Hearings to examine using the 504 program to build America's manufacturing future, including S.2659, to amend the Small Business Investment Act of 1958 to enhance the Office of Credit Risk Management, to require the Administrator of the Small Business Administration to issue rules relating to environmental obligations of certified development companies, S.2662, to amend the Small Business Investment Act of 1958 to improve the loan guaranty program, enhance the ability of small manufacturers to access affordable capital, and S.1555, to increase loan limits for loans made to small manufacturers.

1[Senate Hearing 119-170]2[From the U.S. Government Publishing Office]34                                                      S. Hrg. 119-17056                     USING THE 504 PROGRAM TO BUILD7                     AMERICA'S MANUFACTURING FUTURE8=======================================================================910                                HEARING1112                               BEFORE THE1314                      COMMITTEE ON SMALL BUSINESS15                          AND ENTREPRENEURSHIP1617                                 OF THE1819                          UNITED STATES SENATE2021                    ONE HUNDRED NINETEENTH CONGRESS2223                             FIRST SESSION2425                               __________2627                           SEPTEMBER 17, 20252829                               __________3031      Printed for the use of the Committee on Small Business and32                            Entrepreneurship3334[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3536        Available via the World Wide Web: http://www.govinfo.gov3738                              __________3940                      U.S. GOVERNMENT PUBLISHING OFFICE4161-659                        WASHINGTON : 202642=======================================================================4344            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP45                    ONE HUNDRED NINETEENTH CONGRESS4647                              ----------4849                        JONI ERNST, Iowa, Chair50            EDWARD J. MARKEY, Massachusetts, Ranking Member51JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington52RAND PAUL, Kentucky                  JEANNE SHAHEEN, New Hampshire53TIM SCOTT, South Carolina            CORY A. BOOKER, New Jersey54TODD YOUNG, Indiana                  CHRISTOPHER A. COONS, Delaware55JOSH HAWLEY, Missouri                MAZIE K. HIRONO, Hawaii56TED BUDD, North Carolina             JACKY ROSEN, Nevada57JOHN R. CURTIS, Utah                 JOHN W. HICKENLOOPER, Colorado58JAMES C. JUSTICE, West Virginia      ADAM B. SCHIFF, California59JON HUSTED, Ohio60                Meredith West, Republican Staff Director61                 Sean Moore, Democratic Staff Director6263                           C O N T E N T S6465                              ----------6667                           SEPTEMBER 17, 202568                           Opening Statements6970                                                                   Page71Joni Ernst, U.S. Senator from Iowa...............................     172Edward Markey, U.S. Senator from Massachusetts...................     27374                               Witnesses7576Mr. Karl E. Swanson, President, PCT Ebeam and Integration, LLC,77  Davenport, IA..................................................     578    Prepared Statement...........................................     779Mr. David P. Raccio, Senior Vice President and Director of SBA80  Lending, CDC New England, Wakefield, MA........................    1381    Prepared Statement...........................................    1582Ms. Jean Wojtowicz, Executive Director, Indiana Statewide CDC,83  Indianapolis, IN...............................................    2384    Prepared Statement...........................................    2585Ms. Hilda Kennedy, Founder and President, AmPac Business Capital86  Ontario, CA....................................................    3487    Prepared Statement...........................................    368889              Additional Letters/Statements for the Record9091TMC Financing92    Testimony Dated September 17, 2025...........................    609394                        Questions for the Record9596Mr. David P. Raccio97    Responses to questions submitted by Senator Hirono...........    6498Ms. Jean Wojtowicz99    Responses to questions submitted by Senator Young............    66100101     USING THE 504 PROGRAM TO BUILD AMERICA'S MANUFACTURING FUTURE102103                              ----------104105                     WEDNESDAY, SEPTEMBER 17, 2025106107                      United States Senate,108                        Committee on Small Business109                                      and Entrepreneurship,110                                                    Washington, DC.111    The committee met, pursuant to notice, at 2:31 p.m., in112Room 428A, Russell Senate Office Building, Hon. Joni Ernst,113chair of the committee, presiding.114    Present: Senators Ernst [presiding], Hawley, Husted,115Markey, Shaheen, Coons, Rosen, and Hickenlooper.116117               OPENING STATEMENT OF SENATOR ERNST118119    Chair. I call the Committee on Small Business and120Entrepreneurship to order. We are here today to discuss the121role that the Small Business Administration's 504 Certified122Development Company, or CDC, loan guarantee program can play in123supporting investment in America's small manufacturers.124    Over the course of this year, the committee has examined125the staggering decline of America's manufacturing sector. 40126years ago, factories across the country roared with activity,127towns thrived, and America felt unstoppable. We were truly128unrivaled as a nation. Today many of those same factories stand129idle, communities that once depended on them fade and struggle,130and millions of jobs have vanished.131    Today, we're seeing some of the lowest levels of132manufacturing employment that we've seen in nearly a century.133Sadly, we're losing more than just jobs. We're losing America's134knowledge, talent, innovative edge, and tradition of industrial135excellence.136    By neglecting our manufacturing sector and infrastructure,137we've crippled our own ability to scale new technologies,138leaving us less competitive on the international stage. Simply139put, we've let our guard down, and it's our adversaries like140China who stand to benefit.141    To restore our economic resilience and global dominance, we142must empower our small manufacturers to lead the way. That143starts by providing them with the resources they need to144reverse this decline and rebuild our domestic productive145capacity.146    In prior hearings, we have explored how we can channel more147capital into American manufacturing, whether through private148capital committed as part of the Small Business Investment149Company program, or through 7(a) loans guaranteed by the SBA.150    Today, we're focused on one program that is uniquely suited151to helping small manufacturers build and expand: the 504 Loan152Program. The 504 Loan Program is the primary way that SBA helps153small business owners buy major fixed assets like real estate154buildings, equipment, and machinery, and even construct155facilities from the ground up. It gives borrowers long-term156fixed rate financing of up to 25 years. That kind of157predictability is exactly what small manufacturers need to158establish or modernize their operations.159    Thanks to the work of participating CDCs, the 504 Program160has been able to maintain a low default rate of under one161percent per year. In the last five years, it has been under162half a percent. That is the hallmark of a loan program that is163safe, reliable, and deeply impactful.164    But it isn't perfect. Stakeholders have made clear that165improvements can be made to eliminate red tape in the closing166process and provide more flexibility to borrowers, especially167for rural businesses.168    This committee has continually looked at ways to build upon169the program's success, including consideration of legislation170introduced by Senator Young aimed at streamlining the Office of171Credit Risk Management's oversight of CDCs.172    Another way to strengthen our manufacturing future is by173passing the Made in America Manufacturing Finance Act, which I174introduced in April alongside Senator Coons. The committee175reported out the bill in July. This bipartisan legislation176would double the 504 loan limit from $5 million to $10 million177for small manufacturers who need that capital to modernize,178grow, and train a new generation of American workers.179    I know from the countless conversations I've had with small180business owners, that this makes a real difference. Many181companies could have expanded faster, hired more workers, and182invested in new technologies if only the loan limits had183allowed it. CDCs tell us the same thing. Clients are forced to184slow their growth or seek outside funding on less favorable185terms simply because their needs couldn't be met by what is186currently allowed.187    I'm grateful that we're joined today by our panel of CDC188lenders and program participants. I look forward to hearing189from them about how Congress can improve the 504 Program and190give American entrepreneurs what they need to build a stronger,191more resilient manufacturing future.192    And I now recognize Ranking Member Markey for his opening193statement.194195                  STATEMENT OF SENATOR MARKEY196197    Senator Markey. Thank you, Madam Chair. [Technical198issue.]