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For agencies under the jurisdiction of the Financial Services and General Government Subcommittee. Today, we welcome the Administrator of the Small Business Administration, my friend and former colleague, Kelly Leler. Thank you very much for being here. I'd like to also extend a warm welcome to Senator Reid as the new ranking member of the subcommittee. I look forward to working with you, Senator Reid, in a productive and bipartisan manner to address the important issues that face our nation.
Small businesses employ 6.1, 61.7 million people, nearly 46.4% of the US workforce, and generate a comparable share of US economic activity. To drive, these businesses must constantly innovate, remain agile, and manage their resources carefully. Failure to do so can mean failure to survive. In contrast, some federal agencies seem to expand regardless of fiscal constraints, often without making difficult trade-offs that small businesses have to confront every day.
Administrator Leler brings with her a distinguished career in business. She understands what it takes to succeed and the challenges that entrepreneurs face. I trust you'll apply her vast experience to ensure the SBA operates efficiently and uses taxpayer dollars wisely.
The Small Business Administration's initial budget request proposes total funding of $600 million in 2026 to manage its operations, its grants, and its loans and its loan programs. This direct appropriation supports a massive lending portfolio as well. In the current fiscal year, the SBA will guarantee approximately $72 billion in business loans. This includes $35 billion under the 7(a) loan program, which is SBA's flagship tool. It's estimated to back over 50,000 loans through private lenders with SBA guarantees. The 504 loan program, focused on real estate and equipment, will provide another $16 billion. The Small Business Investment Company program will support $6 billion in private investment capital for small businesses. Finally, the secondary markets guarantee program will provide a $15 billion backstop to help lenders securitize SBA-backed loans and maintain liquidity.
Since most manufacturers in the United States are small businesses, the SBA is uniquely positioned to assist them in rebuilding their domestic supply chains. In addition to business lending, the SBA also plays a critical role in disaster recovery. And I want to thank the SBA for their critical work in helping Tennesseans recover from Hurricane Helen in East Tennessee. Disaster loans help individuals and businesses rebuild physical assets and recover lost income. Applicants must be located in federally declared disaster areas and meet credit criteria and repayment standards. These programs collectively represent an important source of credit helping both entrepreneurs and disaster survivors.
Thank you again, Administrator Leler, for testifying today. I look forward to hearing how you plan to manage your portfolio efficiently and responsibly. And now I'd like to turn to Senator Reid for his opening statement.
Well, thank you very much, Mr. Chairman, and thank you for holding this hearing. Uh, it is our first hearing as you noted and I look forward to working together as we advance the 2026 bill on a productive and very bipartisan basis. Thank you, Mr. Chairman, and welcome, uh, Administrator Leler, uh, and colleague Lela. Thank you for your service. Uh, you are here on behalf of the Small Business Administration and we look forward to your testimony.
As we all know, small businesses make up nearly 44% of America's GDP. In total, there are 34.8 million small businesses in the United States, which employ nearly half of American workers. In my home state of Rhode Island, there are over a 100,000 small businesses employing the majority of Rhode Island workers. But the uncertainty created by President Trump's tariff regime is putting many of these businesses at risk. Indeed, where margins are tight, disruptive tariffs can sink a small business. And despite the recent 90-day timeout on some of these tariffs, Yale University researchers say that our nation's tariffs are currently currently at their highest level since the Great Depression. These blanket taxes and tariffs, our taxes, are also raising costs directly or indirectly on every good that small business needs.
Indeed, I recently heard from Mills Coffee Roasting Company, a coffee roaster located in Providence that was founded in the 1890s. The President's blanket 10% tariff will increase Mills Coffee's cost by around $400,000 this year. That's a big number for a small business. And coffee can only be grown in certain climates, meaning there is almost no domestic alternative to the coffee beans they import. In other words, despite the president's claims, his tariffs on Mills Coffee simply punish American companies that provided jobs for over 150 years without bringing the production of their imports coffee beans back to the United States.
As the president's on-and-off again tariffs roil supply chains and small business finances, the question is, what is a small business doing to meet the moment? What we're seeing is cutting staff that respond to burned disasters, closing offices that help coordinate local businesses' access to SBA programs in times of economic uncertainty, freezing and cancelling millions of dollars in grants that help small businesses stock, grow, and thrive. And further, in President Trump's fiscal year 2026 skinny budget, the administration proposes cutting SBA by over 30%, including the elimination of nearly all of SBA's training, counseling, and mentorship programs that support small businesses across the country. And one asks the question, how does slashing these resources for small business help local companies grow or outcompete their foreign rivals? And it is obvious that this skinny budget eliminates 15 of the 16 entrepreneurial development programs, retaining only Small Business Development Centers. And one of those 15 programs slated for elimination is the SBA Veterans Outreach Program, which provides targeted veteran small business programming. And frankly, this is unacceptable. Veterans have served. They've earned the respect and more than the respect of the American people. And they're uniquely positioned to be small business owners given their leadership skills and what they've uh learned from military service. And in fact, we have to do much more, not less, for these veterans.
And Administrator Laughler, I look forward to working with you. But u we all understand, as you did, particularly as a senator from Georgia, that the power of the purse and responsibility to conduct oversight of the executive branch rests with Congress. So we would ask that you and your colleagues and uh fellow workers uh be responsive to us in terms of any requests we make for information. Uh, and in fact, 713 section of the Financial Services General Account Government Act uh explicitly bars any agency from preventing its employees to converse with members of Congress. And we were a bit uh troubled when SBA didn't bother to brief the subcommittee staff following its March 21st announcement that it would be slashing the AY's workforce by 43%. And uh the responsiveness has to be improved, frankly, Madame Director, and you appreciate that as a former senator. I'm sure many times you were frustrated and uh please remember those days. Um, there's a lot of work to do and we want to do it together and we want to make progress for the country. And thank you, Madam Administrator, for being here. And thank you, Mr. Chairman. Thank you to the Administrator. I'm going to turn to the Administrator now for her opening statement.
