation, business assistance and loan review. This data should help us understand the system better, and to understand the credit activities and the impacts on small businesses. We believe that the outcome of this initiative will help us frame the debate on how we can all provide new age solutions to small business and, in particular, minority owned businesses. We also believe that the combination of these programs can help Southern California small businesses access capital and secure the resources that they need. We're very proud of our relationship with the SBA, and in particular with our SBA district office in Los Angeles who is the holder of two prestigious awards and the nation's leader in loans. We are also particularly proud that the Santa Ana SBA district hosts the nation's only venture capital technical assistance center. The Tech Coast SBDC is located in Irvine and provides resources to support early stage and start up businesses. The Tech Coast SBDC produces an annual funding directory and resource guide that is considered a source for emerging growth companies and advisers. We also have a Diamond Venture Forum, and we have multiple access to capital venues in Santa Ana, and weekly access to capital activities in Los Angeles County. We understand the challenges that we have heard today about access and outreach, and we have come up with a strategy to create community based relationships by establishing branch offices. And I noticed Cook Snew happens to be here from API and is also one of our branch office locations. We also have a relationship with Women's Inc. We are establishing a new cultural arts and entertainment SBDC program which will focus on an industry that is often overlooked. This has just brought a few of the activities that the California SBDC program, and in particular the Southern California SBDC program are doing to deal with the issues of small business development, technical assistance and access. I want to call to your attention as I conclude, the vast size of the counties that we serve in Southern California. And if you take Los Angeles County and you take Orange County, you will be looking at the largest concentration of minority owned businesses, yet we have eight SBDC centers hosted to provide the services. And while our partnerships are leverage and we have community based relationships, we have to become more innovative in the ways that we approach these businesses. It is for that reason that we have established a toll free line, 1- 866-You Ask SBDC as a central point of contact for small business owners seeking not only the assistance of the SBDC program, but technical assistance in Southern California. And during Small Business Week we will launch a new portal askSBDC.com. AskSBDC.com will not only provide technical assistance and online training, but chat rooms and forums for small business. We are particularly happy that the askSBDC.com will have a digital commerce solution which will allow small business owners to create webpages, have e-mails, shopping charts online at reduced or virtually no cost. Most minority small businesses have Internet access, however few have active sites that allow them to transact businesses on line. In closing, I would like to give you an idea of the impact that the Southern California SBDC program had on its districts in the last year. Eight of the SBDCs contributed to the creation of 676 jobs. $31,367 in sales. $24,414 in financing of which $20 million was SBA financing. The California SBDC program is a whole, we operate as a network, created 3,778 jobs, retained 5,295 and increased sales by $115 million. Mr. Issa. Ms. Brown. Ms. Brown. Yes. Mr. Issa. I am afraid I am going to have to ask you to put the remainder into your written statement. It will be retained for the record. Ms. Brown. Thank you. [Ms. Brown's statement may be found in appendix.] Mr. Issa. Thank you. Well, first of all, I want to thank you again for all coming. And as I did with the first panel, I want to limit my comments since the Congresswoman's district is here and I am a visitor, and I appreciate the opportunity to be in this district, but I think a lot of the issues are very much germane to this area and I want to concentrate the time on her questions. The two things I want to do before yielding, first of all, is to ask all of you as I asked the first panel, if you come in contact with access to government contracts being denied either because of bundling, prohibitively large for your companies even though they have