--manufacturers faring in the Trump economy. Well, the199Institute for Supply Management reported that the manufacturing200sector shrank for the sixth consecutive month in August as201supply prices continue to rise.202    According to a July survey from the National Association of203Manufacturers, small manufacturers' positive outlook for their204companies has dropped to the lowest level since the height of205the COVID-19 pandemic. And since Trump's so-called ``tariff206liberation day'' in the beginning of April, the United States207has lost more than 42,000 manufacturing jobs. They've208disappeared.209    And we've seen this before. During President Trump's first210administration, 200,000 manufacturing jobs were lost. And to211hide the failing state of his economy, President Trump is212following the three Ds; divert, distract, and deceive. Instead213of taking responsibility, President Trump has fired the Bureau214of Labor Statistics Commissioner and called to end quarterly215earnings reports.216    But no matter how hard President Trump tries to hide the217data, it is crystal clear that it is his policies that are218hurting small manufacturers across our country. President219Trump's tariffs are pushing up prices, making it difficult for220our small U.S. manufacturers to compete. For too many small221U.S. manufacturers, MAGA stands for ``manufacturers are going222abroad''. In May, our committee heard from Julie Robbins, CEO223of EarthQuaker Devices in Ohio. She told us that she had faced224tariffs as high as 185 percent forcing her to consider moving225production overseas.226    President Trump's attack on clean energy is also fueling227America's manufacturing decline. Trump's SBA ended their Green228Lender Initiative, and the big ugly bill rolled back many of229the clean energy incentives in the Inflation Reduction Act of2302022. These incentives and programs contributed to the almost231700,000 manufacturing jobs added during the Biden232Administration.233    And now, President Trump's sweeping attacks on immigrants234are crushing the manufacturing workforce from the largest235manufacturers to the smallest of the small manufacturers in our236country. And to add to the small business' paying, President237Trump's SBA is adopting draconian requirements. These238requirements bar small businesses with any amount of foreign239investment and small businesses, partially owned by people who240are lawfully here, including DACA recipients, assignee, and241refugees from getting an SBA loan.242    This breaks from at least a quarter of a century of SBA243policy that allowed small businesses, including manufacturers,24451 percent owned and controlled by U.S. citizens, nationals,245and green card holders to receive SBA loans. These changes are246creating a chilling effect. In Massachusetts, one small247business owner with a green card who was likely an eligible SBA248borrower decided not to apply for an SBA loan because they249feared their legal immigration status would be used against250them in President Trump's America.251    If President Trump were serious about growing American252manufacturing, he would be investing in our future not burning253it down. So, I agree with raising the loan limits on SBA's 504254Loan Program, or as I'd like to have it be called, the Economic255Development Loan Program.256    And I appreciate Chair Ernst and Senator Coons' leadership257on this issue, and the intent of the Made in American258Manufacturing Finance Act. However, we should work to ensure259that the larger loans allowed under this legislation lead to260good-paying jobs. We should raise SBA loan limits specifically261for our clean energy manufacturers to supercharge our economy,262make our communities cleaner, and to create jobs.263    We must return to the historic SBA lending rules that264supported immigrant entrepreneurs, and we must break down265barriers and create programs that are tailored to help our266minority entrepreneurs access capital. So, today, I look267forward to hearing from our witnesses about how we can268accomplish these goals. I thank you Madam Chair for calling269this hearing and the legislation which you and Senator Coons270have put together.271    Chair. Wonderful. Thank you, Ranking Member Markey. And,272again, I want to extend a warm welcome to all of our witnesses.273I will now introduce our witnesses who are testifying today. I274am thankful that you-all took time out of your busy schedules275to join us here in DC and share your expertise on SBA's 504276Loan Program and access to capital through Certified277Development Companies, or CDCs.278    First, we have Mr. Karl Swanson. He is the president of PCT279Ebeam and Integration, which is a small manufacturer of280electron beam systems in Davenport, Iowa. Mr. Swanson281previously served as director of sales and marketing at PCT282Engineered Systems and began his career as an automation sales283specialist at Industrial Engineering Equipment Company.284    He received his bachelor's degree in electrical engineering285from University of Illinois Urbana-Champaign, and his MBA from286St. Ambrose University. And thanks for making the trip again287from Iowa. Thank you, Karl.288    Ms. Jean Wojtowicz is the executive director of the Indiana289Statewide CDC. She is also the founder and president of290Cambridge Capital Management Corporation, an Indianapolis-based291manager of non-traditional sources of capital for businesses.292She previously served as the lead independent director on the293board of directors of Vectren Corporation, a New York Stock294Exchange energy holding company serving Indiana and Ohio.295    Ms. Wojtowicz who holds two bachelor's degrees in finance296and real estate from the University of Wisconsin-Madison. I now297recognize Ranking Member Markey to introduce his witnesses.298    Senator Markey. Thank you, Madam Chair. Mr. David Raccio299has been with CDC New England located in Wakefield,300Massachusetts since 2017, and is currently the senior vice-301president and director of SBA lending. CDC New England is one302of the most active 504 lenders in Massachusetts. He brings deep303expertise in helping small businesses grow. He's also a proud304U.S. Air Force veteran serving six years on active duty and in305the reserves. And we thank you so much for being with us today.306    And Ms. Hilda Kennedy is the founder and president of AmPac307Business Capital based in Ontario, California. AmPac308participates in several SBA lending programs, including the 504309Program. She is a board member of the National Association of310Development Companies, or NADCO, and she previously worked as311the director of economic development for the City of Inglewood.312And we look forward to hearing of all of the testimony that's313going to be presented today. Thank you, Madam Chair.314    Chair. Wonderful. Thank you, Ranking Member Markey. And315briefly, I'd like to take a moment just to explain our lighting316system that is there on the boxes in front of you. There are317three lights in front of you. Green means go. Yellow means318you're running out of time. And red means to please wrap it up.319    I ask unanimous consent that the witness's full statements320be included in the record. Without objection, so ordered. As321your written testimony has been made part of the record, the322committee asks that you limit your oral remarks to five323minutes. And with that, Mr. Swanson, you are now recognized for324five minutes for your testimony.325326  STATEMENT OF MR. KARL E. SWANSON, PRESIDENT, PCT EBEAM AND327               INTEGRATION, LLC, DAVENPORT, IOWA328329    Mr. Swanson. Chair Ernst, Ranking Member Markey, and330members of the committee, I'm humbled by the responsibility to331represent the interest of the hundreds of thousands of small332manufacturers that fuel the American economy.333    As you said, my name is Karl Swanson, and I grew up on my334family's farm near Rio, Illinois. Today I'm the President of335PCT Ebeam and Integration located in Davenport, Iowa, which was336founded in 1986.337    When the original majority owner was looking to retire, the338most attractive option was to be acquired by a Swiss company.339The integration was unsuccessful, and when the business was340getting ready to close, I found eight of my long-term coworkers341willing to join me and buy the company back.342    In November of 2018, we reached an agreement to make this a343reality and embarked upon what has been a challenging and344rewarding journey. We have experienced firsthand the advantages345of, once again, being an American owned small business. In346seven years, we have grown from 45 to 65 employees and have347also reacquired many of the critical manufacturing capabilities348that were divested by the previous owner.349    PCT is both a systems integrator and a manufacturer of350industrial electron beam systems. Our ebeam machines are used351in a variety of different industries where they enable energy352efficient production of prepainted steel, are used in the353manufacturing of advanced medical materials, and can be used to354achieve more sustainable production of lithium-ion batteries.355    Building these specialized machines requires a skilled356workforce and specific manufacturing capabilities. 