Thank you, Chairman and Ranking Member Reid, uh, and and Chairman Hagerty. Uh, certainly my thoughts are with Tennesseans as they endure, uh, the fallout from this crisis. Uh, the SBA will be on the ground with them. I want to say thank you to all the members of the committee. Thank you for the opportunity to appear before all of you today to discuss the President's fiscal year 2026 discretionary budget request for the US Small Business Administration. This budget reflects our AY's return to its mission with a clear strategy: streamline services, eliminate waste, and ensure every taxpayer dollar delivered measurable results for America's small businesses and taxpayers. It consolidates duplicative operations, shifts resources to our field offices on the front lines, and refocuses the agency on proven solutions, including our capital access program and nationwide network of Small Business Development Centers. It reflects the President's belief that small businesses are not just part of the economy, they are the engine of it. And that to build a stronger, more secure, and more prosperous America, we must put Main Street and our job creators first.
I'm pleased to report that under President Trump's leadership and through the reforms we've implemented at the SBA, that's exactly what's happening. Main Street is making a historic comeback. Since January, President Trump has cut core inflation to its lowest level since 2021. He's secured over $10 trillion in private sector investment and he's delivered half a million new jobs while deregulating after the last four years of massive bureaucratic expansion of the regulatory state. He's brought dozens of countries, including China, back to the negotiating table for fair trade deals. Job creators and workers once again know that they have a seat at the table and they know this administration has their back. Our economy is spring-loaded for growth, especially on Main Street. And I'm pleased to report that the SBA has never been more prepared to help small businesses lead the America First economic comeback.
Since January 20th, we've undertaken a sweeping overhaul of the agency to refocus it on its statutory mission of supporting small business and fueling economic growth through free enterprise. We're committed to cutting red tape, restoring accountability, and delivering capital to the job creators who power uh economic opportunity, growth, and innovation. When we arrived at the SBA, it was bloated and dysfunctional, weighed down by a work-from-home bureaucracy that promoted a partisan political agenda. The Biden administration presided over unprecedented levels of fraud and four straight years of failed audits. Our flagship 7(a) loan program was mismanaged to the tune of $400 million in negative cash flow in just one year. Oversight and accountability had broken down along with any sense of fiscal responsibility to taxpayers. Common sense had left the building along with our workforce. That era is over and it is a new day at the SBA.
I come to this role with three decades of private sector experience. Following an extensive review of the financials and operating metrics, I launched a full-scale reorganization to rightsize this agency, returning to pre-pandemic staffing levels. Our team is unleashing resources that had been consolidated in Washington back into the field among our 68 district offices in local communities. We canceled wasteful contracts for total cost savings of more than $3 billion. I'm proud that we're working alongside the Doge team who are not partisans but patriots and business leaders who care deeply about the financial future of this great nation. We also took urgent action to restore the financial integrity of our core loan programs by reinstating the lender fees and restoring underwriting standards, eliminating the "do what you do" criteria that put taxpayers on the hook for billions of dollars. We implemented new identity and citizenship verification protocols to ensure that loans only go to eligible businesses, not illegal aliens or fraudsters. We made it a priority to depoliticize the agency and end the era of picking winners and losers based on race or ideological belief. Replacing that with our nation's strong tradition of free enterprise, we eliminated DEI mandates, terminated the Green Lender Initiative, and withdrew SBA from voter registration schemes. We began relocating SBA offices out of sanctuary cities that refuse to enforce federal immigration law.
At the same time, we're helping rebuild American industry through the SBA's Made in America Manufacturing Initiative. We're backing new legislation, bipartisan legislation to give small manufacturers additional capital. And just yesterday, we introduced a first-of-its-kind onshoring portal to help small businesses find American-made supply chains and partners. The results are immediate and they're measurable. In our first 100 days, SBA loan approvals have skyrocketed by 80% compared to the same time under the last administration. Loans to the smallest businesses, those with five or fewer employees, have nearly doubled. And the share of federal contracts going to small businesses is now 23%, up from just 18% when we came into office. With new opportunity and a strong economic agenda, demand for capital is up, businesses are growing, and confidence is rising across the country. I'm proud to say this is not the SBA of the past. This is a leaner, stronger, and unapologetically pro-small business agency. It's one that supports American industry and its workers, that respects taxpayer dollars and will deliver results. I have seen the impact of these reforms firsthand. From Bay City to Boise, small business owners are expanding, hiring, and reinvesting in their communities. They know that for the first time since the first Trump administration, this administration is on their side. The SBA is once again serving the people who built this great nation. Not the globalist bureaucrats or partisan political interests, but the small defense manufacturer, the local construction company, and the tech tech company founders who put everything on the line to live the American dream.
Chairman Hagerty and members of the committee. As a former small business owner and employee myself, I believe firmly in the dignity of work, the American dream, and the power of free enterprise to uplift every job creator across this country. That's what guides our work at the SBA, and I'm proud to say it's also the vision that we're returning to at the SBA. Thank you so much, and I look forward to your questions.
Thank you, Administrator. And I I want to particularly applaud the SBA's efforts in the Made in America Manufacturing Initiative. And I especially want to thank you for spending National Small Business Week in my home state of Tennessee in Nashville, meeting with small businesses across the state. They really appreciated your presence there, uh, helping Tennessee small business owners, and I think everybody knows this, but these small businesses are the backbone of America, and I appreciate your commitment to helping our small businesses thrive. Uh, to advance this objective, the President has proposed moving new lending of up to $10 million per small US manufacturer uh from the SBA. Uh, are you intending to provide this funding from an existing program or from a new program?