the ability to perform some significant portion of the contract, or what I earlier described as the beltway mentality of ``Gee, we have a company that has already done it and they are much closer to Washington, DC.'' For all of us as Californians I think we need to point up those examples as they occur. Some people in the audience had already brought me some of those during the break, so hopefully we will continue to accumulate that and that will be the subject of another hearing and, hopefully, some efforts in Washington. And the lastly, Mr. Borden, I wanted to thank you. Your testimony went out of its way to describe something that I think is very important, and that is the inability to manage limited capital that most start up companies have. Having been a micro-business, if $7,000 is micro and 20 years ago I guess it was bigger than it is today, but it is still small. I recognized that in those days one mistake could kill my business. Well, a little bit of luck and sound capital management was the difference between success and failure. And so I appreciate not only your statements, but also the fact that you participate in trying to train start up companies to understand that access to capital is important, but then it takes a lot more capital if you misuse it. And there is not enough capital for any company. To use a current example, Enron had an incredible amount of capital but if one misuses capital, there is not enough money in the whole world and in the piggy bank in Washington to support mismanagement at any level. So, I want to thank you for pointing that out. And with that, I will yield to the gentlelady from the 37th Congressional District. Ms. Millender-McDonald. Both of us from California. I tell you, it has been a remarkable day with you being here with us in the 37th. Thank you so much. You are welcome at anytime. Not too often, though. Mr. Issa. No. Ms. Millender-McDonald. Just kidding. Just kidding. He's my friend. Mr. Issa. You can come to Camp Pendleton. Ms. Millender-McDonald. Oh, that's right. Absolutely. Let me acknowledge some representatives here representing some of our colleagues. Bobbie Blanks is the field director for Congresswoman Maxine Waters, who is here. Thank you so much for being here. Mr. Issa. Just stand up. Ms. Millender-McDonald. And thank the Congresswoman for allowing you to come here today. Lanny Saunders, the administrative assistant to Congresswoman Diane Watson. Please stand, Lanny, so that we can see you. Tell the Congresswoman as well thank you. We have mayor pro tem of the city of Gardenia, Steve Bradford who was here, perhaps stepped out for a--oh, there he is. Very good. Thank you, Steve, for being here. Mr. Basil Kimbre, the Vice President of Compton Unified School District perhaps may be out there in the foyer. And Eric Lee who is the chief executive officer to Lynwood Chamber of Commerce. If he is not here, they are all outside. I see my dear friend sweet Alice who has come in from the Watts area, Parents of Watts. It is good to see you here. I think you have all touched on it; knowledge, experience, capital all elements of a thriving small business. I cannot say enough for Pat Unangst when she said there are 77 definitions of small business. We are also grappling with that in Washington and we need to revisit that issue. One-stop-shopping or development centers are critical to small businesses. They cannot hop around and try to find the resources and knowledge and all of that that we have. I am happy to say that Bruce Thompson is still the head of our SBA is still in the audience with us, as well as Alberto Alvarado who is our Executive Director or Director. I might be giving some titles, but that is okay. I will talk with the President and make sure all of this happens. But, anyway---- Mr. Issa. Between the two of you you certainly are the ``go-to's'' for the state, and we appreciate you being here today. Ms. Millender-McDonald. And I think with Rolina Brown, all of you are still here. You have heard the expert witnesses talk about the need and the needs of small businesses, so we won't belabor that any longer. I would just like to chitchat with all of you so that we can make things happen for small businesses. Rolina, you are talking about all the time teams, and LA teams and LA County. You did not say anything about Long Beach, Carson, other places. We have got to talk to you about that. Ms. Brown. Well, no, no, no. Ms. Millender-McDonald. Got to come to South Bay. Ms. Brown. You are heavily represented in