50 percent357of the ebeam systems we build are exported. Our foreign358customers often require their advanced payments to be secured359by local bank guarantees. The options for a small U.S.360manufacturer to comply with these requirements are limited. For361PCT, it is critical that we have access to funds to support our362material and labor expenses throughout the lengthy production363schedule.364    The Small Business Administration has been a major source365of support for our business. From purchasing our commercial366real estate to expanding our export efforts following our367purchase of the business, we have the opportunity to also368purchase our building and thus secure our company's long-term369future.370    The SBA 504 Loan Program was recommended by our local bank371and made this purchase possible. Following further success, we372decided to expand our manufacturing shop. Once again, the SBA373504 was critical in helping us finance this expansion and add374more production capabilities, facilitate better material flow,375and increase our capacity to assemble and test more ebeam376systems each time we look to invest in our long-term future.377The SBA 504 gave us a financing solution that was both378accessible and affordable. Our experience shows how central the379SBA 504 is to long-term business growth and competitiveness.380    But as that growth leads to bigger opportunities and our381business takes on larger and more complex projects, we have382experienced limitations in SBA's financing programs that impose383undue constraints on the organic and profitable growth of384manufacturing firms like ours.385    The biggest limitation we faced was when our financing386needs intersected with SBA aggregate program caps. For example,387we received a multimillion-dollar order from a customer in388Brazil. We needed to provide bank guarantees equal to the value389of advance payments received before shipment.390    The SBA 7(a) Export Working Capital Program would've been391the ideal solution, but after securing $2.956 million in SBA392504 financing, only $794,000 remained available under the SBA3937(a) guarantee cap. These limitations create constraints not394only for our business, but also for lenders who want to support395U.S. manufacturers competing in global markets.396    The Made in America Manufacturing Finance Act of 2025397introduced by Chair Ernst to increase the maximum total loan398size to $10 million would directly address our situation.399Having access to this additional loan capacity would provide400PCT with a cost-effective means of supporting more export401business, which in turn improves our competitiveness in foreign402markets, enables us to accelerate further investments in403additional staff and production equipment domestically.404    Another limitation we experienced was SBA loan approval405times. The pace of business is fast, and America's small406businesses must be able to move quickly to remain competitive.407An agile SBA, equipped to scale staffing in response to loan408volume and deliver timely approvals is essential to supporting409the growth and success of our nation's entrepreneurs.410    I respectfully request that you continue your efforts to411strengthen and simplify the SBA 504 Program to ensure that412growing manufacturers can expand capacity, compete413internationally, and create more U.S. jobs.414    Thank you for considering these requests to improve the415valuable support the SBA provides to American manufacturers416through the 504 Loan Program.417    [The prepared statement of Mr. Swanson follows.]418    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]419420    Chair. Thank you. And now, Mr. Raccio, you are recognized421for five minutes for your testimony.422423  STATEMENT OF MR. DAVID P. RACCIO, SENIOR VICE PRESIDENT AND424     DIRECTOR OF SBA LENDING, CDC NEW ENGLAND, WAKEFIELD,425                         MASSACHUSETTS426427    Mr. Raccio. Chair Ernst, Ranking Member Markey, and428distinguished members of the committee, thank you for the429opportunity to testify today. I am honored to join my430colleagues from the CDC industry to discuss the SBAs 504 Loan431Program.432    My name is Dave Raccio and I serve as the Senior Vice433President and director of SBA lending at CDC New England, which434is located in Massachusetts. We provide SBA 504 loans across435five New England states, which include Massachusetts,436Connecticut, Rhode Island, Vermont, and New Hampshire. And we437are consistently ranked in the top 15 CDCs nationwide. Since438our funding in 1982, we have delivered more than 1,600 loans439totaling over $1 billion in SBA financing, helping to create440and retain more than 25,000 jobs.441    The SBA program is unique. It provides small businesses442with long-term, fixed rate capital for real estate and major443equipment purchases while requiring measurable economic impact.444In short, the program fuels growth, creates jobs, and445strengthens communities, all while operating at zero subsidies446to taxpayers, and a remarkably low one-year charge off rate of4470.08 percent.448    As an industry, CDCs are proud of these accomplishments.449That said, modernization is needed. I'd like to highlight four450key areas where immediate reforms could expand impact. Number451one; clean energy. In June, 2025, the SBA reimplemented an452arbitrary $16.5 million cap on energy projects and provided no453data to support the need for such a cap. I recommend this cap454be lifted to meet growing demand. We often have repeat455customers, and we want to make sure they have continued access456to capital to continue to grow their businesses.457    A prime example of a business we assisted with the 504458energy efficiency program was the SBO Sports Center in459Massachusetts. This company has been an outstanding corporate460partner, not only providing free clinics for children of all461ages, but also generating significant economic activity and462local jobs.463    To date, they have received three separate 504 loans and464continue to grow their business. Today, in recognition of these465contributions, the company was honored as a 2024 Massachusetts466family-owned business of the year.467    Number two; manufacturing and standard 504 limits. As an468industry, we support increasing the SBA 504 loan maximum from469$5 million to $10 million for manufacturers. If we are serious470about revitalizing U.S. manufacturing, we must provide the471capital tools needed for expansion. We also must address472inflation in the loan limits for traditional 504. The current473statutory caps have not been raised in more than 15 years. I474recommend increasing these limits to $7.5 million for standard475504 loans and $10 million for manufacturers and renewable476energy projects. This will account for inflation and continue477to provide businesses with the capital they need to grow and478create jobs.479    Number three; citizen verification. New SBA rules require480businesses to be 100 percent owned by U.S. citizens, nationals,481or long-term lawful permanent resident. This change is already482shutting out otherwise strong businesses.483    We recently saw a stone importer, which was 85 percent484owned by a female U.S. citizen denied financing because 15485percent of the ownership was held by her father from Brazil who486provided the original startup capital. This policy unfairly487blocks U.S. citizens from accessing growth. Capital SBA should488revert to its longstanding more reasonable guidance.489    Number four; down payment assistance. Our CDC provides down490payment assistance designed to reach underserved borrowers and491businesses in low to moderate income areas. For example, we492recently helped an African American women-owned business secure493$100,000 down payment to purchase her building for her school494serving children with autism.495    With this support, she was able to move forward, and today496her school is thriving, expanding, and providing stability and497jobs for the families who depend on it. We also worked with a498business owner in East Boston whose project qualified as both499minority-owned and located in a low to moderate income500community. With down payment assistance, he was able to expand501his business and successfully repurpose a mixed-use property.502    These stories show just how powerful targeted support can503be with the 504 Program. Small businesses don't just grow, they504build stronger, more resilient communities.505    In conclusion, the SBA 504 Program is one of the most506effective federal tools for supporting small business, creating507jobs, and strengthening communities without taxpayer subsidy.508By lifting outdated loan limits, restoring fair citizenship509rules, and expanding down payment support, we can ensure the510program continues to serve America's entrepreneurs for decades511to come.512    I thank the committee for your leadership on small business513issues and look forward to your questions.514    [The prepared statement of Mr. Raccio follows.]515   [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]516517    Chair. Thank you very much, Mr. Raccio. And now, we will518recognize Ms. Wojtowicz. And you are recognized for five519minutes for your testimony.520521 STATEMENT OF MS. JEAN WOJTOWICZ, EXECUTIVE DIRECTOR, INDIANA522              STATEWIDE CDC, INDIANAPOLIS, INDIANA523524    Ms. Wojtowicz. Thank you, Chair Ernst, Ranking Member525Markey, and distinguished members of the