Chairman, thank you for the question. And it was a great honor to celebrate National Small Business Week in in Nashville and talk to everyone from contractors to restaurants and see that businesses thriving. And um, that's what the uh Made in America Manufacturing Finance Act is about is to help our businesses thrive even more. The last time that a loan uh size increase happened was about 15 years ago. So, we're raising our manufacturing loan limits uh under the proposed bipartisan legislation from $5 million to $10 million that would be provided uh still at zero subsidy to taxpayers like our entire 7(a) and 504 loan program operates, meaning no cost to taxpayers because those loan programs are supported by annual lender fees and guarantee fees. So, no appropriation required, no additional appropriation. Unfortunately, the Biden administration had waived some of those fees and reduced them. So, that loan program under the four-year cohort of the Biden administration is negative cash flow to the tune of $2.2 billion. We will never let that happen and we will alert this uh uh committee should we have any further issues beyond that. But our program will operate at zero subsidy for taxpayers.
Got it. Got it. As Congress examines tax policy, can you explain how immediate expensing and tax cuts can on domestic production will be able to strengthen domestic manufacturing?
Well, absolutely. Um, that's what I hear as I travel across the country meeting with manufacturers. They are uh telling me that their business is spring-loaded for investment. Uh, these tax cuts are absolutely critical to not just manufacturers but to all small businesses who want to invest that next dollar but have the uncertainty that the tax bill uh still has not been passed. So uh, small businesses are telling me they need that tax bill more than anything. And we know that it it's not just spring-loaded, but between the access to capital we're providing, the tax cuts, the deflation, the counter-inflationary economic environment where investment is encouraged, that this economy is spring-loaded uh once the tax cuts come through.
I I couldn't agree with you more and I frankly think that uh as the as the investment occurs, more jobs will be created, more economic activity therefore occurs. This positive feedback loop is going to be extraordinary for the American economy and we'll be back on the same track we have been in the past. and I look forward to seeing your leadership in that. Um, Administrator, the Biden administration's agency, the Biden administration's agency rulemakings incurred nearly $1.4 trillion in incremental compliance cost. That's a drag on economic growth. The Trump administration and Congress have a clear mandate to streamline government operations and roll back excessive regulations. And I don't think this is deregulation for its own sake. It's about making the government serve our citizens more effectively. But some have raised concerns that streamlining at SBA, including some reductions in force that you mentioned earlier, could undermine the AY's ability to function. I want to know how you respond to this question and how ongoing streamlining efforts actually contribute to SBA's efficiency.
Chairman, this is an important question. Taxpayers want to know that government is uh serving them and serving them efficiently, and that's what we're doing at the SBA. The agency had doubled under the last administration in terms of size and workforce. But yet, as we come into President Trump's administration, we've increased loan volume by 80% in our 7(a) loan program. We're doing more with less, just like small businesses across Main Street have to do. We're more accountable to taxpayers. We're reigning in uh waste, fraud, and abuse. And so, what uh small businesses can expect to see is more of the SBA on Main Street. We're deconsolidating it out of Washington back into the field so small businesses will actually have more resources where they're located. We're working for Main Street, not the bureaucracy.
Much appreciated. I'll turn it over to Ranking Member Reed.
Thank you very much, Mr. Chairman, and thank you, Administrator. Uh, earlier this month, you indicated that uh President Trump's tariffs will bring a period of change for small business. And uh uh I think that is right. Uh, many as I indicated in my uh opening statement are very, very concerned about the cost of these tariffs. Uh, more than that, that the National Federation of Independent Businesses uh in their monthly business index have saw that small business confidence levels have dropped every month since President Trump took office, which uh indicates that small business people are not exactly uh feeling yet or uh even expecting uh many of the things you described. Uh, what are you doing right now to help businesses get through this period of change?
Ranking Member Reed, thank you for your question. The um, look, President Trump believes in the American worker and American industry. We have to have that back in this country and the SBA is going to support him in those efforts uh completely because what we have seen across this country is a hollowing out of our productive capacity that didn't just cost us 7,000 factories. It cost us 5 million jobs in small towns where I grew up where our union training center in a town of 600 closed. It was one of the last major employers. So, uh, and that says manufacturing jobs have left. We can never let that happen again. and we can never let it happen again that small businesses rely on the Chinese Communist Party for their productive supply. We can do better. That's why the SBA is looking to increase uh onshoring through our lending programs, but also yesterday announced our Make Onshoring Great Again portal that connects small businesses with 1 million suppliers across this country. As I've traveled from East Coast to West Coast, I have seen the incredible productive capacity and capabilities of our hardworking men and women in our factories across this country. And while the media narrative likes to say we can't make things in this country, I'm seeing it done in real time. And I'm seeing in uh investment in these factories. I'm seeing a skilled workforce being created. I'm seeing jobs and economic opportunities. Just on the factory floor last week, I met a young man. He's 21 years old. He had been at the CNC a machine operator for two years. He just got married and bought a house. He has no student loan debt. He has a great future ahead of him as a skilled technician. And this is the new collar boom that President Trump is going to bring to this country where we can make things in this country again, where we can export again. Well, we will have e open export markets for small businesses who have 400 pages stacked against them in the US Trade Rep's report against our small businesses that no one has fought back on. And so I'm excited to see what's happening across this country. It's a manufacturing renaissance renaissance and I'm grateful to President Trump.
Well, thank you. Uh, it's going to take many years to reassure a significant number of businesses and frankly, many small businesses will not be able to last that long unless SBA actively engages with them, helps them, and I hope you're u appreciative of that point. And one of the major reasons we've had a diminution of our manufacturing was the NAFTA agreement, the CAFA agreement, and the USMCA. And I opposed all those agreements. Uh, but uh, it was both Republicans and Democrats that passed them. We have to make up for that right now and SBA has to be in the lead. You indicated that Doge is working with you and you also indicated it's nonpartisan. Elon Musk is nonpartisan. Is that your conclusion?