South Bay. Ms. Millender-McDonald. Then you must tell me where you are. Ms. Brown. Actually Jim Treat is here and I will allow Jim to respond. Ms. Millender-McDonald. Okay. Jim, we are going to have to talk with you. We are actually in Carson and Long Beach? Ms. Brown. Right. Ms. Millender-McDonald. Well, okay, fine. Pat is one of yours. Ms. Brown. Right. Ms. Millender-McDonald. Okay. Fine. Well, Pat changed names and so she changed a lot of other things going on, but to the betterment, I might add. Let me just say thank you. The time was to be from 10:00 to 12:00. This great man has overstayed the time because he has other things in his district that he must attend to. We are here only for a week, a week and a half and we are trying to cover the waterfront. And so I just wanted to say thank you to all of you. I will be in touch with you getting to know you better as we continue to move workshops in this area and in the district to enhance small businesses. Again, thank you to the staff from Washington who has come in. Now you know the tremendous task we have of flying in every weekend. You should appreciate us more. Thank you to my district office staff. They were tremendous in getting such a great crowd out today. And with that, I will yield back to the chairman to close it out. Mr. Issa. Thank you. And one last request. If the members from the government side of SBA would please stand for a moment if you are still here. We still have them. For all of you in the business community, we have this hall for another hour. If you want to get them before they go out the door, I would ask that you give them your card or get their card. Because this is also a networking opportunity. And with that, this hearing is adjourned. Thank you. [Whereupon, at 12:25 p.m., the subcommittee adjourned subject to the call of the Chair.] [GRAPHIC] [TIFF OMITTED] T9720A.001 [GRAPHIC] [TIFF OMITTED] T9720A.002 [GRAPHIC] [TIFF OMITTED] T9720A.003 [GRAPHIC] [TIFF OMITTED] T9720A.004 [GRAPHIC] [TIFF OMITTED] T9720A.005 [GRAPHIC] [TIFF OMITTED] T9720A.006 [GRAPHIC] [TIFF OMITTED] T9720A.007 [GRAPHIC] [TIFF OMITTED] T9720A.008 [GRAPHIC] [TIFF OMITTED] T9720A.009 [GRAPHIC] [TIFF OMITTED] T9720A.010 [GRAPHIC] [TIFF OMITTED] T9720A.011 [GRAPHIC] [TIFF OMITTED] T9720A.012 [GRAPHIC] [TIFF OMITTED] T9720A.013 [GRAPHIC] [TIFF OMITTED] T9720A.014 [GRAPHIC] [TIFF OMITTED] T9720A.015 [GRAPHIC] [TIFF OMITTED] T9720A.016 [GRAPHIC] [TIFF OMITTED] T9720A.017 [GRAPHIC] [TIFF OMITTED] T9720A.018 [GRAPHIC] [TIFF OMITTED] T9720A.019 [GRAPHIC] [TIFF OMITTED] T9720A.020 [GRAPHIC] [TIFF OMITTED] T9720A.021 [GRAPHIC] [TIFF OMITTED] T9720A.022 [GRAPHIC] [TIFF OMITTED] T9720A.023 [GRAPHIC] [TIFF OMITTED] T9720A.024 [GRAPHIC] [TIFF OMITTED] T9720A.025 [GRAPHIC] [TIFF OMITTED] T9720A.026 [GRAPHIC] [TIFF OMITTED] T9720A.027 [GRAPHIC] [TIFF OMITTED] T9720A.028 [GRAPHIC] [TIFF OMITTED] T9720A.029 [GRAPHIC] [TIFF OMITTED] T9720A.030 [GRAPHIC] [TIFF OMITTED] T9720A.031 [GRAPHIC] [TIFF OMITTED] T9720A.032 [GRAPHIC] [TIFF OMITTED] T9720A.033 [GRAPHIC] [TIFF OMITTED] T9720A.034 [GRAPHIC] [TIFF OMITTED] T9720A.035 [GRAPHIC] [TIFF OMITTED] T9720A.036 [GRAPHIC] [TIFF OMITTED] T9720A.037 [GRAPHIC] [TIFF OMITTED] T9720A.038 [GRAPHIC] [TIFF OMITTED] T9720A.039 [GRAPHIC] [TIFF OMITTED] T9720A.040 [GRAPHIC] [TIFF OMITTED] T9720A.041 [GRAPHIC] [TIFF OMITTED] T9720A.042 [GRAPHIC] [TIFF OMITTED] T9720A.043 [GRAPHIC] [TIFF OMITTED] T9720A.044 [GRAPHIC] [TIFF OMITTED] T9720A.045 [GRAPHIC] [TIFF OMITTED] T9720A.046 [GRAPHIC] [TIFF OMITTED] T9720A.047 [GRAPHIC] [TIFF OMITTED] T9720A.048 [GRAPHIC] [TIFF OMITTED] T9720A.049 [GRAPHIC] [TIFF OMITTED] T9720A.050 [GRAPHIC] [TIFF OMITTED] T9720A.051 [GRAPHIC] [TIFF OMITTED] T9720A.052 [GRAPHIC] [TIFF OMITTED] T9720A.053 [GRAPHIC] [TIFF OMITTED] T9720A.054 [GRAPHIC] [TIFF OMITTED] T9720A.055 [GRAPHIC] [TIFF OMITTED] T9720A.056 [GRAPHIC] [TIFF OMITTED] T9720A.057 [GRAPHIC] [TIFF OMITTED] T9720A.058 [GRAPHIC] [TIFF OMITTED] T9720A.059 [GRAPHIC] [TIFF OMITTED] T9720A.060 [GRAPHIC] [TIFF OMITTED] T9720A.061 [GRAPHIC] [TIFF OMITTED] T9720A.062 [GRAPHIC] [TIFF OMITTED] T9720A.063 [GRAPHIC] [TIFF OMITTED] T9720A.064 [GRAPHIC] [TIFF OMITTED] T9720A.065 [GRAPHIC] [TIFF OMITTED] T9720A.066 [GRAPHIC] [TIFF OMITTED] T9720A.067 [GRAPHIC] [TIFF OMITTED] T9720A.068 [GRAPHIC] [TIFF OMITTED] T9720A.069 [GRAPHIC] [TIFF OMITTED] T9720A.070 [GRAPHIC] [TIFF OMITTED] T9720A.071 [GRAPHIC] [TIFF OMITTED] T9720A.072 [GRAPHIC] [TIFF OMITTED] T9720A.073 [GRAPHIC] [TIFF OMITTED] T9720A.074 [GRAPHIC] [TIFF OMITTED] T9720A.075