committee. Thank you526for inviting me to join you today. I'm honored to represent the527Certified Development Company industry to discuss the 504 Loan528Program, which is firmly focused on economic development and529job creation.530    My name is Jean Wojtowicz, I am the executive director of531Indiana Statewide CDC. Through this entity, we have funded more532than $750 million in 504 loans, and leveraged more than $2.2533billion to over 1,500 Indiana companies, many of them534manufacturers and companies located in rural areas. I'm also a535past chair of NADCO, the trade association that advocates for536the 504 Loan Program, and serve on the board of Eagle537Compliance, which is the fiscal agent that sells the debentures538that fund these loans.539    CDCs are SBA-certified organizations dedicated to creating540jobs and growing local businesses by delivering the 504 Loan541Program. Many CDCs also deliver other federal, state, and local542lending products and must invest in economic development beyond543the 504 Program. This highly successful public-private544partnership is structured with 50 percent provided by a private545lender, 40 percent through the SBA backed CDC debenture, and 10546percent by the borrower.547    This structure supports liquidity, retention and working548capital preservation as a result of the low down payment, with549terms conventional lenders rarely provide. The structure and550terms provide certainty and help borrowers manage cash flow551fluctuations that come with expanding a business and employing552more citizens in their communities.553    On March 10th of this year, Administrator Loeffler, along554with Senator Young, and others, kicked off the Made in America555tour in Indianapolis at Aerodyne Engineering, who utilized the556504 Loan Program four times to support their growth and557expansion. It is companies like Aerodyne that are the backbone558of growth, innovation, and the creators of jobs for citizens559all over our country.560    The CDC lending industry is proud of the work we're doing561to support these companies, and we know the 504 Loan Program562can do more. We have several recommendations that would enhance563the program and allow us to serve more growing businesses.564    Number one; pass the Made in America Manufacturing Finance565Act. The CDC industry supports increasing the manufacturing566loan size for borrowers to $10 million. This statutory change567would support the scaling of domestic manufacturing since a $10568million 504 loan could support a total project cost of up to569$25 million.570    Number two; reduce the equity contribution from571manufacturers from 10 percent to 5 percent. Manufacturing is572capital intensive, and reduced equity requirements will573encourage investment and job creation while preserving critical574working capital. These companies need to expand.575    Number three; modernize the 504 loan size limit for all576borrowers. We would ask you to consider raising the cap for all577borrowers to $7.5 million and index it to inflation reflecting578the growth since the last adjustment was made in 2010.579    Number four; eliminate the extra 5 percent borrower equity580injection requirement for special purpose properties. This581requirement negatively impacts borrowers and SBA's charge off582data shows that these properties do not present a higher credit583risk.584    And number five; continue separating the 504 and 7(a) loan585programs as they have separate purposes. The 504 Program is586focused on fixed asset financing, supporting job creation, and587economic development. The ``credit elsewhere test'', which is a5887(a) program requirement, should not apply to the 504 Program.589    In conclusion, since 1986, the 504 Program has assisted590over 200,000 small businesses with nearly $140 billion in591loans, and a total investment of almost $400 billion and the592creation of 3.3 million jobs. And it has done so with a charge593off rate of only 0.08 percent for the most recent year.594Enacting these recommendations will make the program more595effective and accessible, allowing more small businesses to596grow, create jobs, and strengthen our economy.597    Thank you for your leadership on small business issues and598the opportunity to testify today. I look forward to your599questions.600    [The prepared statement of Ms. Wojtowicz follows.]601    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]602603    Chair. Thank you very much. And finally, we will hear from604Ms. Kennedy. You are recognized for five minutes.605606 STATEMENT OF MS. HILDA KENNEDY, FOUNDER AND PRESIDENT, AMPAC607             BUSINESS CAPITAL, ONTARIO, CALIFORNIA608609    Ms. Kennedy. Thank you, Chair Ernst, Ranking Member Markey,610and distinguished members of the committee. I'm delighted to be611here as well to represent the CDC industry and is to discuss612the 504 Loan Program, the agency's premier economic development613program.614    This year, AmPac proudly celebrates 20 years of service615committed to serving small businesses and targeting those who616control, own, and control little productive capital. As stated617in the Small Business Act of 1953, through our partnership with618SBA, AMPAC has leveraged the SBA 504 Program to provide more619than $2 billion in loans and creation of over 7,700 new jobs.620    I want to focus my comments on three primary areas; energy621efficiency, down payment assistance, and citizenship. The622Congressionally authorized energy policy goals signed into law623by President Bush in 2007 are delivering significant results.624In California, where we serve Dahdoul Textile, a family-owned625wholesaler and retailer of consumer goods, is a shining626example.627    They've used the SBA financing multiple times and have628created new jobs with each expansion. In the last two years,629they acquired two locations using the 504 energy public policy630goal. They installed solar panels, and benefited from greater631cost savings. With these two recent projects, Dahdoul created63233 new jobs, and revitalized two vacant stores.633    SBA's current $16.5 million cap on energy-related 504 loans634limit businesses like Dahdoul from additional SBA financing to635expand, reduce energy costs and create jobs. Eliminating the636cap would ensure that small businesses can fully leverage637energy efficiency and long-term growth and sustainability.638    As noted, the 504 Program follows a basic structure. 50/40/63910. 10 percent represents borrower equity. However, many small640businesses, especially first-generation entrepreneurs and641first-time commercial real estate buyers, may have 10 percent642down, but the working capital is not there for growth. At643AmPac, we launched our first ``It Is Possible'' down payment644assistance loan program to help small businesses.645    And I want to tell you about Jerry. He's the owner of646Riggins Urban Barber College. He's a Navy veteran who's647dedicated his life to giving young men and women a second648chance by training them in barbering. As a first-generation649entrepreneur, when he bought his building, AmPac's down payment650assistance helped him to restore cash to support his expansion651and add for new jobs.652    I recommend establishing a pilot program under the 504 loan653program for first-time commercial real estate buyers to qualify654with 5 percent down, which would act as a floor and not a655ceiling, and allow CDCs' flexibility to make credit decisions656that also maintain our 0.21 percent default rate as noted in657Fiscal Year 2024.658    I want to also highlight recent changes in the SOP659regarding citizenships. That's limited to 100-owned by U.S.660citizens, U.S. nationals, and lawful permanent residents. I661fully support SBA resources going to U.S. citizens, but this662change has negatively impacted some majority-owned and663controlled U.S. citizen businesses.664    One such business is a private school in Orange County,665founded by three partners, two U.S. citizens, and a minority666partner with 6.5 percent stake. The schools were looking for a667504 loan, but we were not able to help them because of this668change.669    I recommend restoring the SOP language that allowed SBA670financing for businesses that were majority-owned and671controlled by U.S. citizens by addressing citizenship, clean672energy, and down payment assistance, as well as a thoughtful673adjustment such as increasing 504 size limit and for674manufacturing businesses.675    The SBA can fulfill its Congressional mandate to fill676market gaps for America's entrepreneurs and build on the677economic development mission of the 504 loan program.678    Thank you so much for the invitation, and we welcome your679questions.680    [The prepared statement of Ms. Kennedy follows.]681    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]682683    Chair. Wonderful. Thank you very much. And now we will go684into our question and answer portion of today's hearing, and I685will recognize myself for five minutes for questions.686    And I'll start with Mr. Swanson. So, Mr. Swanson, thank you687for making the trip to Washington, and for representing Iowa688small businesses. In your testimony, you describe how you689bought your business from an international owner and then used690the SBA's 504 loan program to both purchase your business'691building, and then expand your operation in Iowa.692    Can you describe the investments that the 504 Program has693enabled you to make, and