Uh, look, our Doge team uh is a group of um young men who are supporting our efforts and um I call the shots at the SBA. I'm the one calling the shots at the SBA and I appreciate the support I've gotten in terms of some of the quantitative work that I wanted done and analyzing the financial and operational metrics and I have made all those decisions and they're not they're based on the business skills I learned over three decades.
Does Doge have access to data of American small businesses?
Uh, I can only speak to my my team are members of the Small Business Administration and they comply with all the laws that apply to all Small Business. So, they're not they're not Doge people. They've been they are members of the Small Business Administration. They they're hired members of Correct. They're employees of the SBA. SBA temporary employees or they're active current employees.
Okay. Uh, have uh those reimbursed the SBA for uh any support they received from you?
Senator uh Chairman uh Ranking Member, could you please clarify your question?
Yeah. Uh, Doge goes in, they do quite a bit of work uh and encounter cost. uh do they turn to you and ask to be reimbursed or what is the salaries typically of these uh young men?
Um, they they are employees of the SBA. I can come back to you if with regard to any compensation uh details as an employee, but um I would appreciate that, Administrator, and I look forward to a second round. Thank you, Ranking Member Reid. Um, I I'll open the floor up to questions right now and I will turn to Senator Mullen.
Thank you, Chairman. Administrator. Thank you so much uh for for being here. You know, I my my Democrat colleagues continue to rail on President Trump's tariffs, and it seems like a lot of my colleagues forgot that uh of the literally hundreds of thousands of manufacturing jobs that have left the United States and the trillions of dollars of uh of not just um uh income throughout our communities, but also the billions of dollars and of investments that have lost that we've lost over the last 30 years. And and yet they're completely silent on the fact that over the last previous administration, they averaged 4.95% inflation at a high point of 9.71%, which was a greater cost than these tariffs will ever be on on our economy. And so I appreciate you standing strong and fighting uh and this administration for fighting the way that they have. Uh, but with that being said, while you were on your manufacturing tour across America, which I love, I'm actually a little jealous of. I think that'd be absolutely awesome to walk into all these manufacturing plants and see these proud workers making a living and developing uh tomorrow's future. Um, what did you hear about the tariffs, Senator?
Uh, first of all, it is such an honor to uh work for the SBA in terms of supporting the manufacturing initiatives because you're exactly right. As we walk onto factory floors and we see the pride in American-made, we see the American flag hanging in that factory. We're talking to apprentices coming in to manufacturing. It's absolutely uh encouraging and and they're encouraged by the Trump administration's belief in the American worker and restoring this industry because we did lose millions and millions of jobs and that's why the SBA got to work as soon as President Trump uh unleashed what is a um brilliant fair trade agenda. We have to have this in this country. It's the first president that has had the backbone to stand up for the American worker. So that is why we immediately responded with uh providing more capital. We've already set records for manufacturing loans and President Trump's first 100 days issuing 1,120 manufacturing loans, an increase of 74% of the 7(a) loans compared to Biden's first 100 days. Um, so we continue to do that. Um, we're working with uh uh manufacturers around skilled workforce. I was at a great technical and trade school last week where we saw uh students learning everything from welding to CNC machine operating to composites materials and then finally ensuring that we are advocating for those important tax cuts that will affect everyone and that will allow us to enable this uh boom in manufacturing made in America through the um not just the 199(a) deduction but the 179 and the accelerated depreciation and immediate at expensing.
So, in your um uh opening statement, you had talked about partisan funding that had been riddled through the SBA. Can you expand on that, Senator?
What we found was an agency that was almost uh aimed at social engineering through its loan programs. We we saw DEI programs uh that crowded out our veterans programs for small business. um uh statutory goals in contracting. Uh, we saw the use of trying to expand loan limits for Green New Deal companies um which are obviously a scam and uh we ended that. We saw lending companies given licenses so that they could do DEI-based lending. Uh, we recently reformed that announcing that community advantage SPLC's uh licenses would be rescinded if they didn't meet capital uh requirements. These are mission-based nonprofit undercapitalized groups such as the um black investment fund, the the progress fund, the people's fund. Um, and we saw some of their delinquencies as high as 30% when our portfolio runs at uh roughly 3% including those terrible data points. So, um, we're really reigning that in for the benefit of small businesses who qualify all across this country and to make sure they don't disadvantage or advantage anyone un any you don't. You're starting to actually have loans based on merit, not based on political ideas.
Yeah, that's great that you're finally getting politics out of the SBA. That's where it should be. And that's that's why the loans are growing. That's why the lenders are coming back to the program. They trust that these are fair and uh qualified loans. Thank you so much for being here and thank you for the job you're doing.
Thank you, Senator Coons. Thank you, Chairman Hagerty, Ranking Member Reid. Thank you, Administrator Leler. Good to be with you again. Um, it is unfortunate we don't have in front of us a full budget. That's the case of all the appropriation subcommittees on which I serve. Um, what's the timeline on on which you'll be providing us with an actual budget for us to review and work with you on?
Senator, we hope to have it to you in the coming weeks. I don't have a a hard deadline for you, but as soon as we have it, we will be providing that to you.
