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Statement of the Hon. Nydia Velazquez on Oversight of the Small Business Administration

Thank you, Administrator Guzman, for testifying before the committee today. It has been two years since you were confirmed as SBA Administrator. In those years, SBA delivered more than a trillion dollars in pandemic relief, saving countless jobs and small businesses from permanent closure. And, there have been a record number of small business applications – thanks in large part to an historic investment in not just the nation’s economic recovery but also its future. This effort unlocked opportunities for Americans, leading to a surge in entrepreneurship, which is vital to our economy.

Small businesses have the power to spark economic growth and create good paying jobs in our local communities. They can turn Main Streets into vibrant destinations where retailers, restaurants, and personal service businesses can thrive. And entrepreneurship can spark innovation, bringing new ideas and solutions to the marketplace. Looking ahead to the next two years, I hope to learn more about your vision for the agency. In particular, how SBA’s FY 2024 budget plan will nurture our nation’s 33 million entrepreneurs and innovative start-ups, while creating a landscape that will be ripe for local economic growth.

Part of that discussion will inevitably include SBA’s IG and GAO’s reports and recommendations on the pandemic relief programs. Their investigations have identified billions of dollars in potential fraud, and it’s important for the Committee to hear the steps you have taken to address fraud and save taxpayers’ dollars.

Finally, I want to hear from you about the two proposed rulemakings, which could lead to major changes in how the 7(a) program operates. The stated intent of the two rules is to fill a gap in underserved markets.

And it goes without saying that ensuring support for minority-owned small businesses and entrepreneurs from underserved communities is a top priority of mine. With that said, I have been disappointed with SBA’s initial lack of engagement on the proposed rulemakings, and questions remain that I hope can be answered prior to finalizing the rules.

Put simply, the agency should slow down and address issues with fraud in the Paycheck Protection Program before moving forward with major policy changes to the 7(a) program. As you know, the IG identified 70,000 potentially fraudulent PPP loans, totaling more than $4.6 billion, and a disproportionate share of these loans were made by Fintechs.

These entities are not subject to the same prudent lending rules as traditional banks and credit unions, and lifting the moratorium on SBLCs to allow non-regulated entities to participate in SBA’s flagship lending program may not be the best way to reach underbanked communities. Congress put the moratorium in place forty years ago to safeguard the 7(a) loan program and make sure the agency had the resources to supervise lenders effectively. We do not have any assurances that SBA has the bandwidth to manage these new unregulated entities – even though we have been asking.

Major policy changes can’t be made hastily. The agency should be working with this committee and stakeholders to improve the program while still protecting its integrity. Let me finish by stating, there may be areas of disagreement throughout this hearing, but that is part of the legislative process.

Today’s hearing will give us an excellent opportunity to closely examine the achievements we’ve made for small businesses but also discuss the challenges they face and learn how best to support them through our bipartisan efforts.

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