how the program helps small694manufacturers secure the capital they need to expand operations695and maintain a steady pace of modernization?696    Mr. Swanson. Thank you, Senator Ernst. In our case, the697structure of the 504 Program was essential for us as a698relatively new ownership group to afford even considering the699purchase of the building. And what that enabled us to do is700secure the future of our business in that location within a701purpose-built structure that, that met our needs very well.702    The expansion following behind that, again, with the 504703Program was a very attractive way that we could do that while704still maintaining enough working capital continue to hire the705staff that we were building back.706    As I indicated in my comments, additionally we were in need707of bringing in more production equipment. And so, again, by708having the capacity to continue to make those in incremental709investments over the growth of our business, that is the end710result of how we use that, the program, and how it benefited711us.712    Chair. Wonderful. I appreciate that. And then713modernization, continual modernization. Really appreciate that.714    Mr. Swanson. Constantly. And we've made more investments715this year in some new capabilities, a laser welder, plasma716table, all things that we didn't have the internal capacity to717do before. And it just all helps drive more of our capabilities718internally.719    Chair. Fantastic. Thank you. And Ms. Wojtowicz, over the720last five years, we have seen demand for larger loans within721this 504 Program. They've steadily increased. In Fiscal Year7222021, only four percent of loans reached the program maximum723compared to over nine percent in Fiscal Year 2025. Over that724same period, the share of these large dollar projects for725manufacturers has grown at an even faster rate, nearly726tripling.727    My Made in America Manufacturing Finance Act in conjunction728with Senator Coons--and thank you for partnering; really729appreciate that--would double the loan limits for small730manufacturers. So, if you could explain for us, what are the731benefits of expanding the 504 loan program's limits for small732manufacturers, and how can we do that while also mitigating733taxpayer risk?734    Ms. Wojtowicz. Thank you, Senator Ernst, and thank you for735introducing that bill. We think it's going to be extremely736impactful to manufacturers. Indiana is a very high level of737manufacturing state. In fact, 45 percent of our 504 loans that738we've made have been to the manufacturing sector. So, clearly739important to our state and to the employees that work at those740companies.741    If you think about the cost of manufacturing, much of this742equipment is multimillion dollar pieces of equipment. And for a743company to expand, like Mr. Swanson's has expanded, and having744to continue to bring current equipment in that will increase745efficiencies and keep those companies competitive, is extremely746important.747    And so, not only do we use the higher loan limits so that748they can build larger buildings and employ more people, but749certainly also to purchase and put into production the very750large pieces of equipment that are necessary for those751companies to remain competitive and to continue to grow. So,752it's extremely important to see those loan limits increased.753    Chair. Oh, we appreciate the feedback very much. And just754very briefly, Ms. Kennedy, I've always prioritized ensuring755that the SBA programs provide that meaningful support to rural756small business owners who often face substantial challenges in757getting adequate access to capital. We hear about that all the758time. Could you just briefly walk us through any efforts you've759made to support rural small business owners?760    Ms. Kennedy. Thank you so much, Chair Ernst. We have761actually made a number of loans to rural businesses. In fact,762about $70 million in 504 lending to rural businesses as well as763loans to businesses for Microloans and Community Advantage764loans. 2.3 million residents in California are rural, or 5.8765percent of the population. So, it's a very important part of766the business that we do in the state. So, thank you for the767question. Really appreciate that.768    Chair. Thank you. And now I recognize Ranking Member Markey769for five minutes.770    Senator Markey. Thank you, Madam Chair, very much. And as I771said in the opening, Senator Ernst and senator Coons'772Manufacturing Act is one step forward. But as I also pointed773out, President Trump's policies are four steps backwards for774manufacturers at the same time, which is still hurting our775economy.776    And as I mentioned in my opening, Trump's SBA new severe777citizenship verification requirements are cutting off small778business access to capital. These requirements specifically bar779small businesses with any amount of foreign investments or780ownership through individuals lawfully in the United States of781America, including DACA recipients and refugees from receiving782a loan.783    Now, to qualify for an SBA loan, small businesses must be784100 percent owned by U.S. citizens, nationals, or green card785holders. Not even one percent can be owned by someone with a786different legal immigration status. Let's just say your father787from Brazil, one percent, you're up.788    Mr. Raccio and Ms. Kennedy, I'm concerned about the789chilling effects that these requirements will have on790entrepreneurs looking for an SBA loan. Can you expand on how791U.S. small businesses and local communities are hurt by these792new requirements? Mr. Raccio.793    Mr. Raccio. Thank you for that question, Senator Markey. It794has been challenging for many small businesses. As I alluded to795in my testimony, we did have the Brazilian family that was796unable to obtain a loan. We also had a more recent example in797your home state of Massachusetts with a 80 percent American798citizen, a 10 percent two-year green card holder, as well as799someone on a work visa owning the other 10 percent. That800project was not able to move forward based on an ownership. So,801that was difficult.802    While we won't be able to completely quantify who is not803applying, we are confident that we are seeing businesses not804applying due to the lack of 100 percent ownership of a U.S.805citizen or lawful permanent resident. We would urge the806committee to return to the previous rules that allowed 51807percent ownership.808    Senator Markey. Right. And 30 percent of all companies in809Massachusetts are started by immigrants. So, that's a story810across the whole country, too. So, it gets complicated. Ms.811Kennedy.812    Ms. Kennedy. Senator Markey, we too. That matter regarding813100 percent citizenship, especially in the state of California,814has been significant. And one of the examples that I included815in my written testimony was a returning SBA 504 customer that816we had served a local winery. Really a beautiful business,817family-owned business in the community.818    And they have a partner that is a 30 percent owner that is819a Canadian native, a Canadian citizen. And when that first loan820was done, we were able to serve that business because it's821majority-owned and controlled by a U.S. citizen. When they came822back to us, we were not able to serve that business because of823the new citizenship rule.824    And I agree with my colleague that if we rolled back to the825requirements in the SOP that this change, we would be able to826serve locally-owned, majority-owned and controlled U.S.827citizens who are creating jobs here in America.828    Senator Markey. Okay, thank you. So, small businesses are829required to use the loans to accomplish certain goals,830including to reduce energy consumption, increase the use of831sustainable designs that reduce greenhouse gas emissions and832use renewable energy.833    These energy goals were passed on a bipartisan basis,834signed into law by President Bush in 2007. I know because I835stood over his shoulder when he signed it because I was the836Democratic author of the bill. So, Mr. Raccio, can you explain837how loans used to meet the clean energy goals have helped small838businesses and their communities?839    Mr. Raccio. Absolutely. Thank you, Senator, for that840question. We have had a lot of good success stories. One, as I841mentioned earlier in testimony, was SBO Sport that was able to842do multiple projects utilizing renewable energy.843    As a matter of fact, they've had such success with the844solar project they've done that they're able to feed845electricity back to the grid. So, it's been a very nice project846where they're able to provide other small businesses energy at847peak times, all while creating jobs and growing their own848business by being able to sell some of this energy back.849    We also see many hotels that are doing this as well.850They've got large flat rooftops. They are traditionally capped851at the traditional 504 loan amount. So, by utilizing a852renewable energy project, they're able to put solar panels on853the roof, save themselves energy usage, and also move forward854and obtain the financing that they're looking for.855    Senator Markey. Thank you, Mr. Raccio. Thank you, Madam856Chair.857    Chair. Thank you, Ranking Member Markey. And now, I858recognize Senator Jon Husted for five minutes.859    Senator Husted. Thank you, Chair Ernst. I want to just860reflect a little