As you can imagine, it it's sort of difficult for us to do our work if the budget hasn't arrived and we can't uh have it in front of us. I think my small home state is typical. U small businesses are 98% of all the businesses and employ two-thirds of our workforce and the SBA is crucial for those who want to start a new business. It provides a great resource for new uh and existing businesses. And I want to briefly at the outset recognize the service of Michelle Harris uh the SBA state director who is retiring after 35 years of federal service and know who dedicated her career to lots of small businesses. I am concerned by actions um you've taken to cut over 40% of the workforce at SBA and close regional offices. And from what we have in the skinny budget, um you're proposing fairly significant cuts uh to an agency that I think does very important work. Um, I wanted to focus for a moment if I could on a small but mighty uh part of SBA, which is the SCORE program. Um, SCORE, as you know, uh was founded in my hometown of Wilmington by DuPont volunteers. Uh, and it is the definition of an efficient government program. There are 10,000 SCORE volunteers all over the country in every SBA office and district um that help new small businesses launch. In fact, last year these 10,000 volunteers helped launch 63,000 small businesses. Um, and Congress appropriated $17 million to it. Uh, with a full-year continuing resolution, this program should receive another $17 million. In your confirmation hearing, you agreed you'd want to work on a bipartisan reauthorization of this program. And the most recent study said that for every dollar we appropriate to SCORE, um it generates $45 just in new federal tax revenue. So I I think this is a wonderful program, well worth saving. I understand you're here defending a budget that is not complete or finished and that may reflect choices not your own. Just that's always true. Could you provide us with an update? um on the funding that's been appropriated and whether it's being dispersed and tell me anything about how you see SCORE fitting into um the mission of the agency to deliver highly efficient and effective support for small business.
Senator, thank you for your question and uh congratulations Michelle and um Senator, I also want to thank you for your support of the Made in America manufacturing bill. Um, look, as I've traveled across the country and done dozens of roundtables with our resource partners that provide technical assistance, uh, be it SCORE, Women's Business Centers, our Small Business Development Centers, and others. Um, I've seen a fair amount of confusion by small businesses about who they should be working with. And within the budget uh constraints, it's important that we unify and streamline this agency so that small businesses have the benefit of going direct to the agency, which we have 1,000 Small Business Development Centers that operate across the country that provide direct access to our resource partners, as as well as direct access to our lenders and the SBA. And so those SBDCs are critical in delivering those services uh to our small businesses. And we think that unifying and streamlining it will create a better user experience for our small businesses and have more accountability for taxpayers of eliminating overlapping services that uh often result in confusion for our borrowers.
But but if I might um I think SCORE fits a unique niche in that it is seasoned, experienced, often retired business executives, people who've got uh personal experience u financing running whether it's a manufacturing business, a service business uh and at very little cost to the federal government, they provide a service. I hear you on the potentially we could debate it confusing array of different centers and missions, but I think SCORE fits a unique uh window if I might with your forbearance one more question Mr. Chairman. We also discussed during your confirmation hearing the SBIR program. Um, I recently introduced with Senator Curtis the Ramp for Innovators Act, which expedites the application process, improves technical and business assistance, and focuses more on commercialization. Some have rightfully criticized SBIR grants as leading to circular not moving towards the workplace. This is a bill that Senator Rubio and I previously worked on. SBA plays a critical role in the success of SBIR. Um, can you assure us when we get your full budget that your agency will have the staffing to successfully implement this valuable program that takes research and innovation to the marketplace?
Senator, we've been reviewing the SBIR program and we feel that it's languished in the last four years and needs attention to achieve the uh at the important aims of the program so that critical technologies can be brought to market. And in this a reauthorization year for SBIR, I look forward to working with you and your office to understand uh how those programs can be strengthened uh across all agencies that utilize this important effort. Thank you.
Great. Thank you. Thank you, Mr. Chairman. Thank you, Senator Coons. I'll turn to Senator Fischer now.
Thank you, Mr. Chairman. Welcome, Administrator Leler. It is such a pleasure to see you again, and I want to congratulate you on your nomination confirmation, and also thank you for all the good work you are already doing in this position. Your enthusiasm is evident, your passion is evident, and I know you will continue to provide the services that this administration has focused on and that are need need to happen for the small businesses across this country. So, thank you for that.
As you know, in the 2017 tax bill, it included my bill to create a tax credit for employers who offer paid family and medical leave to their employees. The credit is the only national paid family medical leave policy that has ever been enacted into federal law. The credit expires at the end of this year and I've introduced legislation to make a couple of tweaks to make the credit permanent. I was pleased to see that the House included my bill in their tax package and I look forward to working with my Senate colleagues to see that it is included in the final product. I believe that the SBA can play a critical role in increasing awareness of the credit. One of the tweaks we made in the bill was to require SBA to do targeted education outreach and technical assistance on the credit and how employers can use it. And when we designed the bill, our hope was that small businesses would be able uh to take advantage of it to offer their hourly employees um a paid family medical leave that many of them uh do not have the opportunity to have as employees from larger businesses and corporations uh have that. We know that over 75% of small business owners support a federal financial incentives for f small employees employers to provide paid leave benefits. Another survey tells us that for small business owners who don't offer paid leave, over 58% reported that while they wanted to, they couldn't afford to. So, I think awareness, education, assistance are keys here. And I think the SBA will play a large role in helping to get the word out. Again, this is a tax credit, pro-business, pro-family. Um, not a mandate, not a new entitlement. Uh, like uh in FY25, I also intend to secure funding for the SBA to conduct that outreach. Can you commit to me that SBA will carry out this work diligently and quickly once we're able to get the authority and the funding to do the work?
Well, Senator, thank you for your leadership in this important area and and you brought it to my attention during my confirmation process. So, uh, I'm pleased to hear that it's, uh, progressed and, uh, it's timely because we at the SBA have, uh, refocused on our field organization, uh, in our 68 regional offices and, as you just heard, our 10,000 Small Business Development Centers that would be an excellent conduit to support uh, awareness and implementation and support. It's one more reason that this uh, tax bill is so critical to small businesses across this country. So, I look forward to learning more about that with you and your team and uh, welcome the conversation.
