WASHINGTON, D.C. – Today, Chairman Roger Williams (R-TX) led a full Committee on Small Business hearing titled “Under the Microscope: Reviewing Key SBA Programs with Associate Administrator Frost.” Chairman Williams issued the following statement after today’s hearing.

“Today’s hearing was especially important as this Committee continues conducting oversight of all aspects of the SBA,” said Chairman Williams. “It is disappointing to see that the SBA has removed clear and necessary guardrails from its lending programs, especially when taxpayers are on the hook for most of the loan if they default. Moreover, I hope the SBA will recognize that it should not be a direct lender competing with the private sector, but instead a lender of last resort.”

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Watch the full hearing here.

Below are some key excerpts from today’s hearing:

Chairman Williams: “In this year's congressional budget justification I was disappointed to see that plans that the SBA requested to establish a direct lending program. The SBA is supposed to be the lender of last resort and not compete with the private sector. When the administrator testified on the hill last month, she made it clear that it would take an act of Congress to set up a direct lending program. So, Ms. Frost, do you agree with the administrator that the SBA will not be able to set up a direct lending program without Congress’ involvement? And will you commit that you will not take any actions to skirt the statutory check on the SBA ability to set up the program in the future?” Associate Administrator Frost: “The administrator said during her testimony last month that we would begin a direct lending business program if given the tools to do so.”

Rep. Stauber: “Ms. Frost, we have a Minnesota business supporting 227 good paying jobs that has had a miserable and disappointing experience with the SBA's PPP audit and appeals process. The primary frustration with this process has been the lack of clarity and communication from the SBA throughout the entire process. Not only has the SBA failed to respond to two letters submitted by impacted organizations, but the SBA has also failed to respond to two elected officials from the state of Minnesota Senator Klobuchar and Congressman Emmer, respectively. Ms. Frost, what is the SBA’s procedure for following up on inquiries made by appealing parties?” Associate Administrator Frost: “So we of course take all agency requests from members of Congress and other elected officials seriously. You know, my office responds to them. And then, of course, it moves through an interagency concurrence process. So we work closely with our colleagues on any of those requests.”

Rep. Meuser: “The CEO of Funding Circle, one of three companies, be awarded a new SBLC license, reported two months ago that they, basically couldn't handle it, wasn't worth it, etc... The question is, is it common practice, and I assume it's a common practice, but why would the SBA approve an SBLC for a company with mounting losses and unwillingness to provide capital as Funding Circle has disclosed?” Associate Administrator Frost: “So it's actually pretty common in the financial industry for businesses to take a loss for a couple of years during, for example, a growth period or at the start of a new loan fund program. So, losses for a specific period is not in a loan itself, considered a huge negative indicator. You do want to, of course, ensure that the company is properly capitalized, that they have appropriate loan loss reserves and they have prudent lending standards. Funding Circle did meet all of those requirements.” Rep. Meuser: “Okay, but it didn't work out for them very well.”

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