bit on some of the conversations I've had with861Ohio businesses over the past few months because they were862grateful that they have a more stable environment to operate in863this country since the passage of President Trump's budget864reconciliation bill, which passed here and was signed into law865on July the 4th, which included expanded pass through income866deductions, a hundred percent immediate expensing of business867investments, an R&D expense and deduction for domestic R&D868costs so that we can invest through the private sector in869advancing innovation, employer-provided childcare credits and870other employee benefits.871    And I know that in talking with them. Like, what does this872mean to you? What does it mean? It means more cash flow. It873means more liquidity, lower compliance costs, greater874incentives, and incentives to hire people. And because they can875provide additional benefits to their employees and it876encourages them to invest so they can compete with people877around the globe.878    And I know that's hard for small businesses, but we've done879a great deal, and we can do more to create a better business880environment in this country. But I was reflecting on Ms.881Wojtowicz's testimony here. You said something that struck me.882Indiana, Ohio, we have a lot of manufacturing in our respective883states, and I know Chair Ernst touched on this as well, that we884want to do Made in America.885    We say we want more manufacturing jobs in this country. We886know that all states are not made the same. Some have a high887amount of manufacturing in their respective states as a part of888their economy. And you said one of your recommendations--I want889to give you a chance to just explain why you believe this is so890important.891    Because I agree with you that Congress should expand access892to the 504 loan program to enable manufacturers to retain more893capital by reducing the borrowing equity injection from 10894percent to 5 percent. It's almost a penalty to be a895manufacturer even though those sites are coveted in states like896ours where people want to have access to those facilities. And897just talk about how you think that this will help boost898manufacturing in your state and the country.899    Ms. Wojtowicz. Certainly, Senator, thank you for the900question. And manufacturing is critically important to our901country in every state. And those states like ours that are902heavy manufacturing-focused states, it's even more important in903the manufacturing sector.904    Again, buildings and equipment are extremely expensive, and905often, those companies have working capital needs that are906extreme as well. So, by limiting their down payment from 10907percent to 5 percent, they'll be able certainly to have more908working capital.909    But let me take one other step on there, because many of910these manufacturing sites have rail access, which is critical911to them to be able for them to deliver goods. If a rail site is912on that property, it is currently classified as a special913purpose property and they have to put another 5 percent down as914equity.915    So, instead of in a typical manufacturing project being 50916percent bank, 40 percent CDC, 10 percent equity, if there's a917railroad spur on that property, the borrower has to put down 15918percent and only get 35 percent of the very attractive SBA 504919financing with a long-term fixed rate.920    So, we're looking for all companies that are special921purpose, and there are many, to not have to have that 5 percent922penalty. And specifically, for manufacturers, to be able to923reduce their equity contribution from 10 percent to 5 percent.924    Senator Husted. And if you talk to a manufacturer, they925need to compete because we have higher wage rates in our926country. So, to compete, they have to have the capital to buy927the new machinery and equipment that they can to up their928productivity gains so that they can actually compete. This is929an important part of them having the capital to do that in the930big scheme.931    Ms. Wojtowicz. Extremely important. So, they not only have932to invest in that capital, and having a 10 percent down payment933pulls some of the working capital out of the business.934    Senator Husted. I see Mr. Swanson smiling and shaking his935head. I think he wants to say something here. Would like to936add?937    Mr. Swanson. Oh, Senator, I was just nodding in agreement.938There's only one pool of capital we have available as a939company. We have to elect where to deploy that, whether it's on940equipment purchases and modernization, or hiring more staff, et941cetera. So, my colleague's point is exactly on target with942that.943    Senator Husted. Great. Thank you.944    Chair. Thank you. Senator Coons.945    Senator Coons. Thank you, Chair Ernst, Ranking Member946Markey. And thank you to our four great witnesses today.947    Not everybody finds manufacturing capital needs riveting,948but I do. I'm excited about this hearing. I think this is949interesting. We all find manufacturing exciting. Some of you950know I spent a decade in manufacturing before I ever ran for951office, and then as county executive, and now as Senator, work952closely with the CDCs in Delaware and with those who help with953capital lending, and who compete globally as small and medium954sized American manufacturers.955    So, Mr. Swanson, Mr. Raccio, Ms. Wojtowicz, and Ms.956Kennedy, thank you for what you do as small manufacturers, as957CDC lenders, to help deploy the resources of the 504 Program.958And thanks for helping us understand how the 504 Program helps959bridge the gap, and CDCs help originate and put together and960secure these.961    I am proud to work with Chair Ernst on the Made in America962Manufacturing Finance Act, recently approved by this committee963and its corollary in the House by voice vote to increase the964loan size available to small manufacturers.965    Mr. Swanson, in your prepared testimony, you discussed the966challenge of competing in foreign markets. I think you spoke967earlier about competing in Brazil. How does the guaranteed968lending offered by the 504 Program allow small manufacturers to969successfully compete globally?970    Mr. Swanson. Well, thank you, Senator Coons. The starting971point I would refer to would be as was discussed by allowing us972to continue to invest particularly in the kinds of capital973equipment. That can be extremely useful for us to offset the974challenges of labor supply, and with allowing us to, in our975case, the specific requirements to produce the high-tech976equipment that we're manufacturing. We leverage those977advantages in, in terms of the international markets that we978pursue.979    Senator Coons. I remember meeting with Miller Metal in980Bridgeville, Delaware, my first year as a Senator and seeing981how both SCORE, which is an organization founded in Wilmington,982Delaware of business executives who volunteer and consult, and983the Manufacturing Extension Partnership Program helped this984small, family-owned metal pressing and bending company figure985out what capital investments they needed to make to get a986cutting-edge bending, and welding, and punching machine. And987then, they successfully competed against a Chinese manufacturer988for a small part that went into thousands of assembled, what I989would call a Hi-Fi system, but a stereo system. It was amazing990to me a company from Bridgeville could compete directly with a991Chinese manufacturer and win.992    I was concerned to hear that their funding had been held up993for months, and they were beginning to lay off people994federally. They have 10,000 volunteer mentors. It's the most995cost-effective federal program known. I was relieved to find996out today that those withheld funds are now being released and997flowing. You mentioned SCORE and other resource partners in998your written testimony. How do they help reinforce your work999delivering capital to manufacturers?1000    Mr. Raccio. Thank you, Senator Coons, for that question.1001They help on almost a weekly basis. SCORE has been a monumental1002partner in helping our small businesses, whether it's finding1003access to certain SBA programs, helping them with business1004plans, is often critical for our small business partners.1005Whether they're looking to expand or simply start and they're1006not sure how to go about it.1007    Specifically, in New England, we have a lot of retired1008executives that have an extreme amount of industry knowledge,1009so it's been a really good partnership with SCORE. They'll also1010pair up with SBDC as well and work with them. So, they're out1011at events. They are a great product. Great set of people. I'm1012glad the funding was released. But they are out there and1013working with our businesses every day.1014    Senator Coons. Last question for anyone on the panel, if I1015might. There have been proposals to cut the SBA workforce by as1016much as 40 percent. At least in Delaware, I've seen how having1017the SBA office and staff with connections, and resources, and1018experience helps facilitate access, particularly to1019manufacturers who tend to be overextended, and overstretched,1020and only know about these programs because there's staff1021available to help with the outreach.1022    What sort of impact do you think we would see if they1023actually carry through with dramatic cuts to the total SBA1024staff? Anybody jump