Thank you. Uh, earlier this year, I joined with my Alaska colleague, Senator Sullivan and Murkowski in sending you a letter requesting the SBA issue guidance on SBA's uh contract program, ADA contract program, clarifying that the recent executive order that eliminates DEI programs does not impact contracting with Native-owned companies. And I appreciate your response that we have gotten a guarantee that tribes will not be impacted by that executive order. It is important that we provide support to and for our Native-owned companies uh through the ADA contract program, including conducting outreach through the Office of Native American Affairs. as as we look at this program, um, do you will you first of all will you commit to continuing to work with me on ensuring that SBA tribal efforts are protected, but also to be able to uh stress the importance of of this program in our outreach and support for our Native tribes?
Absolutely, Senator. We look forward to talking with you further about this and actually um visiting your state to learn more about uh, you know, the the key issues uh there for small businesses uh and and our uh Native Americans.
Thank you. Thank you. We look forward to welcoming you to Nebraska and once again, good to see you. Thank you, Vice Chair Murray.
Thank you very much, Mr. Chairman, for your accommodation. and I'm running between several appropriation committees this afternoon. So, I appreciate um the opportunity to ask Administrator Leler a few questions. Now, um, first of all, I've been hearing from small businesses in my state about the SBA grants that have been canceled and frozen. Uh, one example is you canceled a $2.5 million Regional Innovation Cluster contract in Washington State that would have supported small businesses that were working on carbon capture and utilization and storage. It's not an isolated case, but that that is a program that Congress historically funded with strong bipartisan support. I wanted to ask you today, why have you canceled funding for a program that has bipartisan support and really drives small business growth in our emerging sectors?
Vice Chair, thank you for the question. Our Regional Innovation Clusters are certainly mechanisms to deliver uh support technical assistance to small businesses in in various regions based on uh expertise in that region and the needs of that region. Um, I have broad uh authority in this administration to uh reshape the Regional Innovation Clusters and we are undertaking a review of those programs to rightsize them and uh form them to where the needs are most uh urgent. Right now we've uh just announced that we have a regional innovation cluster centered around manufacturing because of the uh skills and uh efforts and the focus needed on that right now. But we intend to continue to pursue these programs based on the regional needs and we'll be working.
I would just say this is a regional need and I would just ask you to go back and look at that one. Happy to provide you information, but it really is a critical one for our region. I'd be happy to work with your office.
Okay. And I I wanted to say I met with some small business owners in Seattle a few weeks ago. One of them runs a coffee shop and imports green tea. And like a lot of small business owners that I'm talking to and you know, they operate on very thin margins. So the current tariffs are hitting them really hard. We don't grow green tea in the United States. I doubt we ever will. Um, and given that the the increased cost imposed by that tariff, those tariffs could really, he told me, shutter his business. What what what should they do in this situation? So this period of negotiation uh, you know, is is not one where we don't acknowledge their near-term effects, but for the long term, we want to have a situation small business, they can't last much longer. Well, what we're focused on is ensuring that we never get in the position again of having unfair trade and that's what President Trump's fighting for. That's what we're fighting for. We just yesterday put out our uh Make Onshoring Great Again directory to ensure that small businesses have access to millions, a million suppliers across this country that can offer alternatives. This country doesn't produce green tea and this small business is not going to last more than a few months. I hear your bigger scheme is that someday this will all pay off. This small business won't be there. What I'm just asking you, what are they supposed to do? Are you gonna um have do you have anything drafted? Are you looking at anything that can help these small businesses who are on the verge of closing right now and the they can't wait two, three, five, six months from now?
Well, what the SBA is offering is certainly the capital, the counseling that they need, as well as import and export loan financing to deal with these times of uncertainty. But the uncertainty is going to be short-lived. President Trump already has 75 countries at the negotiating table. We've already cut deals with China and the UK, and there's more to come. And small businesses are benefiting because inflation is down, because we're having $10 trillion dollars of investment that we've never had in this country. We have economic opportunity on the horizon that is really unprecedented.
I appreciate that you have an optimistic view. I'm just telling you, having sat down and met with these small businesses, whether it's shutting the regional SBA office or canceling these grants to support our entrepreneurs or these tariffs that are having impact, there are small businesses that will not make it based on your optimism and and there are small businesses that are going to be struggling if we don't pass this tax bill, too. So, small businesses unfortunately bear uh a lot of headwinds of uncertainty right now, specifically with regard to the the tax bill that will affect 100% of all I'm not here to talk about the tax bill. I'm talking I'm talking about our little shop owners that aren't going to make it. Small business response.
Thank you. Thank you. Thank you, Vice Chair Murray. Turn to Senator Bosman now.
Thank you. It's great to have you here, Administrator Senator Leler. We miss you, but we're very, very proud of the great work that you're doing and I know that uh your heart is certainly in this and uh you are doing a very, very good job. Uh, I guess the first question I'd have is is just as a committee, what what tools can we give you in your toolbox? You've been out and about and uh touring and you know, trying to figure out the world is is very different now than it was a year or so ago. What what additional authorities do we need to give you? How can we help you?