ball? Ms. Kennedy.1025    Ms. Kennedy. Senator Coons, thank you very much for the1026question. You know the SBA staff is so resilient. We've just1027found them to be so committed to getting the work done and1028partnering with other economic development organizations like1029CDCs that we would all have to jump in because small businesses1030are that important to our local economies and to creating jobs.1031    And so, certainly, cuts always hurt, but the rally for1032small businesses is absolutely there in our local communities,1033and we want to make sure that those employees are there for1034serving our community, but as well as having those partners1035like SCORE. So, that was really good news to hear. So, thank1036you for delivering that, too.1037    Senator Coons. Thank you. And thank you, Madam Chair, for1038the chance to work with you to help provide more capital to1039America's small business manufacturers.1040    Chair. I'm so glad to partner with you. Thank you. And,1041Senator Shaheen.1042    Senator Shaheen. Well, thank you, Madam Chair, and thank1043you to all of our witnesses today. We're really delighted to1044have you here and to have your experience to share with us.1045Just following-up on Senator Coons' question about staffing1046shortages. One of the things that I've heard from some of my1047constituents in New Hampshire is that 504 approvals are taking1048longer in large part due to staffing cuts, and the loss of some1049of the experienced staff that have been working on these kinds1050of loans for a long time.1051    Can any of you speak to what difference it makes when it1052takes longer to get a 504 loan approved? What does that mean1053for the small businesses who are affected?1054    Mr. Raccio. Thank you for that question, Senator.1055Absolutely, it impacts our businesses and their ability to1056close on loans, whether it's real estate that needs to be1057purchased. For example, we had a recent deal where there was a10581031 real estate exchange which is a federally-timed product1059where we have to close. And we're waiting, and the business is1060very nervous if they're going to get the approval.1061    So, that's just one example of where when there are time1062delays it's very sensitive to the businesses, and it often1063leaves them feeling anxious, noticeably so. So, anything we can1064do to increase turnaround time, and have that accountability1065and predictability for the small businesses that they know,1066whether it's 5 days or 10 days, that would be immeasurable to1067the small business to know when they start their loan1068application with us, in this certain amount of time, they're1069going to have a decision.1070    Senator Shaheen. Thank you. Does anybody want to add to1071that?1072    Ms. Kennedy. Senator, it's a great question. And again, I1073would say to you that SBA staff is so resilient in terms of1074trying to make sure they serve small business. They're1075committed to that. But I agree with my colleague, time matters,1076and time kills deals. And so, it's really important to have1077that level of certainty when they submit a loan that we can get1078that approved in a timely manner.1079    Senator Shaheen. Thank you. I appreciate that. And I would1080agree with you, the SBA field staff in New Hampshire is1081tremendously resilient and do a great job. And my experience is1082that all of the other SBA folks that we've worked with are in1083that category.1084    I know that Senators Young and Klobuchar have worked1085together on some improvements to the 504 Program. One change in1086particular that they've proposed that I think is really1087important is shifting the occupancy rates to make it easier to1088use a 504 loan for mixed use building.1089    New Hampshire, like so many states is really an affordable1090housing crisis. There are a lot of New Hampshire towns that1091have main street buildings that are no longer occupied that1092could really benefit from investment to allow them to be used1093as housing, as well as commercial space.1094    So, I know, Mr. Raccio, or at least I understood, that you1095may have looked into this issue and maybe others have as well.1096Do you think that changing those occupancy requirements would1097be helpful as we're looking at how do we address both small1098business issues but also some of the housing challenges that we1099have in states?1100    Mr. Raccio. Thank you, Senator, for that question. Yes, we1101would absolutely love to be able to change the occupancy1102requirements to a 50 percent owner-occupied versus 51 for1103existing and 60 for ground up new construction. What that would1104really do is it would allow more SBA borrowers to get access to1105these capital funds to purchase real estate.1106    We're often involved as a panel with customers that are1107buying much like you mentioned, Senator, buildings that may1108have two floors, you know, might have some investment space to1109it, which is great for our borrower to have some of that1110accountability.1111    And believe it or not, sometimes, especially in New England1112where I lend, we have a lot of buildings that are identical up1113and down. So, you're stuck at 50 percent. Yes, we understand1114that can't move forward. So, it would be really nice to be able1115to have it be 50/50, and be able to have more access for1116capital to borrowers.1117    Senator Shaheen. So, you said 50/50 on existing buildings,1118but what did you say about new buildings?1119    Mr. Raccio. Same. 50/50.1120    Senator Shaheen. Do others want to address that? Ms.1121Wojtowicz.1122    Ms. Wojtowicz. Thank you, Senator. I would like to just add1123a little bit of clarification, because the current SOP also1124requires that even if it's at 51 percent, that over a period of1125time, they occupy up to 80 percent. So, that would not allow1126those kinds of projects to go forward unless we address both1127sides of that issue.1128    Senator Shaheen. Oh, that's a really good point. Thank you1129very much for that. Thank you-all very much for your testimony.1130    Chair. Thank you. Senator Rosen.1131    Senator Rosen. Well, thank you. Thank you, Chair Ernst,1132Ranking Member Markey, for holding this hearing. I love to see1133everyone is smiling and agreeing. And this is a--you know, this1134committee, small businesses, the backbone of our country. And1135in Nevada, we have 280,000 small businesses. That's 99 percent1136of businesses in Nevada are small businesses. And right now, we1137have almost 100 approved 504 loans for, I think, over $1201138million total. And we want to keep that going. So, thank you1139for all being here.1140    And I know supporting clean energy businesses has been1141brought up by Senator Markey. I want to build on that a little1142bit because we know a little something about that. Nevada and1143some more, supporting small business in the clean energy SEC1144sector is beneficial for local national economies. Seeing these1145benefits firsthand.1146    Nevada is a leader in clean energy with the most solar jobs1147per capita of any state. We got plenty of Sun. We farm the Sun,1148Iowa, you've got the corn. Nevada, we've got the Sun, right? We1149farm what we can, and we're still growing. Last year, Nevada1150had its greatest expansion of solar capacity in a decade, which1151will create even more economic opportunity for clean energy1152small businesses.1153    So, this means a cancellation for funding streams like1154solar for all program and cuts to the clean energy tax credits1155in the recently enacted reconciliation bill. Well, it's going1156to have a devastating impact on the small businesses. We have1157tons of small businesses that make all the pieces and parts1158that go into building solar panels, a solar field, and all that1159support. And it's really important. We have a lot of businesses1160for our broader clean energy economy. So, due to these cuts,1161businesses in Nevada, they're uncertain. Will they close? Will1162they stay? Will they go? And it's a very, very stressful time1163for us.1164    So, Ms. Kennedy, you mentioned in your testimony a1165successful clean energy project in Reno. Thank you very much.1166It utilizes 504, maybe one of these nearly 100 programs. Can1167you speak to the importance of directing investment to emerging1168industries like clean energy and the ways we can make it1169easier, especially for those? We have wind, water, solar,1170geothermal, that's what Nevada has, our geography and geology1171and we want to be able to leverage that 504 funding.1172    Ms. Kennedy. Well, thank you so much, Senator. And we1173certainly agree with that. When we think about that Somerset1174Reno project where we were able to assist a business that had1175gotten multiple SBA loans in California and moved into Reno. To1176do another Memory Care facility that included some senior1177housing as well, being able to get access to the SBA energy1178public policy goal and open up another location, creating over117970 jobs, a very significant project in Reno.1180    And so, being able to eliminate that cap, which was already1181in place in the previous administration, it really will make a1182difference for clean energy and energy cost, or increasing in1183states like California with all of the fires. And so, being1184able to sell back to the grid, as my colleague mentioned, being1185able to create that clean energy at solar and reduce energy1186costs is such a win-win for small businesses already dealing1187with so many additional costs.1188    Senator Rosen. I agree. Thank you. And I want to move on.1189You talked about affordable housing, but I'm going to move on1190about expanding SBA loans for affordable housings because our1191nation is facing a severe shortage of affordable housing. It's1192forcing families into housing insecurity. It's creating1193challenges for small businesses. It's dragging down our local1194economies.1195    And in order to address the housing crisis, we must support1196small businesses in the housing industry working to tackle this1197issue; home builders, contractors, all the support businesses1198that do that to ensure they have the capital that they need to1199contribute to their communities.1200    And so, I recently sent a letter to SBA and HUD urging them1201to work together to better support small business in the1202housing industry, including by opening up SBA capital to home1203building those developers. Affordable housing, it really makes1204a difference.1205    So, Mr. Raccio, can you give us any stories here, discuss1206how you're working with small businesses in the housing space,1207and any stories that you want to share in this time I have1208left?1209    Mr. Raccio. Thank you, Senator, for that question. As I'm1210sure you're aware, the SBA 504 isn't able to directly provide1211assistance for housing. But we do on a daily basis provide1212financing for some of those businesses to purchase their own1213real estate and expand.1214    I recently had a project up in Cape Cod, Massachusetts with1215a large contractor where we were able to utilize the SBA 5041216refinance program and help that contractor out to refinance 191217pieces of heavy-duty equipment such as excavators and1218bulldozers.1219    So, while we might not be able to directly provide funds to1220the end user as of today, we're certainly involved with the1221industry helping them out on a daily basis.1222    Senator Rosen. That's fantastic. Thank you. Well, it's an1223all of be above approach. So, thank you all for being here.1224Thank you, Madam Chair.1225    Chair. Absolutely. Thank you. And now I'll recognize1226Senator Hickenlooper for five minutes.1227    Senator Hickenlooper. Thank you, Madam Chair. This is a1228treat. We're watching you on TV. You don't see us all here, but1229we're watching, and really appreciate. There are not that many1230of us left, but I'm one the--I'm an entrepreneur in my own1231right. I started out as a geologist, and then in the big long1232kind of inflation--what'd you call it? The stagflation epics of1233the '80s, our company got sold and we all got laid off. And I1234was out of work for a couple years, but ended up opening a1235restaurant that brew its own beer.1236    And our lending parameters where no one--I went to 331237banks, and they turned me down every time. I was only trying to1238borrow 50 grand because the city would give us 125 grand,1239because we were at an abandoned warehouse district so they1240wanted to stimulate the area.1241    And so, we finally got open after all these banks--1242actually, the Women's Bank was the only bank that would give us1243a loan. And we had to put up about literally $150,000 worth of1244collateral, stock certificates, and house deeds to get a1245$50,000 loan.1246    Got going and things took off, and we needed--we had all of1247a sudden everyone copied us, and we had all these competitors.1248And we had to expand, and we were going to take this big old1249five story warehouse and put affordable housing up on top.1250Minor detail was, I didn't have any money still. We had a1251business that was doing great and cash flowing like crazy.1252    Anyway, the 504 program was what we used, and it allowed us1253to take the cash flow we have and then the asset. And we were1254gambling. If we put these millions of dollars into it, it would1255be worth this much more money. And it worked and really was--no1256one else would've talked to us, no one else would've given us1257that chance.1258    And I think if you look at so much of the good ideas and1259innovations that come out of this country, it's people that are1260not that smart. They're just about to lose their business, and1261they're fretting every hour, lying awake at night figuring how1262you're going to make payroll, how can you get more customers,1263how can you get a better margin on those customers?1264    And that's what creates that devotion to trying to solve1265your problems. It's is really what leads to solutions that a1266lot of other people benefit from. It turned out we ended up1267making a whole bunch of money out of it, but I never intended1268that. You know, the only reason I was a small business person1269was because I didn't want to have a boss. [Laughter.]1270    Anyway, I appreciate very much all of you and what you've1271done. And let me start off with Ms. Kennedy. You know, as I1272said, major investments in things where you've got fixed1273assets. It's amazing resource for our businesses. And I think1274the renewable energy, obviously, we've seen a bunch of that.1275One of our first bills that we introduced was going to allow us1276to use 504 programs to invest in energy efficiency or clean1277energy projects.1278    Sometimes it's hard to get that improvement in cash flow to1279be monetized. Now more than ever, we're seeing them use these1280investments to navigate the increasing costs and the new energy1281sources that will lower energy costs.1282    But in this past June, the SBA put a cap on 504 financing1283that a business could receive for energy projects just as it1284were at that point where suddenly we had a bunch of projects1285lined up and ready to come through that ultimately, I think,1286were those small businesses that were so neurotic and driven1287that they would've come up with the innovations and the great1288ideas.1289    So, Ms. Kennedy, I'd ask, how have small businesses used1290504 to invest in clean energy, and what does the cap do, in1291candid terms?1292    Ms. Kennedy. Thank you so much, Senator. As I mentioned in1293my written and oral testimony, this 504 cap will hinder small1294businesses from continuing to use the energy efficiency public1295policy goal by no longer being able to do multiple projects.1296    Dahdoul Textile is one of the businesses I mentioned. In1297Somerset, Reno, is another business I've mentioned. And we have1298a number of businesses in California, in particular, who could1299benefit from removal of that cap so that they can continue to1300grow using the energy public policy goal. It's really critical.1301In California, energy costs continue to go up because of the1302fires, and we need to have access to this particular public1303policy goal without those limitations.1304    Senator Hickenlooper. Great. Thank you. And can I steal1305another minute?1306    Chair. I suppose. [Laughter.]1307    Senator Hickenlooper. I told too long a story, and I1308apologize. Mr. Raccio, and I'll get rid of all the flowery1309preamble. But how do you describe how lenders can combine1310different types of financing to support businesses, and is1311there something we should be doing in Congress? Or is there1312something that we can kind of put our shoulder to the wheel,1313and try and get the SBA to do in terms of being innovative?1314    I ended up with four different loans to get that project1315done. And one of the great things about the 504 was it really,1316it would go below like the city loan, which just had a--it made1317all the difference.1318    Mr. Raccio. Thank you, Senator. We have an amazing tool box1319set of products, whether it's the 504 for a fixed capital asset1320or it's the 7(a) to help out with working capital, a lot of the1321tools that the everyday business owner is going to need. We1322have, I think, being able to increase some of those limits.1323    And also, having some accountability with regards to1324timeframes will really help to boost where we go with those1325products. So, I would think the panel would agree. We've got a1326really good tool set. Just listening to your story, listening1327to Karl's story, at the end of the day, when we're able to do1328these loans, we can see the excitement in your face. We really1329do make small business owners dreams come true. And it's not1330every day we can say that, but we really have clients like1331yourself that really love what they do and are excited about1332taking the opportunity to purchase real estate.1333    Senator Hickenlooper. Yeah. I appreciate that, and thank1334you-all. It's funny, I came very close to doing a brew pub in1335Indianapolis, and came very close doing one in Davenport. Rock1336Island actually is where we were looking, but in that Quad City1337stuff. So, anyway, thank you-all. I yield back.1338    Chair. Okay. If there are no further questions, I want to1339thank our witnesses for being here with us today. I ask1340unanimous consent that the record of today's hearing remain1341open for two weeks for members to submit questions, revise and1342extend their remarks, and submit additional information into1343the record.1344    Without objection, so ordered. And with that, the Committee1345on Small Business and Entrepreneurship stands adjourned. Thank1346you all very much.1347    [Whereupon, at 3:44 p.m., the hearing was adjourned.]1348    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]13491350                          [all]