Well, Senator, thank you for the question. Um, you know, it is humbling to serve our nation's 34 million small businesses and then to be able to walk their restaurant floors, their showroom floors, their factory floors with them and listen to what their needs are. And their needs are really along the lines of uh reduced regulation. They've suffered from four years of trillions of dollars of burdensome regulation. They almost faced uh a $4 trillion tax increase if we don't get this tax bill passed. The uncertainty from that uh they're focused on uh skilled workforce. They really need support on attracting uh that workforce uh into these what we call new collar jobs for the fusion of technology and manufacturing which is very exciting and is going to provide uh an on-ramp into the economy for towns that have been hollowed out by the prior three decades of shipping our jobs overseas. And so obviously our focus is on deregulating, supporting the tax cuts, providing capital, which we're doing at record levels for small businesses who are investing in themselves uh and ensuring that they have the access to the counseling through our Small Business Development Centers. I'm also really um pleased of our with our work to support our veterans who had been virtually left behind during the the Biden administration. And so what we are seeing is an opportunity to uh get the u social engineering out of the SBA, get back to Main Street, uh leave back, leave behind the bureaucracy that had been built up over the last four years. And then finally, small businesses want us to pursue the fraud that has happened in this agency that was swept under the rug the last four years and get back to focusing the resources on them. They're already seeing the impact in the field. uh they said that they they feel that the Small Business Administration is now there for them again. And so um, you know, continuing to support our our funding and um certainly the bipartisan Made in America Manufacturing Finance Act would be tremendous uh to continue to put America first.
One of the things, you know, I'm always amazed at the as you learn about the small business program, uh, just how broad it is and the tremendous things that can be offered to small businesses. A lot of small businesses simply don't know. And I guess my question would be, you know, how can we help you? How can you help yourselves? what what are we doing to make it such that small business is aware that there's this great vehicle out there that this committee, you know, has worked hard to support uh through the years so that they can uh actually benefit from the opportunities.
Well, we certainly take that responsibility very seriously to get the word out. That's why we've put 30% of our staff into the field. We'd love to partner with with your offices in the field to to make sure that they know the resources available. will be working with uh the Veterans Administration to reach our veterans in the field collaboratively, the USDA as well.
So, we would look forward to visiting Arkansas. We've certainly, um, our hearts go out to those impacted by recent disasters, and we've been on the ground serving disasters. In fact, uh, we've put out more disaster loans in the first 100 days of President Trump's administration than all of, uh, the last year of President Biden's administration. So, we are back on the ground in local communities and, uh, would welcome the opportunity to work with your office to support Arkansas small businesses.
Tell me about the small business loan volumes. What, what is SBA being able to accomplish in the first 100 days regarding, uh, small business loans?
Yeah. So, you're asking specifically about the loan program. Yeah. So, we operate two, um, core loan programs. The 7(a) loan program. Uh, we've seen a tremendous increase in interest in that program. Uh, that's largely because we've put the guardrails back on the lending standards. Our lenders were very confused by the rolling back of the guardrails around underwriting, uh, during the Biden administration. That, unfortunately, for that four-year cohort, drove a $2.2 billion negative cash flow for a program that should operate at no cost to taxpayers. So, we've cleaned up the underwriting standards and tightened that so that all small businesses that qualify, uh, have access to that, but that we aren't funding businesses that don't qualify.
Um, our 504 loan program is also one that will benefit from the increased from $5 to $10 million in manufacturing. That's a fixed capital asset, uh, program really aimed at restaurants and manufacturers, asset-based businesses. Um, that's, we're probably going to have the second highest year, uh, in that loan program in terms of volume. So, we see an interest in Main Street businesses, rural communities investing and growing thanks to President Trump's economic agenda.
Thank you. Thank you, Mr. Chairman. Thank you, Senator. I'll call Senator Van Hollen now.
Um, thank you, Mr. Chairman, and, um, it was good to work with you when, uh, you were ranking member, and, um, I, I can't say that I'm happy we switched places, but, um, congratulations, Senator. Uh, thank you for taking on the ranking member position. Uh, Administrator, um, uh, Lujan, welcome. Uh, I want to pick up actually on the SBA's role when it comes to disaster relief. I was out, uh, in western Maryland on Friday. It's a beautiful part of our state, but it just got hit really hard, uh, by massive floods. Uh, the waters rose at an incredible rate, three feet per hour. Um, in some places, the waters rose as high as 23 feet. You may have seen some of the images of students, um, at Westernport Elementary School being evacuated by boat. So, uh, lots of damage done. Uh, I was out there surveying, um, sort of the aftermath. The, the great news is communities are pulling together. Um, and the emergency responders, uh, were doing a great job. Uh, but lots of damage to small businesses, to homes, to personal property.
Um, I, I have been concerned, uh, to hear Secretary [inaudible] talking about the possible elimination of FEMA. That's a debate for another day and another, uh, hearing. And I've been concerned about they're talking about not allowing smaller disasters qualify for some of the FEMA declarations and relief because, as you well know, um, it may be small on the larger scheme of things nationally, but they can be very intense, uh, locally, and the losses can be huge relative to the local jurisdictions' towns' ability to handle them.
So, uh, I, I just did want to, uh, get your reassurance with respect to the SBA disaster loan program when we had the collapse of the Key Bridge in Baltimore. Um, because that wasn't a natural disaster, that didn't qualify for a FEMA declaration. Uh, but the Small Business Administration was there, and I, I do want to thank, um, all the men and women at the Small Business Administration that played an important role there. And so, uh, my, my question to you today is very straightforward, given what just happened in Western Maryland. Um, can I get your commitment that you will work with us? Um, I think the governor's likely, not final, to make a damage assessment and declaration based on the surveys that they've been doing. And I would just like your assurance that you would work with us to make sure that if, if it qualifies, if the damage qualifies for the current criteria for SBA damage relief, that we could try to expedite that.
Absolutely, Senator. Uh, and my prayers are with all who are impacted. Our team is already actively evaluating that, and as you know, an SBA declaration can be made even if there's not, uh, a FEMA declaration. So, we will, uh, be on that, um, very quickly, as we have been, and ensure that, um, we provide whatever relief we possibly can.
I appreciate that. Yeah, I walked, you know, like the local library, the mud was three feet deep, the book collection pretty much wiped out. Same with the local fire department was in better shape, but lots of damage.
Um, if I could turn to, um, student loans because you mentioned some of the SBA traditional loan programs like the 7(a), uh, program. Uh, we've been hearing, although I haven't heard this confirmed, there's a possibility that people are trying to move the student loan programs from the Department of Education, uh, to the Small Business Administration. Um, you know, my understanding is, I think it's pretty clear that would require congressional action. Um, number one, do you share that view? And are you expecting to make that request as part of the upcoming budget or through other legislation?
Uh, Senator, at this time, um, you know, this, the repayments on the student loans have just started, uh, under the Department of Education, and, um, we will be working closely with the Department of Education, Treasury, the White House, and all of you in Congress to determine the best path for path forward. And I, I do strongly support President Trump's decision to return educational funds to the states where they belong, with students and, and local education officials. Uh, but at this moment, there's been no final decision, and, uh, we will all be working closely together on that.
No. Okay. I appreciate it. I, I don't want to get in a debate about this, but you do agree that in order to make those changes, that would require a change in the statute, right?
Uh, Senator, I'll, I'll defer to the White House as to the path that they're going to take to to make those changes. Um, at this time, I don't have anything to announce.
Okay. And, and just to make sure I understand, understood your answer correctly, and you're not planning to make those proposed changes as part of the SBA budget request?
I have further conversations with the White House. I, I don't have any, uh, budget requests to announce at this time.
Okay. Anyway, thank you. Just let me follow up on Senator Van Hollen. Last March, the president said in the Oval Office, "I've decided that the SBA, the Small Business Administration, headed by Kelly Lujan, a terrific person, will handle all of the student loan portfolio. We have a portfolio that's very large." That's a quote from the president. He is reconsidering this decision now.
Uh, Senator, what, what we're focused on is supporting the White House's decisions and, uh, ensuring that, um, we're able to take on whatever the president would ask us to do, and we would be working with the Department of Education and with Treasury, um, should such a transition be made. And, um, you know, it's, um, our agency operates a $444 billion loan portfolio that performs very well. Uh, it's a public-private partnership through lenders, uh, much like the Department of Education's program is with outsourced servicing and so forth. Um, but we, um, will be working with the White House, uh, on next steps.
Well, uh, this portfolio is $1.6 trillion and it has 43 million borrowers, and, uh, one, it'd be very difficult, I think, for any agency to assume that, particularly as we progress into the year and we don't have any direction, uh, and also if you're cutting your workforce by 43%, where will you get the people to run this very complicated, uh, loan program? And I must reemphasize what Senator Van Hollen said, "You need congressional authorization to make this transfer." And so if you don't propose it, then, uh, it can't be done. And I hope you can communicate that back to the White House.
Just let me go one final point here on veterans. Uh, you're cutting veterans programs. Uh, and, uh, it seems, uh, to me, uh, inappropriate. Uh, you're cutting the veterans outreach programs, which include Veterans Business Outreach Centers, the Boots to Business program, and the Service-Disabled Veteran Entrepreneurship Training program. Uh, I think we should be doing more for veterans, not less. So why are you cutting aid to veterans?
Ranking Member, I'm, I'm glad you asked. There is no stronger champion of veterans than President Trump, and that's why he plused up the Veterans Administration budget by $5 billion. And as the daughter and granddaughter of veterans, uh, my father actually started a business based on what he learned in the military for trucking. And, um, I'm proud of the work we're doing at SBA to actually grow our veterans outreach. What we had seen was our veterans work had been crowded out by the DEI initiatives. We've rectified that. We're getting the small business contracting targets for veterans met again by reducing arbitrary, uh, DEI limits that the Biden administration had put in. This week alone, we're conducting 15 veterans outreach efforts for Boots to Business and Reboot to serve our veterans in their local communities. And I'm excited to partner with Secretary Collins at the VA for an MOU to streamline the, uh, vetsert and vet biz on-ramp into the small business, uh, ecosystem, and then also working with the Department of Defense, uh, transition assistance program as veterans come into that transition phase and looking at starting a small business. So, veterans are going to find that we are not cutting, uh, the VBOX. We are simply, um, ensuring that they're working with our Small Business Development Centers, of which there are a thousand across the country, along with our PCRs, which are our procurement center representatives, putting them on base at, uh, military installations to better support that small business ecosystem. So, I'm really, uh, optimistic that we are going to make, uh, small business, uh, more accessible to more veterans than has ever been true before.
Well, I don't think the numbers are quite as supportive. Uh, you are planning to integrate, uh, these veterans programs into the SBDCs and providing a $10 million increase this year. Uh, last year, or the last, in FY24, the level of congressional funding was $18.5 million. So, what you're proposing is a 46% decrease in funding direct to the veterans, and the numbers, I don't think, lie.
Ranking Member, if you will, that, that's a floor. That's a $10 million floor minimally that we are putting into VBOX. But also note that we talked about our, uh, district outreach at 68 district offices in addition to 1,000 SBDCs. So, we have quite a network, and those are already delivering those Boots to Business and Reboot efforts, uh, and the outreach on base. So, we are going to supercharge the resources that we have and make them front and center for veterans as opposed to what happened in the last administration where everything was brought back to Washington, and the veterans outreach was basically non-existent.
Um, there's no stronger champion of President, uh, of veterans than President Trump and myself, and we are going to make sure that we make a difference working, uh, alongside Secretary Collins and the Department of Defense.
Well, thank you, Madame Administrator. Appreciate your testimony. Thank you, Senator. Thank you, Madame Administrator, for appearing before our subcommittee today. Our members will have one week to submit questions for the record, due May 28th. I would appreciate it if your office could respond to those questions as soon as possible. With that, this subcommittee is adjourned.